UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q




(Mark
One)


x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the quarterly period ended March 31, 2010




or




 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the transition period from ____ to ____




Commission
File Number 000-51774




ProUroCare Medical Inc.





(Exact
name of registrant as specified in its charter)





Nevada
              
              20-1212923(State
      or other jurisdiction
                of
      incorporation or organization)
              
              (IRS
      Employer
                Identification
      No.)





6440
Flying Cloud Drive, Suite 101


Eden
Prairie, MN  55344


(Address
of principal executive offices and Zip Code)




(952)
476-9093




(Registrant’s
telephone number, including area code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.           YES
x
NO  ̈




Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such
files).                                                                                                                                                 
YES ̈NO ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large
      accelerated filer  ̈
                
                Accelerated
      filer  ̈Non-accelerated
      filer  ̈
                
                Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act).                                                                                                                                                          YES
 ̈  NO
x




The
registrant has 11,404,465 shares of common stock and 1,505,356 Units outstanding
as of May 13, 2010.










ProUroCare
Medical Inc.


Form
10-Q for the


Quarter
Ended March 31, 2010





Table
of Contents





Page
      No.PART
      I - FINANCIAL INFORMATION
                            1ITEM
      1.
                            
                            FINANCIAL
      STATEMENTSConsolidated
      Balance Sheets
                            1Consolidated
      Statements of Operations
                            2Consolidated
      Statements of Cash Flows
                            3Notes
      to Consolidated Financial Statements
                            6ITEM
      2.
                            
                            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                            12ITEM
      4T.
                            
                            CONTROLS
      AND PROCEDURES
                            17PART
      II - OTHER INFORMATION
                            17ITEM
      1A. RISK FACTORS
                            17ITEM
      5.
                            
                            OTHER
      INFORMATION
                            18ITEM
      6.
                            
                            EXHIBITS
                            18SIGNATURES
                            
                            
                            19









PART
I. FINANCIAL INFORMATION




Item
1.  Financial Statements




ProUroCare
Medical Inc.


(A
Development Stage Company)


Consolidated
Balance Sheets





March 31,
                                2010
                                (Unaudited)
                              
                              
                              December 31,
                                2009AssetsCurrent
      assets:Cash
                              
                              $
                              538,635
                              
                              
                              $
                              1,000,874Other
      current assets
                              
                              
                              128,946
                              
                              
                              
                              58,200Total
      current assets
                              
                              
                              667,581
                              
                              
                              
                              1,059,074Equipment
      and furniture, net
                              
                              
                              1,332
                              
                              
                              
                              1,470Debt
      issuance costs, net
                              
                              
                              6,865
                              
                              
                              
                              27,383$
                              675,778
                              
                              
                              $
                              1,087,927Liabilities
      and Shareholders’ DeficitCurrent
      liabilities:Notes
      payable, bank
                              
                              
                              1,400,025
                              
                              
                              
                              1,300,000Notes
      payable
                              
                              
                              300,000
                              
                              
                              
                              624,865Notes
      payable - related party
                              
                              
                              243,000
                              
                              
                              
                              —Accounts
      payable
                              
                              
                              830,315
                              
                              
                              
                              985,560Accrued
      license and development fees
                              
                              
                              15,000
                              
                              
                              
                              1,595,385Accrued
      expenses
                              
                              
                              231,676
                              
                              
                              
                              269,230Total
      current liabilities
                              
                              
                              3,020,016
                              
                              
                              
                              4,775,040Commitments
      and contingencies:Long-term
      note payable, bank
                              
                              
                              —
                              
                              
                              
                              100,025Long-term
      note payable
                              
                              
                              —
                              
                              
                              
                              300,000Long-term
      note payable - related party
                              
                              
                              —
                              
                              
                              
                              243,000Total
      liabilities
                              
                              
                              3,020,016
                              
                              
                              
                              5,418,065Shareholders’
      deficit:Common
      stock, $0.00001 par.  Authorized 50,000,000 shares; issued and
      outstanding 12,895,477 and 11,326,283 shares on March 31, 2010 and
      December 31, 2009, respectively
                              
                              
                              129
                              
                              
                              
                              113Additional
      paid-in capital
                              
                              
                              27,107,201
                              
                              
                              
                              23,549,626Deficit
      accumulated during development stage
                              
                              
                              (29,451,568
                              )
                              
                              
                              (27,879,877
                              )Total
      shareholders’ deficit
                              
                              
                              (2,344,238
                              )
                              
                              
                              (4,330,138
                              )$
                              675,778
                              
                              
                              $
                              1,087,927








See
accompanying notes to consolidated financial statements.




Page
1




ProUroCare
Medical Inc.


(A
Development Stage Company)


Consolidated
Statements of Operations


(Unaudited)





Three Months Ended
                      March 31
                    
                    
                    Period from
                      August 17,1999
                      (Inception) to
                      March 31,2010
                    
                    
                    2009
                    
                    
                    2010Operating
      expenses:Research
      and development
                    
                    $
                    84,154
                    
                    
                    $
                    100,000
                    
                    
                    $
                    7,779,051General
      and administrative
                    
                    
                    485,150
                    
                    
                    
                    425,517
                    
                    
                    
                    12,027,398Total
      operating expenses
                    
                    
                    569,304
                    
                    
                    
                    525,517
                    
                    
                    
                    19,806,449Operating
      loss
                    
                    
                    (569,304
                    )
                    
                    
                    (525,517
                    )
                    
                    
                    (19,806,449
                    )Incentive
      for early warrant exercise
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (1,313,309
                    )Incentive
      for early warrant exercise - related parties
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (43,555
                    )Interest
      income
                    
                    
                    1,295
                    
                    
                    
                    21
                    
                    
                    
                    19,748Interest
      expense
                    
                    
                    (68,228
                    )
                    
                    
                    (763,234
                    )
                    
                    
                    (4,792,183
                    )Interest
      expense - related parties
                    
                    
                    (20,028
                    )
                    
                    
                    (284,289
                    )
                    
                    
                    (1,679,251
                    )Debt
      extinguishment expense
                    
                    
                    (882,092
                    )
                    
                    
                    (45,940
                    )
                    
                    
                    (1,380,373
                    )Debt
      extinguishment expense - related parties
                    
                    
                    (33,334
                    )
                    
                    
                    (120,408
                    )
                    
                    
                    (456,196
                    )Net
      loss
                    
                    $
                    (1,571,691
                    )
                    
                    $
                    (1,739,367
                    )
                    
                    $
                    (29,451,568
                    )Net
      loss per common share:Basic
      and diluted
                    
                    $
                    (0.14
                    )
                    
                    $
                    (0.22
                    )
                    
                    $
                    (14.07
                    )Weighted
      average number of shares outstanding:Basic
      and diluted
                    
                    
                    11,617,324
                    
                    
                    
                    8,072,096
                    
                    
                    
                    2,093,391








See
accompanying notes to consolidated financial statements.


Page
2


ProUroCare
Medical Inc.


(A
Development Stage Company)


Consolidated
Statements of Cash Flows


(Unaudited)





Three Months Ended
                    March 31
                  
                  
                  Period from August17,
                    1999 (Inception)to2010
                  
                  
                  2009
                  
                  
                  March 31, 2010Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (1,571,691
                  )
                  
                  $
                  (1,739,367
                  )
                  
                  $
                  (29,451,568
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                  
                  
                  138
                  
                  
                  
                  16
                  
                  
                  
                  21,121Gain
      on sale of furniture and equipment
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (2,200
                  )Stock-based
      compensation
                  
                  
                  68,585
                  
                  
                  
                  148,706
                  
                  
                  
                  2,313,805Common
      stock issued  for services rendered
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  222,046Common
      stock issued to related parties for interest
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,322Common
      stock issued for debt guarantees
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  106,667Common
      stock issued for debt issuance cost
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  6,667Common
      stock issued for debt extinguishment
                  
                  
                  11,111
                  
                  
                  
                  33,333
                  
                  
                  
                  44,444Units
      issued for debt extinguishment
                  
                  
                  870,981
                  
                  
                  
                  —
                  
                  
                  
                  870,981Notes
      payable issued for intangibles expensed  as research and
      development
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  150,000Warrants
      issued for services
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  567,036Warrants
      issued for debt guarantees
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  355,197Warrants
      issued for debt extinguishment
                  
                  
                  —
                  
                  
                  
                  607
                  
                  
                  
                  360,007Warrants
      issued for debt extinguishment-related parties
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  26,828Warrants
      issued for debt issuance cost
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  12,834Warrants
      issued for early warrant exercise incentive
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,356,864Amortization
      of note payable-original issue discount
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  152,247Amortization
      of note payable-related parties original  issue
      discount
                  
                  
                  —
                  
                  
                  
                  2,720
                  
                  
                  
                  142,964Amortization
      of convertible debt-original issue discount
                  
                  
                  —
                  
                  
                  
                  507,902
                  
                  
                  
                  1,146,587Amortization
      of convertible debt-related parties original  issue
      discount
                  
                  
                  —
                  
                  
                  
                  325,709
                  
                  
                  
                  1,194,132Amortization
      of debt issuance costs
                  
                  
                  77,843
                  
                  
                  
                  269,200
                  
                  
                  
                  2,226,737Bargain
      conversion option added to note payable- related parties for debt
      extinguishment
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  48,214Write-off
      debt issuance cost for debt extinguishment
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  42,797Write-off
      of deferred offering cost
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  59,696License
      rights expensed as research and development,  paid by issuance
      of common stock to CS Medical Technologies, LLC
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  475,000License
      rights expensed as research and development,  paid by issuance
      of common stock to Profile, LLC
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,713,600Changes
      in operating assets and liabilities:Other
      current assets
                  
                  
                  (70,746
                  )
                  
                  
                  7,778
                  
                  
                  
                  (71,629
                  )Accounts
      payable
                  
                  
                  (155,245
                  )
                  
                  
                  (147,776
                  )
                  
                  
                  722,580Accrued
      development expense
                  
                  
                  (15,000
                  )
                  
                  
                  (827,835
                  )
                  
                  
                  2,080,385Accrued
      expenses
                  
                  
                  24,889
                  
                  
                  
                  (174,957
                  )
                  
                  
                  876,326Net
      cash used in operating activities
                  
                  
                  (759,135
                  )
                  
                  
                  (1,593,964
                  )
                  
                  
                  (12,228,313
                  )Cash
      flows from investing activities:Purchases
      of equipment and furniture
                  
                  
                  —
                  
                  
                  
                  (561
                  )
                  
                  
                  (22,453
                  )Deposit
      into a restricted cash account
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (44,214
                  )Withdrawal
      from a restricted cash account
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  44,214Net
      cash used in investing activities
                  
                  
                  —
                  
                  
                  
                  (561
                  )
                  
                  
                  (22,453
                  )


Page
3


ProUroCare
Medical Inc.


(A
Development Stage Company)


Consolidated
Statements of Cash Flows (continued)


(Unaudited)





Three Months Ended
                  March 31
                
                
                Period from August
                  17, 1999 (Inception)to2010
                
                
                2009
                
                
                March 31, 2010Cash
      flows from financing activities:Proceeds
      of note payable, bank
                
                
                —
                
                
                
                —
                
                
                
                600,000Payments
      of note payable, bank
                
                
                —
                
                
                
                (400,000
                )
                
                
                (900,000
                )Proceeds
      of notes payable
                
                
                —
                
                
                
                —
                
                
                
                340,500Payments
      of notes payable
                
                
                (24,865
                )
                
                
                (73,642
                )
                
                
                (1,486,288
                )Proceeds
      of notes payable - related parties
                
                
                —
                
                
                
                67,638
                
                
                
                653,738Payments
      of notes payable - related parties
                
                
                —
                
                
                
                (34,000
                )
                
                
                (282,800
                )Proceeds
      from long-term notes payable and bank debt
                
                
                —
                
                
                
                —
                
                
                
                4,207,362Proceeds
      from long-term notes payable, related parties
                
                
                —
                
                
                
                —
                
                
                
                1,363,500Payments
      on long-term bank debt
                
                
                —
                
                
                
                —
                
                
                
                (600,000
                )Proceeds
      from warrants
                
                
                —
                
                
                
                —
                
                
                
                104,500Proceeds
      from exercise of warrants
                
                
                321,761
                
                
                
                —
                
                
                
                2,035,357Payments
      for debt issuance costs
                
                
                —
                
                
                
                —
                
                
                
                (766,227
                )Payment
      for rescission of common stock
                
                
                —
                
                
                
                —
                
                
                
                (100,000
                )Payments
      for offering expenses
                
                
                —
                
                
                
                (363,662
                )
                
                
                (513,823
                )Cost
      of reverse merger
                
                
                —
                
                
                
                —
                
                
                
                (162,556
                )Net
      proceeds from issuance of common stock
                
                
                —
                
                
                
                2,613,600
                
                
                
                8,296,138Net
      cash provided by financing activities
                
                
                296,896
                
                
                
                1,809,934
                
                
                
                12,789,401Net
      increase (decrease) in cash
                
                
                (462,239
                )
                
                
                215,409
                
                
                
                538,635Cash,
      beginning of the period
                
                
                1,000,874
                
                
                
                48,114
                
                
                
                —Cash,
      end of the period
                
                $
                538,635
                
                
                $
                263,523
                
                
                $
                538,635Supplemental
      cash flow information:Cash
      paid for interest
                
                $
                21,269
                
                
                $
                53,550
                
                
                $
                860,321Non-cash
      investing and financing activities:Deferred
      offering costs included in accounts payable
                
                
                —
                
                
                
                (200,508
                )
                
                
                509,947Deferred
      offering costs included in accrued expenses
                
                
                46,214
                
                
                
                (70,000
                )
                
                
                46,214Debt
      issuance costs included in accounts payable
                
                
                —
                
                
                
                —
                
                
                
                114,156Warrants
      issued pursuant to notes payable
                
                
                —
                
                
                
                (3,327
                )
                
                
                467,191Warrants
      issued for debt issuance costs
                
                
                —
                
                
                
                —
                
                
                
                298,021Prepaid
      expenses financed by note payable
                
                
                —
                
                
                
                —
                
                
                
                246,871Convertible
      debt issued in lieu of cash for accrued expenses
                
                
                —
                
                
                
                —
                
                
                
                31,413Common
      stock issued in lieu of cash for  accrued
    expenses
                
                
                —
                
                
                
                —
                
                
                
                259,053Common
      stock issued in lieu of cash for  accrued development
      cost
                
                
                1,565,385
                
                
                
                500,000
                
                
                
                2,065,385Common
      stock issued for debt issuance cost
                
                
                —
                
                
                
                66,667
                
                
                
                301,230Common
      stock issued for accrued debt extinguishment
                
                
                22,222
                
                
                
                —
                
                
                
                22,222




Page
4


ProUroCare
Medical Inc.


(A
Development Stage Company)


Consolidated
Statements of Cash Flows (continued)


(Unaudited)





Three Months Ended
                  March 31
                
                
                Period fromAugust
                  17, 1999(Inception) to2010
                
                
                2009
                
                
                March 31, 2010Warrants
      issued in lieu of cash for accrued expenses
                
                
                —
                
                
                
                —
                
                
                
                1,250Conversion
      of notes payable, related parties into convertible
    debentures
                
                
                —
                
                
                
                —
                
                
                
                200,000Common
      stock issued in lieu of cash for  accounts
    payable
                
                
                —
                
                
                
                —
                
                
                
                122,291Common
      stock issued in lieu of cash for  notes payable-related
      parties
                
                
                —
                
                
                
                —
                
                
                
                10,300Convertible
      debt issued as debt issuance costs related to guarantee of long-term debt
      (recorded as a beneficial conversion in additional paid-in capital)
      applied to accounts payable
                
                
                —
                
                
                
                —
                
                
                
                733,334Issuance
      of note payable for redemption of common stock
                
                
                —
                
                
                
                —
                
                
                
                650,000Conversion
      of accounts payable to note payable
                
                
                —
                
                
                
                12,293
                
                
                
                253,906Conversion
      of accrued expenses to note payable
                
                
                —
                
                
                
                13,569
                
                
                
                13,569Deposits
      applied to note payable and accrued interest
                
                
                —
                
                
                
                —
                
                
                
                142,696Deposits
      applied to accounts payable
                
                
                —
                
                
                
                —
                
                
                
                45,782Assumption
      of liabilities in the Profile, LLC transaction
                
                
                —
                
                
                
                —
                
                
                
                25,000Proceeds
      from sale of furniture and equipment
                
                
                —
                
                
                
                —
                
                
                
                2,200Deposits
      applied to accrued expenses
                
                
                —
                
                
                
                —
                
                
                
                1,076Deferred
      offering costs offset against gross proceeds of offering
                
                
                —
                
                
                
                823,078
                
                
                
                823,078Conversion
      of convertible debt to units
                
                
                —
                
                
                
                1,638,750
                
                
                
                1,638,750Conversion
      of convertible debt-related parties to units
                
                
                —
                
                
                
                1,323,334
                
                
                
                1,323,334Conversion
      of convertible debt-related parties to common stock
                
                
                —
                
                
                
                —
                
                
                
                281,000Conversion
      of notes payable to units
                
                
                600,000
                
                
                
                —
                
                
                
                600,000Conversion
      of accrued expenses to units
                
                
                97,546
                
                
                
                331,261
                
                
                
                428,807Note
      payable-related party tendered for warrant exercise
                
                
                —
                
                
                
                —
                
                
                
                26,000Warrant
      exercise cost paid  in lieu of cash for
      services  rendered-related party
                
                
                —
                
                
                
                —
                
                
                
                11,250








See
accompanying notes to consolidated financial statements.


Page
5




ProUroCare
Medical Inc.


(A
Development Stage Company)


Notes
to Consolidated Financial Statements




March
31, 2010 and 2009 and the period from


August
17, 1999 (Inception) to March 31, 2010




(Unaudited)





(1)  Description
of Business and Summary of Significant Accounting Policies.




(a)
            Description
      of Business, Development Stage
Activities




ProUroCare
Medical Inc. (“ProUroCare,” the “Company,” “we” or “us”) is a development stage
company engaged in the business of developing for market innovative products for
the detection and characterization of male urological prostate
disease.  The primary focus of the Company is currently the prostate
mechanical imaging system, designed for use as an aid to the physician in
visualizing and documenting abnormalities in the prostate that have been
previously detected by a digital rectal exam.  The Company’s
developmental activities, conducted by its wholly-owned operating subsidiary
ProUroCare Inc. (“PUC”), have included acquiring several technology licenses,
purchasing intellectual property, entering into product development agreements
and conducting clinical studies.




PUC had
no activities from its incorporation in August 1999 until July 2001, when it
acquired a license to certain microwave technology from CS Medical Technologies,
LLC (“CS Medical”).  In January 2002, PUC acquired a license to
certain prostate imaging technology from Profile, LLC (“Profile”).




Pursuant
to a merger agreement effective April 5, 2004 (the “Merger”), PUC became a
wholly-owned operating subsidiary of Global Internet Communications, Inc.
(“Global”), which changed its name to ProUroCare Medical Inc. on April 26,
2004.  In connection with the Merger, the Company completed a private
placement of 220,500 shares, as adjusted for the Reverse Split (as defined
below), of common stock (the “2004 Private Placement”) pursuant to Rule 506
under the Securities Act of 1933, as amended (the “Securities
Act”).




On
December 27, 2007, the Company’s shareholders approved a one-for-ten reverse
split of the Company’s common stock without a corresponding reduction in the
number of authorized shares of the Company’s capital stock (the “Reverse
Split”).  The Reverse Split became effective on February 14,
2008.  The exercise price and the number of shares of common stock
issuable under the Company's outstanding convertible debentures, options and
warrants were proportionately adjusted to reflect the Reverse Split for all
periods presented.




On
January 12, 2009, the Company closed a public offering of 3,050,000 units at
$1.00 per unit (the “2009 Public Offering”).  Each unit sold (the
“2009 Units”) consisted of one share of common stock and one redeemable warrant
to purchase one share of common stock at an exercise price of $1.30 per
share.


Page
6


(b)
            Basis
      of Presentation




The
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
(“GAAP”) and pursuant to the rules and regulations of the Securities and
Exchange Commission (the “SEC”) for interim financial
information.  Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with GAAP have been omitted pursuant to such rules and regulations, although the
Company believes that the disclosures made are adequate to make the information
not misleading.  Operating results for the three months ended March
31, 2010 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2010 or any other period.  The
accompanying financial statements and related notes should be read in
conjunction with the audited financial statements of the Company, and notes
thereto, contained in our Annual Report on Form 10-K for the year ended December
31, 2009.




The
accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, PUC.  Significant
intercompany accounts and transactions have been eliminated in
consolidation.  Certain comparative figures have been reclassified to
conform to the financial statement presentation adopted in the current year,
including the reclassification of transactions with related
parties.  The financial information furnished reflects, in the opinion
of management, all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the results of the interim periods
presented.




(c)
            Net
      Loss Per Common Share




Basic and
diluted loss per common share is computed by dividing net loss by the
weighted-average number of common shares outstanding for the reporting
period.  Dilutive common-equivalent shares have not been included in
the computation of diluted net loss per share because their inclusion would be
antidilutive.  Antidilutive common equivalent shares issuable based on
future exercise of stock options or warrants could potentially dilute basic loss
per common share in subsequent years.  All options and warrants
outstanding were anti-dilutive for the three months ended March 31, 2010 and
2009 and the period from August 17, 1999 (Inception) to March 31, 2010 due to
the Company’s net losses.  8,249,721 and 8,747,442 shares of common
stock issuable under stock options and warrants were excluded from the
computation of diluted net loss per common share for each of the three months
ended March 31, 2010 and 2009, respectively.




(d)
            Stock-Based
      Compensation




The
Company’s policy is to grant stock options at fair value at the date of grant
and to record stock-based employee compensation expense at fair
value.  The Company recognizes the expense related to the fair value
of the award on a straight-line basis over the vesting period.  From
time to time, the Company issues options to consultants.  The fair
value of options issued to non-employees (typically consultants) is measured on
the earlier of the date the performance is complete or the date the consultant
is committed to perform.  In the event that the measurement date
occurs after an interim reporting date, the options are measured at their
then-current fair value at each interim reporting date.  The fair
value of options so determined is expensed on a straight-line basis over the
associated performance period.




The
Company uses the Black-Scholes pricing model to estimate the fair value of
options.  The Black-Scholes option-pricing model was developed for use
in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option pricing models require the input
of highly subjective assumptions. Because the Company’s employee and consultant
stock options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, the existing models may not necessarily provide
a reliable single measure of the fair value of the Company’s stock
options.




Stock-based
compensation expense related to stock options was $68,585, $148,706 and
$2,191,230 for the three months ended March 31, 2010 and 2009 and the period
from August 17, 1999 (Inception) to March 31, 2010, respectively, or $0.01,
$0.02 and $1.05 on a per share basis.  The Company estimates the
amount of future stock-based compensation expense related to currently
outstanding options to be approximately $264,000, $45,000 and $5,000 for the
years ending December 31, 2010, 2011 and 2012, respectively.


Page
7




In
determining the compensation expense of the options granted during the three
months ended March 31, 2010 and 2009, the fair value of each option grant has
been estimated on the date of grant using the Black-Scholes pricing model and
the weighted-average assumptions used in these calculations are summarized as
follows:




Three Months Ended March 312010
                          
                          
                          2009Risk-free
      Interest Rate
                          
                          
                          1.82
                          %
                          
                          
                          2.98
                          %Expected
      Life of Options Granted
                          
                          4.02
      years
                          
                          
                          3.85
      yearsExpected
      Volatility
                          
                          
                          131.2
                          %
                          
                          
                          130.6
                          %Expected
      Dividend Yield
                          
                          
                          0
                          
                          
                          
                          0




The
expected life of the options is determined using a simplified method, computed
as the average of the option vesting periods and the contractual term of the
option.  For performance-based options that vest upon the occurrence
of an event, the Company uses an estimate of when the event will occur as the
vesting period used in the Black-Scholes calculation for each option
grant.  Expected volatility is based on a simple average of weekly
price data since the date of the Merger.  Based on the lack of history
to calculate a forfeiture rate, the Company has not adjusted the calculated
value of the options.  The risk-free rates for the expected terms of
the stock options and awards are based on the U.S. Treasury yield curve in
effect at the time of grant.




(e)
            Warrants




The
Company’s policy is to record warrants issued to non-employees as consideration
for goods or services received at their fair value on the issue date and expense
them as an operating expense depending on the nature of the goods or services
received.




Excluding
warrants issued as a component of units issued upon the conversion of a loan
into equity securities (see Note 4), no warrants were granted during the three
months ended March 31, 2010.  Excluding warrants issued as a component
of the units sold in the 2009 Public Offering, no warrants were granted during
the three months ended March 31, 2009.  Stock-based consideration
related to warrants issued to non-employees for goods and services received was
$122,575 for the period from August 17, 1999 (Inception) to March 31, 2010 or
$0.06 on a per share basis.




(f)
            Debt
      Issuance Costs




The
Company’s loans have been made pursuant to loan arrangements or guarantees that
include the provision of compensation to the lenders or guarantors in the form
of Company common stock.  The value of the common stock compensation
is recorded as debt issuance cost and amortized over the term of the
loans.




Debt
issuance costs are summarized as follows:




March 31,
                    2010
                  
                  
                  December 31,
                    2009Debt
      issuance costs, gross
                  
                  $
                  227,654
                  
                  
                  $
                  203,662Less
      amortization
                  
                  
                  (220,789
                  )
                  
                  
                  (176,279
                  )Debt
      issuance costs, net
                  
                  $
                  6,865
                  
                  
                  $
                  27,383




Page
8




Amortization
expense related to debt issuance costs was $77,843, $269,200 and $2,226,737 for
the three months ended March 31, 2010 and 2009 and the period from August 17,
1999 (Inception) to March 31, 2010, respectively.




(g)
            Going
      Concern




The
Company has incurred operating losses, accumulated deficit and negative cash
flows from operations since inception.  As of March 31, 2010, the
Company had an accumulated deficit of approximately
$29,452,000.  These factors, among others, raise substantial doubt
about the Company’s ability to continue as a going concern.  The
accompanying unaudited consolidated financial statements do not include any
adjustments related to recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.




Note
2.  Accrued Expenses.




Accrued
expenses are summarized as follows:




March 31,
                          2010
                        
                        
                        December 31,
                          2009Accrued
      interest payable in cash
                        
                        $
                        58,371
                        
                        
                        $
                        137,340Accrued
      interest payable in common stock
                        
                        
                        47,906
                        
                        
                        
                        20,014Accrued
      debt extinguishment payable in common stock
                        
                        
                        77,778
                        
                        
                        
                        66,666Accrued
      audit fees
                        
                        
                        18,000
                        
                        
                        
                        14,000Accrued
      directors’ fees
                        
                        
                        16,666
                        
                        
                        
                        —Uninvoiced
      expenses
                        
                        
                        12,955
                        
                        
                        
                        22,210Other
                        
                        
                        —
                        
                        
                        
                        9,000$
                        231,676
                        
                        
                        $
                        269,230




Note
3.  Notes Payable – Bank.




On March
26, 2010, the maturity dates of the Company’s $1.3 million of Crown Bank
promissory notes were extended to April 28, 2010 with no changes to other
existing note terms.  On April 26, 2010, the maturity dates of the
Crown Bank loans were further extended to June 28, 2010, with principal
reductions of $50,000 due on each of April 28, 2010 and May 28,
2010.




Note
4.  Notes Payable.




On March
26, 2010, the Company converted its $600,000 loan from an individual lender and
$97,546 of accrued interest thereon into 381,173 equity units, with each unit
consisting of one share of the Company’s common stock and one warrant to
purchase one share of Company’s common stock.  The immediately
exercisable warrants had a three-year term, an exercise price of $1.83 per share
and a cashless exercise provision.  The lender immediately elected to
exercise the warrants, and the Company issued 102,154 shares of stock to the
lender pursuant to the cashless exercise.  The Company recognized debt
extinguishment expense of $870,981 during the three months ended March 31, 2010,
representing the excess fair value of the securities issued over the carrying
value of the debt and interest.  Upon loan conversion to equity, the
Company issued to the individual lender 66,666 shares of common stock as
consideration pursuant to the original terms of the loan.




Page
9




Note
5.  Shareholders’ Equity.




(a)
            Common
      Stock




Between
February 3, 2010 and March 2, 2010, holders of 249,970 warrants to purchase the
Company’s common stock exercised their warrants resulting in proceeds to the
Company of $321,761.




On March
15, 2010, the Company issued 769,231 shares of common stock to Artann
Laboratories Inc. (Artann) pursuant to a development agreement.  The
$1,565,385 value of the shares was recorded as research and development expense
during the year ended December 31, 2009.




On March
26, 2010, the Company converted its $600,000 loan from an individual lender and
$97,546 of accrued interest thereon into 381,173 shares of the Company’s common
stock and 381,173 warrants to purchase the Company’s common stock (see Note
4).




(b)
            Stock
      Options




On March
1, 2010, the Company issued non-qualified options to purchase 10,374 shares of
the Company’s common stock to each of two directors upon their election to the
Board of Directors.  The options were valued at $1.97 per share, and
will vest over a two-year period.  The options are exercisable for a
seven-year period at $2.41 per share.




Note
6.  Income Taxes.




The
Company applies the policy of classifying interest in interest expense and
penalties in general and administrative expense.  The Company had
recorded no accrued interest or penalties.




The
Company had no significant unrecognized tax benefits as of March 31, 2010 and
December 31, 2009 and, likewise, no significant unrecognized tax benefits that,
if recognized, would affect the effective tax rate.  The Company had
no positions for which it deemed that it is reasonably possible that the total
amounts of the unrecognized tax benefit will significantly increase or
decrease.  Any interest or penalties are expensed as general and
administrative expense as incurred.




The
Company has generated net operating loss carryforwards of approximately $8.3
million which, if not used, will begin to expire in 2021.  Federal and
state tax laws impose significant restrictions on the utilization of net
operating loss carryforwards in the event of a change in ownership of the
Company that constitutes an “ownership change,” as defined by Section 382 of the
Internal Revenue Code of 1986, as amended (the “Code”).  The Company
has analyzed its equity ownership changes and believes that such an ownership
change occurred upon the completion of its 2009 public offering.  The
Company’s use of its net operating loss carryforwards of approximately $5.3
million and built-in loss incurred prior to the closing of the 2009 public
offering will be limited as a result of this change; however, the amount of
limitation will not be known until a full Section 382 study is
completed.




The net
operating loss carryforwards are subject to examination until they
expire.  The tax years that remain subject to examination by major tax
jurisdictions currently are:




Federal
2006 - 2008


State of
Minnesota 2006 - 2008




Note
7.  Related Parties.




The
Company considers its directors, executives and beneficial shareholders of more
than five percent of its common stock to be related parties.  During
the three months ended March 31, 2010, the following significant transactions
were made between the Company and those parties that were related parties at the
time of each transaction:


Page
10




Pursuant
to the guaranties received relating to the Company’s March 19, 2009 renewal of
its $1,200,000 Crown Bank promissory note, the Company accrued for issuance
33,333 shares of common stock during the three months ended March 31, 2010 as
consideration to each of James Davis and William Reiling, both five percent
shareholders at the time of the note renewal.  The 66,666 shares
accrued were valued at $33,333 based on the fair market value on the date of the
guarantees received and recorded as debt extinguishment expense.




On March
1, 2010, the Company’s Board of Directors awarded $12,000 to director David
Koenig in recognition of his years of service as corporate
secretary.  In addition, Mr. Koenig was engaged by the Board as a paid
consultant to the Company to assist management with corporate
financing.  In this role, Mr. Koenig will be paid $4,000 per month for
up to 12 months.


Page
11


Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operation.




The
accompanying Management’s Discussion and Analysis of Financial Condition and
Results of Operation should be read in conjunction with our unaudited
consolidated financial statements, and notes thereto, filed with our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2010.




Disclosure
Regarding Forward-Looking Statements




Certain
statements contained in this Quarterly Report on Form 10-Q may be deemed to be
forward-looking statements as defined by the Private Securities Litigation
Reform Act of 1995, and the Company intends that such forward-looking statements
be subject to the safe-harbor created thereby. Such forward-looking statements
relate to, among other things: general economic or industry conditions,
nationally and in the physician, urology and medical device communities in which
we intend to do business; our ability to raise capital to fund our 2010 and 2011
working capital needs and launch our products into the marketplace; our ability
to pursue additional development of our existing and proposed products on a
timely basis or at all; legislation or regulatory requirements, including our
securing of all U.S. Food and Drug Administration (“FDA”) and other regulatory
approvals on a timely basis, or at all, prior to being able to market and sell
our products in the United States; competition from larger and more well
established medical device companies and other competitors; the development of
products that may be superior to the products offered by us; securing and
protecting our intellectual property and assets, and enforcing breaches of the
same;; the quality or composition of our products and the strength and
reliability of our contract vendors and partners; changes in accounting
principles, policies or guidelines; financial or political instability; acts of
war or terrorism; and other economic, competitive, governmental, regulatory and
technical factors affecting our operations, proposed products and prices. We
caution that these statements are qualified by important factors that could
cause actual results to differ materially from those reflected by the
forward-looking statements contained herein.




Overview




ProUroCare
Medical Inc. (“ProUroCare,” the “Company,” “we” or “us”) is an emerging medical
device company that is in the process of obtaining FDA clearance for its first
product, an innovative prostate imaging system known as the ProUroScanTM
System.  The ProUroScan System incorporates our new proprietary
elasticity imaging technology to create a “map” of the prostate to be used as an
aid in visualizing and documenting abnormalities of the prostate
detected/monitored by digital rectal examination.  We own patents and
exclusively license patent applications and know-how related to the creation in
real-time of two- and three-dimensional images of soft tissue using special
software to process data acquired by probes that incorporate arrays of sensitive
mechanical force sensors.  The ProUroScan System is our first
embodiment of this technology, to be used to image the prostate.  We
believe that this technology can be applied to other soft organ tissue in the
future.




The
ProUroScan System was developed over the past several years under agreements
with our development partner, Artann Laboratories Inc. (“Artann”), a scientific
technology company focused on early-stage technology
development.  During 2008 and 2009, our research and development
activities conducted through Artann were primarily directed toward completion of
the final configuration of the ProUroScan System and conducting clinical
trials.  This work culminated in the preparation and submission to the
FDA of a 510(k) application in November 2009.


Our goal
is to have the ProUroScan System regulated by the FDA as a Class II
device.  In a 510(k), applicants must demonstrate that their device is
substantially equivalent to an existing approved product, or “predicate
device”.  An otherwise safe and effective product that employs such
new or novel technology that a predicate device does not exist can still be
cleared for marketing using a clearance path that is referred to as a “de novo”
application.
 Page
12






de novo de novo de novo de novo




During
this pre-revenue stage, in addition to work performed by Artann, we have
conducted our development and clinical activities primarily through the use of
contracted resources that specialize in managing the clinical trial process,
developing regulatory strategies and in counseling on FDA matters.  We
have found that using consultants and contractors to perform these functions
during our development stage has allowed us to engage specialized talent and
capabilities as needed by the business while providing the flexibility to engage
them as our financial resources have permitted.  We have identified a
highly qualified contract manufacturer, Logic (Minneapolis, MN), to produce the
first commercial ProUroScan Systems.  Logic is currently working with
Artann to transfer the technology into production.




We expect
to market the system in cooperation with a yet-to-be-determined medical device
company that has an established worldwide presence in the urology
market.  We are actively engaged in discussions with several such
companies and intend to identify the final marketing partner during
2010.  Prior to entering the market through a commercialization
partner, we plan to produce a small number of systems and place them with
highly-regarded urologists across the United States.  These key
opinion leaders will expand our base of clinical reference while evaluating
physician training and in-service programs.  We also intend to place a
limited number of systems in Europe during this period.  During the
course of 2010, as we move into production and begin marketing our products, we
expect to add internal resources in the areas of sales and marketing,
engineering and quality control.




In
addition to the research and development work, we incur ongoing expenses that
are directly related to being a public company, including professional audit and
legal fees, public and investor relations, financial printing, press releases
and transfer agent fees.  We also incur costs associated with the
prosecution and maintenance of our intellectual property.  We
currently rent approximately 1,000 square feet of office space on a
month-to-month basis at a cost of $1,000 per month. Other expenses incurred
include executive officer compensation, travel, insurance, telephone, supplies
and other miscellaneous expenses.




Results
of Operations





The
following discussion of the financial condition and results of operations should
be read in conjunction with the financial statements included herewith. This
discussion should not be construed to imply that the results discussed herein
will necessarily continue into the future, or that any conclusion reached herein
will necessarily be indicative of actual operating results in the
future.





Three
months ended March 31, 2010 compared to the three months ended March 31,
2009:





Operating
Expenses/Operating Loss.  Our operating
expenses (and our operating loss) for the three months ended March 31, 2010 were
$569,304, an increase of $43,787, or eight percent, compared to $525,517 last
year.  This increase resulted from consulting fees for new regulatory,
reimbursement, finance and manufacturing activities totaling $124,000 and from
$24,000 of new public relations efforts.  Offsetting these new
expenses were reduced compensation and benefits costs during the three months
ended March 31, 2010 of $32,000, or 26 percent, compared to last year as a
result of a $40,000 bonus awarded during the three months ended March 31, 2009
following the completion of our 2009 public offering and reduced stock-based
compensation of $80,000, or 54 percent, compared to last year, as a result of a
grant of immediately vesting stock options to directors and officers valued at
$139,400 last year.


Page
13





Net
Interest Expense.Net interest
expense for the three months ended March 31, 2010 was $86,961, a decrease of 92
percent compared to $1,047,502 last year.  Included in the expense for
the three months ended March 31, 2009 was the approximately $980,000 write-off
of unamortized original issue discount and debt issuance costs related to our
2006, 2007 and 2008 private debt placements and the 2008 unit put arrangement,
upon the closing of our 2009 public offering and the subsequent automatic
conversion of approximately $3.3 million of debt and accrued interest into
equity.  Interest expense excluding the write-off of original issue
discount debt issuance cost increased 34 percent to approximately $ 87,000 for
the three months ended March 31, 2010 compared to approximately $65,000 last
year resulting from increased debt and debt guarantees that carry stock-based
consideration provisions.





Debt
Extinguishment Expense.  Our debt extinguishment expense arises
primarily from the issuance of stock or warrants issued pursuant to the
provisions of short-term loans from certain lenders in refinancing transactions.
Our debt extinguishment expense for the three months ended March 31, 2010 was
$915,426, an increase of 450 percent, compared to $166,348 last
year.   The increase is primarily due to the conversion of a
$600,000 loan from the Phillips W. Smith Family Trust (the “Smith Trust”) and
$97,546 of accrued interest thereon into 381,173 equity units, with each unit
consisting of one share of the Company’s common stock and one warrant to
purchase one share of Company’s common stock.  We recognized debt
extinguishment expense of $870,981 in this conversion, representing the excess
fair value of the securities issued over the carrying value of the debt and
interest at the time of the conversion.





Balance
Sheet Changes




During
the three months ended March 31, 2010, the following transactions resulted in
material changes to our balance sheet:




On March
15, 2010, the Company issued 769,231 shares of common stock to Artann pursuant
to a development agreement.  The $1,565,385 value of the shares had
been recorded as an accrued development fee as of December 31,
2009.




On March
26, 2010, the Company converted its $600,000 loan from the Smith Trust and
$97,546 of accrued interest thereon into 381,173 shares of the Company’s common
stock and 381,173 warrants to purchase the Company’s common stock.  As
a result, notes payable and accrued expenses were reduced
accordingly.




As of
March 31, 2010, all of our notes payable were scheduled to mature within one
year.  Amounts classified as long-term as of December 31, 2009 were
therefore reclassified to short-tem as of March 31, 2010.




Liquidity
and Capital Resources




Assets;
Property Acquisitions and Dispositions




Our
primary assets are our intellectual property rights, including patents, patent
applications and our license and commercialization and development agreements
with Artann, which are the foundation for our proposed product offerings. These
assets secure $1.3 million of senior bank notes and, as a result, are not
available to secure additional senior debt financing. We do not
anticipate selling any significant assets in the near term.




Sources
and Uses of Cash




Net cash
used in operating activities was $759,000 during the three months ended March
31, 2010 compared to $1.6 million in 2009.  During the three months
ended March 31, 2009, we made cash payments to Artann of $600,000 for licensing
fees and a total of $500,000 for milestone achievements pursuant to our
licensing and development agreements.   In addition to increased
operating expenses, other uses of cash included payments for accounts payable
and prepayment of the production of probe sensors to be used in future clinical
work.


Page
14




Net cash
provided by financing activities was $300,000 during the three months ended
March 31, 2010, resulting from the exercise of warrants by certain warrant
holders.   Net cash provided by financing activities was $1.8
million during the first three months of 2009, resulting from the $2.3 million
net proceeds from our 2009 public offering, offset by our retirement of a
$400,000 bank debt in March 2009.




Cash
Requirements and Financing
  Our goal
is to begin our commercial launch of the ProUroScan system in
2010.  The timing of the market launch is dependent upon the amount of
funding that is available to fund manufacturing and market scale-up activities
and the timing of FDA approval.
  We expect
that our cash needs for our operating expenses (including payments due to Artann
explained below) will be approximately $3.3 million through the remainder of
2010.  Of this amount, we anticipate that on-going general and
administrative expenses, including the cost of existing personnel, rent, patent
filing and maintenance, legal, audit and other costs of being a public company,
will be approximately $810,000.  We estimate that our cost of
contracting for certain product engineering and development work to reduce the
cost of the ProUroScan system and make certain enhancements will cost
approximately $460,000.  We expect to add personnel in the areas of
sales and marketing, engineering and quality control during the remainder of
2010, which we estimate to cost approximately $600,000.  We expect to
initiate sales and marketing programs in advance of obtaining a corporate
distribution partner that will cost approximately $425,000.  Placing
systems and performing additional patient studies at certain key institutions
will cost approximately $225,000.
  Pursuant
to the terms of the Artann development agreement, upon receipt of FDA 510(k)
clearance we are required to make a cash payment of $750,000 and provide a
$1,000,000 equity payment to Artann.  The equity payment is subject to
a $100,000 reduction per month beginning April 23, 2010 until FDA clearance is
received.
  We
estimate that a September market launch will require approximately $550,000 to
fund inventory and accounts receivable by the end of 2010.  We also
anticipate purchasing approximately $230,000 of tooling, molds and other capital
for production, computer equipment, software and general office furniture and
equipment during the remainder of the year.
  We have
agreed to retire $250,000 of our $1.25 million of existing loans with Crown Bank
during the three months ending June 30, 2010, and we expect to renew the
remaining $1.0 million.  In addition, we expect to make payments
towards other current liabilities and interest totaling approximately $300,000
through the remainder of 2010.
  In total,
assuming financing permits, we expect our cash requirements for operating
expenses, working capital, capital expenditures and payments toward debt and
vendor obligations during the remainder of 2010 to be approximately $4.6
million.  Of this, at least $1.5 million is subject to reduction or
postponement based on availability of funding.
  As of
April 30, 2010, we had approximately $285,000 of cash on hand.  We
will require additional funds to support our manufacturing scale-up, development
of a small sales staff and marketing team, reinforce our patent position and
fund operations leading to a commercial market launch.  We expect that
a significant portion of the additional funds will come from the exercise of
outstanding warrants.  .  We currently have the right to
redeem 4,505,707 outstanding warrants with an exercise price of $1.30 per
share.  Upon our exercise of our right to redeem the warrants, holders
of the warrants will have a period of 30 days to exercise their
warrants.  We could realize up to approximately $5.9 million depending
on the number of shares actually exercised.  In addition, we will gain
the ability to redeem 1,244,829 warrants if the last sale price of our common
stock were to equal or exceed $4.00 per share for a period of 10 consecutive
trading days.  If we were to subsequently exercise our redemption
right on these warrants, we could realize up to an additional $1.6 million
depending on the number of shares actually exercised pursuant to such
redemption.  There can be no assurance that we will be able to redeem
the warrants, or how much would be realized if such redemption were
made.
  We plan
to identify a distribution partner during 2010 to help market our
products.  We expect such a distribution partner may provide financial
support in the form of licensing fees, loans, equity investment or a combination
of these.  In addition to financial support, a successful
collaboration with such a partner would allow us to gain access to downstream
marketing, manufacturing and sales support.  There can be no assurance
that a distribution partner can be successfully identified and engaged during
2010, if at all.




Page
15


In
addition to these actions, we will pursue additional private funding in 2010 to
achieve our market launch goals and provide funding for operations in
2011.  The amounts of such additional funding will depend upon the
amount of funding we receive from the exercise of the outstanding warrants noted
above.  The additional private funding may be in the form of
convertible debt, equity securities, private debt or debt guarantees for which
stock-based consideration is paid, the calling of the outstanding redeemable
warrants, a warrant exercise offer program similar to our 2009 warrant exercise
program, or a combination of these.  There can be no assurance we will
be successful in raising such funds
  If our
funding from warrants or other private funding initiatives is delayed or proves
insufficient to allow an aggressive ramp-up toward market launch, or if FDA
clearance of the ProUroScan system is not received by September 2010, we will be
forced to delay pre-market activities accordingly, and the funding required for
inventory and accounts receivable during 2010 would be reduced.


Off-Balance
Sheet Arrangements




None.




Going
Concern




We have
incurred operating losses, accumulated deficit and negative cash flows from
operations since inception. As of March 31, 2010, we had an accumulated deficit
of approximately $29.5 million. These factors, among others, raise
substantial doubt about our ability to continue as a going concern. Our
consolidated financial statements included in this Quarterly Report on Form 10-Q
do not include any adjustments related to recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should we be unable to continue as a going concern.




Critical
Accounting Policies




Our
critical accounting policies are policies which have a high impact on the
reporting of our financial condition and results and require significant
judgments and estimates. Our critical accounting policies relate to (a) the
valuation of stock-based compensation awarded to employees, directors, loan
guarantors and consultants and (b) the accounting for debt with beneficial
conversion features.




Valuation
of Stock-Based Compensation




Since
inception, we have measured and recognized compensation expense for all
share-based payment awards made to employees and directors, including employee
stock options, based on fair value. Our determination of fair value of
share-based payment awards is based on the date of grant using an option-pricing
model which incorporates a number of highly complex and subjective variables.
These variables include, but are not limited to, the expected volatility of our
stock price and estimates regarding projected employee stock option exercise
behaviors and forfeitures. We recognize the expense related to the fair value of
the award straight-line over the vesting period.




Debt
with Beneficial Conversion Features




The
beneficial conversion features of the promissory notes were valued using the
Black-Scholes pricing model. The resulting original issue discount is amortized
over the life of the promissory notes using the straight-line method, which
approximates the interest method.




Page
16




Item
4T.  Controls and Procedures.




Disclosure
Controls and Procedures


We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in our reports filed or submitted under the Securities
and Exchange Act of 1934, as amended (the “Exchange Act”) is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission (the “SEC”). As of
March 31, 2010, the end of the period covered by this Quarterly Report on Form
10-Q, we carried out an evaluation, under the supervision and with the
participation of management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange
Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are
effective.




Changes
in Internal Control Over Financial Reporting




During
the quarter ended March 31, 2010, there has been no change in the Company’s
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.







PART
II.  OTHER INFORMATION.




Item
1A. Risk Factors.




Investing
in our securities involves a high degree of risk. You should carefully
consider the risks and uncertainties set forth under Part I, Item 1A of our
Annual Report on Form 10-K for the year ended December 31, 2009 and the material
changes set forth below before purchasing our securities.  These risks
and uncertainties are not the only ones facing our Company; additional risks and
uncertainties may also impair our business operations. If any of the risks
actually occur, our business, financial condition, results of operations or cash
flows would likely suffer. In that case, the trading price of
our securities could fall, and you may lose all or part of your
investment.  We undertake no obligation to update or revise any
forward-looking statement except as required by the SEC.




The
risk factor disclosed in our Annual Report on Form 10-K relating to FDA
clearance of the ProUroScan System has been revised to read as
follows:
  We
are relying upon Artann to obtain FDA market clearance of the ProUroScan System.
There is no guarantee that the FDA will grant timely clearance of the ProUroScan
System, if at all, and failure to obtain such timely clearance would adversely
affect our ability to market that product and expand utilization of the
technology in other prostate applications or in other soft tissue organs in the
body, which may affect our ability to grow our business.
  The
ProUroScan System is subject to regulation by the FDA and by comparable agencies
in various foreign countries. The process of complying with the requirements of
the FDA and comparable agencies is costly, time consuming and burdensome. Our
goal is to have the ProUroScan System regulated by the FDA as a Class II
device.  In a 510(k), applicants must demonstrate that their device is
substantially equivalent to an existing approved product, or “predicate
device”.  An otherwise safe and effective product that employs such
new or novel technology that a predicate device does not exist can still be
cleared for marketing using a clearance path that is referred to as a “de novo”
application.
  In
communications with the FDA in March and April 2010, the FDA determined that the
ProUroScan System is not substantially equivalent (NSE) to a device currently
being marketed.  This finding allows us to file a de novo application for
market clearance.  We believe that appropriate general and special
controls can be drafted to ensure that the ProUroScan is a safe and effective
device, and therefore meets the criteria for classification as a Class II device
under the de novo
process.  We plan to meet with representatives of the FDA to confirm
the process for completing the de novo classification
application, which we will submit in May 2010.  In the event
that
 Page
17


de novo  There is
no guarantee that the FDA will grant market clearance or designate the
ProUroScan System as a class II device in a timely manner, if at all. Failure to
obtain clearance for the ProUroScan System would require Artann to re-apply for
clearance with additional supporting data or information, or for a different
labeling claim, submit a Premarket Approval Application (a “PMA”) for FDA
approval, or abandon the product. Even if FDA market clearance is received,
Artann may encounter significant delays in receiving such clearance. If
unexpected clearance delays occur, or if Artann needs to re-apply for FDA
clearance or submit a PMA, it could have a material adverse effect on our
business.  If such delays occur, we would need to obtain additional
financing to continue operations.




Item
5.  Other Information.





None.





Item
6.  Exhibits.





Exhibit No.
                
                Description4.1
                
                Warrant
      to acquire 381,173 shares of ProUroCare Medical Inc. common stock issued
      in favor of the Phillips W. Smith Family Trust on March 26, 2010
      (incorporated by reference to Exhibit 4.27 to Annual Report on
      Form 10-K filed March 31, 2010).10.1
                
                Modification/Amendment
      Agreement to Crown Bank Loans dated March 26, 2010 (incorporated by
      reference to Exhibit 10.50 to Annual Report on Form 10-K filed
      March 31, 2010).31.1         
      *
                
                Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Sarbanes-Oxley Act of 2002.31.2         
      *
                
                Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Sarbanes-Oxley Act of 2002.32.1          *
                
                Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of
2002





*Filed
herewith.


Page
18


SIGNATURES





Pursuant
to the Securities Exchange Act of 1934, as amended, the Company has duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.




ProUroCare
      Medical Inc.Date:  May
      13, 2010
                    By:
                    /s/ Richard C. CarlsonName:  Richard
      C. CarlsonTitle:  Chief
      Executive OfficerDate:  May
      13, 2010
                    By:
                    /s/ Richard ThonName:  Richard
      ThonTitle:  Chief
      Financial
Officer




Page
19


Exhibit
Index





Exhibit No.
                  
                  Description4.1
                  
                  Warrant
      to acquire 381,173 shares of ProUroCare Medical Inc. common stock issued
      in favor of the Phillips W. Smith Family Trust on March 26, 2010
      (incorporated by reference to Exhibit 4.27 to Annual Report on
      Form 10-K filed March 31, 2010).10.1
                  
                  Modification/Amendment
      Agreement to Crown Bank Loans dated March 26, 2010 (incorporated by
      reference to Exhibit 10.50 to Annual Report on Form 10-K filed
      March 31, 2010).31.1          *
                  
                  Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Sarbanes-Oxley Act of 2002.31.2          *
                  
                  Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Sarbanes-Oxley Act of 2002.32.1          *
                  
                  Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of
2002





*Filed
herewith.