1003464--3/16/2007--ENDOCARE

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Our independent auditor has issued an unqualified opinion with an explanatory paragraph, to the effect that there is substantial doubt about our ability to continue as a going concern. The sale of our common stock to Fusion Capital may cause dilution and the sale of the shares of common stock acquired by Fusion Capital could cause the price of our common stock to decline. Our business may be materially and adversely impacted by the loss of our largest customer or the reduction, delay or cancellation of orders from this customer; in addition, our business may be materially and adversely impacted if this customer delays payment or fails to pay for products sold to this customer. We may be required to make tax payments that exceed our settlement estimates. We may incur significant expenses in the future as a result of our obligation to pay legal fees for and otherwise indemnify former officers and former directors. Our success will depend on our ability to attract and retain key personnel. Our success is reliant on the acceptance by doctors and patients of the Cryocare Surgical System as a preferred treatment for tumor ablation. 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. If we are unable to continue to enhance our Cryocare Surgical System, our business will suffer. There is uncertainty relating to third-party reimbursement, which is critical to market acceptance of our products. If we fail to protect our intellectual property rights, our competitors may take advantage of our ideas and compete directly against us. Because the medical device industry is litigious, we may be sued for allegedly violating the intellectual property rights of others. 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we fail to obtain or maintain necessary regulatory clearances or approvals for products, or if approvals are delayed or withdrawn, we will be unable to commercially distribute and market our products or any product modifications. Our products may be subject to product recalls even after receiving FDA clearance or approval, which would harm our reputation and our business. We could be negatively impacted by future interpretation or implementation of the federal anti-kickback and Stark laws and other federal and state anti-self-referral and anti-kickback laws. If we become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage. Our intangible assets could become impaired. Our facilities and systems are vulnerable to natural disasters or other catastrophic events. Risks Associated with an Investment in Our Common Stock The market price of our common stock is highly volatile. Future sales of shares of our common stock may negatively affect our stock price. Our common stock was delisted from the Nasdaq Stock Market and, as a result, trading of our common stock has become more difficult.

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1003464--3/16/2007--ENDOCARE_INC