<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
ENDOCARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0618093
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7 Studebaker
Irvine, California 92618
(714) 595-4770
(Address, including zip code, and telephone number,
including area code of registrant's principal
executive offices)
------------------------
PAUL W. MIKUS
President
Endocare, Inc.
7 Studebaker
Irvine, California 92618
(714) 595-4770
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
ELAINE R. LEVIN, ESQ.
Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, California 92626
(714) 433-2900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form S-3 are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being offered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _______________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / _______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<PAGE> 2
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 2,550,714 $4.66 $11,886,327 $3,602
=============================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Section 6 and Rule 457, based on the average of the high and low
sales prices, $5.00 and $4.31, respectively, on March 14, 1997 as reported on
the Nasdaq SmallCap Market.
------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such State.
PROSPECTUS SUBJECT TO COMPLETION
DATED MARCH 19, 1997
ENDOCARE, INC.
2,550,714 SHARES
COMMON STOCK
PAR VALUE $0.001 PER SHARE
The 2,550,714 shares (the "Shares") of Common Stock, par value $0.001
per share ("Common Stock"), of Endocare, Inc. (the "Company") offered hereby are
to be sold by the persons and entities named herein under "Selling
Stockholders."
INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH IN THIS
PROSPECTUS BEGINNING ON PAGE 4 UNDER "RISK FACTORS" PRIOR TO PURCHASE.
Holders of the Shares may resell the Shares from time to time in
transactions on the Nasdaq SmallCap Market, and may sell the Shares through a
broker or brokers or in the over-the-counter market at prices prevailing on such
exchange or over-the-counter market, as appropriate, at the times of such sales.
The Selling Stockholders may also make private sales directly or through such
broker or brokers. See "Plan of Distribution." Sales of the Shares may be
effected by selling such securities to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the sellers thereof. Such sellers and any broker-dealer who
acts in connection with the sales of Shares may be deemed to be "underwriters"
as that term is defined in the Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by them and profit on any resale
of the Shares might be deemed to be underwriting discounts and commissions under
the Securities Act.
None of the proceeds from the sale of the Shares will be received by
the Company. The Company has agreed to bear all expenses (other than
underwriting discounts and selling commissions and fees and expenses of counsel
and other advisors to the Selling Stockholders) in connection with the
registration and sale of the Shares being registered hereby. The Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended. See
"Plan of Distribution."
------------------------
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "ENDO." On March 18, 1997, the reported closing price of the Company's
Common Stock on the Nasdaq SmallCap Market was $4 3/4 per share.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained or incorporated by reference in
this Prospectus, and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or by any other
person. All information contained in this Prospectus is as of the date of this
Prospectus. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company or in the facts herein set forth since the
date hereof. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any security other than the securities covered
by this Prospectus, nor does it constitute an offer to or solicitation of any
person in any jurisdiction in which such offer or solicitation may not lawfully
be made.
------------------------
The date of this Prospectus is _______________, 1997.
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, and the rules and regulations thereunder, and
in accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the following Regional Offices of the Commission: Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such reports, proxy statements and other information
concerning the Company are also available for inspection at the offices of The
Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. In addition
the Commission maintains an Internet site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants, including the Company, that file electronically with the
Commission.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all exhibits, schedules, amendments, and supplements
thereto, the "Registration Statement") under the Securities Act with respect to
the Common Stock offered by this Prospectus. This Prospectus, which forms a part
of the Registration Statement, does not contain all the information set forth in
the Registration Statement (certain parts of which have been omitted in
accordance with the rules and regulations of the Commission). For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement. Statements contained in this Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete, and, in each instance, reference is made to the copy of the document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by reference to such exhibit. The Registration
Statement may be inspected and copied at the public reference facilities at the
Commission's offices at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at: Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of all or any
part thereof may be obtained from such office upon payment of prescribed fees.
2.
<PAGE> 5
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) The Annual Report of the Company on Form 10-K (File No. 0-27212)
for its fiscal year ended December 31, 1996, as filed with the Commission on
February 21, 1997;
(2) The Annual Report of the Company, as amended, on Form 10-K/A for
the fiscal year ended December 31, 1996, as filed with the Commission on March
4, 1997;
(3) The description of the Common Stock contained in a registration
statement on the Company's Form 10-SB/A Amendment No. 2, as filed with the
Commission on January 5, 1996;
(4) The definitive Proxy Statement of the Company, as filed with the
Commission on March 6, 1997; and
(5) All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
modified or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
which have been incorporated by reference herein, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference
therein). Requests for such copies should be directed to: Paul W. Mikus,
President, Endocare, Inc., 7 Studebaker, Irvine, California 92618, telephone
number (714) 595-4770.
3.
<PAGE> 6
RISK FACTORS
An investment in the Shares of Common Stock offered by this Prospectus
involves a high degree of risk. Prospective purchasers of the Common Stock
offered hereby should carefully review the following risk factors as well as the
other information set forth in this Prospectus.
This Prospectus, including the information set forth below, contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and are intended to be covered by the safe harbors created thereby.
Forward-looking statements include statements regarding the Company's
development of new products, its ability to market and sell existing products
and obtain regulatory approvals, the trends in the markets served by the Company
and the Company's ability to meet its liquidity requirements. Prospective
purchasers are cautioned that all forward-looking statements are subject to
risks and uncertainties, including, without limitation, the risks outlined in
this section.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES
The Company has a limited history of operations as an independent
operating entity. Since its inception, the Company has engaged primarily in
research and development, and the Company has minimal experience in
manufacturing, marketing and selling its products in commercial quantities.
Additionally, the Company has incurred annual operating losses since its
inception, and expects to continue to incur operating losses as new products
will require substantial development, clinical, regulatory, manufacturing and
other expenditures. As of December 31, 1996, the Company's accumulated deficit
was approximately $1.53 million. There can be no assurance that ENDOcare will
successfully develop or commercialize its current or future products, that the
Company will achieve significant revenues from sales, or that the Company will
achieve or sustain profitability in the future. Additionally, successful
completion of the Company's development program and its transition, to attaining
profitable operations is dependent upon achieving a level of revenues adequate
to support the Company's cost structure and obtaining additional financing
adequate to fulfill its research and development activities to continue
refinement of existing products and to develop and commercialize new products.
DECLINING SALES OF EXISTING PRODUCTS; UNCERTAIN MARKET ACCEPTANCE OF THE
COMPANY'S NEW PRODUCTS
Sales of several existing ENDOcare products, including Prolase(R) and
Diolase(TM), have declined and are expected to continue to decline over the next
two years and beyond. Certain of the Company's products, including ENDOcare's
CRYOcare Systems, which were introduced in the second quarter of 1996, are in
the early stages of development or market introduction. There can be no
assurance that any of the Company's products will be accepted by potential
customers. The Company's ability to successfully market its CRYOcare System is
dependent upon acceptance of cryosurgical procedures in the United States and
certain international markets. Although cryosurgery has existed for many years,
cryosurgery has not been widely accepted due to cost, competing products and
limited reimbursement by third party payers. The acceptance of cryosurgery by
the general population also may be affected adversely by its price, concerns
relating to its safety and efficacy, the accepted effectiveness of alternative
methods of correcting urological disorders and lack of reimbursement from third
party payers. Medicare does not currently reimburse for cryosurgical ablation of
the prostate, the approved use of the Company's eight probe CRYOcare System. In
addition, any future reported adverse events or other unfavorable publicity
involving patient outcomes from the use of cryosurgery, whether from the
Company's products or the products of the Company's competitors, could adversely
affect acceptance and reimbursement for cryosurgery. Emerging new technologies
and procedures to treat cancer, prostate enlargement and other prostate
disorders also may adversely affect the market acceptance of cryosurgery. There
can be no assurance that the Company's CRYOcare Systems will gain any
significant degree of market acceptance among physicians, patients and health
care payers.
4.
<PAGE> 7
UNCERTAINTY OF PRODUCT DEVELOPMENT; RISKS RELATED TO CLINICAL TRIALS
The Company's growth is substantially dependent upon its continued
ability to successfully develop, commercialize and market new products.
ENDOcare's future products are in varying stages of development. There can be no
assurance that the Company will be successful in developing and commercializing
new products that achieve market acceptance or that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of new products. There can be no assurance that the
Company's products in development will prove to be safe and effective in
clinical trials under applicable regulatory guidelines, and clinical trials may
identify significant technical or other obstacles that must be overcome prior to
obtaining necessary regulatory or reimbursement approvals. Even if a product
overcomes these obstacles, the Company's products will not be used unless they
present an attractive alternative to other treatments and the clinical benefits
to the patient and cost savings achieved through use of the Company's products
outweigh the cost of such products. The Company believes that recommendations
and endorsements of physicians and patients and reimbursement by health care
payers will be essential for market acceptance of its products, and there can be
no assurance that any such recommendations, endorsements or reimbursements will
be obtained. Failure of the Company to successfully develop, commercialize and
market new products or the failure of the Company's products to achieve
significant market acceptance would have a material adverse effect on the
Company's business, financial condition and results of operations.
DEPENDENCE ON BOSTON SCIENTIFIC; LIMITED SALES AND MARKETING EXPERIENCE
The Company has only limited experience marketing and selling its
products, and does not have experience marketing and selling its products in
commercial quantities. In November 1996, the Company entered into an eight year
exclusive distribution agreement whereby Boston Scientific agreed to market and
distribute the Company's CRYOcare Systems worldwide. As a result, future sales
of the CRYOcare System, the Company's main product, will be dependent on the
marketing efforts of Boston Scientific. The Company derives a majority of its
revenues from the sales of CRYOcare Systems and expects that sales of CRYOcare
Systems will continue to constitute the majority of net sales for the
foreseeable future. Accordingly, any factor adversely affecting the sales of
CRYOcare Systems would have a material adverse effect on the Company's business,
financial condition and results of its operations. Although the distributorship
agreement requires Boston Scientific to purchase a minimum number of products,
if and when there were a lack of sales as a result of unforeseen regulatory
(including lack of Medicare reimbursement of cryosurgical ablation of the
prostate) or clinical circumstances relating to a product or failure of the
Company to deliver products in a timely manner, the minimum purchase
requirements can be renegotiated. Currently, Medicare does not provide
reimbursement for cryosurgical ablation of the prostate, the approved use of the
Company's eight probe CRYOcare System.
The Company believes that to become and remain competitive, it will
need to continue to develop third party distribution channels and/or a
substantial direct sales force for its new and other products. Establishing
marketing and sales capabilities sufficient to support sales in commercial
quantities will require significant resources, and there can be no assurance
that the Company will be able to recruit and retain direct sales personnel, or
that the Company will succeed in establishing and maintaining any third party
distribution channels, or that the Company's future sales and marketing efforts
will succeed at all.
In addition, under the distribution agreement, Boston Scientific has a
right of first refusal to match any offer received by the Company from a third
party to purchase the assets related to the CRYOcare System, and a right to buy
the assets and technology related to the CRYOcare System at purchase dates of
twenty-four, thirty-six and forty-eight months after the date that Medicare
provides reimbursement for cryosurgical ablation of the prostate, for a purchase
price of 1.7, 1.5 and 1.3 times net sales for the product for the preceding
twelve months, but not less than $40 million, $50 million and $60 million,
respectively. This buyout provision may have the impact of creating a
theoretical cap on the value of the CRYOcare System and, indirectly, the market
value of the Company.
5.
<PAGE> 8
PRIOR RELIANCE ON MEDSTONE; NEED FOR ADDITIONAL FINANCING
The Company operated as a division or wholly owned subsidiary of
Medstone from its commencement of operations until January 1996 and relied upon
Medstone for financial support and for assistance with personnel management and
financial administration. ENDOcare anticipates that its need for working capital
through the end of 1997 should be satisfied with the proceeds from the $7.8
million private placement of Common Stock by Endocare which closed on January
27, 1997. The Company expects that to meet its long-term needs it will need to
raise substantial additional funds through the sale of its equity securities,
the incurrence of indebtedness or through funds derived through entering into
collaborative arrangements with third parties. Any additional equity financing
may be dilutive to shareholders, and debt financing, if available, may involve
restrictive covenants. Collaborative arrangements, if necessary to raise
additional funds, may require the Company to relinquish rights to certain of its
technologies, products or marketing territories. The failure of the Company to
raise capital when needed could have a material adverse effect on the Company's
business, financial condition and results of operations.
COMPETITION; RAPID TECHNOLOGICAL AND INDUSTRY CHANGE
ENDOcare competes in an established field of surgical device
manufacturers, and the competition in this field is intense. Many of the
Company's competitors are significantly larger than the Company and have greater
financial, technical, research, marketing, sales, distribution and other
resources than the Company. Additionally, the Company believes there will be
intense price competition for products developed in the Company's markets. There
can be no assurance that the Company's competitors will not succeed in
developing or marketing technologies and products, including drug-based
treatments, that are more effective or commercially attractive than any that are
being developed or marketed by the Company, or that such competitors will not
succeed in obtaining regulatory approval, introducing or commercializing any
such products prior to the Company. Such developments could have a material
adverse effect on the Company's business, financial condition and results of
operations. Further, there can be no assurance that, even if the Company is able
to compete successfully, it would 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. The Company's
future success will depend upon its ability to develop and introduce new cost
effective products in a timely manner. There can be no assurance that the
Company's products will not be rendered obsolete as a result of future
innovations.
LIMITED MANUFACTURING EXPERIENCE
The Company has limited experience in producing its products in
commercial quantities. Manufacturers often encounter difficulties in scaling up
production of new products, including problems involving production yields,
quality control and assurance, component supply and shortages of qualified
personnel. The Company's failure to overcome these manufacturing problems could
materially adversely affect the Company's business, financial condition and
results of operations.
The Company uses a combination of internal manufacturing capacity and
third party manufacturers in its manufacturing efforts. Most of the Company's
purchased components and processes are available from more than one vendor.
However, certain components and processes are currently available from or
performed by a single vendor. Any supply interruption from a single source
vendor would have a material adverse effect on the Company's ability to
manufacture its products until a new source of supply was qualified and, as a
result, could have a material adverse effect on the Company's business,
financial condition and results of operations. Further, the ability of third
party manufacturing sources to deliver components or finished goods will affect
the Company's ability to commercialize its products, and the Company's
dependence on third party sources may adversely affect the Company's profit
margins.
Additionally, the Company's success will depend in part upon its
ability to manufacture its products in compliance with the FDA's Good
Manufacturing Practices ("GMP") regulations and other regulatory requirements,
in sufficient quantities and on a timely basis, while maintaining product
quality and acceptable manufacturing costs. Failure to increase production
volumes in a timely or cost effective manner or to maintain compliance with GMP
or other regulatory requirements could have a material adverse effect on the
Company's business, financial condition and results of operations.
6.
<PAGE> 9
DEPENDENCE UPON KEY PERSONNEL
The Company's future success depends to a significant degree upon the
continued service of key technical and senior management personnel, including
Paul W. Mikus, the President of the Company, none of whom is bound by an
employment agreement or covered by an insurance policy of which the Company is
the beneficiary. The Company's future success also depends on its continuing
ability to attract, retain and motivate highly qualified technical, managerial
and sales personnel. The inability to retain or attract qualified personnel
could have a material adverse effect upon the Company's business, financial
condition and results of operations.
GOVERNMENT REGULATION
Governmental regulations in the United States and other countries are a
significant factor affecting the research and development, manufacture and
marketing of the Company's products. In the United States, the United States
Food and Drug Administration ("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 which vary from country to country.
The process of obtaining FDA and other required regulatory approvals is
lengthy and expensive. There can be no assurance that ENDOcare will be able to
obtain necessary approvals for clinical testing or for manufacturing or
marketing of its products. Failure to comply with applicable regulatory
approvals can, among other things, result in fines, suspension of regulatory
approvals, product recalls, operating restrictions and criminal prosecution. In
addition, governmental regulation may be established which could prevent, delay,
modify or rescind regulatory approval of ENDOcare's products. There can be no
assurance that any such position by the FDA, or change of position by the FDA,
would not adversely impact the Company's business, financial condition or
results of operations.
Regulatory approvals, if granted, may include significant limitations
on the indicated uses for which the Company's products may be marketed. In
addition, to obtain such approvals, the FDA and foreign regulatory authorities
may impose numerous other requirements on the Company. FDA enforcement policy
strictly 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. There can be no assurance that the Company will be able to obtain
regulatory approvals for its 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 material adverse effect on the Company's business, financial
condition and results of operations.
UNCERTAINTY RELATING TO THIRD PARTY REIMBURSEMENT
In the United States, health care providers, such as hospitals and
physicians, that purchase medical devices such as the Company's products,
generally rely on third party payers, principally Federal Medicare, state
Medicaid and private health insurance plans, to reimburse all or part of the
cost of medical procedures involving the Company's products. Currently, Medicare
does not reimburse for cryosurgical ablation of the prostate, the approved use
of the Company's eight probe CRYOcare System. Without such reimbursement, market
acceptance and use of the product will be limited and may adversely affect the
Company's revenues from sales of the product. There can be no assurance that the
cost of medical procedures involving the Company's products will be reimbursed
by Medicare or other governmental, insurance or third party payers.
In addition, the Company anticipates that in a prospective payment
system, such as the DRG system utilized by Medicare, and in many managed care
systems used by private health care payers, the cost of the Company's products
will be incorporated into the overall cost of the procedure and that there will
be no separate, additional reimbursement for the Company's products. Separate
reimbursement for the Company's products is not expected to be available in the
United States and there can be no assurance that reimbursement for the Company's
products will be available in international markets under either governmental or
private reimbursement systems.
7.
<PAGE> 10
Furthermore, the Company could be adversely affected by changes in
reimbursement policies of governmental or private health care payers,
particularly to the extent any such changes affect reimbursement for procedures
in which the Company's products are used. Failure by physicians, hospitals and
other users of the Company's products to obtain sufficient reimbursement from
health care payers for procedures involving the Company's products, or adverse
changes in governmental and private third party payers' policies toward
reimbursement for such procedures, could have a material adverse effect on the
Company's business, financial condition and results of operations.
PRODUCT LIABILITY AND RECALL RISKS
The manufacture and sale of medical products entails significant risk
of product liability claims or product recalls. There can be no assurance that
the Company's existing insurance coverage limits are adequate to protect the
Company from any liabilities it might incur in connection with the clinical
trials or sales of its products. In addition, the Company may require increased
product liability coverage as its products are commercialized. Such insurance is
expensive and in the future may not be available on acceptable terms, if at all.
A successful product liability claim or series of claims brought against the
Company in excess of its insurance coverage, or a recall of the Company's
products, could have a material adverse effect on the Company's business,
financial condition and results of operations.
UNCERTAINTY RELATED TO HEALTH CARE REFORM
Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. The Company
anticipates that Congress, state legislatures and the private sector will
continue to review and assess alternative health care delivery and payment
systems. Potential approaches that have been considered include mandated basic
health care benefits, controls on health care spending through limitations on
the growth of private purchasing groups, price controls and other fundamental
changes to the health care delivery system. Legislative debate is expected to
continue in the future, and market forces are expected to demand reduced costs.
The Company cannot predict what impact the adoption of any Federal or state
health care reform measures, future private sector reform or market forces may
have on its business.
DEPENDENCE ON PATENT AND PROPRIETARY RIGHTS
ENDOcare's success will depend in part on its ability to secure and
protect intellectual property rights relating to its technology. While ENDOcare
believes that the protection of patents or licenses is important to its
business, it also relies on trade secrets, know-how and continuing technological
innovation to maintain its competitive position. No assurance can be given that
ENDOcare's patent applications will be approved, that ENDOcare will develop any
additional proprietary products that are patentable and/or that any issued
patents will provide ENDOcare with a competitive edge or will not be challenged
by any third parties.
No assurance can be given that ENDOcare's processes or products will
not infringe patents or proprietary rights of others or that any license
required would be made available under any such patents or proprietary rights,
on terms acceptable to ENDOcare or at all. From time to time, the Company has
received correspondence alleging infringement of proprietary rights of third
parties. No assurance can be given that any relevant claims of third parties
would not be upheld as valid and enforceable, and therefore that the Company
could be prevented from practicing the subject matter claimed or would be
required to obtain licenses from the owners of any such proprietary rights to
avoid infringement.
The Company seeks to preserve the confidentiality of its technology by
entering into confidentiality agreements with its employees, consultants,
customers, and key vendors and by other means. No assurance can be given,
however, that these measures will prevent the unauthorized disclosure or use of
such technology.
8.
<PAGE> 11
LIQUIDITY
ENDOcare Common Stock began trading on the Nasdaq SmallCap Market on
February 28, 1997. Between February 20, 1996 and February 28, 1997, the Common
Stock traded on the Nasdaq electronic bulletin board. As a result, the Common
Stock has a limited trading history. If the Company is unable to maintain the
standards for quotation on the Nasdaq Small Cap Market, the ability of investors
to resell their shares after registration with the Securities and Exchange
Commission may be limited. In addition, the Company's securities may be
subjected to so-called "penny stock" rules that impose additional sales practice
and market making requirements on broker-dealers who sell and/or make a market
in such securities. This could affect the ability or willingness of
broker-dealers to sell and/or make a market in the Company's securities and the
ability of holders of the Company's securities to sell their securities in the
secondary market.
There can be no assurance regarding the price at which the ENDOcare
Common Stock will trade before or after the date of this Prospectus. The market
prices for securities of emerging companies have historically been highly
volatile. Future announcements concerning ENDOcare or its competitors, including
the Company's operating results, technological innovations or new commercial
products, corporate collaborations, government regulations, developments
concerning proprietary rights, litigation or public concern as to safety of
ENDOcare's products, as well as investor perception of the Company and industry
and general economic and market conditions, may have a significant impact on the
market price of ENDOcare's Common Stock. 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, and are often unrelated to their operating performance.
SHARES ELIGIBLE FOR FUTURE SALE; DILUTION
Sales of Common Stock (including shares issued upon the exercise of
outstanding options and warrants) after the date of this Prospectus could
materially adversely affect the market price of the Common Stock. Such sales
also might make it more difficult for the Company to sell equity securities or
equity-related securities in the future at a time and price that the Company
would deem appropriate. As of March 1, 1997, the Company had 8,195,853 shares of
Common Stock outstanding, of which 5,615,472 shares may be freely traded (unless
held by an affiliate of the Company), and the remaining 2,580,381 shares were
restricted securities within the meaning of the Securities Act. Of the 2,580,381
restricted shares of Common Stock, 2,550,714 are being registered in connection
with this offering. As a result, upon completion of this offering, 29,667 shares
of Common Stock will be restricted securities. In addition, as of March 1, 1997
warrants to purchase 382,497 shares of Common Stock were outstanding. Also, as
of March 1, 1997 stock options to purchase 1,516,000 shares of Common Stock had
been granted under the Company's stock option plans, subject to various vesting
schedules. Stock options to purchase an additional 84,000 shares of Common Stock
may be issued by the Company from time to time under such plans. In addition,
the Company is requesting its stockholders to approve, at its annual meeting of
stockholders to be held on March 27, 1997, an increase in the number of shares
that may be issued under such plans from 1,600,000 to 2,150,000 shares of Common
Stock (from 1,500,000 to 2,000,000 under the Company's 1995 Stock Plan and from
100,000 to 150,000 under the Company's 1995 Director Option Plan). Exercise of
these options or warrants may result in substantial dilution to investors. In
addition, the Company has granted certain shareholders and warrantholders
piggyback registration rights with respect to 357,497 shares of Common Stock.
The price of the Shares to be sold in this offering may be
substantially higher than the book value per share of Common Stock. Of the
2,550,714 shares to be sold in this offering, 2,218,714 shares were purchased by
the Selling Stockholders for a purchase price of $3.50 per share in a private
placement which occurred on January 27, 1997. The remaining 332,000 shares
offered hereby were issued by the Company on January 27, 1997 upon conversion of
promissory notes issued on August 26, 1996 at a conversion price of $2.50 per
share of Common Stock. Investors purchasing the Shares offered hereby may
therefore incur immediate, substantial dilution.
9.
<PAGE> 12
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS; POSSIBLE NEGATIVE EFFECT ON STOCK
PRICE
Certain provisions of the Company's Certificate of Incorporation and
the 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
the Company. Such provisions could limit the price that certain investors might
be willing to pay in the future for shares of the Company's Common Stock. For
example, certain of these provisions allow the Company to issue Preferred Stock
without any vote or further action by the shareholders, eliminate the ability of
shareholders to act by written consent without a meeting and eliminate
cumulative voting in the election of directors. These provisions may make it
more difficult for shareholders to take certain corporate actions and may have
the effect of delaying or preventing a change in control of the Company.
10.
<PAGE> 13
THE COMPANY
ENDOcare develops, manufactures and markets minimally invasive medical
devices to treat a variety of urological conditions. The Company has focused its
efforts on the development of surgical devices for the treatment of the two most
common diseases of the prostate; benign prostatic hyperplasia ("BPH") and
prostate cancer. To date, the Company has received marketing clearance by the
FDA for six of its products and has an attractive research and development
pipeline for other novel urological devices.
ENDOcare has developed and recently introduced an innovative, second
generation cryosurgical system for the treatment of prostate cancer. The
CRYOcare(TM) System offers the advantage of controlled, targeted freezing of the
tumor with the benefit of faster patient recovery and minimal complications. In
November, 1996, the Company entered into an exclusive worldwide distribution
agreement with Boston Scientific Corporation ("Boston Scientific") to market and
sell the CRYOcare System for urological applications. The Company expects that
the partnership with Boston Scientific will allow the proper clinical and market
development necessary to position the CRYOcare System as an accepted outpatient
therapy for the treatment of prostate cancer. See "Risk Factors -- Dependence on
Boston on Scientific; Limited Marketing Experience."
ENDOcare also is developing new therapies for the improved treatment of
BPH. The Company's initial product development efforts for BPH involve the use
of stent technology to provide both immediate and long-term relief to BPH
patients. ENDOcare is implementing a two-part strategy for the commercialization
of its stent-based BPH therapies. The first stage is the development of the
Company's Horizon Temporary Stent(TM). This nitinol-based stent has shape memory
characteristics for easy placement via a catheter following surgical
intervention of the prostate and convenient non-traumatic removal of the stent
following the healing process. The Company believes that its Horizon Temporary
Stent will address one of the major issues of BPH therapy, the immediate relief
of patients following thermotherapy and surgical resection. ENDOcare has
recently commenced preclinical studies for the Horizon Temporary Stent and
expects to begin clinical trials in early 1997.
The second stage in developing the Company's stent technology will
combine the Company's nitinol stent with a catheter system which will deliver
thermotherapy by utilizing the stent as a conductor of heat energy. The Company
believes that this Hot Stent(TM) will provide immediate and long-term therapy in
a one-step process. Both stent applications are being designed to be performed
on an outpatient basis. The ability to perform BPH therapy in this manner is
expected to result in an increase in the number of BPH sufferers who will seek
curative surgical procedures.
The Company also markets disposable surgical devices for the treatment
of BPH. The Prolase fiber optic catheter was introduced in 1993, the Diolase 60,
a surgical laser, was introduced in 1994 to be used with the Prolase laser fiber
and the Uroloop and Vaporbar electrosurgical cutting elements were introduced in
late 1995.
ENDOcare became an independent public company effective as of January
1, 1996, through a tax-free spinout by its former parent company, Medstone
International, Inc. ("Medstone") The core operations of ENDOcare commenced in
1990, first as the research and development arm of Medstone and ultimately as a
separate division focusing on the development of novel urological devices.
ENDOcare and its management team successfully developed and launched innovative
devices to improve the performance of existing urological procedures by
minimizing trauma to patients. Over the past five years, the Company has
expanded its research efforts, which have resulted in the development of
products that offer multiple opportunities to treat BPH and prostate cancer less
invasively on an outpatient basis.
The Company's principal executive offices are located at 7 Studebaker,
Irvine, California 92618, and its telephone number is (714) 595-4770.
11.
<PAGE> 14
USE OF PROCEEDS
The Shares are being sold by the Selling Stockholders and, accordingly,
the Company will receive none of the proceeds therefrom.
THE SELLING STOCKHOLDERS
All of the shares of Common Stock offered hereby are offered by the
Selling Stockholders. Any sales of such Shares will be for the account of such
persons or entities and none of the proceeds of such offering will be received
by the Company. The following table sets forth, with respect to the Selling
Stockholders, the number of shares of Common Stock and percentage of Common
Stock owned by each Selling Stockholder prior to this offering, the number of
shares of Common Stock offered for each Selling Stockholder's account and the
number of shares of Common Stock and percentage of Common Stock owned by each
Selling Stockholder after the anticipated completion of this offering.
<TABLE>
<CAPTION>
Shares of Percent of Shares of Shares of Percent of
Common Common Common Common Common
Stock Owned Stock Owned Stock Offered Stock Owned Stock Owned
Prior to Prior to in this After After this
Name of Selling Stockholder this Offering this Offering Offering this Offering Offering
- --------------------------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Pharmaceutical/Medical Technology 85,714 1.0 85,714 0 *
Fund, L.P.
Essex Special Growth Opportunities 55,000 * 55,000 0 *
Fund, L.P.
Harris & Harris Group, Inc. 150,000 1.8 150,000 0 *
Health Reform Opportunities, L.P. 30,000 * 30,000 0 *
The Kaufman Fund, Inc. 1,000,000 12.2 1,000,000 0 *
Par Investment Partners, L.P. 275,000 3.4 275,000 0 *
Porter Partners, L.P. 145,000 1.7 145,000 0 *
EDJ Limited 25,000 * 25,000 0 *
Technology Funding Partners III, 474,000(2) 5.8 354,000 120,000(2) 1.5
L.P.(1)
Technology Funding Venture Partners 15,800(3) * 11,800 4,000(3) *
IV, an Aggressive Growth Fund, L.P.(1)
Technology Funding Venture Partners 15,800(4) * 11,800 4,000(4) *
V, an Aggressive Growth Fund, L.P.(1)
Technology Funding Medical Partners 126,400(5) 1.5 94,400 32,000(5) *
I, L.P.(1)
Opco Senior Executive Investment 43,000 * 43,000 0 *
Partnership, L.P.(6)
Westfield Performance Fund, L.P. 70,000 * 70,000 0 *
Educational Employees Supplementary 56,450 * 56,450 0 *
Retirement System of Fairfax County
NCR Pension Trust 15,450 * 15,450 0 *
</TABLE>
12.
<PAGE> 15
<TABLE>
<CAPTION>
Shares of Percent of Shares of Shares of Percent of
Common Common Common Common Common
Stock Owned Stock Owned Stock Offered Stock Owned Stock Owned
Prior to Prior to in this After After this
Name of Selling Stockholder this Offering this Offering Offering this Offering Offering
- --------------------------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Newell Pension Investment Committee 54,600 * 54,600 0 *
Robinson Companies Profit Sharing 4,900 * 4,900 0 *
Trust
AT&T Investment Management Corp. 34,700 * 34,700 0 *
Local 25 S.E.I.U. Employers Pension 5,350 * 5,350 0 *
Plan
Sisters of St. Joseph Carondelet 11,700 * 11,700 0 *
Tracor, Inc. 16,850 * 16,850 0 *
--------- ------------ ---
TOTALS: 2,550,714 2,550,714 0
</TABLE>
- --------------------
* Less than 1%.
(1) Peter F. Bernardoni is an officer of Technology Funding Inc. and a
partner of Technology Funding Ltd., each a general partner of
Technology Funding Partners III, L.P., Technology Funding Venture
Partners IV, an Aggressive Growth Fund, L.P., Technology Funding
Ventures Partners V, an Aggressive Growth Fund, L.P., and Technology
Funding Medical Partners I, L.P. (collectively, the "Funds"). Mr.
Bernardoni has sole voting and shared investment power with respect to
all shares owned by the Funds, and therefore may be deemed to be a
beneficial owner of such shares. Mr. Bernardoni has served on the
Company's Board of Directors since November 1995 and is a member of the
Compensation Committee and Audit Committee of the Board of Directors.
As compensation for being an outside director, Mr. Bernardoni has been
granted stock options to purchase 15,000 shares of Common Stock of the
Company. In August 1996, the Company obtained a two-year $1,500,000
borrowing facility from the Funds. In connection with such loan, the
Funds also received warrants for the purchase of up to 150,000 shares
of Common Stock of the Company, exercisable at any time on or before
August 26, 2001 at the price of $3.00 per share, and received an
origination fee of 10,000 shares of Common Stock on that same date. On
January 27, 1997, the outstanding principal balance of $750,000 under
such loan was converted, at the option of the holders, into 300,000
shares of Common Stock at a conversion price of $2.50 per share.
Interest on the loan had accrued at a rate of 16% per year, and all
$50,000 was converted into 20,000 shares on that same date at $2.50 per
share. The Funds received an additional 12,000 shares of Common Stock
($50,250 total market value) to induce conversion of the loan at that
time. At the Company's election, the remaining borrowing facility was
cancelled on that same date.
(2) Includes warrants to purchase an additional 112,500 shares of Common
Stock.
(3) Includes warrants to purchase an additional 3,750 shares of Common
Stock.
(4) Includes warrants to purchase an additional 3,750 shares of Common
Stock.
(5) Includes warrants to purchase an additional 30,000 shares of Common
Stock.
(6) Oppenheimer & Co., Inc., an entity affiliated with Opco Senior
Executive Investment Partnership, L.P., acted as placement agent for
the offering and sale of 2,218,714 shares of Common Stock of the
Company in a private placement which closed on January 27, 1997.
Oppenheimer & Co., Inc. received a placement fee of $543,585, a warrant
to purchase 177,497 shares of Common Stock of the Company, exercisable
at any time between January 28, 1998 and January 27, 2002 at an
exercisable price of $4.20 per share, and reimbursement for certain
out-of-pocket expenses.
13.
<PAGE> 16
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
The following summary is a description of certain provisions of the
Company's Certificate of Incorporation, as amended and restated (the
"Certificate of Incorporation"). Such summary does not purport to be complete
and is subject to, and is qualified in its entirety by, all of the provisions of
the Certificate of Incorporation.
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, $0.001 par value, and 1,000,000 shares of Preferred Stock, $0.001
par value ("Preferred Stock").
COMMON STOCK
As of March 1, 1997, there were 8,195,853 shares of Common Stock issued
and outstanding.
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. There are no
cumulative voting rights applicable to the Common Stock.
Subject to the preferences or other rights applicable to shares of
Preferred Stock that may be issued from time to time, holders of shares of
Common Stock are entitled to participate ratably in dividends, if, when and as
declared by the Board of Directors from funds legally available therefor and are
entitled, in the event of liquidation or dissolution of the Company, to share
ratably in all assets available for distribution to stockholders after payment
of liabilities and preferred stock preferences, if any.
The authorized but unissued shares of Common Stock are available for
issuance without further action by the Company's stockholders, unless such
action is required by applicable law or the rules of any stock exchange on which
the Common Stock may be listed. Shares of Common Stock are not redeemable and
there are no sinking fund provisions.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the Company's
Board of Directors, without any vote or action by the holders of Common Stock,
to issue Preferred Stock from time to time in one or more series. The Board is
authorized to determine the number of shares and designation of any series of
Preferred Stock and the dividend rights, dividend rate, conversion rights and
terms, voting rights (full or limited, if any), redemption rights and terms,
liquidation preferences and sinking fund terms and the other designations,
preferences and relative, participating, optional and other special rights and
such qualifications, limitations or restrictions of any series of Preferred
Stock. The Preferred Stock would be subject to the applicable rules of The
Nasdaq Stock Market, Inc. or other organizations on whose systems the stock of
the Company may then be quoted or listed. Depending upon the terms of Preferred
Stock established by the Board, any or all series of Preferred Stock could have
preference over the Common Stock with respect to dividends and other
distributions and upon liquidation of the Company. Issuance of any such shares
with voting powers, or issuance of additional shares of Common Stock, would
dilute the voting power of the outstanding Common Stock. As of March 1, 1997,
the Company had no outstanding shares of Preferred Stock.
NO PREEMPTIVE RIGHTS
No holder of any capital stock of the Company has any preemptive rights
to subscribe for or purchase any securities of any class or kind of the Company.
TRANSFER AGENT
The Company's registrar and transfer agent for the Common Stock is U.S.
Stock Transfer Corporation.
14.
<PAGE> 17
PLAN OF DISTRIBUTION
The Shares are being registered to permit public secondary sales of the
Shares by the Selling Stockholders from time to time until the earlier of:
January 27, 2000; such date as all of the Shares offered hereby have been sold;
or such time as all of the Shares offered hereby can be sold within a given
three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 promulgated thereunder. The Company has
agreed, among other things, to bear all expenses (other than underwriting
discounts, selling commissions and fees and the expenses of counsel and other
advisors to the Selling Stockholders) in connection with the registration and
sale of the Shares. The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including certain liabilities under the Securities
Act.
The Company anticipates that the Selling Stockholders may sell all or a
portion of the Shares from time to time on the Nasdaq SmallCap Market, and may
sell the Shares through a broker or brokers or in the over-the-counter market at
prices prevailing on such exchange or over-the-counter market, as appropriate,
at the times of such sales. The Selling Stockholders may also make private sales
directly or through such broker or brokers. Brokers participating in such
transactions may receive customary brokerage commissions from the Selling
Stockholders. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. In
connection with such sales, the Selling Stockholders and brokers participating
in such sales may be deemed to be underwriters within the meaning of the
Securities Act and may be deemed by the National Association of Securities
Dealers to have received underwriting compensation for purposes of the
Association's Rules of Fair Practice. The Company will receive no proceeds from
this offering.
LEGAL OPINION
The validity of the Shares offered hereby is passed upon for the
Company by Riordan & McKinzie, a Professional Law Corporation, Orange County,
California.
EXPERTS
The financial statements and schedule of Endocare, Inc. as of December
31, 1996 and for the year ended December 31, 1996, have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP covering the
December 31, 1996 financial statements refers to a change in the accounting for
the impairment of long-lived assets and for long-lived assets to be disposed of.
The financial statements and schedule of Endocare, Inc. for the years
ended December 31, 1995 and 1994 appearing in Endocare, Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1996 have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
15.
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration Fee............................. $ 3,602
Blue Sky fees and expenses................... 5,000
Accounting fees and expenses................. 20,000
Legal fees and expenses...................... 20,000
Transfer Agent Fees ........................ 5,000
Miscellaneous................................ 6,398
-------
Total........................................ $60,000
</TABLE>
All such expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware Corporation Law provides that a Delaware
corporation may indemnify any person against expenses, judgments, fines and
settlements actually and reasonably incurred by any such person in connection
with a threatened, pending or completed action, suit or proceeding in which he
is involved by reason of the fact that he is or was director, officer, employee
or agent of such corporation, provided that (i) he acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation and (ii) with respect to any criminal action or proceeding, he had
no reasonable cause to believe his conduct was unlawful. If the action or suit
is by or in the name of the corporation, the corporation may indemnify any such
person against expense actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation for negligence or misconduct in the
performance of his duty to the corporation, unless and only to the extent that
the Delaware Court of Chancery or the court in which the action or suit is
brought determines upon application that, despite the adjudication of liability
but in view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expense as the court deems proper.
The Company's Certificate of Incorporation provides that to the fullest
extent permitted by the Delaware Corporation Law, no director of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director. The Certificate of
Incorporation also provides that no amendment or repeal of such provision shall
apply to or have any effect on the right to indemnification permitted thereunder
with respect to claims arising from acts or omissions occurring in whole or in
part before the effective date of such amendment or repeal whether asserted
before or after such amendment or repeal.
The Company's Bylaws provide that the Company shall indemnify to the
full extent authorized by law each of its directors and officers against
expenses incurred in connection with any proceeding arising by reason of the
fact that such person is or was an agent of the corporation.
The Company has entered into indemnification agreements with its
directors and certain of its officers.
II-1
<PAGE> 19
ITEM 16. EXHIBITS.
Exhibit
Number Description
------ -----------
4 ++ Specimen Certificate of the Company's Common Stock.
5 * Opinion of Riordan & McKinzie, a Professional Law
Corporation.
23.1 * Consent of KPMG Peat Marwick LLP.
23.2 * Consent of Ernst & Young LLP.
23.3 * Consent of Riordan & McKinzie (included in Exhibit 5).
24 * Powers of Attorney with respect to the Company (included
on page II-4).
- -------------------------
* Included in this filing.
++ Previously filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, and incorporated herein
by reference.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
II-2
<PAGE> 20
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Irvine, State of California, on March 18, 1997.
ENDOCARE, INC.
By: /s/ PAUL W. MIKUS
------------------------------------------------
Paul W. Mikus, Chief Executive Officer,
President, Chief Financial Officer and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Paul W. Mikus his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (unless revoked in writing), to sign any and all amendments to this
Registration Statement, including any post-effective amendments as well as any
related registration statement (or amendment thereto) filed in reliance upon
Rule 462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following person in the capacities
and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------- ------------------------------------------------- ---------------
<S> <C> <C>
Chief Executive Officer, President, Chief March 18, 1997
Financial Officer, Treasurer and Director
/s/ PAUL W. MIKUS (Principal Executive Officer, Principal Financial
- ------------------------------- Officer and Principal Accounting Officer)
Paul W. Mikus
/s/ PETER F. BERNARDONI March 18, 1997
- ------------------------------- Director
Peter F. Bernardoni
/s/ KEVIN MARINELLI
- ------------------------------- Director March 18, 1997
Kevin Marinelli
</TABLE>
II-4
<PAGE> 22
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
4 ++ Specimen Certificate of the Company's Common Stock.
5 * Opinion of Riordan & McKinzie, a Professional Law
Corporation.
23.1 * Consent of KPMG Peat Marwick LLP.
23.2 * Consent of Ernst & Young LLP.
23.3 * Consent of Riordan & McKinzie (included in Exhibit 5).
24 * Powers of Attorney with respect to the Company (included on
page II-4).
- -------------------------
* Included in this filing.
++ Previously filed with the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, and incorporated herein
by reference.
II-5
<PAGE> 1
EXHIBIT 5
RIORDAN & MCKINZIE
A PROFESSIONAL LAW CORPORATION
695 TOWN CENTER DRIVE, SUITE 1500
COSTA MESA, CALIFORNIA 92626
March 19, 1997
5-110-002
Endocare, Inc.
7 Studebaker
Irvine, California 92618
Ladies and Gentlemen:
We have acted as counsel to Endocare, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "1933 Act"), of 2,550,714 authorized and
previously issued shares of the Common Stock (the "Shares"), $.001 par value per
share, of the Company to be sold by certain selling stockholders. This opinion
is delivered to you in accordance with the requirements of Item 601(b)(5) of
Regulation S-K under the 1933 Act in connection with the Registration Statement
on Form S-3, including all pre-effective and post-effective amendments thereto
(the "Registration Statement"), for the aforementioned sale, filed with the
Securities and Exchange Commission (the "Commission") under the 1933 Act.
In rendering the opinion set forth herein, we have made such
investigations of fact and law, and examined such documents and instruments, or
copies thereof established to our satisfaction to be true and correct copies
thereof, as we have deemed necessary under the circumstances.
Based upon the foregoing and such other examination of law and
fact as we have deemed necessary, and in reliance thereon, we are of the opinion
that, the Shares are duly authorized, validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm under the
caption "Legal Matters" in the Prospectus which is a part of the Registration
Statement. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the 1933 Act or
the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ RIORDAN & MCKINZIE
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report incorporated herein by reference
and to the reference to our firm under the caption "Experts" in the prospectus.
Our report refers to a change in the accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of.
KPMG Peat Marwick LLP
Orange County, California
March 18, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related prospectus of Endocare, Inc.
for the registration of 2,550,714 shares of its common stock and to the
incorporation by reference therein of our report dated February 14, 1996, with
respect to the financial statements and schedule of Endocare, Inc. for the years
ended December 31, 1995 and 1994 included in its Annual Report (Form 10-K) for
the year ended December 31, 1996, filed with the Securities and Exchange
Commission.
Ernst & Young LLP
Orange County, California
March 18, 1997
