1003464--3/30/2009--ENDOCARE

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We may be required to make tax payments that exceed our settlement estimates, which may result in a material adverse effect on our financial condition, results of operations and cash flows. Our facilities and systems are vulnerable to natural disasters or other catastrophic events, which could interrupt our operations for an extended period of time, and could have a material adverse effect on our business. Risks Associated with an Investment in Endocare s Common Stock The market price of our common stock is highly volatile. Historically our common stock has a low trading volume and any sale of a significant number of shares is likely to depress the trading price. Future sales of shares of our common stock, or the perception of significant future sales, may negatively affect our stock price. If Endocare fails to meet all applicable continued listing requirements of the NASDAQ Capital Market and NASDAQ determines to delist Endocare s common stock, the market liquidity and market price of Endocare s common stock could decline. The anti-takeover provisions in our charter, our stockholder rights plan and certain provisions of Delaware law could prevent a third party from acquiring us or limit the price that investors may be willing to pay for shares of our common stock. The issuance of common stock in the Merger and the Financing will trigger an ownership change that will negatively impact our ability to utilize net operating loss and capital loss deferred tax assets in the future. Risks Related to the Merger If the proposed Merger with Galil is consummated, Endocare s business could suffer materially and Endocare s stock price could decline. The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes. Ownership of Endocare s common stock may be highly concentrated after consummation of the Merger and the Financing. The required repayment of pre-merger bridge financing of Galil will decrease the funds available to Endocare after consummation of the Merger and the Financing. Antitrust authorities may attempt to delay or prevent consummation of the Merger. Endocare may assume significant tax liabilities of Galil with respect to which it may be dependent on third parties for indemnification or for which it may not be entitled to indemnification at all. Endocare s stockholders and Galil s shareholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger and the Financing. During the pendency of the Merger, Endocare may not be able to implement desirable business decisions or enter into a business combination with another party because of restrictions in the Merger Agreement. The lack of a public market for Galil s shares makes it difficult to evaluate the fairness of the Merger consideration payable to the Galil shareholders, and the Galil shareholders may receive consideration in the Merger that is greater than the fair market value of Galil s shares. If any of the events described in Risks Associated with Endocare s Business, Risks Related to Galil or Risks Related to Endocare and the Combined Company and the Industry in Which They Will Operate occur, those events could cause the potential benefits of the Merger not to be realized. If the proposed Merger with Galil is not consummated, Endocare s business could suffer materially and Endocare s stock price could decline. Galil is incorporated under the laws of, and its principal offices are located in, the State of Israel and therefore its business operations may be harmed by adverse political, economic and military conditions affecting Israel. Galil has a limited operating history with significant losses. Tax benefits Galil receives through operating in Israel may be terminated or reduced in the future, which would increase Galil s costs. The Israeli government grants Galil has received for research and development expenditures restrict its ability to manufacture products and transfer technologies outside of Israel and require it to satisfy specified conditions. Galil s operations may be disrupted by the obligation of its personnel to perform military service. Galil is subject to risks arising from currency exchange rates, which could increase its costs and may have a negative effect on its results of operations. Risks Related to Endocare and the Combined Company and the Industry in Which They Will Operate We may require additional financing in the future to sustain our operations and without it we may not be able to continue operations. Our success is reliant on the acceptance by doctors and patients of our cryoablation systems as a preferred treatment for tumor ablation. If we are unable to continue to enhance our cryoablation systems, our business will suffer. Our intangible assets could become impaired. 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. 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. Our ability to conduct medical research and receive medical information may be hampered by the privacy regulations developed under the Health Insurance Portability and Accountability Act of 1996, referred to as HIPAA. 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. We may be required to modify our agreements, operations, marketing and expansion strategies in response to changes in the statutory and regulatory environment. Our products may be subject to product recalls even after receiving FDA clearance or approval, which would harm our reputation and our business. We are subject to risks associated with doing business internationally. 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.

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1003464--3/30/2009--ENDOCARE_INC