posam
As filed with the Securities and Exchange Commission on
March 20, 2006
Registration
No. 333-123866
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO FORM S-2
REGISTRATION STATEMENT
ON
Form S-3
UNDER
THE SECURITIES ACT OF 1933
Endocare, Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware |
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33-0618093 |
(State or Other Jurisdiction of
Incorporation or Organization) |
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(I.R.S. Employer
Identification No.) |
201 Technology Drive
Irvine, California 92618
(949) 450-5400
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrants Principal Executive
Offices)
Michael R. Rodriguez
Senior Vice President, Finance and Chief Financial Officer
Endocare, Inc.
201 Technology Drive
Irvine, California 92618
(949) 450-5400
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
With a Copy to:
Clint B. Davis
Senior Vice President, Legal Affairs, General Counsel and
Secretary
Endocare, Inc.
201 Technology Drive
Irvine, California 92618
(949) 450-5400
Approximate date of commencement of proposed sale to the
public: from time to time after the effectiveness of this
Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the
following
box: þ
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering: o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering: o
If this Form is a registration statement pursuant to General
Instruction 1.D., or a post-effective amendment thereto
that shall become effective upon filing with the Commission
pursuant to Rule 462(e) under the Securities Act, check the
following
box. o
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction 1.D. filed
to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities
Act, check the following
box. o
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
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Proposed Maximum |
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Proposed Maximum |
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Amount of |
Title of Each Class of |
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Amount to be |
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Offering |
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Aggregate |
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Registration |
Securities to be Registered |
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Registered(1) |
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Price per Share(2) |
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Offering Price(2) |
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Fee |
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Common Stock, $0.001 par value per share(3)
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9,580,126 shares |
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$3.35 |
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$32,093,422 |
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$3,777(4) |
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(1) |
Includes 5,635,378 shares currently held by selling
securityholders and 3,944,748 shares issuable upon the
exercise of common stock purchase warrants held by selling
securityholders. In accordance with Rule 416 under the
Securities Act of 1933, also includes an indeterminable number
of shares that may become issuable by reason of stock splits,
stock dividends and similar transactions in accordance with the
terms of the common stock purchase warrants. |
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(2) |
Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(c) based on the average of the
high and low sales prices of the registrants common stock
as reported on the Pink Sheets on April 1, 2005. |
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(3) |
Each share of Common Stock is paired with a stock purchase right
under the Registrants Stockholder Rights Plan. |
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(4) |
Paid previously with initial filing of Registration Statement. |
The
information in this prospectus is not complete and may be
changed. The selling securityholders may not sell these
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where
the offer or sale is not
permitted.
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SUBJECT TO
COMPLETION, DATED MARCH 20, 2006
PROSPECTUS
9,580,126 Shares
Endocare, Inc.
Common Stock
THE SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE
OF RISK. SEE RISK FACTORS BEGINNING ON PAGE 2 FOR
INFORMATION THAT YOU SHOULD CONSIDER.
This prospectus is being used in connection with offerings from
time to time by the selling securityholders listed herein or
their transferees. All of the shares of common stock,
$0.001 par value per share, that may be offered under this
prospectus were issued by us in private transactions.
The prices at which the selling securityholders or their
transferees may dispose of their Endocare shares or interests
therein will be determined by the selling securityholders at the
time of sale and may be at fixed prices, the prevailing market
price for the shares, at prices related to such market price, at
varying prices determined at the time of sale or at negotiated
prices. Information regarding the selling securityholders and
the times and manner in which they may offer and sell the shares
or interests therein under this prospectus is provided under
Selling Securityholders and Plan of
Distribution in this prospectus. We will not receive any
of the proceeds from the disposition of the shares offered under
this prospectus. However, certain of the shares of common stock
covered hereby will be issued only upon the exercise of
warrants. Upon exercise of these warrants, we will receive the
proceeds of the exercise prices of such warrants if they are
exercised other than on a net exercise basis.
Our common stock is traded on the
Over-the-Counter
Bulletin Board, or OTCBB, under the symbol
ENDO. On March 17, 2006, the last sale price of
our common stock reported on the OTCBB was $3.25 per share.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus
is ,
2006.
TABLE OF CONTENTS
No person has been authorized to give any information or to make
any representations other than those contained in this
prospectus in connection with the offering made hereby, and if
given or made, such information or representations must not be
relied upon as having been authorized by Endocare, any selling
securityholder or by any other person. Neither the delivery of
this prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that information herein is
correct as of any time subsequent to the date hereof. This
prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the
securities covered by this prospectus, nor does it constitute an
offer to or solicitation of any person in any jurisdiction in
which such offer or solicitation may not lawfully be made.
ENDOCARE, INC.
Endocare, Inc. is a specialty medical device company focused on
improving patients lives through the development,
manufacturing and distribution of health care products for
cryoablation. Our strategy is to achieve a dominant position in
the prostate and renal cancer markets, further developing and
increasing the acceptance of our technology in the
interventional radiology and oncology markets for treatment of
liver and lung cancers and management of pain from bone
metastases, while achieving penetration across additional
markets with our proprietary cryosurgical technology. The term
cryoablation refers to the use of ice to destroy
tissue, such as tumors, for therapeutic purposes. The term
cryosurgical technology refers to technology
relating to the use of ice in surgical procedures, including
cryoablation procedures.
Today, our FDA-cleared Cryocare Surgical System occupies a
growing position in the urological market for treatment of
prostate and renal cancer. Because of our initial concentration
on prostate and renal cancer, the majority of our sales and
marketing resources are directed toward the promotion of our
technology to urologists. We believe our proprietary
cryosurgical technologies have broad applications across a
number of surgical markets, including for the treatment of
tumors in the lung and liver, and the management of bone pain
caused by tumors. To that end, we employ a dedicated sales and
marketing team focused on marketing percutaneous cryoablation
procedures related to kidney, liver, lung and bone cancer to
interventional radiology physicians throughout the United
States. We intend to continue to invest in resources to continue
to penetrate the interventional radiology and oncology markets
and develop new markets for our cryosurgical products and
technologies, particularly in the area of tumor ablation.
We were incorporated under the laws of the State of Delaware in
May 1994. We maintain our executive offices at 201 Technology
Drive, Irvine, California 92618, and our telephone number at
that address is (949) 450-5400. Our website address is
www.endocare.com. Information contained on our website is
not incorporated into, and does not constitute any part of, this
prospectus. This prospectus, and any prospectus supplements
issued in relation to it, contain trademarks of Endocare, Inc.
and its affiliates, and may contain trademarks, trade names and
service marks of other parties.
In this prospectus, unless we indicate otherwise, references to
Endocare or to we or us are
to Endocare, Inc. and its subsidiaries. Information contained on
our Internet website is not a part of this prospectus or any
prospectus supplement issued subsequently.
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RISK FACTORS
The risks and uncertainties described below are not the only
ones we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair
our operations. The occurrence of any of the following risks
could harm our business. In that case, the trading price of our
common stock could decline, and you may lose all or part of your
investment.
We face risks related to investigations by the SEC and
DOJ.
As previously reported, the Securities and Exchange Commission
(SEC) and the Department of Justice (DOJ) are
conducting investigations into allegations that we and certain
of our current and former officers and directors issued, or
caused to be issued, false and misleading statements regarding
our financial results for 2001 and 2002 and related matters,
including whether we prematurely recognized revenue from the
sale of Cryocare Surgical Systems and improperly delayed posting
of expenses. Although we have fully cooperated with these
governmental agencies in these matters and intend to continue to
fully cooperate, these agencies may determine we have violated
federal securities laws. We cannot predict when these
investigations will be completed or their outcomes. If it is
determined that we have violated federal securities laws or
other laws or regulations, we may face sanctions, including, but
not limited to, significant monetary penalties and injunctive
relief. In addition, we are generally obliged, to the extent
permitted by law, to indemnify our directors and officers who
are named defendants in legal proceedings related to their
service.
Our management members have spent considerable time and
effort dealing with external investigations.
Our management members continue to spend considerable time and
effort dealing with the SEC and DOJ investigations involving our
previous internal controls, accounting policies and procedures,
disclosure controls and procedures and corporate governance
policies and procedures. The significant time and effort spent
has adversely affected our operations and may continue to do so
in the future.
We face risks relating to our liquidity and we may never
reach or maintain profitability.
We have incurred annual operating losses each year since our
inception. As of December 31, 2005, our accumulated deficit
was approximately $165.7 million and cash equivalents of
$8.1 million. It is possible that we will not generate
sufficient revenues from product sales and service revenues to
achieve profitability. Even if we do achieve significant
revenues from our products sales and service revenues, we expect
that operating expenses will result in significant operating
losses over the next several quarters, as we, among other things:
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incur costs related to legal proceedings, including ongoing
government investigations; |
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attempt to get our stock relisted on a national exchange; |
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comply with changes in generally accepted accounting principles
and include employee based stock option charges in our
consolidated statement of operations in 2006; |
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comply with the increasing complexities and costs of being a
public company, such as Sarbanes-Oxley compliance; |
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expand our sales and marketing activities as we attempt to gain
market share for our Cryocare Surgical System; and |
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continue our research and development efforts to improve our
existing products and develop newer products. |
We will need to significantly increase the revenues we receive
from sales of cryoablation disposable products and procedure
fees as a result of these operating expenses. We may be unable
to do so, and therefore, may not achieve profitability. Even if
we do achieve profitability, we cannot be certain that we will
be able to sustain or increase profitability on a quarterly or
annual basis.
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If we do not generate positive cash flows from operations we may
need to raise additional capital which may not be available on
terms acceptable to us, or at all. Any additional equity
financing may be dilutive to stockholders, and debt financing,
if available, may involve interest expense and restrictive
covenants.
We have incurred significant expenses related to legal, audit
and accounting support fees, including expenses related to our
efforts to achieve compliance with the internal control
reporting requirements of Section 404 of the Sarbanes-Oxley
Act. We face large cash expenditures in the future related to
past due state and local tax obligations. We also expect to pay
$750,000 upon the finalization of the proposed settlement with
the SEC.
We may be required to make sales and use tax payments that
exceed our settlement estimates.
As of December 31, 2004 and 2005 we estimated that we owed
$2.9 million as of each balance sheet date in sales and use
taxes in various jurisdictions in the United States. We are in
the process of negotiating resolutions of the past due tax
obligations with the applicable tax authorities. While we hope
that these obligations can be settled for less than the amounts
accrued, we cannot predict whether we will obtain favorable
settlement terms from the various tax authorities, or that,
after settling, we will satisfy the conditions necessary to
avoid violating the settlements. Our failure to obtain favorable
settlement terms or to satisfy the settlement conditions may
result in a material adverse effect on our business, financial
condition, results of operations and cash flows.
Our success will depend on our ability to attract and retain
key personnel.
In order to execute our business plan, we need to attract,
retain and motivate a significant number of highly qualified
managerial, technical, financial and sales personnel. If we fail
to attract and retain skilled scientific and marketing
personnel, our research and development and sales and marketing
efforts will be hindered. Our future success depends to a
significant degree upon the continued services of key management
personnel, including Craig T. Davenport, our Chief Executive
Officer, William J. Nydam, our President and Chief Operating
Officer, Michael R. Rodriguez, our Senior Vice President,
Finance and Chief Financial Officer, and Clint B. Davis, our
Senior Vice President, Legal Affairs and General Counsel. None
of our key management personnel is covered by an insurance
policy of which we are the beneficiary.
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 or hedging or
other derivative transactions with respect to our stock, could
have a significant negative effect on the market price of our
common stock. These 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. We
had an aggregate of 30,147,894 shares of common stock
outstanding as of March 1, 2006, which included
5,635,378 shares of our common stock that we issued on
March 11, 2005 in connection with the financing described
in the Form 8-K
that we filed on March 16, 2005. Investors in that
financing also received warrants to purchase an aggregate of
1,972,374 shares of our common stock at an exercise price
of $3.50 per share and 1,972,374 shares of our common
stock at an exercise price of $4.00 per share. We entered
into a registration rights agreement in connection with the
financing pursuant to which we agreed to register for resale by
the investors the shares of common stock issued. The
registration statement became effective on September 28,
2005. Sales of shares covered by the registration statement
could have a significant negative effect on the market price of
our stock.
Our common stock was delisted from the NASDAQ Stock Market
and, as a result, trading of our common stock has become more
difficult.
Our common stock was delisted from The NASDAQ Stock Market
(NASDAQ) on January 16, 2003 because of our
failure to keep current in filing our periodic reports with the
SEC. Trading is now conducted in the
over-the-counter market
on the so-called bulletin board. Consequently,
selling our
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common stock is more difficult because smaller quantities of
shares can be bought and sold, transactions can be delayed and
security analyst and news media coverage of us may be reduced.
These factors could result in lower prices and larger spreads in
the bid and ask prices for shares of our common stock as well as
lower trading volume. We have been in discussions with the
American Stock Exchange (AMEX) and NASDAQ regarding
the relisting of our common stock. We hope that our common stock
will be relisted with either AMEX, the NASDAQ Capital Market or
the NASDAQ Global Market by the end of 2006, but we cannot
assure you that our common stock will be relisted within any
particular time period, or at all. As noted below, we may
effectuate a reverse stock split in order to qualify our stock
for relisting.
As a result of the delisting of our common stock from The NASDAQ
Stock Market, our common stock has become subject to the
penny stock regulations, including
Rule 15g-9 under
the Securities Exchange Act of 1934. That rule imposes
additional sales practice requirements on broker-dealers that
sell low-priced securities to persons other than established
customers and institutional accredited investors. For
transactions covered by this rule, a broker-dealer must make a
special suitability determination for the purchaser and have
received the purchasers written consent to the transaction
prior to sale. Consequently, the rule may affect the ability of
broker-dealers to sell our common stock and affect the ability
of holders to sell their shares of our common stock in the
secondary market. To the extent our common stock remains subject
to the penny stock regulations, the market liquidity for the
shares will be adversely affected.
In order to qualify our stock for relisting, we may
effectuate a reverse stock split, which could adversely affect
our stockholders.
In order to qualify our stock for relisting, we may effectuate a
reverse stock split. AMEX requires a minimum bid price of $3.00,
the NASDAQ Capital Market requires a minimum bid price of $4.00
and the NASDAQ Global Market requires a minimum bid price of
$5.00. As of March 17, 2006, the closing price for our
common stock as reported on the bulletin board was
$3.25 per share. Of course, we cannot predict whether this
share price will be maintained or increased in the future.
Any reverse stock split requires the prior approval of our
stockholders at a stockholders meeting, because our charter
prohibits stockholder action by written consent. On
August 30, 2005, our stockholders held a Special Meeting
and by a vote of more than 70 percent authorized our board
of directors to effectuate a reserve stock split. The approval
allowed for the combination of any whole number of shares of
common stock between and including two and five into one share
of common stock, i.e., each of the following combination
ratios: one for two, one for three, one for four and one for
five. If our board decides to proceed with the reverse stock
split, then the board will determine the exact ratio within the
range described in the previous sentence. If the board does not
implement a reverse stock split prior to the one-year
anniversary of the special stockholders meeting, then
stockholder approval again would be required prior to
implementing any reverse stock split. We expect to ask our
stockholders to reauthorize the reverse stock split for an
additional year at our 2006 annual stockholders meeting.
In many instances historically the markets have reacted
negatively to the effectuation of a reverse stock split. The
trading price of our stock may be negatively affected if our
board decides to proceed with a reverse stock split. However, we
believe that our circumstances and rationale for the reverse
stock split differentiate us from many other companies that have
effectuated reverse stock splits. Among other things, we would
be effectuating a reverse stock split to qualify our common
stock for listing, whereas many other companies have effectuated
reverse stock splits to avoid delisting in the face of dire
financial or operational circumstances.
Our success is reliant on the acceptance by doctors and
patients of the Cryocare Surgical System as a preferred
treatment for tumor ablation.
Cryosurgery has existed for many years, but has not been widely
accepted primarily due to concerns regarding safety and efficacy
and widespread use of alternative therapies. Because the
technology previously lacked precise monitoring capabilities,
cryosurgical procedures performed in the 1970s resulted
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in high cancer recurrence and negative side effects, such as
rectal fistulae and incontinence, and gave cryosurgical
treatment negative publicity. To overcome these negative side
effects, we have developed ultrasound guidance and temperature
sensing to enable more precise monitoring in our Cryocare
Surgical System. Nevertheless, we will need to overcome the
earlier negative publicity associated with cryosurgery in order
to obtain market acceptance for our products. In addition, use
of our Cryocare Surgical System requires significant physician
education and training. As a result, we may have difficulty
obtaining recommendations and endorsements of physicians and
patients for our Cryocare Surgical System. We may also have
difficulty raising the brand awareness necessary to generate
interest in our Cryocare Surgical System. Any adverse side
effects, including impotence or incontinence, recurrence of
cancer or 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.
In addition, emerging new technologies and procedures to treat
cancer, prostate enlargement and other prostate disorders may
negatively affect the market acceptance of cryosurgery. If our
Cryocare Surgical System does not achieve broad market
acceptance, we will likely remain unprofitable.
We are faced with intense competition and rapid technological
and industry change, which may make it more difficult for us to
achieve significant market penetration.
The medical device industry generally, and the cancer treatment
market in particular, are characterized by rapid technological
change, changing customer needs, and frequent new product
introductions. If our competitors existing products or new
products are more effective than or considered superior to our
products, the commercial opportunity for our products will be
reduced or eliminated. We face intense competition from
companies in the cryosurgical marketplace as well as companies
offering other treatment options, including radical
prostatectomy, radiation therapy and hormone therapy. If we are
successful in penetrating the market for treatment of prostate
cancer with our cryosurgical treatment, other medical device
companies may be attracted to the marketplace. Many of our
potential competitors are significantly larger than we are and
have greater financial, technical, research, marketing, sales,
distribution and other resources than we do. We believe there
will be intense price competition for products developed in our
markets. Our competitors may develop or market technologies and
products that are more effective or commercially attractive than
any that we are developing or marketing. Our competitors may
obtain regulatory approval, and introduce and commercialize
products before we do. These developments could have a material
adverse effect on our business, financial condition, results of
operations and cash flows. Even if we are able to compete
successfully, we may not be able to do so in a profitable manner.
If we are unable to continue to develop and enhance our
Cryocare Surgical System, our business will suffer.
Our growth depends in part on continued ability to successfully
develop enhancements to our Cryocare Surgical System. We may
experience difficulties that could delay or prevent the
successful development and commercialization of these 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 before
obtaining necessary regulatory or reimbursement approvals. In
addition, our competitors may succeed in developing commercially
viable products that render our products obsolete or less
attractive. Failure to successfully develop and commercialize
new products and enhancements would likely have a significant
negative effect on our financial prospects.
There is uncertainty relating to third-party reimbursement,
which is critical to market acceptance of our products.
Hospitals and other health care providers in the United States
generally rely on third-party payors, principally federal
Medicare, state Medicaid and private health insurance plans, to
reimburse all or part of the cost of medical procedures
involving our products. While private health insurers in some
areas of the United States provide reimbursement for procedures
in which our products are used, we can provide no
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assurance that private insurance reimbursement will be adopted
nationally or by additional insurers. Furthermore, those private
insurance companies currently paying for procedures in which our
products are used may terminate such coverage. If reimbursement
levels from Medicare, Medicaid, other governmental health care
programs or private insurers are not sufficient, physicians may
choose not to recommend, and patients may not choose, procedures
using our products.
International market acceptance of our products may depend, in
part, upon the availability of reimbursement within prevailing
health care payment systems. Reimbursement and health care
payment systems in international markets vary significantly by
country, and include both government sponsored health care and
private insurance. We may not obtain international reimbursement
approvals in a timely manner, if at all. Our failure to receive
international reimbursement approvals may negatively impact
market acceptance of our products in the international markets
in which those approvals are sought.
From time to time significant attention has been focused on
reforming the health care system in the United States and other
countries. Any changes in Medicare, Medicaid or third-party
medical expense reimbursement, which may arise from health care
reform, may have a material adverse effect on reimbursement for
our products or procedures in which our products are used and
may reduce the price we are able to charge for our products. In
addition, changes to the health care system may also affect the
commercial acceptance of products we are currently developing
and products we may develop in the future. Potential approaches
that have been considered include controls on health care
spending and price controls. Several proposals have been made in
the United States Congress and various state legislatures
recently that, if adopted, would potentially reduce health care
spending, which may result in a material adverse effect on our
business, financial condition, results of operations and cash
flows.
We believe that our current structure and business and our
contemplated future operations comply and will comply with the
federal anti-kickback law. However, certain of our business
practices do not fit or will not fit within a safe
harbor and there is no assurance that if viewed under the
totality of the facts and circumstances, our structure and
business would not be challenged, perhaps even successfully, as
a violation of the anti-kickback law. Mere challenge, even if we
ultimately prevail, could have a material adverse effect on our
business.
We could be difficult to acquire due to anti-takeover
provisions in our charter, our stockholders rights plan and
Delaware law.
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 our company. In addition, our board of
directors has 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 corporate actions and may have the effect of delaying or
preventing a change in control. These provisions also could
deter or prevent transactions that stockholders deem to be in
their interests. In addition, we are subject to the
anti-takeover provisions of Section 203 of the Delaware
General Corporation Law. Subject to specified exceptions, this
section provides that a corporation may not engage in any
business combination with any interested stockholder during the
three-year period following the time that such stockholder
becomes an interested stockholder. This provision could have the
effect of delaying or preventing a change of control of our
company. The foregoing factors could reduce the price that
investors or an acquiror might be willing to pay in the future
for shares of our common stock.
If we fail to protect our intellectual property rights, our
competitors may take advantage of our ideas and compete directly
against us.
Our success will depend to a significant degree on our ability
to secure and protect intellectual property rights and to
enforce patent and trademark protections relating to our
technology. From time to time, litigation may be advisable to
protect our intellectual property position, however, these legal
means afford only limited protection and may not adequately
protect our rights or permit us to gain or keep any competitive
advantage. Any litigation in this regard could be costly, and it
is possible that we will not have
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sufficient resources to fully pursue litigation or to protect
our other intellectual property rights. It could result in the
rejection or invalidation of our existing and future patents.
Any adverse outcome in litigation relating to the validity of
our patents, or any failure to pursue litigation or otherwise to
protect our patent position, could have a material adverse
effect on our business, financial condition, results of
operations and cash flows. Also, even if we prevail in
litigation, the litigation would be costly in terms of
management distraction as well as in terms of money. In
addition, confidentiality agreements with our employees,
consultants, customers, and key vendors may not prevent the
unauthorized disclosure or use of our technology. It is possible
that these agreements could be breached or that they might not
be enforceable in every instance, and that we might not have
adequate remedies for any such breach. Enforcement of these
agreements may be costly and time consuming. Furthermore, the
laws of foreign countries may not protect our intellectual
property rights to the same extent as the laws of the United
States.
Because the medical device industry is litigious, we may be
sued for allegedly violating the intellectual property rights of
others.
The medical technology industry has in the past been
characterized by a substantial amount of litigation and related
administrative proceedings regarding patents and intellectual
property rights. In addition, major medical device companies
have used litigation against emerging growth companies as a
means of gaining or preserving a competitive advantage.
Should third parties file patent applications or be issued
patents claiming technology also claimed by us in pending
applications, we may be required to participate in interference
proceedings in the United States Patent and Trademark Office to
determine the relative priorities of our inventions and the
third parties inventions. We could also be required to
participate in interference proceedings involving our issued
patents and pending applications of another entity. An adverse
outcome in an interference proceeding could require us to cease
using the technology or to license rights from prevailing third
parties.
Third parties may claim we are using their patented inventions
and may go to court to stop us from engaging in our normal
operations and activities. These lawsuits are expensive to
defend and conduct and would also consume and divert the time
and attention of our management. A court may decide that we are
infringing a third partys patents and may order us to
cease the infringing activity. A court could also order us to
pay damages for the infringement. These damages could be
substantial and could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
If we are unable to obtain any necessary license following an
adverse determination in litigation or in interference or other
administrative proceedings, we would have to redesign our
products to avoid infringing a third partys patent and
could temporarily or permanently have to discontinue
manufacturing and selling some of our products. If this were to
occur, it would negatively impact future sales and, in turn, our
business, financial condition, results of operations and cash
flows.
If we fail to obtain or maintain necessary regulatory
clearances or approvals for products, or if approvals are
delayed or withdrawn, we will be unable to commercially
distribute and market our products or any product
modifications.
Government regulation has 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 Food and Drug Administration (FDA) has broad authority
under the federal Food, Drug and Cosmetic 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 clearances and approvals is lengthy and
expensive. We may not be able to obtain or maintain 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 or withdrawal of regulatory approvals, product
recalls, operating restrictions, and criminal prosecution. In
addition, governmental regulations may be established which
could prevent, delay, modify or rescind
7
regulatory approval of our products. Any of these actions by the
FDA, or change in FDA regulations, could have a material adverse
effect on our business, financial condition, results of
operations and cash flows.
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 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 unforeseen problems
following initial marketing. We may not be able to obtain or
maintain 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 could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
Our products may be subject to product recalls even after
receiving FDA clearance or approval, which would harm our
reputation and our business.
The FDA and similar governmental authorities in other countries
have the authority to request and, in some cases, require the
recall of our products in the event of material deficiencies or
defects in design or manufacture. A governmental mandated or
voluntary recall by us could occur as a result of component
failures, manufacturing errors or design defects. Any recall of
product would divert managerial and financial resources and harm
our reputation with customers and our business.
We could be negatively impacted by future interpretation or
implementation of the federal Stark law and other federal and
state anti-referral laws.
The federal Stark law prohibits a physician from referring
medical patients for certain services to an entity with which
the physician has a financial relationship. A financial
relationship includes both investment interests in an entity and
compensation arrangements with an entity. Many states have
similar and often broader laws prohibiting referrals by any
licensed health care provider to entities with which they have a
financial relationship. These state laws generally apply to
services reimbursed by both governmental and private payors.
Violation of these federal and state laws may result in
prohibition of payment for services rendered, loss of licenses,
fines, criminal penalties and exclusion from governmental and
private payor programs, among other things. We have financial
relationships with physicians and physician-owned entities,
which in turn have financial relationships with hospitals and
other providers of designated health services. Although we
believe that our financial relationships with physicians and
physician-owned entities, as well as the relationships between
physician-owned entities that purchase or lease our products and
hospitals, are not in violation of applicable laws and
regulations, governmental authorities might take a contrary
position. If our financial relationships with physicians or
physician-owned entities or the relationships between those
entities and hospitals were found to be illegal, we and/or the
affected physicians and hospitals could be subject to civil and
criminal penalties, including fines, exclusion from
participation in government and private payor programs and
requirements to refund amounts previously received from
government and private payors. In addition, expansion of our
operations to new jurisdictions, or new interpretations of laws
in our existing jurisdictions, could require structural and
organizational modifications of our relationships with
physicians, physician-owned entities and others to comply with
that jurisdictions laws.
We believe that the arrangements we have established with
physician-owned entities and hospitals comply with applicable
Stark law exceptions. However, if any of the relationships
between physicians and hospitals involving our services do not
meet a Stark law exception, neither the hospital nor we would be
able to bill for any procedure resulting from a referral that
violated the Stark law. Although, in most cases we are not the
direct provider and do not bill Medicare for the designated
health services, any Stark law problem with our business
arrangements with physicians and hospitals would adversely
affect us as well as the referring physician and the hospital
receiving the referral.
8
Many states also have patient referral laws, some of which are
more restrictive than the Stark law and regulate referrals by
all licensed health care practitioners for any health care
service to an entity with which the licensee has a financial
relationship unless an exception applies. Such laws in
particular states may prohibit us from entering into
relationships with physicians and physician-owned entities,
which may limit business development.
We believe that our business practices comply with the Stark law
and applicable state referral laws. No assurance can be made,
however, that these practices would not be successfully
challenged and penalties, such as civil money penalties and
exclusion from Medicare and Medicaid, and/or state penalties,
imposed. And again, mere challenge, even if we ultimately
prevail, could have a material adverse effect on us.
If we become subject to product liability claims, we may be
required to pay damages that exceed our insurance coverage.
Our business exposes us to potential product liability claims
that are inherent in the testing, production, marketing and sale
of medical devices. While we believe that we are reasonably
insured against these risks, we may not be able to maintain
insurance in amounts or scope sufficient to provide us with
adequate coverage. A claim in excess of our insurance coverage
would have to be paid out of cash reserves, which could have a
material adverse effect on our business, financial condition,
results of operations and cash flows. In addition, any product
liability claim likely would harm our reputation in the industry
and our business.
Fluctuations in our future operating results may negatively
impact the market price of our common stock.
Our operating results have fluctuated in the past and can be
expected to fluctuate from time to time in the future. Some of
the factors that may cause these fluctuations include the
following:
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market acceptance of our existing products, as well as products
in development; |
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timing of payments received and the recognition of such payments
as revenue under collaborative arrangements and strategic
alliances; |
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ability to manufacture products efficiently; |
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timing of our research and development expenditures; |
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timing of customer orders; |
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changes in reimbursement rates for our products and procedures
by Medicare and other third-party payors; |
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timing of regulatory approvals for new products; |
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outcomes of clinical studies by us or our competitors; |
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competition from other treatment modalities; |
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physician and patient acceptance of cryosurgery; and |
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ability to obtain reimbursement for procedures in lung and liver
cancer, and pain related to bone metastases. |
If our operating results are below the expectations of
securities analysts or investors, the market price of our common
stock may fall abruptly and significantly.
Our stock price may be volatile and your investment could
decline in value.
Our stock price has fluctuated significantly in the past and is
likely to continue to fluctuate significantly, making it
difficult to resell shares when investors want to at prices they
find attractive. The
9
market prices for securities of emerging companies have
historically been highly volatile. Future events concerning us
or our competitors could cause such volatility including:
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actual or anticipated variations in our operating results and
cash flows; |
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developments regarding government and third-party reimbursement; |
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changes in government regulation of our products and business
practices; |
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developments concerning government investigations of us; |
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developments concerning proprietary rights; |
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developments concerning litigation or public concern as to the
safety of our products or our competitors products; |
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technological innovations or introduction of new products by us
or our competitors; |
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investor and analyst perception of us and our industry; |
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introduction of new competing technologies; |
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general economic and market conditions; and |
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physician and patient acceptance of cryosurgery. |
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.
Our intangible assets and goodwill could become impaired.
Intangible assets acquired in a purchase, such as intellectual
property or developed technology, are generally amortized over
various periods depending on their anticipated economic benefits
or useful lives. Long-lived assets, including amortizable
intangibles, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount
of an asset to undiscounted future net cash flows expected to be
generated by the asset. Following a review, if such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying value of the assets
exceeds the fair value of the assets. Significant estimates,
including assumptions regarding future events and circumstances
that cannot be easily predicted are required to perform an
analysis of the value of goodwill and intangible assets. These
estimates and assumptions may differ materially from actual
outcomes and occurrences.
Our facilities and systems are vulnerable to natural
disasters or other catastrophic events.
Our headquarters, cryosurgical products manufacturing
facilities, research facilities and much of our infrastructure,
including computer servers, are located in California, an area
that is susceptible to earthquakes and other natural disasters.
A natural disaster or other catastrophic event, such as an
earthquake, fire, flood, severe storm, break-in, terrorist
attack or other comparable problems could cause interruptions or
delays in our business and loss of data or render us unable to
accept and fulfill customer orders in a timely manner, or at
all. We have no formal disaster recovery plan and our business
interruption insurance may not adequately compensate us for
losses that may occur. In the event that an earthquake, natural
disaster or other catastrophic event were to destroy any part of
our facilities or interrupt our operations for any extended
period of time, or if harsh weather conditions prevent us from
delivering products in a timely manner, our business, financial
condition and operating results would be seriously harmed.
10
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus may contain forward-looking statements that
involve risks and uncertainties. Such statements typically
include, but are not limited to, statements containing the words
believes, intends,
anticipates, expects,
estimates, should, could,
may, plans, planned and
words of similar import. Forward-looking statements involve
risks and uncertainties, including those risks and uncertainties
identified in the Risk Factors section of this
prospectus beginning on page 2 and those risks and
uncertainties identified elsewhere in, or incorporated by
reference into, this prospectus. Due to these risks and
uncertainties, the actual results that we achieve may differ
materially from these forward-looking statements. These
forward-looking statements are based on current expectations. In
preparing this prospectus, we have made a number of assumptions
and projections about the future of our business. These
assumptions and projections could be wrong for several reasons
including, but not limited to, those items identified in the
Risk Factors section.
You are urged to carefully review and consider the various
disclosures that we make in this prospectus, any subsequent
prospectus supplements and in our other reports filed with the
Securities and Exchange Commission.
USE OF PROCEEDS
All net proceeds from the disposition of the common shares
covered by this prospectus or interests therein will go to the
selling securityholders. We will not receive any proceeds from
the disposition of the common stock or interests therein by the
selling securityholders. However, certain of the shares of
common stock covered hereby will be issued only upon the
exercise of warrants issued in connection with our March 2005
equity financing described below. Upon exercise of these
warrants, we will receive the proceeds of the exercise prices of
such warrants if they are exercised other than on a net exercise
basis. To the extent we receive cash upon any exercise of the
warrants, we intend to use that cash for general corporate
purposes.
SELLING SECURITYHOLDERS
The following table sets forth, as of March 1, 2006, the
names of the selling securityholders, the number of shares of
our common stock beneficially owned by each selling
securityholder before and after this offering and the number of
shares that may be offered pursuant to this prospectus. This
information is based on information provided by or on behalf of
the selling securityholders and, with regard to the beneficial
holdings of the selling securityholders, is accurate only to the
extent beneficial holdings information was disclosed to us by or
on behalf of the selling securityholders. The selling
securityholders and holders listed in any supplement to this
prospectus, and any transferors, pledgees, donees or successors
to these persons, may from time to time offer and sell, pursuant
to this prospectus and any subsequent prospectus supplement, any
and all of these shares or interests therein. Any supplement to
this prospectus may contain additional or varied information
about the selling securityholders and/or additional holders, and
any of their transferors, pledgees, donees or successors, the
names of natural persons with voting or investment control over
the shares covered hereby, and the aggregate amount of the
shares offered that is beneficially owned by each person. This
information will be obtained from the selling securityholders
and/or additional holders.
As of March 1, 2006, 30,147,894 shares of our common
stock were outstanding. The 9,580,126 shares of our common
stock registered for public resale pursuant to the registration
statement of which this prospectus is a part and listed under
the column Shares Offered by this Prospectus include
5,635,378 shares of our common stock issued to the selling
securityholders in our March 2005 equity financing described
below and 3,944,748 shares of our common stock that may be
issued upon the exercise of warrants issued to the selling
securityholders in our March 2005 equity financing.
Shares listed under the column Shares Offered by this
Prospectus represent the number of shares that may be sold
by each selling securityholder pursuant to this prospectus.
Pursuant to Rule 416 of the
11
Securities Act of 1933, the registration statement of which this
prospectus is a part also covers any additional shares of our
common stock which become issuable in connection with such
shares resulting from stock splits, stock dividends or similar
transactions.
The information under the heading Shares Beneficially
Owned After the Offering assumes each selling
securityholder sells all of its shares covered hereby to
unaffiliated third parties, that the selling securityholders
will acquire no additional Endocare common stock prior to the
completion of this offering, and that any other shares of our
common stock beneficially owned by the selling securityholders
will continue to be beneficially owned. Each selling stockholder
may dispose of all, part or none of its shares.
For purposes of the table below, beneficial ownership is
determined in accordance with the rules of the SEC, and includes
voting and investment power with respect to shares. Shares of
common stock subject to options, warrants or issuable upon
conversion of convertible securities currently exercisable or
exercisable within 60 days from March 1, 2006 are
deemed outstanding for computing the percentage ownership of the
person holding the options, warrants or convertible securities,
but are not deemed outstanding for computing the percentage of
any other person. Warrants issued in our March 2005 equity
financing are currently exercisable, and therefore the shares
underlying those warrants are included for purposes of
determining beneficial ownership.
The selling securityholders identified below may have sold,
transferred or otherwise disposed of all or a portion of their
shares of common stock in transactions exempt from the
registration requirements of the Securities Act of 1933 since
the date on which they provided to us the information regarding
their shares of common stock.
Except as indicated below, none of the selling securityholders
has held any position or office or had any other material
relationship with us or any of our predecessors or affiliates
within the past three years other than as a result of the
ownership of our securities. We may amend or supplement this
prospectus from time to time to update the disclosure set forth
in it.
Each of the selling securityholders that is affiliated with a
registered broker-dealer has represented to us that it purchased
the shares offered by this prospectus in the ordinary course of
business and, at the time of purchase of those shares, did not
have any plans to dispose of those shares.
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Shares Beneficially | |
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Shares Beneficially | |
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Owned Prior to the | |
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Owned After the | |
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Offering | |
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Offering(3) | |
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Shares Offered by | |
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Selling Securityholders(1) |
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Number | |
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Percent(2) | |
|
This Prospectus | |
|
Number | |
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Percent(2) | |
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Arbor Partners, L.P.(4)
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122,490 |
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* |
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122,490 |
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None |
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None |
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Bregman, Lior
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126,352 |
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* |
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126,352 |
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None |
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None |
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Cimarron Biomedical Equity Master Fund LP(5)
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245,487 |
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* |
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245,487 |
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None |
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|
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None |
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City of Milford Pension & Retirement Fund(6)
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276,116 |
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* |
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276,116 |
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City of Stamford Firemens Pension Fund(7)
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122,740 |
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* |
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122,740 |
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None |
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None |
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Daniels, John and Daniels, AnnaMarie, as Trustees of The Daniels
Family Trust UTA 1993(8)
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184,115 |
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* |
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184,115 |
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None |
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None |
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Charles Schwab & Co Inc. FBO Craig T. Davenport Roth
Conversion IRA(9)
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60,799 |
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* |
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60,799 |
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None |
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None |
|
Charles Schwab & Co Inc. FBO Craig T. Davenport Sep
IRA(10)
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52,738 |
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* |
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52,738 |
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None |
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None |
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Fleming, Hayden R. and Fleming, LaDonna M., as Trustees of the
Hayden R. Fleming Revocable Trust dated as of July 19,
1995(11)
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422,707 |
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1.4% |
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306,857 |
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|
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115,850 |
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* |
|
12
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|
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|
|
|
|
|
|
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Shares Beneficially | |
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Shares Beneficially | |
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Owned Prior to the | |
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Owned After the | |
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Offering | |
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Offering(3) | |
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Shares Offered by | |
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Selling Securityholders(1) |
|
Number | |
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Percent(2) | |
|
This Prospectus | |
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Number | |
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Percent(2) | |
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GW2001 Fund, L.P.(12)
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107,186 |
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* |
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67,327 |
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39,859 |
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|
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* |
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Haimovitch, Larry, as Trustee of the Larry Haimovitch 2000
Separate Property Revocable Trust(13)
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91,316 |
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* |
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15,341 |
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75,975 |
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|
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* |
|
JP Morgan Trust Co. (Bahamas) Limited as Trustee U/ A/ D
11/3/93(14)
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104,380 |
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* |
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104,380 |
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|
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None |
|
|
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None |
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Kotler, Kevin(15)
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172,471 |
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* |
|
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61,371 |
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|
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111,100 |
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|
|
* |
|
Midwood Capital Partners QP, L.P.(16)
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533,738 |
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1.8% |
|
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98,187 |
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|
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435,551 |
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1.4% |
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Midwood Capital Partners, L.P.(17)
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548,710 |
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1.8% |
|
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198,066 |
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350,644 |
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1.2% |
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Norwalk Employees Pension Plan(18)
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107,440 |
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|
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* |
|
|
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107,440 |
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|
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None |
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None |
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Nydam, William J.(19)
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879,774 |
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2.9% |
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|
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306,857 |
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572,917 |
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1.9% |
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Paragon Associates, J.V.(20)
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1,176,936 |
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3.8% |
|
|
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1,176,936 |
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|
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None |
|
|
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None |
|
Prothro Family Limited Partnership Ltd.(21)
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184,115 |
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|
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* |
|
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184,115 |
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None |
|
|
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None |
|
Public Employee Retirement System of Idaho(22)
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613,700 |
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|
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2.0% |
|
|
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613,700 |
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|
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None |
|
|
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None |
|
SRB Greenway Capital, L.P.(23)
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63,723 |
|
|
|
* |
|
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63,723 |
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|
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None |
|
|
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None |
|
SRB Greenway Capital (QP), L.P.(23)
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454,954 |
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1.5% |
|
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454,954 |
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None |
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None |
|
SRB Greenway Offshore Operating Fund, L.P.(23)
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28,430 |
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* |
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28,430 |
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None |
|
|
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None |
|
Walker Smith Capital, L.P.(23)
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85,906 |
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* |
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85,906 |
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None |
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|
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None |
|
Walker Smith Capital (QP), L.P.(23)
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439,539 |
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1.4% |
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439,539 |
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None |
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None |
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Walker Smith International Fund, Ltd.(23)
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659,000 |
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2.2% |
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|
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659,000 |
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None |
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None |
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Weber Capital Partners, L.P.(24)
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264,630 |
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* |
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239,530 |
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|
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25,100 |
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* |
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Winters, Robert K.(25)
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3,060 |
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* |
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3,060 |
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|
|
None |
|
|
|
None |
|
WPG Opportunistic Value Fund, L.P.(26)
|
|
|
449,286 |
|
|
|
1.5% |
|
|
|
449,286 |
|
|
|
None |
|
|
|
None |
|
WPG Opportunistic Value Overseas, L.P. (27)
|
|
|
298,450 |
|
|
|
* |
|
|
|
298,450 |
|
|
|
None |
|
|
|
None |
|
WS Opportunity Fund (QP), L.P.(23)
|
|
|
92,610 |
|
|
|
* |
|
|
|
92,610 |
|
|
|
None |
|
|
|
None |
|
WS Opportunity Fund International, Ltd.(23)
|
|
|
126,007 |
|
|
|
* |
|
|
|
126,007 |
|
|
|
None |
|
|
|
None |
|
WS Opportunity Fund L.P.(23)
|
|
|
88,969 |
|
|
|
* |
|
|
|
88,969 |
|
|
|
None |
|
|
|
None |
|
Total(28)
|
|
|
9,187,874 |
|
|
|
26.5% |
|
|
|
7,460,878(29 |
) |
|
|
1,726,996 |
|
|
|
5.6% |
|
|
|
|
|
(1) |
The names of the selling securityholders and the number of
securities held by the selling securityholders may be amended
subsequent to the date of the Prospectus pursuant to
Rule 424(b)(3) of the Securities Act of 1933. |
|
|
(2) |
Percentage ownership is based on 30,147,894 shares of our
common stock outstanding as of March 1, 2006. Shares of
common stock subject to options, warrants or issuable upon
conversion of convertible securities currently exercisable or
exercisable within 60 days from March 1, 2006 are
deemed outstanding for computing the percentage ownership of the
person holding the options, warrants or convertible securities,
but are not deemed outstanding for computing the percentage of
any other person. Warrants issued in our March 2005 equity
financing are currently exercisable, and |
13
|
|
|
|
|
therefore the shares underlying those warrants are included for
purposes of determining beneficial ownership. |
|
|
(3) |
Assumes the sale of all shares offered in this Prospectus and no
other purchases or sales of our common stock. |
|
|
(4) |
Richard Shuster has dispositive and voting power over the shares
held by Arbor Partners, L.P. |
|
|
(5) |
These shares are beneficially owned by Cimarron Biomedical
Equity Master Fund, L.P., formerly known as Cimarron Overseas
Equity Master Fund, L.P. Cimarron Biomedical Equity Master Fund,
L.P. is wholly owned by Cimarron Biomedical Equity Fund, L.P.,
formerly known as Cimarron Overseas Equity Fund (QP), L.P.
Cimarron Biomedical Investors, L.P. is the general partner of
Cimarron Biomedical Equity Fund, L.P. Cimarron Global
Management, LLC is the general partner of Cimarron Biomedical
Investors, L.P. J.H. Cullum Clark is the sole principal of
Cimarron Global Management, LLC, and in such capacity has
dispositive and voting power over the shares beneficially owned
by Cimarron Biomedical Equity Master Fund, L.P. Mr. Clark
expressly disclaims beneficial ownership of the shares
beneficially owned by Cimarron Biomedical Equity Master Fund,
L.P. |
|
|
(6) |
The Managing Directors of Zesiger Capital Group LLP have
dispositive and voting power over the shares held by City of
Milford Pension & Retirement Fund. The Managing
Directors of Zesiger Capital Group LLP currently are Albert L.
Zesiger, Barrie R. Zesiger, Donald Devivo, James F. Cleary, John
Kayola and Robert K. Winters. |
|
|
(7) |
The Managing Directors of Zesiger Capital Group LLP have
dispositive and voting power over the shares held by City of
Stamford Firemens Pension Fund. The Managing Directors of
Zesiger Capital Group LLP currently are Albert L. Zesiger,
Barrie R. Zesiger, Donald Devivo, James F. Cleary, John Kayola
and Robert K. Winters. |
|
|
(8) |
John R. Daniels and AnnaMarie Daniels have dispositive and
voting power over the shares held by the Daniels Family
Trust UTA 1993. Dr. Daniels is one of our directors.
In addition to the shares shown in the table above,
Dr. Daniels has the right to acquire 40,000 shares
upon the exercise of options that are exercisable within
60 days of March 1, 2006. |
|
|
(9) |
Craig T. Davenport, who is our Chairman and Chief Executive
Officer, has dispositive and voting power over the shares held
by Charles Schwab & Co Inc. FBO Craig T. Davenport Roth
Conversion IRA. In addition to the shares shown in the table
above, Mr. Davenport has the right to acquire
581,250 shares upon the exercise of options that are
exercisable within 60 days of March 1, 2006. |
|
|
(10) |
Mr. Davenport has dispositive and voting power over the
shares held by Charles Schwab & Co Inc. FBO Craig T.
Davenport Sep IRA. In addition to the shares shown in the table
above, Mr. Davenport has the right to acquire
581,250 shares upon the exercise of options that are
exercisable within 60 days of March 1, 2006. |
|
(11) |
Hayden R. Fleming and LaDonna M. Fleming have dispositive and
voting power over the shares held by the Hayden R. Fleming
Revocable Trust dated as of July 19, 1995. |
|
(12) |
Eugene M. Weber has dispositive and voting power over the shares
held by GW2001 Fund, L.P. |
|
(13) |
Larry Haimovitch has dispositive and voting power over the
shares held by the Larry Haimovitch 2000 Separate Property
Revocable Trust. |
|
(14) |
The Managing Directors of Zesiger Capital Group LLP have
dispositive and voting power over the shares held by JP Morgan
Trust Co. (Bahamas) Limited as Trustee U/ A/ D 11/3/93. The
Managing Directors of Zesiger Capital Group LLP currently are
Albert L. Zesiger, Barrie R. Zesiger, Donald Devivo, James F.
Cleary, John Kayola and Robert K. Winters. |
|
(15) |
Shares Beneficially Owned Prior to the Offering and
Shares Beneficially Owned After the Offering include
111,100 shares held by Broadfin Healthcare Fund L.P.,
over which Kevin Kotler has dispositive and voting power. |
|
(16) |
Ross DeMont and David Cohen have dispositive and voting power
for the shares held by Midwood Capital Partners QP, L.P. |
14
|
|
(17) |
Ross DeMont and David Cohen have dispositive and voting power
for the shares held by Midwood Capital Partners, L.P. |
|
(18) |
The Managing Directors of Zesiger Capital Group LLP have
dispositive and voting power over the shares held by Norwalk
Employees Pension Plan. The Managing Directors of Zesiger
Capital Group LLP currently are Albert L. Zesiger, Barrie R.
Zesiger, Donald Devivo, James F. Cleary, John Kayola and Robert
K. Winters. |
|
(19) |
William J. Nydam is our President and Chief Operating Officer.
Shares Beneficially Owned Prior to the Offering and
Shares Beneficially Owned After the Offering include
572,917 shares underlying options that are exercisable
within 60 days of March 1, 2006. |
|
(20) |
Bradbury Dyer III has dispositive and voting power over the
shares held by Paragon Associates J.V. |
|
(21) |
J.H. Cullum Clark has dispositive and voting power over the
shares held by Prothro Family Limited Partnership LP. |
|
(22) |
The Managing Directors of Zesiger Capital Group LLP have
dispositive and voting power over the shares held by Public
Employee Retirement System of Idaho. The Managing Directors of
Zesiger Capital Group LLP currently are Albert L. Zesiger,
Barrie R. Zesiger, Donald Devivo, James F. Cleary, John Kayola
and Robert K. Winters. |
|
(23) |
WS Capital, L.L.C. (WS Capital) is the general
partner of WS Capital Management, L.P. (WSC
Management). WSC Management is the general partner of
Walker Smith Capital, L.P. (WSC) and Walker Smith
Capital (Q.P.), L.P. (WSCQP) and is the agent and
attorney-in-fact for
Walker Smith International Fund, Ltd., a British Virgin Islands
exempted company (WS International). WSV Management,
L.L.C. (WSV) is the general partner of WS Ventures
Management, L.P. (WSVM). WSVM is the general partner
of WS Opportunity Fund, L.P. (WSO) and WS
Opportunity Fund (Q.P.), L.P. (WSOQP) and is the
agent and
attorney-in-fact for WS
Opportunity Fund International, Ltd. (WSO
International). BC Advisors, LLC (BCA) is the
general partner of SRB Management, L.P. (SRB
Management). SRB Management is the general partner of SRB
Greenway Capital, L.P. (SRBGC), SRB Greenway Capital
(Q.P.), L.P. (SRBQP) and SRB Greenway Offshore
Operating Fund, L.P. (SRB Offshore). Reid S. Walker
and G. Stacy Smith are principals of WS Capital and WSV, and
Patrick P. Walker is a principal of WSV. Through their control
of WS Capital, Messrs. R. Walker and Smith share voting and
investment control over the portfolio securities of each of WSC,
WSCQP and WS International. Through their control of WSV,
Messrs. R. Walker, Smith and P. Walker share voting
and investment control over the portfolio securities of each of
WSO, WSOQP and WSO International. Steven R. Becker is the sole
principal of BCA. Through his control of BCA, Mr. Becker
possesses sole voting and investment control over the portfolio
securities of each of SRBGC, SRBQP and SRB Offshore. Pursuant to
a letter agreement, Steven R. Becker may collaborate with Reid
S. Walker, G. Stacy Smith and Patrick P. Walker on investment
strategies from time to time. |
|
(24) |
Eugene M. Weber has dispositive and voting power for the shares
held by Weber Capital Partners, L.P. |
|
(25) |
As noted above, Robert K. Winters, as a Managing Director of
Zesiger Capital Group LLP, also has voting and dispositive power
over the shares held by City of Milford Pension &
Retirement Fund, City of Stamford Firemens Pension Fund,
JP Morgan Trust Co. (Bahamas) Limited as Trustee U/A/ D 11/3/93,
Norwalk Employees Pension Plan and Public Employee
Retirement System of Idaho. |
|
(26) |
Richard Shuster and Daniel Vandivent have dispositive and voting
power for the shares held by WPG Opportunistic Value Fund, L.P. |
|
(27) |
Richard Shuster and Daniel Vandivent have dispositive and voting
power for the shares held by WPG Opportunistic Value Overseas,
L.P. |
|
(28) |
Shares Beneficially Owned Prior to the Offering and
Shares Offered by this Prospectus include all
3,944,748 shares underlying the warrants issued in our
March 2005 equity financing, all of which |
15
|
|
|
are currently exercisable. In addition, Shares
Beneficially Owned Prior to the Offering and Shares
Beneficially Owned After the Offering include
572,917 shares underlying options that are exercisable
within 60 days of March 1, 2006. |
|
(29) |
Of the 9,580,126 shares originally registered in the
registration statement of which this prospectus is a part, the
selling securityholders have sold an aggregate of
2,119,248 shares. As a result, an aggregate of
7,460,878 shares are shown as offered by this prospectus,
which consist of (i) an aggregate of 3,516,130 shares
of our common stock issued outright in our March 2005 equity
financing, and (ii) an aggregate of 3,944,748 shares
of common stock underlying the warrants issued in our March 2005
equity financing. |
March 2005 Equity Financing
On March 10, 2005, we entered into a Purchase Agreement and
a Registration Rights Agreement in connection with a private
placement of our securities to the selling securityholders for
aggregate gross proceeds of $15.6 million. Pursuant to the
terms of the Purchase Agreement, we sold a total of
(i) 5,635,378 shares of our common stock (the
Shares), and (ii) warrants (the
Warrants) to purchase an aggregate of
3,944,748 shares of our common stock (Warrant
Shares).
Pursuant to the Purchase Agreement, each of Endocare, on the one
hand, and the selling securityholders, on the other hand, made
representations and warranties regarding matters that are
customarily included in financings of this nature. The Purchase
Agreement also contained certain conditions to closing, which
were satisfied prior to the closing, which occurred on
March 11, 2005.
The securities sold pursuant to the Purchase Agreement have not
yet been registered under the Securities Act of 1933 and may not
be offered or sold in the United States in the absence of an
effective registration statement or exemption from applicable
registration requirements. Pursuant to the Registration Rights
Agreement, we were required to file a registration statement on
Form S-2 within
30 days following the closing for purposes of registering
the resale of the Shares and the Warrant Shares. The
Registration Rights Agreement provides that if the registration
statement is not filed with the SEC within 30 days after
the closing, then we are required to make pro-rata payments to
each of the selling securityholders in an amount equal to 1% of
the aggregate purchase price paid by each selling
securityholders for the Shares for each
30-day period following
the filing deadline. In addition, we have agreed to make similar
payments to the selling securityholders if the registration
statement is not declared effective by the SEC prior to the
earlier of: (i) if the SEC informs Endocare that no review
of the registration statement will be made, then five business
days after the later of (A) the date on which the SEC shall
have informed Endocare that no review of the registration
statement will be made, or (B) the date on which we shall
have filed our internal control report pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002; or
(ii) the ninetieth day after the closing date. Pursuant to
this provision, we incurred an aggregate of approximately
$600,000 of liquidated damages in 2005 because of a delay in the
original effectiveness of the registration statement of which
this prospectus is a part.
Pursuant to the Registration Rights Agreement, each of Endocare,
on the one hand, and the selling securityholders, on the other
hand, have agreed to indemnify the other party and certain
affiliates against certain liabilities related to the
registration statement.
Pursuant to the terms of the Purchase Agreement, each of the
selling securityholders was issued a Series A Warrant to
purchase shares of common stock at an exercise price of
$3.50 per share and a Series B Warrant to purchase
shares of common stock at an exercise price of $4.00 per
share. The number of shares underlying each Series A
Warrant is equal to 35% of the number of shares sold to the
respective selling securityholder in the transaction. Similarly,
the number of shares underlying each Series B Warrant is
equal to 35% of the number of shares sold to the respective
selling securityholder in the transaction. For a detailed
description of the Warrants, see the section of this prospectus
entitled Description of Capital Stock
Series A Warrants and Series B Warrants.
16
In the Purchase Agreement, each of the selling securityholders
agreed that, prior to the earliest to occur of (i) the
termination of the Purchase Agreement, (ii) the effective
date of the registration statement covering the Shares and the
Warrant Shares or (iii) the effectiveness deadline
described above, such selling securityholder will not, and will
cause its trading affiliates not to, engage, directly or
indirectly, in effecting or agreeing to effect any short sale,
whether or not against the box, establish any put
equivalent position (as defined in
Rule 16a-1(h)
under the Securities Exchange Act of 1934) with respect to our
common stock, grant any other right (including, without
limitation, any put or call option) with respect to our common
stock or with respect to any security that includes, relates to
or derives any significant part of its value from our common
stock or otherwise seek to hedge its position in the Shares and
the Warrant Shares. Each of the selling securityholders also
agreed not to sell, contract to sell, grant any option to
purchase, transfer the economic risk of ownership in, make any
short sale of, pledge or otherwise transfer or dispose of any
interest in any of the Shares or Warrant Shares until after the
date of our conference call regarding our financial results for
the quarter ending March 31, 2005, but in any event no
later that June 20, 2005.
Two members of our management team, Chairman and Chief Executive
Officer Craig T. Davenport and President and Chief Operating
Officer William J. Nydam, made personal investments in the
transaction in the amounts of $184,999.99 and $499,998.85,
respectively. In addition, a member of our board of directors,
John R. Daniels, M.D., invested $299,999.31 in the
transaction.
In January 2005, our board of directors approved a
recommendation from our management to instruct our investment
bank, Seven Hills Partners, to evaluate the potential for
completing an equity round of financing. With that decision, our
management and several board members expressed interest in
participating in the round if such was executed. In order to
ensure a conflict of interest was avoided, our board established
a Special Committee to manage and negotiate the terms for the
round without Messrs. Davenport and Nydam and any
participating board member being involved in the negotiations.
The Special Committee negotiated the terms of this transaction
with participating investors. Messrs. Davenport and Nydam
and the board members who were not on the Special Committee were
given the opportunity to participate at the terms agreed upon by
the Special Committee and the investors.
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 51,000,000 shares of capital
stock, consisting of 50,000,000 shares of common stock,
$0.001 par value per share, and 1,000,000 shares of
preferred stock, $0.001 par value per share, of which
250,000 shares have been designated Series A Junior
Participating Preferred Stock.
The following is a summary of the material terms of our capital
stock. You should refer to our Restated Certificate of
Incorporation, as amended, and Amended and Restated Bylaws and
the agreements described below for more detailed information.
Common Stock
As of March 1, 2006, 30,147,894 shares of our common
stock were issued and outstanding. Holders of our common stock
are entitled to one vote per share on all matters to be voted
upon by the stockholders. Subject to limitations under Delaware
law and preferences that may apply to any outstanding shares of
preferred stock, holders of our common stock are entitled to
receive ratably such dividends or other distribution, if any, as
may be declared by our board of directors out of funds legally
available therefor. In the event of our liquidation, dissolution
or winding up, holders of our common stock are entitled to share
ratably in all assets remaining after payment of liabilities,
subject to the liquidation preference of any outstanding
preferred stock. The common stock has no preemptive, conversion
or other rights to subscribe for additional securities. There
are no redemption or sinking fund provisions applicable to our
common stock. The rights, preferences and privileges of holders
of common stock are subject to, and may be adversely affected
by, the rights of the holders of shares of any series of
preferred stock that we may designate and issue in the future.
All outstanding shares of our common stock are, and all shares of
17
common stock to be outstanding upon completion of the offering
will be, validly issued, fully paid and nonassessable.
Preferred Stock
There are no shares of our preferred stock currently issued and
outstanding. We may issue preferred stock from time to time in
one or more series. Our board of directors is authorized to
determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued
series of preferred stock, and, within the limitations or
restrictions stated in any resolution or resolutions of the
board originally fixing the number of shares constituting any
series, to increase or decrease, not below the number of shares
of any series then outstanding, the number of shares of any
series subsequent to the issuance of shares of that series, to
determine the designation and par value of any series of
preferred stock and to fix the number of shares of any series.
Our board may authorize and issue preferred stock with voting or
conversion rights that could adversely affect the voting power
or other rights of the holders of our common stock. In addition,
the issuance of our preferred stock may have the effect of
delaying, deferring or preventing a change in control. In
connection with our adoption of the stockholder rights plan
described below, our board of directors designated
250,000 shares of our preferred stock as Series A
Junior Participating Preferred Stock.
Stockholder Rights Plan
In April 1999, we adopted a stockholder rights plan in which
rights to purchase shares of Series A Junior Participating
Preferred Stock (Series A Preferred Stock) were
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 Endocare or
to deprive our stockholders of their interest in the long-term
value of Endocare. These rights seek to achieve these goals by
forcing a potential acquirer to negotiate with our board of
directors (or go to court to try to force the board of directors
to redeem the rights), because only the board of directors can
redeem the rights and allow the potential acquirer to acquire
our shares without suffering very significant dilution. However,
these rights also could deter or prevent transactions that
stockholders deem to be in their interests, and could reduce the
price that investors or an acquirer might be willing to pay in
the future for shares of our common stock, as noted above under
Risk Factors.
Each right entitles the registered holder to purchase one
one-thousandth of a share (a Unit) of our
Series A Preferred Stock at a price of $25.00 per
Unit, subject to adjustment. Units of Series A Preferred
Stock purchasable upon exercise of the rights will not be
redeemable. Each Unit of Series A Preferred Stock will be
entitled to an aggregate dividend of 1,000 times the dividend
declared per share of common stock. In the event of liquidation,
the holders of the Units of Series A Preferred Stock will
be entitled to an aggregate payment of 1,000 times the payment
made per share of common stock. Each Unit of Series A
Preferred Stock will have 1,000 votes, voting together with the
common stock. Finally, in the event of any merger, consolidation
or other transaction in which shares of common stock are
exchanged, each Unit of Series A Preferred Stock will be
entitled to receive 1,000 times the amount received per share of
common stock. These rights are protected by customary
anti-dilution provisions.
The rights will be exercisable only if a person or group
acquires 15 percent or more of our 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 percent or more of our common stock.
At any time within ten business days after the date of a public
announcement that a person or group has acquired 15% or more of
our common stock (subject to certain exceptions), our board of
directors may redeem the rights at a price of one cent per
right. The rights will expire at the close of business on
April 15, 2009, unless the expiration date is extended or
unless the rights are earlier redeemed or exchanged by Endocare.
18
Series A Warrants and Series B Warrants
1,972,374 of the shares of common stock offered by the selling
securityholders in this prospectus are issuable upon the
exercise of Series A Warrants that we issued to the selling
securityholders in our March 2005 equity financing. An
additional 1,972,374 of the shares of common stock offered by
the selling securityholders in this prospectus are issuable upon
the exercise of Series B Warrants that we issued to the
selling securityholders in our March 2005 equity financing. The
initial exercise price of the Series A warrants is
$3.50 per share and the initial exercise price of the
Series B warrants is $4.00 per share. The warrants
expire on March 11, 2010. The warrants are exercisable
solely for cash, except in limited circumstances after the first
anniversary of the closing date if there is not an effective
registration statement covering the resale of the shares
underlying the warrants.
The warrants provide for adjustment of the number and kind of
securities purchasable upon exercise of the warrants, as well as
for adjustment of the per share exercise price, upon the
occurrence of certain specified events. These specified events
include, without limitation, the payment by Endocare of a
dividend or a distribution on our common stock in shares of
common stock, the consolidation or merger of Endocare with
another entity in which Endocare is not the surviving entity,
and the recapitalization, reclassification or reorganization of
our capital stock. The warrants also contain a weighted-average
anti-dilution adjustment provision which provides for an
adjustment to the per share exercise price in the event that we
issue shares of our common stock for per share consideration
that is less than the exercise price then in effect, subject to
customary exceptions.
Each warrant is callable by Endocare at a price of
$0.01 per share underlying such warrant if shares of our
common stock trade above certain dollar thresholds ($6.50 for
the Series A Warrants and $7.50 for the Series B
Warrants) for 20 consecutive trading days commencing on any date
after the effectiveness of the registration statement required
by the Registration Rights Agreement described above under
Selling Securityholders March 2005 Equity
Financing.
Transfer Agent and Registrar; Market
The transfer agent and registrar for our common stock is
U.S. Stock Transfer Corporation. Our common stock is traded
on the OTCBB, under the symbol ENDO.
PLAN OF DISTRIBUTION
The selling securityholders, which as used herein includes
donees, pledgees, transferees or other
successors-in-interest
selling shares of common stock or interests in shares of common
stock received after the date of this prospectus from a selling
securityholder as a gift, pledge, partnership distribution or
other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of common stock
or interests in shares of common stock on any stock exchange,
market or trading facility on which the shares are traded or in
private transactions. These dispositions may be at fixed prices,
at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices
determined at the time of sale, or at negotiated prices.
The selling securityholders may use any one or more of the
following methods when disposing of shares or interests therein:
|
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|
|
ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers; |
|
|
|
block trades in which the broker-dealer will attempt to sell the
shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction; |
|
|
|
purchases by a broker-dealer as principal and resale by the
broker-dealer for its account; |
|
|
|
an exchange distribution in accordance with the rules of the
applicable exchange; |
|
|
|
privately negotiated transactions; |
19
|
|
|
|
|
short sales effected after the date the registration statement
of which this Prospectus is a part is declared effective by the
SEC; |
|
|
|
through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise; |
|
|
|
broker-dealers may agree with the selling securityholders to
sell a specified number of such shares at a stipulated price per
share; |
|
|
|
a combination of any such methods of sale; and |
|
|
|
any other method permitted pursuant to applicable law. |
The selling securityholders may, from time to time, pledge or
grant a security interest in some or all of the shares of common
stock owned by them and, if they default in the performance of
their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock, from time to time,
under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the
Securities Act amending the list of selling securityholders to
include the pledgee, transferee or other successors in interest
as selling securityholders under this prospectus. The selling
securityholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or
other successors in interest will be the selling beneficial
owners for purposes of this prospectus.
In connection with the sale of our common stock or interests
therein, the selling securityholders may enter into hedging
transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume.
The selling securityholders may also sell shares of our common
stock short and deliver these securities to close out their
short positions, or loan or pledge the common stock to
broker-dealers that in turn may sell these securities. The
selling securityholders may also enter into option or other
transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which
require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares
such broker-dealer or other financial institution may resell
pursuant to this prospectus (as supplemented or amended to
reflect such transaction).
The aggregate proceeds to the selling securityholders from the
sale of the common stock offered by them will be the purchase
price of the common stock less discounts or commissions, if any.
Each of the selling securityholders reserves the right to accept
and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be
made directly or through agents. We will not receive any of the
proceeds from this offering. Upon any exercise of the warrants
by payment of cash, however, we will receive the exercise price
of the warrants.
The selling securityholders also may resell all or a portion of
the shares in open market transactions in reliance upon
Rule 144 under the Securities Act of 1933, provided that
they meet the criteria and conform to the requirements of that
rule.
The selling securityholders and any underwriters, broker-dealers
or agents that participate in the sale of the common stock or
interests therein may be underwriters within the
meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any
resale of the shares may be underwriting discounts and
commissions under the Securities Act. Selling securityholders
who are underwriters within the meaning of
Section 2(11) of the Securities Act will be subject to the
prospectus delivery requirements of the Securities Act.
To the extent required, the shares of our common stock to be
sold, the names of the selling securityholders, the respective
purchase prices and public offering prices, the names of any
agents, dealer or underwriter, any applicable commissions or
discounts with respect to a particular offer will be set forth
in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement that
includes this prospectus.
20
In order to comply with the securities laws of some states, if
applicable, the common stock may be sold in these jurisdictions
only through registered or licensed brokers or dealers. In
addition, in some states the common stock may not be sold unless
it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and
is complied with.
We have advised the selling securityholders that the
anti-manipulation rules of Regulation M under the Exchange
Act may apply to sales of shares in the market and to the
activities of the selling securityholders and their affiliates.
In addition, we will make copies of this prospectus (as it may
be supplemented or amended from time to time) available to the
selling securityholders for the purpose of satisfying the
prospectus delivery requirements of the Securities Act. The
selling securityholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares
against certain liabilities, including liabilities arising under
the Securities Act.
We have agreed to indemnify the selling securityholders against
liabilities, including liabilities under the Securities Act and
state securities laws, relating to the registration of the
shares offered by this prospectus.
We have agreed with the selling securityholders to keep the
registration statement of which this prospectus constitutes a
part effective until the earlier of (1) such time as all of
the shares covered by this prospectus have been disposed of
pursuant to and in accordance with the registration statement or
(2) the date on which the shares may be sold pursuant to
Rule 144(k) of the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the
issuance of the common stock offered hereby have been passed
upon by Morrison & Foerster LLP, San Diego,
California.
EXPERTS
Ernst & Young LLP, independent registered public
accounting firm, has audited our consolidated financial
statements and schedule included in our Annual Report on
Form 10-K for the
year ended December 31, 2005, and managements
assessment of the effectiveness of internal control over
financial reporting as of December 31, 2005, as set forth
in their reports, which are incorporated by reference in this
prospectus and elsewhere in the registration statement. Our
financial statements and schedule and managements
assessment are incorporated by reference in reliance on
Ernst & Young LLPs reports, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-2,
including exhibits and schedules, and a post-effective amendment
on Form S-3 to the
registration statement, in connection with the common stock to
be sold in this offering. This prospectus is part of the
registration statement and does not contain all the information
included in the registration statement. For further information
about us and the common stock to be sold in this offering,
please refer to the registration statement. When a reference is
made in this prospectus to any contract, agreement or other
document, the reference may not be complete and you should refer
to the copy of that contract, agreement or other document filed
as an exhibit to the registration statement on to one of our
previous SEC filings.
We also file annual, quarterly and special reports, proxy
statements, and other information with the SEC. You may read and
copy the registration statement on any other document we file
with the SEC at the SECs public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois.
You can request copies of these documents by writing to the SEC
and paying a fee for the copying cost. Please call the SEC at
l-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from the
SECs web site at www.sec.gov.
21
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference into
this prospectus certain information that we file with it. This
means that we can disclose important information to you by
referring you to another document that we filed separately with
the SEC. The information in this prospectus updates (and, to the
extent of any conflict, supersedes) information incorporated by
reference that we have filed with the SEC prior to the date of
this prospectus, while information that we file with the SEC
after the date of this prospectus that is incorporated by
reference will automatically update (and, to the extent of any
conflict, supersede) the information in this prospectus. You
should read the information incorporated by reference because it
is an important part of this prospectus.
We incorporate by reference the following documents that we have
filed, or in the future will file, with the SEC:
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1. Our current report on
Form 8-K filed
with the SEC on January 12, 2006; |
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2. Our current report on
Form 8-K filed
with the SEC on January 18, 2006; |
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3. Our current report on
Form 8-K filed
with the SEC on February 16, 2006; |
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4. Our current report on
Form 8-K filed
with the SEC on March 1, 2006; |
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5. Our current report on
Form 8-K filed
with the SEC on March 14, 2006; |
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6. Our annual report on
Form 10-K filed
with the SEC on March 16, 2006; |
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7. The description of our common stock contained in the
Registration Statement on
Form 10-SB filed
under Section 12(g) of the Exchange Act filed with the SEC
on November 14, 1995, including any subsequent amendment or
report filed for the purpose of amending such description; |
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8. The description of the stock purchase rights under our
stockholder rights plan contained in the Registration Statement
on Form 8-A filed
under Section 12(g) of the Exchange Act filed with the SEC
on June 28, 2005, including any subsequent amendment or
report filed for the purpose of amending such
description; and |
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9. All documents filed by us with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this prospectus. |
The documents incorporated by reference in this prospectus may
be obtained from us at no cost. You may obtain a copy of the
documents by submitting a written request to Endocares
Corporate Secretary at 201 Technology Drive, Irvine, California
92618 or by calling Endocare at (949) 450-5400. Additional
information about us is available at our website located at
www.endocare.com. Information contained on our website is
not incorporated into, and does not constitute any part of, this
prospectus.
22
9,580,126 Shares
Endocare, Inc.
Common Stock
PROSPECTUS
,
2006
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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Item 14. |
Other Expenses of Issuance and Distribution. |
The following is an estimate, subject to future contingencies,
of the expenses to be incurred by us in connection with the
issuance and distribution of the securities being registered.
None of the following expenses will be borne by the selling
securityholders.
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Registration Fee
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$ |
3,777 |
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Legal Fees and Expenses
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150,000 |
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Accounting Fees and Expenses
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115,000 |
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Printing and Engraving Fees
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Listing Fees
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Transfer Agents Fees
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700 |
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Miscellaneous
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Total
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$ |
269,477 |
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Item 15. |
Indemnification of Directors and Officers. |
Section 145 of the Delaware Corporation Law provides that a
Delaware corporation may indemnify any person against expenses,
judgments, fines and settlements actually and reasonably
incurred by any such person in connection with a threatened,
pending or completed action, suit or proceeding in which he is
involved by reason of the fact that he is or was a director,
officer, employee or agent of such corporation, provided that
(i) he acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the
corporation, and (ii) with respect to any criminal action
or proceeding, he had no reasonable cause to believe his conduct
was unlawful. If the action or suit is by or in the name of the
corporation, the corporation may indemnify such person against
expenses actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation,
except that no indemnification may be made in respect to any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation for negligence or
misconduct in the performance of his duty to the corporation,
unless and only to the extent that the Delaware Court of
Chancery or the court in which the action or suit is brought
determines upon application that, despite the adjudication of
liability but in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for
such expenses as the court deems proper.
As permitted by Section 102 of the Delaware General
Corporation Law, the Company has adopted provisions in its
restated certificate of incorporation and amended and restated
bylaws that limit or eliminate the personal liability of its
directors for a breach of their fiduciary duty of care as a
director. The duty of care generally requires that, when acting
on behalf of the Company, directors exercise an informed
business judgment based on all material information reasonably
available to them. Consequently, a director will not be
personally liable to the Company or its stockholders for
monetary damages or breach of fiduciary duty as a director,
except for liability for:
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any breach of the directors duty of loyalty to the Company
or its stockholders; |
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any act or omission not in good faith or that involves
intentional misconduct or a knowing violation of law; |
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any act related to unlawful stock repurchases, redemptions or
other distributions or payment of dividends; or |
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any transaction from which the director derived an improper
personal benefit. |
II-1
These limitations of liability do not affect the availability of
equitable remedies such as injunctive relief or rescission.
As permitted by Section 145 of the Delaware General
Corporation Law, the Companys amended and restated bylaws
provide that:
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the Company may indemnify its directors, officers and employees
to the fullest extent permitted by the Delaware General
Corporation Law, subject to limited exceptions; |
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the Company may advance expenses to its directors, officers and
employees in connection with a legal proceeding to the fullest
extent permitted by the Delaware General Corporation Law,
subject to limited exceptions; and |
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the rights provided in its amended and restated bylaws are not
exclusive. |
We have entered into indemnification agreements with each of our
directors and executive officers, as well as with certain
employees and consultants. These indemnification agreements
provide that we hold harmless and indemnify each such director,
officer, employee and consultant to the fullest extent
authorized or permitted by law. In addition, subject to certain
conditions, these indemnification agreements provide for payment
of expenses (including attorneys fees) actually and
reasonably incurred in connection with any threatened, pending
or completed proceeding to which the indemnified director,
officer or employee is, was or at any time becomes a party, or
is threatened to be made a party, by reason of the fact that he
or she is, was or at any time becomes a director, officer,
employee or agent of us, or is or was serving or at any time
serves at the request of us as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. In addition, we have
purchased policies of directors and officers
liability insurance, which insure our directors and officers
against the cost of defense, settlement or payment of a judgment
in some circumstances.
A list of exhibits filed with this registration statement
amendment on
Form S-3 is set
forth on the Exhibit Index following the signature page.
The Exhibit Index is hereby incorporated by reference
herein.
(a) The undersigned registrant hereby undertakes:
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(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement: |
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(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933; |
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(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate
offering price set forth in the Calculation of
Registration Fee table in the effective registration
statement; and |
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(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in this registration statement; |
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provided, however, that paragraphs (a)(1)(i),
(a)(1)(ii) and (a)(1)(iii) do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in |
II-2
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reports filed with or furnished to the SEC by the registrant
pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is
part of the registration statement. |
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(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof. |
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(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering. |
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(4) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser: |
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(i) If the registrant is relying on Rule 430B: |
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(A) Each prospectus filed by the registrant pursuant to
Rule 424(b)(3) shall be deemed to be part of the
registration statement as of the date the filed prospectus was
deemed part of and included in the registration
statement; and |
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(B) Each prospectus required to be filed pursuant to
Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering
made pursuant to Rule 415(a)(1)(i), (vii), or (x) for
the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed
to be part of and included in the registration statement as of
the earlier of the date such form of prospectus is first used
after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration
statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is
part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or
made in any such document immediately prior to such effective
date; or |
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(ii) If the registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness.
Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such date of first use. |
(b) The undersigned registrant hereby further undertakes
that, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the registrants
annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to
the securities
II-3
offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
existing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on
Form S-3 and has
duly caused this post-effective amendment no. 1 to registration
statement (no.
333-123866) to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Irvine, State of California, on
March 20, 2006.
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By: |
/s/ Craig T. Davenport |
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Craig T. Davenport |
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Chairman and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment no. 1 to registration statement (no.
333-123866) has been
signed by the following persons in the capacities and on the
dates indicated:
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Signature |
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Title |
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Date |
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/s/ Craig T. Davenport
Craig T. Davenport |
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Chairman and Chief Executive Officer (principal executive
officer) |
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March 20, 2006 |
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/s/ Michael R. Rodriguez
Michael R. Rodriguez |
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Senior Vice President, Finance and Chief Financial Officer
(principal financial and accounting officer) |
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March 20, 2006 |
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*
John R. Daniels, M.D. |
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Director |
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March 20, 2006 |
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*
David L. Goldsmith |
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Director |
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March 20, 2006 |
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*
Eric S. Kentor |
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Director |
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March 20, 2006 |
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*
Terrence A. Noonan |
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Director |
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March 20, 2006 |
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*
Michael J. Strauss, M.D. |
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Director |
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March 20, 2006 |
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*
Thomas R. Testman |
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Director |
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March 20, 2006 |
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*By: |
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/s/ Michael R. Rodriguez
Michael R. Rodriguez
Attorney-in-Fact |
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II-5
EXHIBIT INDEX
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Exhibit No. |
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Description |
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2 |
.1(1) |
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Stock Purchase Agreement, dated as of January 13, 2006, by
and among Plethora Solutions Holdings plc, Endocare, Inc. 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. |
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2 |
.2(2) |
|
$1,425,000 Secured Convertible Promissory Note, dated as of
February 10, 2006, from Plethora Solutions Holdings plc to
Endocare, Inc. |
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4 |
.1(3) |
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Form of Stock Certificate. |
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4 |
.2(4) |
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Form of Series A Warrant. |
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4 |
.3(4) |
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Form of Series B Warrant. |
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4 |
.4(5) |
|
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. |
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4 |
.5(6) |
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Amendment No. 1 to Rights Agreement, dated as of
September 24, 2005, between the Company and U.S. Stock
Transfer Corporation. |
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5 |
.1(7) |
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Opinion of Morrison & Foerster LLP |
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23 |
.1 |
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Consent of Independent Registered Public Accounting Firm. |
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23 |
.2(7) |
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Consent of Morrison & Foerster LLP (included in
Exhibit 5.1). |
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24 |
.1(8) |
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Power of Attorney for Directors Other than David L. Goldsmith. |
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24 |
.2 |
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Power of Attorney for David L. Goldsmith. |
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(1) |
Previously filed as an exhibit to our
Form 8-K filed on
January 18, 2006. |
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(2) |
Previously filed as an exhibit to our
Form 10-K filed on
March 16, 2006. |
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(3) |
Previously filed as an exhibit to our
Form 10-K for the
year ended December 31, 1995. |
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(4) |
Previously filed as an exhibit to our
Form 8-K filed on
March 16, 2005. |
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(5) |
Previously filed as an exhibit to our
Form 8-K filed on
June 3, 1999. |
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(6) |
Previously filed as an exhibit to our
Form 8-K filed on
June 28, 2005. |
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(7) |
Previously filed as an exhibit to our
Form S-2 filed on
April 4, 2005. |
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(8) |
Included on the signature page of the
Form S-2 filed on
April 4, 2005. |
II-6