UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark  One)
[X]     Quarterly  report  pursuant  to  Section  13  or 15(d) of the Securities
        Exchange  Act  of  1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                                       or

[ ]     Transition  report  pursuant  to Section 13 or 15(d) of the Securities
        Exchange  Act  of  1934

             For the transition period from __________ to __________

                         COMMISSION FILE NUMBER 0-27212

                                 ENDOCARE, INC.
             (Exact name of registrant as specified in its charter)


                     Delaware                        33-0618093
             (State or other jurisdiction of     (I.R.S. Employer
            incorporation or organization)     Identification No.)

                     7 STUDEBAKER, IRVINE, CALIFORNIA 92618
               (Address of principal executive office) (Zip Code)

                                 (949) 595-4770
              (Registrant's telephone number, including area code)



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

The  number  of  shares  of  the  Registrant's Common Stock, par value $.001 per
share,  outstanding  on  August  6,  2001  was  16,820,868.



<PAGE>
<TABLE>
<CAPTION>
                                 ENDOCARE, INC.
                     FORM 10-Q, QUARTER ENDED JUNE 30, 2001
                                      INDEX


                                                                                       PAGE
                                                                                    -------
<S>      <C>                                                                            <C>
                  Part I. Financial Information

Item 1.  Financial Statements (unaudited)

            Condensed Consolidated Statements of Operations for the
            three and six months ended June 30, 2001 and 2000 . . .                       3

            Condensed Consolidated Balance Sheets at June 30, 2001
            and December 31, 2000                                                         4

            Condensed Consolidated Statements of Cash Flows for the
            six months ended June 30, 2001 and 2000                                       5

            Notes to Condensed Consolidated Financial Statements                          6

Item 2. .Management's Discussion and Analysis of Financial Condition
         and Results of Operations . . . . . . . . . . . . . . .                          9

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                      18

                  Part II. Other Information

Item 1.  Legal Proceedings                                                               19

Item 2.  Changes in Securities                                                           19

Item 3.  Defaults Upon Senior Securities                                                 19

Item 4.  Submission of Matters to a Vote of Security Holders                             19

Item 5.  Other Information                                                               20

Item 6.  Exhibits and Reports on Form 8-K                                                20

Signature Page                                                                           21
</TABLE>


                          ITEM 1. FINANCIAL STATEMENTS


<PAGE>
<TABLE>
<CAPTION>
                                 ENDOCARE, INC. AND SUBSIDIARY
                         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (UNAUDITED)


                                                      THREE MONTHS ENDED               SIX MONTHS ENDED
                                                          JUNE  30,                        JUNE  30,
                                                    2001             2000            2001            2000
<S>                                            <C>            <C>               <C>           <C>
Revenues:
   Net sales. . . . . . . . . . . . . . . . .  $  3,537,849   $     1,565,213   $ 6,293,436   $    2,876,242

Costs and expenses:
   Cost of sales. . . . . . . . . . . . . . .     1,272,403           754,687     2,446,293        1,370,017
   Research and development . . . . . . . . .       923,445           820,944     1,826,264        1,544,652
   Selling, general and administrative. . . .     3,440,374         3,194,905     6,464,494        5,855,335
                                               -------------  ----------------  ------------  ---------------
           Total costs and expenses . . . . .     5,636,222         4,770,536    10,737,051        8,770,004
                                               -------------  ----------------  ------------  ---------------

Loss from operations. . . . . . . . . . . . .    (2,098,373)       (3,205,323)   (4,443,615)      (5,893,762)
Interest income (expense), net. . . . . . . .        34,467          (146,070)       37,541         (471,299)
                                               -------------  ----------------  ------------  ---------------
Net loss. . . . . . . . . . . . . . . . . . .  $ (2,063,906)  $    (3,351,393)  $(4,406,074)  $   (6,365,061)
                                               -------------  ----------------  ------------  ===============

Net loss per share of common stock -
   basic and diluted .  . . . . . . . . . . .  $      ( .13)  $          (.27)  $     ( .29)  $         (.53)
                                               =============  ================  ============  ===============

Weighted average shares of common stock
   outstanding                                   15,601,688        12,535,000    15,379,381       11,917,000
                                               =============  ================  ============  ===============

</TABLE>


    The accompanying notes are an integral part of these condensed consolidated
                              financial statements.

<PAGE>
<TABLE>
<CAPTION>

                          ENDOCARE, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                                     JUNE 30,       DECEMBER 31,

                                                       2001            2000
                                                   (UNAUDITED)
<S>                                                <C>              <C>
                                 ASSETS
Current assets:
   Cash and cash equivalents.  . . . . . . . . . .  $ 15,927,694   $ 22,016,448
   Accounts receivable, net  . . . . . . . . . . .     3,670,629      2,113,766
   Inventories.  . . . . . . . . . . . . . . . . .     2,197,975      1,543,733
   Prepaid expenses and other current assets. .          116,152        178,972
                                                    -------------  -------------

           Total current assets . .. . . . . . . .    21,912,450     25,852,919

Property and equipment, net . . . .. . . . . . . .     1,448,376      1,496,153
Investments, intangible and other assets, net .        4,557,689      1,495,718
                                                    -------------  -------------

           Total assets  . . . . . . . . . . . . .  $ 27,918,515   $ 28,844,790
                                                    =============  =============

                    LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable . . . .  . . . . . . . . . . . . . 1,997,483   $  2,231,344
   Accrued compensation. . . . . . . . . . . . . . . . 1,822,198      1,646,079
   Other accrued liabilities.  . . . . . . . . . . . . 1,350,468      1,523,602
   Credit facility . . . . . . . . . . . . . . . . . . 1,558,011      1,000,000
                                                    -------------  -------------

           Total current liabilities . . . . . . .     6,728,160      6,401,025

Convertible debentures. . . . . . .  . . . . . . .     2,300,000      7,500,000
Note payable and other liabilities.  . . . . . . .        54,971         74,268
                                                    -------------  -------------

           Total liabilities . . . . . . . . . . .     9,083,131     13,975,293

Shareholders' equity:
   Preferred stock, $.001 par value; 1,000,000
     shares authorized; none issued and outstanding           --             --
   Common stock, $.001 par value; 16,177,495 and
     15,018,649 issued and outstanding at June 30,
     2001 and December 31, 2000, respectivel              16,178         15,019
   Additional paid-in capital. . . . . . . . . . . .  56,426,656     48,163,186
   Note receivable from stock sale . . . . . . .      (1,028,125)    (1,135,457)
   Accumulated deficit . . . . . . . . . . . . . .   (36,579,325)   (32,173,251)
                                                    -------------  -------------
Total shareholders' equity. . . . . . .. . . . . .    18,835,384     14,869,497
Total liabilities and shareholders' equity. . . . . $ 27,918,515   $ 28,844,790
                                                    =============  =============
</TABLE>

    The accompanying notes are an integral part of these condensed consolidated
                              financial statements.


<PAGE>
<TABLE>
<CAPTION>
                          ENDOCARE, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


                                                         SIX MONTHS ENDED
                                                             JUNE 30,
                                                     2001               2000
<S>                                              <C>            <C>
Cash flows from operating activities:
Net loss. . .  . . . . . . . . . . . . . .  . .  $ (4,406,074)  $    (6,365,061)
Adjustments to reconcile net loss to net
  cash used in operating activities:
  Depreciation and amortization . . . . ..  . .       196,460           274,501
  Amortization of warrant value . . . . ..  . .        98,124           191,674
  Amortization of deferred financing costs. . .        89,937           284,114
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . .  .   (1,556,863)          (51,017)
Inventories . . . . . . . . . . . . . . . . .  .     (617,172)         (527,334)
Prepaid expenses and other current assets . .  .       38,656            37,460
Other assets. . . . . . . . . . . . . . . . .  .     (118,053)          386,612
Accounts payable. . . . . . . . . . . . . . .  .     (233,861)          630,027
Accrued compensation. . . . . . . . . . . . .  .      176,119            98,278
Other accrued liabilities . . . . . . . . . .  .      (92,939)          238,081
Net cash used in operating activities . . . .  .   (6,425,665)       (4,802,665)
                                                 -------------  ----------------
Cash flows from investing activities:
Purchases of property and equipment . . . . .  .     (117,054)          (99,655)
Investment in alliances and patent. . . . . .  .     (458,850)         (435,000)
                                                 -------------  ----------------
Net cash used in investing activities . . . .  .     (575,904)         (534,655)
                                                 -------------  ----------------
Cash flows from financing activities:
     Borrowings under the credit facility . .  .      558,011           258,040
Issuance of common stock. . . . . . .. . . . . .      354,806           754,559
Issuance of convertible debentures. . . . . . .  .         --         8,000,000
Financing costs . . . . . . . . . . . . . . . .  .         --          (585,000)
Net cash provided by financing activities . . .       912,814         8,427,599
                                                 -------------  ----------------
Net decrease in cash and cash equivalents . . .    (6,088,754)        3,090,279
Cash and cash equivalents, beginning of period.    22,016,448         7,364,951
                                                 -------------  ----------------
Cash and cash equivalents, end of period. . . .  $ 15,927,694   $    10,455,230
                                                 =============  ================
Non-cash activities:
 Convertible debentures and accrued interest
 converted to common stock, net of  unamortized
 deferred financing costs of   $1,573,585 and
 $217,750 in 2001 and  2000, respectiv
Issuance of common stock as investment. . . . .     2,837,293                --
 Acquisition of trademark and domain name
 through issuance of 20,000 shares of common stock         --           435,000
 Transfer of inventory to property and  equipment
 for placement at customer sites. . . . . . . . . .    42,930           483,154
 Forgiveness of recourse loan and compensation
 To employees                                          81,747                --
                                                 -------------  ----------------
 Total non-cash activities. . . . . . . . . . . .$  8,416,746   $     7,524,318
                                                 =============  ================
</TABLE>

    The accompanying notes are an integral part of these condensed consolidated
                              financial statements.


<PAGE>
                                 ENDOCARE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   Organization  and  Operations  of  the  Company

Endocare,  Inc. ("Endocare" or the "Company") is a vertically-integrated medical
device company that develops, manufactures and markets cryosurgical applications
in  oncology  and  urology.  Cryoablatoin is the use of sub-zero temperatures to
destroy  abnormal  tissue.  The  Company  also  operates  a  mobile  cryosurgery
business.  The  Company has concentrated on developing devices for the treatment
of  the  two  most  common  diseases of the prostate, prostate cancer and benign
prostate  hyperplasia.  The Company is also developing cryosurgical technologies
for  treating  tumors  in  other organs, including the kidney, breast, liver and
lung.  Additionally, the Company is developing stent technologies for urological
disorders.

2.   Financial  Information

     Basis  of  Presentation

The  accompanying  unaudited condensed consolidated financial statements contain
all  adjustments  necessary  (consisting  only  of normal recurring accruals) to
present fairly the financial information contained therein.  These statements do
not include all disclosures required by accounting principles generally accepted
in  the  United  States  of  America  and should be read in conjunction with the
audited  consolidated financial statements and other information included in the
Company's  Annual  Report  on  Form  10-K  for the year ended December 31, 2000.
Financial  results  for  this  interim  period are not necessarily indicative of
results  to  be  expected  for  the  full  year  2001.

Accounting  Principles

In  July  2001,  the  Financial  Accounting  Standards  Board,  or  FASB, issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  141,  "Business
Combinations"  and  No.  142, "Goodwill and Other Intangible Assets."  Statement
141  requires  that  the  purchase method of accounting be used for all business
combinations  initiated  after  June  30,  2001  as  well as all purchase method
business  combinations  completed  after  June  30,  2001.  Statement  141  also
specifies  criteria for intangible assets acquired in a purchase method business
combination  must meet to be recognized and reported apart from goodwill, noting
that any purchase price allocable to an assembled workforce may not be accounted
for  separately.  Statement 142 will require that goodwill and intangible assets
with  indefinite  useful  lives  no  longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement 142.
Statement  142  will  also  require  that intangible assets with definite useful
lives  be  amortized  over  their  respective  estimated  useful  lives to their
estimated  residual  values, and reviewed for impairment in accordance with SFAS
No.  121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets  to  Be  Disposed  Of."

The  Company  is  required to adopt the provisions of Statement 141 immediately,
except with regard to business combinations initiated prior to July 1, 2001, and
Statement  142  effective  January  1,  2002.  Furthermore, any goodwill and any
intangible  asset determined to have an indefinite useful life that are acquired
in  a  purchase  business  combination completed after June 30, 2001 will not be
amortized,  but  will continue to be evaluated for impairment in accordance with
the  appropriate  pre-Statement  142  accounting  literature.  Goodwill  and
intangible  assets  acquired  in  business combinations completed before July 1,
2001  will  continue  to  be  amortized  prior to the adoption of Statement 142.

Because  of  the  extensive effort needed to comply with adopting Statements 141
and  142,  it  is  not practicable to reasonably estimate the impact of adopting
these  Statements  on  the Company's financial statements, including whether any
transitional  impairment  losses  will  be  required  to  be  recognized  as the
cumulative  effect  of  a  change  in  accounting  principle.

3.   Use  of  Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United States of America requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  at the date of the financial statements and the reported amounts of
revenue  and  expenses  during the reporting period. Actual results could differ
from  those  estimates.


<PAGE>

4.   Supplemental  Financial  Statement  Data

                    JUNE 30,   DECEMBER 31,
                      2001         2000
Inventories:
Raw materials . .  $1,078,188  $     763,389
Work in process .     660,274        288,480
Finished goods. .     459,513        491,864
                   ----------  -------------

Total inventories  $2,197,975  $   1,543,733
                   ==========  =============

5.   Net  Loss  Per  Share

Under  SFAS  No.  128, "Earnings Per Share", basic EPS is calculated by dividing
net earnings (loss) by the weighted-average common shares outstanding during the
period.  Diluted  EPS  reflects  the  potential dilution to basic EPS that could
occur  upon  conversion  or  exercise  of  securities,  options,  convertible
debentures,  or  other  such  items,  to  common shares using the treasury stock
method based upon the weighted-average fair value of the Company's common shares
during  the  period.  In  accordance  with  SFAS  128, the consolidated net loss
(numerator),  shares  (denominator)  and  per-share amounts for the three months
ended  June 30, 2000 and June 30, 2001 are $(3,351,393), 12,535,000 $(0.27), and
$(2,063,906),  15,601,688  and $(0.13), respectively.  The consolidated net loss
(numerator),  shares (denominator) and per share amount for the six months ended
June  30,  2000  and  2001  are  $(6,365,061),  11,917,000  and  $(0.53),  and
$(4,406,074),  15,379,381 and $(0.29), respectively.  As the Company has been in
a  consolidated  net  loss  position  for  the  periods presented, the potential
dilution  from the conversion of options, warrants and convertible debentures to
common stock of approximately 4,310,000 and 3,435,000 for the three months ended
June  30,  2000  and 2001, respectively, and 4,674,000 and 3,435,000 for the six
months  ended  June  30,  2000  and 2001, respectively, were not used to compute
diluted  loss  per  share as the effect was antidilutive.  Consequently, diluted
EPS  equals  basic  EPS.

The  Company's  revenues  are  derived  from  cryosurgical  product  sales  and
cryosurgery procedures.  The Company's revenues from cryosurgical procedures for
the  three  and  six  month  period  ended June 30, 2001 and 2000 were $412,000,
$754,000,  $172,000  and  $345,000,  respectively.

6.   Collaborative  Agreements

On  June  30,  2001, the Company issued 213,010 shares of Common Stock valued at
their  fair  value  of $2,837,293 in consideration for a membership interest, in
the  form  of  Class  A  Units  of  U.S.  Therapies,  L.L.C.  ("UST"),  equal to
approximately  five  percent  (5%)  of  the total issued and outstanding Class A
units  of  UST  on a fully-diluted basis.  In a related "Distributor Agreement",
U.S.  Medical  Devices  Ltd.  ("USMD"),  a  subsidiary  of  UST, was appointed a
distributor  and  given  exclusive distribution rights to the Company's Cryocare
Probe  Surgical  System  and  associated  disposabale  products  in  certain
territories  and  for  certain  customers.  The investment in UST is included in
investments,  intangible  and  other  assets  in  the  accompanying consolidated
balance  sheet  for June 30, 2001.  The Company has recorded sales of $1,310,000
and  $1,955,000  to  USMD  for  the  three  months and six months ended June 30,
2001,  respectively.

In  October  1999,  the  Company  entered into a strategic alliance with Sanarus
Medical,  Inc.  ("Sanarus")  to  commercialize  the  Company's  proprietary
cryosurgical  technology in the treatment of breast cancer, benign breast tumors
and  gynecological  diseases.  The  terms  of the related agreements included an
equity  investment  by  the  Company  in Sanarus totaling $300,000 and a warrant
received  by  the  Company  to acquire at that time approximately 57% of Sanarus
common  stock  in  consideration  for  entering  into a manufacturing supply and
license  agreement.  In  the  event  the Company were to exercise the warrant at
that time, the Company would then own a majority equity position in Sanarus. The
investment  is included in other assets in the accompanying consolidated balance
sheets as of December 31, 2000 and June 30, 2001 and is reflected at cost, which
approximates  fair  market  value,  as  the  Company  does  not have significant
influence  over the operations of Sanarus.  In June 2001, the Company provided a
bridge  loan to Sanarus in the amount of $250,000.  This amount was subsequently
repaid  in July 2001 upon Sanarus' receipt of a secondary equity financing round
from  outside investors.  Sanarus' second round of financing effectively reduced
the Company's ownership percentage to approximately 21% on a fully-diluted basis
at  July  2001.

7.   Debt

Convertible  Debentures

     On May 5, 2000, the Company received $8,000,000 from the sale of additional
debentures  to the same institutional investors pursuant to certain call options
referenced  above,  of which $500,000 was converted into 74,074 shares of common
stock  during  the fourth quarter of 2000, $1,000,000 was converted into 148,148
shares  of  common  stock  during  the  first quarter of 2001 and $4,200,000 was
converted into 622,222 shares of common stock during the second quarter of 2001.
Financing  costs  totaling  $585,000  associated  with the transaction are being
amortized  to  interest  expense  over  three  years.  In  July  2001, the final
$2,300,000  was  converted  into  340,741  shares  of  common  stock.

     Credit Facility

On  July 29, 1999, the Company entered into a Loan and Security Agreement with a
lender  which  originally  provided for a revolving credit line in the amount of
$2,000,000  plus  up  to  an  additional  $1,000,000  based on eligible accounts
receivable  of  the  Company (the "Loan").  In April 2000, the Company increased
the  revolving  portion  of its credit facility from $2,000,000 to $4,000,000 in
addition to the $1,000,000 based on eligible accounts receivable of the Company.
As  of  June 30, 2001, $1,558,000 of the loan was outstanding.  The Loan accrued
interest at the highest prime or equivalent rate announced by certain designated
banks, plus 2% for the portion of the loan based on eligible accounts receivable
or  3.5%.  The Loan was secured by a first priority lien on all of the assets of
the  Company, except for intellectual property, was fully guaranteed by AMP, and
contained  certain  restrictive  covenants.   The Company was in compliance with
the  restrictive  covenants  of  the  agreement  as  of June 30, 2001.  The loan
matured  on  July  31,  2001  and  was  paid  in  full  on  that  date.

8.   Stockholders'  Rights  Plan

     In  April  1999,  the  Company  adopted  a stockholder rights plan in which
preferred  stock  purchase  rights were distributed as a dividend at the rate of
one  right  for  each  share of common stock held as of the close of business on
April  15, 1999.  The rights are designed to guard against partial tender offers
and  other abusive and coercive tactics that might be used in an attempt to gain
control  of  the  Company  or  to  deprive  the  Company's stockholders of their
interest  in the long-term value of the Company.  The rights will be exercisable
only  if  a  person  or group acquires 15% or more of the Company's common stock
(subject  to  certain exceptions stated in the Plan) or announces a tender offer
the  consummation of which would result in ownership by a person or group of 15%
or  more of the Company's common stock.  At any time on or prior to the close of
business  on  the first date of a public announcement that a person or group has
acquired  beneficial  ownership  of  15%  or  more of the Company's common stock
(subject  to  certain  exceptions stated in the Plan), the rights are redeemable
for  one  cent  per  right  at  the  option  of  the  Board  of  Directors.

9.   Legal  Proceedings

In  March  2000,  the  Company  filed in the U.S. District Court for the Central
District  of  California, two separate patent infringement lawsuits, one against
Israeli-based  Galil  Medical,  Ltd,  and its U.S. affiliate, Galil Medical USA,
Inc.  (collectively,  "Galil")  and the other against Cryomedical Sciences, Inc.
("CMSI").   In March 2001 and December 2000, the parties reached a settlement in
these  actions.  Each  of  Galil  and  CMSI  stipulated  for  purposes  of their
respective  settlement  agreements  that  the  Company's  patent  combining
cryo-cooling,  ultrasound  and  temperature  monitoring  technology is valid and
enforceable.  The  settlements  resulted  in  certain cross-licensing agreements
between  Galil  and  Endocare  and  between  CMSI  and  Endocare.

In  the normal course of business, the Company is subject to various other legal
matters.   While  the  results of litigation and claims cannot be predicted with
certainty, the Company believes that the final outcome of these matters will not
have  a  material  adverse  effect  on its consolidated results of operations or
financial  condition.


<PAGE>

ITEM  2.

                                 ENDOCARE, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The  following  should  be  read  in  conjunction  with  the unaudited condensed
consolidated  financial  statements and notes thereto included in Part I--Item 1
of  this  report,  and  the audited consolidated financial statements, and notes
thereto,  and  Management's  Discussion  and Analysis of Financial Condition and
Results of Operations contained in the Annual Report on Form 10-K for the fiscal
year  ended  December  31,  2000.

The  following  Management's  Discussion and Analysis of Financial Condition and
Results  of Operations may contain forward-looking statements within the meaning
of  Section  21E  of  the  Securities  Exchange  Act of 1934, as amended and are
subject  to the Safe Harbor provisions created by that statute. Our business and
results  of operations are subject to various risks and uncertainties including,
but  not  limited to, those discussed under the caption "Factors That May Affect
Our Future Results and The Trading Price of Our Common Stock" included elsewhere
in  this  report,  and  in  risk factors contained in our other periodic reports
filed  with  the  Securities and Exchange Commission. Such risk factors include,
but are not limited to, limited operating history of our business with a history
of  losses;  fluctuations  in  our  order  levels;  uncertainty regarding market
acceptance  of  our current and new products; uncertainty of product development
and  the  associated  risks  related  to  clinical  trials;  the  rapid  pace of
technological  change  in  our  industry;  our  limited  sales,  marketing  and
manufacturing  experience, and the ability to convince health care professionals
and  third  party  payers  of  the medical and economic benefits of our Cryocare
System.  The  actual  results  that  we  achieve  may differ materially from any
forward-looking  statements due to such risks and uncertainties and we undertake
no  obligation  to  update  any  such  forward-looking  statements.

General

We are a fully-integrated medical device company that develops, manufactures and
markets  cryosurgical  technologies  and  are  developing stent technologies for
applications  in  oncology  and  urology.  We  have  concentrated  on developing
devices  for  the  treatment  of  the  two most common diseases of the prostate,
prostate  cancer  and  benign  prostate  hyperplasia.  We  are  also  developing
cryosurgical  technologies  for  treating  tumors in other organs, including the
kidney,  breast,  liver  and  lung.

We  derive  revenues  primarily  from  the sale of our Cryocare Systems, related
disposable Cryoprobes and revenue from mobile cryosurgical procedures.  Revenues
are  recognized  upon  the  shipment  of  products, or in the case of our mobile
cryosurgical  procedures,  upon  the  completion  of  procedures.

Results  of  Operations

Three  and  six  months  ended  June  30,  2001  and  2000

Net  sales for the three months ended June 30, 2001 increased 126% to $3,538,000
compared  to  $1,565,000 for the three months ended June 30, 2000.  The increase
was  attributable  primarily  to  the increased sales of our Cryocare System and
related  disposable  Cryoprobes following Medicare's July 1, 1999 implementation
of  national  coverage  for  localized  prostate  cancer  due  to  the  expanded
commercialization  of  the  product  and  collaborative  sales  alliances.  Our
business plan is focused primarily on the sale and placement of Cryocare Systems
and  related  disposables.

Net  sales  for  the six months ended June 30, 2001 increased 119% to $6,293,000
compared  to  $2,876,000  in  2000.  The  increase  is attributed to the reasons
stated  above.

Gross  margin  on  net  sales  was  64% for the three months ended June 30, 2001
compared  to  52% for the three months ended June 30, 2000.  The increase is due
primarily  to a mix of higher margin cryosurgical system and probe sales coupled
with  a  reduction  in  product  costs  due primarily to increased manufacturing
efficiencies.

Gross  margin  on  net products sales for the six months ended June 30, 2001 was
61%  compared  to  52%  for the same period in 2000.  The increase is due to the
reasons  described  above.

Research  and  development  expense  for  the  three  months ended June 30, 2001
increased  12% to $923,000, compared to $821,000 for the three months ended June
30,  2000.  The  increase  primarily reflects the investment we have made in the
form  of  additional  personnel  and  related  infrastructure to support general
product  improvement in our Cryocare System, new product development efforts and
clinical  costs  associated  with  the  Horizon  Prostatic  Stent  .

Research  and  development  expense  for  the  six  months  ended  June 30, 2001
increased 18% to $1,826,000, compared to $1,545,000 for the same period in 2000.
The  increase  is  primarily attributable to continued investment in new product
development  and  the  improvement  of  existing  products.

Selling,  general and administrative expense for the three months ended June 30,
2001  increased  8%  to  $3,440,000, compared to $3,195,000 for the three months
ended  June 30, 2000. The increase reflects increased sales and marketing costs,
including  increased  sales  commissions,  associated  with  increased
commercialization  of  our  cryosurgical  product  for  prostate  cancer.

Selling,  general  and  administrative expense for the six months ended June 30,
2001  increased 10% to $6,464,000, compared to $5,855,000 for the same period in
2000.  The  increase is primarily attributable to increased sales, marketing and
infrastructure  costs.

Interest  income  (expense),  net  for  the three months ended June 30, 2001 was
$34,000,  compared  to $(146,000) for the three months ended June 30, 2001.  The
increase was primarily due to increased interest income associated with a higher
balance  of  cash  and  cash  equivalents  in 2001, partially offset by interest
expense.

Interest  income  (expense),  net  for  the  six  months ended June 30, 2001 was
$38,000  compared  to  $(471,000)  for  the six months ended June 30, 2000.  The
increase  is primarily due to increased interest income associated with a higher
balance  of  cash  and  cash  equivalents  in 2001, partially offset by interest
expense.

Our net loss for the three months ended June 30, 2001 was $2,064,000 or 13 cents
per  share  on 15,602,000 weighted average shares outstanding, compared to a net
loss  of $3,351,000, or 27 cents per share on 12,535,000 weighted average shares
outstanding  for  the  same  period  in 2000. The decrease in net loss primarily
resulted  from  increased  revenues  and  lower cost of sales as a percentage of
sales  and  increased  interest  income, partially offset by higher research and
development  and  selling,  general  and  administrative  expenses.

Our  net  loss for the six months ended June 30, 2001 was $4,406,000 or 29 cents
per  share  on  15,379,000 weighted average shares outstanding compared to a net
loss  of  $6,365,000 or 53 cents per share on 11,917,000 weighted average shares
outstanding  for the same period in 2000.  The decrease in net loss is primarily
attributable  to  increased  revenues and lower cost of sales as a percentage of
sales  and  increased  interest  income, partially offset by higher research and
development  and  selling,  general  and  administrative  expenses.

Liquidity  and  Capital  Resources

At  June 30, 2001, our cash and cash equivalent balance was $15,928,000 compared
to  $22,016,000  at  December  31, 2000.  The decrease was due primarily to cash
used  by  operating  activities.  At  June 30, 2001, our net working capital was
$15,184,000  and  the ratio of current assets to current liabilities was 3 to 1.

For  the  six  months ended June 30, 2001, net cash used in operating activities
was  $6,426,000  compared  to  $4,803,000  for  the  same  period  in  2000.  In
conjunction  with  the  increased  sales  of  our  Cryocare  System  and related
disposable  Cryoprobes for prostate cancer, inventory increased to $2,198,000 at
June  30,  2001,  compared  to  $1,544,000  at the beginning of the year and net
accounts  receivable  increased  to  $3,671,000  at  June  30, 2001, compared to
$2,114,000 at December 31, 2000.  Additions to property and equipment during the
first  six  months  of  2001  were  approximately  $117,000. Current liabilities
increased  to  $6,728,000 at June 30, 2001 from $6,401,000 at December 31, 2000.

On  June  30,  2001, the Company issued 213,010 shares of Common Stock valued at
their  fair  value  of $2,837,293 in consideration for a membership interest, in
the  form  of  Class  A  Units  of  U.S.  Therapies,  L.L.C.  ("UST"),  equal to
approximately  five  percent  (5%)  of  the total issued and outstanding Class A
units  of  UST  on a fully-diluted basis.  In a related "Distributor Agreement",
U.S.  Medical  Devices  Ltd.  ("USMD"),  a  subsidiary  of  UST, was appointed a
distributor  and  given  exclusive distribution rights to the Company's Cryocare
Probe  Surgical  System  and  associated  disposabale  products  in  certain
territories  and  for  certain  customers.  The investment in UST is included in
investments,  intangible  and  other  assets  in  the  accompanying consolidated
balance  sheet  for June 30, 2001.  The Company has recorded sales of $1,310,000
and  $1,955,000  to  USMD  for  the  three  months and six months ended June 30,
2001,  respectively.

In  June  and  July  1999,  we  received  a total of $8,000,000 from the sale to
institutional investors of 7% convertible debentures due in three years from the
date  of  issuance.  During  the  second  quarter  of  2000,  the  $8,000,000 in
convertible debentures was converted into 1,475,610 shares of common stock under
the  terms  of  the agreements.  On May 5, 2000, we received $8,000,000 from the
sale  of  the  additional  7%  convertible debentures to institutional investors
pursuant  to  the  purchase  options  discussed  above,  of  which  $500,000 was
converted  into 74,074 shares of common stock during the fourth quarter of 2000,
$1,000,000  was  converted  into 148,148 shares of common stock during the first
quarter of 2001 and $4,200,000 was converted into 622,222 shares of common stock
during  the  second  quarter  of  2001.  In  July 2001, the final $2,300,000 was
converted  into  340,741  shares  of  common  stock.

On  July 29, 1999, the Company entered into a Loan and Security Agreement with a
lender  which  originally  provided for a revolving credit line in the amount of
$2,000,000  plus  up  to  an  additional  $1,000,000  based on eligible accounts
receivable  of  the  Company (the "Loan").  In April 2000, the Company increased
the  revolving  portion  of its credit facility from $2,000,000 to $4,000,000 in
addition to the $1,000,000 based on eligible accounts receivable of the Company.
As  of  June  30,  2001, $1,558,000 of the loan was outstanding.  The Loan bears
interest at the highest prime or equivalent rate announced by certain designated
banks, plus 2% for the portion of the loan based on eligible accounts receivable
or  3.5%.  The  Loan is secured by a first priority lien on all of the assets of
the  Company,  except  for  intellectual  property,  is  fully guaranteed by our
subsidiary,  AMP,  and contains certain restrictive covenants.   The Company was
in  compliance  with  the  restrictive covenants of the agreement as of June 30,
2001.  The  loan matured on July 31, 2001.  The credit facility was paid in full
on  that  date.

In  November  2000,  we  sold 1,509,440 shares of our common stock at a price of
$13.25  per  share  in  a  private  placement.  After  transaction  fees, legal,
accounting,  filing  fees  and  other  associated  expenses  of  approximately
$1,648,000,  the  net contribution to our capital was approximately $18,352,000.

We believe that our existing cash resources will provide sufficient resources to
meet  present  and reasonably foreseeable working capital requirements and other
cash  needs  into  2002.  If  we  elect  to  undertake or accelerate significant
research  and  development  projects  for  new  products  or  pursue  corporate
acquisitions,  we  may  require  additional  outside  financing  sooner  than
anticipated.  There  can  be  no  assurance  that financing will be available on
acceptable  terms  or at all.  We expect that to meet our long-term needs we may
need  to  raise  substantial  additional  funds  through  the sale of our equity
securities,  the  incurrence  of  indebtedness  or through funds derived through
entering  into  collaborative  agreements  with  third  parties.


FACTORS  THAT  MAY AFFECT OUR FUTURE RESULTS AND THE TRADING PRICE OF OUR COMMON
STOCK

WE HAVE A LIMITED OPERATING HISTORY AND WE EXPECT TO CONTINUE TO GENERATE LOSSES

     Since  our inception, we have engaged primarily in research and development
and have minimal experience in manufacturing, marketing and selling our products
in  commercial  quantities.

     We  have  incurred annual operating losses since inception.  For the fiscal
years  ended  December  31, 1998, 1999, 2000 and the six month period ended June
30,  2001, we had net losses of approximately $4.9 million, $9.3 million,  $12.4
million  and  $4.4  million, respectively.  As of June 30, 2001, our accumulated
deficit  was  approximately  $36.6  million.  We may not be able to successfully
develop  or  commercialize  our  current or future products, achieve significant
revenues  from  sales  or  procedures  or  achieve or sustain profitability.  We
expect  to  continue to incur operating losses because our products will require
substantial expenditures relating to, among other matters, development, clinical
testing,  regulatory  compliance, manufacturing and marketing.  If we do achieve
profitability,  we cannot be certain that we will be able to sustain or increase
profitability  on  a  quarterly  or  annual  basis  thereafter.

OUR  PRODUCTS  MAY  NOT  ACHIEVE MARKET ACCEPTANCE, WHICH COULD LIMIT OUR FUTURE
REVENUE

     Our  products,  including  our  Cryocare System and related accessories and
disposable  products,  are  in  the  early  stages  of market introduction.  Our
products  may  not  be  accepted  by  potential  customers.  We  believe  that
recommendations  and  endorsements  of  physicians  and  patients and sufficient
reimbursement  by  health care payers will be essential for market acceptance of
our  Cryocare  System  and  other  products,  and  these  recommendations  and
endorsements  may  not  be  obtained  and  sufficient  reimbursement  may not be
forthcoming.  Cryosurgery  has  existed  for many years, but has not been widely
accepted  primarily due to concerns regarding safety and efficacy and widespread
use  of  alternative therapies.  Use of our Cryocare System requires significant
physician  education  and  training.  Our  ability  to  successfully  market our
Cryocare  System  is  dependent,  among  other  things,  upon  acceptance  of
cryosurgical  procedures in the United States and certain international markets.
Any  adverse side effects or future reported adverse events or other unfavorable
publicity  involving  patient outcomes from the use of cryosurgery, whether from
our  products  or  the  products  of  our  competitors,  could  adversely affect
acceptance  of  cryosurgery.  Emerging  new technologies and procedures to treat
cancer,  prostate  enlargement  and other prostate disorders also may negatively
affect  the market acceptance of cryosurgery.  Our Cryocare System and our other
products  may  not  gain  any  significant  degree  of  market  acceptance among
physicians,  patients  and  health  care payers.  If our products do not achieve
market  acceptance,  our  future  revenue  will  be  limited.

WE  MAY  NOT  BE  SUCCESSFUL  IN  DEVELOPING  OR  MARKETING  OUR  PRODUCTS

     Our  growth  depends  in  large  part  on continued ability to successfully
develop  and  commercialize  our  current  products under development or any new
products.  Several  of  our  products are in varying stages of development.  Our
Horizon  Prostatic  Stent  is  in  clinical trials and has not been approved for
marketing  in  the  United  States.  We  also are developing enhancements to our
Cryocare System.  We may experience difficulties that could delay or prevent the
successful  development  and  commercialization  of  our  current products under
development or any new products.  Our products in development may not prove safe
and  effective  in  clinical  trials.  Clinical  trials may identify significant
technical  or other obstacles that must be overcome prior to obtaining necessary
regulatory  or reimbursement approvals.  Our failure to successfully develop and
commercialize  new  products  or  to achieve significant market acceptance would
have  a  significant  negative  effect  on  our  financial  condition.

THERE  IS  UNCERTAINTY RELATING TO THIRD PARTY REIMBURSMENT WHICH IS CRITICAL TO
MARKET  ACCEPTANCE  OF  OUR  PRODUCTS

     In  the  United  States,  health  care  providers,  such  as  hospitals and
physicians,  that  purchase  our  products generally rely on third party payers,
principally federal Medicare, state Medicaid and private health insurance plans,
to  reimburse  all  or  part  of  the  cost  of medical procedures involving our
products  and  on  reimbursement for our products and procedures.  While certain
private  health insurance companies pay for the procedures in which our products
are  used in certain areas of the United States, private insurance reimbursement
may not be adopted nationally or by additional insurers and may be terminated by
those  private  insurance companies currently paying for procedures in which our
products  are  used.  Reimbursement  levels  from  Medicare, Medicaid or private
insurers  may not be sufficient to induce physicians to perform, and patients to
elect,  procedures  utilizing  our products.  Further, we anticipate that, under
the  prospective  payment system used by private health care payers, the cost of
our  products  will  be  incorporated into the overall cost of the procedures in
which they are used and that there will be no separate, additional reimbursement
for  our  products.  This  also  may  discourage  the  use  of  our  products.
Furthermore,  we  could  be  negatively  affected  by  changes  in reimbursement
policies of government or private health care payers, particularly to the extent
any  such  changes affect reimbursement for procedures in which our products are
used.  Failure  by  physicians,  hospitals  and  other  users of our products to
obtain sufficient reimbursement from health care payers for procedures involving
our  products  could  have  a  significant  negative  effect  on  our  financial
condition.

     Furthermore,  significant  attention  is placed on reforming the healthcare
system  in  the  United  States  and  other countries.  Any changes in Medicare,
Medicaid  or  third  party  medical  expense reimbursement, which may arise from
healthcare  reform, would likely have a material adverse effect on the price for
our products.  In addition, changes to the healthcare system may also affect the
commercial  acceptance  of  products we are currently developing and products we
may  develop  in  the  future.  Several  proposals  have been made in the United
States  Congress and various state legislatures recently that, if adopted, would
reform  the  healthcare  system  in  the  United  States  and potentially reduce
healthcare  spending  which  may  result  in  a  material  adverse effect on our
business.

WE  HAVE  LIMITED  SALES  AND  MARKETING  EXPERIENCE

     We  currently  handle  most of our own marketing, distribution and sales of
our  Cryocare  Systems.  We  have  limited  experience marketing and selling our
products,  and  do  not  have  experience  marketing and selling our products in
commercial  quantities.  If  we  are  unable  to  expand our sales and marketing
capabilities,  we  may  not  be  able  to effectively commercialize our Cryocare
System  product  or  other  products.

     We  derive  the majority of our revenues from the sales of Cryocare Systems
and  expect  that  sales  of  Cryocare  Systems  will continue to constitute the
majority  of  our  sales  for  the  foreseeable  future.  Any  factor negatively
impacting the sales or usage of Cryocare Systems would have a significant effect
on  our  business.

     We  believe that, to become and remain competitive, we will need to develop
third party international distribution channels and a direct sales force for our
products.  If  we  enter into third party marketing arrangements, our percentage
share of product revenues is likely to be lower than if we directly marketed and
sold our products through our own sales force.  Establishing marketing and sales
capabilities  sufficient  to support sales in commercial quantities will require
significant  resources.  We  may  not be able to recruit and retain direct sales
personnel,  succeed in establishing and maintaining any third party distribution
channels  or  succeed  in  our  future  sales  and  marketing  efforts.

WE  ARE  DEPENDENT UPON A LIMITED NUMBER OF THIRD PARTY SUPPLIERS TO MANUFACTURE
OUR  PRODUCTS

     We  depend  upon a limited number of unaffiliated third-party suppliers for
components  and  materials used in the manufacture of our products and, as such,
our business would be seriously harmed if we were unable to develop and maintain
relationships  with  suppliers that allow us to obtain sufficient quantities and
quality  materials  and  components  on  acceptable  terms.  If  our  principal
suppliers  cease  to  supply the materials and components we need to manufacture
our  products,  there  may not be adequate alternatives to meet our needs, which
will have a material adverse effect on our business.  To date, we have been able
to  obtain the necessary components and materials used in the manufacture of our
products  without  material  delays,  however, there can be no assurance that we
will  be  able  to  obtain  the  necessary  components and materials used in our
products  in  the  future  on  a  timely  basis,  if  at  all.

WE  ARE  DEPENDENT  ON  ADEQUATE PROTECTION OF OUR PATENT AND PROPRIETARY RIGHTS

     We  may not be able to obtain effective patents to protect our technologies
from  use  by  other  companies  with competitive products, and patents of other
companies  could  prevent  us  from  developing  or marketing our products.  Our
success  will  depend,  to  a  significant  degree, on our ability to secure and
protect  intellectual  proprietary  rights  and  enforce  patent  and  trademark
protections relating to our technology.  While we believe that the protection of
patents or licenses is important to our business, we also rely on trade secrets,
know-how  and  continuing  technological  innovation to maintain our competitive
position.  From  time to time, litigation may be advisable to protect our patent
position.  Any  litigation  in  this  regard could be costly, and it is possible
that we will not have sufficient resources to fully pursue this litigation or to
protect  our  other  patent  rights  and  could  result  in  the  rejection  or
invalidation of our existing and future patents, if any.  Any adverse outcome in
litigation  relating  to  the  validity  of our patents, or any other failure to
pursue  litigation or otherwise to protect our patent position, could materially
harm  our  business  and financial condition. In addition, in the future, we may
receive  correspondence  alleging  infringement  of  proprietary rights of third
parties.  Even  if infringement claims against us are without merit, defending a
lawsuit  takes  significant  time,  may  be  expensive and may divert management
attention  from other business concerns.  We try to preserve the confidentiality
of  our  technology  by  entering  into  confidentiality  agreements  with  our
employees,  consultants,  customers,  and key vendors and by other means.  These
measures  may  not,  however, prevent the unauthorized disclosure or use of such
technology.  It  is possible that these agreements will be breached or that they
will  not  be  enforceable in every instance, and that we will not have adequate
remedies  for any such breach.  In addition, enforcement of these agreements may
be  costly  and  time  consuming.

WE  ARE  FACED  WITH  INTENSE  COMPETITION  AND RAPID TECHNOLOGICAL AND INDUSTRY
CHANGE

     We  are faced with intense competition and rapid technological and industry
change  and,  if  our  competitors'  existing  products or new products are more
effective  than  or  considered  superior  to  our  products,  the  commercial
opportunity  for  our  products  will be reduced or eliminated.  We face intense
competition from other surgical device manufacturers, as well as, in some cases,
from pharmaceutical companies.  Many of our competitors are significantly larger
than  us  and  have  greater  financial,  technical, research, marketing, sales,
distribution and other resources than us. We believe there will be intense price
competition  for products developed in our markets.  Our competitors may develop
or  market  technologies and products, including drug-based treatments, that are
more  effective  or  commercially  attractive than any that we are developing or
marketing.  Our  competitors  may  succeed in obtaining regulatory approval, and
introducing  or  commercializing products before we do.  Such developments could
have  a  significant negative effect on our financial condition.  Even if we are
able  to  compete  successfully,  we  may  not  be able to do so in a profitable
manner.  The  medical  device  industry  generally,  and  the urological disease
treatment market in particular, are characterized by rapid technological change,
changing  customer  needs, and frequent new product introductions.  Our products
may  be  rendered  obsolete  as  a  result  of  future  innovations.

WE  MAY  NEED  ADDITIONAL  LONG-TERM  FINANCING

     If we undertake or accelerate significant research and development projects
for  new  products  or  pursue corporate acquisitions, we may require additional
outside  financing.  Such additional funds may be raised through the sale of our
equity  securities or the incurrence of additional debt or through collaborative
arrangements.   Any additional equity financing may be dilutive to shareholders,
and  debt  financing, if available, may involve interest expense and restrictive
covenants.  Collaborative  arrangements, if necessary to raise additional funds,
may  require us to relinquish rights to certain of our technologies, products or
marketing  territories.  Our  failure  to raise capital when needed could have a
significant  negative  effect  on  our  business,  operating  results, financial
condition  and  prospects.

WE  HAVE  LIMITED  MANUFACTURING  EXPERIENCE

     We  have  limited  experience  in  producing  our  products  in  commercial
quantities.  Manufacturers often encounter difficulties in scaling up production
of new products, including problems involving production yields, quality control
and  assurance,  component  supply  and  shortages  of qualified personnel.  Our
failure  to  overcome  these  manufacturing problems could negatively impact our
business and financial condition.  We use internal manufacturing capacity in our
manufacturing  efforts.  Certain  of  our purchased components and processes are
currently  available  from  or  performed  by  a  single  vendor.  Any  supply
interruption  from  a  single  source  vendor  would have a significant negative
effect  on  our ability to manufacture our products until a new source of supply
is  qualified  and, as a result, could have a significant negative effect on our
business  and  financial  condition.  Our  success  will depend in part upon our
ability  to  manufacture  our  products  in  compliance  with  the  FDA's  Good
Manufacturing  Practices  regulations  and  other  regulatory  requirements  in
sufficient  quantities  and on a timely basis, while maintaining product quality
and acceptable manufacturing costs.  Failure to increase production volumes in a
timely  or  cost-effective  manner or to maintain compliance with the FDA's Good
Manufacturing  Practices  or  other  regulatory  requirements  could  have  a
significant  negative  effect  on  our  financial  condition.

WE  ARE  DEPENDENT  ON  KEY  PERSONNEL

     Failure  to  attract and retain skilled personnel could hinder our research
and development and sales and marketing efforts. Our future success depends to a
significant  degree  upon  the  continued  services  of key technical and senior
management  personnel,  including  Paul  W.  Mikus, our Chief Executive Officer.
None  of  these individuals is bound by an employment agreement or covered by an
insurance  policy  of  which  we  are  the beneficiary.  Our future success also
depends  on  our  continuing  ability  to  attract,  retain  and motivate highly
qualified  managerial,  technical  and  sales  personnel.  Competition  for such
personnel  is intense, particularly in southern California where we are located.
The  inability to retain or attract qualified personnel could have a significant
negative  effect  upon  our  research  and  development  and sales and marketing
efforts  and  thereby  materially  harm  our  business  and financial condition.


GOVERNMENT  REGULATION  CAN  HAVE  A  SIGNIFICANT  IMPACT  ON  OUR  BUSINESS

     Government  regulation  in  the  United  States  and  other  countries is a
significant  factor  affecting  the  research  and  development, manufacture and
marketing  of  our  products.  In the United States, the FDA has broad authority
under  the federal Food, Drug and Cosmetic Act and the Public Health Service Act
to  regulate the distribution, manufacture and sale of medical devices.  Foreign
sales  of  drugs  and  medical  devices  are  subject  to  foreign  governmental
regulation and restrictions, which vary from country to country.  The process of
obtaining  FDA and other required regulatory approvals is lengthy and expensive.
We may not be able to obtain necessary approvals for clinical testing or for the
manufacturing  or  marketing of our products.  Failure to comply with applicable
regulatory  approvals  can,  among  other things, result in fines, suspension of
regulatory  approvals,  product  recalls,  operating  restrictions, and criminal
prosecution.  In  addition,  governmental  regulations  may be established which
could prevent, delay modify or rescind regulatory approval of our products.  Any
such position by the FDA, or change of position by the FDA, may adversely impact
our  business  and  financial  condition.  Regulatory approvals, if granted, may
include significant limitations on the indicated uses for which our products may
be  marketed.  In  addition,  to  obtain  such  approvals,  the  FDA and foreign
regulatory  authorities  may  impose  numerous  other  requirements  on us.  FDA
enforcement  policy strictly prohibits the marketing of approved medical devices
for  unapproved  uses.  In  addition,  product  approvals  can  be withdrawn for
failure  to  comply  with  regulatory  standards or the occurrence of unforeseen
problems  following  initial marketing.  We may not be able to obtain regulatory
approvals  for  our products on a timely basis, or at all, and 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  significant  negative  effect  on  our  financial condition.  In
addition,  the health care industry in the United States is generally subject to
fundamental  change  due  to  regulatory,  as well as political, influences.  We
anticipate  that  Congress  and  state  legislatures will continue to review and
assess  alternative  health  care  delivery  and  payment  systems.  Potential
approaches  that  have  been considered include controls on health care spending
through  limitations  on  the  growth  of  private  purchasing  groups and price
controls.  We  cannot  predict  what impact the adoption of any federal or state
health  care  reform  measures  may  have  on  our  business.

WE  COULD  BE  NEGATIVELY IMPACTED BY FUTURE INTERPRETATION OR IMPLEMENTATION OF
FEDERAL  AND  STATE  FRAUD  AND  ABUSE  LAWS,  INCLUDING  ANTI-KICKBACK  LAWS.

     Federal  anti-kickback  laws  and  regulations prohibit the offer, payment,
solicitation  and  receipt of any form of remuneration in exchange for referrals
of  products  or services for which payment may be made by Medicare, Medicaid or
other federal healthcare programs.  Violations of federal anti-kickback laws are
punishable  by  monetary  fines, civil and criminal penalties and exclusion from
participation  in  Medicare,  Medicaid  and  other  federal healthcare programs.
Several  states  have  similar  laws.  While  we  believe  our operations are in
material  compliance  with  the applicable Medicare and Medicaid fraud and abuse
laws,  including  the  anti-kickback  laws,  there  is  a  risk that the federal
government  might  investigate  our arrangements with physicians and other third
parties.  Such  investigations,  regardless  of  their outcome, could damage our
reputation  and  adversely  affect important business relationships that we have
with  third  parties,  including  physicians,  hospitals  and  others.  If  our
arrangements  with  physicians and other third parties were found to be illegal,
we  could  be  subject  to  civil  and  criminal  penalties, including fines and
possible  exclusion  from  participation  in  governmental  payor  programs.
Significant  fines  could  cause  liquidity  problems  and  adversely affect our
results  of  operations.  Exclusion  from  participation  from  government payor
programs would eliminate an important source of revenue and adversely affect our
business.

WE  COULD  BE  NEGATIVELY IMPACTED BY FUTURE INTERPRETATION OR IMPLEMENTATION OF
THE  FEDERAL  STARK  LAW  AND  OTHER  STATE  AND  FEDERAL  ANTI-REFERRAL  LAWS

     We  are  also subject to federal and state statutes and regulations banning
payments  for  referrals  of  patients and referrals by physicians to healthcare
providers  with  whom the physicians have a financial relationship.  The federal
Stark  Law  applies  to  Medicare  and  Medicaid  and prohibits a physician from
referring  patients  for  certain services to an entity with which the physician
has a financial relationship.  A financial relationship includes both investment
interests  in  an  entity  and  compensation  arrangements with an entity.  Many
states  have  similar  laws.  These  state  laws  generally  apply  to  services
reimbursed  by both governmental and private payors.  Violation of these federal
and  state laws may result in prohibition of payment for services rendered, loss
of  licenses,  fines,  criminal  penalties  and  exclusion from governmental and
private  payor  programs,  among  other things.  We have financial relationships
with  physicians.  Although  we  believe  that  our financial relationships with
physicians are not in violation of applicable laws and regulations, governmental
authorities might take a contrary position.  If our financial relationships with
physicians  were  found to be illegal, we could be subject to civil and criminal
penalties,  including  fines,  exclusion  from  participation  in government and
private  payor  programs  and requirements to refund amounts previously received
from government and private payors.  In addition, expansion of our operations to
new jurisdictions, or new interpretations of laws in our existing jurisdictions,
could  require  structural and organizational modifications of our relationships
with  physicians  and  others  to  comply  with  that jurisdiction's laws.  Such
structural  and organizational modifications could result in lower profitability
and  failure  to  achieve  our  growth  objectives.

WE  MAY  BE  NEGATIVELY  IMPACTED  BY  PRODUCT  LIABILITY  AND  PRODUCT  RECALL

     The  manufacture  and  sale of medical products entails significant risk of
product  liability  claims and product recalls.  Our existing insurance coverage
limits  may not be adequate to protect us from any liabilities we might incur in
connection  with  the  clinical trials or sales of our products.  We may require
increased  product  liability  coverage  as  our  products  are  commercialized.
Insurance  is expensive and may not be available on acceptable terms, or at all.
A  successful  product liability claim or series of claims brought against us in
excess  of  our  insurance  coverage,  or a recall of our products, would have a
significant  negative  effect  on  our  business  and financial condition.  Even
unsuccessful  claims  could  result  in the significant expenditure of funds and
management  time,  could  substantially  harm  our reputation and could harm our
business.

WE  MAY  EXPERIENCE  FLUCTUATIONS  IN  OUR  FUTURE  OPERATING  RESULTS

     If  our  revenue  declines  in  a  quarter from the revenue in the previous
quarter  our  earnings  will  likely  decline  because  many of our expenses are
relatively  fixed.  In particular, research and development, sales and marketing
and  general and administrative expenses are not affected directly by variations
in revenue.  In some future quarter or quarters, due to a decrease in revenue or
for  some  other  reason,  our  operating  results  likely  will  be  below  the
expectations  of  securities  analysts  or investors.  In this event, the market
price  of  our  common  stock  may  fall  abruptly  and  significantly.

OUR  BUSINESS  IS  EXPOSED  TO  RISKS  RELATED  TO  ACQUISITIONS  AND  MERGERS

     As  part  of our strategy to commercialize our products, we may acquire one
or  more  businesses,  such  as a related company that would use our products in
clinical applications.  In June 1999, we consummated a business combination with
Advanced  Medical Procedures, LLC, a regional mobile cryosurgery service company
that provides our cryosurgical equipment for the treatment of prostate and liver
cancer  on  a procedural basis.  We may not be able to effectively integrate our
business  with  any  other  business we may acquire or merge with or effectively
utilize  the  business acquired to develop and market our products.  The failure
to  integrate  an  acquired  company  or acquired assets into our operations may
cause  a  drain  on  our  financial and managerial resources, and thereby have a
significant  negative  effect  on  our  business  and  financial  results.

     These  difficulties  could  disrupt  our  ongoing  business,  distract  our
management  and  employees  or increase our expenses.  Furthermore, any physical
expansion  in  facilities  due  to an acquisition may result in disruptions that
seriously impair our business.  We are not experienced in managing facilities or
operations  in geographically distant areas.  In addition, our profitability may
suffer  because of acquisition-related costs or amortization costs or impairment
of  acquired  goodwill and other intangible assets.  Finally, in connection with
any future acquisitions, we may incur debt or issue equity securities as part or
all of the consideration for the acquired company's assets or capital stock.  We
may be unable to obtain sufficient additional acquisition financing on favorable
terms  or  at  all.  In  addition,  equity  issuances  would  be dilutive to our
existing  stockholders.

OUR  COMMON  STOCK  HAS  A  LIMITED  MARKET  AND  TRADING  HISTORY

     If  we  fail  to  satisfy  the continued listing requirements of the Nasdaq
National Market or Nasdaq SmallCap Market, our stock could become subject to the
SEC's  Penny  Stock Rules, making the stock difficult to sell.  Our common stock
began trading on the Nasdaq SmallCap Market on February 28, 1997 and in May 2000
was  listed  and  is  currently traded on the Nasdaq National Market.  If we are
unable  to maintain the standards for quotation on the Nasdaq National Market or
the  Nasdaq SmallCap Market, the ability of our investors to resell their shares
may  be  limited.  In addition, our securities may be subjected to "penny stock"
rules  that  impose  additional sales practice and market making requirements on
broker-dealers  who sell or make a market in such securities.  This could affect
the  ability  or  willingness  of broker-dealers to sell or make a market in our
securities and the ability of holders of our securities to sell their securities
in  the  secondary  market.

OUR  STOCK  PRICE  MAY  FLUCTUATE  SIGNIFICANTLY

     Our  stock  price  has  in the past fluctuated and is likely to continue to
fluctuate  significantly,  making it difficult to resell shares when an investor
wants  to  at  prices they find attractive.  The market prices for securities of
emerging companies have historically been highly volatile.  Future announcements
concerning  us  or  our  competitors  could  cause  such  volatility  including
announcements  regarding:  our  operating  results, technological innovations or
new  commercial  products,  corporate collaborations, government and third party
reimbursement,  government  regulation,  developments  concerning  proprietary
rights,  litigation or public concern as to the safety of our products, investor
perception  of  us and our industry, and general economic and market conditions.
In  addition,  the stock market is subject to price and volume fluctuations that
affect  the  market  prices  for companies in general, and small-capitalization,
high  technology  companies  in  particular,  which  are  often unrelated to the
operating  performance  of  these  companies.  In addition, any failure by us to
meet  or  exceed estimates of financial analysts is likely to cause a decline in
our  common  stock  price.

THE  FUTURE  SALES OF SHARES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK
PRICE

     Future sales of our common stock (including shares issued upon the exercise
of outstanding options and warrants and the conversion of convertible debentures
or  hedging  or  other  derivative transactions with respect to our stock) could
have  a  significant  negative  effect  on the market price of our common stock.
Such sales also might make it more difficult for us to sell equity securities or
equity-related  securities  in the future at a time and price that we would deem
appropriate.


ANTI-TAKEOVER  PROVISIONS  IN OUR CHARTER MAY HAVE A POSSIBLE NEGATIVE EFFECT ON
OUR  STOCK  PRICE

     Certain  provisions of our Certificate of Incorporation and Bylaws may have
the  effect  of  making  it  more  difficult for a third party to acquire, or of
discouraging  a  third  party  from  attempting  to  acquire, control of us.  In
addition,  in  April  1999,  our board of directors adopted a stockholder rights
plan  in  which  preferred stock purchase rights were distributed as a dividend.
These  provisions  may  make  it more difficult for stockholders to take certain
corporation  actions  and may have the effect of delaying or preventing a change
in  control.  In  addition,  we  are  subject to the anti-takeover provisions of
Section  203  of  the  Delaware  General  Corporation Law.  Subject to specified
exceptions,  this  section  provides  that a corporation shall not engage in any
business  combination  with  any  interested  stockholder  during the three-year
period  following  the  time  that  such  stockholder  becomes  an  interested
stockholder.  This  provision  could have the effect of delaying or preventing a
change of control of Endocare.  The foregoing factors could limit the price that
certain investors might be willing to pay in the future for shares of our common
stock.

CALIFORNIA  ENERGY  CRISIS

     Our  headquarters  and  principal  operations are located in Orange County,
California.  California has recently found itself in a utility crisis caused, in
part,  by  a  lack  of affordable power sources and the financial instability of
several  of  its  primary  power suppliers.  Orange County has undergone several
periods  of  "rolling  blackouts,"  a  technique  used  by our power provider to
conserve  its  resources.  Although  our  operations  have  not been halted as a
result  of  these conservation measures, potential suspensions of our operations
due  to  power  disruptions  could  result  in  materially higher costs and lost
revenues,  either  of  which  would  materially  adversely  impact our business,
financial  condition  and  results  of  operations.


<PAGE>

ITEM  3.

                    QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                ABOUT MARKET RISK

Our  financial  instruments include cash, cash equivalents, notes receivable and
credit  facility  debentures.  At  June  30,  2001,  the  carrying values of our
financial  instruments  approximated  their  fair  values.

Our  policy  is  not  to enter into derivative financial instruments.  We do not
have any significant foreign currency exposure since we do not transact business
in  foreign  currencies.  Therefore, we do not have significant overall currency
exposure.  In  addition,  we  do not enter into any futures or forward contracts
and  therefore  we  do not have significant market risk exposure with respect to
commodity  prices.

<PAGE>

PART  II.  OTHER  INFORMATION

Item  1.   Legal  Proceedings

As previously reported, in March 2000, the Company filed two patent infringement
lawsuits against Israeli-based Galil Medical, Ltd, and its U.S. affiliate, Galil
Medical  USA,  Inc.  (collectively,  "Galil") in the U.S. District Court for the
Central  District  of California.  Additional developments were also reported in
our  first quarterly report for this fiscal year. In March 2001, the Company and
Galil reached a settlement.  In the settlement, Galil stipulated for purposes of
the  agreement  that the Company's patent combining cryo-cooling, ultrasound and
temperature  monitoring  technology  is  valid  and enforceable.  The settlement
resulted  in  certain  cross-licensing  agreements  between  Galil and Endocare.

In  the normal course of business, the Company is subject to various other legal
matters.   While  the  results of litigation and claims cannot be predicted with
certainty, the Company believes that the final outcome of these matters will not
have  a  material  adverse  effect  on its consolidated results of operations or
financial  condition.

Item  2.   Changes  in  Securities

In  June  2001, in connection with the hiring of John V. Cracchiolo as our Chief
Operating  Officer  and  Chief  Financial  Officer,  Mr.  Cracchiolo was granted
options  to  purchase  an  aggregate  of  350,000 shares of the Company's common
stock.  50,000 of such options were granted pursuant to the Company's 1995 Stock
Plan, and 300,000 of such options were granted outside of the Company's existing
stock  option  plans.  The  exercise  price  for  the  approximately  322,332
non-qualified stock options issued to Mr. Cracchiolo is $13.75, and the exercise
price  of  the approximately 27,688 incentive stock options is $14.00 per share.
The 300,000 option shares granted outside of the Company's existing stock option
plans  were  issued  in  a  private  transaction  exempt  from  the registration
requirements  of  the  Securities  Act  in  accordance  with Section 4(2) of the
Securities  Act.  Of  the  350,000  option shares granted, 300,000 of the option
shares  will  become  exercisable  in annual and monthly installments during Mr.
Cracchiolo's  continued  service  as an officer of the Company and the remaining
50,000  option  shares will vest upon the earlier of June 2006 or the attainment
of  performance  based  objectives

In  June  2001,  the Company issued 213,010 shares of its common stock valued at
$2,837,293  in  consideration  for a membership equal to approximately 5% of the
total  issued  and  outstanding  Class  A  Units  of U.S. Therapies, L.L.C. on a
fully-diluted  basis.  The  Company  issued  the shares in a private transaction
exempt  from  the  registration  requirements  of the Securities Act pursuant to
Regulation  D  promulgated  under  the Securities Act and/or Section 4(2) of the
Securities  Act.

Item  3.   Defaults  Upon  Senior  Securities

     Not  applicable.

Item  4.   Submission  of  Matters  to  a  Vote  of  Security  Holders

     The  Company's  Annual  Meeting  of  Stockholders was held on May 22, 2001.
Proposal  1,  submitted  to  a  vote  of security holders at the meeting was the
election  of Directors.  The following Directors, being all the Directors of the
Company,  were  elected  at  the meeting, with the total number of votes cast as
follows:

<TABLE>
<CAPTION>
                            BROKER
NAME                      VOTES FOR   VOTES AGAINST                   BROKER
                                       OR WITHHELD    ABSTENTIONS    NON-VOTES
<S>                       <C>         <C>             <C>           <C>
Paul W. Mikus. . . . . .  10,678,290     1,633,073            0          0
Peter F. Bernardoni. . .  12,293,991        17,372            0          0
Robert F. Byrnes . . . .  12,293,943        17,420            0          0
Benjamin Gerson, M.D.. .  12,294,143        17,220            0          0
Alan L. Kaganov, Sc.D. .  12,294,143        17,220            0          0
Michael J. Strauss, M.D.  12,294,143        17,220            0          0
</TABLE>


     Proposal  2, submitted to a vote of security holders at the meeting, was to
ratify  the  appointment  of  KPMG LLP as the Company's independent auditors for
fiscal  year  2001.  Votes  cast  were  as  follows:


  VOTES FOR    VOTES AGAINST     ABSTENTIONS    BROKER NON-VOTES

 12,222,786         83,979          4,558                 0


The  proposal  was  approved.

Item  5.     Other  Information

     Not  applicable.

Item  6.     Exhibits  and  Reports  on  Form  8-K

     (a)  Exhibits


Exhibit     Description


  3.1(1)    Certificate of Incorporation
  3.2(2)    Amended and Restated Bylaws
   10.1     Offer  letter  to  John  V.  Cracchiolo,  dated  June  11,  2001
   10.2     Compensation Agreement issued to John V. Cracchiolo dated
            June  25, 2001
   10.3*    Distribution  agreement  with  USMD,  ltd.,  dated  as  of
            June  27,  2001
     (1)    Previously  filed  with  amendment  number  1  to  the  Company's
            application  for  registration  on Form 10-SB filed with the SEC on
     (2)    Previously filed with
     (*)    Confidential  portions  of  this  exhibit  were omitted by means of
            marking such portins with an asterisk (the "Mark").


(b)  Reports  on  Form  8-K  --  None


<PAGE>
                               SIGNATURES


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

Date: August 13, 2001

                                        ENDOCARE,  INC.

                                   By:  /s/  Paul  W.  Mikus

                                        Paul  W.  Mikus
                                        Chief  Executive  Officer and  President
                                        (Duly  Authorized  Officer  )


                                   By:  /s/  John  V.  Cracchiolo

                                        John  V.  Cracchiolo
                                        Chief  Operating  Officer  and
                                        Chief  Financial  Officer
                                        (Principal  Financial  and
                                        Accounting  Officer)


<PAGE>