SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: (Date earliest event reported) October 1, 2000
Urologix, Inc.
---------------
(Exact name of registrant as specified in its charter)
Minnesota 0-28414 41-1697237
--------- ------- ----------
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction of Incorporation) Identification No.)
14405 21/st/ Avenue North, Minneapolis, MN 55447
(Address of principal executive offices)
Registrant's telephone number, including area code: (763) 475-1400
1
The undersigned registrant hereby amends the following items, financial
statements, interim financial statements, pro forma financial information and
exhibits, if any, or other portions of its Form 8-K Report dated October 1, 2000
filed October 11, 2000 as set forth in the pages attached hereto:
ITEM 2. ACQUISITION OR DISPOSAL OF ASSETS
As previously reported, on October 1, 2000, Urologix entered into and
closed an Asset Purchase Agreement with EDAP TMS S.A., a French corporation
("EDAP"), Technomed Medical Systems S.A., a French corporation ("French
Subsidiary") and EDAP Technomed Inc., a Delaware corporation ("U.S. Subsidiary")
(collectively "Sellers"). Under the terms of the Asset Purchase Agreement,
Urologix acquired Seller's Transurethral Microwave Thermotherapy (TUMT(R))
product line, related patents and technologies (the "Acquired Assets").
The Acquired Assets included equipment used in the Sellers' TUMT
business, raw materials, spare parts and a portion of the inventory of finished
products, U.S. third party accounts and notes receivables (with some
exceptions), books and records, causes of action relating to the Acquired Assets
prior to the closing date, sales and promotional literature, designated assumed
customer and supply contracts, patents, trademarks and other intellectual
property, product approvals, clearances and permits, computer software and
firmware used in the TUMT business and all goodwill of Sellers with respect to
the TUMT business. The Acquired Assets excluded, among other things, cash,
certain inventories and contracts, and real property. Urologix currently intends
to continue to use the Acquired Assets for the research, development, marketing
and sale of the Prostatron products in conjunction with the Urologix Targis (TM)
product line.
Under the Asset Purchase Agreement and related documents, Urologix paid
total consideration of $7,988,000 in cash, issued 1,365,000 shares of Urologix
common stock and a five-year warrant to purchase 327,466 shares of Urologix
common stock at a price of $7.725 per share. Urologix agreed to assume
approximately $1.5 million in lease obligations related to equipment located at
customer sites and issued a promissory note to pay Sellers $575,000 on December
30, 2003. Of the total amount paid to Sellers, $2,250,000 and 97,097 shares of
Urologix common stock were placed into an escrow account to secure
indemnification obligations and compliance by Sellers of certain of the
representations, warranties and undertakings. Urologix and Sellers have entered
into a separate Registration Rights Agreement under which Urologix granted
Sellers certain demand and piggyback rights to have its shares included in
future registration statements filed by Urologix with the Securities and
Exchange Commission beginning one year from the closing of the transaction.
2
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
-----------------------------------------
Financial statements required to be filed pursuant to Item 7(a) of Form 8-K
dated October 1, 2000 filed October 11, 2000 for EDAP TMS S.A. and
subsidiaries TUMT business
Report of Independent Public Accountants
Combined Balance Sheets as of December 31, 1999 and 1998
Combined Statements of Income for the Years ended December 31, 1999 and
1998
Combined Statements of Comprehensive Income for the Years ended December
31, 1999 and 1998
Combined Statements of Changes in Business Equity for the Years ended
December 31, 1999 and 1998
Combined Statements of Cash Flows for the Years ended December 31, 1999
and 1998
Notes to Combined Financial Statements
Interim Financial Statements of Business Acquired
-------------------------------------------------
Interim financial statement required to be filed pursuant to 7(a) of Form
8-K for EDAP TMS S.A. and subsidiaries TUMT business
Unaudited Condensed Combined Balance Sheets at June 30, 2000 and
December 31, 1999
Unaudited Condensed Combined Statements of Income for Six Months ended
June 30, 2000 and 1999
Unaudited Condensed Combined Statements of Comprehensive Income for the
Six Months ended June 30, 2000 and 1999
Unaudited Condensed Combined Statements of Changes in Business Equity
for the Periods ended December 31, 1999 and June 30, 2000
Combined Statements of Cash Flows for Six Months ended June 30, 2000 and
1999
Notes to Condensed Financial Statements as of June 30, 2000
(b) Pro Forma Financial Information
-------------------------------
Pro forma financial statements required to be filed pursuant to Item 7(b)
of Form 8-K dated October 1, 2000 filed October 11, 2000 for EDAP TMS S.A.
and subsidiaries TUMT business
Pro Forma Financial Information
Pro Forma Condensed Combined Balance Sheet as of June 30, 2000
Pro Forma Condensed Statement of Operations for the Fiscal Year ended
June 30, 2000
Notes to Pro Forma Financial Statements
(c) Exhibits
--------
23.1 Consent of Ernst and Young
SIGNATURES
Pursuant to the requirement 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.
UROLOGIX, INC.
By /s/ Christopher R. Geyen
--------------------------
Christopher R. Geyen
Chief Financial Officer
November 22, 2000
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To EDAP TMS SA :
We have audited the accompanying combined balance sheets of the Transurethral
Microwave Thermotherapy (TUMT) business, as further described in Note 1, of EDAP
TMS S.A. as of December 31, 1999 and 1998 and the related combined statements of
income, comprehensive income, changes in EDAP TMS S.A. investment, and cash
flows for the years then ended. These combined 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
audits 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the TUMT business as
of December 31, 1999 and 1998 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles in the United States.
Ernst and Young Audit
Represented by
Jean-Luc Desplat
October 2, 2000
Lyons, France
4
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Combined Balance Sheets (As Defined in Note 1)
December 31, 1999 and 1998
(In thousands of Euros)
December 31
Notes 1999 1998
--------- -------- --------
ASSETS
Trade accounts and notes receivable, net of allowance for
doubtful accounts of e 577 in 1999 and e 278 in 1998............... 3 1,159 3,811
Inventories.......................................................... 1,288 1,407
4 -------- ---------
Total current assets............................................. 2,447 5,218
Property, plant and equipment, net................................... 5 617 134
-------- ---------
Total assets..................................................... 3,064 5,352
======== =========
LIABILITIES AND BUSINESS EQUITY
Current portion of long-term debt.................................... 6 852 451
Trade accounts and notes payable..................................... 365 219
Deferred income...................................................... 7 2,890 3,417
-------- ---------
Total current liabilities........................................ 4,107 4,087
Long-term debt....................................................... 6 1,456 1,519
Business Equity...................................................... (2,499) (254)
-------- ---------
Total liabilities and business equity 3,064 5,352
======== =========
The accompanying notes are an integral part of the combined financial
statements.
5
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Combined Statements of Income
(As Defined in Note 1)
For the Years Ended December 31, 1999 and 1998
(In thousands of Euros)
Year Ended
December 31
Notes 1999 1998
----- ---- ----
Net equipment sales............................................... 1,294 1,601
Net sales of disposables, spare parts, supplies and services...... 4,370 3,651
------------- -------------
Net sales....................................................... 5,664 5,252
Other revenues.................................................... 8 258 555
------------- -------------
Total revenues.................................................. 5,922 5,807
Cost of sales..................................................... (3,025) (3,082)
------------- -------------
Gross profit.................................................... 2,897 2,725
Research and development expenses................................. (779) (757)
Selling, General & Administrative expenses........................ 9 (6,202) (6,173)
------------- -------------
Operating Loss.................................................. (4,084) (4,205)
Interest expense, net............................................. (664) (27)
Currency exchange gains (losses), net............................. 153 (37)
Other income, net................................................. - 42
------------- -------------
Loss before taxes............................................... (4,595) (4,227)
Income tax (expense) benefit...................................... (52) 13
------------- -------------
Net loss........................................................ (4,647) (4,214)
============= =============
The accompanying notes are an integral part of the combined financial statements
6
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Combined Statements of Comprehensive Income
For the Years Ended December 31, 1999 and 1998
(In thousands of Euros)
Year Ended
December 31
Notes 1999 1998
----- ---- ----
Net loss.......................................................... (4,647) (4,214)
Foreign currency translation adjustments.................. (285) 233
------------- -------------
Comprehensive loss, net of tax.................................... (4,932) (3,981)
============= =============
The accompanying notes are an integral part of the combined financial statements
7
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Combined Statements of Changes in Business Equity
For the Years Ended December 31, 1999 and 1998
(In thousands of Euros)
Business Equity at January 1, 1998 444
Net loss (4,214)
Foreign currency translation adjustments 233
--------
Comprehensive loss (3,981)
Net change in EDAP TMS S.A. advances 3,283
--------
Business Equity at December 31, 1998 (254)
Net loss (4,647)
Foreign currency translation adjustments (285)
--------
Comprehensive loss (4,932)
Net change in EDAP TMS S.A. advances 2,687
--------
Business Equity at December 31, 1999 (2,499)
========
The accompanying notes are an integral part of the combined financial statements
8
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Combined Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998
(In thousands of Euros)
For the year ended
December 31
1999 1998
----------- ------------
Cash flows from operating activities
Net loss................................................................. (4,647) (4,214)
Elimination of expenses and benefits without effect on cash:
Depreciation........................................................... 106 44
Change in allowances for doubtful accounts & slow-moving
Inventories........................................... 326 278
----------- ------------
432 322
Increase / Decrease in operating assets and liabilities:
Decrease / (Increase) in trade accounts and notes
and other receivables................................. 2,353 (777)
Decrease / (Increase) in inventories................................... 91 (757)
(Decrease) / Increase in trade accounts and notes payable.............. 146 71
(Decrease) / Increase in other current liabilities..................... (527) 238
----------- ------------
2,063 (1,225)
----------- ------------
Net cash used in operating activities.................................. (2,152) (5,117)
Cash flows from investing activities
Acquisitions of property, plant and equipment............................ (589) (9)
----------- ------------
Net cash used in investing activities.................................. (589) (9)
Cash flow from financing activities
Proceeds from new long-term borrowings................................... 0 1,718
Repayment of long term borrowings........................................ (232) 0
(Decrease) / Increase in bank overdrafts and short-term borrowings....... 252 (86)
Net change in Business Equity............................................ 2,402 3,516
----------- ------------
Net cash provided by financing activities.............................. 2,422 5,148
Net effect of exchange rate changes on cash.............................. 319 (22)
----------- ------------
Net increase in cash and cash equivalents - -
Cash and cash equivalents at beginning of year - -
----------- ------------
Cash and cash equivalents at end of year - -
=========== ============
The accompanying notes are an integral part of the financial statements
9
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands of Euros unless otherwise noted)
1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1-1 Basis of Presentation
On October 1, 2000, Urologix, Inc. and EDAP TMS S.A. entered into an asset
purchase agreement (the "Agreement") whereby Urologix purchased from EDAP TMS
S.A. certain assets and assumed certain liabilities related to the transurethral
thermotherapy (TUMT) business of EDAP TMS S.A. (the "Business").
The assets purchased consist of trade accounts and notes receivable, inventories
and property, plant and equipment. The liabilities assumed consist of trade
accounts and notes payable, deferred income and long-term debt.
The accompanying combined financial statements pertain to the TUMT Business that
was purchased by Urologix, and have been prepared in accordance with generally
accepted accounting principles in the United States. These financial statements
are presented on a carve-out basis prepared from EDAP TMS S.A.'s historical
accounting records and include allocations of interest expense, income taxes,
and direct and indirect corporate management and administrative costs
attributable to the TUMT Business. All intercompany transactions including
allocated expenses are deemed to be paid in the period recorded and are shown as
a net change in the Business Equity on the balance sheet.
EDAP TMS S.A., the parent company, provides various administrative services to
the Business including cash management, tax, legal, accounting, sales and
marketing and other corporate functions. It is the parent's policy to charge
these expenses and all other central operating costs, first on the basis of
direct usage when identifiable, with the remainder allocated among the parent's
subsidiaries on the basis of their respective annual sales. In the opinion of
management, this method of allocation is reasonable.
1-2 Reporting currency
Until December 31, 1998 EDAP TMS S.A. prepared and reported its consolidated
financial statements in French Francs (FF). With the introduction of the euro
("euro" or "e") on January 1, 1999 EDAP TMS S.A. has begun to report financial
information in euro. Thus, solely for the convenience of the reader, the
accompanying consolidated financial statements as of and for the period ended
December 31, 1998, have been restated in euro using the official conversion rate
of e 1=FF 6.55957, and depict the same trends as would have been presented if it
had continued to present its consolidated financial statements in FF. The
financial statements will, however, not be comparable to the euro financial
statements of other companies that previously reported their financial
information in a currency other than French Francs.
10
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(In thousands of Euros unless otherwise noted)
1-3 Management estimates
The preparation of financial statements in conformity with generally accepted
accounting principles 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. Actual results could differ from those estimates.
1-4 Concentrations of Credit Risk
Credit limits, ongoing credit evaluation and account monitoring procedures are
utilized to minimize the risk of loss. Collateral is generally not required.
Expected losses are provided for currently and actual losses have been within
management's expectations.
1-5 Principles of Combination
The accompanying combined financial statements include the financial position,
results of operations and cash flows of the TUMT business of EDAP TMS S.A. and
the TUMT business of all its domestic and foreign majority-owned subsidiaries,
which include Technomed Medical Systems S.A. ("TMS S.A."), EDAP Technomed
Inc., Edap Technomed Sdn Bhd, Edap Technomed Italia S.R.L and EDAP Technomed Co.
Ltd. All significant intercompany transactions and balances within the TUMT
business are eliminated.
1-6 Revenue recognition
For equipment sales with no significant remaining vendor obligation, payments
contingent upon customer financing, acceptance criteria that can be subjectively
interpreted by the customer, or tied to the use of the equipment, revenue is
recognized when title to the machine passes (depending on terms, either upon
shipment or delivery), and the customer has the intent and ability to pay in
accordance with contract payment terms that are fixed or determinable. For sales
in which payment is contingent upon customer financing, acceptance criteria can
be subjectively interpreted by the customer, or payment depends on use of the
equipment, revenue is recognized when the contingency is resolved.
Revenues related to services and maintenance contracts are recognized when the
services are rendered. Billings or cash receipts in advance of services due
under maintenance contracts are recorded as deferred revenue.
1-7 Inventories
Inventories are valued at the lower of manufacturing cost, which is principally
comprised of components and labor costs, or market (net realizable value). Cost
is determined on a first-in, first-out basis for components and spare parts and
by specific identification for finished goods (medical devices). Appropriate
consideration is given to deterioration, obsolescence and other factors in
evaluating net realizable value.
11
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(In thousands of Euros unless otherwise noted)
1-8 Property, plant and equipment
Property, plant and equipment are stated at historical cost. Depreciation of
property, plant and equipment is calculated by the straight-line method over the
estimated useful life of the assets concerned, as follows:
Equipment............................. 3-10 years
Equipment includes industrial equipment and research equipment that has
alternative future uses. Equipment also includes machines that are leased to
customers through operating leases related to cost per procedure transactions.
This equipment is depreciated over a period of three years. The Group applies
Statement of Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
and records a provision for impairment if the carrying values of property, plant
and equipment exceed undiscounted estimated future cash flows.
1-9 Research and development costs
Research and development costs are recorded as an expense in the period in which
they are incurred.
1-10 Advertising costs
Advertising costs are recorded as an expense in the period in which they are
incurred. Advertising costs for the years ended December 31, 1999 and 1998 were
not material to the Business financial statements.
1-11 Translation of foreign currencies
Translation of the financial statements of combined companies
Translation rules applicable to the financial statements of the TUMT business of
foreign subsidiaries (EDAP Technomed Inc., Edap Technomed Sdn Bhd, Edap
Technomed Italia S.R.L., and Edap Technomed Co. Ltd.) are as follows:
. assets and liabilities are translated at year-end exchange rates;
. statement of income items are translated at average exchange rates for the
year;
Translation of balance sheet items denominated in foreign currencies
Receivables and payables denominated in foreign currencies are translated at
year-end exchange rates. The resulting unrealized exchange gains and losses are
carried to the statement of income.
12
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands of Euros unless otherwise noted)
2--RELATED PARTY TRANSACTIONS
For the purpose of these carve-out financial statements, payables and
receivables related to transactions between the Business and EDAP TMS S.A. are
included as a component of Business Equity.
EDAP TMS S.A. provided the Business with certain services including cash
management, tax, legal, accounting, sales and marketing and other corporate
functions. Charges for these services were allocated based on methods that
management believed to be reasonable and amounted to Euros 5,607 thousand and
Euros 5,810 thousand for the years ended December 31, 1999 and 1998,
respectively. These charges are included in selling, general and administrative
expenses in the income statement.
3--TRADE ACCOUNTS AND NOTES RECEIVABLE, NET
Dec. 31, Dec. 31,
1999 1998
---------------- ----------------
Trade accounts and notes receivable................................... 1,368 4,089
Other receivables due from TMS to Edap Technomed Inc.................. 368 0
Less: allowance for doubtful accounts................................. (577) (278)
---------------- ----------------
Total............................................................... 1,159 3,811
================ ================
Notes receivable usually represent commercial bills of exchange (drafts) with
initial maturities of 90 days or less.
4--INVENTORIES
Dec. 31, Dec. 31,
1999 1998
---------------- ----------------
Components, spare parts and work-in-progress.......................... 337 268
Finished goods........................................................ 978 1,139
---------------- ----------------
Total gross inventories............................................. 1,315 1,407
Less: provision for slow-moving inventory............................. (27) 0
---------------- ----------------
Total............................................................... 1,288 1,407
================ ================
13
5--PROPERTY, PLANT AND EQUIPMENT
Dec. 31, Dec. 31,
1999 1998
---------------- ----------------
Equipment............................................................. 844 255
Less: accumulated depreciation........................................ (227) (121)
---------------- ----------------
Total.............................................................. 617 134
================ ================
Depreciation expense for the years ended December 31, 1999 and 1998 was Euros
106 thousand and Euros 44 thousand, respectively.
14
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands of Euros unless otherwise noted)
6--LONG-TERM DEBT
Long-term debt consists of the following:
Dec. 31, Dec. 31,
1999 1998
---------------- ----------------
U.S. dollar term loan................................................. 2,308 1,970
Less current portion.................................................. (852) (451)
---------------- ----------------
Total long-term portion............................................ 1,456 1,519
================ ================
The sale of 10 Prostatron units in the United States in 1998 was characterized
as a financing lease of such units by the Company. The U.S. dollar term loan
shown above was recorded to reflect the Company's long-term liability of USD
2,005 thousand as at December 31, 1999 pursuant to such lease. The Company has
started to repay the amount due under the lease in sixty monthly installments of
USD 53,643 beginning February 1, 1999. The interest rate implicit in the lease
is 22.49% annually.
Long-term debt as at December 31, 1999 matures as follows:
2000.......................................................................... 852
2001.......................................................................... 377
2002.......................................................................... 462
2003.......................................................................... 565
2004.......................................................................... 52
------------
Total.................................................................. 2,308
============
15
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands of Euros unless otherwise noted)
7--DEFERRED INCOME
Dec. 31, Dec. 31,
1999 1998
---------------- ----------------
Deferred royalty income.............................................. 2,367 2,616
Other deferred income................................................ 523 801
---------------- ----------------
Total............................................................ 2,890 3,417
================ ================
In July 1996, TMS S.A. sold a non-exclusive license to two companies for the use
of technologies pertaining to the treatment of benign prostatic hyperplasia.
Deferred royalty income represents a non-refundable advance on royalty income
related to this license which will be earned by the Business in 2000 and future
years based on sales in those future years of products incorporating the
licensed technologies. The cash received in advance was included as a reduction
of business equity.
8--OTHER REVENUE
1999 1998
---------------- ----------------
Proceeds from sale of license........................................ 0 282
Royalties............................................................ 212 212
Subsidies and others................................................. 46 61
---------------- ----------------
Total............................................................ 258 555
================ ================
In July 1996, TMS S.A. sold a non-exclusive license to two companies for the use
of technologies pertaining to the treatment of benign prostatic hyperplasia. An
additional sum was received in 1997. Royalty income is due by these companies to
TMS S.A. based on sales in future years of products incorporating the licensed
technologies. Royalty revenue recognized is the greater of revenue due based on
actual sales or revenue based on amortization of the license fee over the
remaining license period. In June 1998, TMS S.A. sold a non-exclusive license to
one additional company. No further royalties are due under that agreement.
16
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(in thousands of Euros unless otherwise noted)
9--OPERATING EXPENSES
Operating expenses include bad debt expense of e 545 thousand and e 293
thousand, for 1999 and 1998, respectively. These operating expenses also include
allowance for slow moving inventory of e 50 thousand and e 70 thousand, for 1999
and 1998, respectively.
10--INCOME TAXES
(Provision) / credit
-------------------------------------------------------- 1999 1998
--------------------------------
Current income tax provision................................. (52) (59)
Research and development tax credit.......................... 0 42
Carryback of tax losses to prior years....................... 0 30
--------------------------------
Sub total current income tax.............................. (52) 13
Income tax expense of Euros 52,000 and a tax benefit of Euros 13,000 were
recorded by the Business for the years ended December 31, 1999 and 1998,
respectively. The income tax benefit in 1998 was principally related to the
research and development tax credit recorded in France. The Company was not
eligible for the research and development tax credit in 1999 due to the limited
increase in the research and development expenses in 1999 as compared to 1998.
The income tax expense of $52,000 in 1999 is principally related to minimum
income taxes payable in France.
A reconciliation of differences between the statutory French income tax rate and
the effective tax rate is as follows:
1999 1998
-------------------------------------
French statutory rate.............................. 41.7% 41.7%
Research and development tax credit............... 0% 2.1%
Carryback of tax losses to prior years............ 0% (0.4%)
Effect of net operating loss carryforwards and
valuation allowances............................. (34.2)% (36.5)%
Other............................................. (5.7)% (7.2%)
-------------------------------------
Effective tax rate................................. 1.8% (0.3%)
=====================================
17
Significant components of deferred taxes consist of the following:
December 31,
------------------------------------
(In thousands of Euros) 1999 1998
--------------- ---------------
Deferred tax assets:
Net operating loss carryforwards...................................... 3,695 1,757
Other deferred tax assets............................................. 252 290
Deferred tax liabilities:............................................... (78) (67)
--------------- ---------------
Net deferred tax assets................................................. 3,869 1,980
Valuation allowance..................................................... (3,869) (1,980)
--------------- ---------------
Deferred taxes, net................................................... - -
=============== ===============
The Business has provided valuation allowances covering 100% of net deferred tax
assets due to the Company's history of losses.
11--OPERATING LEASES
Operating leases having initial or remaining non-cancelable lease terms greater
than one year consist principally of a lease for the production facility of TMS
S.A. in Vaulx-en-Velin, France that has a lease term of nine years expiring at
the option of the lessee at the end of each three-year period through 2003 (i.e.
in 2000 or 2003). Future minimum lease payments for this operating lease will
amount to Euros 267 thousand per year until 2003, or until otherwise canceled by
the lessee.
Total rent expense under operating leases allocated to the Business amounted to
Euros 542 thousand and Euros 777 thousand for the years ended December 31, 1999
and 1998, respectively.
18
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Condensed Interim Financial Statements of Business Acquired
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Unaudited Condensed Combined Balance Sheets
(in thousands of Euros)
June 30 Dec. 31
-------- ---------
Notes 2000 1999
----- -------- ---------
ASSETS
Trade accounts and notes receivable, net of allowance for
doubtful accounts of e 450 in 2000 and e 577 in 1999............... 1,246 1,159
Inventories.......................................................... 2 1,162 1,288
------------ ------------
Total current assets............................................. 2,408 2,447
Property, plant and equipment, net................................... 433 617
------------ ------------
Total assets..................................................... 2,841 3,064
============ ============
LIABILITIES AND BUSINESS EQUITY
Current portion of long-term debt.................................... 358 852
Trade accounts and notes payable..................................... 255 365
Deferred income...................................................... 2,786 2,890
------------ ------------
Total current liabilities........................................ 3,399 4,107
Long-term debt....................................................... 1,342 1,456
Business Equity...................................................... (1,900) (2,499)
------------ ------------
Total liabilities and business equity 2,841 3,064
============ ============
The accompanying notes are an integral part of the combined financial
statements.
19
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Unaudited Condensed Combined Statements of Income
(in thousands of Euros)
Six Months Ended
Notes June 30, June 30,
------- 2000 1999
------------- -------------
Net equipment sales............................................... 1,612 622
Net sales of disposables, spare parts, supplies and services...... 2,749 1,909
------------- -------------
Net sales....................................................... 4,361 2,531
Other revenues.................................................... 105 129
------------- -------------
Total revenues.................................................. 4,466 2,660
Cost of sales..................................................... (2,149) (1,337)
------------- -------------
Gross profit.................................................... 2,317 1,323
Research and development expenses................................. (436) (390)
Selling, General & Administrative expenses........................ (2,414) (3,101)
------------- -------------
Operating loss.................................................. (533) (2,168)
Interest expense, net............................................. (353) (286)
Currency exchange gains, net...................................... 55 70
Other expense, net................................................ (2) -
------------- -------------
Loss before taxes............................................... (833) (2,384)
Income tax expense................................................ 0 (25)
------------- -------------
Net loss........................................................ (833) (2,409)
============= =============
The accompanying notes are an integral part of the combined financial
statements.
20
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Unaudited Condensed Combined Statements of Comprehensive Income
(in thousands of Euros)
Six Months Ended
Notes June 30, June 30,
------- 2000 1999
------------- -------------
Net loss.......................................................... (833) (2,409)
Foreign currency translation adjustments..................... (4) (68)
------------- -------------
Comprehensive loss, net of tax.................................... (837) (2,477)
============= =============
The accompanying notes are an integral part of the combined financial
statements.
21
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Unaudited Condensed Combined Statements of Changes in Business Equity
For the Periods Ended December 31, 1999 and June 30, 2000
(In thousands of Euros)
Business Equity at December 31, 1998 (254)
Net loss (4,647)
Foreign currency translation adjustments (285)
--------
Comprehensive loss (4,932)
Net change in EDAP TMS S.A. advances 2,687
--------
Business Equity at December 31, 1999 (2,499)
Net loss (833)
Foreign currency translation adjustments (4)
--------
Comprehensive loss (837)
Net change in EDAP TMS S.A. advances 1,436
--------
Business Equity at June 30, 2000 (1,900)
========
22
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
Combined Statements of Cash Flows
For the Periods Ended June 30, 2000 and 1999
(In thousands of Euros)
June 30, June 30,
2000 1999
--------- ---------
Cash flows from operating activities
Net loss................................................................. (833) (2,409)
Elimination of expenses and benefits without effect on cash:
Depreciation........................................................... 124 60
Change in allowances for doubtful accounts & slow-moving
Inventories...................................................... (127) 36
--------- ---------
(3) 96
Increase / Decrease in operating assets and liabilities:
Decrease / (Increase) in trade accounts and notes
and other receivables............................................ 41 3,433
Decrease / (Increase) in inventories................................... 125 (265)
(Decrease) / Increase in trade accounts and notes payable.............. (110) 87
(Decrease) / Increase in other current liabilities..................... (103) (18)
--------- ---------
(47) 3,237
--------- ---------
Net cash (used in) / provided by operating activities.................. (883) 924
Cash flows from investing activities
Acquisitions of property, plant and equipment............................ 0 (276)
Proceeds from sales of property, plant and equipment..................... 60 0
--------- ---------
Net cash provided by/(used in) investing activities.................... 60 (276)
Cash flow from financing activities
Proceeds from new long-term borrowings................................... 0 0
Repayment of long term borrowings........................................ (153) 0
(Decrease) / Increase in bank overdrafts and short-term borrowings....... (572) (292)
Net change in Business Equity............................................ 1,431 (620)
--------- ---------
Net cash provided by/(used in) financing activities.................... 706 (912)
Net effect of exchange rate changes on cash.............................. 117 264
--------- ---------
Net increase in cash and cash equivalents - -
Cash and cash equivalents at beginning of year - -
--------- ---------
Cash and cash equivalents at end of year - -
========= =========
The accompanying notes are an integral part of the combined financial
statements.
23
TUMT BUSINESS
A BUSINESS OF EDAP TMS S.A. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2000
1--BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have been
prepared in accordance with United States generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all of the information and footnotes required by United States generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair presentation have
been included. Operating results for the six-month periods ended June 30, 2000
are not necessarily indicative of the results that may be expected for the year-
ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
combined financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
For further information, refer to the combined financial statements and
footnotes thereto included in section 7(a) of this document.
The unaudited condensed combined financial statements pertain to the TUMT
Business that was purchased by Urologix, and have been prepared in accordance
with United States generally accepted accounting principles for interim
financial information. These financial statements are presented on a carve-out
basis prepared from EDAP TMS S.A.'s historical accounting records and include
allocations of interest expense, income taxes, and direct and indirect corporate
management and administrative costs attributable to the TUMT Business. All
intercompany transactions including allocated expenses are deemed to be paid in
the period recorded and are shown as a net change in business equity on the
balance sheet.
EDAP TMS S.A., the parent company, provides various administrative services to
the Business including cash management, tax, legal, accounting, sales and
marketing and other corporate functions. It is the parent's policy to charge
these expenses and all other central operating costs, first on the basis of
direct usage when identifiable, with the remainder allocated among the parent's
subsidiaries on the basis of their respective annual sales. In the opinion of
management, this method of allocation is reasonable.
2--INVENTORIES
June 30, Dec. 31,
2000 1999
------------- -------------
Components, spare parts and work-in-progress.................... 275 337
Finished goods.................................................. 915 978
------------- -------------
Total gross inventories...................................... 1,190 1,315
Less: provision for slow-moving inventory....................... (28) (27)
------------- -------------
Total........................................................ 1,162 1,288
============= =============
24
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
PRO FORMA FINANCIAL INFORMATION - GENERAL
On October 1, 2000, Urologix entered into and closed an Asset Purchase
Agreement with EDAP TMS S.A., a French corporation, Technomed Medical Systems
S.A., a French corporation and EDAP Technomed Inc., a Delaware corporation
(collectively "EDAP"). Under the terms of the Asset Purchase Agreement, Urologix
acquired Seller's Transurethral Microwave Thermotherapy (TUMT(R)) product line,
related patents and technologies.
The accompanying pro forma unaudited condensed balance sheet as of June 30, 2000
and the pro forma unaudited condensed statement of operations for the twelve
months ended June 30, 2000 are presented to illustrate the estimated effects of
the acquisition of certain assets and assumption of certain liabilities of EDAP
and its affiliates by Urologix, Inc. The pro forma unaudited condensed balance
sheet has been prepared as if the purchase occurred on June 30, 2000. The pro
forma unaudited condensed statement of operations has been prepared as if the
transaction occurred on July 1, 1999.
The pro forma adjustments are based on available information and certain
estimates and assumptions. Therefore it is likely that the actual adjustments
will differ from the pro forma adjustments. The Company believes that such
estimates and assumptions provide a reasonable basis for presenting all of the
significant effects of the transactions and events and that the pro forma
adjustments give appropriate effect to those estimates and assumptions and are
properly applied in the pro forma unaudited condensed combined financial
statements.
The pro forma unaudited condensed combined financial statements should be read
in conjunction with the historical financial statements and related notes
included in the Company's Form 10-K. The pro forma unaudited condensed combined
financial statements are provided for informational purposes only and should not
be construed to be indicative of the Company's results of operations or the
Company's financial position had the transactions and events described above
been consummated on the dates assumed and do not project the Company's financial
position or results of operations for any future date or period.
25
UROLOGIX, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2000
(in thousands except share and per share data)
Urologix EDAP Pro Forma Urologix
Assets Historical (1) Historical (2) Adjustments Pro Forma
--------------- ---------------- --------------- --------------
Current assets:
Cash and cash equivalents $ 23,598 - $ (7,988) (3) $ 15,610
Accounts receivable 1,027 1,186 2,213
Inventories 1,454 1,106 2,560
Prepaid and other current assets 238 - 1,518 (9) 1,756
-------------- ---------------- --------------- --------------
Total current assets 26,317 2,292 (6,470) 22,139
-------------- ---------------- --------------- --------------
Property and equipment 1,679 412 2,091
Goodwill and other intangibles - - 21,177 (6) 21,177
Deposits and other assets 3,960 - (731) (7) 3,229
-------------- ---------------- --------------- --------------
$ 31,956 $ 2,704 $ 13,976 $ 48,636
-------------- ---------------- --------------- --------------
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 1,084 $ 243 $ 1,327
Accrued liabilities 2,102 - 410 (11) 2,512
Current portion of long-term debt - 341 341
Deferred Income - 2,652 (731) (7) 1,921
-------------- ---------------- --------------- --------------
Total current liabilities 3,186 3,236 (321) 6,101
-------------- ---------------- --------------- --------------
Long-term debt 1,278 575 (8) 1,853
Shareholders' equity
Common stock 116 - 14 (4) 130
Additional paid-In capital 91,583 - 11,898 (5) 103,481
Retained earnings (62,894) - - (62,894)
Business equity - (1,810) 1,810 (17) -
Comprehensive loss (35) - - (35)
-------------- ---------------- --------------- --------------
Total shareholders' equity and
liabilities to be assumed $ 31,956 $ 2,704 $ 13,976 $ 48,636
-------------- ---------------- --------------- --------------
The accompanying notes are an integral part of the pro forma condensed financial
statements
26
UROLOGIX, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 2000
(In thousands except share and per share data)
Historical Pro Forma Urologix
Urologix (10) EDAP (12) Adjustments Pro Forma
-------------------------------------------------------------
Sales $ 8,163 $ 7,728 $ (545) (13) $ 15,346
Cost of sales 4,356 3,837 (251) (14) 7,942
---------- ----------- ---------- ----------
Gross profit 3,807 3,891 (294) 7,404
Research and development expenses 3,614 826 - 4,440
Selling, General & Administrative 8,767 5,515 - 14,282
expenses
Amortization of intangibles including
goodwill - - 1,426 (15) 1,426
---------- ----------- ---------- ----------
12,381 6,341 1,426 20,148
---------- ----------- ---------- ----------
Operating loss (8,574) (2,450) (1,720) (12,744)
Interest Expense 1,477 (732) - 745
Currency exchange gain - 137 - 137
Other income - (1) - (1)
Income tax expense - (26) - (26)
---------- ----------- ---------- ----------
Net Loss $(7,097) $ (3,072) $ (1,720) $ (11,889)
---------- ----------- ---------- ----------
Weighted Average Number of Shares
Outstanding 11,514 1,365 (16) 12,879
Net Loss Per Share $ (0.62) $ (0.92)
The accompanying notes are an integral part of the pro forma condensed financial
statements
27
UROLOGIX, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENT
The purchase price has been allocated to assets and liabilities as indicated in
the following summary (in thousands):
Cash $ 7,988
Common Stock and warrants 11,912
Transaction expense 410
Liabilities assumed 4,358
----------
$ 24,668
Receivables $ 1,186
Inventory 1,106
Other assets 1,930
Intangible assets 11,000
Excess of cost over net assets acquired 9,446
----------
$ 24,668
1. Represents the condensed historical balance sheet of Urologix as of June 30,
2000 as reported in the Company's June 30, 2000 Form 10-K as filed with the
SEC.
2. Represents the unaudited historical balance sheet of EDAP's TUMT business as
of June 30, 2000.
3. Represents cash consideration paid to EDAP pursuant to the Asset Purchase
Agreement and Supply Agreement
4. Represents 1,365,000 shares of $0.01 par value common stock of Urologix
issued pursuant to the Asset Purchase Agreement
5. Represents 1,365,000 shares of common stock less par value plus the fair
value of 327,466 warrants issued pursuant to the Asset Purchase Agreement.
6. Represents value of purchased technology, excess of the purchase price paid
to acquire tangible assets and other intangibles assets as a result of the
acquisition of EDAP.
7. Represents the elimination of an intercompany royalty obligation by EDAP to
Urologix as a result of the transaction.
8. Represents $575,000 term loan due December 30, 2003 issued pursuant to Asset
Purchase Agreement.
9. Represents $1,148,000 of the total cash consideration paid to EDAP that will
be used as a credit for future purchases of inventory made pursuant to
Supply Agreement and a obligation of EDAP to pay Urologix $370,000
concurrent with the execution of the Asset Purchase agreement.
10. Represents the historical statement of operations of the Company for the
fiscal year ended June 30, 2000 as reported in the Company's June 30, 2000
Form 10-K filed with the SEC
11. Represents transaction expenses.
12. Represents the unaudited historical financial statement of EDAP's TUMT
business for the twelve months ended June 30, 2000.
13. Represents in the elimination of intercompany royalty payments made by
Urologix to EDAP and a reduction for service revenue that will not acquired
by Urologix as a result of the acquisition of EDAP's TUMT business
14. Represents costs associated with the service revenue that will not be
acquired by Urologix as a result of the acquisition of EDAP's TUMT business.
28
15. Reflects amortization of purchased technology, excess cost over net assets
acquired and other intangible assets with lives between 14 and 15 years.
16. Represents 11,513,878 weighted average shares outstanding and 1,365,000
weighted average shares issued to EDAP pursuant to the Asset Purchase
Agreement. Warrants have been excluded from the calculation, as they would
be anti-dilutitive.
17. Represents elimination of Business equity of EDAP as a result of the
transaction.
29