##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  R
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006OR£
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM            TO           .
 COMMISSION FILE NUMBER: 001-15063
 Endocare, Inc.
 (Exact name of Registrant as Specified in Its Charter)
 DELAWARE(State of Incorporation)
    
    33-0618093(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)
 R £ R £
  £ R £
 £ R




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##### 



Endocare, Inc.
 INDEX
 Part I. Financial InformationItem 1.
    
    Condensed Consolidated Financial Statements (Unaudited)
    
    3Condensed Consolidated Statements of Operations  Three months ended March 31, 2006 and 2005
    
    3Condensed Consolidated Balance Sheets  March 31, 2006 and December 31, 2005
    
    4Condensed Consolidated Statements of Cash Flows  Three months ended March 31, 2006 and 2005
    
    5Notes to Condensed Consolidated Financial Statements
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    21Item 4.
    
    Controls and Procedures
    
    21Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    22Item 1A.
    
    Risk Factors
    
    22Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    22Item 3.
    
    Defaults Upon Senior Securities
    
    22Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    22Item 5.
    
    Other Information
    
    22Item 6.
    
    Exhibits
    
    23Signatures
    
    
    
    25
 2




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##### 



PART I  FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 
 ENDOCARE, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended March 312006
    
    
    2005(Unaudited)(In thousands, exceptper share data)Total revenues
    
    $
    7,262
    
    
    $
    6,867Costs and expenses:Cost of revenues
    
    
    3,766
    
    
    
    4,187Research and development
    
    
    1,012
    
    
    
    423Selling and marketing
    
    
    3,769
    
    
    
    3,205General and administrative.
    
    
    3,994
    
    
    
    3,643Impairment charge
    
    
    
    
    
    
    26Total costs and expenses
    
    
    12,541
    
    
    
    11,484Loss from operations
    
    
    (5,279
    )
    
    
    (4,617
    )Interest expense, net
    
    
    (46
    )
    
    
    (602
    )Loss from continuing operations before taxes
    
    
    (5,325
    )
    
    
    (5,219
    )Tax benefit on continuing operations
    
    
    151
    
    
    
    Loss from continuing operations
    
    
    (5,174
    )
    
    
    (5,219
    )Income from discontinued operations
(including gain on disposal of $418 in 2006), net
of taxes
    
    
    245
    
    
    
    713Net loss
    
    $
    (4,929
    )
    
    $
    (4,506
    )Net income (loss) per share  basic and diluted:Continuing operations
    
    $
    (0.17
    )
    
    $
    (0.17
    )Discontinued operations
    
    $
    0.01
    
    
    $
    0.02Weighted average shares of common stock outstanding
    
    
    30,143
    
    
    
    29,988
  3




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##### 



ENDOCARE, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)(In thousands, exceptper share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,047
    
    
    $
    8,108Accounts receivable, net
    
    
    4,051
    
    
    
    3,549Inventories, net
    
    
    2,222
    
    
    
    2,462Prepaid expenses and other current assets
    
    
    1,434
    
    
    
    1,213Assets of discontinued operations
    
    
    
    
    
    
    9,624Total current assets
    
    
    18,754
    
    
    
    24,956Property and equipment, net
    
    
    1,607
    
    
    
    1,794Intangibles, net
    
    
    4,028
    
    
    
    4,167Investments and other assets
    
    
    2,401
    
    
    
    1,320Total assets
    
    $
    26,790
    
    
    $
    32,237LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,107
    
    
    $
    2,680Accrued compensation
    
    
    2,853
    
    
    
    3,614Other accrued liabilities
    
    
    6,647
    
    
    
    6,629Liabilities of discontinued operations
    
    
    
    
    
    
    1,461Total current liabilities
    
    
    12,607
    
    
    
    14,384Common stock warrants
    
    
    5,235
    
    
    
    5,023Stockholders 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; 30,155 and 30,089 issued and
outstanding as of March 31, 2006 and December
31, 2005, respectively
    
    
    30
    
    
    
    30Additional paid-in capital
    
    
    179,524
    
    
    
    178,477Accumulated deficit
    
    
    (170,606
    )
    
    
    (165,677
    )Total stockholders equity
    
    
    8,948
    
    
    
    12,830Total liabilities and stockholders equity
    
    $
    26,790
    
    
    $
    32,237
  4




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##### 



ENDOCARE, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 31,2006
    
    
    2005(Unaudited)(In thousands)Cash flows from operating activities:Net loss
    
    $
    (4,929
    )
    
    $
    (4,506
    )Adjustments to reconcile net loss to net cash used in operating activities:Costs related to assets held for sale
    
    
    
    
    
    
    (609
    )Gain on divestiture
    
    
    (418
    )
    
    
    Depreciation and amortization
    
    
    463
    
    
    
    1,037Impairment charge
    
    
    
    
    
    
    26Loss on disposals of fixed assets
    
    
    204
    
    
    
    8Compensation expense related to issuance of options and warrants
    
    
    900
    
    
    
    2Minority interests
    
    
    
    
    
    
    (214
    )Interest expense related to common stock warrants
    
    
    212
    
    
    
    651Changes in operating assets and liabilities:Accounts receivable
    
    
    (271
    )
    
    
    (332
    )Inventories
    
    
    16
    
    
    
    (270
    )Prepaid expenses and other current assets
    
    
    112
    
    
    
    (54
    )Accounts payable
    
    
    150
    
    
    
    322Accrued compensation
    
    
    (784
    )
    
    
    (590
    )Other accrued liabilities
    
    
    6
    
    
    
    (1,521
    )Net cash used in operating activities
    
    
    (4,339
    )
    
    
    (6,050
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (51
    )
    
    
    (34
    )Proceeds from divestitures
    
    
    7,277
    
    
    
    850Net cash provided by investing activities
    
    
    7,226
    
    
    
    816Cash flows from financing activities:Stock options and warrants exercised
    
    
    52
    
    
    
    22Proceeds from sale of common stock and warrants, net of issuance costs
    
    
    
    
    
    
    14,717Net cash provided by financing activities
    
    
    52
    
    
    
    14,739Net increase in cash and cash equivalents
    
    
    2,939
    
    
    
    9,505Cash and cash equivalents, beginning of period
    
    
    8,108
    
    
    
    7,985Less: Cash of discontinued operations
    
    
    
    
    
    
    (70
    )Cash and cash equivalents, end of period
    
    $
    11,047
    
    
    $
    17,420Non-cash activities:Transfer of inventory to property and equipment
    
    $
    250
    
    
    $
    289Note receivable received in divestiture
    
    
    1,425
    
    
    
    
  5




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##### 



ENDOCARE, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS   (Unaudited)
 1. Organization and Operations of the Company
   2. Basis of Presentation
   3. Recent Operating Results and Liquidity
    6




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##### 



4. Sale of Timm Medical
  Accounting for the Impairment or Disposal of
Long-Lived Assets,
  7




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##### 



Assets:Cash, inventories and other current assets
    
    
    
    
    
    $
    1,216Property and equipment, net
    
    
    
    
    
    
    75Goodwill, net
    
    
    
    
    
    
    4,552Intangibles, net
    
    
    
    
    
    
    3,716Other assets
    
    
    
    
    
    
    65Total assets
    
    
    
    
    
    $
    9,624Liabilities:Accounts payable and other current liabilities
    
    
    
    
    
    $
    942Other accrued liabilities
    
    
    
    
    
    
    519Costs to sell
    
    
    
    
    
    
    Total liabilities
    
    
    
    
    
    
    1,461Net assets
    
    
    
    
    
    $
    8,163
  5. Private Placement of Common Stock and Warrants
      8




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##### 



Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In,
a Companys Own Stock,
 
    
    First, we used the Black-Scholes option-pricing model with the following assumptions:
an expected life equal to the remaining contractual term of the warrants (four years); no
dividends; a risk free rate of 4.83 percent, which equals the yield on Treasury bonds at
constant (or fixed) maturity equal to the remaining contractual term of the warrants; and
volatility of 65.7 percent. Under these assumptions, the Black-Scholes option-pricing model
yielded a value of $1.88 for each of the Series A warrants and $1.77 for each of the Series
B warrants, for an aggregate value of $7.2 million;
    
    Second, since the warrants are limited in the amount of realizable profit to the
holders as a result of the call provision described above, we reduced the value of the
warrants to account for the probability that the stock price will reach or exceed $6.50
and $7.50, respectively (i.e., the prices above which we have the right to call the Series
A and Series B warrants, effectively compelling the holders to exercise their warrants).
We used a statistical formula to calculate the probability that our stock price will reach
or exceed $6.50 and $7.50, respectively. Based on this formula, we calculated that, for
the Series A warrants, the probability that the stock price of $6.50 will be reached or
exceeded is approximately 25.6 percent. Similarly, we calculated that, for the Series B
warrants, the probability that the stock price of $7.50 will be reached or exceeded is
approximately 19.2 percent. Based on these probabilities, we reduced the valuation of each
of the Series A warrants to $1.40 (which equals one minus 25.6 percent, multiplied by
$1.88) and we reduced the valuation of each of the Series B warrants to $1.43 (which
equals one minus 19.2 percent, multiplied by $1.77). This yields an aggregate value of the
warrants equal to $5.6 million; and
 9




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##### 




    
    Third, we further reduced the value of the warrants on the assumption that our stock price on
the day that the warrants are exercised will be affected by dilution as a result of the additional
stock introduced into the market. Given that we have approximately 30 million shares outstanding,
we calculated that the exercise of the warrants will result in dilution of approximately 6.2
percent. Using the dilution figure of 6.2 percent, we reduced the value of each of the Series A
warrants to $1.31 and the Series B warrants to $1.34. This yields an aggregate value of the
warrants equal to $5.2 million. As a result of this fair value calculation, we recorded net interest
expense of $0.2 million for the three months ended March 31, 2006 (compared to $0.6 million for the
three months ended March 31, 2005), which represents the change in the fair value of the warrants
from December 31, 2005. The $0.2 million net interest expense includes a $0.8 million reduction in
the fair value of the warrants as calculated at December 31, 2005 due to changes in the methodology
we used to measure volatility in conjunction with the adoption of SFAS No. 123R, Share Based
Paymentas further discussed in Note 7  Stock-Based Compensation below. This reduction is a
change in estimate and is recorded in the 2006 first quarter operations. The change in estimate is
offset by a $1.0 million increase in the fair value of the warrants during the first quarter of
2006 as a result of increase in the value of our common stock. The fair value of the underlying
common stock increased from $2.74 as of December 31, 2005 to $3.44 as of March 31, 2006.
  6. Capital Stock and Net Loss Per Share
  7. Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock Based
Compensation
 Share Based Payment
 Share-Based Payment
 a.
    
    We increased the expected term from 5 years to
6.25 years using the shortcut method
under SAB 107 (an expected term based on the mid point between the vesting date and the
end of the contractual
 10




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##### 



term). The use of the short cut method is permitted through December 31, 2007. We will
convert to company-specific experience on or before January 1,
2008. The options have a maximum contractual term of ten years and
vest pro rata over four years, which is the requisite service period.b.
    
    While we continue to use historical volatility (based on daily trading prices) to
estimate the fair value of options granted, we have increased the period over which
volatility is measured from three years to 6.25 years. We have excluded the period from
October 23, 2002 to January 16, 2003 (inclusive) during which our common stock
experienced unusually high volatility as a result of announcement of our failure to
file the September 30, 2002 Form 10-Q, temporary suspension of
trading, delisting of our shares from NASDAQ, and an investigation commenced by the SEC. These changes resulted in
a net decrease in volatility from previous estimates. Average volatility for options
granted in 2005 and during the quarter ended March 31, 2006 was approximately 0.9 and
0.7, respectively. We did not incorporate implied volatility since there are no actively
traded option contracts on our common stock and sufficient data for an accurate measure
of implied volatility was not available.c.
    
    Prior to January 1, 2006, we accounted for forfeitures as they occurred.
Compensation expense related to unvested forfeited options was reversed in the period the
employee was terminated. Upon adoption of SFAS No. 123R, we have estimated an average
forfeiture rate of 25.3 percent based on historical experience during 2000 to 2005. Stock-based
compensation expense recorded in the first quarter of 2006 is net of expected
forfeitures. We will periodically assess the forfeiture rate. Changes in estimates will
be recorded in the period of adjustment.
    Net loss, as reported
    
    $
    (4,506
    )Add: Stock-based employee compensation expense included in reported
net loss for all awards
    
    
    2Less: Total stock-based employee compensation expense determined
under fair value based method for all awards
    
    
    (901
    )Net loss, as adjusted
    
    $
    (5,405
    )Basic and diluted loss per share:As reported
    
    $
    (0.15
    )As adjusted
    
    $
    (0.18
    )
  11




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##### 



Weighted
    
    
    Remaining
    
    
    Aggregate IntrinsicNumber of
    
    
    Average
    
    
    Contractual
    
    
    ValueOptions
    
    
    Exercise Price
    
    
    Term
    
    
    ('000s)Options
outstanding at
December 31, 2005
    
    
    6,006,240
    
    
    $
    4.27Granted
    
    
    611,750
    
    
    
    3.25Exercised
    
    
    (65,833
    )
    
    
    0.79Canceled
    
    
    (120,585
    )
    
    
    4.09Options outstanding
at March 31, 2006
    
    
    6,431,572
    
    
    $
    4.21
    
    
    
    7.76
    
    
    $
    2,065Options
exercisable at
March 31, 2006
    
    
    3,362,912
    
    
    $
    5.08
    
    
    
    6.82
    
    
    $
    1,144
  Weighted Average
    
    
    
    
    
    
    NumberNumber Outstanding
    
    
    Remaining
    
    
    Weighted
    
    
    Exercisable
    
    
    WeightedRange of
    
    As of March 31,
    
    
    Contractual Life
    
    
    Average
    
    
    As of March 31,
    
    
    AverageExercise Prices
    
    2006
    
    
    (Years)
    
    
    Exercise Price
    
    
    2006
    
    
    Exercise Price$1.88 - $2.15
    
    
    349,865
    
    
    
    7.16
    
    
    $
    2.12
    
    
    
    183,720
    
    
    $
    2.10$2.25 - $2.25
    
    
    875,000
    
    
    
    6.92
    
    
    $
    2.25
    
    
    
    656,250
    
    
    $
    2.25$2.36 - $2.75
    
    
    657,750
    
    
    
    8.06
    
    
    $
    2.68
    
    
    
    334,764
    
    
    $
    2.64$2.80 - $3.00
    
    
    806,245
    
    
    
    9.30
    
    
    $
    2.88
    
    
    
    106,214
    
    
    $
    2.99$3.04 - $3.31
    
    
    742,950
    
    
    
    9.41
    
    
    $
    3.24
    
    
    
    51,325
    
    
    $
    3.18$3.35 - $4.15
    
    
    671,792
    
    
    
    8.29
    
    
    $
    3.83
    
    
    
    278,792
    
    
    $
    3.94$4.16 - $4.20
    
    
    41,750
    
    
    
    7.56
    
    
    $
    4.18
    
    
    
    30,105
    
    
    $
    4.17$4.27 - $4.27
    
    
    1,000,000
    
    
    
    7.71
    
    
    $
    4.27
    
    
    
    506,250
    
    
    $
    4.27$4.50 - $5.13
    
    
    708,459
    
    
    
    6.75
    
    
    $
    4.75
    
    
    
    648,459
    
    
    $
    4.75$6.19 - $21.23
    
    
    577,761
    
    
    
    5.47
    
    
    $
    13.00
    
    
    
    567,033
    
    
    $
    13.03$1.88 - $21.23
    
    
    6,431,572
    
    
    
    7.76
    
    
    $
    4.21
    
    
    
    3,362,912
    
    
    $
    5.08
   12




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##### 



8. Inventories
   March 31
    
    
    December 31,2006
    
    
    2005Raw materials
    
    $
    1,665
    
    
    $
    1,646Work in process
    
    
    239
    
    
    
    275Finished goods
    
    
    719
    
    
    
    911Total inventories
    
    
    2,623
    
    
    
    2,832Less inventory reserve
    
    
    (401
    )
    
    
    (370
    )Inventories, net
    
    $
    2,222
    
    
    $
    2,462
 9. Commitments and Contingencies
       13




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##### 



10. Income Taxes
  11. Results of Operations
  Three Months EndedMarch 31,2006
    
    
    2005Revenues:Cryocare Surgical Systems
    
    $
    220
    
    
    $
    152Cryoablation disposable products and procedure fees
    
    
    6,873
    
    
    
    6,480Cardiac royalties (CryoCath)
    
    
    159
    
    
    
    210Other revenue
    
    
    10
    
    
    
    25$
    7,262
    
    
    $
    6,867Cost of Revenues:Cryocare Surgical Systems
    
    $
    370
    
    
    $
    157Cryoablation disposable products and procedure fees
    
    
    3,396
    
    
    
    4,030$
    3,766
    
    
    $
    4,187
  Three Months EndedMarch 31,2006
    
    
    2005Disposable products
    
    $
    2,410
    
    
    $
    1,130Procedure fees
    
    
    4,463
    
    
    
    5,350$
    6,873
    
    
    $
    6,480
  12. Recent Accounting Pronouncements
 Accounting Changes and Error Corrections Accounting
Changes Reporting Changes in Interim Financial Statements
 14




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##### 



13. Subsequent Event  Revolving Line of Credit
   
 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, 2005.
 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 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
   15




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##### 



Strategy, Key Metrics and Developments
       16




---



##### 



Results of Operations
  Three Months EndedMarch 31,2006
    
    
    2005Revenues:Cryocare Surgical Systems
    
    $
    220
    
    
    $
    152Cryoablation disposable products and procedure fees
    
    
    6,873
    
    
    
    6,480Cardiac royalties (CryoCath)
    
    
    159
    
    
    
    210Other revenue
    
    
    10
    
    
    
    25$
    7,262
    
    
    $
    6,867Cost of Revenues:Cryocare Surgical Systems
    
    $
    370
    
    
    $
    157Cryoablation disposable products and procedure fees
    
    
    3,396
    
    
    
    4,030$
    3,766
    
    
    $
    4,187
  Three Months EndedMarch 31,2006
    
    
    2005Disposable products
    
    $
    2,410
    
    
    $
    1,130Procedure fees
    
    
    4,463
    
    
    
    5,350$
    6,873
    
    
    $
    6,480
       17




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##### 



Share Based Payment Accounting for Stock Issued to Employees,
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
 Revenues.
   Cost of Revenues.
 18




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##### 



Gross Margins.
 Research and Development Expenses.
 Selling
and Marketing Expenses.
 General and Administrative Expenses.
 Interest Expense, Net.
 Loss from Continuing Operations.
 Income from Discontinued Operations.
 19




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##### 



Liquidity and Capital Resources
     
    
    $8.1 million in cash paid to us on February 10, 2006; and
    
    $1.4 million in the form of a secured convertible promissory note due and payable in
full, together with all accrued interest, on the date 24 months or, under certain
circumstances, 15 months following the closing date of the transaction, bearing
interest at five percent per annum.
    20




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##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
  Changes in Internal Controls.
 21




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##### 



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  
 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
  
 Item 5. Other Information
  22




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##### 



Item 6. Exhibits
 ExhibitNo.
    
    Description2.1(1)
    
    Partnership Interest Purchase Agreement, dated as of December 30, 2004, by and between the
Company and Advanced Medical Partners, Inc.2.2(2)
    
    Stock Purchase Agreement, dated as of 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.2.3(3)
    
    $1,425,000 Secured Convertible Promissory Note, dated as of February 10, 2006, from
Plethora Solutions Holdings plc to the Company.3.1(4)
    
    Certificate of Amendment of Restated Certificate of Incorporation of the Company.3.2(4)
    
    Certificate of Designation of Series A Junior Participating Preferred Stock of the Company.3.3(4)
    
    Restated Certificate of Incorporation.3.4(5)
    
    Amended and Restated Bylaws of the Company.4.1(6)
    
    Form of Stock Certificate.4.2(7)
    
    Form of Series A Warrant.4.3(7)
    
    Form of Series B Warrant.4.4(8)
    
    Rights Agreement, dated as of 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(9)
    
    Amendment No. 1 to Rights Agreement, dated as of September 24, 2005, between the Company
and U.S. Stock Transfer Corporation.10.1
    
    Description of salary adjustments for William J. Nydam and Michael R. Rodriguez, effective
January 1, 2006.10.2(10)
    
    Employment Agreement, dated as of January 12, 2006, between the Company and Clint B. Davis.10.3
    
    Amendment to Loan Documents, dated as of February 10, 2006, between the Company, Timm
Medical Technologies, Inc. and Silicon Valley Bank.10.4(11)
    
    Description of director compensation, as amended on February 23, 2006.10.5(12)
    
    Description of 2006 Management Incentive Compensation Program.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 23




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(1)
    
    Previously filed as an exhibit to our Form 8-K filed on January 6, 2005.(2)
    
    Previously filed as an exhibit to our Form 8-K filed on January 18, 2006.(3)
    
    Previously filed as an exhibit to our Form 10-K filed on March 16, 2006.(4)
    
    Previously filed as an exhibit to our Registration Statement on Form S-3 filed on September 20, 2001.(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 10-K for the year ended December 31, 1995.(7)
    
    Previously filed as an exhibit to our Form 8-K filed on March 16, 2005.(8)
    
    Previously filed as an exhibit to our Form 8-K filed on June 3, 1999.(9)
    
    Previously filed as an exhibit to our Form 8-K filed on June 28, 2005.(10)
    
    Previously filed as an exhibit to our Form 8-K filed on January 12, 2006.(11)
    
    Previously filed as an exhibit to our Form 8-K filed on March 1, 2006.(12)
    
    Previously filed as an exhibit to our Form 8-K filed on March 14, 2006. 24




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SIGNATURES
  ENDOCARE, INC.By:
    /s/ CRAIG T. DAVENPORTCraig T. DavenportChief Executive Officer and
Chairman of the Board
(Duly Authorized Officer)By:
    /s/ MICHAEL R. RODRIGUEZMichael R. RodriguezSenior Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)  25




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##### 



EXHIBIT INDEX
 ExhibitNo.
    
    Description2.1(1)
    
    Partnership Interest Purchase Agreement, dated as of December 30, 2004, by and between the
Company and Advanced Medical Partners, Inc.2.2(2)
    
    Stock Purchase Agreement, dated as of 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.2.3(3)
    
    $1,425,000 Secured Convertible Promissory Note, dated as of February 10, 2006, from
Plethora Solutions Holdings plc to the Company.3.1(4)
    
    Certificate of Amendment of Restated Certificate of Incorporation of the Company.3.2(4)
    
    Certificate of Designation of Series A Junior Participating Preferred Stock of the Company.3.3(4)
    
    Restated Certificate of Incorporation.3.4(5)
    
    Amended and Restated Bylaws of the Company.4.1(6)
    
    Form of Stock Certificate.4.2(7)
    
    Form of Series A Warrant.4.3(7)
    
    Form of Series B Warrant.4.4(8)
    
    Rights Agreement, dated as of 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(9)
    
    Amendment No. 1 to Rights Agreement, dated as of September 24, 2005, between the Company
and U.S. Stock Transfer Corporation.10.1
    
    Description of salary adjustments for William J. Nydam and Michael R. Rodriguez, effective
January 1, 2006.10.2(10)
    
    Employment Agreement, dated as of January 12, 2006, between the Company and Clint B. Davis.10.3
    
    Amendment to Loan Documents, dated as of February 10, 2006, between the Company, Timm
Medical Technologies, Inc. and Silicon Valley Bank.10.4(11)
    
    Description of director compensation, as amended on February 23, 2006.10.5(12)
    
    Description of 2006 Management Incentive Compensation Program.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 26




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##### 



(1)
    
    Previously filed as an exhibit to our Form 8-K filed on January 6, 2005.(2)
    
    Previously filed as an exhibit to our Form 8-K filed on January 18, 2006.(3)
    
    Previously filed as an exhibit to our Form 10-K filed on March 16, 2006.(4)
    
    Previously filed as an exhibit to our Registration Statement on Form S-3 filed on September 20, 2001.(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 10-K for the year ended December 31, 1995.(7)
    
    Previously filed as an exhibit to our Form 8-K filed on March 16, 2005.(8)
    
    Previously filed as an exhibit to our Form 8-K filed on June 3, 1999.(9)
    
    Previously filed as an exhibit to our Form 8-K filed on June 28, 2005.(10)
    
    Previously filed as an exhibit to our Form 8-K filed on January 12, 2006.(11)
    
    Previously filed as an exhibit to our Form 8-K filed on March 1, 2006.(12)
    
    Previously filed as an exhibit to our Form 8-K filed on March 14, 2006. 27