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                                                                    EXHIBIT 99.1

                                 CAUTIONARY STATEMENT

    Endocardial Solutions, Inc. (the "Company"), or persons acting on behalf of
the Company, or outside reviewers retained by the Company making statements on
behalf of the Company, or underwriters, from time to time make, in writing or
orally, "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended).  When used in conjunction with an identified forward-looking
statement, this Cautionary Statement is for the purpose of qualifying for the
"safe harbor" provisions of such sections and is intended to be a readily
available written document that contains factors which could cause results to
differ materially from such forward-looking statements.  These factors are in
addition to any other cautionary statements, written or oral, which may be made
or referred to in connection with any such forward-looking statement.

    The following matters, among others, may have a material adverse effect on
the business, financial condition, liquidity, results of operations or
prospects, financial or otherwise, of the Company.  Reference to this Cautionary
Statement in the context of a forward-looking statement or statements shall be
deemed to be a statement that any or more of the following factors may cause
actual results to differ materially from those in such forward-looking statement
or statements:

DEPENDENCE ON SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION OF THE ENSITE SYSTEM

    The Company's future success is entirely dependent upon the successful
development, commercialization and market acceptance of the EnSite System, the
development of which is ongoing and the complete efficacy and safety of which
have not yet been demonstrated. The EnSite System is currently the Company's
only potential product, and the Company could be required to cease operations if
the system is not successfully commercialized. The EnSite System will require
further development, significant additional clinical trials and, ultimately,
United States and international regulatory approvals before it can be marketed
in the United States and internationally. There can be no assurance that
unforeseen problems will not occur in research and development, clinical
testing, regulatory submissions and approval, product manufacturing and
commercial scale-up, marketing or product distribution. Any such occurrence
could materially delay the commercialization of the EnSite System or prevent its
market introduction entirely. The Company will not generate any significant
revenue until such time, if ever, as the EnSite System is successfully
commercialized. There can be no assurance that the Company will ever derive
substantial revenues from the sale of the EnSite System.


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LIMITED CLINICAL TESTING EXPERIENCE; SAFETY AND EFFICACY NOT YET ESTABLISHED

    The Company has conducted only limited clinical trials on patients for VT
and SVT in the United States and in the United Kingdom.  Clinical data obtained
to date are insufficient to demonstrate the safety and efficacy of the EnSite
System under applicable United States and international regulatory guidelines.
Accordingly, the Company believes it will be required to conduct extensive
clinical testing in the United States in order to support a pre-market approval
("PMA") application to the United States Food and Drug Administration ("FDA")
for marketing approval.  Patients selected for clinical trials must meet
stringent guidelines to undergo testing, and there can be no assurance that
patients can be enrolled in clinical trials on a timely basis. Further, there
can be no assurance that any of the Company's products will prove to be safe and
effective in clinical trials under United States or international regulatory
guidelines or that the Company will not encounter problems in clinical testing
that will cause a delay in the commercialization of the EnSite System. Moreover,
the clinical trials may identify significant technical or other obstacles to be
overcome prior to obtaining necessary regulatory or reimbursement approvals. In
addition, the Company's development of the EnSite System for diagnosing atrial
fibrillation is in its early stages.  The Company submitted an investigational
device exemption ("IDE") application for the use of the EnSite System in
diagnosing atrial fibrillation in June 1997, but has not yet applied for
regulatory approval in international markets for the use of the EnSite System in
diagnosing atrial fibrillation. Securing regulatory approval in the United
States or in international markets for use of the EnSite System in diagnosing
atrial fibrillation will require extensive clinical trials. If the EnSite System
does not prove to be safe and effective in clinical trials, the Company's
business, financial condition and results of operations will be materially
adversely affected.

LACK OF REGULATORY APPROVAL

    The manufacture and sale of medical devices, including the EnSite System,
are subject to extensive regulation by numerous governmental authorities in the
United States, principally the FDA and corresponding state agencies, and in
other countries. In the United States, the Company's products are regulated as
medical devices and are subject to the FDA's premarket approval requirements,
which have not been satisfied. Securing FDA approvals requires the submission of
extensive clinical data and supporting information to the FDA. Although the
EnSite System has been used in limited clinical trials in the United States on
patients suffering from VT, under an IDE approved by the FDA, the Company cannot
file with the FDA a PMA application to market the EnSite System for diagnosing
VT in the United States until more extensive clinical trials are completed. The
process of obtaining FDA and other required regulatory approvals is lengthy,
expensive and uncertain and frequently requires from one to several years from
the date of FDA


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filing, if premarket approval is obtained at all. In addition, the use of the
EnSite System to diagnose SVT is in the initial stages of clinical development.
The Company believes that it will require an IDE approval from the FDA to pursue
clinical testing of the EnSite System for SVT in the United States and
significant additional testing will be required to support a subsequent PMA
application.

    Sales of medical devices outside of the United States are subject to
international regulatory requirements that vary from country to country. The
time required to obtain approval for sale internationally may be longer or
shorter than that required for FDA approval, and the requirements may differ.
After mid-1998, the Company will be required to obtain the certifications
necessary to enable the CE Mark to be affixed to the Company's products in order
to sell its products in member countries of the European Union. The Company has
not obtained such certifications and there can be no assurance it will be able
to do so in a timely manner. In addition, significant costs and requests for
additional information may be encountered by the Company in its efforts to
obtain regulatory approvals. Any such events could substantially delay or
preclude the Company from marketing its products internationally.

    Regulatory approvals, if granted, may include significant limitations on
the indicated uses for which the product may be marketed. In addition, to obtain
such approvals, the FDA and certain foreign regulatory authorities may impose
numerous other requirements with which medical device manufacturers must comply.
FDA enforcement policy strictly prohibits the marketing of approved medical
devices for unapproved uses. In addition, product approvals could be withdrawn
for failure to comply with regulatory standards or the occurrence of unforeseen
problems following the initial marketing. The Company will be required to adhere
to applicable FDA regulations regarding Good Manufacturing Practices ("GMP") and
similar regulations in other countries, which include testing, control, and
documentation requirements. Ongoing compliance with GMP and other applicable
regulatory requirements will be monitored through periodic inspections by
federal and state agencies, including the FDA, and by comparable agencies in
other countries. Failure to comply with applicable regulatory requirements,
including the marketing of products for unapproved uses, could result in, among
other things, warning letters, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, refusal of the
government to grant premarket approval for devices, withdrawal of approvals and
criminal prosecution. Changes in existing regulations or adoption of new
governmental regulations or policies could prevent or delay regulatory approval
of the Company's products. Certain material changes to medical devices also are
subject to FDA review and approval.

    There can be no assurance that the Company will be able to obtain PMA
approval for the EnSite System for use in diagnosing VT and SVT, the
certifications


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necessary for affixation of the CE Mark on the Company's products or other
necessary regulatory approvals on a timely basis or at all. Delays in receipt of
or failure to receive such approvals, the loss of previously obtained approvals,
or failure to comply with existing or future regulatory requirements would have
a material adverse effect on the Company's business, financial condition and
results of operations.

UNCERTAINTY OF AVAILABILITY OF TREATMENTS EMPLOYING ENSITE SYSTEM

    The Company has developed its EnSite System to diagnose VT and assist
electrophysiologists in selecting among treatment options. Current treatments
for VT include drugs, implantable defibrillators, surgery and, potentially,
catheter ablation. The Company believes that the EnSite System will enable
increased use of catheter ablation for treating complex VT. Because ablation
treatment for VT is a relatively new and to date an untested treatment, the long
term effects of ablation on patients are unknown. As a result, the long term
success of ablation therapy in treating VT will not be known for several years.
To date, no medical devices for treating VT patients in the United States
through catheter ablation have been approved by the FDA. Such catheter ablation
devices require PMA approval by the FDA, and there can be no assurance that any
such device will be approved by the FDA, or that any FDA approval will be
granted in the near future. Accordingly, there can be no assurance that the
catheter ablation market will develop in the near term or ever. Moreover, even
if medical devices for catheter ablation are approved by the FDA, there can be
no assurance that the market for treating VT through catheter ablation will
develop or that the EnSite System will prove useful in diagnosing VT for
treatment by catheter ablation products approved by the FDA. The Company is not
in the process of developing a catheter for ablation treatment and is entirely
dependent upon other medical device companies for the development of such
devices. If the medical devices for treating ventricular tachycardia through
catheter ablation are not approved by the FDA or, even with such approval, if a
market for treating ventricular tachycardia by catheter ablation does not
develop, the business, financial condition and results of operations of the
Company would be materially adversely affected.

UNCERTAINTY OF MARKET ACCEPTANCE; TRAINING OF PHYSICIANS REQUIRED

    The commercial success of the EnSite System is dependent upon the number of
diagnostic procedures performed by electrophysiologists using the system. There
can be no assurance that the Company's EnSite System will gain any significant
degree of market acceptance among electrophysiologists, patients and health care
insurers and managed care providers. Electrophysiologists will not recommend
that diagnostic procedures be performed using the Company's products until such
time, if at all, as clinical data demonstrate the efficacy of such procedures as
compared to other diagnostic procedures currently available or under
development.  Even if the


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clinical efficacy of procedures using the EnSite System is established,
electrophysiologists and other physicians may elect not to recommend the
procedures for any number of other reasons, including inadequate levels of
reimbursement. Broad use of the EnSite System will require training of
electrophysiologists, and the time required to complete such training could
adversely affect market acceptance. Failure of the Company's products to achieve
significant market acceptance would have a material adverse effect on the
Company's business, financial condition and results of operations.

UNCERTAINTY OF ABILITY TO DIAGNOSE AND TREAT ATRIAL FIBRILLATION

    The Company intends to apply the EnSite System to the diagnosis of atrial
tachycardia, including atrial fibrillation; however, the Company has conducted
only limited clinical studies of its technology on patients suffering from
atrial tachycardia. Although the Company has submitted an IDE application to the
FDA for the clinical testing of the EnSite System in the right atrium, there can
be no assurance that the Company will be able to successfully extend its
technology to the mapping of atrial fibrillation or obtain regulatory approval
to test and market any products developed using such technology to map atrial
fibrillation. In addition, the Company has made and expects to continue to make
significant research and development expenditures in extending its technology to
the diagnosis of atrial fibrillation. There can be no assurance that the Company
will realize any benefit from these expenditures.

    Atrial fibrillation is a complex disease and the subject of continuing
research. The therapies presently available for atrial fibrillation are in the
developmental stage with no proven effectiveness. Even if the Company is
successful in extending its technology to provide products that are capable of
diagnosing atrial fibrillation, there can be no assurance that treatments for
atrial fibrillation will exist that will require the diagnostic capabilities of
any products developed by the Company. As a result, there can be no assurance
that a commercial market will ever develop for any product developed by the
Company for the diagnosis of atrial fibrillation. The Company is not currently
engaged and has no present intention to engage in researching or developing any
medical devices for the treatment of atrial fibrillation.

UNCERTAINTY OF ABILITY TO PENETRATE COMPLEX TACHYCARDIA PATIENT POPULATION

    The Company's EnSite System is designed to diagnose patients suffering from
complex tachycardia. The Company estimates that a majority of the four million
patients who suffer from tachycardia have complex forms of this disease.
Although the Company believes that the patients who suffer from complex
tachycardia are potential candidates for diagnosis using the Company's EnSite
System, there can be no assurance as to the number of complex tachycardia
patients that will be


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diagnosed using the Company's products due to a number of factors, including
patient preferences, the health and clinical history of the particular patient,
the access of the patient to electrophysiology labs employing the EnSite System,
the availability of alternative diagnostic procedures, the availability of
treatment options and the expense of the diagnosis using the EnSite System
vis-a-vis alternative diagnostic procedures. Failure of the Company's products
to achieve significant penetration of the population of patients suffering from
complex tachycardia could have a material adverse effect on the Company's
business, financial condition and results of operations.

HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; EXPECTATION OF FUTURE LOSSES

    The Company has generated no revenue and has sustained significant
operating losses each year since its inception. The Company expects such losses
to continue at least through 1999. There can be no assurance that the Company
will ever generate substantial operating revenues or achieve profitability. The
Company's ability to generate revenues from operations and achieve profitability
is dependent upon successful development, regulatory approval, manufacturing and
commercialization of the EnSite System and the Company's successful transition
from a development stage company to a manufacturing and sales company.

SIGNIFICANT COMPETITION; RAPID TECHNOLOGICAL CHANGE

    The cardiac medical device market is highly competitive and characterized
by rapid innovation and technological change. The Company's EnSite System for
the mapping of ventricular tachycardia is a new technology that must compete
with more established mapping procedures and devices such as single-point
contact catheters that are currently widely used to map tachycardia and which
are generally less expensive and, unlike EnSite catheters, are generally reused
after resterilization. Single-point contact diagnostic catheters have been
approved by the FDA for VT mapping. In addition, certain of the Company's
competitors are developing new approaches and new products for diagnosing
ventricular tachycardia and atrial fibrillation for which regulatory approval
has not been granted, including contact mapping systems using multi-electrode
basket contact catheters and single-point mapping technologies. There can be no
assurance that any of these competitors will not receive required regulatory
approval to market their products before the Company. Certain competitors have
integrated product lines that include products for both diagnosis and ablation
treatment, which may afford opportunities for product bundling and other
marketing advantages. Many of the Company's competitors have an established
presence in the field of electrophysiology and established relationships with
electrophysiology labs. Many of these competitors have substantially greater
financial and other resources than the Company, including larger research and
development staffs and more experience and capabilities in conducting research
and development activities, testing products in


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clinical trials, obtaining regulatory approvals, and manufacturing, marketing
and distributing products. There can be no assurance that the Company will
succeed in developing and marketing technologies and products that are more
clinically efficacious or cost effective than the more established products or
the new approaches and products developed and marketed by its competitors.
Certain of the Company's competitors may achieve patent protection, regulatory
approval or product commercialization more quickly than the Company, which may
negatively impact the Company's ability to compete. The failure of the Company
to demonstrate the efficacy and cost effectiveness of its products as compared
to those of its competitors or the failure to develop new technologies and
products before its competitors would have a material adverse effect on
business, financial condition and results of operations.

    The medical device industry is subject to rapid technological innovation
and, consequently, the life cycle of any particular product is short. There can
be no assurance that alternative diagnostic systems or other discoveries and
developments with respect to mapping tachycardia will not render the Company's
products obsolete. Furthermore, the greater financial and other resources of
many of the Company's competitors may permit such competitors to respond more
rapidly than the Company to technological advances.

DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY

    The Company's success will depend in part on its ability to obtain patent
protection for its products and processes, to preserve its trade secrets and to
operate without infringing the proprietary rights of third parties. The patent
positions of medical device companies, including the Company, are uncertain and
involve complex and evolving legal and factual questions. There can be no
assurance that any pending or future patent applications will result in issued
patents, that any current or future patents will not be challenged, invalidated
or circumvented, that the scope of any of the Company's patents will exclude
competitors or that the rights granted thereunder will provide any competitive
advantage to the Company, that any of the Company's patents will be held valid
if subsequently challenged or that others will not claim rights in or ownership
of the patents and other proprietary rights held by the Company. Furthermore,
there can be no assurance that others will not independently develop similar
technologies or duplicate any technology by the Company or that the Company's
technology will not infringe patents or other rights owned by others. Moreover,
the Company cannot be certain that it was the first to make the inventions
covered by each of its issued patents and its pending patent applications, or
that it was the first to file patent applications for such inventions. In
addition, there can be no assurance that competitors, many of which have
substantial resources and have made substantial investments in competing
technologies, will not seek to apply for and obtain patents that will prevent,
limit or interfere with the Company's ability to make, use or sell its products
either in the


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United States or in international markets. Further, the laws of certain foreign
countries may not protect the Company's intellectual property rights to the same
extent as do the laws of the United States.

    There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry and competitors may
resort to intellectual property litigation as a means of competition.
Intellectual property litigation is complex and expensive and the outcome of
such litigation is difficult to predict. There can be no assurance that the
Company will not become subject to patent infringement claims or litigation in a
court of law, or interference proceedings declared by the United States Patent
and Trademark Office to determine the priority of inventions or an opposition to
a patent grant in a foreign jurisdiction. Litigation or regulatory proceedings,
which could result in substantial cost and uncertainty to the Company, may also
be necessary to enforce patent or other intellectual property rights of the
Company or to determine the scope and validity of other parties' proprietary
rights. There can be no assurance that the Company will have the financial
resources to assert patent infringement suits or to defend itself from claims of
invalidity. An adverse determination in any litigation could subject the Company
to significant liabilities to third parties, or require the Company to seek
licenses from or pay royalties to third parties that may be substantial.
Furthermore, there can be no assurance that the necessary licenses would be
available to the Company on satisfactory terms, if at all. Accordingly, an
adverse determination in a judicial or administrative proceeding or failure to
obtain necessary licenses could prevent the Company from manufacturing, selling
or using its proposed products, any of which would have a material adverse
effect on the Company's business, financial condition, results of operations and
prospects.

    In addition to patents, the Company relies on trade secrets and proprietary
knowledge, which it seeks to protect, in part, through confidentiality
agreements with employees, consultants and other parties. In particular, the
Company relies upon such means to protect the proprietary software used in the
EnSite System. There can be no assurance that the Company's proprietary
information or confidentiality agreements will not be breached, that the Company
will have adequate remedies for any breach, or that the Company's trade secrets
will not otherwise become known to or independently developed by competitors.

LIMITED MANUFACTURING EXPERIENCE; SCALE-UP RISK

    The Company has only limited experience in manufacturing the EnSite
catheter and the patient interface unit of the EnSite System's clinical
workstation. The Company currently manufactures its catheters and patient
interface units in limited quantities for laboratory and clinical testing and
intends to manufacture the EnSite catheter for commercial sale. The Company has
no experience manufacturing its products in the volumes that will be necessary
for the Company


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to achieve significant commercial sales, and there can be no assurance that
reliable, high-volume manufacturing capacity can be established or maintained at
commercially reasonable costs. If the Company receives FDA or foreign approval
for its products, it will need to expend significant capital resources and
develop the necessary expertise to establish large-scale manufacturing
capabilities. Manufacturers often encounter difficulties in scaling up
production of new products, including problems involving production yields,
quality control and assurance, component supply shortages, shortages of
qualified personnel, compliance with FDA and foreign regulations, and the need
for further FDA or foreign regulatory approval of new manufacturing processes.
Any inability of the Company to establish and maintain large-scale manufacturing
capabilities would have a material adverse effect on the Company's business,
financial condition and results of operations.

    The Company's manufacturing facilities will be subject to periodic
inspection by United States and foreign regulatory authorities. In order to
manufacture products for sale in the United States, the Company's operations
must undergo GMP compliance inspections conducted by the FDA. To date, the
Company's facilities and manufacturing processes have not undergone any such
inspections. The Company will also be required to comply with ISO 9001 and 9002
and CE Mark standards in order to sell its products in Europe. Any failure of
the Company to comply with GMP or ISO 9001 and 9002 and CE Mark standards may
result in the Company being required to take corrective actions, such as
modification of its manufacturing policies and procedures. In addition, the
Company may be required to cease all or part of its operations for some period
of time until it can demonstrate that appropriate steps have been taken to
comply with GMP or ISO 9001 and 9002 and CE Mark regulations. There can be no
assurance that the Company will be found in compliance with GMP or ISO 9001 and
9002 and CE Mark standards in future audits by regulatory authorities or that
the Company will not experience difficulties in the course of developing its
manufacturing capability. A failure to comply with GMP or ISO 9001 and 9002 and
CE Mark standards, or to develop its manufacturing capability in compliance with
such standards, would prohibit the Company from manufacturing and distributing
its products and therefore have a material adverse effect on the Company's
business, financial condition and results of operations.

DEPENDENCE ON SOLE OR LIMITED SOURCE SUPPLIERS

    The Company purchases raw materials and certain key components of its
products, including the computer workstation and certain components for its
catheter, from sole, single or limited source suppliers.  For certain of these
components, there are relatively few alternative sources of supply.  The Company
currently has no agreements that would assure delivery of raw materials and
components from such suppliers. Establishing additional or replacement suppliers
for any of the numerous components used in the Company's products, if required,
may not be accomplished quickly and could involve significant additional costs.
The


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inability of any of the Company's suppliers to provide an adequate supply of
components in a timely manner, or the inability of the Company to locate
qualified alternative suppliers for materials and components at a reasonable
cost, could adversely affect the Company's business, financial condition and
results of operations. In the event the Company had to replace a single source
supplier, such replacement would be required to meet GMP and certain other
regulatory standards.

NEED TO MANAGE EXPANDING OPERATIONS

    In order to complete clinical trials in progress, prepare additional
products for clinical trials, and develop future products, the Company believes
that it will be required to expand its operations, particularly in the areas of
research and development, manufacturing, quality assurance and sales and
marketing. As the Company expands its operations in these areas, such expansion
will likely result in new and increased responsibilities for management
personnel. To accommodate any such growth and compete effectively, the Company
will be required to implement and improve information systems, procedures, and
controls, and to expand, train, motivate and manage its work force. The
Company's future success will depend to a significant extent on the ability of
its current and future management personnel to operate effectively, both
independently and as a group. There can be no assurance that the Company's
personnel, systems, procedures and controls will be adequate to support the
Company's future operations. Any failure to implement and improve the Company's
operational, financial and management systems or to expand, train, motivate or
manage employees as required by future growth, if any, would have a material
adverse effect on the Company's business, financial condition and results of
operations.

LACK OF COMMERCIAL SALES AND MARKETING EXPERIENCE

    The Company has no experience marketing the EnSite System and has not yet
entered into any marketing or distribution arrangements for the system or hired
sales personnel. There can be no assurance that the Company will be able to
build and maintain a suitable sales force or enter into satisfactory marketing
arrangements with third parties when commercial potential develops, if ever, or
that its sales and marketing efforts will be successful.

RISKS RELATING TO INTERNATIONAL OPERATIONS

    The Company plans to market the EnSite System through distributors in
international markets, subject to receipt of required foreign regulatory
approvals. Sales in foreign markets are initially expected to be the Company's
only source of revenue. The Company is obligated by agreement to extend a right
of first offer for distribution outside North America to Medtronic, Inc. There
can be no assurance that international distributors for the Company's products
will devote adequate resources to selling its products.


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    Changes in overseas economic conditions, currency exchange rates, foreign
tax laws or tariffs or other trade regulations could have a material adverse
effect on the Company's ability to market its products internationally and
therefore on its business, financial condition and results of operations. The
Company's business is also expected to subject it and its representatives,
agents and distributors to laws and regulations of the foreign jurisdictions in
which they operate or the Company's products are sold. The Company may depend on
foreign distributors and agents for compliance and adherence to foreign laws and
regulations. The regulation of medical devices in a number of such
jurisdictions, particularly in the European Union, continues to develop and
there can be no assurance that new laws or regulations will not have an adverse
effect on the Company's business, financial condition and results of operations.
In addition, the laws of certain foreign countries do not protect the Company's
intellectual property rights to the same extent as do the laws of the United
States.

DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL

    The success of the Company is dependent in large part upon the ability of
the Company to attract and retain key management and operating personnel.
Qualified individuals are in high demand and are often subject to competing
offers. In the future, the Company will need to add additional skilled personnel
in the areas of research and development, sales, marketing and manufacturing.
There can be no assurance that the Company will be able to attract and retain
the qualified personnel needed for its business. The loss of the services of one
or more members of the Company's research, manufacturing or management group or
the inability to hire additional personnel as needed would likely have a
material adverse effect on the Company's business and prospects.

FUTURE CAPITAL REQUIREMENTS; NO ASSURANCE FUTURE CAPITAL WILL BE AVAILABLE

    The Company may require substantial funds to meet its working capital
requirements for continued research and development, testing, regulatory
approval and full-scale commercial introduction of its EnSite System. In order
to meet its funding needs, the Company may be required to raise additional funds
through public or private financings, including the sale of equity or debt. Any
additional equity financings may be dilutive to current stockholders, and debt
financing, if available, may involve restrictive covenants. Adequate funds for
the Company's operations, whether from financial markets or from other sources,
may not be available when needed on terms attractive to the Company, if at all.
Insufficient funds may require the Company to delay, scale back or eliminate
some or all of its programs designed to facilitate the commercial introduction
of the EnSite System or prevent such commercial introduction altogether.


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UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT

    Sales of the Company's proposed products in most markets in the United
States and internationally will be dependent on availability of adequate
reimbursement for tachycardia diagnostic procedures from third-party payors,
such as government and private insurance plans, health maintenance organizations
and preferred provider organizations. In the United States, the Company's
products, if and when approved for commercial sale, would be purchased primarily
by health care providers which will then seek to be reimbursed by various third
party payors, such as Medicare, Medicaid and other government programs and
private insurance plans, for the health care services provided to their
patients. Third-party payors reimburse health care providers for medical
treatment based on a variety of methods, including a lump sum prospective
payment system based on a diagnosis related group or per diem, a blend between
the health care provider's reported costs and a fee schedule, a payment for all
or a portion of charges deemed reasonable and customary, or a negotiated per
capita fixed payment. Third-party payors are increasingly challenging the
pricing of medical products and procedures. Even if a procedure is eligible for
reimbursement, the level of reimbursement may not be adequate. Additionally,
payors may deny reimbursement if they determine that the device used in a
treatment was unnecessary, inappropriate or not cost-effective, experimental or
used for a non-approved indication.

    It is anticipated that the Company's EnSite catheter will be sold at a
premium in comparison to existing single point catheters used in current
diagnostic or mapping procedures, in addition to requiring an initial capital
outlay for the companion clinical workstation. Existing single point catheters,
unlike EnSite catheters, are generally reused after sterilization. In addition
to establishing the safety and efficacy of the EnSite System, and assuming no
increase in the level of reimbursement for cardiovascular procedures expected to
utilize the Company's products, the Company will be required to economically
justify the relative increased cost of utilizing the EnSite System by
satisfactorily demonstrating the enhanced benefits of the EnSite System to
health care providers and payors in terms of such factors as enhanced patient
procedural efficiencies, reduced radiation exposure and improved patient
outcomes.

    The commercial success of the Company's EnSite System may also be affected
by the availability of adequate reimbursement for treatments for complex VT,
including catheter ablation. To date, catheter ablation has not been approved by
the FDA for treatment of VT and is not a commonly prescribed treatment for VT.
The Company believes that the improved mapping technology of the EnSite System
may enable catheter ablation for treating complex VT.

    There can be no assurance that adequate levels of reimbursement will be
available to enable the Company to achieve or maintain market acceptance of its


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products or maintain price levels which exceed the Company's costs of developing
and manufacturing its products. In addition, use of the Company's products will
also depend on the adequacy of third-party reimbursement for treatments that
would be used in connection with the Company's products, such as catheter
ablation treatment. There can be no assurance that adequate levels of
reimbursement for ablation treatment will be available to support the use of the
Company's products. Without adequate support from third-party payors, the market
for the Company's products may be severely limited. Moreover, the Company is
unable to predict what additional legislation or regulation, if any, relating to
the health care industry or third-party coverage and reimbursement may be
enacted in the future, or what effect such legislation or regulation would have
on the Company. There is significant uncertainty concerning third-party
reimbursement of medical devices, and there can be no assurance that third-party
reimbursement will be available in the future for the EnSite System or that any
third-party reimbursement that is obtained will be adequate. Any failure to
obtain third party reimbursement for diagnostic procedures using the Company's
products or treatment procedures that rely on the Company's products could have
a material adverse effect on the Company's business, financial condition and
results of operations.

    The Company expects that there will be continued pressure on
cost-containment throughout the United States health care system. Reforms may
include mandated basic health care benefits, controls on health care spending
through limitations on the growth of private health insurance premiums and
Medicare and Medicaid spending, greater reliance on prospective payment systems,
the creation of large insurance purchasing groups and fundamental changes to the
health care delivery system. The Company anticipates that Congress and state
legislatures will continue to review and assess alternative health care delivery
systems and payment methodologies and public debate of these issues will likely
continue in the future. Due to uncertainties regarding the ultimate features of
reform initiatives and their enactment and implementation, the Company cannot
predict which, if any, of such reform proposals will be adopted, when such
proposals may be adopted or what impact they may have on the Company.

    Reimbursement systems in international markets vary significantly by
country and by region within some countries, and reimbursement approvals must be
obtained on a country-by-country basis. Many international markets have
government managed health care systems that control reimbursement for new
devices and procedures. In most markets there are private insurance systems as
well as government managed systems. There can be no assurance that reimbursement
for the Company's products will be available in international markets under
either government or private reimbursement systems.

PRODUCT LIABILITY RISK


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    The Company faces an inherent business risk of exposure to product
liability claims in the event that an electrophysiology patient is adversely
affected by its products. The Company currently carries a product liability
insurance policy covering the Company's clinical trial operations with an
aggregate limit of $5 million, although there can be no assurance that the
Company's existing insurance coverage limits are adequate to cover the Company
from any liabilities it might incur in connection with the distribution of its
products. Although the Company expects to obtain product liability insurance
coverage in connection with the commercialization of the EnSite System, there
can be no assurance that such insurance will be available on commercially
reasonable terms, or at all, or that such insurance, even if obtained, would
adequately cover any product liability claim. A product liability or other claim
with respect to uninsured liabilities or in excess of insured liabilities could
have a material adverse effect on the business and prospects of the Company.

POSSIBLE VOLATILITY OF PRICE

    The trading prices of the Company's Common Stock could be subject to wide
fluctuations in response to quarter to quarter variations in the Company's
operating results, announcements by the Company or its competitors regarding the
results of regulatory approval filings or clinical trials or testing,
developments or disputes concerning proprietary rights, technological
innovations or new commercial products, governmental regulatory action,
third-party reimbursement decisions, general conditions in the medical
technology industry, or other events or factors, many of which are beyond the
Company's control. In addition, the stock market has experienced extreme price
and volume fluctuations, which have particularly affected the market prices of
many medical technology companies and which have often been unrelated to the
operating performance of such companies.


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