1003472--6/1/2006--PAINCARE_HOLDINGS

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Risks Related to Our Business We may need to restate our consolidated financial statements again. A number of class action lawsuits have been filed against us and certain of our officers and directors. We may need to negotiate a waiver letter with respect to our senior credit facility. We Need to Continue to Improve and Implement our Controls and Procedures. The success of our growth strategy depends on the successful identification, completion and integration of acquisitions. Our growth strategy may not prove viable and expected growth and value may not be realized. If we do not have sufficient additional capital to finance our growth strategy, our development may be limited. There has been a lack of profitable operations in recent periods. A significant portion of our assets consists of goodwill and other intangible assets and any impairment, reduction, or elimination of these intangible assets could hurt our results of operations. Our cash flow and financial condition may be adversely affected by the assumption of credit risks. If we are forced to repay our debentures and notes in cash, we may not have enough cash to fund our operations. We rely on the services of our physicians. We may not be able to attract and retain qualified physicians we need to support our business. If certain key employees were to leave, we may be unable to operate our business profitably, complete existing projects or undertake certain new projects. Our employment agreements with certain senior executive officers entitle them to individual annual bonuses equal to a minimum of $200,000 up to a maximum of 150% of salary. Increased costs associated with corporate governance compliance may significantly affect our results of operations. Changes associated with reimbursement by third-party payors for our services may adversely affect our operating results and financial condition. Professional liability claims could adversely impact our business. Our business is subject to substantial competition which could have a material impact on our business and financial condition. Failure to obtain managed care contracts and legislative changes could adversely affect our business. Risks Related to Our Industry The health care industry is highly regulated and our failure to comply with laws and regulations applicable to us or the owned practices, and the failure of the managed practices and the limited management practices to comply with laws and regulations applicable to them, could have an adverse effect on our financial condition and results of operations. Periodic revisions to laws and regulations may reduce the revenues generated by the owned practices, managed practices and the limited management practices. Federal and state healthcare reform may have an adverse effect on our financial condition and results of operations. Our affiliated physicians may not appropriately record or document services they provide. Unfavorable changes or conditions could occur in the geographic areas where our operations are concentrated. Regulatory authorities could assert that our owned practices, the managed practices or the limited management practices, or the contractual arrangements between us and the managed practices or the limited management practices, fail to comply with state laws analogous to the Stark Law. In such event, we could be subject to civil penalties and could be required to restructure or terminate the contractual arrangements. State regulatory authorities or other parties may assert that we are engaged in the corporate practice of medicine. If such a claim were successfully asserted, we could be subject to civil, and perhaps criminal, penalties and could be required to restructure or terminate the applicable contractual arrangements. This result, or our inability to successfully restructure our relationships to comply with these statutes, could jeopardize our business and results of operations. Regulatory authorities or others may assert that our agreements with limited management practices or managed practices, or our owned practices, violate state fee splitting laws. If such a claim were successfully asserted, we could be subject to civil and perhaps criminal penalties, and could be required to restructure or terminate the applicable contractual arrangements. This result, or our inability to successfully restructure our relationships to comply with these statutes, could jeopardize our business and results of operations. Our use and disclosure of patient information is subject to privacy regulations. Risks Related to Our Common Stock Because we use our common stock as consideration for our acquisitions, your interest in our company will be significantly diluted. In addition, if the investors in our recent financings convert their debentures and notes, or if we elect to pay principal and/or interest on the debentures and notes with shares of our common stock or anti-dilution rights in these securities are triggered, our existing shareholders will experience significant dilution. Future sales of our common stock in the public market, including sales by our stockholders with significant holdings, may depress our stock price. There is a limited market for our common stock and the market price of our common stock has been volatile. We do not expect to pay dividends. Provisions of Florida law and our charter documents may hinder a change of control and therefore depress the price of our common stock.

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1003472--6/1/2006--PAINCARE_HOLDINGS_INC