<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 0-27212
ENDOCARE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0618093
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
7 STUDEBAKER, IRVINE, CALIFORNIA 92618
(Address of principal executive office) (Zip Code)
(714) 595-4770
(Registrant's telephone number, including area code)
18 Technology Drive, Suite 134, Irvine, California 92618
(Former Address)
----------------------------------------
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
--- ---
The number of shares of the Registrant's Common Stock, par value $.001 per
share, outstanding on May 20, 1997 was 8,195,853.
<PAGE> 2
ENDOCARE, INC.
FORM 10-Q, QUARTER ENDED MARCH 31, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1 Financial Statements (unaudited)
Condensed Statements of Operations for the three
months ended March 31, 1996 and 1997 3
Condensed Balance Sheets at December 31, 1996
and March 31, 1997 4
Condensed Statements of Cash Flows for the three months
ended March 31, 1996 and 1997 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3 Quantitative and Qualitative Disclosures About Market Risk None
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 12
Item 2 Changes in Securities 12
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 15
Signature Page 16
</TABLE>
-2-
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
ENDOCARE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------
1996 1997
----------- -----------
Revenues:
<S> <C> <C>
Net product sales $ 369,056 $ 658,836
Revenue from collaborative agreements 1,600 20,832
----------- -----------
Total revenues 370,656 679,668
Costs and expenses:
Cost of product sales 241,305 429,912
Research and development 133,650 290,445
Selling, general and administrative 248,407 696,065
Impairment loss on long-lived assets 324,878 --
----------- -----------
Total costs and expenses 948,240 1,416,422
----------- -----------
Loss before income taxes (577,584) (736,754)
Provision for income taxes -- 2,700
----------- -----------
Net loss $ (577,584) $ (739,454)
=========== ===========
Net loss per share of common stock $ (.10) $ (.10)
=========== ===========
Weighted average shares and common
stock equivalents outstanding 5,625,122 7,439,048
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 4
<TABLE>
<CAPTION>
ENDOCARE, INC.
BALANCE SHEETS
December 31, 1996 March 31, 1997
(unaudited)
----------- -----------
(restated)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 476,854 $ 6,565,767
Accounts receivable, net 587,945 618,824
Inventories 396,725 439,848
Prepaid expenses and other current assets 41,398 90,872
----------- -----------
Total current assets 1,502,922 7,715,311
Property and equipment, net 178,788 285,685
Other assets 69,191 17,677
----------- -----------
Total assets $ 1,750,901 $ 8,018,673
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ 668,761 $ 550,839
Accrued compensation 53,190 39,655
Other accrued liabilities 143,399 148,712
Deferred revenue 118,333 118,333
Customer deposits -- 14,108
----------- -----------
Total current liabilities 983,683 871,647
Deferred revenue 166,667 145,835
Convertible note payable 750,000 --
Shareholders' equity (deficiency):
Common stock, $.001 par value 5,645 8,196
Additional paid-in capital 1,376,354 9,263,897
Accumulated deficit (1,531,448) (2,270,902)
----------- -----------
Total shareholders' equity (deficiency) (149,449) 7,001,191
----------- -----------
Total liabilities and equity (deficiency) $ 1,750,901 $ 8,018,673
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
ENDOCARE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (577,584) $ (739,454)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 7,586 21,408
Amortization of warrant value -- 18,952
Offering costs -- 62,869
Common stock issued for services 4,688 --
Other -- 7,794
Impairment loss on long-lived assets 324,878 --
Changes in operating assets and liabilities:
Accounts receivable (95,036) (30,879)
Inventories 53,120 (43,123)
Prepaid expenses and other current assets (22,719) (49,475)
Other Assets -- 51,514
Accounts payable 204,384 (117,922)
Accrued compensation 30,286 (13,535)
Other accrued liabilities 35,721 5,313
Deferred revenue -- (20,832)
Customer deposits 9,068 14,108
----------- -----------
Net cash used in operating activities (25,608) (833,262)
Cash flows from investing activities:
Purchases of property and equipment (6,473) (128,305)
Proceeds from sale of property and equipment 15,750 --
----------- -----------
Net cash provided (used) in investing activities 9,277 (128,305)
Cash flows from financing activities:
Issuance of common stock, Medstone Distribution 500,000 --
Issuance of common stock, other -- 7,050,480
----------- -----------
Net cash provided by financing activities 500,000 7,050,480
----------- -----------
Net increase in cash and cash equivalents 483,669 6,088,913
Cash and cash equivalents, beginning of period 1,941 476,854
----------- -----------
Cash and cash equivalents, end of period $ 485,610 $ 6,565,767
=========== ===========
Non-Cash Transactions:
Conversion of note payable to common stock -- $ 850,250
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
ENDOCARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS OF THE COMPANY
ENDOcare, Inc. (the "Company" or "ENDOcare") designs, manufactures, and
markets medical devices to treat prostate diseases worldwide.
Since its formation in 1990, ENDOcare operated first as a research and
development department, then later as a division of Medstone
International, Inc. ("Medstone"). Effective January 1, 1996, ENDOcare
became a totally independent, publicly-owned corporation. At the beginning
of 1996, ENDOcare issued 5,616,528 shares of ENDOcare common stock to
Medstone in exchange for $500,000 cash and the accounts receivable,
inventory, and other net assets of the ENDOcare Division. On February 6,
1996, Medstone distributed to existing Medstone shareholders a stock
dividend of one share of ENDOcare common stock for each share of Medstone
common stock outstanding on December 29, 1995.
2. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
ENDOcare in accordance with Securities and Exchange Commission rules and
regulations. In the opinion of Company management, the unaudited financial
statements include all entries and adjustments necessary for a fair
presentation.
During its third quarter of 1996, the Company recognized a sale relating
to the shipment of product to an international distributor. The total
revenue recognized on this sale approximated $140,000. Due to the lack of
payment by the customer, the Company provided an allowance for doubtful
accounts for a substantial portion of the sale in the fourth quarter of
1996. However, the Company became aware that the product had not been
shipped to the customer. As a result, the Company plans to restate the
results of operations for the third quarter of 1996. Though revenues for
the year ended December 31, 1996 will be restated, there will be no net
effect on the net loss for the year ended December 31, 1996. In addition,
the above restatement also is expected to be reflected in the Company's
balance sheets as of September 30, 1996 and December 31, 1996, primarily
as a reduction of net accounts receivable and an increase in inventories.
The accompanying balance sheet at December 31, 1996 has been restated to
reflect the expected impact of the above-mentioned restatement. The
Company is currently in the process of preparing amendments to its Form
10-Q for the quarter ended September 30, 1996 and its Form 10-K for the
year ended December 31, 1996 to reflect this matter.
These financial statements should be read in conjunction with the audited
financial statements and other information included in the Company's Form
10-KA for the year ended December 31, 1996. Financial results for this
interim three-month period are not necessarily indicative of results to be
expected for the full year 1997.
3. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates.
-6-
<PAGE> 7
4. SUPPLEMENTAL FINANCIAL STATEMENT DATA
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1997
(unaudited)
-------- --------
<S> <C> <C>
Inventories:
Raw materials $213,154 $185,141
Work in process 86,130 63,635
Finished goods (restated) 97,441 191,072
-------- --------
Total inventories $396,725 $439,848
======== ========
</TABLE>
-7-
<PAGE> 8
5. EARNINGS PER SHARE
Earnings per share data for the period is computed using the weighted
average number of common shares and dilutive common stock options
outstanding, at the average market price for the period. Fully diluted
earnings per share amounts are not presented because they approximate
primary earnings per share.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
(SFAS No. 128). This statement is effective for both interim and annual
periods ending after December 31, 1997, and replaces the presentation of
"primary" earnings per share with "basic" earnings per share and the
presentation of "fully diluted" earnings per share with "diluted" earnings
per share. Earlier application is not permitted. When adopted, all
previously reporting earnings per common share amounts must be restated
based on the provision of SFAS No. 128. Management does not expect that
the adoption of SFAS No. 128 will have a material effect on the loss per
share amounts of the Company previously reported.
6. CONVERTIBLE LOAN PAYABLE
On August 26, 1996, ENDOcare obtained a two-year $1,500,000 borrowing
facility from four partnerships (the "Partnerships") managed by Technology
Funding Inc., a venture capital firm. In connection with entering into
this loan, ENDOcare issued to the four Partnerships 10,000 shares of
common stock as an origination fee and warrants to purchase an aggregate
of up to 150,000 shares of ENDOcare common stock. The warrants are
exercisable at any time between August 26, 1996 and August 26, 2001, at an
exercise price of $3.00 per share, subject to adjustment.
At December 31, 1996, $750,000 was outstanding under this loan, accruing
interest at a rate of 16% per year.
On January 27, 1997, the Partnerships converted their $750,000 principal
amount and accrued interest into 320,000 shares of ENDOcare common stock
at the conversion rate of $2.50 per share. Also, 12,000 additional shares
of common stock were issued to the Partnerships as an inducement to
convert at that time. At ENDOcare's election, the remaining $750,000
borrowing facility was cancelled on that same date.
7. PRIVATE PLACEMENT OF COMMON STOCK
On January 27, 1997, ENDOcare sold 2,218,714 shares of common stock at a
price of $3.50 per share in a private placement, with Oppenheimer & Co.,
Inc. ("Oppenheimer") acting as placement agent. After expenses, the net
contribution to the Company's capital was approximately $7,050,000.
Expenses deducted from the proceeds include a commission to Oppenheimer of
$543,585 and estimated legal, accounting, and other professional expenses
of $160,000 (final actual expenses may be different). In addition,
Oppenheimer received a warrant to purchase 177,497 shares of ENDOcare
common stock for a period of five years at a price of $4.20 per share. The
warrants are exercisable at any time between January 27, 1998 and January
27, 2002.
-8-
<PAGE> 9
ITEM 2.
ENDOCARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
ENDOcare designs, manufactures, and markets medical devices to treat diseases of
the prostate, including prostate cancer and prostate enlargement. ENDOcare began
marketing disposable surgical devices in 1993 with the introduction of the
Prolase laser catheter. In late 1995, ENDOcare began marketing two new
disposable product families, the Uroloop and Vaporbar electrosurgical cutting
elements, sales of which became the more significant portion of revenue in early
1996. In May 1996, the Company introduced its new CRYOcare cryosurgical system
for the treatment of prostate cancer. In November 1996, ENDOcare signed a
distribution agreement with Boston Scientific Corporation granting that company
exclusive world-wide marketing rights for CRYOcare systems for urological
applications.
ENDOcare currently is developing additional, innovative therapies for prostate
enlargement. The Company does not expect to be profitable in the immediate
future because of increased operating expenses from expanded research and
development efforts and support of clinical trials for products currently under
development.
Since its formation in 1990, ENDOcare operated first as a research and
development department, then later as a division of Medstone International, Inc.
Effective January 1, 1996, ENDOcare was spun out and began operating as an
independent corporation.
RESULTS OF OPERATIONS
Product revenue for the three months ended March 31, 1997 increased 178% to
$659,000 compared to $369,000 in 1996. This increase resulted from the first
shipment of CRYOcare systems to Boston Scientific Corporation for revenue of
$500,000. The shipments are non-refundable discounted unit sales targeted for
demonstration purposes by Boston Scientific Corporation under the distribution
agreement. The corresponding period in 1996 included revenue derived from
surgical disposable products.
Revenue from collaborative agreements and related parties for the three months
ended March 31, 1997 increased to $21,000 from $1,600 in 1996. The 1997 amounts
represent amortization of a lump-sum payment from Boston Scientific Corporation
based upon the distribution agreement entered into in November 1996. The 1996
amounts represented engineering services provided by ENDOcare to its former
parent, Medstone International, none of which is continuing in 1997.
Gross margins on product sales were 34.7% in the three months ended March 31,
1997, compared to 34.6% in 1996. The product sales in 1997 were predominantly
discounted
-9-
<PAGE> 10
CRYOcare systems to Boston Scientific Corporation compared to revenue
derived from disposable products such as Prolase and Vaporbar in the same period
in 1996.
Research and development expense increased 212% to $290,000 for the three month
period ended March 31, 1997 compared to $134,000 for the corresponding period in
1996. The increase represents continued investment in the Horizon Stent and
CRYOcare development efforts.
Selling, general and administrative expense increased 271% to $696,000 for the
three month period ended March 31, 1997 compared to $248,000 for the
corresponding period in 1996. The 1997 amount represents increased professional
expenses and costs associated with the offering and sale of common stock in the
private placement, the annual meeting of stockholders and related reports
required of public companies. Additionally, expenses reflect one time non-cash
interest and warrant charges of $78,627 resulting from the conversion of notes
from the four partnerships managed by Technology Funding Inc. into common stock.
The increase in expenses was partially offset by interest income of $60,034
earned on the proceeds from the private placement. The reserve for bad debt for
the three month period ended March 31, 1997 was $142,211 compared to $7,465 for
the corresponding period in 1996 due to the change in product mix of sales from
inexpensive disposable products in 1996 to costly capital equipment in CRYOcare
systems in 1997.
ENDOcare's net loss was $739,454 for the three month period ended March 31, 1997
compared to $578,000 for the first quarter of 1996. The increase resulted from
low gross margins and higher general administrative costs and higher research
and development expenses during the period.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, ENDOcare's cash balance was $6,566,000, compared to $477,000
at December 31, 1996. Outstanding debt at March 31, 1997 was zero, compared to
$750,000 at December 31, 1996. This improvement in liquidity and capital
resources resulted from two financing transactions consummated on January 27,
1997.
On that date, ENDOcare sold 2,218,714 shares of common stock at a price of $3.50
per share in a private placement, with Oppenheimer & Co., Inc. acting as
placement agent. After deducting commissions and other estimated expenses of the
sale, this offering added approximately $7,050,000 to ENDOcare's capital base.
Also on January 27, 1997, the four partnerships managed by Technology Funding
Inc. converted the outstanding principal amount of their $750,000 promissory
notes and $50,000 of accrued interest into common stock at the conversion rate
of $2.50 per share. To induce conversion at that time, ENDOcare issued to the
partnerships an additional 12,000 shares of stock, with a fair market value on
that date of approximately $50,000. These transactions
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<PAGE> 11
converted the outstanding debt into equity so that ENDOcare will not be required
to re-pay principal or to continue to incur interest expense.
Additional working capital has been used as ENDOcare's operations have increased
in 1997. Net accounts receivable increased to $619,000 at March 31, 1997,
compared to $588,000 at December 31, 1996. Inventory increased to $440,000 at
March 31, 1997, compared to $397,000 at the beginning of the year. Fixed asset
additions during the first three months of 1997 were approximately $96,000.
Accounts payable decreased to $551,000 from $669,000 at December 31, 1996.
At March 31, 1997 ENDOcare's net working capital was $6,843,664 and the ratio of
current assets to current liabilities was 8.8 to 1.
With the January 1997 capital infusions, the Company believes that its existing
cash resources and anticipated cash flows from future operations will provide
sufficient resources to meet present and reasonably foreseeable working capital
requirements and other cash needs through the end of 1997. Insofar as the
Company may elect to undertake or accelerate significant research and
development projects for new products or may pursue corporate acquisitions, it
may require additional outside financing prior to such time.
The preceding forward-looking statements are subject to uncertainties in
economic conditions, regulatory issues, and other risk factors. Such factors may
cause actual future results to differ significantly from management's current
expectations.
-11-
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On November 27, 1996, Cryomedical Sciences, Inc. ("CMS") filed a
complaint in the Circuit Court for Montgomery County, Maryland
against the Company and Dr. Chang, the Company's Vice President of
Research and Development and former employee of CMS. The suit alleges
that Dr. Chang breached his employment contract with CMS, that the
Company tortiously interfered with the employment contract and the
prospective business relations of CMS, misappropriated trade secrets
and confidential information, competed unfairly with and conspired
against CMS. CMS is seeking injunctive relief and damages of at
least $10,000,000 and punitive damages of $20,000,000. On January
23, 1997 a temporary restraining order was issued by the court
against the Company and Dr. Chang for the limited purpose of
preventing disclosure of certain information at a cryosurgery
conference. The order expired by its terms on February 3, 1997, and
no other injunction or other relief has been granted to CMS. The
Company denies all allegations of wrongdoing in the complaint and
intends to defend the lawsuit vigorously. However, the costs of
defending the lawsuit could be material, and there can be no
assurance that damages, which could have a material adverse effect on
the Company, will not be assessed. The Company is not a party to any
other legal proceedings.
Item 2. Changes in Securities
Common Stock
On January 27, 1997, ENDOcare sold 2,218,714 shares of common stock
at a price of $3.50 per share in a private placement, with
Oppenheimer & Co., Inc. ("Oppenheimer") acting as placement agent.
Expenses deducted from the proceeds include a commission to
Oppenheimer of $543,585 and estimated legal, accounting, and other
professional expenses of $160,000 (actual expenses may be different).
Also on January 27, 1997, the four partnerships managed by Technology
Funding Inc. converted the $750,000 outstanding principal amount
under the promissory notes and $50,000 of accrued interest into
common stock at the conversion rate of $2.50 per share. To induce
conversion at the same time as the private placement, the Company
issued an additional 12,000 shares of common stock to the
partnerships (fair market value of $50,250 at January 27, 1997), for
an aggregate of 332,000 shares of common stock issued in connection
with such conversion.
The sales and issuances of the common stock described above were
deemed to be exempt from registration under the Securities Act of
1933, as amended (the "Securities Act") in reliance upon Section 4(2)
thereof, as transactions not involving a public offering. The
purchasers in such private offerings of stock represented their
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<PAGE> 13
intention to acquire the securities for investment only and not with
a view to the distribution thereof.
Stock Options
During the period from January 1, 1997 through March 31, 1997, the
Company granted stock options to two individuals covering an
aggregate of 13,000 shares of its common stock. All such options were
granted at fair market value, vest over a four year period, and are
exercisable over a ten year period. In addition, pursuant to the
Company's 1995 Director Option Plan (a formula plan), options
covering an aggregate of 10,000 shares of common stock were
automatically granted to two non-employee directors. These directors
options were granted at fair market value, vest over a one year
period, and are exercisable over a ten year period. No consideration
was paid for any of such options. Such grants were exempt from the
registration requirement of the Securities Act as not involving the
sale of a security.
Warrants
On January 27, 1997, ENDOcare issued a warrant to purchase up to
177,497 shares of common stock for a period of five years at a price
of $4.20 per share to Oppenheimer & Co., Inc. in connection with
their services as placement agent for the Company's private placement
of common stock.
On February 14, 1997, ENDOcare issued a warrant to purchase up to
25,000 shares of common stock for a period of five years at a price
of $4.375 per share in connection with a license of technology.
On February 17, 1997, ENDOcare issued a warrant to purchase up to
20,000 shares of common stock for a period of five years at a price
of $4.375 per share to a consultant of the Company.
Such issuances of warrants described above were exempt from the
registration under the Securities Act in reliance upon Section 4(2)
thereof.
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<PAGE> 14
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on March 27, 1997.
Proposal 1, submitted to a vote of security holders at the meeting, was the
election of Directors. The following Directors, being all the Directors of the
Company, were elected at the meeting, with the number of votes cast for or
against each Director or withheld from each Director being set forth after his
respective name:
<TABLE>
<CAPTION>
NAME VOTES FOR VOTES AGAINST ABSTENTIONS
OR WITHHELD
<S> <C> <C> <C>
Paul W. Mikus 4,186,281 0 10,379
Peter F. Bernardoni 4,186,281 0 10,379
Kevin Marinelli 4,186,281 0 10,379
</TABLE>
There were no broker non-votes recorded.
Proposal 2, submitted to a vote of security holders at the meeting, was to
approve the amendment and restatement of the Company's 1995 Stock Plan. Votes
cast were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
<S> <C> <C> <C>
3,416,449 370,436 14,289 395,486
</TABLE>
The proposal was approved.
Proposal 3, submitted to a vote of security holders at the meeting, was to
approve the amendment and restatement of the Company's 1995 Director Option
Plan. Votes cast were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
<S> <C> <C> <C>
3,806,538 377,133 12,989 0
</TABLE>
The proposal was approved.
-14-
<PAGE> 15
Proposal 4, submitted to a vote of security holders at the meeting, was to
approve the adoption of the Company's Employee Stock Purchase Plan. Votes cast
were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
<S> <C> <C> <C>
4,165,373 16,597 14,690 0
</TABLE>
The proposal was approved.
Proposal 5, submitted to a vote of security holders at the meeting, was the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
fiscal year 1997. Votes cast were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
<S> <C> <C> <C>
4,182,299 2,922 11,439 0
</TABLE>
The proposal was approved.
Item 5. Other Information
The Company is currently in the process of preparing amendments to
its Form 10-Q for the quarter ended September 30, 1996 and its Form
10-K for the year ended 1996. See Note 2 to the Financial
Statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 Calculation of Earnings Per Share page 17
Exhibit 27 Financial Data Schedule page 18
(b) Reports on Form 8-K
On January 31, 1997, the Company filed a Form 8-K with the Securities and
Exchange Commission dated January 27,1997 reporting the sale of 2,218,714 shares
of common stock in a private placement which closed January 27, 1997 for
aggregate gross proceeds of $7,765,499 to the Company and that on January 27,
1997, at the request of the holders, the Company converted an aggregate
principal amount of $750,000 of the Company's Convertible Secured Promissory
Notes due August 26, 1998, plus accrued interest thereon, into 332,000 shares of
common stock.
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<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENDOCARE, INC.
Date: May 20, 1997 By: /s/ Paul W. Mikus
--------------------------------------
Paul W. Mikus
Chief Executive Officer, President,
Chief Financial Officer, and Treasurer
(Duly Authorized Officer and Principal
Financial Officer)
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<PAGE> 1
EXHIBIT 11.
ENDOCARE, INC.
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997
------------------
<S> <C>
Net loss $ (739,454)
==============
Weighted average number of common
shares outstanding during the period 7,439,048
=========
Primary net loss per share $ (.10)
========
Fully diluted net loss per share $ (.10)
========
</TABLE>
The effect of potential exercise of common stock options and warrants is
not included in these calculations because such effect would be
anti-dilutive.
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,565,767
<SECURITIES> 0
<RECEIVABLES> 819,174
<ALLOWANCES> 200,350
<INVENTORY> 439,848
<CURRENT-ASSETS> 7,715,311
<PP&E> 576,097
<DEPRECIATION> 290,412
<TOTAL-ASSETS> 8,018,673
<CURRENT-LIABILITIES> 871,647
<BONDS> 0
0
0
<COMMON> 8,196
<OTHER-SE> 9,263,897
<TOTAL-LIABILITY-AND-EQUITY> 8,018,673
<SALES> 658,836
<TOTAL-REVENUES> 679,668
<CGS> 429,912
<TOTAL-COSTS> 429,912
<OTHER-EXPENSES> 986,510
<LOSS-PROVISION> 142,211
<INTEREST-EXPENSE> 0
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