424B1 1 d424b1.txt FINAL PROSPECTUS Filed Pursuant to Rule 424(B)(1) File No. 333-61848 PROSPECTUS [Logo of Urologix] 327,466 Shares Common Stock ___________________ A selling shareholder of Urologix, Inc. is offering 327,466 shares of common stock issuable pursuant to a warrant dated October 1, 2000. Urologix will not receive any proceeds from the sale of shares offered by the selling shareholder. The shares of common stock offered will be sold as described under the heading "Plan of Distribution," beginning on page 15. Our common stock is listed on the Nasdaq National Market under the symbol "ULGX." On June 1, 2001, the last reported sale price of our common stock was $22.42. ___________________ The common stock offered involves a high degree of risk. We refer you to "Risk Factors," beginning on page 6. ___________________ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. _________________ This prospectus is dated June 4, 2001 TABLE OF CONTENTS
Urologix............................................................................. 3 Where You Can Find Additional Information............................................ 5 Information Incorporated By Reference................................................ 5 Risk Factors......................................................................... 6 Warning About Forward Looking Statement.............................................. 13 Use of Proceeds...................................................................... 14 Selling Shareholder.................................................................. 14 Plan of Distribution................................................................. 15 Interests of Named Experts and Counsel............................................... 16 Disclosure of Commission Position on Indemnification for Securities Act Liabilities.. 16
____________________ You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different information. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus is accurate as of the date on the front cover. You should not assume that the information contained in this prospectus is accurate as of any other date. When we refer to "We," "Our," and "Us," in this prospectus we mean Urologix, Inc. 2 UROLOGIX Our Business Our company has developed and offers non-surgical, anesthesia-free, catheter-based therapies that use a proprietary cooled microwave technology for the treatment of benign prostatic hyperplasia (BPH), a disease that dramatically affects more than 23 million men worldwide by causing adverse changes in urinary voiding patterns. We market our products under the TargisTM and Prostatron(R) names. Both systems utilize Cooled ThermoTherapyTM, a targeted microwave energy combined with a unique cooling mechanism that protects healthy tissue and enhances patient comfort while providing safe, effective, lasting relief from the symptoms of BPH. Cooled ThermoTherapy can be performed without anesthesia or intravenous sedation and, as a result, can be performed in a physician's office or an outpatient clinic. We believe that Cooled ThermoTherapy provides an efficacious, safe and cost effective solution for BPH with results superior to medication without the complications and side effects inherent in surgical procedures and, as such, is well positioned to address the needs of physicians, patients and payors. Third-party reimbursement will be essential to acceptance of the Cooled ThermoTherapy procedure, and clinical efficacy, overall cost effectiveness and physician advocacy will be keys to obtaining such reimbursement. We estimate that 60% to 80% of patients who receive treatment in the United States will be eligible for Medicare coverage. The remaining patients will either be covered by private insurers, including traditional indemnity health insurers and managed care organizations, or be private-paying patients. As a result, Medicare reimbursement is particularly critical for widespread market acceptance in the United States. The rate of Medicare reimbursement for Cooled ThermoTherapy is dependent on the site of service. Through July 31, 2000, Medicare had reimbursed for each Cooled ThermoTherapy procedure performed in hospitals on a reasonable cost basis. Under the reasonable cost basis of reimbursement, Medicare reimbursed all reasonable costs the hospital incurred in conducting the procedures. Beginning on August 1, 2000, the United States Healthcare Finance Administration ("HCFA"), which administers Medicare, replaced the reasonable cost basis of reimbursement for outpatient hospital-based procedures, with a new fixed rate or "prospective payment system". Under this new method of reimbursement, a hospital receives a fixed reimbursement for each procedure performed in its facility. Medicare began to reimburse for Cooled ThermoTherapy procedures performed in a physician's office on a fixed rate basis on January 1, 2001. The change was a significant milestone for us, as it marked the first time patients will be covered directly by Medicare for in-office procedures. We believe that this change in reimbursement allows Cooled ThermoTherapy treatments to be performed in the environment the technology was designed to serve and will lead to increased demand for our products. With the recent changes in reimbursement rates and site of care for which Medicare will reimburse procedures, our company is in a period of transition. We will continue to support 3 our hospital-based business while making the preparations necessary to serve and accelerate the volume of business in urologists' offices. Our strategy will continue to focus on generating physician access to and awareness of Cooled ThermoTherapy while creating patient demand by providing education on the benefits of the treatment. We will continue to market our products through a direct sales force in the United States and utilize a network of distributors internationally. Recent Developments On October 1, 2000, we purchased the Transurethral Microwave Thermotherapy (TUMT(R)) product line and related patents and technologies from EDAP TMS S.A., a French corporation, EDAP Technomed Medical Systems S.A., a French corporation and EDAP Technomed Inc., a Delaware corporation (collectively "EDAP"). We paid total consideration of $7,988,000 in cash, issued 1,365,000 shares of common stock and a five-year warrant to purchase 327,466 shares of our common stock at a price of $7.725 per share. We also agreed to assume approximately $1.5 million in lease obligations related to equipment located at customer sites and issued a promissory note to pay EDAP $575,000 plus accrued interest on December 30, 2003. Our acquisition of the TUMT product line and related patents and technologies was accounted for using the purchase method of accounting. Since the acquisition, we have been integrating the EDAP Prostatron into our product line and operations. 4 WHERE YOU CAN FIND ADDITIONAL INFORMATION We file annual, quarterly and special reports, proxy statements, and other information with the Securities and Exchange Commission. You may read and copy any document we file at the public reference room in Washington D.C. located at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms, including locations of regional offices. Some of our recent SEC filings are also available to the public from our Web site at www.urologix.com or at the SEC Web site at www.sec.gov. Information on our Web site is not a part of this prospectus. INFORMATION INCORPORATED BY REFERENCE We "incorporate by reference" the information we file with the SEC. This means we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus. We incorporate by reference the documents listed below, and any future filings made with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 until all the securities offered by this prospectus are sold. This prospectus is part of a registration statement we filed with the SEC (Registration No. 333-61848). The following documents are incorporated by reference: o Our Annual Report on Form 10-K for the fiscal year ended June 30, 2000; o Our Quarterly Reports on Form 10-Q for the quarters ended September 30, 2000; December 31, 2000 and March 31, 2001; o Our Definitive Proxy Statement dated October 6, 2000 for the Annual Meeting of Shareholders held on November 14, 2000; o Our Current Report on Form 8-K dated October 1, 2000 and filed October 11, 2000; as amended by Form 8-K/A filed on November 22, 2000. You may request a copy of these filings, at no cost, by writing or telephoning us at the following address: Urologix, Inc. 14405 21st Avenue North Minneapolis, MN 55447 (763) 475-1400 5 RISK FACTORS This offering involves a high degree of risk. You should carefully consider the risks and uncertainties described below and the other information contained in this prospectus and in the documents to which we refer you under the heading "Information Incorporated by Reference" on page 5 before deciding whether to invest in shares of our common stock. If any of the following risks actually occur, our business, financial condition or operating results could be harmed. In that case, the trading price of our common stock could decline, and you may lose part or all of your investment. These risks and uncertainties described below are not the only ones facing Urologix. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also impair our business operations and adversely affect the market price of our common stock. We Have a Limited Operating History and Expect to Continue to Generate Losses We have incurred substantial losses since our inception and, if physicians do not purchase and use our Cooled ThermoTherapy system to treat patients with BPH we may never achieve and maintain profitability. We incurred a net loss of approximately $4.3 million for the nine months ended March 31, 2001, and have incurred losses of $67.2 million since our inception from costs relating to the development and commercialization of our Cooled ThermoTherapy systems. We expect to continue to incur operating losses in the near future as we continue to expand our investment in sales and marketing activities and continue to fund research and development activities. Our future profitability depends upon our ability to sell sufficient quantities of our Cooled ThermoTherapy systems and the related disposables to generate revenue in excess of our planned expenditures. If we do achieve profitability, we cannot be certain that we would be able to sustain or increase profitability on a quarterly or annual basis thereafter. Our Products May Not Achieve Market Acceptance, Which Could Limit Our Future Revenue Physicians will not recommend Cooled ThermoTherapy procedures unless they conclude, based on clinical data and other factors, that it is an effective alternative to other methods of enlarged prostate treatment, including more established methods. Patient acceptance of the procedure will depend in part upon physician recommendations and on other factors, including the degree of invasiveness and the rate and severity of complications associated with the Cooled ThermoTherapy procedure compared with other therapies. Patient acceptance of the Cooled ThermoTherapy procedure will also depend upon the ability of physicians to educate these patients on their treatment choices. Healthcare payor acceptance of our procedure will require, among other things, evidence of the cost effectiveness of the Cooled ThermoTherapy as compared to other BPH therapies. Our marketing strategy must overcome the difficulties inherent in the introduction of new technology to the medical community. If our Cooled ThermoTherapy procedure is not accepted by physicians, patients or payors or is 6 accepted more slowly than expected, our sales will be negatively affected and we may never operate profitably. Third Party Reimbursement is Critical to Market Acceptance of our Products Our future revenues are subject to uncertainties regarding healthcare reimbursement and reform. In the United States, healthcare providers, such as hospitals and physicians, generally rely on third-party payors. Third-party reimbursement is dependent upon decisions by the United States Health Care Financing Administration and contract Medicare carriers for Medicare, individual managed care organizations, private insurers, foreign governmental health programs and other payors of healthcare cost. Any failure to receive or maintain favorable coding, coverage and reimbursement determinations for Cooled ThermoTherapy by these organizations could discourage physicians from using our products. We may be unable to sell our products on a profitable basis if third-party payors deny coverage, provide low reimbursement rates or reduce their current levels of reimbursement. The continuing efforts of government and insurance companies, health maintenance organizations and other payors of healthcare costs to contain or reduce costs of healthcare may affect our future revenues and profitability. With recent federal and state government initiatives directed at lowering the total cost of healthcare, the United States Congress and state legislatures will likely continue to focus on healthcare reform including the reform of Medicare and Medicaid systems, and on the cost of medical products and services. Additionally, third-party payors are increasingly challenging the prices charged for medical products and services. Also, the trend toward managed healthcare in the United States and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of healthcare services and products, as well as legislative proposals to reform healthcare or reduce government insurance programs, may also result in lower prices for or rejection of our products. The cost containment measures that healthcare payors and providers are instituting and the effect of any healthcare reform could cause reductions in the amount of reimbursement available, and could materially adversely affect our revenues and ability to operate profitably. We are Faced with Intense Competition and Rapid Technological and Industry Change We are faced with intense competition and rapid technological and industry change and, if our competitors' existing products or new products are more effective or superior to our products, the commercial opportunity for our products will be reduced or eliminated. We face intense competition from other device manufacturers and surgical manufacturers, as well as pharmaceutical companies. Many of our competitors are significantly larger than us and have greater financial, technical, research, marketing, sales, distribution and other resources than us. We believe there will be intense price competition for products developed in our markets. Our competitors may develop or market technologies and products, including drug-based treatments, that are more effective or commercially attractive than any we are developing or marketing. Our competitors may succeed in obtaining regulatory approval and introducing or 7 commercializing products before we do. Such developments could have a significant negative effect on our financial condition. Even if we are able to compete successfully, we may not be able to do so in a profitable manner. The medical device industry generally, and the urological disease treatment market in particular, are characterized by rapid technological change, changing customer needs, and frequent new product introductions. Our products may be rendered obsolete as a result of future innovations. We are Dependent on Adequate Protection of our Patent and Proprietary Rights We rely on patents, trade secrets, trademarks, copyrights, know-how, license agreements and contractual provisions to establish and protect our intellectual property rights. These legal means, however, afford us only limited protection and may not adequately protect our rights or remedies to gain or keep any advantages we may have over our competitors. In addition, litigation may be necessary to enforce our intellectual property rights, to protect our patents and trade secrets and to determine the validity and scope of our proprietary rights. Any litigation would likely result in substantial expense and divert our attention from implementing our business strategy. Furthermore, we cannot assure you that others have not developed or will not develop similar products or manufacturing processes, duplicate any of our products or manufacturing processes, or design around any of our patents. The medical device industry has been characterized by extensive litigation regarding patents and other intellectual property rights, and companies in the medical device industry have employed intellectual property litigation to gain a competitive advantage. Intellectual property litigation would likely result in substantial cost to and diversion of effort by us. In addition to being costly, protracted litigation regarding our ability to incorporate intellectual property into our products could result in our customers or potential customers deferring or limiting their purchase or use of the affected products until the litigation is resolved. We Depend Upon our Cooled Thermotherapy Systems for all of our Revenues All of our revenues are derived from sales of our Cooled ThermoTherapy systems and disposable treatment catheters. As a result, our success is solely dependent upon the success of our Cooled ThermoTherapy systems. To date, our Cooled ThermoTherapy systems have not received widespread market acceptance. If we are unable to commercialize the use of our Cooled ThermoTherapy systems successfully, our business, financial condition and results of operations would be materially and adversely affected. 8 We Have Limited Manufacturing Experience and We are Dependent Upon a Limited Number of Third-Party Suppliers to Manufacture our Products We have contracted with third-parties for the production of the Prostatron product line and the Targis system control unit pursuant to written supply agreements. If, for any reason, the third-party manufacturers are unable or unwilling to manufacture the products for us in the future, we could incur significant delays in obtaining a substitute contract manufacturer. In addition, we purchase additional components used in our products from various suppliers and rely on single sources for several components. One such component is obtained from a source that has a patent for the technology. Delays could be caused if supply of this component or other components were interrupted. These delays could be extended in certain situations where a substitute contract manufacturer or a component substitution would require approval by the FDA of a PMA supplement. The termination or interruption of any of these relationships or the failure of these manufacturers or suppliers to supply products or components to us on a timely basis or in sufficient quantities would likely cause us to be unable to meet customer orders for our system and harm our business. We produce the disposable treatment catheter for the Targis System. We have limited experience in manufacturing products in commercial quantities or rapidly scaling-up production. Manufacturers often encounter difficulties in scaling up production of new products, including problems involving production yields, product recalls, quality control and assurance, component supply and lack of qualified personnel. If we or any of our third-party manufacturers or suppliers experience production problems, we may not be able to locate an alternate manufacturer promptly. Identifying and qualifying alternative suppliers of components takes time and involves significant additional costs and may delay the production of our products. The FDA requires us to identify any supplier we use. The FDA may require additional testing of any component from new suppliers prior to our use of these components. The termination of our relationships with these single source suppliers or the failure of these parties to supply us with the components on a timely basis and in sufficient quantities would likely cause us to be unable to meet customer orders for our products in a timely manner or within our budget and harm our business. We are Dependent on Distributors for International Sales To date, a majority of our revenues outside the United States have been derived from sales through third-party distributors. Boston Scientific Corporation has distribution rights through June 2001 for the Targis System in most of the European countries, and Nihon Kohden has exclusive distribution rights to the Targis System in Japan. EDAP has distribution rights to the Prostatron system in Japan. Although we intend to work with our distributors to improve international sales, we expect only slight growth in international sales. The failure of our distributors to effectively market our products in the international markets or our failure to locate and establish relationships with reputable distributors could have an adverse effect on our ability to achieve penetration of these markets and establish long-term acceptance of Cooled ThermoTherapy. 9 We are Dependent on Key Personnel Failure to attract and retain skilled personnel could hinder our research and development and sales and marketing efforts. Our future success depends to a significant degree upon the continued services of key technical and senior management personnel, including Michael M. Selzer Jr., our Chief Executive Officer. Our future success also depends on our continuing ability to attract, retain and motivate highly qualified managerial, technical and sales personnel. The inability to retain or attract qualified personnel could have a significant negative effect upon our research and development and sales and marketing efforts and thereby materially harm our business and financial condition. Government Regulation Can Have a Significant Impact on our Business Government regulation in the United States and other countries is a significant factor affecting the research and development, manufacture and marketing of our products. In the United States, the FDA has broad authority under the federal Food, Drug and Cosmetic Act and the Public Health Service Act to regulate the distribution, manufacture and sale of medical devices. Foreign sales of drugs and medical devices are subject to foreign governmental regulation and restrictions that vary from country to country. The process of obtaining FDA and other required regulatory approvals is lengthy and expensive. We may not be able to obtain necessary approvals for clinical testing or for the manufacturing or marketing of our products. Failure to comply with applicable regulatory approvals can, among other things, result in fines, suspension of regulatory approvals, product recalls, operating restrictions, and criminal prosecution. In addition, governmental regulations may be established that could prevent, delay, modify or rescind regulatory approval of our products. Any such position by the FDA, or change of position by the FDA, may adversely impact our business and financial condition. Regulatory approvals, if granted, may include significant limitations on the indicated uses for which our products may be marketed. In addition, to obtaining such approvals, the FDA and foreign regulatory authorities may impose numerous other requirements on us. FDA prohibits the marketing of approved medical devices for unapproved uses. In addition, product approvals can be withdrawn for failure to comply with regulatory standards or the occurrence of unforeseen problems following initial marketing. We may not be able to obtain regulatory approvals for our products on a timely basis, or at all, and delays in receipt of or failure to receive such approvals, the loss of previously obtained approvals, or failure to comply with existing or future regulatory requirements would have a significant negative effect on our financial condition. In addition, the healthcare industry in the United States is generally subject to fundamental change due to regulatory, as well as political, influences. We anticipate that Congress and state legislatures will continue to review and assess alternative healthcare delivery and payment systems. Potential approaches that have been considered include controls on healthcare spending through limitations on the growth of private purchasing groups and price controls. We cannot predict what impact the adoption of any federal or state healthcare reform measures may have on our business. We, as well as our distributors and healthcare providers who purchase our products and services, are subject to state and federal laws prohibiting kickbacks or other forms of bribery 10 in the healthcare industry. We may be subject to civil and criminal prosecution and penalties if we or our agents violate any of these laws. We May be Negatively Affected by Product Liability and Product Recall The manufacture and sale of medical products entails significant risk of product liability claims or product recalls. Our existing insurance coverage limits may not be adequate to protect us from any liabilities we might incur in connection with the clinical trials or sales of our products. We may require increased product liability coverage as our products are commercialized. Insurance is expensive and may not be available on acceptable terms, or at all. A successful product liability claim or series of claims brought against us in excess of our insurance coverage, or a recall of our products, could have a significant negative effect on our business and financial condition. Even unsuccessful claims could result in the expenditure of funds and management time and could have a negative impact on our business. We May Experience Fluctuations in our Future Operating Results If our revenue declines in a quarter from the revenue in the previous quarter our earnings will likely decline or our loss may increase because many of our expenses are relatively fixed. In particular, research and development, marketing and general and administrative expenses are not affected directly by variations in revenue. In some future quarter or quarters, due to a decrease or shortfall in revenue or for some other reason, our operating results likely will be below the expectations of securities analysts or investors. In this event, the market price of our common stock may fall abruptly and significantly. Our Business is Exposed to Risks Related to Acquisitions and Mergers As part of our strategy to commercialize our products, we may acquire one or more businesses. On October 1, 2000, we purchased the Transurethral Microwave Thermotherapy TUMT product line and related patents and technologies from EDAP. We may not be able to effectively integrate our business with any other business we may acquire. The failure to integrate an acquired company or acquired assets into our operations may cause a drain on our financial and managerial resources, and thereby have a significant negative effect on our business and financial results. These difficulties could disrupt our ongoing business, distract our management and employees or increase our expenses. Furthermore, any physical expansion in facilities due to an acquisition may result in disruptions that seriously impair our business. We are not experienced in managing facilities or operations in geographically distant areas. In addition, our profitability may suffer because of acquisition-related costs or amortization costs for acquired goodwill and other intangible assets. Finally, in connection with any future acquisitions, we may incur debt or issue equity securities as part or all of the consideration for the acquired company's assets or capital stock. We may be unable to obtain sufficient additional financing on favorable terms or at all. Equity issuances would be dilutive to our existing stockholders. 11 Our Stock Price May Fluctuate Significantly Our stock price may fluctuate significantly, making it difficult to resell shares when an investor wants to at prices they find attractive. The market prices for our securities and securities of other emerging companies in general have historically been highly volatile. Future announcements concerning us or our competitors could cause such volatility including: our operating results, technological innovations or new commercial products, corporate collaborations, government regulation or actions, developments concerning proprietary rights, litigation or public concern as to the safety of our products, investor perception of us and our industry, and general economic and market conditions. In addition, the stock market is subject to price and volume fluctuations that affect the market prices for companies in general, and small-capitalization, high technology companies in particular, which are often unrelated to the operating performance of these companies. The Future Sales of Shares of our Common Stock May Negatively Affect our Stock Price Future sales of our common stock (including shares issued upon the exercise of outstanding options and warrants) could have a significant negative effect on the market price of our common stock. In addition to the 327,466 shares being sold pursuant to this Prospectus, EDAP is the owner of 1,365,000 shares of common stock that are eligible for resale under Rule 144 of the Securities Act of 1933 beginning October 1, 2000. EDAP also has registration rights with respect to its shares in the future. Such sales also might make it more difficult for us to sell equity securities in the future at a time and price that we would deem appropriate. Anti-Takeover Provisions in our Articles of Incorporation may have a Possible Negative Effect on our Stock Price Certain provisions of our Certificate of Incorporation and Bylaws may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us. We have in place several anti-takeover measures that could discourage or prevent a takeover, even if an acquisition would be beneficial to our stockholders. Our stock option plans contain provisions that allow for the acceleration of vesting or payments of awards granted under the plans in the event of specified events that result in a "change in control." In addition, we have adopted a shareholder rights plan, which would cause substantial dilution to any person or group that attempts to acquire our company on terms, not approved in advance by our board of directors. 12 WARNING ABOUT FORWARD-LOOKING STATEMENTS This prospectus and the documents to which we refer you under the heading "Information Incorporated by Reference" contain forward-looking statements. In addition, from time to time, we or our representatives may make forward-looking statements orally or in writing. We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as "may," "will," "should," "expects," "anticipates," "contemplates," "estimates," "believes," "plans," "projected," "predicts," "potential" or "continue" or the negative of these or similar terms. In evaluating these forward-looking statements, you should consider various factors, including the factors set forth under the heading "Risk Factors," beginning on page 6 of this prospectus. These and other factors may cause our actual results to differ materially from any forward-looking statement. Forward-looking statements are only predictions. The forward-looking events discussed in this prospectus and the documents to which we refer you under the heading "Documents Incorporated by Reference into this Prospectus" and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. We are not obligated to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus and other statements made from time to time by us or our representatives, might not occur. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 13 USE OF PROCEEDS We will receive proceeds when EDAP exercises its warrant to purchase up to 327,466 shares of the common stock. If this warrant is exercised in full, we will receive aggregate proceeds of $2.5 million. There can be no assurance that any portion of the warrant will be exercised. If the warrant is exercised, we intend to use proceeds for working capital purposes. We will not receive any proceeds from the sale of the common stock underlying the warrant. SELLING SHAREHOLDER On October 1, 2000, we purchased the Transurethral Microwave Thermotherapy (TUMT(R)) product line and related patents and technologies from EDAP. We paid total consideration of $7,988,000 in cash, issued 1,365,000 shares of common stock and a five-year warrant to purchase 327,466 shares of our common stock at a price of $7.725 per share. We also agreed to assume approximately $1.5 million in lease obligations related to equipment located at customer sites and issued a promissory note to pay EDAP $575,000 plus accrued interest on December 30, 2003. Our acquisition of the TUMT product line and related patents and technologies was accounted for using the purchase method of accounting. Under the terms of the purchase, Urologix agreed to nominate and solicit proxies for the election to its board of directors of a representative from EDAP's management team or directors. This obligation terminates when EDAP's ownership of Urologix common stock is reduced to less than eight percent of Urologix' outstanding shares. The following table sets forth certain information with respect to EDAP's beneficial ownership of the common stock of Urologix.
Shares Beneficially Owned Before Shares Beneficially Owned the Offering Shares Being After the Offering Name of Beneficial Owner Number Amount Offered Number Amount ------------------------- ---------------- ----------------- ---------------- --------------- ------------- EDAP TMS S.A. 1,692,466(1) 12.5% 327,466 1,365,000 10.1%
(1) Consists of 1,365,000 shares of common stock owned directly and 327,466 issuable pursuant to a currently exercisable warrant. 14 PLAN OF DISTRIBUTION The common stock may be sold or distributed from time to time by EDAP, or by pledgees, donees or transferees of, or other successors in interest to EDAP, directly to one or more purchasers (including pledgees) or through brokers, dealers or underwriters who may act solely as agents or may acquire common stock as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the common stock may be effected in one or more of the following methods: o ordinary brokers' transactions; o transactions involving cross or block trades or otherwise on the Nasdaq National Market; o purchases by brokers, dealers or underwriters as principals and resale by such purchasers for their own accounts pursuant to this prospectus; o "at the market" to or through market makers or into an existing market for the shares; o in other ways not involving market makers or established trading markets, including direct sales to purchasers or sales effected through agents; o through transactions in options, swaps or other derivatives (whether exchange-listed or otherwise); or o any combination of the foregoing, or by any other legally available means. In connection with one or more of these transactions, EDAP may sell the shares by establishing a margin account with a broker-dealer and borrowing the funds to exercise the warrant. Brokers, dealers, underwriters or agents participating in the distribution of the common stock as agents may receive compensation in the form of commissions, discounts or concessions from EDAP or purchasers of the shares for whom such broker-dealers may act as agent, or to whom they may sell as principals, or both which compensation as to a particular broker-dealer may be less than or in excess of customary commissions. EDAP and any broker-dealers who act in connection with the sale of shares hereunder may be deemed to be underwriters within the meaning of the Securities Act of 1933, and any commissions they receive and proceeds of any sale of common stock may be deemed to be underwriting discounts and commissions under the Securities Act of 1933. We know of no existing arrangements between EDAP and any other shareholder, broker, dealer, underwriter or agent relating to the sale or distribution of the common stock. We have agreed to split all expenses incurred in connection with registration, filing or qualification of the common stock under federal and state securities laws, other than underwriting discounts and commissions and fees and expenses of counsel for EDAP. 15 INTERESTS OF NAMED EXPERTS AND COUNSEL The validity of the issuance of the common stock offered hereby will be passed upon for us by Lindquist & Vennum, P.L.L.P., in Minneapolis, Minnesota. The consolidated financial statements and schedule included in our Annual Report on Form 10-K for the year ended June 30, 2000 and incorporated by reference in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Our bylaws provide for indemnification of directors to the fullest extent permitted by the Minnesota Business Corporation Act Section 302A.521 provides that a Minnesota corporation shall indemnify any director, officer employee or agent of the corporation made or threatened to be made a party to a proceeding, by reason of the former or present official capacity of the person, against judgments, penalties, fines, settlements, and reasonable expenses incurred by the person in connection with the proceeding if certain statutory standards are met. "Proceeding" means a threatened, pending or completed civil, criminal, administrative, arbitration or investigative proceeding, including one by or on behalf of us. Indemnification for securities laws liabilities may be against public policy and unenforceable. 16