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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended June 30, 2000.
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition 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: (763) 475-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
(1) Common Stock, $.01 par value.
(2) Series A Junior Participating Preferred Stock Purchase Rights
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 (_)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. (x)
As of September 8, 2000, the aggregate value of the Company's Common Stock held
by non-affiliates of the Company was approximately $83,000,000 million based on
the last reported sales price on that date.
As of September 8, 2000 the Company had outstanding 11,651,222 shares of Common
Stock, $.01 par value.
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DOCUMENTS INCORPORATED BY REFERENCE
Certain information is incorporated into Part III of this report by reference to
the Proxy Statement for the Registrant's 2000 annual meeting of stockholders to
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
not later than 120 days after the end of the fiscal year covered by this Form
10-K.
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INDEX
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
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PART I
ITEM 1. BUSINESS
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Forward Looking Statements
Statements included in this Annual Report on Form 10-K that are not historical
or current facts are forward-looking statements that are based on current
expectations and beliefs. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
suggested in the forward-looking statements. Some of the factors that could
cause actual results to differ include, among others, (i) market acceptance of
the Targis System, (ii) availability, timing and amount of third-party
reimbursement for the Targis procedure, (iii) the Company's ability to maintain
intellectual property protection for its proprietary products and to defend its
existing intellectual property rights from challenges by third parties, and the
additional factors set forth below under "Cautionary Statements Regarding Future
Operations" and in this and other documents filed from time to time with the
Securities and Exchange Commission. The forward-looking statements included in
this report are made only as of the date hereof, and Urologix undertakes no
obligation to publicly revise or update the forward-looking statements to
reflect subsequent events or circumstances.
Overview
Benign Prostatic Hyperplasia
Benign Prostatic Hyperplasia ("BPH") is a non-cancerous urological disease
in which the prostate enlarges and constricts the urethra. Symptoms associated
with BPH affect the quality of life of millions of sufferers worldwide and can
lead to irreversible bladder or kidney damage. The prostate is a walnut-size
gland surrounding the male urethra (the channel that carries urine from the
bladder out of the body) that is located just below the bladder and adjacent to
the rectum. While the actual cause of BPH is not fully understood, it is known
that as men reach middle age, cells within the prostate begin to grow at an
increasing rate. As the prostate expands, it compresses or impinges upon other
portions of the prostate gland and the urethra, thereby restricting the normal
passage of urine. BPH patients typically suffer from a variety of troubling
symptoms that can have a significant impact on their quality of life. Symptoms
of BPH include frequent urination during the day and night, urgency and painful
urination. A delay in treatment can have serious consequences, including
complete obstruction (acute retention of urine), urinary tract infections, loss
of bladder functions, and in extreme cases, kidney failure.
Evidence of BPH typically begins to appear in men in their 50's, and by age
70, the quality of life of most men is negatively affected by BPH symptoms.
Medical sources estimate that the percentage of men suffering from symptoms of
BPH is approximately 50% for men in their 50's and increases to more than 75%
for men over age 80. The BPH market is large and can be expected to continue to
grow due to the general aging of the world's population, as well as increasing
life expectancies. It is estimated that approximately 23 million men worldwide
suffer from the symptoms of BPH with current annual expenditures in excess of
$10 billion.
Many patients diagnosed with BPH are regularly monitored by their
physicians but, due in part to the side effects and complications associated
with current BPH therapies, elect not to receive active intervention (a course
of inaction known as watchful waiting). If symptoms persist or worsen, drug
therapy or surgical intervention has been recommended. Drug therapy is usually
the first line of treatment. An estimated 30% to 40% of patients who initially
pursue drug therapy discontinue treatment within 12 months due to various
reasons including ineffectiveness, side effects and the burdens of compliance
and cost. The most common surgical procedure has been
Transurethral Resection of the Prostate (known as TURP), an invasive surgery in
which portions of the prostatic urethra and surrounding tissue are removed,
thereby widening the urethra improving urinary flow. While TURP results in a
dramatic improvement in urine flow and reductions in symptoms, a significant
number of patients experience serious
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complications. The TURP procedure requires a highly skilled surgeon with
extensive training, and the incidence of these complications may be affected by
the experience of the surgeon performing the TURP.
The Urologix Approach
The Targis System is a non-surgical, catheter-based treatment for BPH that
is better than medication and less invasive than surgery. The Targis System was
developed to be the therapy of choice for patients who have failed drugs but
wish to avoid choosing surgery.
The Targis System utilizes a proprietary microwave technology, delivered
through a flexible catheter that precisely targets energy into the diseased area
of the prostate to a temperature sufficient to cause cell death, while
simultaneously cooling and protecting the pain sensitive urethral tissue. During
a Targis procedure, a Targis Catheter is inserted into the urethra and a rectal
thermosensing unit ("RTU") is placed into the rectum. Chilled water is then
circulated through the catheter. The chilled water is designed to lower the
temperature of the urethra to protect it from heat and discomfort during the
treatment. Temperatures in the urethra and rectum are monitored continuously by
the Targis system during the treatment to ensure that the appropriate level of
energy is delivered. During the treatment, precisely targeted energy is
delivered into the prostatic tissue resulting in a reduction in the size of the
prostate. Following treatment, a small catheter is inserted and the patient is
released. The small catheter is typically left in place for two to four days to
drain urine while temporary swelling caused by the treatment subsides. During
the period following the treatment, pressure on the urethra is decreased and BPH
symptoms are reduced.
The Targis procedure provides significant advantages over other BPH
therapies. The Targis procedure produces lasting results that are clinically
superior to drug therapy while avoiding the complications associated with
surgery. The Targis procedure does not require punctures or incisions, thereby
leaving the urethra intact. Not only does this result in fewer complications but
allows the Targis procedure to be performed without anesthesia or intravenous
sedation in a physician's office or hospital outpatient environment.
The Targis System consists of the Targis Control Unit and the Targis
Procedure Kit, which includes the Targis Catheter, Cooling Bag and Rectal
Thermosensing Unit. The Targis Control Unit contains a microwave generator, a
solid-state refrigeration device, a circulation pump and electronic circuitry to
monitor therapy. The Targis Control Unit supplies microwave energy and coolant
to the Targis Catheter and collects and processes data from the Targis Catheter
and the RTU. The Targis Catheter contains a microwave antenna for precisely
delivering microwave energy to the prostate and a thermosensor for monitoring
the urethral temperature. The Coolant Bag holds the chilled water that is
circulated during therapy. The RTU monitors rectal temperatures. The Targis
Catheter, Coolant Bag and RTU are single-use devices.
Clinical Status
The combined results of the Company's clinical trials indicate that the
Targis System can be performed without anesthesia and in the vast majority of
cases was effective in reducing American Urological Association ("AUA") Symptom
Scores by 58% at three months and that the results were maintained for at least
five years. The AUA Symptom Score is a statistically validated system of
evaluating and monitoring BPH symptom severity. The data also demonstrated that
the Targis procedure increased peak urine flow rates for patients with a mean
increase of 4ml/sec at three months and that a flow rate increase of
approximately 3ml/sec was maintained through five years. The Company has patient
quality of life data from the 548 patients from whom the Company has received
one-year follow-up data. These patients were asked statistically validated
quality of life assessment questions to evaluate how they would feel living the
rest of their life with their current BPH symptoms. At 12 months following their
Targis procedures, 74% of these patients indicated they were satisfied, an
increase from only 4% giving the same response prior to treatment. The Targis
treatment results in a minimum level of complications, as only 7% of the
patients experienced an episode of urinary tract infection that was treated and
resolved with routine antibiotic therapy, and less than 1% experienced urethral
stricture requiring intervention. Other minor complications included
epididymitis (4%), loss of ejaculate (4%), and transient
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urinary incontinence (3%). There can be no assurance that future clinical
results will be consistent with those achieved to date.
Sales and Marketing
The Company's marketing strategy includes (i) increasing market awareness
of the Targis System, (ii) creating access to the Targis System through the
placement and sale of Targis System control units, (iii) enhancing the use of
the Targis System by physicians who have access, and (iv) demonstrating the cost
effectiveness of the Targis System to governmental and commercial payors.
United States
The Company has developed a sales and marketing team consisting of sales
and marketing management, product managers, communication specialists and direct
sales representatives, who are all dedicated to marketing the Targis System. The
Company targets urologists who practice in high-volume prostate treatment groups
and who are opinion leaders in BPH treatment methods. In addition to a direct
sales force, the Company utilizes independent third party mobile service
providers. The mobile service providers transport the Targis System between
sites, making the treatment available to physicians and patients at different
sites on a rotating basis. The mobile service providers can offer smaller
hospitals and urology clinics cost effective access to the Targis treatment. The
Company has hired and trained 16 sales representatives and is actively
recruiting additional sales representatives. As of September 8, 2000, the
Company employed a total of 27 individuals in its sales and marketing
department.
The Company offers urologists and hospitals the option to either purchase
the Targis System Control Unit or to rent the Targis System on a per use basis.
The list prices for the purchase of a Control Unit and Procedure Kit are
$150,000 and $1,200 respectively. Rental fees vary depending on the length and
terms of the arrangement.
International
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 and Procedure Kits from Boston Scientific's inventory through Urologix'
direct sales force and other distributors in Europe. Boston Scientific
compensates Urologix for Urologix' market development services.
Manufacturing
The Company has recently transitioned the production of the Targis Control
Unit to Colorado Medtech from Plexus, formerly SeaMED. The Targis Control Unit
is manufactured to the Company's specifications under a supply agreement that
expires in 2003. The change in suppliers is anticipated to result in lower
product costs and increased product quality. Although the Company expects the
transition to progress according to a pre-determined plan and timetable and that
Colorado Medtech will be able to adequately meet demand for the Targis Control
Unit on a timely basis, there can be no assurance that this will be the case.
The Targis Procedure Kits are assembled by the Company, using materials and
components supplied to the Company by various subcontractors and suppliers, as
well as components fabricated by the Company. Several of the components are
currently available to the Company through a single vendor. Wherever possible
and practical, the Company intends to develop alternative sources for every
critical component. Where alternative sourcing is not possible, the Company
intends to enter into supply agreements with each component provider.
Nevertheless, failure to obtain
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components from such providers or delays associated with any future component
shortages, particularly as the Company increases its manufacturing level, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company's manufacturing operations must comply with the United States
Food and Drug Administration's ("FDA") quality system regulation, which
includes, but is not limited to, the FDA's Good Manufacturing Practices ("GMP")
requirements, and with certain requirements of state, local and foreign
governments, which establish requirements for assuring quality by controlling
components, processes and document traceability and retention, among other
things. In June 1997, July 1998 and September 2000, the FDA conducted
inspections of the Company's manufacturing facility, in which the Company's
facility, documentation and quality control systems were determined to be
satisfactory and no significant deficiencies of GMP were raised by the FDA. The
Company's facilities will continue to be subject to periodic inspections by the
FDA and by other auditors. The Company believes that its manufacturing and
quality control procedures meet the requirements of these regulations, and has
established training and self-audit systems designed to ensure compliance.
The Company has received ISO 9001 certification indicating compliance of
the Company's manufacturing facilities with European standards for quality
assurance and manufacturing process control. The Company has also received CE
mark certification, which allows it to affix the CE Mark to its products and
market them in the European Union. In addition, the Targis System has been
approved for marketing by the Japanese Ministry of Health and Welfare. As of
September 8, 2000, the Company employed 18 individuals in its manufacturing
department.
Research and Development
The Company intends to build upon its clinical knowledge and relationships
to develop innovative future generations of BPH and other urology products. The
Company's research and development efforts are currently focused on improving
the function and features of the Targis System, reducing the production cost of
the components in the Targis System, and investigating other applications for
its technologies. The Company also believes that its core technologies may have
other medical applications for prostatic diseases, including malignancies.
During the fiscal years ended June 30, 2000, 1999 and 1998, the Company
spent $3.6 million, $5.1 million and $6.7 million, respectively, in its research
and development efforts. As of September 8, 2000, the Company employed 19
individuals in its research and development department.
Reimbursement
The Company believes that third-party reimbursement will be essential to
acceptance of the Targis procedure, and that clinical efficacy, overall cost
effectiveness and physician advocacy will be keys to obtaining such
reimbursement. The Company estimates that 60% to 80% of patients who receive a
Targis treatment in the United States will be eligible for Medicare coverage.
The remaining patients will either be covered by private insurers, including
traditional indemnity health insurers and managed care organizations, or be
private-paying patients. As a result, Medicare reimbursement is particularly
critical for widespread market acceptance of the Targis treatment in the United
States.
The level of Medicare reimbursement of transurethral microwave therapy is
dependent on the site of service. Beginning on August 1, 2000 the Health Care
Financing Administration ("HCFA") replaced the reasonable cost basis of
reimbursement for outpatient hospital-based procedures, including the Targis
treatment, with a new fixed rate or "prospective payment system". Under this new
method of reimbursement, a hospital will receive a fixed reimbursement of
approximately $1,875 for each Targis treatment performed in its facility,
although this rate can be higher or lower depending on a wage index and other
factors for each hospital. The urologist performing the Targis treatment will
continue to be reimbursed approximately $600 per procedure.
On July 17, 2000, HCFA published new Medicare payment rates and a schedule
for implementing
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microwave thermotherapy for the treatment of BPH in the physician's office.
Coverage for Targis treatment is included in the ruling, which has been
published in the Federal Register and proposed to become effective January 1,
2001, subject to a 60-day comment period. Although the initial publication by
HCFA contained an error, the American Urological Association has estimated the
reimbursement rate (inclusive of the physician's fee) for the Targis treatment
in the urologist's office to be approximately $2,601 in 2001 and $3,258
beginning January 1, 2002. The final rate for transurethral microwave
thermotherapy when performed in the physician's office is expected to be
included in a final ruling expected to be published in November 2000.
Although HCFA has made national payment decisions for transurethral
microwave therapy, local Medicare carriers each made their own coverage
decisions. Based on communications with various local Medicare carriers, the
Company believes that coverage for transurethral microwave therapy for BPH in
the hospital outpatient environment is currently available in 50 states. Despite
these indications and recommendations, there can be no assurance that
reimbursement will continue to be available to providers in the hospital
outpatient environment or that transurethral microwave therapy will receive
positive coverage decisions for use in the physician's office.
With the recent changes and proposed changes in the reimbursement rate and
site of care for which Medicare will reimburse the Company's products, the
Company is in a period of transition. The Company's strategy will be to continue
to support its hospital-based customers while making the preparations necessary
to service and accelerate the volume of business in the urologists' office. In
both settings, the Company will continue to focus its marketing and sales
efforts on patient awareness and physician advocacy of the Targis treatment.
Private insurance companies and HMOs make their own determinations
regarding coverage and reimbursement based upon "usual and customary" fees
established for CPT codes.
There can be no assurance that the Company will receive favorable coding,
coverage and reimbursement determinations for its Targis System from Medicare
and other payors or that amounts reimbursed to physicians for performing a
Targis procedure will be sufficient to encourage physicians to use the Company's
Targis System.
Internationally, reimbursement approvals for the Targis procedure will be
sought on an individual country basis. Some countries currently have established
reimbursement authorizations for transurethral microwave therapy. Reimbursement
approvals have been obtained through Nihon Kohden Corporation for the Targis
System in Japan. The Company is actively pursuing reimbursement approvals on a
country-by-country basis throughout Western Europe. Clinical studies and
physician advocacy will be used to support reimbursement requests in countries
where there is currently no reimbursement for such procedures.
Patents and Proprietary Rights
The Company aggressively pursues protection of its intellectual property
and has been issued a number of United States and foreign patents. The Company
also has patent applications pending in the United States and in a number of
foreign jurisdictions and intends to file additional patent applications in the
future.
Several of the United States patents issued to the Company claim
methods and devices, which the Company believes, are critical to providing a
safe and efficacious treatment for BPH. The claims under these
patents relate to devices and methods for preferentially limiting the amount of
microwave energy directed toward the rectum. Because cell death is a function of
time and temperature and because the rectum is in close proximity to the
prostate, the Company believes preferential heating is critical to enable
continuous delivery of energy to achieve an adequate zone of necrosis to durably
treat BPH while not endangering the rectum.
The Company also has several issued patents and pending applications
relating to its gamma-matched, helical-dipole microwave antenna. For a
microwave antenna to radiate energy efficiently, it must be impedance matched to
its environment. Further, the antenna design controls the evenness of the
heating and the area to be heated. The
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Company has been issued patents covering various designs and methods of its
helical microwave antenna with impedance matching.
There can be no assurance that these patents, or any patents that may be
issued as a result of existing or future applications, will offer any degree of
protection from competitors or that any of the Company's patents or applications
will not be challenged, invalidated or circumvented in the future. In addition,
there can be no assurance that competitors, many of which have substantial
resources and have made substantial investments in competing technologies, will
not seek to apply for and obtain patents that will prevent, limit or interfere
with the Company's ability to manufacture or market its Targis System in the
United States or in international markets. Further, there can be no assurance
the Company's Targis System does not infringe upon the patent rights or other
intellectual property rights of other companies, that the Company will not be
required to seek licenses from other companies or that other companies will not
pursue claims of infringement against the Company.
Other companies have developed or are in the process of developing medical
methods and devices to transurethrally treat BPH with microwave energy. Several
companies have applied for, and in some cases received, patents related to such
medical methods and devices. One company, BSD Medical Corporation ("BSD"),
initiated a patent infringement lawsuit against the Company in 1992. The Company
chose to settle that lawsuit in March 1994 by entering into a settlement
agreement with BSD ("the 1994 BSD Settlement Agreement"), under which BSD
granted the Company a license for the patent at issue, as well as several other
patents. In May 1998 the Company entered into a settlement agreement ("1998
Agreement") with BSD Medical Corporation and TherMatrx, Inc. which resolved a
dispute about the 1994 BSD Settlement Agreement. Under the terms of the 1998
Agreement, the Company paid a total of $5.0 million and now holds a fully-paid,
non-cancellable, non-exclusive, worldwide license from BSD Medical and
TherMatrx, Inc. with respect to patents relating to the microwave treatment of
BPH and other urological diseases.
In August 1996, the Company entered into a non-exclusive, worldwide patent
license agreement with EDAP TMS S.A., a French corporation, and its subsidiary,
EDAP Technomed, Inc. (collectively referred to as "EDAP") for certain EDAP
patents relating to the microwave treatment of BPH.
The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect, in part, through proprietary information agreements with
employees, consultants and other parties. The Company's proprietary information
agreements with its employees and most of its consultants contain industry
standard provisions requiring such individuals to assign to the Company, without
additional consideration, any inventions conceived or reduced to practice while
retained by the Company, subject to customary exceptions. The Company's officers
and other key employees also agree not to compete with the Company for a period
following termination. There can be no assurance that proprietary information or
non-compete agreements with employees, consultants and others will not be
breached, that the Company would have adequate remedies for any breach, or that
third parties will not nonetheless gain access to the Company's technology.
Competition
Competition in the market for BPH treatments is intense and is expected to
increase. The Company believes that its principal competition will come from
both surgical and non-surgical therapies. Surgical therapies include TURP,
Transurethral Incision of the Prostate (known as TUIP) or alternative surgical
procedures for vaporization of the prostate tissue using laser or radio
frequency energy. Non-surgical alternatives include drug therapy and emerging
less invasive technologies.
The Company expects that competition in the BPH field will be based, among
other things, on the ability of the therapy to provide safe, effective and
lasting treatment, cost effectiveness of the therapy, acceptance of the
procedure by physicians, health care payors and patients, patent position,
marketing and sales capabilities, and third-party reimbursement policies.
Another factor in competition may be the timing of market introduction of
competitive products.
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Government Regulation
Governmental regulation in the United States and other countries is a
significant factor affecting the research and development, manufacture and
marketing of the Company's products. In the United States, the FDA has broad
authority under the Federal Food, Drug and Cosmetic Act and the Public Health
Service Act to regulate the distribution, manufacture and sale of medical
devices. Foreign sales of medical devices are subject to foreign governmental
regulation and restrictions that vary from country to country.
Medical devices intended for human use in the United States are classified
into one of three categories, depending upon the degree of regulatory control to
which they will be subject. Such devices are classified by regulation into
either class I (general controls), class II (performance standards) or class III
(pre-market approval or "PMA") depending upon the level of regulatory control
required to provide reasonable assurance of the safety and effectiveness of the
device. Good Manufacturing Practices, labeling, maintenance of records and
filings with the FDA also apply to medical devices.
The FDA approved the PMA for the Targis System in August 1997. On several
occasions subsequent to August 1997, the FDA approved expanded claims for the
Targis System. The FDA made the Targis System a restricted device that means
that its labeling specifies requirements for the training of physicians who may
use the device and that the FDA has greater control over advertising for the
Targis System.
The FDA's regulations require agency approval of a PMA supplement for
certain changes if they affect the safety and effectiveness of the device. Such
changes include, but are not limited to: new indications for use; the use of a
different facility or establishment to manufacture, process or package the
device; changes in manufacturing methods or quality control systems; changes in
vendors used to supply components of the device; changes in performance or
design specifications, and certain labeling changes. Any such changes will
require FDA approval of a PMA supplement before marketing. There can be no
assurance that the required approvals of PMA supplements for any changes to the
Targis System will be granted on a timely basis or at all, and delays in receipt
of, or failure to receive such approvals, or the loss of the approval of the PMA
for the Targis System, would have a material adverse effect on the business,
financial condition and results of operations of the Company.
The process of obtaining FDA and other required regulatory clearances or
approvals is lengthy and expensive. There can be no assurance that the Company
will be able to obtain or maintain the necessary clearances or approvals for
clinical testing or for manufacturing or marketing of its products. Failure to
comply with applicable regulatory approvals can, among other things, result in
warning letters, fines, suspensions of regulatory approvals, product recalls,
operating restrictions and criminal prosecution. In addition, governmental
regulation may be established which could prevent, delay, modify or rescind
regulatory clearance or approval of the Company's products.
Product Liability and Insurance
The business of the Company entails the risk of product liability claims.
Any such claims could have an adverse impact on the Company. The Company
maintains product liability insurance with coverage of $1.0 million per
occurrence and an annual aggregate maximum of $2.0 million. The Company also
carries a $15.0 million umbrella insurance policy. The Company evaluates its
insurance requirements on an ongoing basis. There can be no assurance that
product liability claims will be covered by such insurance, will not exceed such
insurance coverage limits or that such insurance will be available on
commercially reasonable terms, or at all. Any successful product liability claim
may prevent the Company from obtaining adequate product liability insurance in
the future on commercially desirable or reasonable terms. In addition, product
liability insurance may cease to be available in sufficient amounts or at an
acceptable cost. An inability to obtain sufficient insurance coverage could
prevent or inhibit the marketing and sale of our products. A product liability
claim could result in a recall of the product by the FDA and could have a
material adverse effect on the Company's reputation, business, financial
condition and results of operations.
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Employees
As of September 8, 2000, the Company employed 72 individuals on a full-time
basis. The Company also has several part-time employees and consultants. The
Company believes that it has been successful in attracting experienced and
capable personnel, although there can be no assurance that the Company will
continue to attract and retain qualified personnel. None of the Company's
employees is covered under a collective bargaining agreement. The Company
considers relations with its employees to be good.
Backlog
Although the Company has received orders for future delivery of its
products, the Company did not have a significant backlog at September 8, 2000.
Cautionary Statements Regarding Future Operations
Uncertainty of Market Acceptance
The Targis procedure represents a new therapy for BPH, and there can be no
assurance that the Targis System will gain any significant degree of market
acceptance among physicians, health care payors or patients. Physicians may
elect not to perform the procedure. Health care payor acceptance of the Targis
procedure will require, among other things, evidence of the cost effectiveness
of the Targis procedure as compared to other BPH therapies. Patient acceptance
of the procedure will depend in part on physician recommendations, as well as
other factors, including the degree of invasiveness, the rate and severity of
complications and other side effects associated with the procedure, as compared
to other therapies and the ability to educate patients of their treatment
choices. If the Targis procedure is not accepted by physicians, patients or
payors the Company's sales may be negatively impacted.
Dependence on Third-Party Reimbursement
In the United States, health care providers, such as hospitals and
physicians generally rely on third-party payers, principally Federal Medicare,
state Medicaid and private health insurance plans, to reimburse all or part of
the cost of medical procedures. The Company's success will be largely dependent
upon the extent to which satisfactory reimbursement for the Targis procedure can
be obtained. Third-party reimbursement is dependent upon decisions by the Health
Care Financing Administration ("HCFA") and contract Medicare carriers for
Medicare, individual managed care organizations, private insurers, foreign
governmental health programs and other payors of healthcare cost. Any failure to
receive or maintain favorable coding, coverage and reimbursement determinations
for the Targis System by these organizations could discourage physicians from
using the Targis System. The Company may be unable to sell its products on a
profitable basis if third-party payors deny coverage or reduce their current
levels of reimbursement.
The continuing efforts of government and insurance companies, health
maintenance organizations and other payors of healthcare costs to contain or
reduce costs of health care may affect the Company's future revenues and
profitability. With recent federal and state government initiatives directed at
lowering the total cost of health care, the United States Congress and state
legislatures will likely continue to focus on healthcare reform including the
reform of Medicare and Medicaid systems, and on the cost of medical products and
services. Additionally, third-party payors are increasingly challenging the
prices charged for medical products and services. Also, the trend toward managed
health care in the United States and the concurrent growth of organizations such
as HMOs, which could control or significantly influence the purchase of
healthcare services and products, as well as legislative proposals to reform
health care or reduce government insurance programs, may also result in lower
prices for or rejection of the Company's products. The cost containment measures
that healthcare payors and providers are instituting and the effect of any
health care reform could cause reductions in the amount of reimbursement
available and could materially adversely affect the Company's revenues and
ability to operate profitably.
10
<PAGE>
Competition
There is intense competition in the market for BPH treatments. The
Company's competitors may be significantly larger than and have greater
financial, technical, research, marketing, sales, distribution and other
resources than the Company. The Company anticipates there will be intense price
competition for products developed and competitors may develop or market
technologies and products, including drug-based treatments, that are more
effective or commercially attractive. Competitors may succeed in obtaining
regulatory approval, and introducing or commercializing products that could have
a significant negative effect on the Company's financial condition or ability to
operate in a profitable manner. The medical device industry generally, and the
urological disease treatment market in particular, are characterized by rapid
technological change, changing customer needs, and frequent new product
introductions. The Company's future success will depend upon the ability to
develop and introduce new cost-effective products in a timely manner.
Dependence on Patents and Proprietary Rights
The Company's success depends in part on its ability to protect its Targis
System and technology under United States and international patent laws and
other intellectual property laws and to operate without infringing upon the
proprietary rights of third parties. The validity and breadth of claims covered
in medical technology patents involve complex legal and factual questions and,
therefore, may be highly uncertain. Companies in the medical device industry
have employed intellectual property litigation to gain a competitive advantage.
Other companies have developed or are in the process of developing medical
methods and devices to transurethrally treat BPH with microwave energy.
Reliance on Single Product
The Targis System is the Company's sole product. As such, the Company's
future success is entirely reliant upon its ability to market the Targis System
commercially in the United States and elsewhere. If the Company is unable to
commercialize the Targis System successfully, the Company's business, financial
condition and results of operations would be materially adversely affected.
Limited Manufacturing Experience; Scale-Up Risk; Product Recall Risk
Urologix purchases components used in the Targis System from various
suppliers and relies on single sources for several components. Delays associated
with any future component shortages, particularly as the Company scales up its
manufacturing activities in support of increased commercial sales, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company has limited experience in manufacturing its products in
commercial quantities. Manufacturers often encounter difficulties in scaling up
production of new products, including problems involving production yields,
product recalls, quality control and assurance, component supply and lack of
qualified personnel. Any products manufactured or distributed by the Company
pursuant to FDA clearances or approvals are subject to pervasive and continuing
regulation by FDA, including record keeping requirements and reporting of
adverse experience with the use of the device. The Company's manufacturing
facilities are subject to periodic inspection by the FDA, certain state agencies
and foreign regulatory agencies. The Company requires that its key suppliers
comply with international standards for production of medical devices, and
assures through detailed, in-depth audits, that the Company's suppliers meet
both recognized standards and the Company's own stringent quality standards. The
failure of the Company or its suppliers to comply with regulatory requirements
could have a material adverse effect on the Company's business. There can be no
assurance that the Company will not be required to incur significant costs to
comply with laws and regulations in the future or that laws or regulations will
not have a material adverse effect upon the Company's business.
Dependence on Third-Party Distributors for International Sales
11
<PAGE>
To date, a majority of the Company's revenues outside the United States
have been derived from sales of its Targis System through third-party
distributors. Boston Scientific has distribution rights for the Targis System in
most of the European countries, and Nihon Kohden has exclusive distribution
rights in Japan. Although the Company intends to work with these distributors to
improve the Company's international sales, the Company expects only slight
growth in international sales in fiscal 2001. The failure to effectively market
the Company's Targis System in the international markets could have an adverse
effect on the Company's ability to achieve penetration of these markets and
establish long-term acceptance of the Targis System.
Contract Manufacturing; Dependence Upon Key Suppliers
The control unit for the Targis System is assembled by a third party
manufacturer pursuant to a supply agreement with the Company. If, for any
reason, the third party manufacturer is unable or unwilling to manufacture the
control unit for the Company in the future, the Company could incur significant
delays in obtaining a substitute contract manufacturer. In addition, the Company
purchases additional components used in the Targis System from various suppliers
and relies on single sources for several components. One such component is
obtained from a source that has a patent for the technology. Delays could be
caused if supply of this component or other components were interrupted. These
delays could be extended in certain situations where a substitute contract
manufacturer or a component substitution would require approval by the FDA of a
PMA supplement.
Possible Volatility of Stock Price.
The stock market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock. In addition, the market price of the
shares of Common Stock is likely to be highly volatile. Factors such as
fluctuations in the Company's operating results, announcements of technological
innovations or new products by the Company or its competitors, FDA and
international regulatory actions, actions with respect to reimbursement matters,
developments with respect to patents or proprietary rights, public concern as to
the safety of products developed by the Company or others, changes in health
care policy in the United States and internationally, changes in stock market
analyst recommendations regarding the Company, other medical device companies or
the medical device industry generally and general market conditions may have a
significant effect on the market price of the Common Stock.
12
<PAGE>
ITEM 2. PROPERTIES
--------------------
The Company leases approximately 37,000 square feet of office,
manufacturing and warehouse space in a suburb of Minneapolis, Minnesota. The
lease expiration date is March 31, 2003. The Company believes its facilities
will be sufficient to meet the Company's current requirements and that
additional space at or near the current location will be available at a
reasonable cost if such space is required in the future.
ITEM 3. LEGAL PROCEEDINGS
---------------------------
The Company is not involved in any material pending litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------------------------------------------------------------
Not applicable.
13
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
------------------------------------------------------------------------------
MATTERS
-------
The Company's Common Stock is traded on the Nasdaq Stock Market under the
symbol ULGX. The following table sets forth quarterly high and low last sale
prices of the Company's Common Stock for the past two years.
Quarter
Fiscal Year First Second Third Fourth
----------- --------------------------------------------
2000 High $4.00 $6.13 $10.44 $6.88
Low 2.38 2.88 4.00 3.81
1999 High 8.94 6.00 5.00 3.69
Low 4.50 3.50 3.00 2.25
On September 8, 2000, the Company had 274 shareholders of record. The Company
has never paid cash dividends on its Common Stock. The Board of Directors of the
Company currently intends to retain any and all income for use in the Company's
business and does not anticipate paying any cash dividends in the foreseeable
future.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
---------------------------------
<TABLE>
<CAPTION>
Years Ended June 30
------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data: (in thousands, except per share data)
Sales $ 8,163 $ 6,110 $ 11,194 $ 5,504 $ 362
Cost of goods sold 4,356 5,910 9,162 4,866 1,177
-------------------------------------------------------
Gross profit (loss) 3,807 200 2,032 638 (815)
Costs and Expenses:
Research and development 3,614 5,106 6,676 5,049 4,811
Sales and marketing 6,659 6,838 6,765 3,430 1,007
General and administrative 2,108 4,018 2,284 2,226 1,192
-------------------------------------------------------
Total costs and expenses 12,381 15,962 15,725 10,705 7,010
-------------------------------------------------------
Operating loss (8,574) (15,762) (13,693) (10,067) (7,825)
Interest income, net 1,477 1,746 2,056 1,833 232
Litigation settlement expense - - (3,376) - -
-------------------------------------------------------
Net loss $ (7,097) $(14,016) $(15,013) $ (8,234) $ (7,593)
=======================================================
Basic and Diluted:
Net loss per common share $ (0.62) $ (1.24) $ (1.44) $ (0.90) $ (1.22)
Shares used in computing net
loss per share 11,514 11,346 10,429 9,173 6,235
<CAPTION>
June 30,
------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
Balance Sheet Data: (in thousands)
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and
available-for-sale securities $ 23,598 $ 28,036 $ 36,500 $ 26,101 $ 40,844
Working capital 23,132 28,803 41,375 27,013 39,940
Total assets 31,956 38,988 53,489 35,582 42,368
Total liabilities 3,186 3,521 4,152 3,185 1,780
Accumulated deficit (62,894) (55,796) (41,780) (26,767) (18,534)
Total shareholders' equity $ 28,770 $ 35,467 $ 49,337 $ 32,397 $ 40,588
</TABLE>
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
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 precisely 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 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.
Results of Operations
Fiscal Years Ended June 30, 2000 and 1999
Sales increased to $8.2 million in fiscal 2000 from $6.1 million in fiscal
1999, due primarily to increased sales of Targis System procedure kits in the
United States. U.S. sales grew to $7.9 million in fiscal 2000 from $5.6 million
in 1999, while international sales decreased to $300,000 in fiscal 2000 from
$500,000 in 1999. The increase in U.S. procedure kits sales is primarily the
result of the "per procedure" sales and marketing business model that was
implemented 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 Company will
continue to offer this program in fiscal 2001. As expected, international sales
decreased in fiscal 2000 due to existing inventories of the Company's products
held by the Company's international distributors.
Cost of goods sold includes raw materials, labor, overhead, and royalties
incurred in connection with the production of the Targis System control units
and disposable procedure kits. Cost of goods sold decreased to $4.4 million in
fiscal 2000 compared to $5.9 million in fiscal 1999. Cost of goods sold was
adversely affected by two events in
16
<PAGE>
fiscal 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 profit as a percentage of sales increased
to 47% in fiscal 2000 from 3% in the prior fiscal year due primarily to improved
manufacturing efficiency, decreased product cost, and the impact of the two
events noted above.
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 $3.6 million in fiscal 2000 from
$5.1 million in fiscal 1999, due primarily to reductions in staffing, lower
clinical study expenses, and lower product development expenses. Research and
development expenses are expected to remain at approximately the same levels in
fiscal 2001 as the Company focuses on improving the function and features of the
Targis system, reducing the production cost of the Targis System components, and
investigating other applications for its technology.
Sales and marketing expenses decreased slightly in fiscal 2000 to $6.7
million, from $6.8 million in fiscal 1999. The decrease was primarily the result
of reductions in international sales and marketing expenses which were offset by
increased investment in U.S. sales and marketing efforts. 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 $2.1 million in fiscal
2000 from $4.0 million in fiscal 1999. General and administrative expenses for
fiscal 1999 include a $1.6 million charge incurred in connection with the
operational realignment. Excluding the impact of $1.6 million charge, general
and administrative expenses decreased due to reductions in staffing and other
administrative expenses.
Interest income decreased to $1.5 million for fiscal 2000 from $1.7 million
in fiscal 1999. Interest income decreased due primarily to lower cash and
investment balances.
Fiscal Years Ended June 30, 1999 and 1998
Sales decreased to $6.1 million in fiscal 1999 from $11.2 million in fiscal
1998 due to a decrease in international sales. Sales in the United States
represented approximately 92% of revenue in fiscal 1999, compared to 27% of
revenue in fiscal 1998, representing growth in United States sales of 87% from
fiscal 1998 to fiscal 1999.
Cost of goods sold decreased to $5.9 million in fiscal 1999 compared to
$9.2 million in fiscal 1998. The decrease in cost of goods sold was attributable
primarily to decreases in sales volume. Cost of goods sold in fiscal 1999
included a $1.3 million reserve for excess inventory, while fiscal 1998 cost of
goods sold included a $700,000 inventory write down related to a bad component.
Gross profit as a percentage of sales decreased to 3% in fiscal 1999 from 18% in
1998, primarily as a result of the excess inventory write-down and allocation of
overhead over lower production volume.
Research and development expenses decreased to $5.1 million in fiscal 1999
from $6.7 million in fiscal 1998, due primarily to the conclusion of several
clinical studies and lower regulatory expenses.
Sales and marketing expenses for fiscal 1999 were $6.8 million, which was
consistent with fiscal 1998. Additional sales and marketing costs incurred in
1999, including fees paid to Boston Scientific in connection with the domestic
co-marketing agreement, were offset by payments received from Boston Scientific
for international market development services provided by Urologix. These
payments were recorded as a reduction to sales and marketing expense. Sales and
marketing expenses were primarily related to sales and marketing personnel,
recruitment of field sales representatives, advertising and promotion, and
efforts related to obtaining third-party reimbursement for the Targis
17
<PAGE>
System.
General and administrative expenses increased to $4.0 million in fiscal
1999 compared to $2.3 million in fiscal 1998. General and administrative
expenses for fiscal 1999 reflect a non-recurring charge of $1.6 million incurred
in connection with a reduction in workforce in October 1998 that resulted from
the downward revision of the Company's sales forecast. The charge included
severance costs paid to employees, future lease costs related to facilities no
longer occupied and the impairment of assets no longer used as a result of the
reduction in work force.
Interest income decreased to $1.7 million for fiscal 1999 from $2.1 million
in fiscal 1998. Interest income decreased due primarily to lower cash and
investment balances.
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. As of
June 30, 2000, the Company had total cash, cash equivalents and available-for-
sale securities of $23.6 million and working capital of $23.1 million.
During fiscal 2000, the Company used $4.3 million in operating activities,
primarily as a result of the Company's net loss of $7.1 million, which was
partially offset by depreciation and amortization of $1.5 million and a decrease
in inventories of $1.0 million. The Company generated $3.7 million in investing
activities, primarily reflecting the net sale of $4.2 million in investment
securities less purchases of $500,000 of property and equipment. The Company
completed a secondary offering in November 1997 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 of 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.
At June 30, 2000, the Company did not have any significant purchase
commitments.
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.
18
<PAGE>
Interest Rate Risk
The fair value of the Company's investment portfolio at June 30, 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
The Company's computer systems and equipment successfully transitioned to
the year 2000 with no significant issues. As of this date, the Company is not
aware of any problems resulting from Year 2000 issues, either with its products,
internal systems, or the products and services of third parties, that would have
a material impact on the future operations or financial results of the Company.
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. The
Company did not incur any material expenditures in connection with its Year 2000
testing and remediation.
19
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------
Information with respect to Disclosures about Market Risk is contained in
the Section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations- Interest Rate Risk" under Item 7 of this
Report of Form 10-K and is incorporated herein by reference.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------
The following financial statements are included in the Form 10-K.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants............................................................ 22
Balance Sheets as of June 30, 2000 and 1999......................................................... 23
Statements of Operations for years ended June 30, 2000, 1999 and 1998............................... 24
Statements of Shareholders' Equity and Comprehensive Income (Loss) for years ended June 30, 2000,
1999 and 1998...................................................................................... 25
Statements of Cash Flows for years ended June 30, 2000, 1999 and 1998............................... 26
Notes to Financial Statements....................................................................... 27
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Urologix, Inc.:
We have audited the accompanying balance sheets of Urologix, Inc. (a Minnesota
corporation) as of June 30, 2000 and 1999, and the related statements of
operations, shareholders' equity and comprehensive income (loss) and cash
flows for each of the three fiscal years in the period ended June 30, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Urologix, Inc. as of June 30,
2000 and 1999, and the results of its operations and its cash flows for each
of the three fiscal years in the period ended June 30, 2000, in conformity
with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
August 7, 2000
22
<PAGE>
UROLOGIX, INC.
Balance Sheets
As of June 30
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 458,707 $ 657,596
Available-for-sale securities 23,138,875 27,378,692
Accounts receivable, net of allowance of $285,000 and $171,000 1,027,494 1,260,810
Inventories 1,454,000 2,436,418
Prepaids and other current assets 237,978 588,355
------------ ------------
Total current assets 26,317,054 32,321,871
------------ ------------
PROPERTY AND EQUIPMENT:
Leasehold improvements 742,923 742,923
Machinery, equipment and furniture 4,516,460 4,029,743
Less- Accumulated depreciation and amortization (3,580,850) (2,521,479)
------------ ------------
Property and equipment, net 1,678,533 2,251,187
OTHER ASSETS 3,960,266 4,414,974
------------ ------------
$ 31,955,853 $ 38,988,032
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of capitalized lease obligations $ - $ 8,924
Accounts payable 1,083,697 836,999
Accrued liabilities 2,101,783 2,672,743
------------ ------------
Total current liabilities 3,185,480 3,518,666
------------ ------------
CAPITALIZED LEASE OBLIGATIONS, less current maturities - 2,723
------------ ------------
Total liabilities 3,185,480 3,521,389
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY:
Undesignated stock, 4,750,000 shares authorized; none issued or
outstanding - -
Series A Junior Participating Preferred Stock, 250,000 shares
authorized; none issued or outstanding - -
Common stock, $.01 par value, 25,000,000 shares authorized;
11,607,624 and 11,428,937 shares issued and outstanding 116,076 114,289
Additional paid-in capital 91,582,753 91,149,858
Accumulated deficit (62,893,684) (55,796,123)
Accumulated other comprehensive loss (34,772) (1,381)
------------ ------------
Total shareholders' equity 28,770,373 35,466,643
------------ ------------
$ 31,955,853 $ 38,988,032
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
23
<PAGE>
UROLOGIX, INC.
Statements of Operations
<TABLE>
<CAPTION>
For the Years Ended June 30
---------------------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
SALES $ 8,163,249 $ 6,109,890 $ 11,194,212
COST OF GOODS SOLD 4,356,563 5,909,826 9,161,708
----------- ------------ ------------
Gross profit 3,806,686 200,064 2,032,504
----------- ------------ ------------
COSTS AND EXPENSES:
Research and development 3,614,199 5,106,379 6,676,716
Sales and marketing 6,659,296 6,837,544 6,764,832
General and administrative 2,107,950 4,018,339 2,283,817
----------- ------------ ------------
Total costs and expenses 12,381,445 15,962,262 15,725,365
----------- ------------ ------------
OPERATING LOSS (8,574,759) (15,762,198) (13,692,861)
INTEREST INCOME, net 1,477,198 1,746,428 2,056,014
LITIGATION SETTLEMENT EXPENSE (Note 6) - - (3,376,144)
----------- ------------ ------------
NET LOSS $(7,097,561) $(14,015,770) $(15,012,991)
=========== ============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.62) $ (1.24) $ (1.44)
=========== ============ ============
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING (Note 2) 11,513,878 11,346,148 10,428,520
=========== ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
24
<PAGE>
UROLOGIX, INC.
Statements of Shareholders' Equity and Comprehensive Income (Loss)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Stock Paid-In Accumulated Comprehensive Shareholders'
-----------------------
Shares Amount Capital Deficit Income (Loss) Equity
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1997 9,256,594 $ 92,566 $59,131,097 $(26,767,362) $ (59,258) $ 32,397,043
Change in unrealized losses
on investment - - - - 47,750 47,750
Net loss - - - (15,012,991) - (15,012,991)
----------
Comprehensive loss - - - - - (14,965,241)
Stock options exercised 240,562 2,406 198,142 - - 200,548
Shares issued through
public offering, net 1,725,000 17,250 31,509,851 - - 31,527,101
Shares issued pursuit to
employee stock purchase plan 17,736 177 177,276 - - 177,453
-----------------------------------------------------------------------------------
BALANCE, June 30, 1998 11,239,892 112,399 91,016,366 (41,780,353) (11,508) 49,336,904
Change in unrealized losses -
on investment - - - - 10,127 10,127
Net loss - - (14,015,770) - (14,015,770)
----------
Comprehensive loss - - - - (14,005,643)
Stock options exercised 159,224 1,592 68,986 - - 70,578
Stock awards net of related
amortization 29,821 298 64,506 - - 64,804
-----------------------------------------------------------------------------------
Balance, June 30, 1999 11,428,937 $114,289 $91,149,858 $(55,796,123) $ (1,381) $ 35,466,643
Change in unrealized losses
on investment - - - - (33,391) (33,391)
Net loss - - - (7,097,561) - (7,097,561)
---------
Comprehensive loss - - - - - (7,130,952)
Stock options exercised 146,784 1,468 312,423 - - 313,891
Stock awards net of related 31,903 319 120,472 - - 120,791
amortization
-----------------------------------------------------------------------------------
Balance, June 30, 2000 11,607,624 $116,076 $91,582,753 $(62,893,684) $ (34,772) $ 28,770,373
===================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
25
<PAGE>
UROLOGIX, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended June 30
----------------------------------------------
2000 1999 1998
-------------- ------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (7,097,561) $(14,015,770) $ (15,012,991)
Adjustments to reconcile net loss to net cash used for operating activities-
Depreciation and amortization 1,514,079 1,469,355 1,619,940
Loss on disposal of assets - 773,191 -
Change in operating items:
Accounts receivable 233,316 2,752,723 (2,194,522)
Inventories 982,418 1,877,477 (2,740,539)
Prepaids and other assets 350,377 155,609 29,278
Accounts payable and accrued liabilities (324,262) (605,104) 987,058
-------------- ------------- --------------
Net cash used for operating activities (4,341,633) (7,592,519) (17,311,776)
-------------- ------------- --------------
INVESTING ACTIVITIES:
Purchases of property and equipment (486,717) (990,867) (2,222,112)
Purchase of securities (55,619,682) (37,535,450) (57,164,738)
Proceeds from sale of securities 59,826,108 45,783,611 47,421,001
Purchase of intangible assets, net - - (2,000,000)
-------------- ------------- --------------
Net cash provided by (used for) investing activities 3,719,709 7,257,294 (13,965,849)
-------------- ------------- --------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 434,682 135,382 31,905,102
Payments made on capital lease obligations (11,647) (25,362) (20,247)
-------------- ------------- --------------
Net cash provided by financing activities 423,035 110,020 31,884,855
-------------- ------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(198,889) (225,205) 607,230
CASH AND CASH EQUIVALENTS:
Beginning of year 657,596 882,801 275,571
-------------- ------------- --------------
End of year $ 458,707 $ 657,596 $ 882,801
============== ============= ==============
Supplemental Cash Flow Disclosures:
Cash paid for interest: $ 856 $ 3,346 $ 5,863
============== ============= ==============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
26
<PAGE>
UROLOGIX, INC.
Notes to Financial Statements
1. Nature of Business:
Description of Operating Activities
Urologix, Inc. (Urologix or the Company) was organized to research, develop,
manufacture and market innovative devices for the treatment of benign prostatic
hyperplasia (BPH) and other urological disorders. Prior to fiscal 1997, the
Company was a development stage enterprise, having devoted substantially all of
its efforts to proprietary product development and selling the Targis System to
international distributors. These efforts also included raising capital,
performing clinical trials and developing commercial markets. The Company
received regulatory approvals necessary to market the Targis System in the
European Union Countries, Japan and Canada in fiscal 1997, and in August 1997,
received United States Food and Drug Administration approval to market the
Targis System in the United States.
Although the Company began actively selling its products in 1997 and no longer
considers itself to be in the development stage, it has not operated profitably
to date and there are no assurances that it will operate profitably in the
future.
2. Significant Accounting Policies:
Cash and Cash Equivalents
The Company classifies highly liquid investments with original maturities of 90
days or less as cash equivalents. Cash equivalents are stated at cost, which
approximates market value.
Available-for-Sale Securities
The Company invests in money market funds and U.S. government and investment-
grade corporate securities with original maturities ranging from 91 days to two
years. These investments are considered to be available-for-sale and are stated
at market value, with the resulting unrealized gains or losses reported as a
component of comprehensive loss in the statement of shareholders' equity.
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.
Inventories
Inventories are stated at the lower of first-in, first-out cost or market and
consist of:
June 30
-----------------------------
2000 1999
---- ----
Raw materials $ 443,500 $ 783,091
Work-in-process 210,006 1,180,443
Finished goods 800,494 472,884
---------- ----------
$1,454,000 $2,436,418
========== ==========
27
<PAGE>
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset the related results on the
hedged item in the income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting treatment.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities- Deferral of the Effective Date of FASB
Statement No. 133," which delayed the effective date of SFAS No. 133 to fiscal
years beginning after June 15, 2000. There will be no effect of initial adoption
of SFAS No. 133 on the Company's financial position or results of operations.
Property and Equipment
Property and equipment are stated at cost. Improvements that extend the useful
lives of property and equipment are capitalized at cost and depreciated over the
remaining useful lives. Repairs and maintenance are charged to expense as
incurred. Depreciation is provided using the straight-line method based upon
estimated useful lives of three to seven years for machinery, equipment,
furniture and leasehold improvements.
Other Assets
Other assets consist primarily of license fees and prepaid royalties resulting
from patent licensing agreements. The agreements require the Company to pay a
royalty on sales of equipment. The license fees and amounts prepaid by the
Company have been charged to expense as sales are recognized.
Research and Development Costs
Research and development costs are charged to expense as incurred.
Net Loss Per Common Share
Basic and diluted net loss per common share is computed by dividing 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.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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. Ultimate results could differ from those estimates.
Financial Instruments
The carrying amount of the Company's financial instruments, including cash,
available-for-sale securities, accounts payable and accruals, approximates fair
value as the majority of these instruments are short-term in nature.
28
<PAGE>
3. Income Taxes:
A reconciliation of the Company's statutory tax rate to the effective rate for
the years ended June 30 is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
----- ------ ------
<S> <C> <C> <C>
Federal statutory rate 34% 34% 34%
State taxes, net of federal tax benefit 6 6 6
Valuation allowance (40) (40) (40)
---- ---- ----
-% -% -%
==== ==== ====
</TABLE>
As of June 30, 2000, the Company had net operating loss carryforwards of
approximately $63,000,000 for federal income tax purposes that are available to
offset future taxable income through the year 2015. Certain restrictions caused
by the change in ownership resulting from sales of stock will limit annual
utilization of the net operating loss carryforwards.
The components of the Company's deferred tax assets for the years ended June 30
is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net operating loss carryforwards $ 25,204,000 $ 22,082,000 $ 16,762,000
Temporary deductible differences 715,000 720,000 228,000
Valuation allowance (25,919,000) (22,802,000) (16,990,000)
------------ ------------ ------------
$ - $ - $ -
============ ============ ============
</TABLE>
4. 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 June 30, 2000 were as follows:
29
<PAGE>
<TABLE>
<CAPTION>
Cash Outlays
---------------------------
Total Charges Asset Write-down Change in 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) 341,000 77,000
Employee severance 309,000 - - 309,000 -
--------------------------------------------------------------------------------------------------
$2,879,000 $2,022,000 $(130,000) $650,000 $77,000
==================================================================================================
</TABLE>
5. Shareholders' Equity:
Stock Options
The Company has a stock option plan (the 1991 Stock Option Plan) which provides
for the granting of incentive stock options to employees and nonqualified stock
options to employees, directors and consultants. As of June 30, 2000, the
Company has reserved 2,450,910 shares of common stock under this plan. As of
June 30, 2000, 382,756 shares were available for future grants under this plan.
Options expire seven to ten years from the date of grant and are subject to
varying vesting schedules. Under the current terms of the Company's 1991 Stock
Option Plan, persons serving as non-employee directors at the date of the annual
shareholder meeting automatically receive a grant to purchase 5,000 shares of
Common Stock at a price equal to fair market value on the date of grant. The
options are immediately exercisable on the date of grant and expire 10 years
from the date of grant, subject to earlier termination one year after the person
ceases to be a director of the Company. In May 1998 and October 1998, the
Company repriced certain stock options previously granted to $8.81 and then to
$3.65, the fair market value on the date of repricing.
30
<PAGE>
Shares subject to option are summarized as follows:
<TABLE>
<CAPTION>
Weighted
Average
Stock Exercise
Options Price
---------- -------------
<S> <C> <C>
Balance at June 30, 1997 973,737 $ 5.47
Options granted 447,234 10.51
Options canceled (159,635) 8.27
Options exercised (240,562) 1.19
--------- ------
Balance at June 30, 1998 1,020,774 8.23
Options granted 1,359,421 3.69
Options canceled (939,585) 8.64
Options exercised (159,224) .44
--------- ------
Balance at June 30, 1999 1,281,386 3.81
Options granted 891,826 3.31
Options canceled (452,784) 3.69
Options exercised (146,784) 2.14
--------- ------
Balance at June 30, 2000 1,573,644 $ 3.72
========= ======
Options exercisable at June 30, 20001999 443,001 $ 3.84
========= ======
</TABLE>
The Company accounts for stock options under the provisions of Accounting
Principles Board Opinion No. 25, under which no compensation cost has been
recognized. Had compensation cost for these options been determined consistent
with SFAS No. 123, "Accounting for Stock-Based Compensation," the net loss and
loss per share would have been increased to the following pro forma amounts:
2000 1999 1998
----------- ------------ ------------
Net loss As reported $(7,097,561) $(14,015,770) $(15,012,991)
Pro forma (9,321,107) (15,850,908) (16,942,225)
Net loss per share As reported $ (0.62) $ (1.24) $ (1.44)
Pro forma (0.81) (1.40) (1.63)
For purposes of calculating the above required disclosure, the fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used for
grants in 2000, 1999 and 1998, respectively: risk-free interest rates of 6.30%,
6.16% and 5.52%, no expected dividend yield, expected volatility of 69.27% in
2000, 70.83% in 1999, and 54.25% in 1998, and expected lives of seven years.
The weighted average fair value of options granted during 2000, 1999 and 1998
was $2.40, $2.62 and $10.51, respectively. Options outstanding at June 30, 2000,
have an exercise price between $0.40 and $14.00, a weighted average exercise
price of $3.72 and a weighted average remaining contractual life of 8.0 years.
31
<PAGE>
1996 Employee Stock Purchase Plan
In 1996, the Company adopted the 1996 Employee Stock Purchase Plan (the Plan)
and reserved 100,000 common shares for issuance under the Plan. Under the terms
of the Plan, employees may purchase common shares at prices to be determined by
the Company's board of directors, ranging from 85% to 100% of the shares' fair
market value. Eligible employees elect to participate through payroll deductions
at the maximum level established by the board of directors, but not to exceed
10% of the participant's base pay, as defined. As of June 30, 2000, 54,460
shares had been purchased under the Plan for gross proceeds of $253,497.
6. Commitments and Contingencies:
Sales Commitments
The Company has signed agreements granting Boston Scientific Corporation and
Nihon Kohden Corporation exclusive distribution rights of the Targis System in
Japan and the majority of the European countries. Nihon Kohden Corporation has
exclusive distribution rights for Japan, while Boston Scientific Corporation has
a distribution agreement that covers the majority of the European countries.
Under the agreement with Boston Scientific Corporation, Urologix has a
commitment to provide market development services for the Targis System for
which Urologix is compensated for these services by Boston Scientific.
Litigation
In May 1998, the Company entered into a settlement agreement resolving
litigation with BSD Medical Corporation (BSD) and TherMatrx, Inc. (TherMatrx)
regarding a dispute about a previous settlement agreement. Pursuant to the
settlement agreement, the Company paid $5 million to BSD and TherMatrx and will
maintain its non-exclusive license to certain patents owned by BSD and TherMatrx
pertaining to transurethral insertable applicators and systems for the treatment
of BPH and other urological conditions. Of the $5 million settlement amount, $2
million was included in other assets and is amortized against future sales, and
the remaining $3 million plus related legal expenses were recorded as litigation
settlement expense for the year ended June 30, 1998.
401(k) Plan
The Company provides a 401(k) savings plan to which eligible employees may make
pretax payroll contributions of up to 15% of their compensation. Company
matching contributions are discretionary, and none have been made to date.
Leases
The Company leases its facility and certain equipment under noncancelable
operating leases which expire at various dates through fiscal 2003. Rent expense
related to operating leases was approximately $280,400, $195,500, and $139,700
for the years ended June 30, 2000, 1999 and 1998, respectively. Future minimum
lease commitments under noncancelable operating leases with initial remaining
terms of one year or more are as follows as of June 30, 1999:
Operating Leases
--------------------
Fiscal year:
2001 $280,409
2002 296,763
2003 205,632
--------
$782,804
========
32
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
Information required under this item with respect to directors is contained
in the section "Election of Directors" in the Company's Proxy Statement for the
2000 Annual Meeting of Shareholders (the "2000 Proxy Statement"), a definitive
copy of which will be filed with the Commission within 120 days of the close of
the past fiscal year, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
Information required under this item is contained in the sections entitled
"Executive Compensation and other Information," and "Employment Agreements" in
the Company's 2000 Proxy Statement, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
Information required under this item is contained in the section entitled
"Security Ownership of Principal Shareholders and Management" in the Company's
2000 Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
Information required under this item is contained in the section entitled
"Certain Transactions" in the Company's 2000 Proxy Statement and is incorporated
herein by reference.
33
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
---------------------------------------------------------------------------
(a) Documents filed as part of this report.
--------------------------------------
(1) Financial Statements. The financial statements of the Company are
--------------------
listed at Item 8 of this Form 10-K.
(2) Financial Statement Schedules for years ended June 30, 2000, 1999 and
---------------------------------------------------------------------
1998. No schedules are required in connection with the filing of this
----
Form 10-K.
(3) Exhibits
--------
3.1 Amended and Restated Articles of Incorporation. (1)
3.2 Amended and Restated Bylaws of the Company. (1)
3.3 Certificate of Designation, Preferences and Rights of Series
A Junior Participating Preferred Stock (2)
4.1 Form of Rights Agreement dated January 14, 1997 between
Urologix, Inc. and Norwest Bank Minnesota, N.A. as Rights
Agent (2)
10.1* Urologix, Inc. 1991 Stock Option Plan (3)
10.2* Employment Agreement dated November 10, 1998 between the
Company and Michael M. Selzer, Jr. (4)
10.2.1* Restricted Stock Agreement between the Company and Michael
M. Selzer Jr. (3)
10.2.2* Stock Option Agreement between the Company and Michael M.
Selzer Jr. (3)
10.3 Lease Agreement dated January 20, 1992, between the Company
and Parkers Lake Pointe I Limited Partnership, including
Addendum to Lease Agreement dated April 5, 1995(1)
10.4* Agreement dated November 5, 1993 between the Company and Dr.
David C. Utz, including supplemental letter agreements dated
November 2, 1994 and July 31, 1995 (1)
10.4.1* Letter agreement dated August 4, 1999 between the Company
and Dr. David C. Utz
10.5** International Distribution Agreement made as of June 26,
1996 between the Company and Boston Scientific Corporation.
(5)
10.5.1** Amendment dated as of February 26, 1999 to the International
Distribution Agreement between the Company and Boston
Scientific Corporation. (5)
10.5.2** Modification dated as of December 31, 1999 to Amendment to
International Distribution Agreement between the Company and
Boston Scientific Corporation (6)
10.6** License Agreement dated August 7, 1996 between the Company
and EDAP International, S.A. and Technomed Medical Systems,
S.A. (5)
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
* Indicates Compensation Plan
** Certain information has been deleted from this exhibit and filed
separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment under Rule 24b-2
(1) Incorporated by reference from the Urologix, Inc. Registration
Statement on Form S-1, File No. 333-3304.
(2) Incorporated by reference from the Urologix, Inc. Registration
Statement on Form 8A, File No. 000-2844, filed on January 16, 1997.
(3) Incorporated by reference from Urologix, Inc. Registration Statement on
Form S-8, File No. 333-84869.
(4) Incorporated by reference from the Urologix, Inc. Form 10-K for the
year ended June 30, 1999.
(5) Incorporated by reference from the Urologix, Inc. Form 10-K for the
year ended June 30, 1996.
(6) Incorporated by reference from the Urologix, Inc. Form 10-Q for the
quarter ended March 31, 2000.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
-------------------
fourth quarter of the fiscal year ended June 30, 2000
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duty caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UROLOGIX, INC.
By: /s/ Michael M. Selzer, Jr.
---------------------------
Michael M. Selzer, Jr., President and
Chief Executive Officer and Director
Each person whose signature appears below hereby constitutes and appoints
Michael M. Selzer, Jr. and Christopher R. Geyen, and each of them his or her
true and lawful attorney-in-fact and agent, with full power of substitution, to
sign on his or her behalf, individually and in each capacity stated below, all
amendments and post-effective amendments to this Form 10-K and to file the same,
with all exhibits thereto and any other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as each might or could do in person, hereby ratifying
and confirming each act that said attorneys-in-fact and agents may lawfully do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed below by the following persons in the
capacities indicated on September 15, 2000.
Signature Title
-----------------------------------------------------------
/s/ Mitchell Dann Chairman of the Board
-------------------------------
Mitchell Dann
/s/ Michael M. Selzer, Jr. Director, President and
-------------------------------
Michael M. Selzer, Jr. Chief Executive Officer
/s/ Christopher R. Geyen Vice President and Chief Financial Officer,
-------------------------------
Christopher R. Geyen Treasurer and Secretary
/s/ Susan Bartlett Foote Director
-------------------------------
Susan Bartlett Foote
/s/ Robert I. Griffin Director
-------------------------------
Robert I. Griffin
/s/ Paul A. LaViolette Director
-------------------------------
Paul A. LaViolette
/s/ Richard D. Randall Director
-------------------------------
Richard D. Randall
/s/ David C. Utz Director
-------------------------------
David C. Utz, M.D.
35
