<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended June 30, 1998
Commission file number 000-23266
UroMed Corporation
(Exact name of registrant as specified in its charter)
Massachusetts 04 - 3104185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
64 A Street, Needham,
Massachusetts 02194
(Address of principal
executive offices)
(781) 433-0033
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
5,364,904 shares of Common stock, no par value,
outstanding at July 31, 1998
<PAGE>
UROMED CORPORATION
FORM 10-Q
For the quarterly period ended June 30, 1998
Table of contents
Part I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Balance Sheet at June 30, 1998 and December 31, 1997 3
Condensed Statement of Operations for the three months and six
months ended June 30, 1998 and 1997 4
Condensed Statement of Cash Flows for the six months ended
June 30, 1998 and 1997 5
Notes to Condensed Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 -12
Part II - OTHER INFORMATION
Item 2. Changes in Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
UROMED CORPORATION
CONDENSED BALANCE SHEET
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
June 30 , December 31,
1998 1997
---------- -----------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,718 $ 12,007
Short-term investments 40,541 53,018
Inventories 305 287
Prepaid expenses and other assets 1,196 1,403
---------- ----------
Total current assets 54,760 66,715
Fixed assets, net 5,949 6,357
Other assets 3,734 3,521
---------- ----------
$ 64,443 $ 76,593
========== ==========
Liabilities and Stockholders' Equity / (Deficit)
Current liabilities:
Accounts payable $ 480 $ 1,197
Accrued expenses 4,604 4,378
Deferred revenue 233 233
---------- ----------
Total current liabilities 5,317 5,808
---------- ----------
Convertible subordinated notes 69,000 69,000
---------- ----------
Stockholders' equity / (deficit):
Common stock 107,024 106,993
Other stockholders' equity / (deficit) (116,898) (105,208)
---------- ----------
Stockholders' equity / (deficit) (9,874) 1,785
---------- ----------
$ 64,443 $76,593
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (continued)
UROMED CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
<S>
<C> <C> <C> <C>
1998 1997 1998 1997
-------- -------- -------- --------
Revenues $ 121 $ 152 $ 181 $ 415
-------- -------- -------- --------
Costs and expenses:
Cost of revenues 867 935 2,002 1,936
Research and development 1,456 3,420 3,376 5,728
Marketing and sales 1,152 3,867 2,916 8,003
General and administrative 832 1,240 1,909 2,557
Restructuring - - 1,024 -
-------- -------- ------- -------
Total costs and expenses 4,307 9,462 11,227 18,224
-------- -------- ------- -------
Loss from operations (4,186) (9,310) (11,046) (17,809)
Interest income 767 1,169 1,664 2,471
Interest expense (1,134) (1,134) (2,268) (2,268)
-------- -------- ------- -------
Net loss $(4,553) $(9,275) $(11,650) $(17,606)
======== ======== ======== =========
Basic and diluted net loss
per share $(0.85) $(1.75) $ (2.17) $ (3.32)
========= ======== ====== =======
Weighted average common
shares outstanding 5,365 5,309 5,360 5,303
========= ========= ====== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (continued)
UROMED CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
<S>
<C> <C>
1998 1997
Net cash used in operating activities $ (11,323) $(16,342)
---------- ----------
Cash flows from investing activities:
Sales of short-term investments, net 12,546 3,909
Purchase of fixed assets (543) (3,666)
Decrease in other assets - 37
---------- ----------
Net cash provided by investing
activities 12,003 280
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 31 104
---------- ----------
Net increase (decrease) in cash and cash
equivalents 711 (15,958)
Cash and cash equivalents, beginning of period 12,007 45,556
---------- ----------
Cash and cash equivalents, end of period $ 12,718 $29,598
========== ==========
Supplemental disclosure of cash flow information:
Interest paid $ 2,070 $ 2,070
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (continued)
UROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
(In thousands, except per share data)
(unaudited)
1. Nature of Business
UroMed Corporation (the "Company"), a Massachusetts corporation, was
incorporated in October 1990 to develop male and female health care
products and has developed or acquired technology in three core areas:
prostate cancer, urinary incontinence, and breast cancer. The Company has
a direct hospital-based business and offers an office-based continuum
of continence care consumer product lines. The Company is developing its
investigational BreastExam, BreastCheck and BreastView electronic
palpation technology.
2. Basis of Presentation
The condensed balance sheet at June 30, 1998, and the condensed statement
of operations and the condensed statement of cash flows for the three
months and six months ended June 30, 1998 and 1997 are unaudited. In the
opinion of management, all adjustments necessary for a fair presentation
of these financial statements have been included. Such adjustments
consisted only of recurring items. Interim results are not necessarily
indicative of results for a full year.
Certain prior year amounts have been reclassified to conform to the
current period financial statement presentation. These reclassifications
had no impact on net loss.
The financial statements should be read in conjunction with the Company's
audited financial statements and related footnotes for the year ended
December 31, 1997, which may be found in the Company's 1997 Annual Report
on Form 10-K
3. Inventories
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method. At June 30, 1998,
inventories consisted of the following:
Raw materials $ 42
Work in process 30
Finished goods 233
--------
$ 305
--------
4. Comprehensive Loss
The Company adopted FASB Statement No. 130, "Reporting Comprehensive
Income", in the first quarter of 1998. This statement establishes
standards for the reporting and display of comprehensive income or loss
and its components in the financial statements.
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
------- ------ ------- -------
Net loss $(4,553) $(9,275) $(11,650) $(17,606)
Unrealized gain
(loss)on
on investments
available-for-sale 11 73 (69) 9
------- ------- ------- -------
Total comprehensive
loss $(4,542) $(9,202) $(11,719) $(17,597)
======== ========= ========= =========
<PAGE>
5. Recently Enacted Accounting Pronouncement
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). The Company will implement SFAS 131 as
required in 1998, which will require the Company to report and display
separately certain information related to operating segments but will
not result in any changes to previously recorded amounts.
6. Licensing Agreement with BEBIG GmbH
During the first quarter of 1998, the Company signed an agreement with
BEBIG GmbH for the exclusive right to market BEBIG's Iodine-125 ("I-125")
seeds for prostate brachytherapy treatment in North and South America, and
non-exclusive rights in other parts of the world. This licensing
agreement calls for a commitment by UroMed of approximately $1.75 million,
which is expected to be paid in 1998 and will be used to support
construction of a related production line and partially as an advance
payment against future I-125 seed purchases. As of June 30, 1998, the
Company had made milestone payments of approximately $0.4 million in
connection with this agreement which are included in Other assets in the
condensed balance sheet. Total milestone payments made through August 6,
1998 are approximately $0.7 million.
7. Restructuring
During the first quarter of 1998, the Company recorded a charge of
$1,024,000 for the restructuring of its operations to increase its
emphasis on its hospital-based sales efforts and to decrease its
investment in the consumer-oriented continence care business, which the
Company believes will be best approached through utilizing marketing
partners. This charge is reported as restructuring in the Condensed
Statement of Operations for the six months ended June 30, 1998, and
includes $579,000 of employee termination benefits and $445,000 of costs
to exit certain leased facilities. The $579,000 cost for employee
termination benefits included the reduction of approximately 40 people
from all functions of the Company. Costs to exit certain leased
facilities included the write-off of $138,000 of fixed assets. As of
June 30, 1998 actual cash expenditures of $356,000 were made for
employee termination benefits and $107,000 for costs to exit certain
leased facilities. The remaining restructuring accrual at June 30, 1998
is $423,000.
8. Reverse Stock Split
On May 18, 1998 the Company adopted an amendment to the Company's
Restated Articles of Organization, which effected a one-for-five reverse
stock split (the "Reverse Stock Split"). The Reverse Stock Split was
approved by the stockholders of the Company on May 15, 1998, with holders
of approximately 93% of the total shares represented at the meeting voted
in favor. Basic and diluted net loss per share and weighted average
shares outstanding in the Condensed Statement of Operations reflect the
effect of the Reverse Stock Split retroactively.
9. Common Stock Repurchase Program
The Board of Directors of the Company authorized a Common Stock
repurchase program on June 17, 1998 (the "Repurchase Program"). The
Company is authorized to repurchase up to one million shares, which is
approximately 20% of the outstanding Common Stock, from time to time,
subject to prevailing market conditions. As of June 30, 1998 the Company
had not repurchased any of its Common Stock. Subsequent to June 30,
1998, the Company has repurchased some shares of its Common Stock as part
of the Repurchase Program.
10. Nasdaq National Market De-Listing
In June 1998, the Nasdaq Stock Market, Inc. ("Nasdaq") notified the
Company that given its current net worth, the Company was not in
compliance with the market capitalization requirements for the continued
listing of its Common Stock on the Nasdaq National Market and requested
that the Company provide additional information to enable Nasdaq to
evaluate the Company's financial condition. As of July 1998, the Company
is involved in an appeal of a delisting notice and has requested a hearing
to review the matter and this request has been granted. At present, the
Company is listed on the Nasdaq National Market, however, it is unclear
whether the Company will remain on the Nasdaq National Market, move to the
the Nasdaq SmallCap Market, or move to the Over the Counter Bulletin
Board.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
The Company is a developer of male and female healthcare products. The
Company has developed or acquired technology in three core areas: prostate
cancer, urinary incontinence, and breast cancer. The Company's direct
hospital-based business lines include its CaverMap Surgical Aid, intended
to aid physicians in preserving vital nerves which control potency during
prostate cancer surgery, its BEBIG Iodine-125 seeds for prostate cancer
brachytherapy and its BEACON Technology System (TM) and AlloSling (TM)
product line, both incontinence surgical lines. The Company's
office-based continuum of continence care product lines include the
Impress(TM) Softpatch, the INTROL(R) Bladder Neck Support Prosthesis, and
the Reliance(R) Insert. In breast cancer screening, the Company is
developing its investigational BreastExam(TM), BreastCheck(TM) and
BreastView(TM) electronic palpation technology in order to aid
physicians and patients in finding suspicious breast lumps earlier. The
Company also continues to dedicate significant resources to the
development and/or acquisition of product lines that fit into its
strategic platform.
In the first quarter of 1998, the Company restructured its operations to
increase its emphasis on hospital-based sales efforts and to decrease its
investment in the consumer-oriented continence care business, which the
Company believes will be best approached through utilizing marketing
partners. The restructuring included the reduction Company-wide of
approximately 40 employees and a provision for exiting certain leased
facilities. This initiative is designed to reduce operating costs while
allowing UroMed to create a business model with a significantly lower
break-even level. The Company expects projected annual cost savings of
the restructuring, and related actions, to be approximately $11.0 million
per year. However, there can be no assurance that these cost savings will
be realized.
Hospital-Based Business
The CaverMap Surgical Aid was cleared by the U.S. Food and Drug
Administration ("FDA") for marketing in the United States in November
1997. The Company began initial introduction efforts of this product
in the U.S. late in the second quarter of 1998. The Company began sales
launches of a series of surgical kits utilizing its BEACON technology
during the first quarter of 1998. The Company recently introduced its
AlloSling(TM) Fascia product line, used in surgery to correct female
incontinence. The AlloSling product line includes UroMed's proprietary
Access(TM) instruments, recently cleared for marketing by the FDA, for use
in conjunction with the AlloSling material during surgical procedures.
The Company expects to commence sales launches of its AlloSling product
line later in 1998.
During the first quarter of 1998, the Company signed an agreement with
BEBIG GmbH for the exclusive right to market BEBIG's Iodine-125 ("I-125")
seeds for prostate brachytherapy treatment in North and South America, and
non-exclusive rights in other parts of the world. Prostate cancer
brachytherapy is a minimally-invasive procedure in which small radiation
sources, or "seeds", are implanted into the prostate to treat localized
cancer. According to terms of the agreement, BEBIG will design and build
an automated manufacturing line, based on its proprietary technology, at
its facility in Berlin, Germany. This licensing agreement calls for a
commitment by UroMed of approximately $1.75 million, which is expected to
be paid in 1998 and will be used to support construction of a related
production line and partially as an advance payment against future I-125
seed purchases. Milestone payments of approximately $0.7 million have
been made in connection with this agreement through August 6, 1998.
The Iodine I-125 seeds are expected to be commercially available in the
United States in early 1999. The Company recently introduced a product
line of insertion needles used as introducers for radioactive
brachytheryapy seeds. The Company will obtain the needles from a third-
party supplier and expects to have them commercially available in late
1998.
As a result of the BEBIG agreement, the Company will be able to pursue two
significant treatment segments for prostate cancer: nerve-sparing
prostatectomy, via the CaverMap Surgical Aid, and brachytherapy, via the
Iodine-125 seeds.
Office-Based Continence Care Products
During the first quarter of 1998, the Company received FDA marketing
clearance for over-the-counter use of its Impress Softpatch. The Company
believes that the best vehicle for capitalizing on both the
over-the-counter and prescription marketplaces is in partnership or
partnerships with larger, more established companies. Therefore, the
Company is currently pursuing partnership(s), and has decided not to incur
Impress launch costs until such partnership(s) are in place.
<PAGE>
In July 1998, the Company announced the signing of an agreement with
Johnson & Johnson Medical K.K. ("JJMKK"), a subsidiary of Johnson &
Johnson, giving JJMKK the exclusive right to distribute the Company's
INTROL Bladder Neck Support Prosthesis in Japan. The agreement has a
term of three years.
Breast Cancer
The BreastCheck technology is an investigational technology and must
receive FDA approval. The Company anticipates seeking this approval
through the form of Pre-Market Approval ("PMA"). The Company has agreed
to a clinical protocol with the FDA and will continue its piloting of
studies on the performance of this technology for professional as well as
consumer use. The final clinical trials are currently slated to begin in
1999, and this technology may be available in the U.S. in 2000, if and
only if, FDA approval is obtained within that time frame. No assurances
can be made that the Company will be successful in obtaining FDA approval
for this product, or as to the timing of such approval.
Results of Operations
Revenues
The Company's revenues for the second quarter of 1998 decreased 20% to
$0.12 million as compared to $0.15 million in the second quarter of
1997, and for the first six months of 1998 decreased 56% to $.18 million
as compared to $.41 million for the first six months of 1997. The
decreases are primarily the result of the recognition of deferred
revenue from European distributorship agreements in 1997 and there
being no such revenue in 1998, partially offset by the commencement of
shipments in 1998 of BEACON Technology Surgical kits and CaverMap Surgical
Aid, which were not commercially available in 1997.
Cost of revenues
Cost of revenues for second quarter of 1998 decreased 7% to $0.87
million as compared to $0.94 million in the second quarter of 1997, and
for the first six months of 1998 increased 3% to $2.0 million as compared
to $1.9 million for the first six months of 1997. The decrease in the
second quarter of 1998 is predominantly a result of decreased
manufacturing engineering costs due to a reduced headcount resulting
from the first quarter of 1998 restructuring. The slight increase in
the first six months of 1998 compared to the first six months of 1997 is
mainly due to 1997 inventory reserve adjustments. The Company
anticipates an increasing cost of revenues over the next two quarters
related to expected increases in product shipments. The Company expects
negative or low gross margins for the near term and, accordingly, has
considered this in its valuation of inventory. There can be no assurance
that the Company will ever realize sufficient production volumes or
otherwise reduce its manufacturing costs in order to raise gross margins.
Operating Expenses
Research and development expenses for the second quarter of 1998 decreased
57% to $1.5 million as compared to $3.4 million for the second quarter of
1997, and for the first six months of 1998 decreased 41% to $3.4 million
as compared to $5.7 million for the first six months of 1997. The
decreases are the result of the decreased level of expenditures incurred
in 1998 on Impress Softpatch activities, product line acquisition costs
and clinical and regulatory efforts. The Company anticipates similar
levels in research and development expenditures in the third and fourth
quarters of 1998, as compared to the second quarter of 1998.
Marketing and sales expenses for the second quarter of 1998 decreased 70%
to $1.2 million as compared to $3.9 million in the second quarter of
1997, and for the first six months of 1998 decreased 64% to $2.9 million
as compared to $8.0 million for the first six months of 1997. These
decreases were predominantly the result of the high level of advertising
and public relations expenses incurred during 1997 in connection with the
Reliance Insert and the Impress Softpatch. There have been insignificant
levels of such expenses incurred during 1998. Marketing and sales
expenses are expected to decrease in the third and fourth quarter of 1998,
as compared to the second quarter of 1998.
<PAGE>
General and administrative expenses for the second quarter of 1998
decreased 33% to $0.8 million as compared to $1.2 million for the second
quarter of 1997, and for the first six months of 1998 decreased 25% to
$1.9 million as compared to $2.6 million for the first six months of
1997. These decreases were mainly due to decreased headcount, and
decreased systems and consulting expenses. General and administrative
expenses are expected to remain at similar levels in the third and fourth
quarters of 1998 as compared to the second quarter of 1998.
Restructuring
During the first quarter of 1998, the Company recorded a charge of $1.0
million for the restructuring of its operations to increase its emphasis
on its hospital-based sales efforts and to decrease its investment in the
consumer-oriented continence care business, which the Company believes
will be best approached through utilizing marketing partners. This charge
included $579,000 of employee termination benefits and $445,000 of costs
to exit certain leased facilities. The $579,000 cost for employee
termination benefits included the reduction of approximately 40 people
from all functions of the Company. Costs to exit certain leased
facilities included $138,000 of fixed assets written off. As of June 30,
1998, actual cash expenditures of $356,000 were made for employee
termination benefits and $107,000 for costs to exit certain leased
facilities. The remaining restructuring accrual at June 30, 1998 is
$423,000. Cash expenses of approximately $353,000 are to be paid out
against this accrual over the next months and the remaining $70,000,
pertaining to costs to exit certain leased facilities, are expected to
be paid out evenly over the subsequent three years.
Interest income and interest expense
Interest income for the second quarter of 1998 decreased 34% to $0.8
million as compared to $1.2 million in the first quarter of 1997, and for
for the first six months of 1998 decreased 33% to $1.7 million as compared
to $2.5 million for the first six months of 1997. The decrease was due
to decreased balances of interest-bearing cash equivalents and
short-term investments.
Interest expense in the second quarter of 1998 remained unchanged at $1.1
million as compared to the first quarter of 1997, and for the first six
months of 1998 remained unchanged at $2.3 million as compared to the first
six months of 1997.
Liquidity and Capital Resources
Cash and short-term investments totaled $53.3 million at June 30, 1998
compared to $65.0 million at December 31, 1997. At June 30, 1998, the
Company's funds were invested in U.S. government obligations, corporate
debt obligations and money market funds.
Net cash used in operating activities of $11.3 million during the six
months ended June 30, 1998 was primarily a result of the net loss for the
period, which was partially offset by depreciation and amortization
expenses and increases in accrued expenses.
Net cash provided by investing activities was $12.0 million during the
six months ended June 30, 1998. Short-term investments decreased by
$12.5 million due to a shift into cash and cash equivalents and cash used
for operating expenses. In addition, the Company made $0.5 million of
fixed asset purchases during the period.
Net cash provided by financing activities was $0.03 million during the
six months ended June 30, 1998 as a result of proceeds received from the
exercise of stock options and from purchases under the Company's
employee stock purchase plan.
In October 1996, the Company sold $69.0 million of its 6% Convertible
Subordinated Notes due October 15, 2003 (the "Convertible Notes").The
Convertible Notes are convertible at any time into shares of common
stock of the Company at a conversion price of $66.41 per share, which
is adjusted for the reverse stock split in May 1998. Interest on the
Convertible Notes is payable each April and October, unless previously
converted or repurchased. There have been no such conversions or
repurchases through June 30, 1998. The Convertible Notes are redeemable
at the option of the Company on or after October 1999 at specified
redemption prices, initially 103.429% of the principal amount plus accrued
and unpaid interest at the redemption date.
<PAGE>
In June 1998, the Nasdaq Stock Market, Inc. ("Nasdaq") notified, that
given its net worth, the Company was not in compliance with the market
capitalization requirements for the continued listing of its Common Stock
on the Nasdaq National Market and requested that the Company provide
additional information to enable Nasdaq to evaluate the Company's
financial condition. As of July 1998, the Company is involved in an
appeal of a delisting notice and has requested a hearing to review the
matter and this request has been granted. At present the Company is
listed on the Nasdaq National Market; however, it is unclear whether the
Company will remain on the Nasdaq National Market, move to the the Nasdaq
SmallCap Market, or move to the Over the Counter Bulletin Board. There
can be no assurance that Nasdaq will grant the Company a waiver for its
present noncompliance or any future noncompliance of its continued listing
criteria. The de-listing of the Common Stock from the Nasdaq National
Market could have a material adverse effect on the market for and price of
the Common Stock.
On May 18, 1998 the Company adopted an amendment to the Company's
Restated Articles of Organization, which effected a one-for-five reverse
stock split (the "Reverse Stock Split"). The Reverse Stock Split was
approved by the stockholders of the Company on May 15, 1998, with holders
of approximately 93% of the total shares represented at the meeting voted
in favor. Basic and diluted net loss per share and weighted average
shares outstanding in the Condensed Statement of Operations reflect the
effect of the Reverse Stock Split retroactively.
The Board of Directors of the Company authorized a Common Stock
repurchase program on June 17, 1998 (the "Repurchase Program"). The
Company is authorized to repurchase up to one million shares, which is
approximately 20% of the outstanding Common Stock, from time to time,
subject to prevailing market conditions. In addition to the Repurchase
Program, the Company is considering from time to time repurchasing some
of its Convertible Notes. The Company intends to complete the Repurchase
Program within one year. Purchases pursuant to the Repurchase Program and
any repurchases of Convertible Notes may be made on the open market or in
privately negotiated transactions. The Company plans to fund such
purchases from its working capital. As of June 30, 1998, the Company had
not repurchased any of its Common Stock or Convertible Notes. Subsequent
to June 30, 1998, the Company has repurchased some of its Common Stock.
The Company believes that available cash, cash equivalents and short term
investments will be sufficient to meet the Company's operating expenses
and capital requirements for the foreseeable future. The Company's future
long-term liquidity and capital requirements depend on numerous factors,
including, but not limited to, development of the Company's marketing
capability, market acceptance of the BEACON Technology system and
AlloSling surgical line and the CaverMap Surgical Aid, development of the
Company's Impress Softpatch partnership(s), the development status of
other potential products, including but not limited to the BreastCheck,
BreastExam and the BreastView devices, potential acquisitions and other
potential strategic product opportunities. There can be no assurance that
the Company will not require additional financing or that, if required,
such financing will be available on terms acceptable to the Company.
The Company has been evaluating its computer software and databases to
ensure that any modifications required to be year 2000 compliant are made
in a timely manner. Thus far, management has determined the financial
impact of such modifications to be immaterial to the Company's financial
position or results of operations in any given year.
<PAGE>
Forward-Looking Statements and Associated Risks
Certain statements contained in this Quarterly Report may be considered
forward looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding (i) the planned progression of the
Company's commercialization strategies for the Impress Softpatch, the
INTROL Bladder Neck Support Prosthesis, the BEACON Technology System
surgical line, the CaverMap Surgical Aid, the AlloSling product line,
Bebig I-125 seeds and brachytherapy seed insertion needles including the
timing and extent of initial or other sales, (ii) consumer acceptance of
the use of the Impress Softpatch and the INTROL Bladder Neck Support
Prosthesis as strategies for the self-care of urinary incontinence and the
size and accessibility of the Company's target markets, (iii) the
Company's expectations regarding its research and development and
in-licensing activities, including but not limited to the BreastCheck,
BreastExam and BreastView devices, (iv) the timing related to the
commencement of marketing activities for the commerical launches of the
BreastCheck, BreastExam and BreastView devices, Impress Softpatch,
BEACON Technology System, the CaverMap Surgical Aid, the AlloSling product
line, Bebig I-125 seeds and brachytherapy seed insertion needles, (v) the
timing related to regulatory clearance for the BreastCheck and BreastExam
devices, (vi) the Company's planned uses for its cash and other liquid
resources, including repurchases of Common Stock and Convertible Notes,
(vii) the Company's expectations regarding its 1998 restructuring,
included anticipated cost savings and (viii) the extent of future
revenues, expenses and results of operations and the sufficiency of the
Company's financial resources to meet planned operational costs and other
expenditure needs. These forward-looking statements are based largely on
the Company's expectations and are subject to a number of risks and
uncertainties, many of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of certain factors, including those described below:
o The uncertainty that the Impress Softpatch, the INTROL Bladder Neck
Support Prosthesis, the BEACON Technology system, the CaverMap
Surgical Aid, the AlloSling product line, Bebig I-125 seeds
and brachytherapy insertion needles will gain market acceptance
either among physicians or patients in the United States.
o The uncertainty that physicians will prescribe the Impress
Softpatch and the INTROL Bladder Neck Support Prostheses in
significant numbers.
o The uncertainty that the Company will be able to develop an
effective sales force and implement a successful marketing
campaign for the BEACON Technology system, the CaverMap Surgical
Aid, its AlloSling product line, Bebig I-125 seeds and brachytherapy
insertion needles in the United States.
o The uncertainty that the Company will be able to develop
effective partnerships to pursue over-the-counter and prescription
outlets for the Impress Softpatch.
o The uncertainty of receiving regulatory clearance for the
Company's BreastCheck, BreastExam and BreastView devices.
o The Company's dependence on others for raw materials and
certain components of its products, including certain materials
available only from single sources.
o The uncertain protection afforded the Company by its patents
and/or other intellectual property rights relating to the Impress
Softpatch, the INTROL Bladder Neck Support Prosthesis and other
products.
o The uncertainty whether the Company will be able to manufacture,
market and sell its products at prices that permit it to achieve
satisfactory margins in the production and marketing of its products.
o Risks relating to FDA or other governmental oversight of the
Company's operations, including the possibility that the FDA could
impose costly additional labeling requirements on, or restrict the
marketing of, the Company's products, or suspend operations at one or
more of the Company's facilities.
o The uncertainty of the size of the potential markets based on
such technology and the coordination of products based on such
technology with UroMed's other products.
Other relevant risks are described in the Company's Annual Report on Form
10-K for the year ended December 31, 1997 under the headings
"Forward-Looking Statements and Associated Risks" and "Risk Factors", and
are incorporated herein by reference.
<PAGE>
Part II. OTHER INFORMATION
Item 2. Changes in Securities
On May 18, 1998, the Company adopted an amendment to the Company's
Restated Articles of Organization, which affected a one-for-five reverse
stock split (the "Reverse Stock Split"). The Reverse Stock Split was
approved by the stockholders of the Company on May 15, 1998 at a Special
Meeting of Stockholders, with holders of approximately 93% of the total
shares represented at the meeting voted in favor.
Item 4. Submission of Matters to a Vote of Security Holders
On May 15, 1998 the Company held its Special Meeting of Stockholders to
consider and vote upon the following three proposals:
(1) A proposal to elect two Class I directors of the Company, each to
hold a three-year term.
(2) A proposed amendment to the Company's Restated Articles of
Organization (the "Amendment") to effect a one-for-five reverse stock
split pursuant to which every five shares of UroMed common stock, no
par value would be converted into one share of Common Stock. The
proposal would decrease the number of outstanding shares of Common
Stock from approximately 26.8 million to 5.4 million. To avoid the
existence of fractional shares of Common Stock, stockholders who
would otherwise be entitled to receive fractional shares of Common
Stock would receive cash in lieu thereof.
(3) A proposal to ratify the appointment of Price Waterhouse LLP as
independent accountants of the Company for the current fiscal year.
Results with respect to the voting on each of the above proposals were as
follows (all vote numbers are presented on a pre-split basis):
Withheld
For Authority
---------- ------------
(1)Election of Directors:
Steven J. Gilbert 23,183,934 450,517
Dr. Elizabeth B. Connell 23,174,227 460,224
For Against Abstain
---------- -------- ---------
(2)Amendment to the Company's
Restated Articles of
Organization to effect a
one-for-five reverse stock
split. 22,022,832 1,404,960 206,659
(3)Approval of Price
Waterhouse LLP as
independent accountants 23,432,270 141,006 61,175
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
99 Restated Articles of Organization with Amendment
for approved reverse stock split.
(b) Reports on Form 8-K
(1) On May 19, 1998 the Company filed a current report on Form
8-K to file a press release to announce the stockholder
approval of a five-for-one reverse stock split.
<PAGE>
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UroMed Corporation
Date: August 6, 1998 /s/ John G. Simon
-------------- ----------------------------------
John G. Simon, President and
Chief Executive Officer
Date: August 6, 1998 /s/ Paul J. Murphy
-------------- -----------------------------------
Paul J. Murphy, Treasurer and
Chief Financial Officer (Principal
Financial and Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE BALANCE
SHEET AND THE STATEMENT OF OPERATIONS FILED AS PART OF THE QUARTERLY
REPORT ON FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
QUARTERLY REPORT ON FROM 10Q.
</LEGEND>
<CIK> 0000917821
<NAME> UroMed-Corp.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAR-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 12,718
<SECURITIES> 40,541
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 305
<CURRENT-ASSETS> 54,760
<PP&E> 10,942
<DEPRECIATION> 4,993
<TOTAL-ASSETS> 64,443
<CURRENT-LIABILITIES> 5,317
<BONDS> 69,000
0
0
<COMMON> 107,024
<OTHER-SE> (116,898)
<TOTAL-LIABILITY-AND-EQUITY> 64,443
<SALES> 121
<TOTAL-REVENUES> 121
<CGS> 867
<TOTAL-COSTS> 4,307
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,134)
<INCOME-PRETAX> (4,553)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,553)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,553)
<EPS-PRIMARY> (0.85)
<EPS-DILUTED> (0.85)
</TABLE>
Exhibit 99 Restated Articles of Organization
The Commonwealth of Massachusetts
Michael Joseph Connelly
Secretary of State
One Ashburton Place, Boston, Mass, 02108
Federal
Identification
Number
04-3104185
Restated Articles of Organization
General Laws, Chapter 156B, Section 74
The fee for filing this certificate is General Laws, Chapter 156B, Section
114. Make check payable to the Commonwealth of Massachusetts.
We: John G. Simon President
Donald-Bruce Abrams Clerk
UroMed Corporation
located at 313 Pleasant Street, Watertown, MA 02172
do hereby certify that the following restatement of the articles of
organization of the corporation was duly adopted at a meeting held on
January 18, 1994, by vote of;
3,085,454 shares of Common Stock of 3,245,758 shares outstanding,
7,860 shares of Series A Convertible Preferred Stock out of 9,580
shares outstanding,
1,532,083 shares of Series B Convertible Preferred Stock out of
1,819,913 shares outstanding,
2,122,085 shares of Series C Convertible Preferred Stock out of
2,478,305 shares outstanding,
1,348,704 shares of Series D Convertible Preferred Stock out of
1,833,960 shares outstanding,
being at least two-thirds of each class of stock outstanding and
entitled to vote and of each class or series of stock adversely
affected thereby:
1. The name by which the corporation shall be known is:
UroMed Corporation
2. The purposes for which the corporation is formed are as
follows:
To engage in the development, manufacture, marketing and
sale of health care products and in general to carry on any
business permitted to corporations under Chapter 156B of
the General Laws as now in effect or as hereafter amended,
or any successor provision of such Chapter.
<PAGE>
3. The total number of shares and the par value, if any, of
each class of stock which the corporation is authorized to
issue is as follows:
WITHOUT PAR VALUE WITH PAR VALUE
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
Preferred -0- 500,000 $ .01
Common 50,000,000 -0- -0-
4. If more than one class is authorized, a description of each
of the different classes of stock with, if any, the
preferences, voting powers, qualifications, special or
relative rights or privileges as to each class thereof and
any series now established:
ARTICLE 4
The total number os shares of all classes of stock which UroMed Corporation
(the "Corporation") shall have authority to issue shall be 50,500,000 shares,
consisting of (i) 50,000,000 shares of the Corporation's Common Stock, no par
value per share (the "Common Stock"), and (ii) 500,000 shares of the
Corporation's preferred stock, par value $0.01 per share (the "Preferred
Stock").
The following is a statement of the designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof in respect of each such class of stock of
the Corporation:
A. COMMON STOCK
1. Voting Rights. Each share of Common Stock shall be entitled to one vote.
2. Dividends. The holders of record of shares of Common Stock shall be entitled
to receive such dividends as may be declared by the Board of Directors from
time to time out of any funds of the Corporation at the time legally available
for payment of dividends.
3. Qualification of Rights. The dividend rights, voting rights and rights in
the event of liquidation of the holders of shares of Common Stock are qualified
by and subject to the rights of the holders of shares of Preferred Stock, as
set forth in Section B hereof or in any resolution of the Board of Directors
adopted pursuant to Section B below:
B. PREFERRED STOCK
The Board of Directors (or a committee thereof) is authorized to establish one
or more series of Preferred Stock and, to the extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts, to fix and determine the
preferences, voting powers, qualifications and special or relative rights or
privileges of the Preferred Stock including, but not limited to:
(a) the number of shares to constitute such series and the distinguishing
designation thereof;
(b) the dividend rate (cumalative or noncumulative of the shares of such
series and the preferences, if any, and the special and relative rights of
such shares of such series as to dividends;
(c) whether or not the shares of such series shall be redeemable, and, if
redeemable, the price, terms and manner of redemption;
(d) the preferences, if any, and the special and relative rights of the
shares of such series upon liquidation of the Corporation;
(e) whether or not the shares of such series shall be subject to the
operation of a sinking or purchase fund and, if so, the terms and
provisions of such fund.
(f) whether or not the shares of such series shall be convertible into
shares of any other class or any other series of the same or any other
class of stock of the Corporation and, if so, the conversion price or ratio
and other conversion rights;
<PAGE>
(g) the conditions under which the shares of such series shall have
separate voting rights or no voting rights; and
(h) such other designations, preferences and relative participating,
optional or other special rights and qualifications, limitations or
restrictions of such series to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts.
The Preferred Stock may consist of one or more series. In the event that
at any time the Board of Directors (or a committee thereof) shall have
established and designated one or more series of Preferred Stock consisting
of a number of shares less than all of the authorized number of shares of
Preferred Stock, the remaining authorized shares of Preferred Stock shall
be deemed to be shares of an undesignated series of Preferred Stock until
designated by the Board of Directors (or committee thereof) as being a
part of a series previously established or a new series then being
established by the Board of Directors. Notwithstanding the fixing of the
number of shares constituting a particular series, the Board of Directors
(or committee thereof) may at any time authorize the issuance of additional
shares of the same series. The preferences, voting powers, qualifications
and special or relative rights or privileges or Preferred Stock may be
dependent on facts ascertainable outside of this Restated Articles of
Organization or any amendment hereto or outside the vote or votes providing
for the issuance of such Preferred Stock, provided that such vote or votes
shall expressly set forth the manner in which any such facts shall operate
upon the preferences, voting powers, qualifications and special or relative
rights or privileges of such Preferred Stock.
5. The restrictions, if any, imposed by the articles of
of organization upon the transfer of shares of stock of any
class are as follows:
None
<PAGE>
6. Other lawful provisions, if any, for the conduct and
regulation of the business and affairs of the corporation
for its voluntary dissolution, or for limiting, defining, or
regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
ARTICLE 6
Article 6 A: No director shall be personally liable to the corporation or
to any of its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director notwithstanding any provision
of law imposing such liability; provided, however, that, to the extent
required from time to time by applicable law, this provision shall not
eliminate the liability of a director, to the extent such liability is
provided by applicable law, (a) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (b) for acts or omissions
not in good faith which involve intentional misconduct or a knowing
violation of law, (c) under Section 61 or Section 62 of the Business
Corporation Law of the Commonwealth of Massachusetts, or (d) for any
transaction from which the director derived an improper personal benefit.
No amendment to or repeal of this Article VI A shall apply to or have any
effect on the liability or alleged liability of any director for or with
respect to any acts or omissions of such director occurring prior to the
effective date of such amendment or repeal:
Article 6 B: Meeting of the stockholders of the corporation may be held
anywhere in the United States.
Article 6 C: The directors may make, amend, or repeal the By-Laws in
whole or in part except with respect to any provision thereof which by law
or the By-Laws requires action by the stockholders.
Article 6 D: The Corporation may be a partner in any business enterprise
which the Corporation would have power to conduct by itself.
* We further certify that the foregoing restated articles of organization effect
no amendments to the articles or organization of the corporation as heretofore
amended, except amendments to the following articles: 2, 3 and 4.
Briefly describe amendments in space below:
Article 2 has been amended to change the purposes for which the Corporation
has been formed.
Article 3 has been amended to delete from the stock that the Corporation is
allowed to issue the 12,000 shares of Series A Convertible Preferred Stock
(the "Series A Preferred"), the 1,851,852 shares of Series B Convertible
Preferred Stock (the "Series B Preferred"), the 2,500,000 shares of Series C
Convertible Preferred Stock (the "Series C Preferred") and the 1,866,667 shares
of Series D Convertible Preferred Stock (the "Series D Preferred").
Article 4 has been amended to delete the terms of the Series A Preferred,
Series B Preferred, Series C Preferred and Series D Preferred.
<PAGE>
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY,we have signed our names
this:
16th day of March in the year 1994
/s/ John G. Simon
----------------------------------
John G. Simon, President
/s/ Donald-Bruce Abrams
-----------------------------------
Donald-Bruce Abrams, Clerk
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
I hereby approve the within restated articles of organization and, the filing
fee in the amount of $500,000 having been paid, said articles are deemed to
have been filed with me this 16th day of March, 1994.
/s/ Michael Joseph Connolly
-----------------------------------
Michael Joseph Connolly,
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT TO:
JOHN UTZSCHNEIDER, ESQ.
BINGHAM, DANA & GOULD
150 FEDERAL STREET
BOSTON, MA 02110
TELEPHONE: (617) 951-8000
<PAGE>
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
Corporations Division
One Ashburton Place, Boston, Mass, 02108-1512
Federal
Identification
Number
04-3104185
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING A
SERIES OF A CLASS OF STOCK
General Laws, Chapter 156B, Section 26
We: John G. Simon, President of
Donald-Bruce Abrams, Clerk of
UroMed Corporation
located at 64 A Street do hereby certify that at a meeting of the directors of
the corporation held on June 24, 1997, the following vote establishing and
designating a series of a class of stock and determining the relative rights
and preferences thereof was adopted:
See continuation Sheets 2A through 2 G
<PAGE>
2A
Uromed Corporation
Continuation Page
VOTED: That pursuant to Article 4B. of the Restated Articles of Organization of
UroMed Corporation (the "Corporation"), the Board of Directors hereby
establishes a series of Preferred Stock, par value $.01 per share (the
"Preferred Stock"), of the Corporation and hereby states the designation and
number of shares, and fixes the preferences, voting powers, qualifications and
special or relative rights or privileges thereof, as follows:
Section 1. Designation and Amount. The shares of such series shall be designated
as "Series A Junior Participating Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting the Series A Preferred Stock shall
be 100,000. Such number of shares may be increased or decreased by vote of the
Board of Directors; provided, that no decrease shall reduce the number of shares
of Series A Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise
of outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Stock, no par value per
share (the "Common Stock"), of the Corporation, and of any other junior stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on the first day of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A Preferred Stock,
in an amount per share (rounded to the nearest cent) equal to the greater of
a)$1.00 or (b)subject to the provision for adjustment hereinafter set forth,
1,000 times the aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all
2B
non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time (i)declare a dividend on the Common Stock payable
in shares of Common Stock, (ii)subdivide the outstanding shares of Common
Stock, (iii)combine the outstanding shares of Common Stock into a smaller number
of shares or (iv)issue any of its shares of capital stock in a reclassification
of the outstanding shares of Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Corporation is the
continuing or surviving entity), then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
<PAGE>
(B) The Corporation shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of
Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding
the date of issue of such shares, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Preferred Stock in an amount less than the total amount
of such dividends at the time accrued
2C
and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share
of Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on
all matters submitted to a vote of the stockholders of the Corporation. In the
event the Corporation shall at any time (i)declare a dividend on the Common
Stock payable in shares of Common Stock, (ii)subdivide the outstanding shares of
Common Stock, (iii)combine the outstanding shares of Common Stock into a smaller
number of shares or (iv)issue any of its shares of capital stock in a
reclassification of the outstanding shares of Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing or surviving entity), then in each such case the
number of votes per share to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
<PAGE>
(B) Except as otherwise provided herein, in any other Certificate of Vote of
Directors establishing a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders of
Series A Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action.
2D
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions payable on
the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter
and until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Preferred Stock outstanding shall have been
paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except dividends
paid ratably on the Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with the
Series A Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series
or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
<PAGE>
2E
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Corporation's Restated Articles of Organization or in any other Certificate of
Vote of Directors establishing a series of Preferred Stock or any similar stock
or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $10.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment;
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to
be distributed per share to holders of shares of Common Stock, or (2)to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time (i)declare a dividend on the Common
Stock payable in shares of Common Stock, (ii)subdivide the outstanding shares of
Common Stock, (iii)combine the outstanding shares of Common Stock into a smaller
number of shares or (iv)issue any of its shares of capital stock in a
reclassification of the outstanding shares of Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing or surviving entity), then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
2F
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time (i)declare a dividend on the Common Stock payable in shares of
Common Stock, (ii)subdivide the outstanding shares of Common Stock, (iii)
combine the outstanding shares of Common Stock into a smaller number of shares
or (iv)issue any of its shares of capital stock in a reclassification of the
outstanding shares of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing or surviving entity), then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall not be
redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all other series
of the Corporation's preferred stock, unless the terms of any such series shall
provide otherwise.
<PAGE>
Section 10. Amendment. The Restated Articles of Organization, as amended, of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class; it being understood that nothing in this Section 10
shall be deemed to restrict the Corporation from designating additional shares
of Series A Preferred Stock if the Board of Directors determines that it is
necessary to do so in order to achieve the purposes of the Rights Agreement,
dated as of June 26, 1997 between the Corporation and State Street Bank and
Trust Company.
2G
Section 11. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
<PAGE>
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 8th day of July in the year 1997
/s/ John G. Simon
----------------------------------
John G. Simon, President
/s/ Donald-Bruce Abrams
-----------------------------------
Donald-Bruce Abrams, Clerk
THE COMMONWEALTH OF MASSACHUSETTS
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING A SERIES OF A CLASS OF STOCK
(General Laws, Chapter 156B, Section 26)
I hereby approve the within certificate and, the filing fee in the amount of
$100.00 having been paid, said certificate is hereby filed this 9th day of
July 1997.
/s/ William Francis Galvin
-----------------------------------
William Francis Galvin
Secretary of the Commonwealth
photocopy of certificate to be sent to:
Jeffrey P. Steele, ESQ
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Telephone: (617) 951-8000
<PAGE>
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
Corporations Division
One Ashburton Place, Boston, Mass, 02108-1512
Federal
Identification
Number
04-3104185
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING A
SERIES OF A CLASS OF STOCK
General Laws, Chapter 156B, Section 26
We: John G. Simon, President of
Donald-Bruce Abrams, Clerk of
UroMed Corporation located at 64 A Street, Needham, MA 02194 certify that these
articles numbered : 4 of the Articles of Organization were duly adopted at a
meeting held on May 15, 1998, by vote of 22,067,354 shares of Common Stock of
26,831,378 shares outstanding.
<PAGE>
The following has been hereby added to Article 4:
Upon these Articles of Amendment to the Restated Articles of Organization
becoming effective pursuant to Massachusetts General Laws (the "Effective
Time"), each FIVE oustanding shares of common stock, no par value ("Common
Stock"), shall thereupon be reclassified and changed into ONE share of
common stock ("New Common Stock"). Upon such Effective Time, each holder
of Common Stock shall thereupon automatically be and become the holder of
ONE share of New Common Stock for every FIVE shares of Common Stock then
held by such holder. Upon such Effective Time, each certificate formerly
representing a stated number of shares of Common Stock shall thereupon be
deemed for all corporate purposes to evidence ownership of New Common
Stock in the appropriately reduced whole number of shares. As soon as
practicable after such Effective Time, stockholders as of the date of the
reclassification will be notified thereof and, upon their delivery of their
certificates of Common Stock to the Corporation will be sent stock
certificates representing their shares of New Common Stock, rounded down
to the nearest whole number, together with cash representing the fair
value of such holder's fractional shares of Common Stock. No scrip or
fractional share certificates for Common Stock will be issued in
connection with this reverse stock split.
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date of not more than thirty days after such
filing, in which event the amendment will become effective on such later date.
Later effective date: May 18, 1998
SIGNED UNDER PENALTIES OF PERJURY, this 15th day of May, 1998,
/s/ John G. Simon
----------------------------------
John G. Simon, President
/s/ Donald-Bruce Abrams
-----------------------------------
Donald-Bruce Abrams, Clerk
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within Articles of Amendment, and the filing fee in the
amount of $100.00 having been paid, said article is deemed to have been filed
with me this 18th day of May, 1998.
Effective date: May 18, 1998
/s/ William Francis Galvin
-----------------------------------
William Francis Galvin
Secretary of the Commonwealth
photocopy of certificate to be sent to:
Dennis C. Liu, ESQ
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
