<PAGE> 1
As Filed With the Securities and Exchange Commission on May 15, 1998
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
(949) 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
(949) 595-4770
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
RICHARD A. FINK, ESQ.
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
(949) 790-6300
------------------------
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. / /
<PAGE> 2
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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 2,000,000 $3.50 $7,000,000 $2,065
$.001 per share shares
- -------------------------------------------------------------------------------------------------------
</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, $3.625 and $3.375, respectively, on May 11, 1998 as reported on
the Nasdaq SmallCap Market.
------------------------
2
<PAGE> 3
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, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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 MAY 15, 1998
ENDOCARE, INC.
2,000,000 SHARES
COMMON STOCK
PAR VALUE $0.001 PER SHARE
The 2,000,000 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 6 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,
3
<PAGE> 4
including certain liabilities under the Securities Act. See "Plan of
Distribution."
------------------------
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "ENDO." On May 14, 1998, the reported closing price of the Company's
Common Stock on the Nasdaq SmallCap Market was $3.188 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 _______________, 1998.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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.
4
<PAGE> 5
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.
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, 1997, as filed with the Commission on
March 31, 1998;
(2) 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;
(3) The definitive Proxy Statement of the Company, as filed with the
Commission on May 5, 1998; and
(4) The Quarterly Report of the Company on Form 10-Q for the quarterly
period ended March 31, 1998, as filed with the Commission on May 15, 1998;
(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
5
<PAGE> 6
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 (949) 595-4770.
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 and Section 21E of the Exchange Act 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 March 31, 1998, the Company's accumulated deficit
was approximately $6.5 million. There can be no assurance that the Company 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.
6
<PAGE> 7
DECLINING SALES OF EXISTING PRODUCTS; UNCERTAIN MARKET ACCEPTANCE OF THE
COMPANY'S NEW PRODUCTS
Sales of certain of the Company's existing products, including
Prolase(R), have declined and are expected to continue to decline over the next
few years. Certain of the Company's products, including its 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, one of
the approved uses 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.
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. The
Company'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.
7
<PAGE> 8
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 BSC agreed to market and distribute the
Company's CRYOcare Systems for urology worldwide. As a result, future sales of
the CRYOcare System, the Company's main product, will be dependent on the
marketing efforts of BSC. 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
BSC to purchase a minimum number of products, if and when there were a lack of
sales as a result of unforeseen regulatory 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, one of the
approved uses 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 current 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
for urological applications, and a right to buy the assets and technology
related to the CRYOcare System for urological applications 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 for urological applications
and, indirectly, the market value of the Company.
8
<PAGE> 9
COMPETITION; RAPID TECHNOLOGICAL AND INDUSTRY CHANGE
The Company 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.
9
<PAGE> 10
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 the Company 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 the Company'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.
10
<PAGE> 11
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, one of the
approved uses 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.
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.
RISKS RELATED TO ACQUISITIONS
As part of its strategy to develop and market its products, the Company
may acquire a business or businesses that the Company believes might enhance and
speed up the development of its products through clinical trials, such as a
surgical center or related company that would use the Company's products in
clinical applications. There is no assurance, however, that the Company will be
able to identify suitable acquisition candidates, or, if it identifies such
candidates, that it would be able to consummate the acquisition of such
candidates. Furthermore, there is no assurance that if the Company acquires a
suitable acquisition candidate, the Company will be able to effectively
integrate the operations of the company acquired into the operations of the
Company, or effectively utilize the company acquired to develop and market the
Company's products. The failure to integrate an acquired company into the
operations of the Company may cause a drain on the financial and managerial
resources of the Company, and thereby materially adversely effect the financial
results of operations of the Company.
11
<PAGE> 12
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
The Company's success will depend in part on its ability to secure and
protect intellectual property rights relating to its technology. While the
Company 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
the Company's patent applications will be approved, that the Company will
develop any additional proprietary products that are patentable and/or that any
issued patents will provide the Company with a competitive edge or will not be
challenged by any third parties.
No assurance can be given that the Company'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 the Company 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.
12
<PAGE> 13
LIQUIDITY
The Company Common Stock began trading on the Nasdaq Small Cap 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 Company
Common Stock will trade. The market prices for securities of emerging companies
have historically been highly volatile. Future announcements concerning the
Company 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 the Company'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 the Company'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
Future sales of Common Stock (including shares issued upon the
exercise of outstanding options and warrants) 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
April 30, 1998, the Company had 10,427,833 shares of Common Stock outstanding,
of which 8,427,833 shares may be freely traded and the remaining 2,000,000
shares were restricted securities within the meaning of the Securities Act.
These remaining 2,000,000 shares are being registered in connection with this
offering. As a result, upon completion of this offering, all 10,427,833 shares
of Common Stock outstanding may be freely traded. In addition, as of April 30,
1998 warrants to purchase 382,497 shares of Common Stock were outstanding. Also,
as of April 30, 1998 stock options to purchase 1,755,854 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 394,146 shares of
Common Stock may be issued by the Company from time to time under such option
plans and up to 250,000 shares of Common Stock may be purchased under the
Company's Employee Stock Purchase Plan. An aggregate of 2,000,000 shares of
Common Stock may be issued under the Company's 1995 Stock Plan, 150,000 shares
of Common Stock may be issued under the Company's 1995 Director Option Plan and
up to 250,000 shares of Common Stock may be issued under the Company's Employee
Stock Purchase Plan. The Company anticipates receiving stockholder approval to
(i) amend and restate the 1995 Stock Plan to increase the number of shares
reserved for issuance thereunder by 1,000,000 shares and implement an automatic
annual share increase feature pursuant to which the number of shares available
for issuance under the plan will automatically increase on the first trading day
of each calendar year, beginning with the 1999 calendar year, by an amount equal
to three percent (3.0%) of the total number of shares of the Company's Common
Stock outstanding on the last trading day of the immediately preceding calendar
year, up to a maximum increase of 500,000 shares each year and (ii) amend and
restate the 1995 Director Option Plan to increase the number of shares of Common
Stock authorized for issuance under the plan by an additional 150,000 shares.
Exercise of these options or warrants may result in substantial
13
<PAGE> 14
dilution to investors. In addition, the Company has granted certain stockholders
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. All of the
2,000,000 shares to be sold in this offering were purchased by the Selling
Stockholders for a purchase price of $3.50 per share in a private placement
which occurred between April 24 and April 27, 1998.
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 stockholders, eliminate the ability of
stockolders 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 stockholders to take certain corporate actions and may have the effect of
delaying or preventing a change in control of the Company.
THE COMPANY
Endocare, Inc., a Delaware corporation ("Endocare" or the "Company")
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
several of its products and has a research and development pipeline for the
development of other novel urological devices.
Endocare has developed and recently introduced an innovative, second
generation cryosurgical system for the treatment of prostate cancer. The
CRYOcare System (TM) 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 Scientific; Limited Sales and 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
14
<PAGE> 15
Company's Horizon Temporary Stent. This nitinol-based stent has shape memory
characteristics for easy placement via a catheter following surgical
intervention of the prostate and convenient atraumatic 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 filed an investigational device exemption ("IDE") with the U.S. Food
and Drug Administration to initiate human clinical studies of the Horizon
Temporary Stent and expects to begin clinical trials in mid 1998.
The second stage in developing the Company's stent technology will
combine a nitinol stent with a catheter system which will deliver thermotherapy.
The Company believes that this ThermaStent (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 Company believes that its
ability to perform BPH therapy in this manner could be expected to result in an
increase in the number of BPH sufferers who will seek curative surgical
procedures.
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 (949) 595-4770.
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
15
<PAGE> 16
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 Stock Common Common Stock Common Stock
Stock Owned Owned Prior to Stock Offered Owned After Owned After
Name of Selling Prior to this this in this this This
Stockholder Offering Offering Offering Offering Offering
- ---------------------- ------------- -------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
The Kaufmann Fund, Inc. 2,500,000 24.0 1,000,000 1,500,000 14.4
Technology Funding 49,764 * 35,714 14,050 *
Venture Partners IV,
An Aggressive Growth
Fund, L.P.(1)
Technology Funding 49,764 * 35,714 14,050 *
Venture Partners V, an
Aggressive Growth
Fund, L.P.(1)
Technology Funding 492,929 4.7 71,429 421,500 4.0
Partners III, L.P.(1)
Pequot Private Equity 760,817 7.3 760,817 0 0
Fund, L.P.
Pequot Offshore 96,326 * 96,326 0 0
Private Equity Fund,
Inc.
TOTALS: 3,949,600 37.9 2,000,000 1,949,600 18.7
</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
20,000 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
16
<PAGE> 17
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.
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 April 30, 1998, there were 10,427,833 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
17
<PAGE> 18
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 April 30, 1998,
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.
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
such date as all of the Shares offered hereby have been resold or such time as
all of the Shares offered hereby can be sold within a three (3)-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 Brobeck, Phleger & Harrison LLP, Irvine, California.
18
<PAGE> 19
EXPERTS
The financial statements and schedule of Endocare, Inc. as of December
31, 1997 and 1996 and for the years ended December 31, 1997 and 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 statements of operations, division deficiency and cash flows and
the schedule of Endocare (a division of Medstone International, Inc.) for the
year ended December 31, 1995, appearing in Endocare, Inc.'s Annual Report (Form
10-K) for the year ended December 31, 1997, 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.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Registration Fee............................. $2,065
Blue Sky fees and expenses................... $2,500
Accounting fees and expenses................. $20,000
Legal fees and expenses...................... $10,000
Transfer Agent Fees ........................ $5,000
-------
Total........................................ $39,565
=======
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
19
<PAGE> 20
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
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
4 ++ Specimen Certificate of the Company's Common Stock.
5 * Opinion of Brobeck, Phleger & Harrison LLP
23.1 * Consent of KPMG Peat Marwick LLP.
23.2 * Consent of Ernst & Young LLP.
23.3 * Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5).
24 * Powers of Attorney with respect to the Company (included
on page II-3).
</TABLE>
- -------------------------
* 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:
20
<PAGE> 21
(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 of the
Exchange Act, 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 Exchange Act(and,
II-2
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) 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 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.
21
<PAGE> 22
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 May 15, 1998.
ENDOCARE, INC.
By: /s/ PAUL W. MIKUS
---------------------------------------
Paul W. Mikus, Chief Executive Officer
and President
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, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the 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, 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>
/s/ PAUL W. MIKUS Chief Executive Officer, President May 15, 1998
- -------------------------- and Director
Paul W. Mikus
/s/ PETER F. BERNARDONI Director May 15, 1998
- --------------------------
Peter F. Bernardoni
/s/ ROBERT F. BYRNES Director May 15, 1998
- --------------------------
Robert F. Byrnes
/s/ BENJAMIN GERSON, M.D. Director May 15, 1998
- --------------------------
Benjamin Gerson, M.D.
</TABLE>
22
<PAGE> 23
II-4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
4 ++ Specimen Certificate of the Company's Common Stock.
5 * Opinion of Brobeck, Phleger & Harrison LLP
23.1 * Consent of KPMG Peat Marwick LLP.
23.2 * Consent of Ernst & Young LLP.
23.3 * Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5).
24 * Powers of Attorney with respect to the Company (included on
page II-3).
</TABLE>
- -------------------------
* 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.
23
<PAGE> 1
EXHIBIT 5
OPINION OF BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
38 Technology Drive
Irvine, California 92618-2301
May 15, 1998
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 its registration of 2,000,000 shares of Common
Stock (the "Common Stock") as described in the Company's Registration Statement
on Form S-3, filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Registration Statement").
It is our opinion that the Common Stock, when sold in accordance with
the Registration Statement, will be validly issued, fully paid and
nonassessable.
We consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to this firm under the caption
"Legal Opinion" in the Prospectus which is part of the Registration Statement.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
---------------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
CONSENT OF KPMG PEAT MARWICK LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Endocare, Inc.
We consent to the use of our report dated February 6, 1998, except as
to note 14, which is as of March 24, 1998, incorporated herein by reference
and to the reference to our firm under the caption "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Orange County, California
May 14, 1998
<PAGE> 1
CONSENT OF ERNST & YOUNG LLP
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 2,000,000 shares of its common stock and to the
incorporation therein of our report dated February 14, 1996, with respect to the
statements of operations, division deficiency and cash flows and schedule of
Endocare (a division of Medstone International Inc.) for the year ended
December 31, 1995 included in Endocare, Inc.'s Annual Report (Form 10-K) for the
year ended December 31, 1997, filed with the Securities and Exchange Commission.
\s\ Ernst & Young LLP
---------------------
Ernst & Young LLP
Orange County, California
May 14, 1998
