1354217--3/23/2007--Volcano

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We have a limited operating history, have incurred significant operating losses since inception and cannot assure you that we will achieve profitability. If the clinical studies that we sponsor or co-sponsor are unsuccessful, we may not be able to develop or increase penetration in identified markets and our business prospects may suffer. If we are unable to identify the plaque that is most likely to rupture and cause a coronary event we may not be able to develop a market for our vulnerable plaque products or expand the market for existing products. If sponsorship of the PROSPECT study is delayed or stopped, our ongoing and future business may be negatively affected because of the potential inability to obtain useful clinical data or increased costs and delays in completing the study. Competition from companies that have longer operating histories and greater resources than us may harm our IVUS business. Failure to innovate will adversely impact our competitive position and may adversely impact our product revenues. We manufacture our IVUS catheters, maintain our own customized equipment and are implementing a new manufacturing process, making us vulnerable to production and supply problems that could negatively impact our revenues. We are dependent on our collaborations, and events involving these collaborations or any future collaborations could delay or prevent us from developing or commercializing products. If we experience difficulties with our IVUS and three-dimensional image development efforts with MediGuide, the commercialization of this product enhancement would be adversely affected. If we experience difficulties with our IVUS and angiographic image co-registration development efforts, the commercialization of this IVUS product enhancement would be adversely affected. Delays in planned product introductions may adversely affect our business and negatively impact future revenues. To market and sell our products, we depend on third-party distributors, and they may not be successful. The risks inherent in our international operations may adversely impact our revenues, results of operations and financial condition. Our manufacturing operations are dependent upon sole source suppliers, which makes us vulnerable to supply problems, price fluctuations and manufacturing delays. If we are unable to recruit, hire and retain skilled and experienced personnel, our ability to effectively manage and expand our business will be harmed. If we fail to properly manage our anticipated growth, our business could suffer. Fluctuations in foreign currency exchange rates could result in declines in our reported revenues and earnings. If we choose to acquire new businesses, products or technologies, we may experience difficulty in the identification or integration of any such acquisition, and our business may suffer. Our FM products have one competitor who, if more successful at commercializing its product, may cause us to lose market share which would adversely impact our business. If we become profitable, we cannot assure you that our net operating losses will be available to reduce our tax liability. We may require significant additional capital to pursue our growth strategy, and our failure to raise capital when needed could prevent us from executing our growth strategy. Our debt agreements contain terms that place restrictions on the operation of our business, and our failure to comply with these terms could put us in default, which would harm our business and operations. The expense and potential unavailability of insurance coverage for our company, customers or products may have an adverse effect on our financial position and results of operations. Risks Related to Government Regulation Modifications to our products may require new regulatory clearances or approvals or may require us to recall or cease marketing our products until clearances are obtained. If we fail to adequately manage our regulatory responsibilities following the Japanese regulatory approvals, our ability to sell our IVUS products in Japan would be impaired. Changes in the Japanese regulatory requirements for medical devices could impact our ability to market our products in Japan and subject us to fines, penalties or other sanctions. If we or our suppliers fail to comply with the FDA s Quality System Regulation or ISO Quality Management Systems, manufacturing of our products could be negatively impacted and sales of our products could suffer. Our products may in the future be subject to product recalls that could harm our reputation, business and financial results. If our products, or malfunction of our products, cause or contribute to death or serious injury, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions. Failure to obtain regulatory approval in additional foreign jurisdictions will prevent us from expanding the commercialization of our products abroad. We depend on one distributor to hold the shonins related to our FM products imported into Japan and for ongoing regulatory compliance, and difficulties involving this relationship will impair our ability to sell our FM products in Japan. We may be subject to Federal, state and foreign healthcare fraud and abuse laws and regulations and other regulatory reforms, and a finding of failure to comply with such laws, regulations and reforms could have a material adverse effect on our business. If our customers are unable to obtain coverage of or sufficient reimbursement for procedures performed with our products, it is unlikely that our products will be widely used. Compliance with environmental laws and regulations could be expensive, and failure to comply with these laws and regulations could subject us to significant liability. The use, misuse or off-label use of our products may result in injuries that lead to product liability suits, which could be costly to our business. Risks Related to Our Intellectual Property and Potential Litigation Our ability to protect our intellectual property and proprietary technology through patents and other means is uncertain. The medical device industry is characterized by patent litigation, and we could become subject to litigation that could be costly, result in the diversion of our management s time and efforts, require us to pay damages or prevent us from selling our products. Our rights to a worldwide license of certain IVUS patents owned or licensed by Boston Scientific may be challenged. Our VH IVUS business depends on a license from The Cleveland Clinic Foundation, the loss of which would severely impact our business. Risks Related to Our Common Stock We expect that the price of our common stock will fluctuate substantially. Future equity issuances or a sale of a substantial number of shares of our common stock may cause the price of our common stock to decline. Our directors, officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders. Anti-takeover provisions in our amended and restated certificate of incorporation and bylaws and Delaware law could discourage a takeover. Our costs have increased significantly as a result of operating as a public company, and our management is required to devote substantial time to comply with public company regulations. We have not paid dividends in the past and do not expect to pay dividends in the future.

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1354217--3/23/2007--Volcano_CORP