<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 JUNE 30, 1998
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)
(949) 595-4770
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
The number of shares of the Registrant's Common Stock, par value $.001 per
share, outstanding on August 10, 1998 was 10,438,354.
<PAGE> 2
ENDOCARE, INC.
FORM 10-Q, QUARTER ENDED JUNE 30, 1998
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1 Financial Statements (unaudited)
Condensed Statements of Operations for the fiscal quarter
and six months ended June 30, 1998 and 1997 3
Condensed Balance Sheets at June 30, 1998
and December 31, 1997 4
Condensed Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3 Quantitative and Qualitative Disclosures About Market Risk None
Part II. Other Information
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 11
Item 3 Defaults Upon Senior Securities 11
Item 4 Submission of Matters to a Vote of Security Holders 11
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
Signature Page 13
</TABLE>
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
ENDOCARE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net product sales $ 318,909 $ 229,165 $ 708,978 $ 888,000
Revenue from collaborative
agreements 330,840 20,832 351,672 41,664
----------- ----------- ----------- -----------
Total revenues 649,749 249,997 1,060,650 929,664
Costs and expenses:
Cost of sales 223,763 151,132 504,305 581,044
Research and development 495,622 423,345 833,784 713,790
Selling, general and
administrative 1,244,769 812,135 2,131,947 1,509,917
----------- ----------- ----------- -----------
Total costs and
expenses 1,964,154 1,386,612 3,470,036 2,804,751
----------- ----------- ----------- -----------
Loss from operations (1,314,405) (1,136,615) (2,409,386) (1,875,087)
Other income (expense), net 85,417 76,789 119,637 75,807
----------- ----------- ----------- -----------
Net loss $(1,228,988) $(1,059,826) $(2,289,749) $(1,799,280)
=========== =========== =========== ===========
Net loss per share of common
stock - basic and diluted $ (.12) $ (.13) $ (.25) $ (.23)
=========== =========== =========== ===========
Weighted average shares of
common stock outstanding 9,952,000 8,195,853 9,166,000 7,817,451
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
ENDOCARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
(Unaudited)
------------ -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,949,780 $ 3,896,316
Accounts receivable, net 239,420 376,141
Inventories 935,016 925,592
Other current assets 68,620 64,237
------------ ------------
Total current assets 10,192,836 5,262,286
Property and equipment, net 254,977 238,192
Other assets 44,010 42,566
------------ ------------
Total assets $ 10,491,823 $ 5,543,044
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 777,438 $ 745,771
Accrued liabilities 1,105,885 697,674
Deferred revenues 65,000 83,333
------------ ------------
Total current liabilities 1,948,323 1,526,778
Other liabilities
-- 83,339
Shareholders' equity:
Common stock, $.001 par value 10,438 8,378
Additional paid-in capital 16,254,119 9,355,857
Accumulated deficit (7,721,057) (5,431,308)
------------ ------------
Total shareholders' equity 8,543,500 3,932,927
------------ ------------
Total liabilities and shareholders'
equity $ 10,491,823 $ 5,543,044
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
ENDOCARE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,289,749) $(1,799,280)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 73,233 49,105
Amortization of warrant value 39,522 38,713
Other -- 70,663
Changes in operating assets
and liabilities:
Accounts receivable 136,721 397,011
Inventories (9,424) (559,647)
Accounts payable 31,667 49,311
Accrued liabilities 408,211 94,001
Deferred revenue (101,672) (41,664)
Other (5,827) (21,861)
----------- -----------
Net cash used in operating activities (1,717,318) (1,723,648)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (90,018) (201,549)
----------- -----------
Net cash used in investing activities (90,018) (201,549)
----------- -----------
Cash flows from financing activities:
Issuance of common stock 6,860,800 7,050,480
----------- -----------
Net cash provided by financing
activities 6,860,800 7,050,480
----------- -----------
Net increase in cash and cash
equivalents 5,053,464 5,125,283
Cash and cash equivalents, beginning
of period 3,896,316 476,854
----------- -----------
Cash and cash equivalents, end of
period $ 8,949,780 $ 5,602,137
=========== ===========
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 an array of innovative, temperature-based surgical devices and
technologies primarily to treat prostate diseases, including prostate cancer
and prostate enlargement.
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.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130),
and intends to adopt Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131) in 1998. Both standards may require financial statement disclosure, but
will not have a material effect on the Company's financial position or
results of operations. SFAS 130 establishes standards for the reporting and
display of comprehensive income. No additional financial statement disclosure
was required as a result of implementing SFAS 130 in the Company's interim
1998 financial statements. SFAS 131 changes the way companies report segment
information and requires segments to be determined and reported based on how
management measures performance and makes decisions about allocating
resources. SFAS 131 will first be reflected in the Company's 1998 Annual
Report.
These financial statements should be read in conjunction with the audited
financial statements and other information included in the Company's Form
10-K for the year ended December 31, 1997. Financial results for this interim
period are not necessarily indicative of results to be expected for the full
year 1998.
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.
4. Supplemental Financial Statement Data
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- --------
<S> <C> <C>
Inventories:
Raw materials $ 541,085 $628,466
Work in process 90,446 56,306
Finished goods 303,485 240,820
---------- --------
Total inventories $ 935,016 $925,592
========== ========
</TABLE>
6
<PAGE> 7
5. Net Loss Per Share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128) in the fourth quarter of 1997. SFAS 128
simplifies the computation of earnings per share ("EPS") previously required
in Accounting Principles Board (APB) Opinion No. 15, "Earnings Per Share," by
replacing primary and fully diluted EPS with basic and diluted EPS. Under
SFAS 128, basic EPS is calculated by dividing net earnings (loss) by the
weighted-average common shares outstanding during the period. Diluted EPS
reflects the potential dilution to basic EPS that could occur upon conversion
or exercise of securities, options, or other such items, to common shares
using the treasury stock method based upon the weighted-average fair value of
the Company's common shares during the period. SFAS 128 was adopted by the
Company in its year-end 1997 Annual Report, and the adoption of SFAS 128 did
not result in a restatement of the Company's loss per share as previously
reported for fiscal 1997 or 1996. In accordance with SFAS 128, the income
(numerator), shares (denominator) and per share amount for the three months
ended June 30, 1998 and 1997 are $(1,228,988), 9,952,000 and $(0.12) and
$(1,059,826), 8,195,853, and $(0.13), respectively. The income (numerator),
shares (denominator) and per share amount for the six months ended June 30,
1998 and 1997 are $(2,289,749), 9,166,000 and $(0.25) and $(1,799,280),
7,817,451 and $(.23), respectively. Dilutive options were 850,000 and 820,000
for the three months ended June 30, 1998 and 1997, respectively, and 855,000
and 827,000 for the six months ended June 30, 1998 and 1997, respectively. As
the Company has been in a net loss position for the periods presented,
dilutive options were not used to compute diluted loss per share as the
effect was antidilutive. Consequently, diluted EPS are not presented as they
equal basic EPS.
6. Bank Line of Credit
In March 1998, Endocare entered into a one-year $1,000,000 line of credit
with a bank which bears interest at prime plus 1%. The line of credit is
secured by the Company's assets, excluding intellectual property, and is
subject to certain financial and other covenants.
7. Common Stock
In January 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. In
addition, under a borrowing facility with four partnerships managed by
Technology Funding, Inc., the partnerships converted $750,000 principal
amount and accrued interest into 320,000 shares of Endocare common stock.
Also, 12,000 additional shares of common stock were issued to the
Partnerships as an inducement to convert at that time.
In April 1998, Endocare sold 2,000,000 shares of common stock at a price of
$3.50 per share in a direct private placement. After estimated legal,
accounting, filing fees and other associated expenses of approximately
$150,000, the net contribution to the Company's capital was approximately
$6,850,000.
7
<PAGE> 8
ITEM 2.
ENDOCARE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the unaudited financial
statements and notes thereto included in Part I--Item 1, the audited financial
statements, and notes thereto, and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
General
Endocare designs, manufactures, and markets an array of innovative,
temperature-based surgical devices and technologies to treat prostate diseases,
including prostate cancer and prostate enlargement. In late 1995, Endocare began
marketing two new disposable product families, the Uroloop and Vaporbar
electrosurgical cutting elements. 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 near 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 June 30, 1998 increased 39% to
$319,000 compared to $229,000 in 1997. This increase was due primarily to an
incremental sale of a CRYOcare system for general surgery.
Product revenue for the six months ended June 30, 1998 decreased 20% to $709,000
compared to $888,000 in 1997. The decrease was attributed to a large initial
purchase by Boston Scientific Corporation of CRYOcare systems in the first
quarter of 1997. Such systems were used by Boston Scientific Corporation to
launch its market development efforts for CRYOcare systems for urological
applications.
Revenue from collaborative agreements for the three months ended June 30, 1998
increased to $331,000 compared to $21,000 in 1997. The increase was due to
additional licensing fees and the respective quarters' amortization of a
lump-sum payment from Boston Scientific Corporation based upon the distribution
agreement.
Revenue from collaborative agreements for the six months ended June 30, 1998
increased to $352,000 compared to $42,000 in 1997. The increase was due to the
reason described above.
Gross margin on product sales was 30% for the three months ended June 30, 1998,
compared to 34% in 1997. The decline in gross margin resulted primarily from
additional infrastructure and personnel costs associated with the Company's new
manufacturing facility in Irvine, California.
Gross margin on product sales for the six months ended June 30, 1998 was 29%
compared to 35% for the same period in 1997. The decrease is attributable to the
reasons described above.
Research and development expense increased 17% to $496,000 for the three months
ended June 30, 1998 compared to $423,000 for the corresponding period in 1997.
The increase reflects the investment the Company has made in the form of
additional personnel and related infrastructure to support general product
improvement and new product development efforts.
8
<PAGE> 9
Research and development expense for the six months ended June 30, 1998
increased 17% to $834,000 compared to $714,000 for the same period in 1997. The
increase is attributable to the reasons described above.
Selling, general and administrative expense increased 53% to $1,245,000 for the
three months ended June 30, 1998, compared to $812,000 for the same period in
1997. The 1998 amount included costs for additional sales, marketing and
administrative personnel and related infrastructure.
Selling, general and administrative expense for the six months ended June 30,
1998 increased 41% to $2,132,000 compared to $1,510,000 in the same period in
1997. The increase is attributable to the reasons described above and costs
associated with Endocare's larger corporate facility which the Company moved
into in March 1997.
Other income (expense), net for the three months ended June 30, 1998 increased
to $85,000 compared to $77,000 in 1997. The increase is due to increased
interest income on a higher balance of cash and cash equivalents.
Other income (expense), net for the six months ended June 30, 1998 increased to
$120,000 compared to $76,000 in 1997. The increase is due to increased interest
income on a higher balance of cash and cash equivalents. Additionally, the six
months ended June 30, 1997 included $58,000 of interest expense and other
charges associated with conversion of notes payable to common stock.
Net loss for the three months ended June 30, 1998 was $1,229,000, or 12 cents
per share on 9,952,000 weighted average shares outstanding, compared to a net
loss of $1,060,000 or 13 cents per share on 8,196,000 weighted average shares
outstanding for the same period in 1997. The increase in net loss resulted from
higher research and development costs and higher selling, general and
administrative expenses.
Net loss for the six months ended June 30, 1998 was $2,290,000 or 25 cents per
share on 9,166,000 weighted average shares outstanding, compared to a net loss
of $1,799,000 or 23 cents per share on 7,817,000 weighted average shares
outstanding for the same period in 1997. The increase is attributable to the
reasons described above.
Liquidity and Capital Resources
At June 30, 1998, Endocare's cash and cash equivalents balance was $8,950,000,
compared to $3,896,000 at December 31, 1997. The increase in cash and cash
equivalents resulted from a cash infusion of $7,000,000 in April, 1998 from the
sale of 2,000,000 shares of common stock in a direct private placement.
Working capital has been used as Endocare's operations have increased in 1998.
Net accounts receivable decreased to $239,000 at June 30, 1998, compared to
$376,000 at December 31, 1997. Inventory increased to $935,000 at June 30, 1998,
compared to $926,000 at the beginning of the year. Additions to property and
equipment during the first six months of 1998 were approximately $90,000.
Working capital was provided as accounts payable and other current liabilities
increased to $1,948,000 from $1,527,000 at December 31, 1997.
At June 30, 1998, Endocare's net working capital was $8,245,000 and the ratio of
current assets to current liabilities was 5 to 1.
In March 1998, Endocare entered into a one-year $1,000,000 line of credit with a
bank which bears interest at prime plus 1%. The line of credit is secured by the
Company's assets, excluding intellectual property, and is subject to certain
financial and other covenants.
In April 1998, Endocare sold 2,000,000 shares of common stock at a price of
$3.50 per share in a direct private placement. After estimated legal,
accounting, filing fees and other associated expenses of approximately $150,000,
the net contribution to the Company's capital was approximately $6,850,000.
With the April 1998 cash infusion of approximately $7,000,000 from the sale of
its common stock, the Company believes that its existing cash resources,
anticipated cash flow from future operations, and its $1,000,000 bank line of
credit, will provide sufficient resources to meet present and reasonably
foreseeable working capital requirements and other cash needs for the next
twelve months. Insofar as the Company elects to undertake or accelerate
significant research and development projects for new products or pursue
corporate acquisitions, it may require additional outside financing prior to
such time.
9
<PAGE> 10
Other Matters
Many existing software programs use only two digits to identify the year in the
date field. If such programs are not corrected, date data concerning the Year
2000 could cause many computer applications to fail, lock-up or generate
erroneous results. The Company is currently assessing the cost to remediate its
Year 2000 issues. Although the actual cost to remediate its Year 2000 issues is
not yet fully known, based upon information to date, it is not expected that the
remediation will have a material impact on the Company's financial condition or
operating results.
This Form 10Q contains forward looking statements. The Company's business and
results of operations are subject to risk and uncertainties including, but not
limited to, those discussed in the Company's Annual Report on Form 10-K and Form
S-3, filed with the Securities and Exchange Commission. Such risk factors
include, but are not limited to, limited operating history of the Company with a
history of losses; fluctuations in the Company's order levels; uncertainty
regarding market acceptance of the Company's new products; uncertainty of
product development and the associated risks related to clinical trials; the
Company's dependence on Boston Scientific Corporation as a distribution partner;
the rapid pace of technological change in the Company's industry; the Company's
limited sales, marketing and manufacturing experience; and, uncertainty relating
to third party reimbursement. The actual results that the Company achieves may
differ materially from any forward looking statements due to such risks and
uncertainties.
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 then 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, and 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 September 23, 1997,
the court granted Dr. Chang's motion (which the Company joined) to
modify an earlier injunction prohibiting Dr Chang from performing
services for the Company, based on the language contained in an
employment agreement between Dr. Chang and CMS that ostensibly prohibits
Dr. Chang from working for a CMS competitor. Under the modification
obtained by Dr. Chang and the Company, Dr. Chang is entitled to provide
consulting services to the Company in the area of stent technology,
subject to certain restrictions and to periodic review of Dr. Chang's
activities by a neutral third party. The Company is subject to the terms
of this modified injunction, insofar as necessary to enforce the
restrictions on Dr. Chang's activities. No other injunctive or other
relief has been granted to CMS. On October 17, 1997, the Company filed a
comprehensive motion for summary judgment seeking dismissal of all
claims against it brought by CMS, on a variety of legal and undisputed
factual grounds. Shortly thereafter, on November 4, 1997, the parties
filed a request that the court stay all proceedings pending efforts to
resolve the case through mediation. The parties are currently
negotiating the terms of a settlement of the litigation. The Company
continues to deny all allegations of wrongdoing in the complaint and
intends to defend the litigation vigorously in the event that the
settlement negotiations do not result in a negotiated solution of the
case. 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, in the normal course of business, is subject to various
other legal matters. While the results of litigation and claims cannot
be predicted with certainty, the Company believes that the final outcome
of these other matters will not have a material adverse effect on the
Company's results of operations or financial condition.
Item 2. Changes in Securities
Stock Options
During the period from April 1, 1998 through June 30, 1998, the Company
granted stock options to 4 individuals covering an aggregate of 172,500
shares of its common stock. All such options were granted at exercise
prices equaling fair market value on the date of grant, vest over a four
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.
10
<PAGE> 11
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 June 4, 1998.
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 8,705,943 0 62,136
Peter F. Bernardoni 8,705,943 0 62,136
Robert F. Byrnes 8,705,943 0 62,136
Benjamin Gerson, 8,705,943 0 62,136
M.D.
</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 of the Company's 1995 Stock Plan. Votes cast
were as follows:
FOR AGAINST ABSTAIN BROKER NON-VOTES
4,690,075 604,287 36,209 3,437,508
The proposal was approved.
Proposal 3, submitted to a vote of security holders at the meeting, was
to approve the amendment of the Company's 1995 Director Option Plan.
Votes cast were as follows:
FOR AGAINST ABSTAIN BROKER NON-VOTES
4,880,784 410,493 39,294 3,437,508
The proposal was approved.
Proposal 4, submitted to a vote of security holders at the meeting, was
to ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for fiscal year 1998. Votes cast were as follows:
FOR AGAINST ABSTAIN BROKER NON-VOTES
8,562,904 39,706 165,469 0
The proposal was approved.
Item 5. Other Information
None.
11
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
On April 23, 1998, the Company filed a Form 8-K with the
Securities and Exchange Commission dated April 15, 1998
reporting the receipt of private placement funding commitments
to purchase an aggregate of 2,000,000 shares of common stock at
$3.50 per share for a total aggregate gross proceeds of
$7,000,000 to the Company. The Form 8-K also reported the
Company entering into a one year, $1,000,000 revolving bank line
of credit. The line bears interest at a rate of prime plus one
percent and is secured by all the Company's assets other than
intellectual property rights.
12
<PAGE> 13
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: August 12, 1998 By: /s/ Paul W. Mikus
--------------------------------------
Paul W. Mikus
Chief Executive Officer and President
(Duly Authorized Officer )
By: /s/ William R. Hughes
--------------------------------------
William R. Hughes
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,949,780
<SECURITIES> 0
<RECEIVABLES> 328,907
<ALLOWANCES> 89,487
<INVENTORY> 935,016
<CURRENT-ASSETS> 10,192,836
<PP&E> 705,700
<DEPRECIATION> 450,723
<TOTAL-ASSETS> 10,491,823
<CURRENT-LIABILITIES> 1,948,323
<BONDS> 0
0
0
<COMMON> 10,438
<OTHER-SE> 16,254,119
<TOTAL-LIABILITY-AND-EQUITY> 10,491,823
<SALES> 708,978
<TOTAL-REVENUES> 1,060,650
<CGS> 504,305
<TOTAL-COSTS> 504,305
<OTHER-EXPENSES> 2,965,731
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,287,949)
<INCOME-TAX> 1,800
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