UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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 May 11, 2000 was 12,380,552.
<PAGE>
ENDOCARE, INC.
FORM 10-Q, QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PAGE
----
Part I. Financial Information
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Item 1.. Financial Statements (unaudited)
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2000 and 1999 3
Condensed Consolidated Balance Sheets at March 31, 2000
and December 31, 1999 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 3 Quantitative and Qualitative Disclosures About Market Risk 17
Part II. Other Information
Item 1 Legal Proceedings 18
Item 2 Changes in Securities 18
Item 3 Defaults Upon Senior Securities 18
Item 4 Submission of Matters to a Vote of Security Holders 18
Item 5 Other Information 18
Item 6 Exhibits and Reports on Form 8-K 18
Signature Page 19
</TABLE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
ENDOCARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
--------------- -------------
<S> <C> <C>
Revenues:
Net product sales . . . . . . . . . . . $ 1,137,910 $ 397,317
Mobile cryosurgical procedures. . . . . 173,120 259,804
--------------- -------------
Total revenues. . . . . . . . . . . . . 1,311,030 657,121
--------------- -------------
Costs and expenses:
Cost of product sales. . . . . . . . . 518,107 259,574
Cost of mobile cryosurgical procedures. 97,223 89,234
Research and development. . . . . . . . 723,708 531,292
Selling, general and administrative . . 2,660,430 1,671,986
--------------- -------------
Total costs and expenses. . . . . . . . 3,999,468 2,552,086
--------------- -------------
Loss from operations. . . . . . . . . . (2,688,438) (1,894,965)
Interest income (expense), net. . . . . ( 325,230) 51,288
--------------- -------------
Net loss. . . . . . . . . . . . . . . . $ (3,013,668) $ (1,843,677)
=============== =============
Net loss per share of common stock -
basic and diluted . . . . . . . . . . . $ ( .27) $ ( .17)
=============== =============
Weighted average shares of common stock
outstanding . . . . . . . . . . . . . . 11,299,878 10,714,000
=============== =============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
ENDOCARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED)
------------ -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,122,936 $ 7,364,951
Accounts receivable, net 910,939 958,145
Inventories 1,362,723 1,278,785
Prepaid expenses and other current assets 174,861 166,969
------------ --------------
Total current assets 7,571,459 9,768,850
Property and equipment, net 1,108,241 962,720
Deferred financing costs and other assets, net 2,516,016 2,264,803
------------ --------------
Total assets $ 11,195,716 $ 12,996,373
============= ==============
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable $ 1,991,952 $ 1,517,470
Accrued compensation 674,361 910,103
Other accrued liabilities 1,164,008 896,210
------------- --------------
Total current liabilities 3,830,321 3,323,783
Convertible debentures 8,000,000 8,000,000
Note payable and other liabilities 2,140,803 2,153,082
------------- --------------
Total liabilities 13,971,124 13,476,865
Shareholders' deficiency
Preferred stock, $.001 par value; 1,000,000 shares
authorized; none issued and outstanding -- --
Common Stock, $.001 par value; 11,384,030
and 11,248,323 issued and outstanding at
March 31, 2000 and December 31, 1999,
respectively 11,384 11,248
Additional paid-in capital 21,028,628 20,310,010
Note receivable from stock sale ( 1,028,125) (1,028,125)
Accumulated deficit (22,787,295) (19,773,625)
------------- --------------
Total shareholders' deficiency ( 2,775,408) (480,492)
-------------- --------------
Subsequent events
Contingencies
Total liabilities and shareholders' deficiency $ 11,195,716 $ 12,996,373
============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
ENDOCARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . $ ( 3,013,668) $ ( 1,843,677)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization . . . . . . . . 96,217 37,631
Amortization of warrant value . . . . . . . . . 96,761 34,761
Amortization of deferred financing costs. . . . . 188,335 --
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . 47,206 ( 258,563)
Inventories . . . . . . . . . . . . . . . . . ( 270,038) ( 600,255)
Prepaid expenses and other current assets . . . .( 7,892) ( 125,772)
Other assets. . . . . . . . . . . . . . . . ( 4,998) ( 47,499)
Accounts payable. . . . . . . . . . . . . . . . . 474,482 624,077
Accrued compensation. . . . . . . . . . . . . . .( 235,743) ( 2,275)
Other accrued liabilities . . . . . . . . . . . . 267,798 292,507
Deferred revenue and other. . . . . . . . . . . .( 12,280) --
-------------- ------------
Net cash used in operating activities . . . . . .( 2,373,820) ( 1,889,065)
-------------- ------------
Cash flows from investing activities:
Purchases of property and equipment . . . . . . .( 55,188) ( 148,850)
-------------- ------------
Net cash used in investing activities . . . . . ( 55,188) ( 148,850)
-------------- ------------
Cash flows from financing activities:
Issuance of common stock. . . . . . . . . . . . . . 186,993 20,854
-------------- ------------
Net cash provided by financing activities . . . . 186,993 20,854
-------------- ------------
Net decrease in cash and cash equivalents . . . . ( 2,242,015) ( 2,017,061)
Cash and cash equivalents, beginning of period. . 7,364,951 6,285,800
-------------- ------------
Cash and cash equivalents, end of period. . . . . $ 5,122,936 $ 4,268,739
============ ============
Non-cash activities:
Acquisition of trademark and domain name through
Issuance of 20,000 shares of common stock . . . . $ 435,000 --
Transfer of inventory to property and equipment
for placement at customer sites . . . . . . . . . 186,100 --
------------- -------------
Total non-cash activities . . . . . . . . . . . ..$ 621,100 --
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
ENDOCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Operations of the Company
Endocare, Inc. (the "Company" or "Endocare") is a medical device company that
develops, manufactures and markets cryosurgical and stent technologies for
applications in oncology and urology. The Company has initially concentrated on
developing devices for the treatment of the two most common diseases of the
prostate, prostate cancer and benign prostate hyperplasia. The Company is also
developing cryosurgical technologies for treating tumors in other organs,
including the kidney, breast and liver.
2. Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary (consisting only of
normal recurring accruals) to present fairly the financial information contained
therein. These statements do not include all disclosures required by generally
accepted accounting principles and should be read in conjunction with the
audited consolidated financial statements and other information included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
Financial results for this interim period are not necessarily indicative of
results to be expected for the full year 2000.
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
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<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ----------
<S> <C> <C>
Inventories:
Raw materials . . $ 650,096 $ 481,141
Work in process . 167,877 310,651
Finished goods. . 544,750 486,993
---------- -----------
Total inventories $1,362,723 $ 1,278,785
========== ===========
</TABLE>
5. Net Loss Per Share
The Company has adopted SFAS No. 128, "Earnings Per Share." 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, convertible debentures, 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. In accordance with SFAS
128, the consolidated loss (numerator), shares (denominator) and per-share
amounts for the three months ended March 31, 1999 and March 31, 2000 are
$(1,844,000), 10,714,000 $(0.17), and $(3,014,000), 11,300,000 and $(0.27),
respectively. As the Company has been in a net loss position for the periods
presented, the potential dilution from the conversion of options, warrants and
convertible debentures to common stock of approximately 3,449,800 and 5,038,000
for the three months ended March 31, 1999 and 2000, respectively, were not used
to compute diluted loss per share as the effect was antidilutive. Consequently,
diluted EPS equals basic EPS.
6. Merger
On June 30, 1999, Endocare acquired all the outstanding units of Advanced
Medical Procedures, LLC, a Florida limited liability company ("AMP"). AMP
operates a mobile cryosurgery business which provides cryosurgical equipment for
the treatment of prostate and liver cancer on a procedural basis. The
acquisition was consummated pursuant to a Plan of Merger (the "AMP Merger
Agreement") by and among AMP, Endocare, and Advanced Medical Procedures, Inc.
("AMPI"), a Delaware corporation and wholly-owned subsidiary of Endocare.
Pursuant to the Merger Agreement, AMP was merged with and into AMPI, with AMPI
surviving as a wholly-owned subsidiary of Endocare. The AMP unitholders
received an aggregate of 260,000 shares of Endocare Common Stock in exchange for
all of their AMP units. The acquisition was accounted for as a
pooling-of-interests for financial reporting purposes. The pooling-of-interests
method of accounting is intended to present as a single interest two or more
common stockholders' interests which were previously independent; accordingly,
the historical financial statements for the periods prior to the acquisition
have been restated as though the companies had been combined. Fees and expenses
related to the acquisition were expensed as incurred and amounted to
approximately $50,000.
The results of operations previously reported by the separate companies and the
combined amounts presented in the accompanying condensed consolidated financial
statements are summarized below:
<TABLE>
<CAPTION>
Three Months Ended
March 31
1999
-----------------
<S> <C>
Net revenue:
Endocare
Net product sales $ 417,147
AMP
Mobile cryosurgical procedures 259,804
Adjustments - elimination of intercompany activities ( 19,830)
--------------
Combined $ 657,121
==============
Net Loss:
Endocare $ (1,868,185)
AMP 44,338
Adjustments - elimination of intercompany activities ( 19,830)
--------------
Combined $ (1,843,677)
==============
</TABLE>
Adjustments have been made to eliminate the impact of intercompany
activities from Endocare to AMP. Procedural revenue is recognized upon
completion of procedures.
7. Debt
Convertible Debentures
On June 7, 1999 and July 30, 1999, the Company received $5,000,000 and
$3,000,000, respectively, from the sale of its 7% convertible debentures due in
three years (the "Debentures"). Interest is payable annually in cash or, at
the Company's option, in common stock at a price per share based on recent bid
prices prior to the date interest is paid. Under the financing arrangements,
the purchasers have options to purchase additional debentures for the aggregate
principal amounts of $5,000,000 and $3,000,000. Under the circumstances
described below, the Company may require the purchasers to exercise these
purchase options. The $5,000,000 principal amount of the Debentures must be
repaid in full in cash on June 7, 2002, but may be converted into the Company's
common stock in whole or in part at the purchasers' option at any time on or
prior to June 7, 2002 at a conversion price of $5.125 per share. The $3,000,000
principal amount of the Debentures must be repaid in full in cash on July 29,
2002, but may be converted into the Company's common stock in whole or in part
at the purchasers' option at any time, subject to certain restrictions, on or
prior to July 29, 2002 at a conversion price of $6.00 per share. The conversion
prices are subject to certain anti-dilution adjustments.
In addition to the purchasers' option to convert the $5,000,000 principal amount
of the Debentures, the Company may require that the purchasers convert the
Debentures into common stock at a conversion price of $5.125 per share (subject
to certain anti-dilution adjustments) if the bid price for the common stock as
listed for quotation is above $8.00 per share for twenty (20) trading days
during a consecutive thirty (30) trading day period, and certain other
conditions are met. Subject to certain restrictions, the Company may also
require that the purchasers convert the $3,000,000 principal amount of the
debentures into common stock at a conversion price of $6.00 per share (subject
to certain anti-dilution adjustments) if the bid price for the common stock as
listed for quotation is above $9.00 per share for twenty (20) trading days
during a consecutive thirty (30) trading day period, and certain other
conditions are met. Subsequent to December 31, 1999, the share price conditions
have been met.
Under a securities purchase agreement, the purchasers have a call option
exercisable at any time prior to June 7, 2002 to require that the Company sell
to the purchasers an additional $5,000,000 principal amount of debentures. The
additional debentures will mature three years from the date they are issued,
will bear interest at 7% per annum and will be convertible in whole or in part
at a conversion price of $6.75 per share (subject to certain anti-dilution
adjustments). The Company has a put option to require the purchasers to buy the
$5,000,000 principal amount of additional debentures if the closing bid price
for the common stock as listed for quotation is more that $10.00 per share for
the twenty (20) trading days in a consecutive thirty (30) trading day period and
on the date the Company elects to exercise the put option, and if certain other
conditions are met. The purchasers also have a call option exercisable at any
time prior to July 29, 2002 to require that the Company sell to the purchasers
an additional $3,000,000 principal amount of debentures. The additional
debentures will mature three years from the date they are issued, will bear
interest at 7% per annum and will be convertible in whole or in part at the
option of the purchasers at any time prior to maturity into common stock at a
conversion price of $6.75 per share (subject to certain anti-dilution
adjustments). The company has a put option to require the purchasers to buy the
$3,000,000 principal amount of additional debentures if the closing bid price
for the common stock as listed for quotation is more that $9.00 per share for
twenty (20) trading days in a consecutive thirty (30) trading day period and on
the date the Company elects to exercise the put option, and certain other
conditions are met. Subsequent to December 31, 1999, the share price conditions
have been met.
The fair value of the purchasers' two call options described above totaling
$1,600,000, has been estimated using the Black-Scholes pricing model and is
reflected in deferred financing costs and other assets in the accompanying
condensed consolidated balance sheets as of December 31, 1999 and March 31,
2000. This amount is being amortized to interest expense over the lives of the
call options.
Credit Facility
On July 29, 1999, the Company entered into a Loan and Security agreement with a
lender which provides for a revolving credit line in the amount of $2,000,000
plus up to an additional $1,000,000 based on eligible accounts receivable of the
Company (the "Loan"). As of December 31, 1999 and March 31, 2000, $2,000,000 of
the loan is outstanding. The Loan matures and all amounts must be repaid on
July 31, 2001. The Loan bears interest at the highest prime or equivalent rate
announced by certain designated banks, plus 2% for the portion of the loan based
on eligible account receivables or 3.5%. The Loan is secured by a first
priority lien on all of the assets of the Company, except for intellectual
property, is fully guaranteed by the Company's subsidiary, and contains certain
restrictive covenants. The Company is in compliance with the restrictive
covenants of the agreement as of March 31, 2000.
8. Stockholders Rights Plan
In April 1999, the Company adopted a stockholder rights plan in which
preferred stock purchase rights will be distributed as a dividend at the rate of
one right for each share of common stock held as of the close of business on
April 15, 1999. The rights are designed to guard against partial tender offers
and other abusive and coercive tactics that might be used in an attempt to gain
control of the Company or to deprive Endocare stockholders of their interest in
the long-term value of the Company. The rights will be exercisable only if a
person or group acquires 15% or more of the Company's common stock (subject to
certain exceptions stated in the Plan) or announces a tender offer the
consummation of which would result in ownership by a person or group of 15% or
more of the Company's common stock. At any time on or prior to the close of
business on the first date of a public announcement that a person or group has
acquired beneficial ownership of 15% or more of the Company's common stock
(subject to certain exceptions stated in the Plan), the rights are redeemable
for one cent per right at the option of the Board of Directors.
9. Legal Proceedings
In March, 2000, the Company filed patent infringement lawsuits against
Israeli-based Galil Medical, Ltd, Galil Medical USA, Inc. and Cryomedical
Sciences, Inc. The suits filed in the U.S. District Court for the Central
District of California, allege that these companies have begun marketing
cryosurgical systems and components that incorporate Endocare's patented
temperature monitoring technology. Endocare's suits seek damages and injunctive
relief with respect to products which are found to infringe Endocare's
proprietary technology. The suits are in the early stage of discovery.
The Company, in the normal course of business, is subject to various legal
matters. While the results of litigation and claims cannot be predicted with
certainty, the Company believes that the final outcome of these matters will not
have a material adverse effect on the Company's consolidated results of
operations or financial condition.
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. Management does not expect any
material adverse effect on the consolidated financial condition or the results
of operations because of such actions.
10. Subsequent Events
On May 5, 2000, the Company received $8,000,000 from the sale of additional 7%
convertible debentures to institutional investors pursuant to the purchase
options discussed in Note 7 to the condensed consolidated financial statements.
The same investors originally purchased $8,000,000 of convertible debentures in
1999. In April 2000, $5,000,000 of the original $8,000,000 in convertible
debentures sold to the investors in 1999 was converted into 975,609 shares of
common stock under the terms of the original agreement.
In April 2000, the Company increased the revolving portion of its credit
facility from $2,000,000 to $4,000,000 in addition to the $1,000,000 based on
eligible accounts receivable of the Company.
<PAGE>
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 condensed
consolidated financial statements and notes thereto included in Part I--Item 1,
the audited consolidated 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, 1999.
General
Endocare is a fully-integrated medical device company that develops,
manufactures and markets cryosurgical and stent technologies for applications in
oncology and urology. The Company has initially concentrated on developing
devices for the treatment of the two most common diseases of the prostate -
prostate cancer and benign prostate hyperplasia. The Company is also developing
its cryosurgical technologies for treating tumors in other organs, including the
kidney, breast and liver.
On June 30, 1999, Endocare merged with Advanced Medical Procedures, LLC ("AMP"),
a company that operates a mobile cryosurgical business. AMP provides urologists
and surgical specialists the option of utilizing Endocare's targeted cryosurgery
for the treatment of prostate and liver cancer on a procedural basis. Endocare
recognizes procedural revenue upon the completion of procedures. The
acquisition was accounted for as a pooling-of-interests for financial reporting
purposes. The pooling-of-interests method of accounting is intended to present
as a single interest two or more common stockholders' interests which were
previously independent; accordingly, the historical financial statements for the
periods prior to the acquisition have been restated as though the companies had
been combined.
Results of Operations
Product revenue for the three months ended March 31, 2000 increased 187%
to $1,138,000 compared to $397,000 in 1999. The increase was attributable
primarily to the third quarter 1999 launch of the Company's cryosurgical
technology in conjunction with Medicare's July 1, 1999 implementation of
national coverage for localized prostate cancer. The Company also experienced
increased general surgery system sales in Asia in 2000.
Revenue from mobile cryosurgical procedures for the three months ended March 31,
2000 decreased 33% to $173,000 compared to $260,000 in 1999. The decrease
corresponds to a change in procedure mix, including a reduction in liver
cryosurgical procedures.
Gross margin on product sales was 54% for the three months ended March 31, 2000
compared to 35% in 1999. The increase is due to a mix of higher margin
cryosurgical probe and system sales in 2000 coupled with a reduction in product
costs due to increased manufacturing efficiencies.
Gross margin on mobile cryosurgical procedures was 44% for the three months
ended March 31, 2000 compared to 66% in 1999. The decrease is due to a change
in procedure mix, including fewer higher margin cryosurgical liver procedures
performed in 2000.
Research and development expense for the three months ended March 31, 2000
increased 36% to $724,000 compared to $531,000 in 1999. The increase reflects
the investment the Company has made in the form of additional personnel and
related infrastructure to support general product improvement, new product
development efforts and clinical costs associated with the Horizon Prostatic
Stent.
Selling, general and administrative expense for the three months ended March 31,
2000 increased 59% to $2,660,000 compared to $1,672,000 in 1999. The increase
reflects increased sales and marketing costs associated with the launch of
Endocare's cryosurgical product for prostate cancer and an almost doubling of
Endocare's direct sales and marketing personnel between periods.
Interest income (expense), net for the three months ended March 31, 2000 was
$(325,000) compared to $51,000 in 1999. The increase was due to interest
expense, including the amortization of deferred financing costs, associated with
the issuance of debt in the middle of 1999, partially offset by interest income.
Endocare's net loss for the three months ended March 31, 2000 was $3,014,000, or
27 cents per share on 11,300,000 weighted average shares outstanding, compared
to a net loss of $1,844,000 or 17 cents per share on 10,714,000 weighted average
shares outstanding for the same period in 1999. The increase in net loss
resulted from higher research and development costs, higher selling, general and
administrative expenses and increased interest expense partially offset by
increased revenues and lower cost of sales.
Liquidity and Capital Resources
At March 31, 2000, Endocare's cash and cash equivalent balance was $5,123,000
compared to $7,365,000 at December 31, 1999.
For the three months ended March 31, 2000, net cash used by operating activities
was approximately $2,374,000 compared to $1,890,000 for the same period in 1999.
Working capital has been used as Endocare's operations have increased in 2000.
Net accounts receivable was $911,000 at March 31, 2000, compared to $958,000 at
December 31, 1999. In conjunction with the launch of Endocare's cryosurgical
technology for prostate cancer, inventory increased to $1,363,000 at March 31,
2000, compared to $1,279,000 at the beginning of the year. Additions to property
and equipment during the first three months of 2000 were approximately $55,000.
Additionally, $186,000 of inventory was transferred to property and equipment in
2000 under the Company's cryosurgical placement program. Working capital was
provided as accounts payable and other current liabilities increased to
$3,830,000 from $3,324,000 at December 31, 1999.
At March 31, 2000, Endocare's net working capital was $3,741,000 and the ratio
of current assets to current liabilities was 2 to 1.
In June and July 1999, Endocare received a total of $8,000,000 from the sale of
its 7% convertible debentures which are due in three years. In addition, in
July 1999, the Company entered into a Loan and Security Agreement which provides
for a revolving credit line in the amount of $2,000,000 plus up to an additional
$1,000,000 based on eligible accounts receivable of the Company (the "Loan").
As of March 31, 2000, $2,000,000 of the Loan is outstanding. The Loan matures
and all amounts must be repaid on July 31, 2001. The Loan bears interest at the
highest prime or equivalent rate announced by certain designated banks, plus 2%
or 3.5%. The Loan is secured by a first priority lien on all of the assets of
the Company, except for intellectual property, is fully guaranteed by the
Company's subsidiary, and contains certain restrictive covenants. Subsequent to
March 31, 2000, the Company received an additional $8,000,000 through the sale
of its 7% convertible debentures which are due in three years and increased its
credit facility to $5,000,000. Additionally, $5,000,000 of the original
$8,000,000 in convertible debentures sold to the investors in 1999 was converted
into 975,609 shares of common stock under the terms of the original agreement.
The Company expects to incur operating losses because its products will require
substantial expenditures relating to among other matters, development, clinical
testing, regulatory compliance, manufacturing and marketing. However, the
Company believes that its existing cash resources and credit facility will
provide sufficient resources to meet present and reasonably foreseeable working
capital requirements and other cash needs for the next year. If 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. The Company expects that to meet its
long-term needs it will need to raise substantial additional funds through the
sale of its equity securities, the incurrence of indebtedness or through funds
derived through entering into collaborative agreements with third parties.
Other Matters
Accounting Principles
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards for derivative financial instruments and hedging activities.
Under the standard, entities must recognize all derivitives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133 - amendment
of FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No.
133 to fiscal quarters and fiscal years beginning after June 15, 2000. The
Company does not typically enter into arrangements that would fall under the
scope of Statement No. 133. Therefore, the Company believes that Statement No.
133 will not significantly affect its financial condition and results of
operations.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements," which was
amended by SAB NO. 101A in March 2000. SAB 101A delayed the implementation date
of SAB No. 101. These SAB's, which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements, are effective in
the second quarter of 2000. The Company is currently assessing the impact of
adoption on its consolidated financial statements.
Factors that May Affect Future Results and Trading Price of Common Stock
Before deciding to invest in the Company, or to maintain or increase your
investment, you should carefully consider the risks described below, in addition
to the other information in this report and our other filings with the SEC. The
risks and uncertainties described below are not the only ones facing the
Company. Additional risks and uncertainties not presently known to us or that
we currently deem immaterial may also affect our business operations. If any of
these risks actually occur, our business, financial condition or results of
operations could be seriously harmed. In that event, the market price for our
common stock could decline and you may lose all or part of your investment.
We have only a limited operating history and we expect to continue to generate
losses. Since our inception, we have engaged primarily in research and
development and have minimal experience in manufacturing, marketing and selling
our products in commercial quantities.
We have incurred annual operating losses since inception. For the fiscal years
ended December 31, 1997, 1998 and 1999 and the three month period ended March
31, 2000, we had net losses of approximately $4.0 million, $4.9 million, $9.3
million and $3.0 million, respectively. As of March 31, 2000, our accumulated
deficit was approximately $22.8 million. We may not be able to successfully
develop or commercialize our current or future products, achieve significant
revenues from sales or procedures or achieve or sustain profitability. We
expect to continue to incur operating losses because our products will require
substantial expenditures relating to, among other matters, development, clinical
testing, regulatory compliance, manufacturing and marketing.
Our products may not achieve market acceptance, which could limit our future
revenue. Certain of our products, including our Cryocare System, are in the
early stages of market introduction. Our products may not be accepted by
potential customers. We believe that recommendations and endorsements of
physicians and patients and sufficient reimbursement by health care payers will
be essential for market acceptance of our Cryocare System and other products,
and these recommendations and endorsements may not be obtained and sufficient
reimbursement may not be forthcoming. Cryosurgery has existed for many years,
but has not been widely accepted due to concerns regarding safety and efficacy
of first generation technologies, limited reimbursement by third party payers
and widespread use of alternative therapies. Our ability to successfully market
our Cryocare System is dependent upon acceptance of cryosurgical procedures in
the United States and certain international markets. Any future reported
adverse events or other unfavorable publicity involving patient outcomes from
the use of cryosurgery, whether from our products or the products of our
competitors, could adversely affect acceptance of cryosurgery. Emerging new
technologies and procedures to treat cancer, prostate enlargement and other
prostate disorders also may negatively affect the market acceptance of
cryosurgery. Our Cryocare System and our other products may not gain any
significant degree of market acceptance among physicians, patients and health
care payers. If our products do not achieve market acceptance, our future
revenue will be limited.
We may not be successful in developing or marketing our products. Our growth
depends in large part on continued ability to successfully develop and
commercialize our current products under development or any new products.
Several of our products are in varying stages of development. Our stents are in
pre-clinical studies or clinical trials and have not been approved for marketing
in the United States. We also are developing enhancements to our Cryocare
System. We may experience difficulties that could delay or prevent the
successful development and commercialization of our current products under
development or any new products. Our products in development may not prove safe
and effective in clinical trials. Clinical trials may identify significant
technical or other obstacles that must be overcome prior to obtaining necessary
regulatory or reimbursement approvals. Our failure to successfully develop and
commercialize new products or to achieve significant market acceptance would
have a significant negative effect on our financial condition.
There is uncertainty relating to third party reimbursement which is critical to
market acceptance of our products. In the United States, health care providers,
such as hospitals and physicians, that purchase our 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 our products. National Medicare reimbursement rates are in
the process of being established for certain uses of our Cryocare System
product. While certain private health insurance companies pay for the
procedures in which our products are used in certain areas of the United States,
private insurance reimbursement may not be adopted nationally or by additional
insurers. Reimbursement levels from Medicare or private insurers may not be
sufficient to induce physicians to perform, and patients to elect, procedures
utilizing our products. Further, we anticipate that, under the prospective
payment system used by private health care payers, the cost of our products will
be incorporated into the overall cost of the procedures in which they are used
and that there will be no separate, additional reimbursement for our products.
This also may discourage the use of our products. Furthermore, we could be
negatively affected by changes in reimbursement policies of government or
private health care payers, particularly to the extent any such changes affect
reimbursement for procedures in which our products are used. Failure by
physicians, hospitals and other users of our products to obtain sufficient
reimbursement from health care payers for procedures involving our products
could have a significant negative effect on our financial condition.
We have limited sales and marketing experience and if we are unable to expand
our sales and marketing capabilities, we may not be able to effectively
commercialize our products. We have limited experience marketing and selling
our products, and do not have experience marketing and selling our products in
commercial quantities.
We derive the majority of our revenues from the sales of Cryocare Systems and
expect that sales of Cryocare Systems will continue to constitute the majority
of sales for the foreseeable future. Any factor negatively impacting the sales
or usage of Cryocare Systems would have a significant effect on our business.
In March 1999, we exercised our right to terminate our exclusive worldwide
distribution agreement with Boston Scientific Corporation pursuant to which
Boston Scientific had agreed to market and distribute the Cryocare System, our
principal product. As a result, future sales of the Cryocare System will be
dependent on our marketing efforts. We may not be able to successfully expand
our sales and marketing capabilities in order to effectively commercialize the
Cryocare System product.
We believe that, to become and remain competitive, we will need to continue to
develop third party international distribution channels and a direct sales force
for our products. If we enter into third party marketing arrangements, our
percentage share of product revenues is likely to be lower than if we directly
marketed and sold our products through our own sales force. Establishing
marketing and sales capabilities sufficient to support sales in commercial
quantities will require significant resources. We may not be able to recruit
and retain direct sales personnel, succeed in establishing and maintaining any
third party distribution channels or succeed in our future sales and marketing
efforts.
We may not be able to obtain effective patents to protect our technologies from
use by other companies with competitive products, and patents of other companies
could prevent us from developing or marketing our products. Our success will
depend, to a significant degree, on our ability to secure and protect
intellectual property rights relating to our technology. While we believe that
the protection of patents or licenses is important to our business, we also rely
on trade secrets, know-how and continuing technological innovation to maintain
our competitive position. We cannot ensure that (1) we were the first to invent
the technologies covered by our patents or pending patent applications, (2) we
were the first to file patent applications for these inventions, (3) any of our
pending patent applications will result in issued patents, (4) others will not
independently develop similar or alternative technologies or duplicate any of
our technologies, (5) our patents will provide a basis for commercially viable
products or will provide us with any competitive advantages, and (6) our
processes or products do not or will not infringe patents or proprietary rights
of others. We have recently filed complaints for patent infringement in the
U.S. District Court for the Central District of California against two
competitors. The complaints seek damages and injunctive relief to prevent these
competitors from marketing cryosurgical systems and components incorporating our
patented temperature monitoring technology. This litigation and any other
litigation necessary to protect our patent position could be costly, and it is
possible that we will not have sufficient resources to fully pursue this
litigation or to protect our other patent rights. If we are unsuccessful in
these lawsuits, our competitors may be able to use our temperature monitoring
technology. This outcome, or any adverse outcome in litigation relating to the
validity of our patents, or any other failure to pursue litigation or otherwise
to protect our patent position, could materially harm our business and financial
condition. In addition, from time to time, we have received correspondence
alleging infringement of proprietary rights of third parties. We may have to
pay substantial damages, possibly including treble damages, for past
infringement if it is ultimately determined that our products infringe a third
party's patents. Further, we may be prohibited from selling our products before
we obtain a license, which, if available at all, may require us to pay
substantial royalties. Even if infringement claims against us are without
merit, defending a lawsuit takes significant time, may be expensive and may
divert management attention from other business concerns. We try to preserve
the confidentiality of our technology by entering into confidentiality
agreements with our employees, consultants, customers, and key vendors and by
other means. These measures may not, however, prevent the unauthorized
disclosure or use of such technology.
We are faced with intense competition and rapid technological and industry
change and, if our competitors' existing products or new products are more
effective than our products, the commercial opportunity for our products will be
reduced or eliminated. The commercial opportunity for our products will be
reduced or eliminated if our competitors develop and market products that are
superior to our products. We face intense competition from other surgical
device manufacturers, as well as, in some cases, from pharmaceutical companies.
Many of our competitors are significantly larger than us and have greater
financial, technical, research, marketing, sales, distribution and other
resources than us. We believe there will be intense price competition for
products developed in our markets. Our competitors may develop or market
technologies and products, including drug-based treatments, that are more
effective or commercially attractive than any that we are developing or
marketing. Our competitors may succeed in obtaining regulatory approval, and
introducing or commercializing products before we do. Such developments could
have a significant negative effect on our financial condition. Even if we are
able to compete successfully, we may not be able to do so in a profitable
manner. The medical device industry generally, and the urological disease
treatment market in particular, are characterized by rapid technological change,
changing customer needs, and frequent new product introductions. Our products
may be rendered obsolete as a result of future innovations.
If we are unable to obtain additional capital to fund our operations when
needed, our product development efforts would be adversely affected, causing our
business, operating results, financial condition and prospects to be materially
harmed. If we undertake or accelerate significant research and development
projects for new products or pursue corporate acquisitions, we may require
additional outside financing. We expect that, to meet our long-term needs, we
will need to raise substantial additional funds through the sale of our equity
securities or the incurrence of additional debt or through collaborative
arrangements. Any additional equity financing may be dilutive to shareholders,
and debt financing, if available, may involve restrictive covenants.
Collaborative arrangements, if necessary to raise additional funds, may require
us to relinquish rights to certain of our technologies, products or marketing
territories. Our failure to raise capital when needed could have a significant
negative effect on our business, operating results, financial condition and
prospects.
We have limited manufacturing experience. We have limited experience in
producing our 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. Our failure to overcome these manufacturing
problems could negatively impact our business and financial condition. We use
internal manufacturing capacity in our manufacturing efforts. Certain of our
purchased components and processes are currently available from or performed by
a single vendor. Any supply interruption from a single source vendor would have
a significant negative effect on our ability to manufacture our products until a
new source of supply is qualified and, as a result, could have a significant
negative effect on our business and financial condition. Further, the ability
of third party manufacturing sources to deliver components will affect our
ability to commercialize our products, and our dependence on third party sources
may have a negative effect on our profit margins. Our success will depend in
part upon our ability to manufacture our products in compliance with the FDA's
Good Manufacturing Practices 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 the FDA's Good
Manufacturing Practices or other regulatory requirements could have a
significant negative effect on our financial condition.
Failure to attract and retain skilled personnel could hinder our research and
development and sales and marketing efforts and our ability to obtain financing.
Our future success depends to a significant degree upon the continued services
of key technical and senior management personnel, including Paul W. Mikus, our
Chief Executive Officer. None of these individuals is bound by an employment
agreement or covered by an insurance policy of which we are the beneficiary.
Our future success also depends on our continuing ability to attract, retain and
motivate highly qualified managerial, technical and sales personnel. The
inability to retain or attract qualified personnel could have a significant
negative effect upon our research and development and sales and marketing
efforts and our ability to obtain financing and thereby materially harm our
business and financial condition.
Government regulation can have a significant impact on our business. Government
regulation in the United States and other countries is a significant factor
affecting the research and development, manufacture and marketing of our
products. In the United States, the FDA has broad authority under the federal
Food, Drug and Cosmetic Act and the Public Health Service Act to regulate the
distribution, manufacture and sale of medical devices. Foreign sales of drugs
and medical devices are subject to foreign governmental regulation and
restrictions which vary from country to country. The process of obtaining FDA
and other required regulatory approvals is lengthy and expensive. We may not be
able to obtain necessary approvals for clinical testing or for the manufacturing
or marketing of our products. Failure to comply with applicable regulatory
approvals can, among other things, result in fines, suspension of regulatory
approvals, product recalls, operating restrictions, and criminal prosecution.
In addition, governmental regulations may be established which could prevent,
delay, modify or rescind regulatory approval of our products. Any such position
by the FDA, or change of position by the FDA, may adversely impact our business
and financial condition. Regulatory approvals, if granted, may include
significant limitations on the indicated uses for which our products may be
marketed. In addition, to obtain such approvals, the FDA and foreign regulatory
authorities may impose numerous other requirements on us. 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. We may not be able to obtain regulatory approvals
for our products on a timely basis, or at all, and delays in receipt of or
failure to receive such approvals, the loss of previously obtained approvals, or
failure to comply with existing or future regulatory requirements would have a
significant negative effect on our financial condition. In addition, the health
care industry in the United States is generally subject to fundamental change
due to regulatory, as well as political, influences. We anticipate that
Congress and state legislatures will continue to review and assess alternative
health care delivery and payment systems. Potential approaches that have been
considered include controls on health care spending through limitations on the
growth of private purchasing groups and price controls. We cannot predict what
impact the adoption of any federal or state health care reform measures may have
on our business.
We may be negatively impacted by product liability and product recall. The
manufacture and sale of medical products entails significant risk of product
liability claims or product recalls. Our existing insurance coverage limits may
not be adequate to protect us from any liabilities we might incur in connection
with the clinical trials or sales of our products. We may require increased
product liability coverage as our products are commercialized. Insurance is
expensive and may not be available on acceptable terms, or at all. A successful
product liability claim or series of claims brought against us in excess of our
insurance coverage, or a recall of our products, could have a significant
negative effect on our business and financial condition.
We may experience fluctuations in our future operating results. If our revenue
declines in a quarter from the revenue in the previous quarter, our earnings
will likely decline because many of our expenses are relatively fixed. In
particular, research and development, sales and marketing and general and
administrative expenses are not affected directly by variations in revenue. In
some future quarter or quarters, due to a decrease in revenue or for some other
reason, our operating results likely will be below the expectations of
securities analysts or investors. In this event, the market price of our common
stock may fall abruptly and significantly.
Our business is exposed to risks related to acquisitions and mergers. As part
of our strategy to commercialize our products, we may acquire one or more
businesses, such as a related company that would use our products in clinical
applications. In June 1999, we consummated a business combination with Advanced
Medical Procedures, LLC, a regional mobile cryosurgery service company that
provides our cryosurgical equipment for the treatment of prostate and liver
cancer on a procedural basis. We may not be able to effectively integrate our
business with that of Advanced Medical Procedures or any other business we may
acquire or merge with or effectively utilize the business acquired to develop
and market our products. The failure to integrate an acquired company or
acquired assets into our operations may cause a drain on our financial and
managerial resources, and thereby have a significant negative effect on our
business and financial results.
If we fail to satisfy the continued listing requirements of the Nasdaq SmallCap
Market, our stock could become subject to the SEC's Penny Stock Rules, making
the stock difficult to sell. Our common stock began trading on the Nasdaq
SmallCap Market on February 28, 1997 and has a limited trading history. We have
applied for listing of our common stock on the Nasdaq National Market, but
currently have not yet been approved for trading on that market. If we are
unable to maintain the standards for quotation on the Nasdaq SmallCap Market (or
the Nasdaq National Market, if approved), the ability of our investors to resell
their shares may be limited. In addition, our securities may be subjected to
"penny stock" rules that impose additional sales practice and market making
requirements on broker-dealers who sell or make a market in such securities.
This could affect the ability or willingness of broker-dealers to sell or make a
market in our securities and the ability of holders of our securities to sell
their securities in the secondary market.
Our stock price may fluctuate significantly, making it difficult to resell
shares when an investor wants to at prices they find attractive. The market
prices for securities of emerging companies have historically been highly
volatile. Future announcements concerning us or our competitors could cause
such volatility including: our operating results, technological innovations or
new commercial products, corporate collaborations, government regulation,
developments concerning proprietary rights, litigation or public concern as to
the safety of our products, investor perception of us and our industry, and
general economic and market conditions. In addition, the stock market is
subject to price and volume fluctuations that affect the market prices for
companies in general, and small-capitalization, high technology companies in
particular, which are often unrelated to the operating performance of these
companies.
The future sales of shares of our common stock may negatively affect our stock
price. Future sales of our common stock (including shares issued upon the
exercise of outstanding options and warrants and the conversion of convertible
debentures) could have a significant negative effect on the market price of our
common stock. Such sales also might make it more difficult for us to sell
equity securities or equity-related securities in the future at a time and price
that we would deem appropriate.
Anti-takeover provisions in our charter may have a possible negative effect on
our stock price. Certain provisions of our Certificate of Incorporation and
Bylaws may have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
us. In March 1999, our board of directors adopted a stockholder rights plan in
which preferred stock purchase rights were distributed as a dividend. 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.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of our common stock.
Some of the information in this report contains forward-looking statements
within the meaning of the federal securities laws. These forward-looking
statements include statements about our plans, objectives, expectations and
intentions and other statements contained in this report that are not historical
facts. You can find these statements under "Factors That May Affect Future
Results and Trading," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report and in other
documents filed with the SEC.
We typically use terms such as "may," "will," "expect," "anticipate," "intend,"
"plan," "believe," "seek" and "estimate" and similar words to identify
forward-looking statements, although we express some forward-looking statements
differently. You should be aware that these statements are not guarantees of
future performance and are subject to certain risks and uncertainties, some of
which are beyond our control and are difficult to predict, and that our actual
results could differ materially from those expressed or forecasted in the
forward-looking statements due to a number of factors, including:
- - failure to successfully commercialize our products
- - failure to develop new products
- - competitive factors
- - general economic conditions
- - failure to achieve positive results in clinical trials
- - uncertainty regarding our patents and patent rights and costs of patent
litigation (including the material harm to us if there were an
unfavorable outcome of any such litigation)
- - government regulation
- - technological change
You should also consider carefully the statements under "Factors That May Affect
Future Results and Trading" and other sections of this report and in the other
documents filed with the SEC, which address additional factors that could cause
our actual results to differ from those set forth in the forward-looking
statements. You should not place undue reliance on our forwarding-looking
statements, which reflect our management's view only as of the date of this
report. We have no plans to update these forward-looking statements.
<PAGE>
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company's financial instruments include cash, cash equivalents and notes
receivable. At March 31, 2000, the carrying values of its financial instruments
approximated their fair values.
The Company's policy is not to enter into derivative financial instruments. The
Company does not have any significant foreign currency exposure since it does
not transact business in foreign currencies. Therefore, the Company does not
have significant overall currency exposure. In addition, the Company does not
enter into any futures or forward contracts and therefore it does not have
significant market risk exposure with respect to commodity prices.
The Company maintains a $5,000,000 credit facility bearing interest at the
highest prime rate or equivalent rate announced by certain designated banks,
plus 2% or 3.5%. The current rate of interest on the credit facility is
approximately 12.5%. This is the Company's only debt which does not have a
fixed-rate of interest. A significant change in interest rates would not
materially impact the Company's consolidated financial statements. The credit
facility expires in July 2001.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In March, 2000, the Company filed patent infringement lawsuits against
Israeli-based Galil Medical, Ltd, Galil Medical USA, Inc. and Cryomedical
Sciences, Inc. The suits filed in the U.S. District Court for the Central
District of California, allege that these companies have begun marketing
cryosurgical systems and components that incorporate the Company's patented
temperature monitoring technology. The Company's suits seek damages and
injunctive relief with respect to products which are found to infringe the
Company's proprietary technology. The suits are in the early stage of
discovery.
The Company, in the normal course of business, is subject to various legal
matters. While the results of litigation and claims cannot be predicted with
certainty, the Company believes that the final outcome of these matters will not
have a material adverse effect on the Company's results of operations or
financial condition.
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. Management does not expect any
material adverse effect on financial condition or the results of operations
because of such actions.
Item 2. Changes in Securities
Stock Options
During the period from January 1, 2000 through March 31, 2000, the Company
granted stock options to 48 individuals covering an aggregate of 242,500 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.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K -- None
<PAGE>
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.
Date: May 12, 2000
ENDOCARE, INC.
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)
<PAGE>
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