Endocare planning to raise capital before March 2007, reports $708,000 second quarter net loss

By Jennifer Lanning Drey

Eugene, Ore., Aug. 8 - Endocare, Inc. expects that it will need to raise additional capital no later than March 31, 2007 to fund its ongoing operations and continued growth, according to Michael R. Rodriguez, Endocare's chief financial officer.

Endocare plans to raise the additional capital through one or more potential transactions, which could include equity financing, debt financing or a corporate transaction such as licensing its technology, Rodriguez said during a company conference call held Tuesday.

The company reported a second quarter net loss of $708,000, or $0.02 per share, on revenues of $6.9 million, according to a company news release.

By comparison, Endocare reported a net loss of $4.2 million, or $0.15 per share, on revenues of $6.9 million for the second quarter of 2005, according to a company new release.

The company said cryoablation procedures grew 19.6% in the second quarter.

Endocare had cash and cash equivalents of $8.0 million at June 30, according to the release.

Cash use in the second quarter was $3.1 million, which included $750,000 paid to an escrow account in connection with the company's settlement with the Securities and Exchange Commission, according to the release.

Under the July settlement, Endocare agreed to a consent judgment with the SEC and entered into a non-prosecution agreement with the Department of Justice, effectively resolving investigations started in January 2003.

Endocare, without admitting or denying any wrongdoing, agreed to pay a total of $750,000 in civil penalties and is enjoined from future violations of securities laws.

"While Endocare has settled, these investigations are ongoing. In the future, we expect there may be additional news about the future and these individuals," said Craig T. Davenport, chief executive officer of Endocare, during Tuesday's call.

Endocare also said Tuesday that it is pursing re-listing on the Nasdaq, following the settlements.

"There are numerous qualifications that must be met, and we believe we should be able to meet all of those in the coming months," Davenport said.

The company's stock price is currently below the minimum required for Nasdaq re-listing. Endocare has not made a decision on whether it will reverse split its stock, and the company will continue to consider market conditions and the stability of its stock price before making a decision, Davenport said.

Stock option review

Endocare also said Tuesday that an internal review of the company's historical stock option practices has identified several stock option grants made between 1997 and 2002 for which the actual measurement dates appear to differ from the recorded grants.

"We analyzed the financial impact of the discrepancies, and we concluded that the impact was not large enough to require adjustment or restatement of our previous financial statements or filings. Our auditors agreed with our conclusion," Rodriguez said.

Endocare met with the SEC last week to discuss the findings and has received a sub poena requesting additional information.

The company is in the process of responding to the sub poena, according to Rodriguez.

Endocare is an Irvine, Calif.-based medical device company developing minimally invasive technologies for tissue and tumor ablation.

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