<PAGE>
================================================================================
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ____________ to _______________
Commission File Number 0-28414
---------------
UROLOGIX, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1697237
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14405 21st Avenue North, Minneapolis, MN 55447
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 475-1400
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
As of April 18, 2000 the Company had outstanding 11,559,155 shares of common
stock, $.01 par value.
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UROLOGIX, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000 June 30, 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 373,887 $ 657,596
Available-for-sale securities 24,222,956 27,378,692
Accounts receivable, net 1,408,578 1,260,810
Inventories, net 562,930 2,436,418
Prepaids and other current assets 247,499 588,355
- ----------------------------------------------------------------------------------------------------------
Total current assets 26,815,850 32,321,871
- ----------------------------------------------------------------------------------------------------------
Property and equipment:
Machinery, equipment and furniture 5,332,024 4,772,666
Less - accumulated depreciation (3,382,431) (2,521,479)
- ----------------------------------------------------------------------------------------------------------
Property and equipment, net 1,949,593 2,251,187
Other assets, net 4,072,809 4,414,974
- ----------------------------------------------------------------------------------------------------------
$ 32,838,252 $ 38,988,032
==========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 742,350 $ 836,999
Accrued liabilities 1,842,452 2,684,390
- ----------------------------------------------------------------------------------------------------------
Total liabilities 2,584,802 3,521,389
- ----------------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
Common stock, $.01 par value, 25,000,000 shares 115,521 114,289
authorized; 11,552,073 and 11,428,937 shares issued and
outstanding
Additional paid-in capital 91,431,482 91,149,858
Accumulated deficit (61,263,101) (55,796,123)
Accumulated other comprehensive loss (30,452) (1,381)
- ----------------------------------------------------------------------------------------------------------
Total shareholders' equity 30,253,450 35,466,643
- ----------------------------------------------------------------------------------------------------------
$ 32,838,252 $ 38,988,032
==========================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
UROLOGIX, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
----------------------------------------------------------------------------------
2000 1999 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 2,326,616 $ 1,341,892 $ 6,158,270 $ 4,200,444
Cost of goods sold 1,213,179 956,368 3,478,428 4,699,070
- -------------------------------------------------------------------------------------------------------------------------
Gross profit (loss) 1,113,437 385,524 2,679,842 (498,626)
- -------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Research and development 788,763 1,264,244 2,780,698 3,790,084
Sales and marketing 1,830,313 1,342,045 4,942,991 5,036,407
General and administrative 484,555 558,142 1,522,651 3,515,295
- -------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 3,103,631 3,164,431 9,246,340 12,341,786
- -------------------------------------------------------------------------------------------------------------------------
Operating loss (1,990,194) (2,778,907) (6,566,498) (12,840,412)
Interest income, net 367,139 418,309 1,099,520 1,344,560
- -------------------------------------------------------------------------------------------------------------------------
Net loss $ (1,623,055) $ (2,360,598) $ (5,466,978) $ (11,495,852)
=========================================================================================================================
=========================================================================================================================
Basic and diluted net loss per common share $ (0.14) $ (0.21) $ (0.48) $ (1.01)
=========================================================================================================================
Basic and diluted weighted average number of
common shares outstanding 11,525,616 11,423,575 11,494,432 11,346,467
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
UROLOGIX, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net loss ($5,466,978) ($11,495,852)
Adjustments to reconcile net loss to net cash used for
operating activities -
Loss on impairment of assets - 771,362
Depreciation and amortization 1,203,117 1,151,997
Change in operating items:
Accounts receivable (147,768) 2,818,110
Inventories 1,873,488 1,339,928
Prepaids and other current assets 340,856 (3,415)
Accounts payable and accrued liabilities (936,587) (553,944)
- --------------------------------------------------------------------------------------------------------
Net cash used for operating activities (3,133,872) (5,971,814)
- --------------------------------------------------------------------------------------------------------
Investing Activities:
Purchases of property and equipment, net (559,358) (663,288)
Proceeds from sale of securities 3,126,665 6,767,810
- --------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 2,567,307 6,104,522
- --------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds from exercise of stock options 282,856 96,027
- --------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 282,856 96,027
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in Cash and Cash Equivalents (283,709) 228,735
Cash and Cash Equivalents:
Beginning of period 657,596 882,801
- --------------------------------------------------------------------------------------------------------
End of Period $ 373,887 $ 1,111,536
========================================================================================================
Supplemental cash flow disclosure:
Cash paid for interest $ 773 $ 707
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
UROLOGIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
1. Basis of presentation
The accompanying unaudited consolidated financial statements reflect all
adjustments, consisting solely of normal recurring adjustments, needed to
present the financial results for these interim periods fairly. These financial
statements include certain amounts that are based on estimates and judgments.
These estimates may be adjusted as more current information becomes available,
and any adjustment could be significant. Results for any interim period are not
necessarily indicative of results for any other interim period or for the entire
year.
Following the rules and regulations of the Securities and Exchange
Commission, footnote disclosures that would substantially duplicate the
disclosures contained in Urologix' annual audited financial statements have been
omitted. However, these unaudited consolidated financial statements should be
read together with the consolidated financial statements and the notes included
in Urologix Annual Report on Form 10-K, for the year ended June 30, 1999.
2. Basic and diluted net loss per share
Basic and diluted net loss per common share was computed by dividing the
net loss by the weighted average number of shares of common stock outstanding
during each period. The impact of common stock equivalents has been excluded
from the computation of weighted average common shares outstanding, as the
effect would be antidilutive.
3. Revenue recognition
Revenue from product sales is recognized at the time of shipment, net of
estimated returns, which are also provided for at the time of shipment. Deferred
revenue for warranty service contracts are recognized over the contract period.
Revenue from equipment rental through the Company's per procedure fee program is
recognized at the time of equipment use.
4. Inventories
Inventories consisted of the following as of:
March 31, 2000 June 30, 1999
- --------------------------------------------------------------------------------
Raw materials $313,727 $ 783,091
Work in process 187,544 1,180,443
Finished goods 61,659 472,884
- --------------------------------------------------------------------------------
$562,930 $2,436,418
================================================================================
<PAGE>
UROLOGIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
5. Operational Realignment and Other Charges
As a result of a downward revision to the Company's sales forecast in the first
quarter of fiscal 1999, the Company consolidated facilities and reduced the
workforce in an effort to decrease operating expenses. As a result of this
operational realignment, the Company recorded a charge to general and
administrative expenses for $1.6 million, reflecting severance costs paid to
employees, future lease costs related to facilities no longer occupied and the
impairment of assets no longer used. Additionally, the Company established a
$1.3 million reserve for excess inventories as a result of the downward revision
to the sales forecast. The impact of the operational realignment produced
reductions to operating expense beginning in the second quarter of fiscal 1999.
The charges described above were recorded in the quarter ended September 30,
1998. The elements of the total charge as of March 31, 2000 were as follows:
<TABLE>
<CAPTION>
Cash Outlays
Asset Change in -------------------------------
Total Charges Write-down Estimate Completed Future
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inventories $ 1,300,000 $ 1,300,000 $ - $ - $ -
Fixed assets 722,000 722,000 - - -
Facility shut down 548,000 - (130,000) 332,000 86,000
Employee severance 309,000 - - 309,000 -
------------------------------------------------------------------------------------
$ 2,879,000 $ 2,022,000 $ (130,000) $ 641,000 $ 86,000
====================================================================================
</TABLE>
6. Comprehensive Loss
Comprehensive loss includes all changes in equity during a period except those
resulting from investments by and distributions to shareholders. For the
Company, comprehensive loss represents net loss adjusted for unrealized gains
(losses) on available-for-sale securities.
Nine Months Ending March 31,
2000 1999
- ----------------------------------------------------------------------------
Net loss $(5,466,978) $(11,495,852)
Change in net unrealized gains (losses)
on available-for-sale securities (29,071) 101,758
- ----------------------------------------------------------------------------
Comprehensive loss $(5,496,049) $(11,394,094)
============================================================================
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion and analysis of the Company's consolidated
financial condition and results of operations for the three and nine months
ended March 31, 2000 and 1999. This section should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended June 30, 1999, which
has been filed with the Securities and Exchange Commission.
Cautionary Statement Regarding Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains, in addition to historical information, forward-looking
statements that are based on the Company's current expectations, beliefs,
intentions or future strategies. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from the
statements, including the extent to which the physicians performing the Targis
System procedures are able to obtain third-party reimbursement, changes in the
reimbursement environment, market acceptance and the rate of adoption of the
Targis treatment by the medical community, the impact of competitive treatments,
products and pricing, the approval of a shortened treatment time for the Targis
System and the effectiveness of the Company's sales and marketing organization.
The Company does not undertake responsibility to update such forward-looking
statements to reflect events that arise after the date of this report. A
detailed discussion of risks and uncertainties may be found in the Company's
Annual Report on Form 10-K for the year ended June 30, 1999.
OVERVIEW
Urologix develops, manufactures, and markets a minimally invasive medical
device for the treatment of benign prostatic hyperplasia ("BPH"), commonly known
as "enlarged prostate." BPH dramatically affects the quality of life of millions
of men by causing adverse changes in urinary voiding patterns. Urologix' Targis
System has been approved for marketing in the United States, the 15 European
Union countries, Japan and Canada.
The Targis procedure is a non-surgical, catheter-based treatment that uses
a proprietary microwave technology to preferentially heat diseased areas of the
prostate, while simultaneously cooling and protecting the pain-sensitive
urethral tissue. Because the urethra is protected from heat and is not punctured
or penetrated, Targis treatment can be performed without general or regional
anesthesia or intravenous sedation. Accordingly, Targis treatment is uniquely
positioned to be performed in a physician's office or an outpatient clinic. The
Company believes Targis treatment provides an efficacious, safe and cost
effective solution for BPH that provides results superior to medication without
the complications and side effects inherent in surgical procedures, and as such,
is well positioned to address the needs of physicians, patients and payors.
The Company markets the Targis System in the United States through a direct
sales force. The Company intends to continue to expand the direct sales force
and enhance its direct sales capabilities. The Company's strategy is to focus
marketing and sales efforts on generating physician access to and awareness of
the Targis System while creating patient demand by providing education on the
benefits of Targis treatment versus other treatment options.
Outside the United States, the Company has a distribution agreement with
Nihon Kohden Corporation ("Nihon Kohden"), a major Japanese developer,
manufacturer and marketer of medical devices, for the market development and
sales of the Targis System in Japan. The Company also has a distribution
agreement with Boston Scientific covering the majority of the European
countries. Under the agreement, Urologix has responsibility for market
development of the Targis System and works with Boston Scientific to sell Targis
Systems from Boston Scientific's inventory through Urologix' direct sales force
and other distributors in Europe. Boston Scientific compensates Urologix for
Urologix' market development services.
<PAGE>
RESULTS OF OPERATIONS
Sales increased to $2.3 million and $6.2 million for the three and nine-
month periods ended March 31, 2000 from $1.3 million and $4.2 million during the
same periods in the prior fiscal year. The increase in revenue during the three
and nine-month periods is due primarily to increased sales of Targis System
procedure kits. To grow procedure based revenue, the Company implemented a "per
procedure" sales and marketing business model in March of 1999. Under the per
procedure fee program, customers pay a fee for the use of a Targis System
control unit and treatment catheter, reducing the need for an upfront capital
equipment purchase. The increase in procedure kits sales is a result of the
success of this program.
Cost of goods sold increased to $1.2 million during the three months ended
March 31, 2000 compared to $956,000 for the same period in 1999. Cost of goods
sold increased as a result of higher sales volume. Gross margin as a percentage
of sales increased to 48% from 29% in the same period in the prior fiscal year
due primarily to decreased product cost and improved manufacturing efficiency.
Cost of goods sold decreased to $3.5 million during the nine-months ended
March 31, 2000 compared to $4.7 million for the same period in 1999. Cost of
goods sold was affected by two events in the nine-months ended March 31, 1999.
First, as a result of a downward revision to forecasted sales, the Company
established a reserve of $1.3 million for excess inventory. Second, the Company
operated under a reduced production schedule, as production was transitioned to
a new catheter design, resulting in the allocation of overhead over a lower
production volume. Gross margin as a percentage of sales increased to 44% from
(12%) in the same period in the prior fiscal year due to decreased product cost
and improved manufacturing efficiency.
Research and development expenses include expenditures for product
development, regulatory compliance and clinical studies. Clinical study costs
consist largely of payments to clinical sites and investigators, product for
clinical studies, and costs associated with monitoring clinical studies.
Research and development expenses decreased to $789,000 and $2.8 million for the
three and nine-month periods ended March 31, 2000 from $1.3 million and $3.8
million for the same periods in the prior fiscal year, due primarily to
reductions in staffing, the conclusion of several clinical studies and lower
regulatory and product development expenses.
Sales and marketing expenses increased to $1.8 million for the three-month
period ended March 31, 2000 from $1.3 million during the same period in the
prior fiscal year. Sales and marketing costs incurred during the nine-months
ended March 31, 2000 decreased to $4.9 million from $5.0 during the same period
in the prior fiscal year. The change in sales and marketing expenses is
attributable to payments received from Boston Scientific Corporation for
international market development services, which are reflected as reductions in
sales and marketing expense. Excluding the payments received from Boston
Scientific, sales and marketing expenses for the three and nine months ending
March 31, 2000 are consistent with expenses for the three and nine-months ending
March 31, 1999. The Company expects sales and marketing expenses to increase as
the Company hires additional direct sales representatives and intensifies its
efforts to generate awareness and acceptance of the Targis treatment.
General and administrative expenses decreased to $485,000 and $1.5 million
for the three and nine-month period ended March 31, 2000 from $558,000 and $3.5
million during the same period in the prior fiscal year. General and
administrative expenses decreased due to reductions in staffing and other
administrative expenses. General and administrative expenses for the nine-months
ended March 1999 include the impact of a $1.6 million charge incurred in
connection with the operational realignment.
Interest income decreased to $367,000 and $1.1 million for the three and
nine-months ended March 31, 2000 from $418,000 and $1.3 million for the same
period in the prior fiscal year. Interest income decreased due primarily to
lower cash and investment balances.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception through sales of
equity securities and, to a lesser extent, sales of the Targis System and Targis
System procedure kits. As of March 31, 2000, the Company had total cash, cash
equivalents and available-for-sale securities of $24.6 million and working
capital of $24.2 million.
During the nine-months ended March 31, 2000, the Company used $3.1 million
in operating activities, primarily as a result of the Company's net loss. The
Company generated $2.6 million in investing activities, primarily reflecting the
sale of $3.1 million of investment securities less purchases of $559,000 of
property and equipment. The Company is financing its fiscal 2000 operating and
investing activities primarily through funds received in a November 1997
secondary offering that raised net proceeds of $31.5 million.
In January of 2000, the Company amended the International Distribution
Agreement with Boston Scientific Corporation. Under the amended agreement,
Boston Scientific will compensate the Company for market development services by
shipping and transferring title of a defined number Targis System control units
held in Boston Scientific's inventory to the Company. The Company intends to use
these control units as part of its per procedure rental program.
The Company expects to continue to incur additional losses and will use its
working capital as it incurs substantial expenses related to the Targis System
marketing and research and development activities. In addition, the Company has
commenced a program to rent Targis System control units to customers on a per
procedure basis. Depending on the growth of this program, the Company may use
substantial capital to finance the units rented by customers.
Although the Company believes that existing cash, cash equivalents and
available-for-sale securities will be sufficient to fund its operations for at
least the next 24 months, there can be no assurance that the Company will not
require additional financing in the future or that any additional financing will
be available to the Company on satisfactory terms, if at all.
INTEREST RATE RISK
The fair value of the Company's investment portfolio at March 31, 2000
approximated carrying value. Increases and decreases in prevailing interest
rates generally translate into decreases and increases in the fair value of
these instruments. Also, fair values of interest rate sensitive instruments may
be affected by the credit worthiness of the issuer, prepayment options, relative
values of alternative instruments, the liquidity of the instrument and other
general market conditions.
Market risk was estimated as the potential decrease in fair value resulting
from a hypothetical 10% increase in interest rates for the issues contained in
the investment portfolio and was not materially different from the year-end
carrying value.
YEAR 2000 ISSUE
In late 1999 the Company completed year 2000 remediation and testing of its
systems and experienced no significant disruptions in critical information
technology and non-information technology systems. The Company did not incur any
material expenditures in connection with the remediation and testing of
information technology and non-information technology systems. As of this date,
the Company is not aware of any material problems resulting from Year 2000
issues, either with its products, internal systems, or the products and services
of third parties. However, there can be no assurance that the
<PAGE>
Company has fully and accurately assessed its Year 2000 readiness or of the
effectiveness of corrective actions. Nor can there be any assurance that the
company's customers, suppliers and vendors fully and accurately assessed their
Year 2000 readiness or of the effectiveness of their corrective actions.
Accordingly, the Company will continue to monitor its critical computer
applications and those of its customers, suppliers and vendors throughout the
year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
Item 3. Qualitative and Quantitative Disclosure about Market Risk
See Item 2, "Management's Discussion and Analysis of Financial Condition
and Results of Operations -"Interest Rate Risk"
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Modification to Amendment to International Distribution Agreement
between Urologix, Inc. and Boston Scientific Corporation. Certain
information has been omitted from this exhibit and filed separately
with the Commission pursuant to a request for confidential treatment
under Rule 24b-2.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter for which this Quarterly Report is filed, the Company
filed no Reports on form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date May 12, 2000
Urologix, Inc.
- --------------
(Registrant)
/s/ Michael M. Selzer, Jr.
- --------------------------
Michael M. Selzer, Jr.
President and Chief Executive Officer
(Duly Authorized Officer)
/s/ Christopher R. Geyen
- ------------------------
Christopher R. Geyen
Vice President Finance
(Principal Financial Officer)
<PAGE>
EXHIBIT 10.1 - CONFIDENTIAL TREATMENT REQUESTED
--------------------------------
Certain information has been omitted from
this exhibit and filed separately with the
Commission pursuant to a request for
confidential treatment under Rule 24b-2
Execution Copy
MODIFICATION
TO
AMENDMENT TO
INTERNATIONAL DISTRIBUTION AGREEMENT
This Modification to Amendment to International Distribution Agreement
(the "Modification") is made as of the 31st day of December, 1999, between
Urologix, Inc., a corporation organized and existing under the laws of the State
of Minnesota ("Urologix"), and Boston Scientific Corporation, a corporation
organized and existing under the laws of Delaware ("BSC").
BACKGROUND
By an International Distribution Agreement dated as of June 26, 1996
(the "Original Agreement"), Urologix granted BSC the rights and responsibilities
of an exclusive distributor of the Products of Urologix in all areas of the
world except the United States and Japan.
By an amendment to the Original Agreement dated as of February 26, 1999
(the "Amendment"), Urologix and BSC amended the Original Agreement in order for
Urologix to perform certain market development activities for the Products
primarily in Europe, Eastern Europe, and the Middle East, in exchange for
certain market development amounts paid to Urologix by BSC.
The term of the First Amendment Period under the Amendment expires on
December 31, 1999 and if the parties do not agree to extend the term of the
Original Agreement, the Amendment and the Original Agreement will then
terminate.
Urologix and BSC desire to continue the term of the Original Agreement
after December 31, 1999 until June 30, 2001 on the terms and conditions set
forth in this Modification. Capitalized terms used but not defined herein shall
have the respective meanings ascribed to such terms in the Original Agreement as
amended by the Amendment. The Original Agreement as amended by the Amendment and
this Modification is herein collectively referred to as the "Agreement."
TERMS AND CONDITIONS
NOW THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
<PAGE>
EXHIBIT 10.1 - CONFIDENTIAL TREATMENT REQUESTED
--------------------------------
Certain information has been omitted from
this exhibit and filed separately with the
Commission pursuant to a request for
confidential treatment under Rule 24b-2
1. Second Amendment Period. The terms of this Modification will apply
from January 1, 2000 through June 30, 2001 (the "Second Amendment Period"),
which period is the remainder of the original term under the Original Agreement.
Accordingly, the term of the Amendment (as amended by this Modification) is
hereby extended through the end of the Second Amendment Period.
2. Redefinition of Territory. Effective January 1, 2000, the definition
of the term "Territory" under the Original Agreement is revoked and of no
further force or effect. During the Second Amendment Period, the term
"Territory" under the Agreement will mean and, be limited to, the European
Countries listed on Exhibit A.
3. Market Development Compensation. [Confidential Treatment Requested]
3.1 [Confidential Treatment Requested]
3.2 [Confidential Treatment Requested]
3.3 [Confidential Treatment Requested]
4. Marketing. Urologix will use such commercial efforts as it deems
satisfactory under the circumstances to solicit the sale of Procedure Kits in
the Territory during the Second Amendment Period.
5. Procedure. All Products sold to third parties by Urologix in the
Territory during the Second Amendment Period will be sold in accordance with the
following procedures:
5.1 New Units. Urologix will determine the price and terms at
which New Units are sold, and will retain all proceeds from the sales
of all New Units. If requested, BSC will ship New Units to customers
designated by Urologix and will invoice those customers on behalf of
Urologix and remit to Urologix all payments received from those
customers within 10 days after BSC's receipt of payment for the New
Unit involved. Urologix will pay BSC $2,000 for each New Unit sold by
Urologix and shipped by BSC to compensate BSC for its services in
handling and shipping those New Units and collecting those invoices,
and will also reimburse BSC for the shipping charges incurred by BSC in
shipping those New Units.
2
<PAGE>
EXHIBIT 10.1 - CONFIDENTIAL TREATMENT REQUESTED
--------------------------------
Certain information has been omitted from
this exhibit and filed separately with the
Commission pursuant to a request for
confidential treatment under Rule 24b-2
5.2 Procedure Kits. Urologix will determine the price at which
Procedure Kits are sold. [Confidential Treatment Requested] There are
no assurances that Urologix will achieve such a gross margin, and
Urologix will not be penalized in any manner if it does not achieve
such a gross margin.
5.3 Purchase Orders. Urologix will inform BSC of all purchase
orders received with respect to Procedure Kits within three business
days of receipt thereof. Within three days after being so informed by
Urologix, BSC may accept any such Purchase Order in accordance with its
terms. If BSC so accepts such a Purchase Order, BSC will be responsible
for the proper and timely shipment of the Procedure Kits involved to,
and the invoicing of, that customer and for the collection of all
amounts due BSC from any such sale. If BSC does not so accept any such
order, Urologix may, at its option, fill that order from Urologix own
inventory. In that event, Urologix will retain all of the proceeds from
that particular sale; BSC will not be entitled to any benefits from
that sale.
5.4 Demo Units. Urologix may sell any Demo Units as used
equipment at such price as may be acceptable to Urologix. Urologix will
promptly inform BSC of the terms of each such sale, and BSC will be
responsible for invoicing and collecting payment from those customers.
[Confidential Treatment Requested] BSC will pay Urologix all amounts
due Urologix in conjunction with each such sale within 10 days after
BSC's receipt of payment for the Demo Unit involved. If any user of any
of the Demo Units (which have not been sold) wishes to discontinue its
use of a Demo Unit, BSC will pay all expenses incurred in conjunction
with that Demo Unit being returned to BSC's facility in Beek for
storage by BSC.
5.5 Demonstration Catheters. Urologix may provide Procedure
Kits from BSC's then existing inventory in Beek, the Netherlands or
from Urologix' own inventory of Procedure Kits to third parties without
charge. [Confidential Treatment Requested] Urologix will reimburse BSC
for all of its shipping costs (including insurance) associated with
such deliveries within 10 days of receipt from BSC of a statement of
such costs. BSC will not receive any payment from Urologix in
conjunction with any such Procedure Kits provided by Urologix out of
its own inventory of Procedure Kits. Urologix will, in its discretion,
determine whether any such Procedure Kits will be provided from BSC's
Beek inventory or from Urologix' own inventory.
5.6 Congresses and Trade Shows. Urologix may display the
Products at congresses and trade shows in Europe and certain other
areas of the world. If Urologix
3
<PAGE>
EXHIBIT 10.1 - CONFIDENTIAL TREATMENT REQUESTED
--------------------------------
Certain information has been omitted from
this exhibit and filed separately with the
Commission pursuant to a request for
confidential treatment under Rule 24b-2
prefers to display the Products at a BSC booth at any of those
congresses or trade shows, Urologix may do so on terms to be
coordinated between Urologix and BSC with reasonable lead time and
planning.
5.7 Inventory. BSC may purchase from Urologix from time to
time, such additional units of any of the Procedure Kits as BSC
determines may be necessary to enable BSC to fill orders for the sale
of Procedure Kits on a timely basis; [Confidential Treatment Requested]
6. Service. Urologix shall be responsible for service of all existing
and future Control Unit placements in the Territory. BSC will pay Urologix for
all parts used in servicing those Control Units but will not provide any other
funding for this activity. Urologix will determine, in its sole discretion, the
nature and extent of the service which it will provide for Control Unit
placements in the Territory.
7. Amendment Provisions Revoked. Effective January 1, 2000, the
following sections of the Amendment are hereby revoked and of no further force
or effect: Sections 1, 2, 3, 4, 5, 6, 7, 8, and 9.
8. Amendment Provisions Modified. Effective January 1, 2000, the
following sections of the Amendment are hereby modified as indicated below:
8.1 In Section 10, the phrase "in accordance with Section 8
hereof" in the third line of Section 10 is hereby deleted.
8.2 In Section 13, the date "January 1, 1999" contained in
Clause (i) is hereby revised to read "January 1, 2001."
9. Early Termination. Either party may terminate the Agreement for any
reason at any time during the Second Amendment Period, upon at least 90 days
prior written notice to the other party (an "Early Termination Notice"). If the
term of the Agreement is terminated pursuant to this Section 9, the rights and
obligations of BSC and Urologix thereafter under the Agreement will be as set
forth in Section 13 of the Amendment.
10. Option to Purchase Control Units. Upon the termination of the
Agreement for any reason, Urologix may, for a period of ninety (90) days
following the effective date of such termination, at its option and by written
notice delivered to BSC within such ninety (90) day period, elect to purchase
from BSC such number of New Units or Demo Units then owned by
4
<PAGE>
EXHIBIT 10.1 - CONFIDENTIAL TREATMENT REQUESTED
--------------------------------
Certain information has been omitted from
this exhibit and filed separately with the
Commission pursuant to a request for
confidential treatment under Rule 24b-2
BSC (taking into account the provisions of Section 3.2 if applicable) as it may
then desire to purchase. [Confidential Treatment Requested] Upon receipt of such
notice and payment, BSC will promptly ship, at Urologix' expense, F.O.B. Beek,
the Netherlands, such New Units and Demo Units so purchased; provided, that in
the event that any Demo Units so purchased are not located in Beek, Urologix
shall be responsible for making all arrangements with respect to, and paying all
costs associated with, retrieving, delivery and shipment of such Demo Units from
their then current location and BSC shall bear no responsibility in connection
therewith, title and all risk of loss with respect to such Demo Units having
passed to Urologix upon BSC's receipt of payment therefore. Urologix will
coordinate retrieval of any Demo Units with BSC personnel to minimize impact on
customer relationships. Urologix will reimburse BSC for all shipping costs
(including insurance) incurred by BSC on Urologix' behalf in connection with
deliveries of New Units and Demo Units pursuant to this Section 10 within ten
days of receipt from BSC of a statement of such costs. NOTWITHSTANDING THE TERMS
OF ANY PURCHASE ORDER, INVOICE OR OTHER DOCUMENT OR STATEMENT (WRITTEN OR ORAL),
WHETHER PRIOR TO, CONTEMPORANEOUS WITH OR SUBSEQUENT TO THE DATE OF THIS
MODIFICATION, ALL SALES OF NEW UNITS AND DEMO UNITS PURSUANT TO THIS SECTION 10
SHALL BE ON AN "AS IS" BASIS EXCEPT THAT ALL NEW UNITS MUST BE SALEABLE AS A NEW
CONTROL UNIT, AND BSC HEREBY DISCLAIMS ANY AND ALL OTHER REPRESENTATIONS AND
WARRANTIES, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO SUCH NEW UNITS AND DEMO
UNITS, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. [Confidential Treatment Requested]
11. Effect of Modification. Except as modified by this Modification,
the Original Agreement, as amended by the Amendment, remains in full force and
effect.
UROLOGIX, INC.
By /s/Christopher R. Geyen
----------------------------------
Its Vice President - Finance
BOSTON SCIENTIFIC CORPORATION
By /s/Ruby Chandy
----------------------------------
Its President, Microvasive Urology
5
<PAGE>
EXHIBIT 10.1 - CONFIDENTIAL TREATMENT REQUESTED
--------------------------------
Certain information has been omitted from
this exhibit and filed separately with the
Commission pursuant to a request for
confidential treatment under Rule 24b-2
EXHIBIT A TO FIRST AMENDMENT
THE TERRITORY
Benelux
United Kingdom
Norway
Sweden
Denmark
Finland
Germany
Switzerland
Austria
Italy
Spain
France
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS OF UROLOGIX FOR THE NINE MONTH PERIOD ENDING
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 373,887
<SECURITIES> 24,222,956
<RECEIVABLES> 1,629,072
<ALLOWANCES> 220,494
<INVENTORY> 562,930
<CURRENT-ASSETS> 26,815,850
<PP&E> 5,332,024
<DEPRECIATION> 3,382,431
<TOTAL-ASSETS> 32,838,252
<CURRENT-LIABILITIES> 2,584,802
<BONDS> 0
0
0
<COMMON> 115,521
<OTHER-SE> 30,137,929
<TOTAL-LIABILITY-AND-EQUITY> 32,838,252
<SALES> 6,158,270
<TOTAL-REVENUES> 6,158,270
<CGS> 3,478,428
<TOTAL-COSTS> 3,478,428
<OTHER-EXPENSES> 9,246,340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 773
<INCOME-PRETAX> (5,466,978)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,466,978)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,466,978)
<EPS-BASIC> (.48)
<EPS-DILUTED> (.48)
</TABLE>
