**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**FORM10-QSB**
| **x**      | **QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934**                                                   |
|------------|------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                               |
| ** ** | **For the quarterly period ended March 31, 2007**                                                                                        |
| ** ** | ** **                                                                                                                               |
| **o**      | **TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934**                                                  |
| ** ** | ** **                                                                                                                               |
| ** ** | **For the transition period from           to         ** |

 

**Commission File Number 333-103781**

**ProUroCare Medical Inc.**

(Exact name ofsmall business issuer as specified in its charter)

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

 

**5500 Wayzata Blvd., Suite 310**

**Golden Valley, Minnesota 55416**

(Address of principalexecutive offices)

**(952) 476-9093**

(Issuer’stelephone number)

Check whether the issuer (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the past12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  YES x  NO o

Indicate by checkmark whether the Registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).YES o  NO x

State the numberof shares outstanding of each of the issuer’s classes of common equity, as ofthe latest practicable date:  15,832,947shares of common stock outstanding as of May 11, 2007 (par value $0.00001 pershare).

Transitional Small Business Disclosure Format (checkone): YES o NO x

 

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**ProUroCare Medical Inc.**

**Form 10-QSB for the**

**QuarterEnded March 31, 2007**

**Table ofContents**
|            | ** **                                                      |
|------------|-----------------------------------------------------------------|
| PART I.    | FINANCIAL INFORMATION                                           |
|       |                                                            |
| ITEM 1.    | FINANCIAL STATEMENTS                                            |
|       |                                                            |
|       | Consolidated balance  sheets                                    |
|       |                                                            |
|       | Consolidated  statements of operations                          |
|       |                                                            |
|       | Consolidated  statements of cash flows                          |
|       |                                                            |
|       | Notes to  consolidated financial statements                     |
|       |                                                            |
| ITEM 2.    | MANAGEMENT’S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION |
|       |                                                            |
| ITEM 3.    | CONTROLS AND  PROCEDURES                                        |
|       |                                                            |
| PART II.   | OTHER INFORMATION                                               |
|       |                                                            |
| ITEM 1.    | LEGAL PROCEEDINGS                                               |
|       |                                                            |
| ITEM 2.    | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    |
|       |                                                            |
| ITEM 5.    | OTHER INFORMATION                                               |
|       |                                                            |
| ITEM 6.    | EXHIBITS                                                        |
|       |                                                            |
| SIGNATURES |

 

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**PART I. FINANCIALINFORMATION**

***Item1.***      Financial Statements

**ProUroCare Medical Inc.**

**A Development Stage Company**

**ConsolidatedBalance Sheets**
| ** **                                                                                                                                                                | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                                                | ** ** | **(Unaudited)**              | ** ** | **(Audited)**                   | ** ** |
| **Assets**                                                                                                                                                                | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| ** **                                                                                                                                                                | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| Current assets:                                                                                                                                                           |       |                         |       |                            |       |
| Cash                                                                                                                                                                      |       | $                            | 18,672     |                            | $          | 2,407 |   |
| Other  receivables                                                                                                                                                        |       | 24,407                       |       | —                          |       |
| Prepaid expenses                                                                                                                                                          |       | 1,685                        |       | 15,459                          |       |
| Total current  assets                                                                                                                                                     |       | 44,764                       |       | 17,866                          |       |
| Equipment and  furniture, net                                                                                                                                             |       | 2,765                        |       | 3,739                           |       |
| Debt issuance costs,  net                                                                                                                                                 |       | 442,986                      |       | 573,013                         |       |
|                                                                                                                                                                      |       |                         |       |                            |       |
|                                                                                                                                                                      |       | $                            | 490,515    |                            | $          | 594,618 |   |
|                                                                                                                                                                      |       |                         |       |                            |       |
| **Liabilities  and Shareholders’ Deficit**                                                                                                                           | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| ** **                                                                                                                                                                | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| Current liabilities:                                                                                                                                                      |       |                         |       |                            |       |
| Notes payable,  bank                                                                                                                                                      |       | $                            | 2,200,000  |                            | $          | — |   |
| Notes payable,  net of original issue discount                                                                                                                            |       | 150,000                      |       | 174,338                         |       |
| Accounts payable                                                                                                                                                          |       | 446,009                      |       | 385,793                         |       |
| Accrued expenses                                                                                                                                                          |       | 638,782                      |       | 662,226                         |       |
| Loans from  officers and directors                                                                                                                                        |       | 4,350                        |       | 15,450                          |       |
| Total current  liabilities                                                                                                                                                |       | 3,439,141                    |       | 1,237,807                       |       |
|                                                                                                                                                                      |       |                         |       |                            |       |
| Commitments and  contingencies                                                                                                                                            |       |                         |       |                            |       |
| Long-term bank debt                                                                                                                                                       |       | —                       |       | 2,200,000                       |       |
| Long-term convertible  debentures, net of original issue discount                                                                                                         |       | 270,256                      |       | 209,983                         |       |
| Total  liabilities                                                                                                                                                        |       | 3,709,397                    |       | 3,647,790                       |       |
|                                                                                                                                                                      |       |                         |       |                            |       |
| Shareholders’ deficit:                                                                                                                                               |       |                         |       |                            |       |
| Common stock,  $0.00001 par. Authorized 50,000,000 shares; issued and outstanding 15,479,039  and 14,399,686 shares on March 31, 2007 and December 31, 2006, respectively |       | 155                          |       | 144                             |       |
| Additional  paid-in capital                                                                                                                                               |       | 10,793,917                   |       | 10,111,482                      |       |
| Deficit  accumulated during development stage                                                                                                                             |       | (14,012,954                  | )          | (13,164,798                     | )          |
|                                                                                                                                                                      |       |                         |       |                            |       |
| Total  shareholders’ deficit                                                                                                                                         |       | (3,218,882                   | )          | (3,053,172                      | )          |
|                                                                                                                                                                      |       |                         |       |                            |       |
|                                                                                                                                                                      |       | $                            | 490,515    |                            | $          | 594,618 |   |

 

*See accompanying notes tofinancial statements.*

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**ProUroCare Medical Inc.**

**A Development Stage Company**

**ConsolidatedStatements of Operations**

(Unaudited)
| ** **                                      | ** ** | ** **            | ** ** | ** **            | ** ** | **Period from**    | ** ** |
|-------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-------------------------|------------|
| ** **                                      | ** ** | **Three months** | ** ** | **Three months** | ** ** | **August 17,1999** | ** ** |
| ** **                                      | ** ** | **ended**             | ** ** | **ended**             | ** ** | **(inception) to** | ** ** |
| ** **                                      | ** ** | **March 31,**    | ** ** | **March 31,**    | ** ** | **March 31,**      | ** ** |
| ** **                                      | ** ** | **2007**              | ** ** | **2006**              | ** ** | **2007**                | ** ** |
| Operating  expenses:                            |       |                  |       |                  |       |                    |       |
| Research and development                        |       | $                     | 24,820     |                  | $          | 87,927                  |       | $ | 4,738,744 |   |
| General and administrative                      |       | 444,441               |       | 405,543               |       | 6,943,663               |       |
|                                            |       |                  |       |                  |       |                    |       |
| Total operating expenses                        |       | 469,261               |       | 493,470               |       | 11,682,407              |       |
|                                            |       |                  |       |                  |       |                    |       |
| Operating loss                                  |       | (469,261              | )          | (493,470              | )          | (11,682,407             | )          |
|                                            |       |                  |       |                  |       |                    |       |
| Interest income                                 |       | —                |       | —                |       | 16,480                  |       |
| Interest expense                                |       | (295,195              | )          | (238,424              | )          | (2,263,327              | )          |
| Debt  extinguishment cost                       |       | (83,700               | )          | —                |       | (83,700                 | )          |
|                                            |       |                  |       |                  |       |                    |       |
| Net loss                                        |       | $                     | (848,156   | )                     | $          | (731,894                | )          | $ | (14,012,954 | ) |
|                                            |       |                  |       |                  |       |                    |       |
| Net loss per  common share:                     |       |                  |       |                  |       |                    |       |
| Basic and diluted                               |       | $                | (0.06      | )                     | $     | (0.05                   | )          | $  | (1.56 | ) |
|                                            |       |                  |       |                  |       |                    |       |
| Weighted average  number of shares outstanding: |       |                  |       |                  |       |                    |       |
| Basic and  diluted                              |       | 15,009,971            |       | 14,184,538            |       | 8,972,154               |       |

 

***See accompanying notes tofinancial statements.***

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**ProUroCare Medical Inc.**

**A Development Stage Company**

**Consolidated Statements of CashFlows**

(Unaudited)
| ** **                                                                                                                                                  | ** ** | **Three months** | ** ** | **Three months** | ** ** | **Period from**         | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|------------------------------|------------|
| ** **                                                                                                                                                  | ** ** | **ended**             | ** ** | **ended**             | ** ** | **August 17,1999**      | ** ** |
| ** **                                                                                                                                                  | ** ** | **March 31,**    | ** ** | **March 31,**    | ** ** | **(inception) to**      | ** ** |
| ** **                                                                                                                                                  | ** ** | **2007**              | ** ** | **2006**              | ** ** | **March 31, 2007** | ** ** |
| Cash flows from  operating activities:                                                                                                                      |       |                  |       |                  |       |                         |       |
| Net loss                                                                                                                                                    |       | $                     | (848,156   | )                     | $          | (731,894                     | )          | $ | (14,012,954 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities:                                                                                |       |                  |       |                  |       |                         |       |
| Depreciation and  amortization                                                                                                                              |       | 974                   |       | 974                   |       | 18,032                       |       |
| Gain on sale of  furniture and equipment                                                                                                                    |       | —                |       | —                |       | (2,200                       | )          |
| Stock-based  compensation                                                                                                                                   |       | 184,224               |       | 86,941                |       | 1,339,942                    |       |
| Issuance of  common stock for services rendered                                                                                                             |       | —                |       | —                |       | 156,904                      |       |
| Warrants issued  for services                                                                                                                               |       | —                |       | —                |       | 468,636                      |       |
| Warrants issued  for debt guarantees                                                                                                                        |       | —                |       | —                |       | 320,974                      |       |
| Warrants issued  for debt extinguishment                                                                                                                    |       | 83,700                |       | —                |       | 83,700                       |       |
| Amortization of  note payable original issue discount                                                                                                       |       | 23,162                |       | 12,184                |       | 152,247                      |       |
| Amortization of  convertible debt original issue discount                                                                                                   |       | 60,273                |       | 39,952                |       | 270,256                      |       |
| Amortization of  debt issuance and deferred offering costs                                                                                                  |       | 130,028               |       | 132,148               |       | 907,558                      |       |
| Write-off of  deferred offering cost                                                                                                                        |       | —                |       | —                |       | 59,696                       |       |
| License rights  expensed as research and development, paid by issuance of common stock to CS  Medical Technologies, LLC                                     |       | —                |       | —                |       | 475,000                      |       |
| License rights  expensed as research and development, paid by issuance of common stock to  Profile, LLC                                                     |       | —                |       | —                |       | 1,713,600                    |       |
| Changes in  operating assets and liabilities:                                                                                                               |       |                  |       |                  |       |                         |       |
| Deposits                                                                                                                                                    |       | —                |       | (50,000               | )          | (189,554                     | )          |
| Other  receivables                                                                                                                                          |       | (24,407               | )          | (17,100               | )          | (24,407                      | )          |
| Prepaid expenses                                                                                                                                            |       | 13,773                |       | 2,860                 |       | 66,751                       |       |
| Accounts payable                                                                                                                                            |       | 60,216                |       | (138,471              | )          | 837,191                      |       |
| Accrued expenses                                                                                                                                            |       | 26,467                |       | (553,436              | )          | 807,413                      |       |
| Net cash used in  operating activities                                                                                                                      |       | (289,746              | )          | (1,215,842            | )          | (6,551,215                   | )          |
|                                                                                                                                                        |       |                  |       |                  |       |                         |       |
| Cash flows from  investing activities:                                                                                                                      |       |                  |       |                  |       |                         |       |
| Purchases of  equipment and furniture                                                                                                                       |       | —                |       | —                |       | (20,797                      | )          |
| Net cash used in  investing activities                                                                                                                      |       | —                |       | —                |       | (20,797                      | )          |
|                                                                                                                                                        |       |                  |       |                  |       |                         |       |
| Cash flows from  financing activities:                                                                                                                      |       |                  |       |                  |       |                         |       |
| Proceeds of note  payable, bank                                                                                                                             |       | —                |       | —                |       | 500,000                      |       |
| Payment of note  payable, bank                                                                                                                              |       | —                |       | (400,000              | )          | (500,000                     | )          |
| Proceeds of  notes payable                                                                                                                                  |       | —                |       | 48,000                |       | 340,500                      |       |
| Payment of notes  payable                                                                                                                                   |       | (29,100               | )          | (148,000              | )          | (1,011,954                   | )          |
| Proceeds from  long-term debt                                                                                                                               |       | —                |       | 1,966,517             |       | 2,200,000                    |       |
| Payments for  debt issuance costs                                                                                                                           |       | —                |       | (228,668              | )          | (231,966                     | )          |
| Payment for  rescission of common stock                                                                                                                     |       | —                |       | —                |       | (100,000                     | )          |
| Net advances  (payments) to Clinical Network, Inc.                                                                                                          |       | —                |       | (8,943                | )          | —                       |       |
| Proceeds from  loans from officers and directors                                                                                                            |       | —                |       | —                |       | 15,450                       |       |
| Payments for  deferred offering costs                                                                                                                       |       | —                |       | —                |       | (28,827                      | )          |
| Cost of reverse  merger                                                                                                                                     |       | —                |       | —                |       | (162,556                     | )          |
| Net proceeds  from issuance of common stock                                                                                                                 |       | 335,111               |       | —                |       | 5,570,037                    |       |
| Net cash  provided by financing activities                                                                                                                  |       | 306,011               |       | 1,228,906             |       | 6,590,684                    |       |
| Net increase in  cash                                                                                                                                       |       | 16,265                |       | 13,064                |       | 18,672                       |       |
| Cash, beginning of the  period                                                                                                                              |       | 2,407                 |       | 37                    |       | —                       |       |
| Cash, end of the period                                                                                                                                     |       | $                     | 18,672     |                  | $          | 13,101                       |       | $ | 18,672 |   |
|                                                                                                                                                        |       |                  |       |                  |       |                         |       |
| Supplemental cash flow  information:                                                                                                                        |       |                  |       |                  |       |                         |       |
| Cash paid for  interest                                                                                                                                     |       | $                     | 80,304     |                  | $          | 47,062                       |       | $ | 438,285 |   |
| Non-cash  investing and financing activities:                                                                                                               |       |                  |       |                  |       |                         |       |
| Warrants issued  pursuant to note payable                                                                                                                   |       | $                     | 23,162     |                  | $          | 23,000                       |       | $ | 234,909 |   |
| Common stock  issued in lieu of cash for accrued expenses                                                                                                   |       | 49,911                |       | —                |       | 167,554                      |       |
| Common stock  issued in lieu of cash for loans from officers and directors                                                                                  |       | 7,000                 |       | —                |       | 7,000                        |       |
| Convertible debt  issued as debt issuance costs related to guarantee of long-term debt  (recorded as a beneficial conversion in Additional paid-in capital) |       | —                |       | 733,334               |       | 733,334                      |       |
| Issuance of note  payable for redemption of common stock                                                                                                    |       | —                |       | —                |       | 650,000                      |       |
| Warrants issued  for debt issuance costs                                                                                                                    |       | —                |       | —                |       | 242,612                      |       |
| Conversion of  accounts payable to note payable                                                                                                             |       | —                |       | —                |       | 241,613                      |       |
| Deposits applied  to note payable and accrued interest                                                                                                      |       | —                |       | —                |       | 142,696                      |       |
| Common stock  issued in lieu of cash for accounts payable                                                                                                   |       | —                |       | —                |       | 101,587                      |       |
| Common stock  issued for deferred offering expenses                                                                                                         |       | —                |       | 22,750                |       | 91,501                       |       |
| Prepaid expenses  financed by note payable                                                                                                                  |       | —                |       | —                |       | 68,437                       |       |
| Deposits applied  to accounts payable                                                                                                                       |       | —                |       | —                |       | 45,782                       |       |
| Assumption of  liabilities in the Profile, LLC transaction                                                                                                  |       | —                |       | —                |       | 25,000                       |       |
| Proceeds from  sale of furinture and equipment applied to accounts payable                                                                                  |       | —                |       | —                |       | 2,200                        |       |
| Deposits applied  to accrued expenses                                                                                                                       |       | —                |       | —                |       | 1,076                        |       |

 

*See accompanying notes to financial statements.*

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**ProUroCareMedical Inc.A Development Stage CompanyNotes to Consolidated Financial Statements**

**March31, 2007 and 2006 and the period fromAugust 17, 1999 (inception) to March 31, 2007**

(Unaudited)

**Note 1. Description of Business and Summary of Significant Accounting Policies.**

***(a)***                                 Description ofBusiness, Development Stage Activities, and Basis of Presentation

ProUroCare Medical Inc. (“ProUroCare,” the “Company, “we” or “us”) is adevelopment stage company that is developing diagnostic and imaging technologyfor use in the detection and treatment of prostate cancer, enlarged prostatesand other male urological conditions. The Company’s developmental activities have included the acquisition ofseveral technology licenses, the development of a strategic business plan and asenior management team, product development, and fund raising activities.

The Company had no activities from its incorporation in August 1999until July 2001, when the Company issued 3,000,000 shares of common stock toClinical Network, Inc. (“Clinical Network”) and Clinical Network LLC (“CN LLC”),a related party to Clinical Network. Moreover, in July 2001, the Company acquired a license to certainmicrowave technology by issuing 3,000,000 shares of common stock to CS MedicalTechnologies, LLC (“CS Medical”).  InJanuary 2002, the Company acquired a license to certain imaging technologythrough the issuance of 3,999,999 shares to Profile LLC (“Profile”).

Pursuant to a merger agreement effective April 5, 2004 among ProUroCareInc. (“PUC”), Global Internet Communications, Inc. (“Global”), and GICAcquisition Corp., a wholly owned subsidiary of Global (“GIC”), GIC merged withand into PUC, which remained as the surviving company and a wholly ownedoperating subsidiary of Global (the “Merger”). On April 26, 2004, Global changed its name to ProUroCare Medical Inc. Inconnection with the Merger, Global completed a private placement of 2,205,000shares of common stock (the “Private Placement”) pursuant to Rule 506promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

The accompanying consolidated financial statements include the accountsof the Company and its wholly owned subsidiary, PUC.  Significant inter-company accounts andtransactions have been eliminated in consolidation.

***(b)***                                 InterimFinancial Information

The accompanying unauditedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America and pursuant tothe rules and regulations of the Securities and Exchange Commission (the “SEC”)for interim financial information. Accordingly, certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with accountingprinciples generally 

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accepted in the UnitedStates have been omitted pursuant to such rules and regulations.  Operating results for the three month periodended March 31, 2007 are not necessarily indicative of the results that may beexpected for the year ending December 31, 2007 or any other period.  The accompanying financial statements andrelated notes should be read in conjunction with the audited financialstatements of the Company, and notes thereto, contained in our Annual Report onForm 10-KSB for the year ended December 31, 2006.

The financial information furnished reflects,in the opinion of management, all adjustments, consisting of normal recurringaccruals, necessary for a fair presentation of the results of the interimperiods presented.

***(c)***                                  AccountingEstimates

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of expenses during thereporting periods. The Company’s significant estimates include thedetermination of the fair value of its common stock, contingent liabilityexpense, and the valuation of license rights. Actual results could differ fromthose estimates.

***(d)***                                 Net Loss PerCommon Share

Basic and diluted loss per common share is computed by dividing netloss by the weighted-average number of common shares outstanding for the reportingperiod.  Dilutive common-equivalentshares have not been included in the computation of diluted net loss per sharebecause their inclusion would be antidilutive. Antidilutive common equivalent shares issuable based on future exerciseof stock options or warrants could potentially dilute basic loss per commonshare in subsequent years.  All optionsand warrants outstanding were antidilutive for the three month periods endedMarch 31, 2007 and 2006 and the period from August 17, 1999 (inception) to March31, 2007 since the Company reported a net loss for these periods.

***(e)***                                  Stock-BasedCompensation

Effective August 17, 1999, the Company adopted the fair valuerecognition provisions of Financial Accounting Standards Board (“FASB”)Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting forStock-Based Compensation” (“SFAS 123”), to record option and warrant issuances,including stock-based employee compensation. The Company’s policy is to grant stock options at fair value at the dateof grant, and to record the expense at fair value as required by SFAS 123,using the Black-Scholes pricing model.

Effective January 1, 2006,the Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS123R”), that focuses primarily on accounting for transactions in which anentity obtains employee services in share-based payment transactions.  This statement replaced SFAS 123, andsupersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting forStock Issued to Employees.”  SFAS 123Rrequires all companies to expense the fair value of employee stock options andsimilar awards, which has been the Company’s policy to date.  Stock-based employee and non-employeecompensation cost related to stock options was $184,224, $86,941 and $1,216,918for the three months 

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ended March 31, 2007 and2006, and the period from August 17, 1999 (inception) to March 31, 2007,respectively.  The Company estimates theamount of future stock-based compensation expense related to currently outstandingoptions to be approximately $185,000 and $107,000 for the years ending December31, 2007 and December 31, 2008, respectively.

The Black-Scholes option-pricing model was developed for use inestimating the fair value of traded options that have no vesting restrictionsand are fully transferable. In addition, option pricing models require theinput of highly subjective assumptions. Because the Company’s employee andconsultant stock options have characteristics significantly different fromthose of traded options, and because changes in the subjective inputassumptions can materially affect the fair value estimate, the existing modelsmay not necessarily provide a reliable single measure of the fair value of theCompany’s employee stock options.

In determining thecompensation cost of the options granted during the three months ended March31, 2007 and 2006, as specified by SFAS 123R and SFAS 123, the fair value ofeach option grant has been estimated on the date of grant using theBlack-Scholes pricing model and the weighted average assumptions used in thesecalculations are summarized as follows:
|                                      | ** ** | **For the three months ended  March 31,** | ** ** |
|--------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                           | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
| Risk-free  Interest Rate             |       | 4.86%                                                              |       | 4.7% |   |
| Expected Life of  Options Granted(1) |       | 4.0  years                                                         |       | 2.8  years |   |
| Expected  Volatility                 |       | 133.4%                                                             |       | 182.9% |   |
| Expected Dividend Yield              |       | 0                                                                  |       | 0 |   |

 

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(1)Calculated as theaverage of the vesting periods and the contractual term of the options.

The expected life of theoptions is determined using a simplified method, computed as the average of theoption vesting periods and the contractual term of the option.  For performance based options that vest uponthe occurrence of an event, the Company uses an estimate of when the event willoccur as the vesting period used in the Black-Scholes calculation for eachoption grant.  Because of the limitedtrading history of the Company’s stock, the expected volatility is based on asimple average of daily price data since the date of the Merger on April 5,2004.  Based on the lack of history tocalculate a forfeiture rate, the Company has not adjusted the calculated valueof the options.  The risk-free rates forthe expected terms of the stock options and awards are based on the U.S. Treasuryyield curve in effect at the time of grants.

***(f)***                                    Warrants

In accordance with Emerging Issues Task Force (“EITF”) No. 96-18, “Accountingfor Equity Instruments that are Issued to Other than Employees for Acquiring,or in Conjunction with Selling, Goods and Services” and EITF No. 98-5, “Accountingfor Convertible Securities with Beneficial Conversion Features or ContingentlyAdjustable Conversion Ratios”, the Company has elected to utilize thefair-value method of accounting for warrants issued to non-employees asconsideration for goods or services received, including warrants issued tolenders and guarantors of Company debt (see Note 5(c)).  The weighted-average fair value of thewarrants granted during the three months ended March 31, 2007 was $0.42, andsuch warrants are immediately vested and exercisable on the date of grant.  During the three 

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months ended March 31, 2006, an immediately vested and exercisablewarrant was issued to a lender to acquire 50,000 shares of common stock at$0.50 per share pursuant to a $23,000 loan. The fair value of stock warrants estimated at grant date usingthe Black-Scholes pricing modelexceeded the amount of the loan. Accordingly, the value of this warrant was recorded as $23,000, or $0.46per share and was expensed during the three months ended March 31, 2006 due tothe note being paid in full.  No otherwarrants were issued during the three months ended March 31, 2006.

The fair value of stockwarrants is the estimated present value at grant date using the Black-Scholespricing model with the following weighted average assumptions:
|                                       | ** ** | **For the three months ended  March 31,** | ** ** |
|---------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                            | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
| Risk-free  Interest Rate              |       | 4.73%                                                              |       | 4.41 |   |
| Expected Life of  Warrants Issued (1) |       | 5 years                                                            |       | 5 years |   |
| Expected  Volatility                  |       | 135.1%                                                             |       | 132.0 |   |
| Expected Dividend Yield               |       | 0                                                                  |       | 0 |   |

 

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(1)The contractualterm of the warrants.

Because of the limited trading history of the Company’sstock, the expected volatility is based on a simple average of daily price datasince the date of the Merger on April 5, 2004. Based on the lack of history to calculate a forfeiture rate, the Companyhas not adjusted the calculated value of the options.  The risk-free rates for theexpected terms of the stock warrants are based on the U.S. Treasury yield curvein effect at the time of grants.

***(g)******                                ******Other Receivables***

Other receivables represent amounts due within 30 days from a jointdevelopment partner for their portion of the cost of the joint developmentproject.  At March 31, 2007 and December31, 2006, no reserves were recorded.

***(h)****                                **Going Concern*

Wehave incurred operating losses, accumulated deficit and negative cash flowsfrom operations since inception.  As ofMarch 31, 2007, we had an accumulated deficit of approximately $14,013,000.  These factors, among others, raisesubstantial doubt about our ability to continue as a going concern.  The accompanying consolidated unauditedfinancial statements do not include any adjustments related to recoverabilityand classification of asset carrying amounts or the amount and classificationof liabilities that might result should we be unable to continue as a goingconcern.

***(i)****                                   **Recent AccountingPronouncements*

**FASB 159**

In February 2007, theFinancial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 159, “The Fair Value Option for FinancialAssets and Financial Liabilities - Including an amendment of FASB Statement No.115” (“SFAS No. 159”). SFAS No. 159 permits entities to elect to measure manyfinancial instruments and certain other items at fair value. Upon adoption ofSFAS No. 159, an entity may elect the fair value option for eligible items thatexist at the adoption date. Subsequent to the initial adoption, the election ofthe fair value option may only be made at initial recognition of the asset orliability or upon a re-measurement event that gives rise to new-basisaccounting. The decision about whether to elect the fair value option isapplied on an instrument-by-instrument basis, is irrevocable and is appliedonly to an entire instrument and not only to specified risks, cash flows orportions of that instrument. SFAS No. 159 does not affect any existingaccounting literature that requires certain assets and liabilities to becarried at fair value nor does it eliminate disclosure requirements included inother accounting standards. SFAS No. 159 is effective for fiscal yearsbeginning after November 15, 2007. The Company is currently evaluating theimpact of adopting SFAS No. 159 on their respective financial position andresults of operations.

**Note 2.  Notes Payable – Bank.**

In February 2006, the Company completed twoclosings of a senior debt financing. Pursuant to the two closings, on February 16, 2006, the Company issued apromissory note to Crown Bank in the amount of $1,200,000 at an interest rateof the prime rate plus one percent (9.25 percent at March 31, 2007 and December31, 2006).  This promissory note matureson January 11, 2008.  On February 28,2006, the Company issued a second promissory note to Crown Bank in the amountof $1,000,000, also at an interest rate of the prime rate plus onepercent.  This promissory note 

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matures on February 29, 2008.  The average interest rate of the notes was9.25 percent for the three months ended March 31, 2007.

The promissory notes aresecured by a pledge of all Company assets, including two technology licensesthat were assigned to Crown Bank, and guaranteed by four accredited individualinvestors.  In consideration for theirguarantees, the Company issued 10 percent unsecured convertible subordinateddebentures totaling $733,334 to the four guarantors (see Note 4).

**Note 3.  Notes Payable.**

OnJune 1, 2006, PUC borrowed $75,000 from an investor, and in connectiontherewith issued to such investor a promissory note to mature on August 30,2006.  On August 24, 2006, the promissorynote was amended to mature on the first of the Company’s closing of anaggregate of $1 million of net proceeds under its financing efforts or October29, 2006.  On January 22, 2007, theCompany repaid $25,000 of the promissory note. On March 20, 2007, the promissory note was amended for a second time toextend the due date of the remaining balance until the Company closes on anaggregate of $750,000 or more of new financing. The promissory note and amendments thereto bear interest at the primerate.  Interest expense recorded duringthe three months ended March 31, 2007 related to this note was $1,209.  In connection with the promissory note, theCompany issued a five-year warrant (immediately exercisable) to the investor toacquire a total of 37,500 shares of the Company’s common stock at $0.50 pershare.  In connection with theamendments, following repayment of the promissory note, the Company will issuea five-year warrant (immediately exercisable) to the investor to acquire 417shares of the Company’s common stock at $0.50 per share for each day thepromissory note is outstanding after August 30, 2006  During the three month period ended March 31,2007, the Company expensed as debt extinguishment cost $20,267 related to theaccrual of 37,530 warrants to be issued pursuant to the terms of the promissorynote.  As of March 31, 2007, the Companyhad accrued for issuance warrants to acquire 89,238 shares of the Company’scommon stock pursuant to this arrangement.

OnNovember 30, 2006, the Company borrowed $100,000 from Adron Holdings, LLC (“Adron”).  In connection therewith, the Company issuedto Adron an unsecured promissory note that bears interest of $5,000 per monthand was set to mature on January 2, 2007. Under the terms of the promissory note, the Company issued a five-yearwarrant (immediately exercisable) to Adron’s partners to acquire 50,000 sharesof Company common stock at $0.50 per share, and additional five-year warrants(immediately exercisable) to acquire 50,000 shares at $0.50 per share when theloan was not repaid on January 2, 2007 (see Note 10(e)).  On March 20, 2007, the Company amended thepromissory note to extend its due date until the first to occur of (1) theCompany closing on an aggregate of $750,000 or more of new financing, or (2)April 30, 2007.  In connection with theamendment, the Company issued to Adron’s partners five-year warrants(immediately exercisable) dated February 1, 2007 to acquire a total 50,000shares of Company common stock at $0.50 per share, and following repayment ofthe promissory note, the Company will issue additional five-year warrants(immediately exercisable) to Adron’s partners to acquire 1,667 shares of theCompany’s common stock for each day the promissory note is outstanding on andafter March 1, 2007, at $0.50 per share. As of March 31, 2007, the Company had accrued for issuance warrants toacquire 51,677 shares of the Company’s common stock pursuant to thisarrangement.  During the three monthperiod ended March 31, 2007, the Company expensed as debt extinguishment cost$36,604 related to the issuance of the 50,000 warrants on February 1, 2007 andthe accrued 51,677 warrants to be issued pursuant to the terms of thepromissory note.

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**Note 4. Long-Term Debt - Convertible Debentures.**

As consideration to the four guarantors toprovide their guarantees for $2,200,000 of bank promissory notes (see Note 2),the Company issued $733,334 of unsecured convertible 10 percentdebentures.  All of the debentures maturethree years from the date of issue (February, 2009) (coincident with theclosing dates of the promissory notes as noted above) and are convertible intoCompany common stock at a price of $0.50 per share.  If the guarantees of the underlying bankindebtedness are not released by August 31, 2007 (or subsequently October 31,2007), the conversion price becomes $0.40 per share (and subsequently $0.30 pershare), respectively.  The cost of thedebentures was recorded as debt issuance cost and is being amortized asinterest expense over the term of the underlying bank note payable.  The value of the beneficial conversionfeature was computed as the difference between the fair market value of theshares at the transaction dates and the lowest possible conversion price duringthe debenture term ($0.30 per share), multiplied by the number of conversionshares that would be issued at that conversion price (2,444,444 shares).  The value so computed was in excess of theface value of the convertible debentures issued, and was therefore limited tothe face value of the debentures issued ($733,334).  The beneficial conversion feature wasrecorded as an original issue discount as defined in EITF No. 98-5 against theconvertible debt liability and is being amortized as interest expense over theterm of the convertible debentures.

OnMarch 21, 2007, the Company and the four guarantors agreed to amend thedebenture agreements.  Under theterms of the revised debentures, each debenture holder agreed to accept aspayment for interest due on the debenture the following:

·                  cash paid forinterest from inception through May 31, 2006 (previously paid in 2006);

·                  InvestmentUnits, consisting of one share of stock and a three year warrant to acquire 0.5shares of Company common stock at $0.50 per share, for interest accrued fromJune 1, 2006 through January 31, 2007, such accrued interest to be convertedinto Investment Units at a price of $0.40 per unit; and

·                  cash or Companycommon stock (converted on the basis of $0.50 per share), at the option of theCompany, for interest accrued from February 1, 2007 through settlement of thedebenture.

Accordingly, on March 21,2007, the Company issued a total of 124,780 shares of its common stock andthree-year warrants (immediatelyexercisable) to acquire up to 62,392 shares of its common stock at $0.50per share to the four guarantors.  Thewarrants, valued at $26,829 using the Black-Scholes pricing model, wereexpensed as debt extinguishment costs. Other terms of the debentures were not changed.

**Note 5.  Shareholders’ Equity.**

***(a)******                                ******Common Stock***

OnJanuary 18, 2007, the Company sold 312,500 of the Company’s Investment Units,on January 23, 2007, sold an additional 312,500 Units, and on February 28, 2007sold an additional 312,500 Units, all at a price of $0.40 each, with totalproceeds of $375,000.  Each InvestmentUnit consists of one share of the Company’s common stock and a 3-year warrant(immediately exercisable) to acquire 0.5 shares of the Company’s common stockfor $0.25 ($0.50 per whole share), exercisable at the discretion of theinvestor during the term of the warrant. The issuance was made in reliance on exemption from registrationprovided under 

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Section4(2) of the Securities Act, for issuance by an issuer not involving a publicoffering.

On February12, 2007, the Company issued 17,073 shares of its common stock to Mr. ScottSmith, a director of the Company, as repayment of a $7,000 loan to the Companyfrom Mr. Smith.  The per share value ofthe stock of $0.41 was based on the last selling price prior to this issuanceas reported on the Over-the-Counter Bulletin Board.  No underwriter was used, and no commissionswere paid on the transaction. The shares were sold in a transaction exempt fromregistration under Section 4(2) of the Securities Act as the transaction was anon-public offering to a single subscriber.

OnMarch 21, 2007, the Company and the four guarantors of the Company’s bank notespayable (see Note 2) agreed to amend the related debenture agreements.  Pursuant to the revised debenture agreements,among other things, the Company issued a total of 124,780 shares of its commonstock to the four guarantors in lieu of accrued interest.  Theissuance was made in reliance on exemption from registration provided underSection 4(2) of the Securities Act, for issuance by an issuer not involving apublic offering.

***(b)***                                 Stock Options

On February 1, 2007, theCompany granted to Mr. Richard Carlson, our Chief Executive Officer, a seven-yearoption to acquire up to 200,000 shares of the Company’s common stock at a price of $0.50 per share.  The options were valued at $0.34 per shareusing the Black-Scholes pricing model and will be expensed over the vestingperiod as general and administrative expense. ** **The options will vest according tothe following schedule if the enumerated conditions are satisfied:

(a)                      50,000 shares vest immediately;

(b)                     50,000 shares vest upon the Company’s closingon new equity financing arrangements aggregating to $3,000,000 or more afterFebruary 1, 2007 and prior to December 31, 2007.  Such new equity financing shall include, inthe event of a corporate partnership, the value of services supplied to theCompany by the partner entity to develop the Company’s products or obtainregulatory approval of them;

(c)                      50,000 shares vest if the Company recordsgross product revenues of $1,000,000 or more in the Company’s 2008 fiscal year;and

(d)                     50,000 shares vest on December 31, 2008.

***(c)***                                  Warrants

***The warrants below issued or to be issuedare exempt from registration under Section 4(2) of the Securities Act as theywere or will be issued in non-public offerings to a limited number ofsubscribers.  Each warrant was valuedusing the Black-Scholes pricing model; however, the recorded value of warrantsissued to lenders and guarantors of Company debt is limited to thecorresponding amount loaned or guaranteed (see Note 1(f)).***

·                  In connection with amendments to a $75,000promissory note originally issued to an investor on June 1, 2006 (see Note 3),following repayment of the promissory note, the Company will issue a five-yearwarrant (immediately exercisable) to the investor to acquire 417 shares of theCompany’s common stock at $0.50 per share for each day the promissory note isoutstanding after August 30, 2006.

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·                  In connection with the Adron Note, on January2, 2007 the Company issued to Adron’s partners five-year warrants (immediatelyexercisable) to acquire 50,000 shares of the Company’s common stock at $0.50per share (see Note 3).

·                  In connection with the March 20, 2007amendment of the Adron Note, the Company issued to Adron’s partners five-yearwarrants (immediately exercisable) dated February 1, 2007 to acquire 50,000shares of Company common stock at $0.50 per share, and following repayment ofthe Adron Note, the Company will issue additional five-year warrants(immediately exercisable) to Adron’s partners to acquire a total of 1,667shares of the Company’s common stock for each day the Adron Note is outstandingon and after March 1, 2007, at $0.50 per share (see Note 3).

·                  On March 14,2007, upon the termination of employment of an employee, and in considerationfor agreeing to defer payment of accrued salaries until the Company is able tomake such payments (on the same basis as the payment of deferred salaries ofcontinuing employees), the Company agreed to extend by three years theexpiration date of 300,000 warrants beneficially held by the employee.  The incremental compensation cost associatedwith modification of the warrant was computed as the increase in the fair valueof the warrant as determined under the provisions of SFAS 123R over the fairvalue so determined immediately before the modification.  The $96,000 incremental compensation cost sodetermined was expensed during the quarter ended March 31, 2007.

·                  On March 21, 2007, the Company and fourguarantors of the Company’s bank notes payable (see Note 2) agreed to amend therelated debenture agreements. Pursuant to the revised debenture agreements, among other things, theCompany issued three-year warrants (immediatelyexercisable) to acquire a total of 62,392 shares of its common stock at$0.50 per share to the four guarantors (seeNote 4).

***Note 6.  DevelopmentAgreements.***

On March 21, 2007, the Company executed anamendment to the Memorandum of Understanding between ProUroCare Inc. andUrologix, Inc. dated July 27, 2005 (the “MOU”). Under the terms of the MOU, the parties were to co-develop new productsutilizing ProUroCare’s Electrical Impedance Tomography (“EIT”) technology. TheEIT technology was expected to be assembled into modules that would becompatible with and incorporated into Urologix’ existing thermal therapysystems.  The project was designed intomultiple phases of research, testing and development.  The first three phases were projected to costapproximately $550,000 over a period of 18 to 24 months.  ProUroCare and Urologix had agreed to equallyshare in the development costs of these phases. After completing Phase I in September 2006, it was determined that anassessment of two key project factors will be required before proceeding withthe second development phase.  As both ofthese issues were outside of the MOU’s original Phase I development definition,the Company plans to conduct research on both issues at its own expense beforea decision is made to move to Phase II of the program.  Under the terms of the MOU amendment,Urologix agreed to postpone any decision regarding the continuance of the remainingphases contemplated under the MOU, while the Company agreed that theassessments described above will be done and funded solely by the Company. Inaddition, Urologix has the right to abandon the project for any reason with 5days’ notice to the Company, and the Company has the right to abandon theproject for any reason by providing 5 days’ notice to Urologix.

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***Note 7.  SubsequentEvents.***

On April 2, 2007, the Company issued41,408 shares of its common stock to a vendor, as payment for productdevelopment work valued at $20,704.

On April 16, 2007, ProUroCare entered into an agreement (the“Cooperation Agreement”) with ArtannLaboratories Inc. (“Artann”) in which the parties agreed to terminatetheir existing Research and Development Agreement and to use their best effortsto finalize a new development agreement within a reasonable period oftime.  The Cooperation Agreementestablishes a platform for joint cooperation in establishing the newdevelopment agreement, which will define a process for the joint development ofa next generation prostate mechanical imaging system with enhancedfunctionalities.  The CooperationAgreement terminates the Research and Development Agreement, and releases eachparty from all undischarged obligations and liabilities under that agreement.

Under the terms of the Cooperation Agreement, the Company paid $60,000in fees originally due to Artann under the Research and Development Agreement,related to submission of two patents and associated patent attorney fees.  Further, the Company issued to Artannfive-year warrants (immediatelyexercisable) to acquire 200,000 shares of its common stock at $0.41 pershare, thus fulfilling another obligation under the Research and DevelopmentAgreement.  The warrants were valued at$72,000 by the Black-Sholes pricing model and will be recorded as research anddevelopment expense.  The Company alsoagreed to pay Artann $35,000 on May 4, 2007, as a first payment for workalready completed under the proposed Development Agreement.

***On April 17, 2007, PUC borrowed, forshort-term working capital needs, $75,000 from Alexander Nazarenko, a directorof the Company.  In consideration, PUCexecuted and delivered to Mr. Nazarenko a $75,000 unsecured demand promissorynote.  The note bore interest at anannual rate of prime plus one percent, and was repaid on May 8, 2007.***

OnMay 2, 2007, the Company sold 312,500 of the Company’s Investment Units at aprice of $0.40 each, with total proceeds of $125,000.  Each Investment Unit consists of one share ofthe Company’s common stock and a 3-year warrant (immediately exercisable) toacquire 0.5 shares of the Company’s common stock for $0.25 ($0.50 per wholeshare), exercisable at the discretion of the investor during the term of thewarrant.  The issuance was made inreliance on exemption from registration provided under Section 4(2) of theSecurities Act, for issuance by an issuer not involving a public offering.

***On May 11, 2007, the Companyentered into an agreement with Mr. Maurice Taylor, its former Chief ExecutiveOfficer, to defer the payment of his accrued salary.  Under the terms of the agreement, Mr. Taylorwill be paid his accrued salary from 2006 and 2007 totaling $141,017 ininstallments of $5,000 per month from June 1, 2007 through December 1, 2007,with the $106,017 balance being paid prior to December 28, 2007.  Mr. Taylor shall have the option, with tendays’ notice, to take up to 100,000 shares of the Company’s common stock inpayment for any or all of the payments based on the current market price on thedue date of the payment.  Asconsideration for his agreement to defer payment of his accrued salary, theCompany extended the original one-year period that Mr. Taylor may exercise hisstock options following his termination of employment until April 1, 2012.***

***On May 11, 2007, the Companyentered into an agreement with Mr. Michael Grossman, its former President andChief Operating Officer, to defer the payment of his accrued salary.  Under the terms***

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***of the agreement, Mr. Grossmanwill be paid his accrued salary from 2006 and 2007 totaling $103,990 ininstallments of $4,000 on May 15, 2007, $6,000 on June 1, 2007, and $8,000 permonth from June 1, 2007 through December 1, 2007, with the $45,990 balancebeing paid prior to December 28, 2007. Mr. Grossman shall have the option, with ten days’ notice, to take up to100,000 shares of the Company’s common stock in payment for any or all of thepayments based on the current market price on the due date of the payment.  As consideration for his agreement to deferpayment of his accrued salary, the Company extended the original one-yearperiod that Mr. Grossman may exercise his stock options following histermination of employment until February 1, 2012.  Except in the event of a breach of theagreement, the parties also agreed to release and waive each other from alldamages, actions, lawsuits, or claims the other party may have arising out ofthe employment of Mr. Grossman and the conclusion of that employment.***

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***Item 2.  Management’s Discussion and Analysis or Planof Operation.***

*The accompanying Plan of Operation should be readin conjunction with ProUroCare’s audited financial statements, and notesthereto, for the year ended December 31, 2006 filed with our Annual Report onForm 10-KSB on March 31, 2007.*

*Certainstatements contained in this Quarterly Report on Form 10-Q Report may be deemedto be forward-looking statements as defined by the Private SecuritiesLitigation Reform Act of 1995, and the Company intends that suchforward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements relate to,among other things: our continued access to critical working capital to fundour needs until we generate sufficient ongoing revenue; estimates regarding thesize of our target markets; successful product completion and development andclinical and commercial trials for our products; the timing and success of suchproduct development and U.S. clinical trials and securing approval from theFood and Drug Administration (“FDA”); acceptance of our products in themarketplace; new product introductions; competitive factors; physician andurology acceptance of our products in the marketplace; reimbursement for ourproducts; enforcement of our intellectual property rights; and the success andstrategy outlined in our business model. We caution that these statements arequalified by important factors that could cause actual results to differmaterially from those reflected by the forward-looking statements containedherein.*

**Overview;Product Offerings.**

ProUroCare Medical Inc. (“ProUroCare,” the “Company,” “we,” “us” or “our,”which terms include reference to ProUroCare Inc. (“PUC”), our wholly ownedsubsidiary) is a development stage company that is developing screening,diagnostic and monitoring equipment for prostate disease.  Our developmental activities have includedthe acquisition of several technology licenses, the development of a strategicbusiness plan and a senior management team, product development and fundraising activities.

*ProUroScan**TM** Prostate Mechanical Imaging System*

Our initial product is theProUroScanTM system, developed and designed as a uniquediagnostic-imaging system that enables physicians to accurately display, chartand monitor prostate examinations for more effective disease diagnosis.  Current screening approaches are accomplishedby means of a digital rectal examination (“DRE”) and a Prostate SpecificAntigen (“PSA”) blood test.

A DRE is a qualitative andsubjective test in which a physician wearing a latex glove inserts a lubricatedfinger into the rectum to palpate the prostate gland to detectabnormalities.  The clinician must relyon his or her experience and sensitivity of touch to estimate the size of theprostate and detect hardness or abnormalities within the prostate that mayindicate the presence of a potentially life-threatening disease.  The ProUroScanTM is designed to produce a digital image of theprostate showing the size and symmetry of the prostate and the location ofsoft-tissue abnormalities within the prostate. We believe that the ProUroScanTM will enable a physician to detectabnormalities in the prostate more accurately than with their finger, assessareas of the prostate that the physician cannot reach with their finger,produce quantifiable and chartable results and monitor the progression of thedisease over time.

The ProUroScanTM imaging system is being designed to detectcertain abnormalities that may be missed by other diagnostic techniques.  These abnormalities include areas on thesurface or within the prostate where the tissue has a different level ofelasticity or stiffness when compared with the rest of the gland, which can beprecursors to a more clearly defined hardened area or nodule.  The system’s operation is based onmeasurement of the stress pattern on the rectal wall when the probe is pressedagainst the prostate.  Temporal andspatial changes in the stress pattern provide information on the elastic structureof the gland and allow two-dimensional and three-dimensional reconstruction ofprostate anatomy and assessment of prostate mechanical properties.  The data acquired allow the calculation of 

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prostatefeatures such as size, shape, nodularity, consistency/hardness and mobility.  The prostate image is displayed on a screenthat allows a physician to identify the specific location of soft-tissueabnormalities and determine the relative size of the prostate upon completionof the imaging procedure.  The ProUroScanTM system prototype has beenvalidated in laboratory experiments on prostate phantoms and in a pre-clinicalstudy**.** The system has been used for more than two years and on more than 160patients at the Robert Wood Johnson Medical Center in New Brunswick, NewJersey.

The ProUroScanTM system consists of a probe, acentral processing unit containing proprietary image construction algorithms, acomputer with color monitor and keyboard, a color printer and single-usedisposable sheaths to cover the tip of the probe.  The ProUroScanTM system’s probe is specially designed for therectal anatomy to minimize patient discomfort. It is ergonomic for the clinician and similar to a traditional DRE forthe patient.  The probe utilizes pressuresensors located on the face of the probe head to palpate the prostate.  The probe’s positioning system ensures thatthe person administering the test examines the entire surface of the prostate,and assists prostate image construction.

To perform a test, theclinician must first place a single-use disposable sheath over the probe headand shaft and cover it with a lubricant. The clinician then inserts the tip of the probe into the patient’srectum and palpates the prostate.  As theprostate is palpated, a color image of the prostate is produced and displayedon the computer monitor, along with indicators of the amount of pressure beingapplied to help guide the clinician. Differences in tissue stiffness and elasticity will be depicted on themonitor in different colors.  Totaltesting time for a healthy prostate is under one minute.

Ideally, the ProUroScanTM examination will be administeredby a trained clinician on all patients in need of a prostate exam.Standardizing the procedure using the ProUroScanTM mechanical imaging device should minimize thedifferences in abilities between physicians in this otherwise subjectiveprocedure.  We expect the system willalso be more sensitive and have the ability to detect abnormalities that thenormal human finger cannot detect, thereby improving the quality of thediagnostic process.  It will also enablephysicians to literally see the differences in tissue elasticity or stiffnesson the color monitor instead of a traditional DRE that is “blind” and reliesexclusively on the clinician’s sense of touch. The system will create a hard copy of the prostate diagnostic procedurewhich can be placed into the patient’s file, and a digital record of the examthat can be stored and used for comparison to subsequent exams. This isadvantageous for physicians and patients in that it gives physicians theability to compare and contrast the patient’s results from exam to exam, and toget second opinions on the patient’s status in regards to the diagnosis.  Comparisons of multiple tests over time canalso be done providing longitudinal assessments of the patient’s disease.

We believe the ProUroScanTM system will be truly unique inthe market.  The closest comparison interms of imaging capability is to an examination using a transrectal ultrasound(“TRUS”) device.  TRUS is a test thatuses a rectal probe and sound wave echoes to create an image of the prostategland, thus allowing visual inspection for abnormal conditions.  Although well established as a highlyaccurate test, TRUS is used primarily as a guide for prostate biopsies, and isseldom used as a screening test.  It is avery expensive test, costing hundreds of dollars each, is difficult for some tointerpret and requires approximately 20 to 40 minutes to perform.  The ProUroScanTM system uses mechanical imaging rather thansound wave echoes, has a probe that is smaller than that of an ultrasoundprobe, will be performed in less than one minute and is less expensive.  The results of the ProUroScanTM test are displayed in color,making the results of the diagnostic test easy to interpret.

We anticipate that themajority of our revenue generated by the ProUroScanTM systemwill be tied to procedure fees for performing the test and the consumption ofproprietary disposable sheaths and probe tips. The systems themselves likely will be placed in clinics under a varietyof programs, including 

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operatingleases, financing leases, outright sale or placements paid for by premiums paidon the usage of the system.

We intend to position this product as an “adjunctive” test to DRE andPSA testing, which have low sensitivity and specificity and cannot bedocumented with color images.  TheProUroScanTM systemwill be marketed to urologists to establish the clinical and economic efficacyof this approach.  Once established as a “standardof care”, it will assist patients and physicians in making educated choicesabout the scope of treatment that will be needed.  As confidence is established regarding use ofthe system and the value of the test, it will become a third tool for thedetection and characterization of suspicious prostate tissue.

The ProUroScanTM system is currently in the latestages of product development.  Thedesign specifications are nearly finalized and performance characteristics aregenerally known.  Further development workin the areas of positioning system refinement, software, user interface andsensor production, among others, must be completed before the system can becommercialized.  It is anticipated that,once sufficient financing is obtained to undertake such work, an additionalnine to ten months will be needed to complete the remaining development tasksleading to the production of clinical study units.  As discussed below, the clinical study unitswill be used to conduct the clinical trials necessary to obtain FDA marketclearance.

We believe that the existingtechnology platform is robust and provides a platform on which to developmultiple future generation systems.  Thefirst generation system will provide an overall assessment of the prostateresulting in a map or record of the pressures that are generated from anassessment of the posterior surface of the prostate using the current sensorprobe.  We believe that the next or “secondgeneration system” will be capable of identifying the specific location (X, Y,and Z coordinates) of lesions found in the prostate.  We believe that this system will also be ableto create a three-dimensional image of the position of the lesions and allowthe physician to rotate the image to assist in identifying the actual positionof the lesion in the prostate gland.  Webelieve that this next generation system will provide a more thorough diagnosisof the patient.  Future generations ofthe ProUroScanTM systemmay include the capability of guiding biopsies to suspected cancer sites, at alower cost than current ultrasound systems.

Much of the ProUroScanTM system’s development to date hasbeen accomplished under two development agreements between the Company andArtann Laboratories, Inc. (“Artann”). Under the first agreement, the “DevelopmentAgreement,” Artann developed two working, pre-clinical ProUroScanTM systems.  These development-level systems weredelivered to us in late November 2004. We paid Artann $180,000 for this 2004 development work.

Under the second agreement, called the “Research and DevelopmentAgreement,” Artann was named a research and development partner to the Company,supporting the further development of the ProUroScanTM system and other to-be-determined technologiesin the urologic field.  Any intellectual propertyand know-how resulting from the advancement of the ProUroScanTM system under this agreement willbe assigned to the Company.

On April 16, 2007, we entered into an agreement (the “CooperationAgreement”) with Artann in which the parties agreed to terminate their existingResearch and Development Agreement and to use their best efforts to finalize anew development agreement within a reasonable period of time.  The Cooperation Agreement establishes aplatform for joint cooperation in establishing the new development agreement,which will define a process for the joint development of a next generationprostate mechanical imaging system with enhanced functionalities.  The Cooperation Agreement terminates the 

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Researchand Development Agreement, and releases each party from all undischargedobligations and liabilities under that agreement.

Under the terms of the Cooperation Agreement, the Company paid $60,000in fees originally due to Artann under the Research and Development Agreement,related to submission of two patents and associated patent attorney fees.  Further, the Company issued to Artannfive-year warrants that are immediately exercisable to acquire 200,000 sharesof its common stock at $0.41 per share, thus fulfilling another obligationunder the Research and Development Agreement. The Company also agreed to pay Artann $35,000 in May, 2007, as a firstpayment for work already completed under the proposed development agreement.

In September 2006, Artannwas awarded a Small Business Innovation Research Phase II Competitive Renewalgrant from the National Cancer Institute. The aim of the grant is to helpcommercialize our ProUroScanTM system.  The three-year grant will provide up to $3million for ProUroScanTM systemdevelopment, effective September 29, 2006. It is our intent to work with Artann under this grant, and to expand ourworking relationship with Artann to include their participation in thedevelopment and commercialization of future generations of the ProUroScanTM system.

In March 2006, we engagedDevicix, LLC of Chaska, Minnesota, a firm that provides electrical, mechanical,biomedical, and software engineering services to early-stage medical devicecompanies.  We expect this firm willassist us and Artann in transferring technology from research and developmentto clinical study status, place design documentation under an FDA compliantquality control system, complete the design documentation required to submit anFDA request for product clearance, perform verification and validation testingincluding certification of safety related testing standards, and qualitycontrol processes for transfer to manufacturing.

We are currently in the process of establishing a series of labelingclaims reflecting the current needs of the market and the capabilities of thesystem.  Given that the system will becapable of providing physicians with a number of different outputs, we areattempting to create a regulatory strategy that will enable us to beginmarketing a basic system and then expand the labeling claims to incorporatemore sophisticated features and functionalities as they are developed andvalidated in clinical studies.  Theadvantage of this approach is that it allows us to minimize the time it willtake to obtain initial FDA approval and to begin commercializing an operationalsystem sooner.  Having systems in placewill also be important in assessing future enhancements while physicians areusing it in actual clinical practice.

Although the initial claim has yet to be finalized, the content of theclaim will likely be limited to the system’s ability to**producea surface map or a record of tissue elasticity measurements taken from theprostate to aid in documenting palpable lesions identified during clinicalprostate examinations.  Based onthe scope of the claim and the input received from consultants and clinicalstudy sites, we believe the initial system can be submitted to the FDA formarket clearance under a 510K application, or be evaluated under the FDA’s*de novo* process. When system development has been completed, we will begin placingsystems in a select number of major medical centers to screen patients andcollect data for the FDA submission.  Itis anticipated that the FDA clinical studies will require approximately threemonths to complete, and that an additional month will be needed to analyze thedata and prepare a formal submission to the agency.  Centers participating in the study will mostlikely be required to obtain approval from each center’s Institutional ReviewBoard (“IRB”) to protect the rights and welfare of all participants.  IRB approval has been granted for the firstProUroScanTM studies at the Veteran’s AdministrationMedical Center in Minneapolis, Minnesota and at the Robert Wood JohnsonUniversity Hospital in New Brunswick, New Jersey.

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The actual number of patients that will be studied and the specificclinical protocol that will be followed will be significantly determined at apre- Investigational Device Exemption (“IDE) meeting that we anticipate havingwith the FDA during 2007, prior to conducting clinical trials.  At that meeting we will present informationabout the product and all relevant and laboratory testing data.  We will also propose a strategy forvalidating our labeling claim and a clinical protocol that all investigativecenters will be expected to follow, with the goal being to obtain enoughclinical data to have sufficient confidence that the system will perform asdefined in the product labeling.

Assuming the path outlined above is acceptable to the FDA, of which noassurance can be given, we expect to make a formal submission to the agencyshortly after completion of the clinical study. Published FDA statistics from 2004 (the most recent available) indicatethat the average total time from receipt of a 510K application to final actionis 100 days, with 65 percent completed in less than 90 days.  Based on this data, assuming that the resultsof the clinical trials pose no unanticipated problems, we expect to receive FDAconcurrence within 90 to 180 days after the 510K application is filed.  Such concurrence will allow us to beginactive marketing of the ProUroScanTM system within the United States.

As new and more enhanced product features are developed, we plan tofile additional submissions with the FDA and to obtain expanded labelingclaims.  Depending on the exact nature ofthese claims, the approval process may require more extensive clinical studiesand possibly a full pre-market approval (“PMA”) application.  Such an application will likely take significantlymore time and be more comprehensive than the 510K approval process.

Simultaneous with the FDAsubmission, we expect to apply for a Conformité Européene (“CE”) mark, a markdisplayed prominently on products indicating compliance with the regulatorydirectives of the European Union.  The CEmark is required to market medical products within the European Union.  We will utilize the services of a notifiedbody such as Technischen Überwachungsvereine or Technical InspectionsOrganizations (“TÜV”), a German company specialized in meeting the regulatorydirectives of the European Union, to obtain CE mark approval.  It is believed the CE mark approval processwill be similar in duration to the FDA 510K process, or approximately sixmonths.

*ProUroVision**TM** Thermal Therapy Vision System*

In addition to ourProUroScanTM technology, we have secured licensed rights totechnology that offers potentially significant enhancements to existingtreatments of benign prostatic hyperplasia (“BPH”) and other urologic applications.  These technologies are covered by patentsheld by the licensors.  We are not awareof any patents held by others that would present any uncertainties regardingthe protection of our intellectual property rights.

Current microwave thermaltherapy treatment utilizes a catheter that is inserted into the patient’surethra.  The catheter contains anantenna that radiates microwave energy in an omni-directional, 360°pattern.  The tissue of the prostateabsorbs this energy and heat is inductively generated to increase thetemperature above 45° C, which is necessary to cause necrosis of thetissue.  After this tissue dies and iseliminated by the body, the enlargement of the prostate is reduced, restoringurine flow.  With our electricalimpedance tomography (“EIT”) technology, the clinician will be capable ofmonitoring the migration of heat within the prostate and monitor thetherapeutic effects of the treatment.

We believe that our uniqueand proprietary EIT technology has the potential to be a significantadvancement to thermal therapy.  EIT isan imaging technology in which an image of the conductivity or resistivity ofpart of the body is inferred from surface electrical measurements.  The heating that occurs 

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duringa thermal therapy procedure produces a change in the local conductivity orresistivity throughout the treatment volume. These local changes in the electrical properties of the tissue will bemeasured by a system of miniature electrodes placed on the patient’s body, anda rectal probe, all of which connect to an electronically controlledlow-frequency power supply.  Eachindividual electrode will receive a specific current and electronically measureall the possible induced voltages among the electrode array.  An inversion algorithm is then employed tocreate a real-time image of the thermal pattern.

The EIT system will beassembled into modules that will be compatible with, and added on to, existingthermal therapy systems.  The moduleswill include a low-frequency power supply, electrodes, a rectal probe, monitorand software containing the proprietary algorithms.  The upgraded systems will continue to utilizetransurethral microwave catheters to generate the heat necessary to causenecrosis.  This system will enableurologists to observe the real-time migration of heat through the prostateduring treatment and adjust the amount of energy applied in order to protectthe urethral tissue and adjacent organs. This information and increased energy efficiency will also help tominimize damage to healthy tissue.

**Third-Party Reimbursement.**

We expect that the use of our ProUroScanTM system will not beimmediately eligible for reimbursement utilizing existing Current ProceduralTerminology (“CPT”) codes.  When a newproduct or procedure is introduced, it must be submitted to the AmericanMedical Association’s (“AMA”) CPT Editorial Panel, who determines if anexisting code should be used, or if a new code should be issued.  However, before reaching the Editorial Panel,it must first be screened by the CPT Advisory Committee and the appropriatenational medical specialty society seated in the AMA House of Delegates (forprostate-related procedures, this is the American Urology Association (“AUA”)).  The process of obtaining a new CPT code cantake from one to three years.  When aprocedure is performed, the physician must use the CPT code when billingthird-party payers such as insurance companies or the government.  The amount of reimbursement the physicianreceives depends on the relative value assigned to the procedure by thethird-party payer via the CPT coding.

In the absence of formal reimbursement coverage, providers must givebeneficiaries a Medicare Advance Beneficiary Notice (“ABN”) before furnishingcertain services when there is a reasonable doubt that Medicare will cover theprocedure.  An ABN can be used for allsituations, including laboratory tests, by all physicians and suppliers.  An alternative to using a patient pay modelin the United States is to submit claims using a “Miscellaneous Code” which canoften result in a favorable coverage position. This approach will require the submission of more product and clinicaldata and all cases will be reviewed on an individual basis.

Initially, we anticipate using a “patient pay model” for physicians toreceive payment for performing the for the ProUroScanTM system test, in which patientsperceiving sufficient value in a procedure agree to pay for the test out oftheir own funds in the absence of reimbursement from their healthinsurance.  This approach was recommendedby Hogan & Hartson, our reimbursement consultants, based on the perceivedvalue of the test for patients that have an abnormal DRE or PSA value.  As the level of clinical and payment experience expands during the initial period of “patientpay” usage, we anticipate filing for a formal CPT procedure code andreimbursement as previously described. Having a formal reimbursement code willdrive additional utilization and will be helpful in obtaining reimbursement andtesting acceptance in other markets. There can be no assurance that we will be successful in obtaining aunique CPT code for use of the ProUroScanTM system.

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Our therapeutic products are anticipated to be “add-on”enhancements to existing thermal therapy systems.  These existing systems are used in proceduresthat already have designated CPT codes. The use of our add-on enhancements is not expected to alter theestablished CPT codes for such procedures or otherwise affect reimbursement forsuch procedures.  We anticipate thatthese products will be sold to established thermal therapy companies and notdirectly to the medical service provider. Because the thermal therapy procedures utilizing the equipment providedby these established companies already have designated CPT codes, neither thereimbursement for such procedures nor our future revenues are directly relatedto or dependent upon the establishment of new CPT codes.  Nevertheless, if reimbursement levels underthe existing CPT codes were reduced for applicable thermal therapy procedures,such reduction may adversely affect our ability to sell therapeutic products ata reasonable price.

**Assets;Property Acquisitions and Dispositions.**

Our primary assets are cash, licenses and other keyintellectual property rights, which are the foundation for our proposed productofferings.  These assets have beenpledged as security against promissory notes with Crown Bank.  We anticipate purchasing only a very limitedamount of equipment and other assets during the next 12 months.  We do not anticipate selling any significantequipment or other assets in the near term.

**Current Operations – Employees and Expenses.**

We currently employ only two employees.  We conduct our research and development,market research, regulatory and other business operations through the use of avariety of consultants and medical device development contractors.  We believe that using consultants andcontractors to perform these functions is more cost effective than hiringfull-time employees and affords us flexibility in directing our resourcestoward specific and changing goals during our development stage.  As we prepare for submission to the FDA andmarket launch of our ProUroScanTM product, we expect to add four to sixemployees in the areas of engineering and regulatory compliance within the next12 months.  During the next 12 months, weexpect to complete the development of clinical ProUroScanTM systems, conduct clinical trials inpreparation for filing a 510(k) submission with the FDA and fund developmentwork on our therapeutic products.

We incur ongoing expenses that are directly related tobeing a publicly traded company, including professional audit and legal fees,financial printing, press releases, and transfer agent fees.  We currently occupy temporary offices withinthe office of a Company director, for which we accrue rent on a month-to-monthbasis of approximately $2,200 per month. The director has informally agreed to defer payment of this rent untilthe Company receives significant funding. We expect to find and relocate to permanent offices of approximately2,000 square feet in the second or third quarter of 2007. Other expensesincurred include executive officer compensation, expensing of stock options,travel, insurance, telephone, supplies and other miscellaneous expenses.  In the next twelve months, the Companyanticipates that it will spend approximately $1.1 million in marketing andadministrative expenses.  Of these, theCompany expects that approximately $410,000 will be for compensation, benefitsand payroll taxes.

The Company anticipates that it will spend between$2.3 and $2.4 million on research and product development of the ProUroScanTM system over the next 12months.  Of this amount, approximately$1.4 million will be spent on manufacturing, engineering, validation anddocumentation efforts on a contracted basis with our development partners,including Artann.  As noted in the “Overview; Product Offerings”section above, much of the ProUroScanTM’sdevelopment to date has 

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beenaccomplished under two development agreements between ProUroCare andArtann.  We anticipate entering into ajoint development agreement with Artann in May 2007.  Although the terms of that agreement have notbeen finalized, we expect fees paid to Artann over the next twelve months underthat agreement will range between $800,000 and $1,000,000.  Clinical trials and the 510(k) filingwith the FDA are expected to cost in the range of $250,000 to $300,000.  ProUroScanTM systems created for development and clinicaluse are expected to cost the Company between $100,000 and $150,000.  Internal salaries, benefits and miscellaneousdepartmental expenses for software and hardware development, regulatory workand project management are estimated to cost between $400,000 and$450,000.  Contracted project managementand engineering is expected to range from $100,000 to $125,000.

**Liquidityand Capital Resources.**

*FinancingPlan.*

We had a working capitaldeficit of approximately $3.4 million at March 31, 2007.  Cash used in operations was approximately$290,000 and $1.2 million for the three month periods ended March 31, 2007 and2006, respectively, and $6.6 million for the period from August 17, 1999 (dateof inception) to March 31, 2007.  Inaddition, as of the date of this filing, the Company has current liabilitiesexceeding $3.4 million.  Consequently,management has taken several measures to conserve cash, including reducing executive headcount, minimizingdevelopment work on the ProUroScanTM system, reducing expenses and deferring vendorpayments and staff salaries.

Management’s plan is to actively raise an additional $10 million thatwill be used to support ongoing operations and the retirement of existing debtand other obligations.  Of the total,approximately $6 million will be used to bring the existing first generationsystem through clinical trials, final FDA concurrence and preparation formarket launch.  These funds will be inaddition to funds available to develop the ProUroScanTM system under Artann’s Small BusinessInnovation Research Phase II Competitive Renewal grant from the National CancerInstitute.  The remaining $4 million will be used toretire existing liabilities and provide working capital.

The plan for raising this level of funding consists of three separateinitiatives:

·                  theCompany has successfully identified prospective investors who are interested inthe Company and able to invest significant amounts of capital.  All of our funding to date has been providedor guaranteed by highly qualified, accredited individual investors;

·                  weare in contact with potential medical device companies that are interested inmarketing products in the prostate cancer detection market.  Conversations are in the early stages with atleast two such companies.  In addition tofinancial support, a successful collaboration with this type of company wouldallow us to gain access to down stream marketing, manufacturing and salessupport; and

·                  weare in preliminary discussions with an investment banker to initiate a publicequity offering.

If additional funds are raised by the issuance of debtor equity securities, such as through the issuance of stock, the issuance andexercise of warrants or the issuance and conversion of convertible debentures,then existing shareholders will experience dilution of their ownershipinterest.  If additional funds are raisedby the issuance of debt or other equity instruments, we may become subject tocertain operational limitations, and such securities may have rights senior tothose of existing holders of common stock.

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If adequate funds are not available through theseinitiatives on a timely basis in 2007, or are not available on acceptableterms, the Company may be unable to fund expansion, to develop or enhance ourproducts.  If the Company is forced toslow its development programs, or to put them on hold, it would delayregulatory approvals needed, and thus delay market entry for our products.Ultimately, if no additional financing is obtained beyond what has been securedto date, we could potentially be forced to cease operations.  See “RISK FACTORS ASSOCIATED WITH OUR BUSINESS, OPERATIONS ANDSECURITIES,” on page 24 of this Quarterly Report on Form 10-QSB.

**Going Concern**

We have incurred operatinglosses, accumulated deficit and negative cash flows from operations sinceinception.  As of March 31, 2007, we hadan accumulated deficit of approximately $14,013,000.  These factors, among others, raisesubstantial doubt about our ability to continue as a going concern.  The accompanying consolidated unauditedfinancial statements do not include any adjustments related to recoverabilityand classification of asset carrying amounts or the amount and classificationof liabilities that might result should we be unable to continue as a goingconcern.

**Critical AccountingEstimates**

Our critical accountingpolicies are those (i) having the most impact on the reporting of our financialcondition and results, and (ii) requiring significant judgments andestimates.  Due to the nature of ourcurrent operations, we do not believe we have any critical policies orprocedures.

**IMPORTANTNOTICES TO INVESTORS; SAFE HARBOR STATEMENT**

Statements in this Quarterly Report on Form 10-QSB that are not purelyhistorical are, and should be deemed, forward-looking statements.  These statements with respect to the goals,plan objectives, intentions, expectations, financial condition, results ofoperations, future performance and business of our Company, include, withoutlimitation: (i) our ability to successfully complete all clinical trials andcommercial development of our products and secure all necessary federal andother regulatory approvals to introduce and market our products in the UnitedStates and around the world; (ii) our ability to fund our working capital needsover the next 12 to 24 months and until we generate sufficient ongoing revenuefrom our products; (iii) our ability to successfully introduce, market and sellour products into the medical device markets; and (iv) all statements precededby, followed by or that include the words “may,” “would,” “could,” “should,” “expect,”“project,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “target” orsimilar expressions.

Forward-looking statements involve inherent risks and uncertainties,and important factors (many of which are beyond our control) that could causeactual results to differ materially from those set forth in the forward-lookingstatements, including the following, in addition to those contained in ourCompany’s reports on file with the Securities and Exchange Commission (the “SEC”):general economic or industry conditions, nationally and in the physician,urology and medical device communities in which we intend to do business; ourability to fund our working capital needs over the next 12 to 24 months; ourability to complete the development of our existing and proposed products on atimely basis or at all; legislation or regulatory requirements, including oursecuring all 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 andother competitors; the development of products that may be superior to theproducts offered by us; securing and protecting our intellectual property andassets and enforcing breaches of the same; clinical results not anticipated bymanagement of the Company; the quality or composition of our products and thestrength and reliability 

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ofour contract vendors and partners; ability to raise capital to fund our 2007working capital needs and launch our products into the marketplace insubsequent years; changes in accounting principles, policies or guidelines;financial or political instability; acts of war or terrorism; and othereconomic, competitive, governmental, regulatory and technical factors affectingour operations, proposed products and prices.

Accordingly, investors and shareholders are cautioned to appreciatethat results actually achieved may differ materially from expected results inthese statements.  Forward-lookingstatements speak only as of the date they are made.  We do not undertake, and specificallydisclaim, any obligation to update any forward-looking statements to reflectevents or circumstances occurring after the date of such statements.

**RISK FACTORS ASSOCIATEDWITH OUR BUSINESS**, OPERATIONS AND SECURITIES

**As a development stage company, we have no operatinghistory and our business plan has not yet been fully tested.  We anticipate incurring future losses untilour products are completed, regulatory approval is secured and our products areintroduced into the United States and worldwide markets.**

The Company, conducting business through ourwholly-owned subsidiary, ProUroCare Inc., is a development-stage company.  We have yet to commence active operations ormanufacture or sell any products associated with the proprietary urology-basedimaging and therapeutic technologies that we intend to market.  We have no prior operating history from whichto evaluate our success, or our likelihood of success in operating ourbusiness, generating any revenues or achieving profitability.  To date, we have generated no revenue and areproposing to enter the highly competitive urology-imaging and therapeuticindustries.  There can be no assurancethat our plans for developing and marketing our urology-based products will besuccessful, or that we will ever attain significant sales orprofitability.  We anticipate that wewill incur losses in the near future.

**We are currently in need of additional financing andwill need further additional financing during 2007 and 2008, and any suchfinancing will likely be dilutive to our existing shareholders.**

As of May 2, 2007, we had cash on hand ofapproximately $119,000.  These funds arenot sufficient for us to complete development of our products and gain approvalof them from the Food and Drug Administration (“FDA”).  In addition, the Company has currentliabilities exceeding $3.4 million. Consequently, management has taken several measures to conserve cash, including reducing executiveheadcount, substantially reducing development work on the ProUroScanTM system, reducing expenses anddeferring vendor payments and staff salaries.

Management’s plan is to actively raise an additional $10 million thatwill be used to support ongoing operations and the retirement of existing debtand other obligations.  Of the total,approximately $6 million will be used to bring the existing first generation ProUroScanTM system through clinicals trials,final FDA concurrence and preparation for market launch.  These funds will be in addition to fundsavailable on a reimbursement basis to develop the ProUroScanTM system under Artann’s SmallBusiness Innovation Research Phase II Competitive Renewal grant from theNational Cancer Institute.  The remaining $4 million will be used toretire existing liabilities and provide working capital.

The plan for raising this level of funding consists of three separateinitiatives.

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·                  Wehave identified several prospective investors who are interested in the Companyand able to invest significant amounts of capital.  All of our funding to date has been providedor guaranteed by highly qualified, accredited individual investors.

·                  Weare in contact with potential medical device companies that are interested inmarketing products in the prostate cancer detection market.  Conversations are in the early stages with atleast two such companies.  In addition tofinancial support, a successful collaboration with this type of company wouldallow us to gain access to down stream marketing and sales support.

·                  Weare in preliminary discussions with an investment banker to initiate a publicequity offering.

If additional funds are raised by the issuance of debtor equity securities, such as through the issuance of stock, the issuance andexercise of warrants, or the issuance and conversion of convertible debentures,then existing shareholders will experience dilution of their ownershipinterest.  If additional funds are raisedby the issuance of debt or other equity instruments, we may become subject tocertain operational limitations, and such securities may have rights senior tothose of existing holders of common stock.

If adequate funds are not available through theseinitiatives on a timely basis in 2007, or are not available on acceptableterms, the Company may be unable to fund expansion, or to develop or enhanceour products.  If the Company is forcedto slow its development programs, or put them on hold, it would delay regulatoryapprovals needed, and thus market entry for our products. Ultimately, if noadditional financing is obtained beyond what has been secured to date, we couldpotentially be forced to cease operations.

###### **Our assetsare pledged to secure a senior bank note and are not available to secure othersenior debt financing, and upon the occurrence of an event of default will beassigned to guarantors of the senior bank note.**

Our senior debt financing through Crown Bank, Minneapolis, Minnesota,has required us to pledge all of our assets and certain licenses, as well as toprovide certain accredited investors’ personal guarantees. As such, the Companywill not be in a position in the future to pledge its assets to secure any debtor lending facility, in the event we desire or need to borrow such funds on asecured lending basis. Moreover, under the terms and conditions of theforegoing facility, and our agreement with such guarantors, in the event of anydefault by the Company with its senior lender that causes the personalguarantees to be called and honored, the Company and its lender have agreedthat all the Company’s assets shall be assigned to such guarantors, pro rata,in consideration of such breach and obligation to pay under the respectiveguarantees. Thus, common shareholders of the Company, and any existing andfuture investors in the Company’s common stock, would, if the foregoing breachand circumstances occurred, not have access or recourse to the Company’s assetsand collateral, and thus, would likely face a complete loss of their investmentin the Company.

**Our products have not been, and may never be, fullycommercially completed and developed.**

Only three complete ProUroScanTM systems have been built fortesting, clinical validations and demonstration purposes.  Previously, we had developed and manufacturedtwo working prototype ProUroScanTMsystems to prove the feasibility of the device and to provide ameans to test and develop future systems. Nevertheless, we have not generated any revenues from the sale of theProUroScanTM system, nor have we manufactured any ProUroScanTM systems in commercialquantities.  The completion 

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of the development ofproposed products remains subject to all the risks associated with thedevelopment and manufacture of new products based on innovative technologies,including unanticipated technical or other problems, failures to meet FDArequirements or performance objectives, and the possible insufficiency of thefunds allocated for the completion of such development, which could result in achange in the design, delay in the development, or abandonment of suchapplications and products.  Consequently,there can be no assurance that our products will be successfully developed ormanufactured.  Of course, our failure tocomplete the development of products will have a materially adverse effect onour business.

**Even if successfully developed, our products may notbe commercially viable.**

Even if we are able to successfully develop ourproducts, we may not be able to manufacture such products in commercialquantities or at prices that will be commercially viable.  Further, there is risk that our products maynot prove to be as effective as currently available medical or diagnosticproducts.  The inability to successfullycomplete development of a product or application or a determination by us, forfinancial, technical or other reasons not to complete development of anyproduct or application, particularly in instances in which we have madesufficient capital expenditures, could have a materially adverse affect on ourbusiness.

**Even if successfully developed, our products may notbe accepted by the marketplace.**

Our products, even if successfully developed, will becompeting against existing treatments and competing products in the medicaldevice marketplace.  There can be noassurance that physicians, urologists or the medical device market, in general,will accept our products.

**Rapid technological change in our competitivemarketplace may render our proposed products obsolete or may diminish ourability to compete in the marketplace.**

The prostate cancer detection, urologic imaging andmedical device markets are extremely competitive, dominated by large and wellfinanced competition and subject to rapid technological advances and changes.  The discovery of new technologies andadvances in the application of such technologies to the medical marketplace ingeneral, and the market for urologic products in particular, may render ourproducts obsolete or non-competitive. Any such changes and advances could force us to abandon our currentlyproposed products, which would have a material and adverse effect on theCompany and our business.

**We will depend upon others for the manufacturing ofour products, which will subject our business to the risk that we will beunable to fully control the supply of our products to the market.**

Our ability to develop, manufacture and successfullycommercialize our proposed products depends upon our ability to enter into andmaintain contractual and collaborative arrangements with others. We do notintend to establish any of our own manufacturing facilities for any of ourproposed products.  Instead, we intend toretain FDA approved contract manufacturers. There can be no assurance that such manufacturers will be able to supplyour products in the required quantities, at appropriate quality levels or atacceptable costs.  We may be adverselyaffected by any difficulties encountered by such third-party manufacturers thatresult in product defects, production delays or the inability to fulfill orderson a timely basis.  If a manufacturercannot meet our quality standards and delivery requirements in a cost-efficientmanner, we would likely suffer interruptions of delivery while we arrange foralternative manufacturing sources.  Anyextended disruption in the delivery of products could result in our inabilityto satisfy customer demand for our products. Consequently, our inability to obtain alternative sources on a timelybasis may have a material adverse effect on our business and results ofoperations.

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**Our reliance on third-party manufacturers and otherthird parties in other aspects of our business may reduce any profits we mayearn from our products, and may negatively affect future product development.**

We currently intend to partner with one or morewell-established companies in the urology market to commercialize productsmanufactured by FDA approved contract manufacturers, and in connectiontherewith we will likely be required to enter into manufacturing, licensing anddistribution arrangements with third parties. These arrangements will likely reduce our product profit margins.  In addition, the identification of newproduct candidates for development may require us to enter into licensing orother collaborative agreements with others, including medical-device andpharmaceutical companies and research institutions.  These collaborative agreements may require usto pay license fees, make milestone payments, or pay royalties or grant rights,including marketing rights, to one or more parties.  Any such arrangement will reduce ourprofits.  Moreover, these arrangementsmay contain covenants restricting our product development or business effortsin the future.

**We may not be able to enter into manufacturingagreements or other collaborative agreements on terms acceptable to us, if atall, which could materially and adversely affect our business.**

We cannot be sure that we will be able to enter intomanufacturing or other collaborative arrangements with third parties on termsacceptable to us, if at all.  If we failto establish such arrangements when and as necessary, we could be required toundertake these activities at our own expense, which would significantlyincrease our capital requirements and may delay the development, manufactureand commercialization of our products. If we could not find ways of addressing these capital requirements, wewould likely be forced to sell or abandon our business.

**We materially rely on consultants and contractors,some of whom have been partially or wholly paid through issuances of commonstock dilutive to our shareholders.**

In each of the past two years, the Company (incombination with our wholly owned subsidiary ProUroCare Inc.) has incurredconsulting and contracted research and development fees that represent amaterial expenditure in relation to our total operating costs.  During the year ended December 31, 2006, weincurred consulting and contracted research and development fees totaling approximately$178,000.  Of this amount, approximately$141,000 was incurred for research and development activities, $39,000 wasincurred for business brokerage services rendered in connection with financingactivities and $7,000 was incurred for services rendered in connection withregulatory and reimbursement matters. Approximately $23,000 of this amount waspaid through the issuance of 25,000 shares of common stock.

We expect to continue to materially rely onconsultants and contractors to perform a significant amount of research anddevelopment, pre-manufacturing, clinical, regulatory and marketingactivities.  Expenses for theseactivities are anticipated to be approximately $1.7 to $1.8 million during thenext 12 months.  We may issue securitiesin partial satisfaction of certain development and consulting expenses.  Any such issuance could be dilutive toshareholders.

**The resale of our common stock under Rule 144 andunder our prior Registration Statement on Form SB-2, has depressed andadversely affected the market price of our common stock in the public market,and thus, could cause additional dilution if and when the Company needs toraise additional working  capital.**

The sale, or availability for sale, of our restrictedcommon stock in the public market pursuant to Rule 144, in the ordinary course,has adversely affected the prevailing market price of our common stock, andwill likely continue to do so in the future. Furthermore, as approximately10,000,000 shares of restricted common stock have been held over one year byshareholders who are not officers or directors, 

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and thus, are eligiblefor resale under Rule 144, selling shareholders may continue to depress theprice of our common stock. Accordingly, the adverse market and pricingpressures resulting from the resale of our common stock may continue for anextended period of time and continue to depress the price of our common stockin the open market.  If these adversemarket conditions persist, and the Company needs to secure additional working capitalduring 2007 and 2008, such pricing pressure and market conditions could hinderour ability to raise capital on terms and conditions acceptable to the Company.In addition, shareholders may experience dilution if and when the Companyraises additional capital by the sale of its equity securities under suchadverse market conditions.

We may issue additional shares in connection with ourbusiness and may grant additional stock options to our employees, officers,directors and consultants or warrants to third parties.  Sales of a substantial number of shares ofour common stock in the public market under Rule 144, or otherwise, wouldadversely affect the market price for our common stock and make it moredifficult to sell our shares.

**The commercialization of our products may besignificantly delayed by governmental regulation and any and all such delays,if they occur, may materially adversely affect the Company and our operations.**

The proposed products we intend to develop, assembleand market are subject to regulations by the FDA, and by comparable agencies incertain states and various foreign countries. The process of complying with the requirements of the FDA, relatedagencies and other state and foreign agencies is costly, time consuming andburdensome, especially for a pre-revenue, development stage company.  Although we have secured the assistance ofregulatory consultants to help direct our regulatory compliance and filings, noassurances can be given that such filings will be acceptable to the FDA orother regulatory bodies.  Further, evenif acceptable, we may encounter significant delays which could materially andadversely affect our business plan.

**We are highly dependent on the services provided bycertain key personnel.**

We are highly and materially dependent upon theservices of our executive officers Richard Carlson and Richard Thon.  We have not obtained “key-man” life insuranceinsuring the lives of either of these persons. If the services of either of these persons become unavailable to us, forany reason, our business could be adversely affected.

**Our officers and directors possess substantial votingpower with respect to our common stock, which could adversely affect the marketprice of our common stock.**

Our officers and directors collectively possessbeneficial ownership of 4,807,578 shares of our common stock, which representsapproximately 27.1 percent of the total voting power.  This represents a significant portion of thevoting power of the Company’s shareholders. As a result, our directors and officers will have the ability tosubstantially (but not wholly) control our management and affairs through theelection and removal of our entire board of directors, and all other mattersrequiring shareholder approval, including the future merger, consolidation orsale of all or substantially all of our assets. This concentrated control could discourage others from initiating anypotential merger, takeover or other change-of-control transaction that mayotherwise be beneficial to our shareholders. As a result, the return on an investment in our common stock through themarket price of our common stock or ultimate sale of our business could beadversely affected.

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**We license from third parties, and do not own orcontrol, key intellectual property critical to our products.**

We have exclusively licensed from third partiesintellectual property covered by patents and patent applications.  Although we have been advised by patentcounsel that such licensed technologies have received protection in proposedmajor market areas, no assurance can be given that such protections will beproperly maintained by the parties controlling such intellectual property, orthat such licenses will be honored and not breached.  The intellectual property licensed from thirdparties includes technology that is critical to our proposed products.  If the parties controlling such intellectualproperty breach our licenses, or fail to adequately maintain, assert and defendsuch intellectual property, and we are unable to defend the intellectualproperty in case of such failure, we may not be able to maintain thetechnological, and thereby competitive, edge we believe we possess.  Any such loss of intellectual propertyprotections would likely have a materially adverse effect on the Company andour business.

**If we lose our right to license from third partiescertain critical intellectual property, our entire business would be injeopardy.**

The agreements pursuant to which we license criticalintellectual properties are not irrevocable. If we should lose our right to license and use any technology covered byour licenses, such loss would have a materially adverse effect on the Companyand our business.  In such a case, theviability of the Company’s business would be in question. Our only alternativeswould be to find existing and non-infringing technology to replace that lost,if any exists, or develop new technology ourselves.  The pursuit of any such alternative wouldlikely cause significant delay in the development and introduction of ourproposed products.

**The protections for the intellectual property we ownand license from other parties may be successfully challenged by third parties.**

We own and, as noted above, license from third partiesvarious key intellectual property.  Noassurance can be given that any intellectual property claims will not besuccessfully challenged by third parties. Any challenge to our intellectual property, regardless of merit, wouldlikely involve costly litigation which would materially and adversely affectthe Company.  Moreover, if a challengewere successful, it is possible that the viability of the Company’s businesscould be in question.  If a successfulchallenge were made to intellectual property that is critical to our proposedproducts, the pursuit of any such alternative would likely cause significantdelay in the development and introduction of such products.

**We may not be able to successfully compete against companiesin our industry with greater resources, or with any competition.**

The urology imaging and therapeutic businesses,specifically, and the medical device and life sciences business in general, areextremely competitive.  We haveexperienced, and expect to continue experiencing significant competition in themedical device market.  Although webelieve that we may have a proprietary niche in the prostate-imaging andprostate-therapeutic marketplaces, many factors beyond our control, includinggovernment regulation, will likely encourage new competitors.  In particular, several large companies willcompete with us in the prostate-imaging and prostate-therapeutic business.  Many of the companies that will be in directcompetition with us have significantly greater resources, more personnel andlonger operating histories than we do. Therefore, no assurance can be given that we will be able tosuccessfully compete with these, or any other companies in the marketplace, ifat all.

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**Our failure to receive third-party reimbursement forour products, when in the marketplace, would result in diminished marketabilityof our products.**

We do not currently receive reimbursement from anyparty for the use of our products because there are no products fully developedand currently available for sale in the marketplace.  As a result, we have not taken any steps toobtain approval for reimbursement for the use of any of our proposedproducts.  Nevertheless, we are workingto formulate the appropriate approach to obtaining and optimizing governmentand third-party reimbursement for the use of our products.  The success of our future medical deviceproducts will materially depend on the ability of medical service providers toobtain third-party reimbursement from private and public insurance sources,such as Medicare, Medicaid, and various foreign governments when using ourproducts.  It may be difficult to predictthe timing and outcome of reimbursement decisions.  Importantly, there are no assurances thatsuch reimbursement will ever be obtained.

**Our common stock is illiquid and may be difficult tosell.**

Trading of our common stock is conducted on theOver-the-Counter Bulletin Board. Management believes that this has an adverse effect on the liquidity ofour common stock, not only in terms of the number of securities that can bebought and sold at a given price, but also through delays in the timing oftransactions and reduction in analyst coverage of our Company.  This may result in lower prices for ourcommon stock than might otherwise be obtained if our stock were traded on alarger or more established exchange, such as NASDAQ Small Market Cap Market, orotherwise, and could also result in a larger spread between the bid and askedprices for our common stock.

**There is currently little trading volume in our commonstock, which may make it difficult to sell shares of our common stock.**

Since the merger, there has been very little tradingactivity in our common stock.  Therelatively small trading volume will likely make it difficult for ourshareholders to sell their shares as and when they choose.  Furthermore, small trading volumes generallydepress market prices.  As a result,investors may not always be able to resell shares of our common stock publiclyat the time and prices that they feel is fair or appropriate.

**Because our stock is deemed a “penny stock,” you mayhave difficulty selling shares of our common stock.**

Our common stock is a “penny stock” and is thereforesubject to the requirements of Rule 15g-9 under the Securities Exchange Act of1934.  Under this Rule, broker-dealerswho sell penny stocks must provide purchasers of these stocks with astandardized risk-disclosure document prepared by the Securities and ExchangeCommission (“SEC”).  The penny-stockrules severely limit the liquidity of securities in the secondary market, andmany brokers choose not to participate in penny-stock transactions.  As a result, there is generally less tradingin penny stocks.  If you become a holderof our common stock, you may not always be able to resell shares of our commonstock publicly at the time and prices that you feel are fair orappropriate.  Under applicableregulations, our common stock will generally remain a “penny stock” until andfor such time as its per-share price is $5.00 or more (as determined inaccordance with SEC regulations), or until we meet certain net asset or revenuethresholds.  These thresholds include thepossession of net tangible assets (i.e., total assets less intangible assetsand liabilities) in excess of $2,000,000 in the event we have been operatingfor at least three years or $5,000,000 in the event we have been operating forfewer than three years, and the recognition of average revenues equal to atleast $6,000,000 for each of the last three years.  We do not anticipate meeting any of thethresholds in the foreseeable future.

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**Our ability to use operating loss carryforwards tooffset income in future years may be limited by future changes in equityownership.**

As of December 31, 2006, theCompany had generated net operating loss carryforwards of approximately $3.0million which, if not used, will begin to expire in 2021.  Federal and state tax laws impose significantrestrictions on the utilization of net operating loss carryforwards in theevent of a change in ownership of the Company that constitutes an “ownershipchange,” as defined by Section 382 of the Internal Revenue Code,.  The Company has analyzed the merger andprivate placement transactions that occurred in April 2004, and we believe thatthey do not constitute such an ownership change.  However, those transactions, together withpossible future changes during the subsequent 36-month period may constitute achange in ownership that could subject the Company’s use of its net operatingloss carryforward to the above limitations. Specifically, additional shares and warrants likely to be issuedpursuant to the Company’s current financing efforts may trigger such a changein ownership.  Based on the Company’sestimates, the limitation would apply to approximately $1.2 million of the $3.0million net operating loss carryforwards.

**Our business and products subject us to the risk ofproduct liability claims.**

The manufacture and sale of medical products and theconduct of clinical trials using new technology involve customary risks ofproduct liability claims.  There can beno assurance that our insurance coverage limits will be adequate to protect usfrom any liabilities which we might incur in connection with the clinicaltrials or the commercialization of any of our products.  Product liability insurance is expensive andin the future may not be available on acceptable terms, if at all.  A successful product liability claim orseries of claims brought against us in excess of our insurance coverage wouldhave a materially adverse effect on our business, financial condition andresults of operations.  In addition, anyclaims, even if not ultimately successful, could adversely affect themarketplace’s acceptance of our products.

**We have never paid dividends, and do not expect to paydividends in the foreseeable future.**

We have never paid dividends on our capital stock anddo not anticipate paying any dividends for the foreseeable future.

***Item 3.  Controls and Procedures.***

We carried out anevaluation, with the participation of our chief executive and chief financialofficers, of the effectiveness, as of March 31, 2007, of our disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of theSecurities Exchange Act of 1934, as amended). Based upon that evaluation, our chief executive officer and chieffinancial officer concluded that as of March 31, 2007 our disclosure controlsand procedures were effective.  There hasbeen no change in the internal controls over financial reporting during thelast fiscal quarter that has materially affected or is likely to materiallyaffect our internal control over financial reporting.

Nevertheless, due to ourlimited number of employees engaged in the authorization, recording, processingand reporting of transactions, there is inherently a lack of segregation ofduties.  We periodically assess the costversus benefit of adding the resources that would remedy or mitigate thissituation, and currently do not consider the benefits to outweigh the costs ofadding additional staff in light of the limited number of transactions due tothe start-up nature of our current operations.

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**PARTII.  OTHER INFORMATION.**

***Item 1. Legal Proceedings.***

***The Company,like most other public companies, is involved in legal proceedings in theconduct of the ordinary course of its business.***

***Item 2.  Unregistered Sales ofEquity Securities and Use of Proceeds.***

*Stock Transactions:*

On February12, 2007, the Company issued 17,073 shares of its common stock to Mr. ScottSmith, a director of the Company, as repayment of a $7,000 loan to the Companyfrom Mr. Smith.  The per share value ofthe stock of $0.41 was based on the last selling price prior to this issuanceas reported on the Over-the-Counter Bulletin Board.  No underwriter was used, and no commissionswere paid on the transaction. The shares were sold in a transaction exempt fromregistration under Section 4(2) of the Securities Act as the transaction was anon-public offering to a single subscriber.

On March 21, 2007, the Company and the fourguarantors of the Company’s bank notes payable agreed to amend the relateddebenture agreements.  Pursuant tothe revised debenture agreements, among other things, the Company issued to thefour guarantors a total of 124,780 shares of its common stock and three-yearwarrants to acquire a total of 62,392 shares of its common stock at $0.50 pershare, as payment for $49,911 of accrued interest on the debentures.  Theissuance was made in reliance on exemption from registration provided underSection 4(2) of the Securities Act, for issuance by an issuer not involving apublic offering.

*Warrant Issuances:*

On March 20, 2007, theCompany amended a promissory note with an investor to extend the due date ofthe remaining balance until the Company closes on an aggregate of $750,000 ormore of new financing.  In connectionwith the amendment, following repayment of the promissory note, the Companywill issue a five-year warrant (immediately exercisable) to the investor toacquire 417 shares of the Company’s common stock at $0.50 per share for eachday the promissory note is outstanding after August 30, 2006.  As of March 31, 2007, the Company had accruedfor issuance warrants to acquire 89,238 shares of the Company’s common stockpursuant to this arrangement. The issuance will be made in reliance onexemption from registration provided under Section 4(2) of the Securities Act,for issuance by an issuer not involving a public offering.

On November 30, 2006,ProUroCare borrowed $100,000 from Adron, and in connection therewith issued toAdron a promissory note to mature on January 2, 2007.  Pursuant to the terms of the promissory note,the Company issued five-year warrants (immediately exercisable) to Adron’spartners to acquire 50,000 shares of Company common stock at $0.50 pershare.  In addition, pursuant to theterms of the promissory note, the Company issued an additional five-yearwarrant (immediately exercisable) to Adron’s partners to acquire 50,000 sharesof Company common stock at $0.50 per share, when the loan was not repaid onJanuary 2, 2007.  On March 20, 2007, theCompany amended the promissory note to extend its due date until the first of(1) the Company closing on an aggregate of $750,000 or more of new financing,or (2) April 30, 2007.  In connectionwith the amendment, the Company issued to Adron a five-year warrant(immediately exercisable) dated February 1, 2007 to acquire 50,000 shares ofCompany common stock at $0.50 per share, and following repayment of the AdronNote, the Company will issue additional five-year warrant to Adron to acquire1,667 shares of the Company’s common stock for each day the Adron Note isoutstanding on and after March 1, 2007, at $0.50 per share.  As of March 31, 2007, the Company had accruedfor issuance warrants to acquire 51,677 shares of the Company’s common 

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stock pursuant to this arrangement.  The issuances were made, and the prospectiveissuances will be made, in reliance on exemption from registration providedunder Section 4(2) of the Securities Act, for issuance by an issuer notinvolving a public offering.

On March 14, 2007, uponthe termination of employment of an employee, and in consideration for agreeingto defer payment of accrued salaries until the Company is able to make suchpayments (on the same basis as the payment of deferred salaries of continuingemployees), the Company agreed to extend by three years the expiration date of300,000 warrants beneficially held by the employee.

***Item 5.  Other Information.***

***On May 11, 2007, the Company entered into an agreement with Mr. MauriceTaylor, its former Chief Executive Officer, to defer the payment of his accruedsalary.  Under the terms of theagreement, Mr. Taylor will be paid his accrued salary from 2006 and 2007 totaling$141,017 in installments of $5,000 per month from June 1, 2007 through December1, 2007, with the $106,017 balance being paid prior to December 28, 2007.  Mr. Taylor shall have the option, with tendays’ notice, to take up to 100,000 shares of the Company’s common stock inpayment for any or all of the payments based on the current market price on thedue date of the payment.  Asconsideration for his agreement to defer payment of his accrued salary, theCompany extended the original one-year period that Mr. Taylor may exercise hisstock options following his termination of employment until April 1, 2012.***

***On May 11, 2007, the Company entered into an agreement with Mr. MichaelGrossman, its former President and Chief Operating Officer, to defer thepayment of his accrued salary.  Under theterms of the agreement, Mr. Grossman will be paid his accrued salary from 2006and 2007 totaling $103,990 in installments of $4,000 on May 15, 2007, $6,000 onJune 1, 2007, and $8,000 per month from June 1, 2007 through December 1, 2007,with the $45,990 balance being paid prior to December 28, 2007.  Mr. Grossman shall have the option, with tendays’ notice, to take up to 100,000 shares of the Company’s common stock inpayment for any or all of the payments based on the current market price on thedue date of the payment.  Asconsideration for his agreement to defer payment of these accrued salary, theCompany extended the original one-year period that Mr. Grossman may exercisehis stock options following his termination of employment until February 1, 2012.  Except in the event of a breach of theagreement, the parties also agreed to release and waive each other from alldamages, actions, lawsuits, or claims the other party may have arising out ofthe employment of Mr. Grossman and the conclusion of that employment.***

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***Item6.  Exhibits***
| Exhibit No. | ** ** | **Description** |
|-------------|------------|-----------------|
|        |       |            |   |
| 4.1         | *          |            | Form of Amended 10% Unsecured Convertible  Subordinated Debentures dated March 21, 2007, issued in favor of William  Reiling, James Davis, Bruce Culver, and the Phillips W. Smith Family Trust. |
|        |       |            |   |
| 10.1        |       |            | Promissory Note issued in favor of Adron Holdings,  LLC, dated November 29, 2006, as amended March 21, 2007 (incorporated by  reference to Exhibit 10.37 to Annual Report on Form 10-QSB filed March 30,  2007). |
|        |       |            |   |
| 10.2        |       |            | Amendment #2 to Promissory Note dated June 1, 2006  issued in favor of Roman Pauly, dated March 21, 2007 (incorporated by  reference to Exhibit 10.38 to Annual Report on Form 10-QSB filed March 30,  2007). |
|        |       |            |   |
| 10.3        |       |            | Amendment to Memorandum of Understanding between  ProUroCare Inc. and Urologix Inc., dated March 21, 2007 (incorporated by  reference to Exhibit 10.39 to Annual Report on Form 10-QSB filed March 30,  2007). |
|        |       |            |   |
| 10.4        | *          |            | Termination and Intent for  Cooperation Agreement dated April 16, 2007 by and between ProUroCare  Medical Inc. and Artann Laboratories, Inc. |
|        |       |            |   |
| 10.5        | *          |            | Promissory Note issued in favor of Alexander  Nazarenko, dated April 17, 2007. |
|        |       |            |   |
| 10.6        | *          |            | Maurice Taylor Agreement to Defer Payment of Accrued  Salary dated May 11, 2007. |
|        |       |            |   |
| 10.7        | *          |            | Michael Grossman Final Separation Agreement dated  May 11, 2007. |
|        |       |            |   |
| 31.1        | *          |            | Certification of Principal Executive Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|        |       |            |   |
| 31.2        | *          |            | Certification of Chief Financial Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |
|        |       |            |   |
| 32.1        | *          |            | Certification of Chief Executive Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |
|        |       |            |   |
| 32.2        | *          |            | Certification of Chief Financial Officer pursuant to  pursuant to 18 U.S.C. Section 906, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002. |

 

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*Filed herewith.

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**SIGNATURES**

Pursuant to the Securities Exchange Act of 1934, as amended, theCompany has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.
|                     | ** ** | **ProUroCare Medical Inc.**     |
|---------------------|------------|---------------------------------|
|                |       |                            |
|                |       |                            |
| Date: May 15,  2007 |       |                            |
|                |       | By:                             | /s/ Richard C. Carlson |   |
|                |       | Name: Richard C.  Carlson       |
|                |       | Title: Chief  Executive Officer |
|                |       |                            |
| Date: May 15,  2007 |       |                            |
|                |       | By:                             | /s/ Richard Thon |   |
|                |       | Name: Richard  Thon             |
|                |       | Title: Chief  Financial Officer |

 

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