##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008
 OR
 o
    
    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: 001-15063
 Endocare, Inc.
 (Exact name of Registrant as Specified in Its Charter)
 DELAWARE
    
    33-0618093(State of Incorporation)
    
    (I.R.S. Employer I.D. No.)
 201 TECHNOLOGY DRIVE, IRVINE, CALIFORNIA 92618  (Address of Principal Executive Office, Including Zip Code)
 (949) 450-5400  (Registrants Telephone Number, Including Area Code)
 þ o þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



Endocare, Inc. and Subsidiary
 INDEX
 Part I. Financial InformationItem 1. Condensed Consolidated Financial Statements (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations  Three and six months ended June 30,
2008 and 2007
    
    
    3Condensed Consolidated Balance Sheets  June 30, 2008 and December 31, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows  Six months ended June 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24Part II. Other InformationItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3. Defaults Upon Senior Securities
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 5. Other Information
    
    
    27Item 6. Exhibits
    
    
    27Signatures
    
    
    28Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 ENDOCARE, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
(In thousands, except per share data)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Total revenues
    
    $
    7,930
    
    
    $
    7,901
    
    
    $
    16,073
    
    
    $
    15,447Costs and expenses:Cost of revenues
    
    
    2,347
    
    
    
    2,713
    
    
    
    4,852
    
    
    
    5,335Research and development
    
    
    570
    
    
    
    621
    
    
    
    1,138
    
    
    
    1,236Selling and marketing
    
    
    3,869
    
    
    
    4,099
    
    
    
    7,697
    
    
    
    7,862General and administrative
    
    
    3,243
    
    
    
    2,845
    
    
    
    6,283
    
    
    
    6,674Total costs and expenses
    
    
    10,029
    
    
    
    10,278
    
    
    
    19,970
    
    
    
    21,107Loss from operations
    
    
    (2,099
    )
    
    
    (2,377
    )
    
    
    (3,897
    )
    
    
    (5,660
    )Interest income, net
    
    
    67
    
    
    
    113
    
    
    
    176
    
    
    
    139Net loss
    
    $
    (2,032
    )
    
    $
    (2,264
    )
    
    $
    (3,721
    )
    
    $
    (5,521
    )Net loss per share  basic and diluted
    
    $
    (0.17
    )
    
    $
    (0.21
    )
    
    $
    (0.32
    )
    
    $
    (0.52
    )Weighted average shares of common
stock outstanding
    
    
    11,802
    
    
    
    10,916
    
    
    
    11,794
    
    
    
    10,618
  3




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ENDOCARE, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
(In thousands, except per share data)
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,804
    
    
    $
    7,712Accounts receivable, net
    
    
    4,494
    
    
    
    3,530Inventories, net
    
    
    3,286
    
    
    
    3,022Prepaid expenses and other current assets
    
    
    520
    
    
    
    2,081Total current assets
    
    
    13,104
    
    
    
    16,345Property and equipment, net
    
    
    839
    
    
    
    850Intangibles, net
    
    
    2,827
    
    
    
    3,077Investments and other assets
    
    
    1,034
    
    
    
    989Total assets
    
    $
    17,804
    
    
    $
    21,261LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,028
    
    
    $
    2,194Accrued compensation
    
    
    2,090
    
    
    
    3,895Other accrued liabilities
    
    
    3,039
    
    
    
    3,034Loan payable
    
    
    880
    
    
    
    880Obligations under capital lease  current portion
    
    
    25
    
    
    
    28Total current liabilities
    
    
    9,062
    
    
    
    10,031Deferred compensation
    
    
    234
    
    
    
    227Obligations under capital lease  less current portion
    
    
    75
    
    
    
    84Stockholders equity:Preferred stock, $0.001 par value; 1,000 shares
authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 50,000 shares
authorized; 11,806 and 11,762 issued and
outstanding as of June 30, 2008 and December 31,
2007, respectively
    
    
    12
    
    
    
    12Additional paid-in capital
    
    
    201,898
    
    
    
    200,663Accumulated deficit
    
    
    (193,477
    )
    
    
    (189,756
    )Total stockholders equity
    
    
    8,433
    
    
    
    10,919Total liabilities and stockholders equity
    
    $
    17,804
    
    
    $
    21,261
  4




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ENDOCARE, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
(In thousands)
 Six Months Ended June 30,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (3,721
    )
    
    $
    (5,521
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    503
    
    
    
    613Loss on sale of placement units and other fixed assets
    
    
    
    
    
    
    52Extinguishment of payroll tax liabilities
    
    
    
    
    
    
    (121
    )Stock-based compensation
    
    
    1,426
    
    
    
    1,576Changes in operating assets and liabilities:Accounts receivable
    
    
    (964
    )
    
    
    (918
    )Inventories
    
    
    (459
    )
    
    
    (407
    )Prepaid expenses and other assets
    
    
    (44
    )
    
    
    516Accounts payable
    
    
    832
    
    
    
    (7
    )Accrued compensation
    
    
    (1,797
    )
    
    
    79Other liabilities
    
    
    (9
    )
    
    
    (95
    )Net cash used in operating activities
    
    
    (4,233
    )
    
    
    (4,233
    )Cash flows from investing activities:Collection of note receivable
    
    
    1,560
    
    
    
    Purchases of property and equipment
    
    
    (48
    )
    
    
    (56
    )Net cash provided by (used in) investing activities
    
    
    1,512
    
    
    
    (56
    )Cash flows from financing activities:Payments under capital lease obligation
    
    
    (12
    )
    
    
    Net borrowings on line of credit
    
    
    
    
    
    
    1,123Payroll tax on issuance of restricted stock
    
    
    (175
    )
    
    
    Proceeds from sale of common stock
    
    
    
    
    
    
    8,600Net cash (used in) provided by financing activities
    
    
    (187
    )
    
    
    9,723Net (decrease) increase in cash and cash equivalents
    
    
    (2,908
    )
    
    
    5,434Cash and cash equivalents, beginning of period
    
    
    7,712
    
    
    
    1,811Cash and cash equivalents, end of period
    
    $
    4,804
    
    
    $
    7,245Non-cash activities:Transfer of inventory to property and equipment for placement at customer sites
    
    $
    248
    
    
    $
    174Transfer of Cryocare Surgical Systems from property and equipment to inventory
for sale
    
    $
    54
    
    
    $
    105Adoption of
FSP 00-19-2:Reduction of retained earnings
    
    $
    
    
    
    $
    4,373Increase in additional paid-in capital
    
    
    
    
    
    
    5,680Reduction of common stock warrant liability
    
    
    
    
    
    
    1,307
  5




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular numbers in thousands, except per share data)
(Unaudited)
 1. Organization and Operations
  2. Basis of Presentation
    3. Recent Operating Results and Liquidity
  Commitments and
Contingencies
  6




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Private Placement of Common Stock and Warrants.
   4. Private Placement of Common Stock and Warrants
 May 2007 Private Placement
    7




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Fusion Capital Equity Purchase Agreement
 Recent Operating Results and Liquidity
   March 2005 Private Placement
   8




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Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock Accounting for Registration Payment Arrangements Accounting
for Contingencies.
 5. Bank Line of Credit
 9




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Recent Operating Results and Liquidity
     6. Capital Stock and Net Loss Per Share
  10




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7. Stock-Based Compensation
 Share-Based Payment
    8. Inventories
   June 30,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    1,927
    
    
    $
    2,331Work in process
    
    
    428
    
    
    
    227Finished goods
    
    
    1,210
    
    
    
    958Total inventories
    
    
    3,565
    
    
    
    3,516Less: inventory reserve
    
    
    (279
    )
    
    
    (494
    )Inventories, net
    
    $
    3,286
    
    
    $
    3,022
 9. Commitments and Contingencies
 Governmental Investigations and Legal Proceedings
 11




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Other Litigation
  10. Income Taxes
  Accounting for Uncertainty in Income Taxes an interpretation of SFAS No. 109 Accounting for
Income Taxes
  11. Fair Value Measurement
 Fair Value
Measurements
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The Fair Value Option for Financial Assets and Financial Liabilities
 12. Results of Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Cryoablation disposable products
    
    $
    5,593
    
    
    $
    5,417
    
    
    $
    11,510
    
    
    $
    10,620Cryocare Surgical Systems
    
    
    465
    
    
    
    521
    
    
    
    897
    
    
    
    9986,058
    
    
    
    5,938
    
    
    
    12,407
    
    
    
    11,618Cryoablation procedure fees
    
    
    1,746
    
    
    
    1,746
    
    
    
    3,436
    
    
    
    3,488Cardiac royalties
    
    
    124
    
    
    
    102
    
    
    
    237
    
    
    
    192Other
    
    
    2
    
    
    
    115
    
    
    
    (7
    )
    
    
    149$
    7,930
    
    
    $
    7,901
    
    
    $
    16,073
    
    
    $
    15,447Costs of Revenues:Cryoablation disposable products and procedure fees
    
    $
    2,226
    
    
    $
    2,353
    
    
    $
    4,585
    
    
    $
    4,746Cryocare Surgical Systems
    
    
    121
    
    
    
    360
    
    
    
    267
    
    
    
    589$
    2,347
    
    
    $
    2,713
    
    
    $
    4,852
    
    
    $
    5,335
  13. Recent Accounting Pronouncements
 13




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Accounting for Collaborative
Arrangements.
 Business Combinations Accounting and Reporting of Noncontrolling Interests in Consolidated Financial Statements  an
amendment of ARB No. 51.
 Goodwill and Other
Intangible Assets Business Combinations
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part I  Item 1 of this
report, and 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, 2007.
 This discussion contains forward-looking statements based on our current expectations. There
are various factors  many beyond our control  that could cause our actual results or the
occurrence or timing of expected events to differ materially from those anticipated in these
forward-looking statements. Some of these factors are described below and other factors are
described elsewhere in this Quarterly Report on Form 10-Q or under Risk Factors in our Annual
Report on Form 10-K referred to above. In addition, there are factors not described in this
Quarterly Report on Form 10-Q or in our Annual Report on Form 10-K that could cause our actual
results or the occurrence or timing of expected events to differ materially from those anticipated
in these forward-looking statements. All
 14




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forward-looking statements included in this Quarterly Report on Form 10-Q are based on
information available to us as of the date hereof, and we assume no obligation to update any such
forward-looking statements.
 Overview
   Strategy and Key Metrics
      15




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Estimated domestic cryoablation procedures
    
    
    2,292
    
    
    
    2,435
    
    
    
    4,860
    
    
    
    4,750Number of cryoprobes sold:Straight probes
    
    
    9,074
    
    
    
    10,131
    
    
    
    19,357
    
    
    
    19,895Right-angle probes
    
    
    2,054
    
    
    
    1,626
    
    
    
    3,974
    
    
    
    3,073Total
    
    
    11,128
    
    
    
    11,757
    
    
    
    23,331
    
    
    
    22,968
   Results of Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Cryoablation disposable products
    
    $
    5,593
    
    
    $
    5,417
    
    
    $
    11,510
    
    
    $
    10,620Cryocare Surgical Systems
    
    
    465
    
    
    
    521
    
    
    
    897
    
    
    
    9986,058
    
    
    
    5,938
    
    
    
    12,407
    
    
    
    11,618Cryoablation procedure fees
    
    
    1,746
    
    
    
    1,746
    
    
    
    3,436
    
    
    
    3,488Cardiac royalties
    
    
    124
    
    
    
    102
    
    
    
    237
    
    
    
    192Other
    
    
    2
    
    
    
    115
    
    
    
    (7
    )
    
    
    149$
    7,930
    
    
    $
    7,901
    
    
    $
    16,073
    
    
    $
    15,447Costs of Revenues:Cryoablation disposable products and procedure fees
    
    $
    2,226
    
    
    $
    2,353
    
    
    $
    4,585
    
    
    $
    4,746Cryocare Surgical Systems
    
    
    121
    
    
    
    360
    
    
    
    267
    
    
    
    589$
    2,347
    
    
    $
    2,713
    
    
    $
    4,852
    
    
    $
    5,335
    16




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Share Based Payment
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
 Revenues
 Three Months EndedJune 30,(dollars in thousands)
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeCryoablation disposable products
    
    $
    5,593
    
    
    $
    5,417
    
    
    $
    176
    
    
    
    3.2
    %Cryocare Surgical Systems
    
    
    465
    
    
    
    521
    
    
    
    (56
    )
    
    
    (10.7
    )%6,058
    
    
    
    5,938
    
    
    
    120
    
    
    
    2.0
    %Cryoablation procedure fees
    
    
    1,746
    
    
    
    1,746
    
    
    
    
    
    
    
    0.0
    %Cardiac royalties
    
    
    124
    
    
    
    102
    
    
    
    22
    
    
    
    21.6
    %Other
    
    
    2
    
    
    
    115
    
    
    
    (113
    )
    
    
    (98.3
    )%$
    7,930
    
    
    $
    7,901
    
    
    $
    29
    
    
    
    0.4
    %
  17




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Cost of Revenues
 Three Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ ChangeCost of revenues
    
    $
    2,347
    
    
    $
    2,713
    
    
    $
    (366
    )Percent of revenues
    
    
    29.6
    %
    
    
    34.3
    %
  Gross Profit and Gross Margin
 Three Months EndedJune 30,(dollars in thousands)
    
    2008
    
    
    2007
    
    
    $ ChangeCryoablation disposable products and procedure fees
    
    $
    5,113
    
    
    $
    4,810
    
    
    $
    303Cryocare surgical systems
    
    
    344
    
    
    
    161
    
    
    
    183Cardiac royalties and other
    
    
    126
    
    
    
    217
    
    
    
    (91
    )$
    5,583
    
    
    $
    5,188
    
    
    $
    395
 Three Months Ended
    
    
    PercentageJune 30,
    
    
    Point(percent of revenues)
    
    2008
    
    
    2007
    
    
    ChangeCryoablation disposable products and procedure fees
    
    
    64.5
    %
    
    
    60.9
    %
    
    
    3.6
    %Cryocare Surgical Systems
    
    
    4.3
    %
    
    
    2.0
    %
    
    
    2.3
    %Cardiac royalties
    
    
    1.6
    %
    
    
    2.8
    %
    
    
    (1.2
    )%70.4
    %
    
    
    65.7
    %
    
    
    4.7
    %
  Research and Development Expenses
 Three Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeResearch and development expenses
    
    $
    570
    
    
    $
    621
    
    
    $
    (51
    )
    
    
    (8.2
    )%Percent of total revenues
    
    
    7.2
    %
    
    
    7.9
    %
 18




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Selling and Marketing Expenses
 Three Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeSelling and marketing expenses
    
    $
    3,869
    
    
    $
    4,099
    
    
    $
    (230
    )
    
    
    (5.6
    )%Percent of total revenues
    
    
    48.8
    %
    
    
    51.9
    %
  General and Administrative Expenses
 Three Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeGeneral and administrative expenses
    
    $
    3,243
    
    
    $
    2,845
    
    
    $
    398
    
    
    
    14.0
    %Percent of total revenues
    
    
    40.9
    %
    
    
    36.0
    %
  Interest Income, Net
 Three Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeInterest income, net
    
    $
    67
    
    
    $
    113
    
    
    $
    (46
    )
    
    
    (40.7
    )%Percent of total revenues
    
    
    0.8
    %
    
    
    1.4
    %
  19




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Net Loss
 Three Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeNet loss
    
    $
    (2,032
    )
    
    $
    (2,264
    )
    
    $
    (232
    )
    
    
    (10.2
    )%Percent of total revenues
    
    
    (25.6
    )%
    
    
    (28.7
    )%
  Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
 Revenues
 Six Months EndedJune 30,(dollars in thousands)
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeCryoablation disposable products
    
    $
    11,510
    
    
    $
    10,620
    
    
    $
    890
    
    
    
    8.4
    %Cryocare Surgical Systems
    
    
    897
    
    
    
    998
    
    
    
    (101
    )
    
    
    (10.1
    )%12,407
    
    
    
    11,618
    
    
    
    789
    
    
    
    6.8
    %Cryoablation procedure fees
    
    
    3,436
    
    
    
    3,488
    
    
    
    (52
    )
    
    
    (1.5
    )%Cardiac royalties
    
    
    237
    
    
    
    192
    
    
    
    45
    
    
    
    23.4
    %Other
    
    
    (7
    )
    
    
    149
    
    
    
    (156
    )
    
    
    (104.7
    )%$
    16,073
    
    
    $
    15,447
    
    
    $
    626
    
    
    
    4.1
    %
   Cost of Revenues
 Six Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ ChangeCost of revenues
    
    $
    4,852
    
    
    $
    5,335
    
    
    $
    (483
    )Percent of revenues
    
    
    30.2
    %
    
    
    34.5
    %
  20




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Gross Profit and Gross Margin
 Six Months EndedJune 30,(dollars in thousands)
    
    2008
    
    
    2007
    
    
    $ ChangeCryoablation disposable products and procedure fees
    
    $
    10,361
    
    
    $
    9,362
    
    
    $
    999Cryocare surgical systems
    
    
    630
    
    
    
    409
    
    
    
    221Cardiac royalties and other
    
    
    230
    
    
    
    341
    
    
    
    (111
    )$
    11,221
    
    
    $
    10,112
    
    
    $
    1,109
 Six Months Ended
    
    
    PercentageJune 30,
    
    
    Point(percent of revenues)
    
    2008
    
    
    2007
    
    
    ChangeCryoablation disposable products and procedure fees
    
    
    64.5
    %
    
    
    60.6
    %
    
    
    3.9
    %Cryocare Surgical Systems
    
    
    3.9
    %
    
    
    2.7
    %
    
    
    1.2
    %Cardiac royalties
    
    
    1.4
    %
    
    
    2.2
    %
    
    
    (0.8
    )%69.8
    %
    
    
    65.5
    %
    
    
    4.3
    %
  Research and Development Expenses
 Six Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeResearch and development expenses
    
    $
    1,138
    
    
    $
    1,236
    
    
    $
    (98
    )
    
    
    (7.9
    )%Percent of total revenues
    
    
    7.1
    %
    
    
    8.0
    %
  Selling and Marketing Expenses
 Six Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeSelling and marketing expenses
    
    $
    7,697
    
    
    $
    7,862
    
    
    $
    (165
    )
    
    
    (2.1
    )%Percent of total revenues
    
    
    47.9
    %
    
    
    50.9
    %
 21




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##### Table of Contents



General and Administrative Expenses
 Six Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeGeneral and administrative expenses
    
    $
    6,283
    
    
    $
    6,674
    
    
    $
    (391
    )
    
    
    (5.9
    )%Percent of total revenues
    
    
    39.1
    %
    
    
    43.2
    %
  Interest Income, Net
 Six Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeInterest income, net
    
    $
    176
    
    
    $
    139
    
    
    $
    37
    
    
    
    26.6
    %Percent of total revenues
    
    
    1.1
    %
    
    
    0.9
    %
  Net Loss
 Six Months EndedJune 30,(dollars in thousands)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeNet loss
    
    $
    (3,721
    )
    
    $
    (5,521
    )
    
    $
    (1,800
    )
    
    
    (32.6
    )%Percent of total revenues
    
    
    (23.2
    )%
    
    
    (35.7
    )%
  22




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##### Table of Contents



Liquidity and Capital Resources
  Commitments and Contingencies
  Private Placement of Common Stock and Warrants
    23




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
  24




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##### Table of Contents



Changes in Internal Controls.
 25




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  We may require additional financing in the future to sustain our operations and without it we may
not be able to continue operations.
        26




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##### Table of Contents



We may incur significant expenses in the future as a result of our obligation to pay legal fees for
and otherwise indemnify former officers.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
   Number of SharesFor
    
    AbstainJohn R. Daniels, M.D.
    
    
    10,360,215
    
    
    
    99,021Craig T. Davenport
    
    
    10,368,316
    
    
    
    90,920David L. Goldsmith
    
    
    10,343,483
    
    
    
    115,753Eric S. Kentor
    
    
    10,360,381
    
    
    
    98,855Terrence A. Noonan
    
    
    10,368,250
    
    
    
    90,986Thomas R. Testman
    
    
    10,368,515
    
    
    
    90,721
  Number of SharesFor
    
    
    10,422,382Against
    
    
    36,621Abstain
    
    
    233
 
 Item 5. Other Information
  
 Item 6. Exhibits
  27




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##### Table of Contents



SIGNATURES
  ENDOCARE, INC.By:
    /s/ CRAIG T. DAVENPORTCraig T. DavenportChief Executive Officer, President andChairman of the Board(Duly Authorized Officer)By:
    /s/ MICHAEL R. RODRIGUEZMichael R. RodriguezSenior Vice President, Finance andChief Financial Officer(Principal Financial andAccounting Officer)  28




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description2.1(1)
    
    Stock Purchase Agreement, dated January 13, 2006, by and among the Company, Plethora
Solutions Holdings plc and Timm Medical Technologies, Inc. The schedules and other
attachments to this exhibit were omitted. The Company agrees to furnish a copy of any
omitted schedules or attachments to the Securities and Exchange Commission upon request.2.2(2)
    
    $1,425,000 Secured Convertible Promissory Note, dated February 10, 2006, from Plethora
Solutions Holdings plc to the Company.3.1(3)
    
    Restated Certificate of Incorporation.3.2(3)
    
    Certificate of Designation of Series A Junior Participating Preferred Stock of the Company.3.3(3)
    
    Certificate of Amendment of Restated Certificate of Incorporation, as filed with the
Delaware Secretary of State on September 25, 2000.3.4(4)
    
    Certificate of Amendment of Restated Certificate of Incorporation, as filed with the
Delaware Secretary of State on August 17, 2007.3.5(5)
    
    Amended and Restated Bylaws of the Company.3.6(6)
    
    Amendment No. 1 to Amended and Restated Bylaws of the Company.4.1(7)
    
    Form of Stock Certificate.4.2(8)
    
    Form of Series A Warrant.4.3(8)
    
    Form of Series B Warrant.4.4(9)
    
    Rights Agreement, dated March 31, 1999, between the Company and U.S. Stock Transfer
Corporation, which includes the form of Certificate of Designation for the Series A Junior
Participating Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B
and the Summary of Rights to Purchase Series A Preferred Shares as Exhibit C.4.5(10)
    
    Amendment No. 1 to Rights Agreement, dated June 24, 2005, between the Company and U.S.
Stock Transfer Corporation.31.1
    
    Certification under Section 302 of the Sarbanes-Oxley Act of 2002 for Craig T. Davenport.31.2
    
    Certification under Section 302 of the Sarbanes-Oxley Act of 2002 for Michael R. Rodriguez.32.1
    
    Certification under Section 906 of the Sarbanes-Oxley Act of 2002 for Craig T. Davenport.32.2
    
    Certification under Section 906 of the Sarbanes-Oxley Act of 2002 for Michael R. Rodriguez.
 
 
    
    Management contract or compensatory plan or arrangement.(1)
    
    Previously filed as an exhibit to our Form 8-K filed on January 18, 2006.(2)
    
    Previously filed as an exhibit to our Form 10-K filed on March 16, 2006.(3)
    
    Previously filed as an exhibit to our Registration Statement on Form S-3 filed on September 20, 2001. 29




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##### Table of Contents



(4)
    
    Previously filed as an exhibit to our Form 8-K filed on August 21, 2007.(5)
    
    Previously filed as an exhibit to our Form 10-K filed on March 15, 2004.(6)
    
    Previously filed as an exhibit to our Form 8-K filed on March 5, 2008.(7)
    
    Previously filed as an exhibit to our Form 10-K for the year ended December 31, 1995.(8)
    
    Previously filed as an exhibit to our Form 8-K filed on March 16, 2005.(9)
    
    Previously filed as an exhibit to our Form 8-K filed on June 3, 1999.(10)
    
    Previously filed as an exhibit to our Form 8-K filed on June 28, 2005. 30