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<SEC-DOCUMENT>0000950123-06-014744.txt : 20061201
<SEC-HEADER>0000950123-06-014744.hdr.sgml : 20061201
<ACCEPTANCE-DATETIME>20061201111755
ACCESSION NUMBER:		0000950123-06-014744
CONFORMED SUBMISSION TYPE:	S-3
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20061201
DATE AS OF CHANGE:		20061201

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ELECTRO OPTICAL SCIENCES INC /NY
		CENTRAL INDEX KEY:			0001051514
		STANDARD INDUSTRIAL CLASSIFICATION:	SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]
		IRS NUMBER:				133986004

	FILING VALUES:
		FORM TYPE:		S-3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-139056
		FILM NUMBER:		061249987

	BUSINESS ADDRESS:	
		STREET 1:		3 WEST MAIN STREET, SUITE 201
		CITY:			IRVINGTON
		STATE:			NY
		ZIP:			10533
		BUSINESS PHONE:		914-591-3783

	MAIL ADDRESS:	
		STREET 1:		3 WEST MAIN STREET, SUITE 201
		CITY:			IRVINGTON
		STATE:			NY
		ZIP:			10533
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-3
<SEQUENCE>1
<FILENAME>y27678sv3.htm
<DESCRIPTION>FORM S-3
<TEXT>
<HTML>
<HEAD>
<TITLE>FORM S-3</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">As
filed with the Securities and Exchange Commission on December&nbsp;1, 2006</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: pt"><u><B>Registration No.&nbsp;333-</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
</DIV>


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM S-3</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>REGISTRATION STATEMENT UNDER SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>ELECTRO-OPTICAL SCIENCES, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B><BR>
(State or other jurisdiction of <BR>
incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>13-3986004</B><BR>
(I.R.S. Employer<BR>
Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>3 West Main Street, Suite&nbsp;201<BR>
Irvington, New York 10533<BR>
(914)&nbsp;591-3783</B></DIV>

<DIV align="center" style="font-size: 10pt">(Address, including zip code, and telephone number, including<BR>
area code, of Registrant&#146;s principal executive offices)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Joseph V. Gulfo, M.D.<BR>
President and Chief Executive Officer<BR>
Electro-Optical Sciences, Inc.<BR>
3 West Main Street, Suite&nbsp;201<BR>
Irvington, New York 10533<BR>
(914)&nbsp;591-3783</B></DIV>

<DIV align="center" style="font-size: 10pt">(Name, address, including zip code, and telephone number,<BR>
including area code, of agent for service)</DIV>


<DIV align="center" style="font-size: 10pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Copy To:</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Valerie A. Price, Esq.<BR>
Dreier LLP<BR>
499 Park Avenue<BR>
New York, New York 10022<BR>
(212)&nbsp;328-6100</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Approximate date of commencement of proposed sale to the public</B>: From time to time after the
effective date of this registration statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following box.&nbsp;<FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is a registration statement pursuant to general Instruction I.D. or a post-effective
amendment thereto that shall become effective upon filing with the commission pursuant to Rule
462(e) under the Securities Act, check the following box,&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is a post-effective amendment to a registration statement filed pursuant to General
Instruction I.D. filed to register additional securities or additional classes of securities
pursuant to Rule 413(b) under the Securities Act, check the following box.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->

    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->

    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->

    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->

    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-bottom: 3px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>Title of each class of</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount to be</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed maximum aggregate</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed maximum</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount of</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>securities to be registered</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>registered (1)</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>offering price per share (2)</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>aggregate offering price</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>registration fee</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
                  <TD valign="top" style="border-top: 2px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">Common stock, par value $0.001 per share
</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 2px solid #000000">2,659,241</TD>
    <TD nowrap valign="top" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top" style="border-top: 2px solid #000000">$</TD>

<TD align="right" valign="top" style="border-top: 2px solid #000000">7.30</TD>
    <TD nowrap valign="top" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top" style="border-top: 2px solid #000000">$</TD>

<TD align="right" valign="top" style="border-top: 2px solid #000000">19,412,459</TD>
    <TD nowrap valign="top" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" valign="top" style="border-top: 2px solid #000000">2,077.13</TD>
    <TD nowrap valign="top" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 346,857 shares of common stock that are issuable upon exercise of outstanding
warrants. Pursuant to Rule 416(a) under the Securities Act of 1933, this registration
statement shall also cover any additional shares of our common stock that may be issued by
reason of any stock split, stock dividend or similar transaction.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c)
of the Securities Act of 1933 based upon the average of the high and low prices of our common
stock as reported by the Nasdaq Capital Market on November&nbsp;29, 2006.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The Registrant hereby amends this registration statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Securities and Exchange Commission, acting pursuant to
said Section&nbsp;8(a), may determine.</B>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>







<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>The information in this prospectus is not complete and may be changed. The selling stockholders
named in this prospectus may not sell the securities under this prospectus until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities, and it is not soliciting an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted.</I></B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>SUBJECT
TO COMPLETION, DATED, December&nbsp;1, 2006</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">PRELIMINARY PROSPECTUS
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I><IMG src="y27678eoslogo.gif" alt="(EOS LOGO)"></I></B>
</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">2,659,241 <B><I>Shares of Common Stock</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
stockholders identified in this prospectus are offering for sale from
time to time up to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2,312,384 shares of our common stock; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>346,857 shares of our common stock that are issuable upon exercise of outstanding warrants.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
November&nbsp;3, 2006, we sold to the stockholders identified in this
prospectus an aggregate of 2,312,384
shares of our common stock and warrants to purchase 346,857 shares of our common stock at an
exercise price of $6.70 per share, subject to adjustment, in a transaction exempt from the
registration requirements of the Securities Act of 1933, as amended. The exercise price and number
of shares of common stock issuable upon exercise of the warrants may be adjusted in the event we
effect any stock split, stock dividend or similar transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are not selling any shares of our common stock under this prospectus and will not receive
any of the proceeds from the resale of the shares of the selling stockholders, except that we will
receive the exercise price payable in connection with exercises of the warrants if the warrants are
exercised for cash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is listed on the Nasdaq Capital Market under the symbol &#147;MELA.&#148; On November
29, 2006, the last reported sale price of our common stock, as reported on the Nasdaq Capital
Market, was $7.35 per share.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE &#147;RISK FACTORS&#148; BEGINNING ON
PAGE 2, AS WELL AS THE RISKS DISCUSSED UNDER THE CAPTION &#147;RISK
FACTORS</I></B><I>&#148;</I><B><I> IN DOCUMENTS WE
SUBSEQUENTLY FILE WITH THE SECURITIES AND EXCHANGE COMMISSION.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The
date of this prospectus is December&nbsp;1, 2006
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101"><B>COMPANY
OVERVIEW</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">3</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102"><B>RISK FACTORS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">3</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">21</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104"><B>USE OF PROCEEDS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">22</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105"><B>SELLING STOCKHOLDERS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">22</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106"><B>LEGAL MATTERS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">26</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107"><B>EXPERTS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">26</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108"><B>WHERE YOU CAN FIND MORE INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" colspan="2" valign="top">26</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y27678exv5w1.htm">EX-5.1: OPINION OF DREIER LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y27678exv23w2.htm">EX-23.2: CONSENT OF EISNER LLP</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ABOUT THIS PROSPECTUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this prospectus, unless we indicate otherwise, &#147;we,&#148; &#147;us,&#148;, &#147;our&#148; and &#147;EOS&#148; refer to
Electro-Optical Sciences, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should rely only on the information provided or incorporated by reference in this
prospectus or any prospectus supplement. Neither we nor the selling stockholders have authorized
anyone to provide you with additional or different information. The selling stockholders are not
making an offer of these securities in any jurisdiction where the offer is not permitted. You
should assume that the information in this prospectus and any prospectus supplement is accurate
only as of the date on the front of the document and that information incorporated by reference in
this prospectus or any prospectus supplement is accurate only as of the date of the document
incorporated by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated in the State of New York in 1989 and subsequently reincorporated under
the laws of the State of Delaware in 1997. Our executive offices are located at 3 West Main
Street, Suite&nbsp;201, Irvington, New York 10533. Our telephone number is (914)&nbsp;591-3783. Our
websites include www.eo-sciences.com and www.melafind.com. The information contained on our
websites is not a part of this prospectus and should not be relied upon. We have included our
website addresses in this document as inactive textual references only.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus contains references to our US registered trademarks: MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>,
DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and the corporate logo for &#147;eos &#151; electro-optical sciences, inc.<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>&#148;
All other trademarks, tradenames and service marks appearing in this prospectus are the property of
their respective owners.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>COMPANY OVERVIEW</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>We are a medical device company focused on the design and development of a non-invasive,
point-of-care instrument to assist in the early diagnosis of melanoma. Our flagship product,
MelaFind</I><SUP style="font-size: 85%; vertical-align: text-top"><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></SUP><I>, features a hand-held imaging device that emits multiple wavelengths of light
to capture images of suspicious pigmented skin lesions and extract data. The data are then analyzed
against our proprietary database of melanomas and benign lesions using sophisticated algorithms in
order to provide information to the physician and produce a recommendation of whether the lesion
should be biopsied.</I>
</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>RISK FACTORS</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Investing in our common stock involves a high degree of risk. You should carefully consider
the following risk factors, as well as the other information contained in this prospectus and in
documents that are incorporated by reference into this prospectus. If any of the following risks
actually occur, our business, financial condition and results of operations would suffer. In that
case, the trading price of our common stock would likely decline and you might lose all or part of
your investment in our common stock.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We currently do not have, and may never develop, any commercialized products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently do not have any commercialized products or any significant source of revenue. We
have invested substantially all of our time and resources over the last five years in developing
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> will require additional development, clinical
evaluation, regulatory approval, significant marketing efforts and substantial additional
investment before it can provide us with any revenue. Our efforts may not lead to commercially
successful products for a number of reasons, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may not be able to obtain regulatory approvals for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, or the
approved indication may be narrower than we seek;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> may not prove to be safe and effective in clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>physicians may not receive any reimbursement from third-party payors, or the level
of reimbursement may be insufficient to support widespread adoption of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may experience delays in our development program;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any products that are approved may not be accepted in the marketplace by physicians or patients;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may not have adequate financial or other resources to complete the development or
to commence the commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and we will not have adequate
financial or other resources to achieve significant commercialization of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may not be able to manufacture our products in commercial quantities or at an acceptable cost; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>rapid technological change may make our technology and products obsolete.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not expect to be able to commercialize MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> before the end of 2007. If
we are unable to develop, obtain regulatory approval for or successfully commercialize
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, we will be unable to generate revenue.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We have not received, and may never receive, FDA approval to market MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have the necessary regulatory approvals to market MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the US or
in any foreign market. We have not filed, and currently do not have plans to file, for regulatory
approval in any foreign market. We plan initially to launch MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, once approved, in
the US. The regulatory approval process for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the US involves, among other
things, successfully completing clinical trials and obtaining pre-market approval (PMA)&nbsp;from the
Food and Drug Administration (FDA). We commenced the PMA application process for
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> by filing a proposed outline for a Modular PMA
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">application (a compilation of well-delineated components submitted separately) on September
30, 2002. The PMA process requires us to prove the safety and effectiveness of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
to the FDA&#146;s satisfaction. This process is expensive and uncertain, and requires detailed and
comprehensive scientific and human clinical data. FDA review may take years after a PMA application
is filed. The FDA may never grant approval. The FDA can delay, limit or deny approval of a PMA
application for many reasons, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> may not be safe or effective to the FDA&#146;s satisfaction;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the data from our pre-clinical studies and clinical trials may be insufficient to support approval;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the manufacturing process or facilities we use may not meet applicable requirements; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in FDA approval policies or adoption of new regulations may require additional data.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No precedent has been established for FDA approval of a device such as MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> to
assist in determining the appropriateness of biopsies of suspicious pigmented skin lesions. Before
submitting a PMA application (the final module), we must successfully complete a pivotal clinical
trial to demonstrate that MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is safe and effective. Product development, including clinical
trials, is a long, expensive and uncertain process, and is subject to delays and failure at any
stage. Furthermore, the data obtained from the trial may be inadequate to support approval of a PMA
application. While we obtained a Protocol Agreement from the FDA, FDA approval of a Protocol
Agreement does not mean that the FDA will consider the data gathered in the trial sufficient to
support approval of a PMA application, even if the trial&#146;s intended endpoints are achieved. There
may be unexpected findings, particularly those that may only become evident from the larger scale
of the pivotal clinical trial, as compared with the smaller scale tests done to date. For example,
we initiated a clinical trial and encountered several technical problems which required us to
refine the MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> system. The data obtained in the pivotal trial may not be
sufficient to support the anticipated indication for use, and may not support a more limited
indication for use. The occurrence of unexpected findings in connection with the pivotal trial or
any subsequent clinical trial required by the FDA may prevent or delay obtaining PMA approval, and
may adversely affect coverage or reimbursement determinations. The FDA may also determine that
additional clinical trials are necessary, in which case the PMA approval may be delayed for several
months or even years while the trials are conducted and the data acquired are submitted in an
amendment to the PMA. If we are unable to complete the clinical trials necessary to successfully
support the MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> PMA application, our ability to commercialize
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and our business, financial condition, and results of operations would be
materially adversely affected, thereby threatening our ability to continue operations. On October
12, 2006 we announced that the FDA had informed us that when submitted the MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> PMA
application would receive expedited review. Expedited review means that upon filing a PMA
application with the FDA, it is placed at the beginning of the FDA&#146;s review queue and receives
additional review resources. While the expedited review could shorten the MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> FDA
approval process, we can give no assurances that this will be the case.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> <B><I>is approved by the FDA, it may be approved only for narrow indications.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even if approved, MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> may not be approved for the indications that are
necessary or desirable for successful commercialization. Our preference is to obtain a broad
indication for use in assisting in the diagnosis of almost all pigmented melanomas (other than
those on palms, soles of the feet, in or near the eye, and inaccessible areas such as the edge of
the nose). The final MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> lesion classifier may be able to identify the maximum
number of types of melanoma possible. The indications for use must specify those lesion types for
which the classifier has not been trained. Approximately five percent of melanoma lesions may be
amelanotic, meaning they are not pigmented. These lesions cannot be differentiated by
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, which will be restricted to pigmented lesions. Approximately ten percent of
pigmented melanoma lesions are nodular, a type of melanoma that is often missed by dermatologists
in early stages. If nodular melanoma lesions are not sufficiently well-represented in the
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> training database, the classifier may not differentiate nodular melanomas from
non-melanomas with sufficient sensitivity and specificity. If we restrict the indications for use
of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> to exclude certain melanoma lesion types, in addition to the other
restrictions, then the size of the market for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and the rate of acceptance of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> by physicians may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we wish to modify MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> after receiving FDA approval, including changes in
indications or other modifications that could affect safety and effectiveness, additional approvals
could be required from the FDA. We may be required to submit extensive pre-clinical and clinical
data, depending on the nature of the changes. Any request by the FDA for
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">additional data, or any requirement by the FDA that we conduct additional clinical studies,
could delay the commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and require us to make substantial
additional research, development and other expenditures. We may not obtain the necessary regulatory
approvals to market MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the US or anywhere else. Any delay in, or failure to
receive or maintain, approval for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> could prevent us from generating revenue or
achieving profitability, and our business, financial condition, and results of operations would be
materially adversely affected.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> <B><I>may not be commercially viable if we fail to obtain an adequate level of
reimbursement by Medicare and other third party payors. The markets for MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> <B><I>may
also be limited by the indications for which its use may be reimbursed.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The availability of medical insurance coverage and reimbursement for newly approved medical
devices is uncertain. In the US, physicians and other healthcare providers performing biopsies for
suspicious skin lesions are generally reimbursed for all or part of the cost of the diagnosis and
biopsy by Medicare, Medicaid, or other third-party payors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The commercial success of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in both domestic and international markets will
significantly depend on whether third-party coverage and reimbursement are available for services
involving MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Medicare, Medicaid, health maintenance organizations and other
third-party payors are increasingly attempting to contain healthcare costs by limiting both the
scope of coverage and the level of reimbursement of new medical devices, and as a result, they may
not cover or provide adequate payment for the use of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. In order to obtain
satisfactory reimbursement arrangements, we may have to agree to a fee or sales price lower than
the fee or sales price we might otherwise charge. Even if Medicare and other third-party payors
decide to cover procedures involving our product, we cannot be certain that the reimbursement
levels will be adequate. Accordingly, even if MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> or future products we develop
are approved for commercial sale, unless government and other third-party payors provide adequate
coverage and reimbursement for our products, some physicians may be discouraged from using them,
and our sales would suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Medicare reimburses for medical devices in a variety of ways, depending on where and how the
device is used. However, Medicare only provides reimbursement if the Centers for Medicare and
Medicaid Services (CMS)&nbsp;determines that the device should be covered and that the use of the device
is consistent with the coverage criteria. A coverage determination can be made at the local level
by the Medicare administrative contractor (formerly called carriers and fiscal intermediaries), a
private contractor that processes and pays claims on behalf of CMS for the geographic area where
the services were rendered, or at the national level by CMS through a national coverage
determination. There are new statutory provisions intended to facilitate coverage determinations
for new technologies, but it is unclear how these new provisions will be implemented. Coverage
presupposes that the device has been cleared or approved by the FDA and further, that the coverage
will be no broader than the approved intended uses of the device as approved or cleared by the FDA,
but coverage can be narrower. A coverage determination may be so limited that relatively few
patients will qualify for a covered use of the device. Should a very narrow coverage determination
be made for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, it may undermine the commercial viability of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Obtaining a coverage determination, whether local or national, is a time-consuming, expensive
and highly uncertain proposition, especially for a new technology, and inconsistent local
determinations are possible. On average, according to an industry report, Medicare coverage
determinations for medical devices lag 15&nbsp;months to five years or more behind FDA approval for that
device. The Medicare statutory framework is also subject to administrative rulings, interpretations
and discretion that affect the amount and timing of reimbursement made under Medicare. Medicaid
coverage determinations and reimbursement levels are determined on a state by state basis, because
Medicaid, unlike Medicare, is administered by the states under a state plan filed with the
Secretary of the US Department of Health and Human Services (HHS). Medicaid generally reimburses at
lower levels than Medicare. Moreover, Medicaid programs and private insurers are frequently
influenced by Medicare coverage determinations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Any adverse results in our clinical trials, or difficulties in conducting our clinical trials,
could have a material adverse effect on our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical studies in the US have been ongoing for over five years, and we have a Protocol
Agreement with the FDA, but we have not conducted the pivotal clinical trial required for PMA
approval. We initiated a trial under the terms of the Protocol Agreement at the end of 2004.
However, technical operational issues with the systems were experienced, requiring further
refinement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are currently refining the hardware systems and expect to have new systems available in
order to start the pivotal clinical trial in 2006. However, we cannot provide any assurances that
we will have these systems available on a timely basis.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, the pivotal clinical trial and supporting clinical studies will require the
involvement of larger numbers of clinical sites than we have previously engaged at any single time
and the recruitment of large numbers of patients. If the clinical sites, which enroll patients on a
best efforts basis, do not provide cases at rates anticipated for any reason (such as, for example,
lower than forecasted clinical site productivity), we may face delays or may be unable to complete
the development of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Risk of delay in product development.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We could encounter delays in our pivotal trial or in obtaining PMA approval because of a
number of factors. We will require the receipt of all information specified in our Protocol
Agreement on the required number of melanomas before the pivotal clinical trial can be concluded.
The MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> classifier will then be utilized to evaluate the lesions acquired during
the pivotal trial, and the results will be analyzed to determine if we have achieved the endpoints
specified in the Protocol Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The final training of the classifier, required to be completed before the classifier is
utilized as described above, is expected to take approximately two months. Accordingly, the
classifier must be ready for final training two months before the end of the pivotal trial. For the
classifier to be ready for final training, approximately 300 melanoma lesions are targeted to have
been received. Therefore, in addition to acquiring the melanoma lesions required to complete the
pivotal trial (approximately 100), we must have completed the acquisition of approximately 300
training melanoma lesions on schedule. Currently, approximately 275 melanoma lesions are in the
training database. The current classifier has been trained on 221 of these melanoma lesions. Our
schedule for the acquisition of these lesions is based upon the projected numbers of imaging
devices to be located at participating sites, the projected productivity of those sites in terms of
melanomas and other lesions biopsied per month, and the projected efficiency of the study
pathologists in classifying the lesion slides presented for histological analysis (the microscopic
examination of excised or biopsied tissue specimens) and reporting their results. If we are unable
to produce and maintain a sufficient number of imaging devices at participating sites, if the
clinicians do not maintain sufficient productivity, or if the pathologists do not produce reports
with sufficient efficiency, then our ability to maintain our schedule will be adversely affected,
the start or conclusion of the pivotal trial may be delayed, and the submission of the completed
PMA will be delayed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, the lesion images in the training database have been acquired using first-generation
hand-held devices, which also extract data from the lesions that are used by the classifiers.
Pre-commercialization hand-held devices are being developed for use in the pivotal trial. If the
lesion data obtained with pre-commercialization devices are not consistent with data from the first
generation hand-held devices, the classifier will need to be trained solely on lesions imaged using
only one or the other generation of hand-held devices. Were this need to arise, significant delay
and expense could be incurred, which could jeopardize our ability to complete the development of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We have incurred losses for a number of years, and anticipate that we will incur continued losses
for the foreseeable future.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We began operations in December&nbsp;1989. At that time we provided research services, mostly to US
government agencies, on classified projects. We have financed our operations since 1999 primarily
through the sale of our equity securities, and have devoted substantially all of our resources to
research and development relating to MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Our net loss for the nine months ended
September&nbsp;30, 2006 was $8.2&nbsp;million, and as of September&nbsp;30, 2006, we had an accumulated deficit of
approximately $28.9&nbsp;million. We expect our research and development expenses to increase in
connection with our clinical trials and other development activities related to
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. If we receive PMA approval for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> from the FDA, we expect
to incur significant sales and marketing expenses, which will require additional funding, and
manufacturing expenses. Additionally, our general and administrative expenses have increased due to
the additional operational and regulatory responsibilities applicable to public companies. As a
result, we expect to continue to incur significant and increasing operating losses for the
foreseeable future. These losses, among other things, have had and will continue to have an adverse
effect on our stockholders&#146; equity.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We expect to operate in a highly competitive market, we may face competition from large,
well-established medical device manufacturers with significant resources, and we may not be able to
compete effectively.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not know of any product possessing the diagnostic assistance capabilities of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. We believe that electro-optical products designed to enhance the
visualization and analysis of potential melanomas have been approved or are under development by:
Welch Allyn, Inc.; Heine Optotechnik; 3Gen, LLC; Derma Medical Systems, Inc.; Medical High
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Technologies S.p.A.; ZN Vision Technologies AG; Polartechnics, Ltd.; Astron Clinica, Ltd.;
LINOS Photonics, Inc.; Biomips Engineering and Sci.Base, AB. The broader market for precision
optical imaging devices used for medical diagnosis is intensely competitive, subject to rapid
change, and significantly affected by new product introductions and other market activities of
industry participants. If our products are approved for marketing, we will potentially be subject
to competition from major optical imaging companies, such as: General Electric Co.; Siemens AG;
Bayer AG; Eastman Kodak Company; Welch Allyn, Inc.; Olympus Corporation; Carl Zeiss AG Deutschland;
and others, each of which manufactures and markets precision optical imaging products for the
medical market, and could decide to develop or acquire a product to compete with
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. These companies enjoy numerous competitive advantages, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>significantly greater name recognition;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>established relations with healthcare professionals, customers and third-party payors;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>established distribution networks;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>additional lines of products, and the ability to offer rebates, higher discounts or
incentives to gain a competitive advantage;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>greater experience in conducting research and development, manufacturing, clinical
trials, obtaining regulatory approval for products, and marketing approved products;
and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>greater financial and human resources for product development, sales and marketing,
and patent litigation.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result, we may not be able to compete effectively against these companies or their products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Technological breakthroughs in the diagnosis or treatment of melanoma could render
MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> <B><I>obsolete.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The precision optical imaging field is subject to rapid technological change and product
innovation. MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is based on our proprietary technology, but a number of companies
and medical researchers are pursuing new technologies. Companies in the medical device industry
with significantly greater financial, technical, research, marketing, sales and distribution and
other resources have expertise and interest in the exploitation of computer-aided diagnosis,
medical imaging, and other technologies MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> utilizes. Some of these companies are
working on potentially competing products or therapies, including confocal microscopy (a type of
scanning microscopy for 3-dimensional specimens, which produces blur-free images at various
depths), various forms of spectroscopy (a study of the way molecules absorb and emit light), other
imaging modalities, including molecular imaging in which tagged antibodies search for cancer cell
antigens, and molecular and genetic screening tests. In addition, the National Institutes of Health
and other supporters of cancer research are presumptively seeking ways to improve the diagnosis or
treatment of melanoma by sponsoring corporate and academic research. There can be no assurance that
one or more of these companies will not succeed in developing or marketing technologies and
products or services that demonstrate better safety or effectiveness, superior clinical results,
greater ease of use or lower cost than MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, or that such competitors will not
succeed in obtaining regulatory approval for introducing or commercializing any such products or
services prior to us. FDA approval of a commercially viable alternative to MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
produced by a competitor could significantly reduce market acceptance of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Any
of the above competitive developments could have a material adverse effect on our business,
financial condition, and results of operations. There is no assurance that products, services, or
technologies introduced prior to or subsequent to the commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
will not render MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> less marketable or obsolete.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We depend on clinical investigators and clinical sites to enroll patients in our clinical trials
and other third parties to manage the trials and to perform related data collection and analysis,
and, as a result, we may face costs and delays that are outside of our control.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on clinical investigators and clinical sites, some of which are private practices, and
some of which are research university or government-affiliated, to enroll patients in our clinical
trials. We rely on: pathologists and pathology laboratories; a contract research organization to
assist in monitoring, collection of data, and ensuring FDA Good Clinical Practices (GCP)&nbsp;are
observed at our sites; a consultant biostatistician; and other third parties to manage the trial
and to perform related data collection and analysis. However, we may not be able to control the
amount and timing of resources that clinical sites and other third parties may devote to our
clinical trials. If these clinical investigators and clinical sites fail to enroll a
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">sufficient number of patients in our clinical trials, or if the clinical sites fail to comply
adequately with the clinical protocols, we will be unable to complete these trials, which could
prevent us from obtaining regulatory approvals for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Our agreements with
clinical investigators and clinical sites for clinical testing place substantial responsibilities
on these parties and, if these parties fail to perform as expected, our trials could be delayed or
terminated. If these clinical investigators, clinical sites or other third parties do not carry out
their contractual duties or obligations or fail to meet expected deadlines, or if the quality or
accuracy of the clinical data they obtain are compromised due to their failure to adhere to our
clinical protocols or for other reasons, our clinical trials may be extended, delayed or
terminated, and we may be unable to obtain regulatory approval for, or successfully commercialize,
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the foregoing, our clinical trial may be delayed or halted, or be inadequate to
support approval of a PMA application, for numerous other reasons, including, but not limited to,
the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the FDA, an Institutional Review Board (IRB)&nbsp;or other regulatory authorities place our clinical trial on hold;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>patients do not enroll in clinical trials at the rate we expect;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>patient follow-up is not at the rate we expect;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IRBs and third-party clinical investigators delay or reject our trial protocol;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>third-party organizations do not perform data collection and analysis in a timely or accurate manner;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory inspections of our clinical trials or manufacturing facilities, among
other things, require us to undertake corrective action or suspend or terminate our
clinical trials, or invalidate our clinical trials;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in governmental regulations or administrative actions; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or effectiveness.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> <B><I>is approved for reimbursement, we anticipate experiencing significant
pressures on pricing.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even if Medicare covers a device for certain uses, that does not mean that the level of
reimbursement will be sufficient for commercial success. We expect to experience pricing pressures
in connection with the commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and our future products due to
efforts by private and government-funded payors to reduce or limit the growth of healthcare costs,
the increasing influence of health maintenance organizations, and additional legislative proposals
to reduce or limit increases in public funding for healthcare services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Private payors, including managed care payors, increasingly are demanding discounted fee
structures and the assumption by healthcare providers of all or a portion of the financial risk.
Efforts to impose greater discounts and more stringent cost controls upon healthcare providers by
private and public payors are expected to continue. Payors frequently review their coverage
policies for existing and new diagnostic tools and can, sometimes without advance notice, deny or
change their coverage policies. Significant limits on the scope of services covered or on
reimbursement rates and fees on those services that are covered could have a material adverse
effect on our ability to commercialize MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and therefore, on our liquidity and our
business, financial condition, and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In some foreign markets, which we may seek to enter in the future, pricing and profitability
of medical devices are subject to government control. In the US, we expect that there will continue
to be federal and state proposals for similar controls. Also, the trends toward managed healthcare
in the US and proposed legislation intended to control the cost of publicly funded healthcare
programs could significantly influence the purchase of healthcare services and products, and may
force us to reduce prices for MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>or result in the exclusion of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> from reimbursement programs.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> <B><I>may never achieve market acceptance even if we obtain regulatory approvals.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, only those patients who were treated by physicians involved in our clinical trials
have been evaluated using MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and even if we obtain regulatory approval, patients
with suspicious lesions and physicians evaluating suspicious
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">lesions may not endorse MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Physicians tend to be slow to change their
diagnostic and medical treatment practices because of perceived liability risks arising from the
use of new products and the uncertainty of third party reimbursement. Physicians may not utilize
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> until there is long-term clinical evidence to convince them to alter their
existing methods of diagnosing or evaluating suspicious lesions and there are recommendations from
prominent physicians that MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is effective. We cannot predict the speed at which physicians
may adopt the use of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. If MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> receives the appropriate
regulatory approvals but does not achieve an adequate level of acceptance by patients, physicians
and healthcare payors, we may not generate significant product revenue and we may not become
profitable. The degree of market acceptance of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> will depend on a number of
factors, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>perceived effectiveness of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>convenience of use;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cost of use of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>availability and adequacy of third-party coverage or reimbursement;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approved indications and product labeling;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>publicity concerning MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>or competitive products;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potential advantages over alternative diagnostic methodologies;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>introduction and acceptance of competing products or technologies; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>extent and success of our sales, marketing and distribution efforts.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The identification and screening of melanomas is now dominated by visual clinical evaluation,
with a minority of dermatologists using dermoscopy. Even if MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>proves to be as
effective as visual inspection by an expert dermatologist, and if all approvals are obtained, the
success of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>will depend upon the acceptance by dermatologists and other
physicians who perform skin examinations and treat skin disorders, including industry opinion
leaders, that the diagnostic information provided by MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is medically useful and
reliable. We will be subject to intense scrutiny before physicians will be comfortable
incorporating MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in their diagnostic approaches. We believe that recommendations
by respected physicians will be essential for the development and successful marketing of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and there can be no assurance that any such recommendations will be obtained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, the medical community outside the limited circle of certain dermatologists
specializing in melanoma has had little exposure to us and MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Because the
medical community is often skeptical of new companies and new technologies, we may be unable to
gain access to potential customers in order to demonstrate the operation and effectiveness of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Even if we gain access to potential customers, no assurance can be given that
members of the dermatological, or later the general practice, medical community will perceive a
need for or accept MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. In particular, given the potentially fatal consequences of
failing to detect melanoma at the early, curable stages, practitioners may remain reluctant to rely
upon MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> even after we receive approval from the FDA for marketing the product.
Any of the foregoing factors, or other currently unforeseen factors, could limit or detract from
market acceptance of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Insufficient market acceptance of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
would have a material adverse effect on our business, financial condition and results of
operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be unable to complete the development and commence commercialization of MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
</SUP><B><I>or other products without additional funding and we will not be able to achieve significant
commercialization without additional funding.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations have consumed substantial amounts of cash for each of the last six years. We
currently believe that our available cash, cash equivalents and marketable securities, including
the proceeds from our recently completed October&nbsp;31, 2006 financing and our 2005 initial public
offering, will be sufficient to fund our anticipated levels of operations through mid 2008.
However, our business or operations may change in a manner that would consume available resources
more rapidly than we anticipate. We expect to continue to spend substantial amounts on research and
development, including conducting a clinical trial for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. We will need
additional funds to fully commercialize the product, including development of a direct sales force
and expansion of manufacturing capacity. We expect that our cash used by operations will increase
significantly in each of the next several years, and should we encounter any material delays or
impediments, we may need additional funds to complete the development of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and
commence commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and we will need additional funds to achieve significant
commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Any additional financing may be dilutive to
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">stockholders, or may require us to grant a lender a security interest in our assets. The
amount of funding we will need will depend on many factors, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the schedule, costs, and results of our clinical trials;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the success of our research and development efforts;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs and timing of regulatory approval;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reimbursement amounts for the use of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> that we are able to obtain
from Medicare and third party payors, or the amount of direct payments we are able to
obtain from patients and/or physicians utilizing MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost of commercialization activities, including product marketing and building a
domestic direct sales force;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the emergence of competing or complementary technological developments;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs of filing prosecuting, defending and enforcing any patent claims and other
rights, including litigation costs and the results of such litigation;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs involved in defending any patent infringement actions brought against us
by third parties; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to establish and maintain any collaborative, licensing or other
arrangements, and the terms and timing of any such arrangements.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional financing may not be available to us when we need it, or it may not be available on
favorable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are unable to obtain adequate financing on a timely basis, we may be required to
significantly curtail or cease one or more of our development and marketing programs. We could be
required to seek funds through arrangements with collaborators or others that may require us to
relinquish rights to some of our technologies, product candidates or products that we would
otherwise pursue on our own. We also may have to reduce marketing, customer support and other
resources devoted to our products. If we raise additional funds by issuing equity securities, our
then-existing stockholders will experience ownership dilution, could experience declines in our
share price and the terms of any new equity securities may have preferences over our common stock.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are unable to establish sales, marketing and distribution capabilities or enter into and
maintain arrangements with third parties to sell, market and distribute MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP><B><I>, our
business may be harmed.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have a sales organization, and have no experience as a company in the marketing and
distribution of devices such as MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. To achieve commercial success for
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, we must develop a sales and marketing force and enter into arrangements with
others to market and sell our products. Following product approval, we currently plan to establish
a small direct sales force to market MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the US, focused on introducing it at
high volume dermatologists&#146; offices and training their staff in its use, but we have not made any
final determinations regarding the use of a particular marketing channel. We anticipate that we
will need additional funds in order to implement this marketing plan. In addition to being
expensive, developing such a sales force is time consuming, and could delay or limit the success of
any product launch. We may not be able to develop this capacity on a timely basis or at all.
Qualified direct sales personnel with experience in the medical device market are in high demand,
and there is no assurance that we will be able to hire or retain an effective direct sales team.
Similarly, qualified, independent medical device representatives both within and outside the US are
in high demand, and we may not be able to build an effective network for the distribution of our
product through such representatives. We have no assurance that we will be able to enter into
contracts with representatives on terms acceptable or reasonable to us. Similarly, there is no
assurance that we will be able to build an alternate distribution framework, should we attempt to
do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will need to contract with third parties in order to sell and install our products in
larger markets, including non-specialist dermatologists and primary care physicians. To the extent
that we enter into arrangements with third parties to perform marketing and distribution services
in the US, our product revenue could be lower and our costs higher than if we directly marketed
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Furthermore, to the extent that we enter into co-promotion or other marketing
and sales
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">arrangements with other companies, any revenue received will depend on the skills and efforts
of others, and we do not know whether these efforts will be successful. If we are unable to
establish and maintain adequate sales, marketing and distribution capabilities, independently or
with others, we will not be able to generate product revenue, and may not become profitable.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We have limited manufacturing capabilities and manufacturing personnel, and if our manufacturing
capabilities are insufficient to produce an adequate supply of MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP><B><I>, our growth
could be limited and our business could be harmed.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not yet completed the development and testing of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and as a result
have no experience in manufacturing MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> for commercial distribution. We currently
have limited resources, facilities and experience to commercially manufacture MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
In order to produce MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the quantities we anticipate to meet market demand, we
will need to increase our third-party manufacturing capacity. There are technical challenges to
increasing manufacturing capacity, including equipment design and automation, material procurement,
problems with production yields, and quality control and assurance. Developing commercial-scale
manufacturing facilities that meet FDA requirements would require the investment of substantial
additional funds and the hiring and retaining of additional management and technical personnel who
have the necessary manufacturing experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently plan to outsource certain production aspects to contract manufacturers. Any
difficulties in the ability of third-party manufacturers to supply devices of the quality, at the
times, and in the quantities we need, could have a material adverse effect on our business,
financial condition, and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Similarly, when we enter into contracts for the third-party manufacture of our devices, any
revenue received will depend on the skills and efforts of others, and we do not know whether these
efforts will be successful. Manufacturers often encounter difficulties in scaling up production of
new products, including problems involving product yields, controlling and anticipating product
costs, quality control and assurance, component supply, and shortages of qualified personnel. We
cannot assure you that the third-party contract manufacturers with whom we are developing
relationships will have or sustain the ability to produce the quantities of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
</SUP>needed for development or commercial sales, or will be willing to do so at prices that allow
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> to compete successfully in the market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assuming that MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> receives regulatory approval, if we are unable to
manufacture or obtain a sufficient supply of product, maintain control over expenses, or otherwise
adapt to anticipated growth, or if we underestimate growth, we may not have the capability to
satisfy market demand, and our business will suffer. Additionally, if MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> receives
regulatory approval and we then need to make manufacturing changes, we may need to obtain
additional approval for these changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is complex and may contain undetected design defects and errors when
first introduced, or errors that may be introduced when enhancements are released. Such defects and
errors may occur despite our testing and may not be discovered until after our devices have been
shipped to and used by our customers. The existence of these defects and errors could result in
costly repairs, returns of devices, diversion of development resources and damage to our reputation
in the marketplace. Any of these conditions could have a material adverse impact on our business,
financial condition and results of operations. In addition, when we contract with third-party
manufacturers for the production of our products, these manufacturers may inadvertently produce
devices that vary from devices we have produced in unpredictable ways that cause adverse
consequences.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our manufacturing operations are dependent upon third-party suppliers, making us vulnerable to
supply problems and price fluctuations, which could harm our business. We anticipate contracting
for final device assembly and integration, but no contract for such services on a commercial basis
has yet been procured.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing efforts currently rely on FillFactory, a subsidiary of Cypress Semiconductor
Corp., to manufacture and supply the complementary metal oxide semiconductor sensor in
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, on Carl Zeiss Jena GmbH (Zeiss) for lens and lens objective assemblies, on
ASKION GmbH (ASKION)&nbsp;for the main subassembly and on Fairchild Semiconductor Corp., Panasonic
Corp., Roithner-Laser Vienna, CompServ and others for light-emitting diodes, or LEDs, printed
circuit boards, and other elements or components of our devices. We have written agreements with
several of these vendors, under which the vendor is obligated to perform services or produce
components for us. There can be no assurance that these third parties will meet their obligations
under the agreements. Each of these suppliers is a sole-source supplier. Our contract manufacturers
also rely on sole-source suppliers to manufacture some of the components used in our products. Our
manufacturers and suppliers may encounter problems during manufacturing due to a variety of
reasons, including failure to procure their raw material on time, failure to follow specific
protocols and procedures, failure to comply with applicable regulations, equipment malfunction
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and environmental factors, any of which could delay or impede their ability to meet our
demand. Our reliance on these outside manufacturers and suppliers also subjects us to other risks
that could harm our business, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>suppliers may make errors in manufacturing components that could negatively affect
the effectiveness or safety of our products, or cause delays in shipment of our
products;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may not be able to obtain adequate supply in a timely manner or on commercially reasonable terms;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may have difficulty locating and qualifying alternative suppliers for our sole-source suppliers;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>switching components may require product redesign and submission to the FDA of a PMA
supplement or possibly a separate PMA, either of which could significantly delay
production;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our suppliers manufacture products for a range of customers, and fluctuations in
demand for the products these suppliers manufacture for others may affect their ability
to deliver components to us in a timely manner; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our suppliers may encounter financial hardships unrelated to our demand for
components, which could inhibit their ability to fulfill our orders and meet our
requirements.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any interruption or delay in the supply of components or materials, or our inability to obtain
components or materials from alternate sources at acceptable prices in a timely manner, could
impair our ability to meet the demand of our customers and cause them to cancel orders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into a development agreement with ASKION to complete developmental engineering
and testing of our hand-held imaging device, and have also entered into a production agreement with
ASKION to assemble the components and produce initial quantities of our hand-held imaging devices
for clinical trials. We intend to enter into a contract for commercial production of the hand-held
imaging devices once specifications for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> have been finalized, but we may not be
able to enter such an agreement on mutually acceptable terms. Failure to enter into such an
agreement with ASKION would require us to expand our own manufacturing facilities or obtain such
services elsewhere. Similarly, we have entered into a confidentiality agreement and a development
agreement with Carl Zeiss Jena GmbH for lens objective assemblies, and we have entered into a
contract for limited production of the lenses. The manufacturing agreement with ASKION includes
integration of these lenses in the hand-held imaging devices. Our planned reliance upon an outside
provider for assembly and production services subjects us to the risk of adverse consequences from
delays and defects caused by the failure of such outside supplier to meet its contractual
obligations, including confidentiality obligations in the case of Carl Zeiss Jena GmbH, which is an
affiliate of Carl Zeiss AG, a potential competitor. The failure by us or our supplier to produce a
sufficient number of hand-held imaging devices that can operate according to our specifications
could delay the pivotal clinical trial and/or the commercial sale of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and
would adversely affect both our ability to successfully commercialize MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and our
business, financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We will not be able to sell MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> <B><I>unless and until its design is verified and
validated in accordance with current good manufacturing practices as set forth in the US medical
device Quality System Regulation.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are in the process, but have not yet successfully completed, all the steps necessary to
verify and validate the design of the MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> system that are required to be performed
prior to commercialization. If we are delayed or unable to complete verification and validation
successfully, we will not be able to sell MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and we will not be able to meet our
plans for the commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in late 2007. Assuming that regulatory
approval of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is granted, the approval may be subject to limitations on the indicated uses
for which the product may be marketed, or may contain requirements for costly post-marketing
testing and surveillance to monitor the safety or effectiveness of the device. Later discovery of
previously unknown problems with MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, including manufacturing problems, or failure
to comply with regulatory requirements such as the FDA Quality System Regulation (QSR), may result
in restrictions on MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> or its manufacturing processes, withdrawal of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> from the market, patient or physician notification, voluntary or mandatory
recalls, fines, withdrawal of regulatory approvals, refusal to approve pending applications or
supplements to approved applications, refusal to permit the import or export of our products,
product seizures, injunctions or the imposition of civil or criminal penalties. Should any of these
enforcement actions occur, our business, financial condition and results of operations could be
materially and adversely affected.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Assuming that MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> <B><I>is approved by regulatory authorities, if we or our
suppliers fail to comply with ongoing regulatory requirements, or if we experience unanticipated
problems with MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP><B><I>, it could be subject to restrictions or withdrawal from the
market.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any product for which we obtain marketing approval, along with the manufacturing processes,
post-approval clinical data and promotional activities for such product, will be subject to
continuous review and periodic inspections by the FDA and other regulatory bodies. In particular,
we and our suppliers are required to comply with the QSR and other regulations which cover the
methods and documentation of the design, testing, production, control, quality assurance, labeling,
packaging, storage, promotion, distribution, and shipping of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and with record
keeping practices. We also will be subject to ongoing FDA requirements, including required
submissions of safety and other post-market information and reports and registration and listing
requirements. To the extent that we contract with third parties to manufacture some of our
products, our manufacturers will be required to adhere to current Good Manufacturing Practices
(cGMP) requirements enforced by the FDA as part of QSR, or similar regulations required by
regulatory agencies in other countries. The manufacturing facilities of our contract manufacturers
must be inspected or must have been inspected, and must be in full compliance with cGMP
requirements before approval for marketing. The FDA enforces the QSR and other regulatory
requirements through unannounced inspections. We have not yet been inspected by the FDA for
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and will have to complete such an inspection successfully before we ship any
commercial MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> devices. However, we were previously inspected in connection with
DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, which we have discontinued for business reasons, and were cited for failures to comply
fully with QSR mandated procedures. The FDA inspectors observed deficiencies that were documented
on FDA Form&nbsp;483 that was issued to us following the inspection. We have discussed the findings in a
subsequent meeting with the FDA and are in the process of addressing the deficiencies. We are
working with consultants to address the inspectional findings, particularly as they relate to
current MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> design development and ultimate MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> commercial
manufacturing. If we are not successful in convincing the FDA that we are capable of addressing its
concerns, or if our efforts to address the deficiencies should prove unsuccessful, we might be
subject to additional FDA action of a type described below, which could negatively affect our
ability to commercialize MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. There can be no assurance that the future
interpretations of legal requirements made by the FDA or other regulatory bodies with possible
retroactive effect, or the adoption of new requirements or policies, will not adversely affect us.
We may be slow to adapt, or may not be able to adapt to these changes or new requirements. Failure
by us or one of our suppliers to comply with statutes and regulations administered by the FDA and
other regulatory bodies, or failure to take adequate response to any observations, could result in,
among other things, any of the following actions:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>warning letters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fines and civil penalties;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unanticipated expenditures;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in approving or refusal to approve MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>withdrawal of approval by the FDA or other regulatory bodies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>product recall or seizure;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>interruption of production;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>operating restrictions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>injunctions; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>criminal prosecution.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If any of these actions were to occur, it would harm our reputation and cause our product sales and
profitability to suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are involved in a heavily regulated sector, and our ability to remain viable will depend on
favorable government decisions at various points by various agencies.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, legislation is introduced in the US Congress that could significantly
change the statutory provisions governing the approval, manufacture and marketing of a medical
device. Additionally, healthcare is heavily regulated by the federal government, and by state and
local governments. The federal laws and regulations affecting healthcare change constantly, thereby
increasing the uncertainty and risk associated with any healthcare related venture, including our
business
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. In addition, FDA regulations and guidance are often revised or
reinterpreted by the agency in ways that may significantly affect our business and our products. It
is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance,
or interpretations changed, and what the impact of such changes, if any, may be.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The federal government regulates healthcare through various agencies, including but not
limited to the following: (i)&nbsp;the FDA, which administers the Food, Drug, and Cosmetic Act, as well
as other relevant laws; (ii)&nbsp;CMS, which administers the Medicare and Medicaid programs; (iii)&nbsp;the
Office of Inspector General (OIG)&nbsp;which enforces various laws aimed at curtailing fraudulent or
abusive practices, including by way of example, the Anti-Kickback Law, the Anti-Physician Referral
Law, commonly referred to as Stark, the Anti-Inducement Law, the Civil Money Penalty Law, and the
laws that authorize the OIG to exclude healthcare providers and others from participating in
federal healthcare programs; and (iv)&nbsp;the Office of Civil Rights, which administers the privacy
aspects of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). All of the
aforementioned are agencies within HHS. Healthcare is also provided or regulated, as the case may
be, by the Department of Defense through its TriCare program, the Public Health Service within HHS
under the Public Health Service Act, the Department of Justice through the Federal False Claims Act
and various criminal statutes, and state governments under Medicaid and other state sponsored or
funded programs and their internal laws regulating all healthcare activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to regulation by the FDA as a medical device manufacturer, we are subject to
general healthcare industry regulations. The healthcare industry is subject to extensive federal,
state and local laws and regulations relating to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>billing for services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>quality of medical equipment and services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>confidentiality, maintenance and security issues associated with medical records and
individually identifiable health information;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>false claims; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>labeling products.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These laws and regulations are extremely complex and, in some cases, still evolving. In many
instances, the industry does not have the benefit of significant regulatory or judicial
interpretation of these laws and regulations. If our operations are found to be in violation of any
of the federal, state or local laws and regulations that govern our activities, we may be subject
to the applicable penalty associated with the violation, including civil and criminal penalties,
damages, fines or curtailment of our operations. The risk of being found in violation of these laws
and regulations is increased by the fact that many of them have not been fully interpreted by the
regulatory authorities or the courts, and their provisions are open to a variety of
interpretations. Any action against us for violation of these laws or regulations, even if we
successfully defend against it, could cause us to incur significant legal expenses and divert our
management&#146;s time and attention from the operation of our business.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We must comply with complex statutes prohibiting fraud and abuse, and both we and physicians
utilizing MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> <B><I>could be subject to significant penalties for noncompliance.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are extensive federal and state laws and regulations prohibiting fraud and abuse in the
healthcare industry that can result in significant criminal and civil penalties. These federal laws
include: the anti-kickback statute which prohibits certain business practices and relationships,
including the payment or receipt of remuneration for the referral of patients whose care will be
paid by Medicare or other federal healthcare programs; the physician self-referral prohibition,
commonly referred to as the Stark Law; the anti-inducement law, which prohibits providers from
offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or
services covered by either program; the Civil False Claims Act, which prohibits any person from
knowingly presenting or causing to be presented false or fraudulent claims for payment by the
federal government, including the Medicare and Medicaid programs and; the Civil Monetary Penalties
Law, which authorizes HHS to impose civil penalties administratively for fraudulent or abusive
acts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sanctions for violating these federal laws include criminal and civil penalties that range
from punitive sanctions, damage assessments, money penalties, imprisonment, denial of Medicare and
Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both. As federal and
state budget pressures continue, federal and state administrative
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">agencies may also continue to escalate investigation and enforcement efforts to root out waste
and to control fraud and abuse in governmental healthcare programs. Private enforcement of
healthcare fraud has also increased, due in large part to amendments to the Civil False Claims Act
in 1986 that were designed to encourage private persons to sue on behalf of the government. A
violation of any of these federal and state fraud and abuse laws and regulations could have a
material adverse effect on our liquidity and financial condition. An investigation into the use of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> by physicians may dissuade physicians from either purchasing or using
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and could have a material adverse effect on our ability to commercialize
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>The application of the privacy provisions of HIPAA is uncertain.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;HIPAA, among other things, protects the privacy and security of individually identifiable
health information by limiting its use and disclosure. HIPAA directly regulates &#147;covered entities&#148;
(insurers, clearinghouses, and most healthcare providers) and indirectly regulates &#147;business
associates&#148; with respect to the privacy of patients&#146; medical information. Certain entities that
receive and process protected health information are required to adopt certain procedures to
safeguard the security of that information. It is uncertain whether we would be deemed to be a
covered entity under HIPAA, and it is unlikely that based on our current business model, we would
be a business associate. Nevertheless, we will likely be contractually required to physically
safeguard the integrity and security of the patient information that we or our physician customers
receive, store, create or transmit. If we fail to adhere to our contractual commitments, then our
physician customers may be subject to civil monetary penalties, and this could adversely affect our
ability to market MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. We also may be liable under state laws governing the
privacy of health information.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may become subject to claims of infringement or misappropriation of the intellectual property
rights of others, which could prohibit us from shipping affected products, require us to obtain
licenses from third parties or to develop non-infringing alternatives, and subject us to
substantial monetary damages and injunctive relief. Our patents may also be subject to challenge on
validity grounds, and our patent applications may be rejected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third parties could, in the future, assert infringement or misappropriation claims against us
with respect to our current or future products. Whether a product infringes a patent involves
complex legal and factual issues, the determination of which is often uncertain. Therefore, we
cannot be certain that we have not infringed the intellectual property rights of such third
parties. Our potential competitors may assert that some aspect of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> infringes
their patents. Because patent applications may take years to issue, there also may be applications
now pending of which we are unaware that may later result in issued patents that
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> infringes. There also may be existing patents of which we are unaware that one
or more components of our MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> system may inadvertently infringe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any infringement or misappropriation claim could cause us to incur significant costs, could
place significant strain on our financial resources, divert management&#146;s attention from our
business and harm our reputation. If the relevant patents were upheld as valid and enforceable and
we were found to infringe, we could be prohibited from selling our product that is found to
infringe unless we could obtain licenses to use the technology covered by the patent or are able to
design around the patent. We may be unable to obtain a license on terms acceptable to us, if at
all, and we may not be able to redesign MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> to avoid infringement. A court could
also order us to pay compensatory damages for such infringement, plus prejudgment interest and
could, in addition, treble the compensatory damages and award attorney fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These damages could be substantial and could harm our reputation, business, financial
condition and operating results. A court also could enter orders that temporarily, preliminarily or
permanently enjoin us and our customers from making, using, selling, offering to sell or importing
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and/or could enter an order mandating that we undertake certain remedial
activities. Depending on the nature of the relief ordered by the court, we could become liable for
additional damages to third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also may rely on our patents, patent applications and other intellectual property rights to
give us a competitive advantage. Whether a patent is valid, or whether a patent application should
be granted, is a complex matter of science and law, and therefore we cannot be certain that, if
challenged, our patents, patent applications and/or other intellectual property rights would be
upheld. If one or more of those patents, patent applications and other intellectual property rights
are invalidated, rejected or found unenforceable, that could reduce or eliminate any competitive
advantage we might otherwise have had.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>New product development in the medical device industry is both costly and labor intensive with very
low success rates for successful commercialization; if we cannot successfully develop or obtain
future products, our growth would be delayed.</I></B>
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our long-term success is dependent, in large part, on the design, development and
commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and other new products and services in the medical device
industry. The product development process is time-consuming, unpredictable and costly. There can be
no assurance that we will be able to develop or acquire new products, successfully complete
clinical trials, obtain the necessary regulatory clearances or approvals required from the FDA on a
timely basis, or at all, manufacture our potential products in compliance with regulatory
requirements or in commercial volumes, or that MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> or other potential products
will achieve market acceptance. In addition, changes in regulatory policy for product approval
during the period of product development, and regulatory agency review of each submitted new
application, may cause delays or rejections. It may be necessary for us to enter into licensing
arrangements in order to market effectively any new products or new indications for existing
products. There can be no assurance that we will be successful in entering into such licensing
arrangements on terms favorable to us or at all. Failure to develop, obtain necessary regulatory
clearances or approvals for, or successfully market potential new products could have a material
adverse effect on our business, financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We face the risk of product liability claims and may not be able to obtain or maintain adequate
insurance.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business exposes us to the risk of product liability claims that is inherent in the
testing, manufacturing and marketing of medical devices, including those which may arise from the
misuse or malfunction of, or design flaws in, our products. We may be subject to product liability
claims if MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> causes, or merely appears to have caused, an injury or if a patient
alleges that MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> failed to provide appropriate diagnostic information on a lesion
where melanoma was subsequently found to be present. Claims may be made by patients, healthcare
providers or others involved with MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> will require PMA
approval prior to commercialization in the US. The clinical studies of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> are
considered by the FDA as &#147;Non-Significant Risk&#148;. Consequently, the trials are conducted under the
auspices of an abbreviated Investigational Device Exemption. We therefore do not maintain domestic
clinical trial liability insurance. We have obtained clinical trial liability insurance in certain
European countries where required by statute or clinical site policy. Although we have general
liability insurance that we believe is appropriate, and anticipate obtaining adequate product
liability insurance before commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, this insurance is and will be
subject to deductibles and coverage limitations. Our anticipated product liability insurance may
not be available to us in amounts and on acceptable terms, if at all, and if available, the
coverages may not be adequate to protect us against any future product liability claims. If we are
unable to obtain insurance at an acceptable cost or on acceptable terms with adequate coverage, or
otherwise protect against potential product liability claims, we will be exposed to significant
liabilities, which may harm our business. A product liability claim, recall or other claim with
respect to uninsured liabilities or for amounts in excess of insured liabilities could result in
significant costs and significant harm to our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may be subject to claims against us even if the apparent injury is due to the actions of
others. For example, we rely on the expertise of physicians, nurses and other associated medical
personnel to operate MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. If these medical personnel are not properly trained or
are negligent, we may be subjected to liability. These liabilities could prevent or interfere with
our product commercialization efforts. Defending a suit, regardless of merit, could be costly,
could divert management attention and might result in adverse publicity, which could result in the
withdrawal of, or inability to recruit, clinical trial volunteers, or result in reduced acceptance
of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insurance and surety companies have reassessed many aspects of their business and, as a
result, may take actions that could negatively affect our business. These actions could include
increasing insurance premiums, requiring higher self-insured retentions and deductibles, reducing
limits, restricting coverages, imposing exclusions, and refusing to underwrite certain risks and
classes of business. Any of these actions may adversely affect our ability to obtain appropriate
insurance coverage at reasonable costs, which could have a material adverse effect on our business,
financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be adversely affected by a data center failure.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The success of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is dependent upon our ability to protect our data center
against damage from fire, power loss, telecommunications failure, natural disaster, sabotage or a
similar catastrophic event. Substantially all of our computer equipment and data operations are
located in a single facility. Our prospective failure to maintain off-site copies of information
contained in our MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> database, or our inability to use alternative sites in the
event we experience a natural disaster, hardware or software malfunction or other interruption of our data center, or any interruption
in the ability of physicians to obtain access to our MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> server and its database
could adversely impact our business, financial condition and results of operations.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be adversely affected by breaches of online security.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> lesion database does not contain any information that allows us to
identify specific patients. However, we must identify certain data as belonging to or as derived
from specific patients for regulatory, quality assurance and billing purposes. To the extent that
our activities involve the storage and transmission of confidential information, security breaches
could damage our reputation and expose us to a risk of loss, or to litigation and possible
liability. Our business may be materially adversely affected if our security measures do not
prevent security breaches. In addition, such information may be subject to HIPAA privacy and
security regulations, the potential violation of which may trigger concerns by healthcare
providers, which may adversely impact our business, financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are dependent upon telecommunications and the internet.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The connection between the MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> hand-held imaging device and the central
server in our offices will be dependent on the internet. Our success will depend in large part on
the continued availability of electronic means for storing and transmitting encoded compressed
diagnostic information, and storing and transmitting the results of the comparison of such
information with our electronically-maintained database through the internet. If the domestic and
international telecommunications infrastructure required for these transmissions fails, our
business could be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We plan to use the internet as a medium to provide diagnostic assistance services to
physicians. We also plan to use the internet to inform the public about the availability of our
products and to market to and communicate with physicians who are potential or actual customers.
Our success will therefore depend in part on the continued growth and use of the internet. If our
ability to use the internet fails, it may materially adversely affect our business.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We will be obligated to comply with Federal Communications Commission regulations for radio
transmissions used by our products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Versions of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> may rely on radio transmissions from the hand-held imaging
device to a base station that is connected to the internet. Applicable requirements will restrict
us to a particular band of frequencies allocated to low power radio service for transmitting data
in support of specific diagnostic or therapeutic functions. Failure to comply with all applicable
restrictions on the use of such frequencies, or unforeseeable difficulties with the use of such
frequencies, could impede our ability to commercialize MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>All of our operations are conducted at a single location. Any disruption at our facility could
increase our expenses.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our operations are conducted at two adjacent buildings in Irvington, New York. We take
precautions to safeguard our facility, including insurance, health and safety protocols, contracted
off-site engineering services, provision for off-site manufacturing, and storage of computer data.
However, a natural disaster, such as a fire, flood or earthquake, could cause substantial delays in
our operations, damage or destroy our manufacturing equipment or inventory, and cause us to incur
additional expenses. The insurance we maintain against fires, floods, earthquakes and other natural
disasters may not be adequate to cover our losses in any particular case.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be liable for contamination or other harm caused by materials that we handle, and changes in
environmental regulations could cause us to incur additional expense.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing, research and development and clinical processes do not generally involve
the handling of potentially harmful biological materials or hazardous materials, but they may
occasionally do so. We are subject to federal, state and local laws and regulations governing the
use, handling, storage and disposal of hazardous and biological materials. If violations of
environmental, health and safety laws occur, we could be held liable for damages, penalties and
costs of remedial actions. These expenses or this liability could have a significant negative
impact on our business, financial condition and results of operations. We may violate
environmental, health and safety laws in the future as a result of human error, equipment failure
or other causes. Environmental laws could become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with violations. We may be subject
to potentially conflicting and changing regulatory agendas of political, business and environmental groups. Changes to or restrictions on permitting
requirements or processes, hazardous or biological material storage or handling might require an
unplanned capital investment or relocation. Failure to comply with new or existing laws or
regulations could harm our business, financial condition and results of operations.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Failure to obtain and maintain regulatory approval in foreign jurisdictions will prevent us from
marketing abroad.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the US, we may market
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> internationally. Outside the US, we can market a product only if we receive a
marketing authorization and, in some cases, pricing approval, from the appropriate regulatory
authorities. The approval procedure varies among countries and can involve additional testing, and
the time required to obtain approval may differ from that required to obtain FDA approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foreign regulatory approval process may include all of the risks associated with obtaining
FDA approval, in addition to other risks. Foreign regulatory bodies have established varying
regulations governing product standards, packaging requirements, labeling requirements, import
restrictions, tariff regulations, duties and tax requirements. We may not obtain foreign regulatory
approvals on a timely basis, if at all. Foreign regulatory agencies, as well as the FDA,
periodically inspect manufacturing facilities both in the US and abroad. Approval by the FDA does
not ensure approval by regulatory authorities in other countries, and approval by one foreign
regulatory authority does not ensure approval by regulatory authorities in other foreign countries
or by the FDA. We have not taken any significant actions to obtain foreign regulatory approvals. We
may not be able to file for regulatory approvals and may not receive necessary approvals to
commercialize MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in any market on a timely basis, or at all. Our inability or
failure to comply with varying foreign regulation, or the imposition of new regulations, could
restrict our sale of products internationally.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our success will depend on our ability to attract and retain our personnel.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are highly dependent on our senior management, especially Joseph V. Gulfo, M.D., our
President and Chief Executive Officer, Gerald Wagner, Ph.D., our Acting Chief Operating Officer and
Dina Gutkowicz-Krusin, Ph.D., our Director of Clinical Studies. Our success will depend on our
ability to retain our current management and to attract and retain qualified personnel in the
future, including scientists, clinicians, engineers and other highly skilled personnel. Competition
for senior management personnel, as well as scientists, clinicians, engineers, and experienced
sales and marketing individuals, is intense, and we may not be able to retain our personnel. The
loss of the services of members of our senior management, scientists, clinicians or engineers could
prevent the implementation and completion of our objectives, including the development and
introduction of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. The loss of a member of our senior management or our
professional staff would require the remaining executive officers to divert immediate and
substantial attention to seeking a replacement. Each of our officers may terminate their employment
at any time without notice and without cause or good reason.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect to expand our operations and grow our research and development, product development
and administrative operations. This expansion is expected to place a significant strain on our
management, and will require hiring a significant number of qualified personnel. Accordingly,
recruiting and retaining such personnel in the future will be critical to our success. There is
competition from other companies and research and academic institutions for qualified personnel in
the areas of our activities. If we fail to identify, attract, retain and motivate these highly
skilled personnel, we may be unable to continue our development and commercialization activities.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our financial results for future periods may be adversely affected by changes required by financial
and accounting regulatory agencies.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our reported financial results may be adversely affected by changes in accounting principles
generally accepted in the US. Generally accepted accounting principles in the US are subject to
interpretation by the Financial Accounting Standards Board (FASB), the American Institute of
Certified Public Accountants, the Securities and Exchange Commission (SEC), and various bodies
formed to promulgate and interpret appropriate accounting principles. A change in these principles
or interpretations could have a significant effect on our reported financial results and could
affect the reporting of transactions completed before the announcement of a change.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our financial results for future periods will be affected by the attainment of milestones.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have granted to certain employees stock options that vest with the attainment of various
performance and development milestones. Upon the attainment of these milestones we will be required
to recognize a stock based compensation expense in an amount based on the fair value of the
options. This could be a significant charge.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we fail to maintain the adequacy of our internal controls, our ability to provide accurate
financial statements could be impaired and any failure to maintain our internal controls and
provide accurate financial statements could cause our stock price to decrease substantially.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We face increased legal, accounting, administrative and other costs and expenses as a public
company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 (SOX), as well
as new rules subsequently implemented by the SEC, the Public Company Accounting Oversight Board and
the NASDAQ Capital Market, require changes in the corporate governance practices of public
companies. We expect these new rules and regulations to increase our legal and financial compliance
costs, to divert management attention from operations and strategic opportunities, and to make
legal, accounting and administrative activities more time-consuming and costly. We have incurred
substantially higher costs to maintain directors&#146; and officers&#146; insurance since becoming a public
company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are in the process of instituting changes to our internal procedures to satisfy the
requirements of the SOX. We have retained a consultant to assist us and are currently evaluating
our internal controls systems in order to allow us to report on, and our independent registered
public accounting firm to attest to, our internal controls, as required by Section&nbsp;404 of the SOX.
While we anticipate being able to fully implement the requirements relating to internal controls
and all other aspects of Section&nbsp;404 of the SOX in a timely fashion, we cannot be certain as to the
timing of completion of our evaluation, testing and remediation actions or the impact of the same
on our operations, since there is no precedent available by which to measure compliance adequacy.
As a small company with limited capital and human resources, we will need to divert management&#146;s
time and attention away from our business in order to ensure compliance with these regulatory
requirements. As a public company, we require greater financial resources than we required as a
private company. Implementing these changes may require new information technologies systems, the
auditing of our internal controls, and compliance training for our directors, officers and
personnel. Such efforts would require a potentially significant expense. If we fail to maintain
the adequacy of our internal controls as such standards are modified, supplemented or amended from
time to time, we may not be able to provide accurate financial statements and comply with the SOX.
Any failure to maintain the adequacy of our internal controls and provide accurate financial
statements could cause the trading price of our common stock to decrease substantially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to our Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>An active trading market for our common stock may not be sustained.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to our initial public offering, there was no public market for our common stock. An
active public market for our common stock may not be sustained. Further, we cannot be certain that
the market price of our common stock will not decline below the initial public offering price or
below the amount required by NASDAQ to maintain a listing on its Capital Market. Should we fail to
meet the minimum standards established by NASDAQ for its Capital Market, we could be de-listed,
meaning shareholders might be subject to limited liquidity.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our stock price may be volatile, meaning purchasers of our common stock could incur substantial
losses.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our stock price is likely to be volatile. The stock market in general and the market for
medical technology companies in particular have experienced extreme volatility that has often been
unrelated to the operating performance of particular companies. The following factors, in addition
to other risk factors described in this section and general market and economic conditions, may
have a significant impact on the market price of our common stock:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>results of our research and development efforts and our clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing of regulatory approval for our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failure of any of our products, if approved, to achieve commercial success;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the announcement of new products or product enhancements by us or our competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory developments in the US and foreign countries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ability to manufacture our products to commercial standards;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>developments concerning our clinical collaborators, suppliers or marketing partners;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in financial estimates or recommendations by securities analysts;</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>public concern over our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>developments or disputes concerning patents or other intellectual property rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>product liability claims and litigation against us or our competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the departure of key personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the strength of our balance sheet;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>variations in our financial results or those of companies that are perceived to be similar to us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the structure of and third-party reimbursement in the US and other countries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in accounting principles or practices;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general economic, industry and market conditions; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>future sales of our common stock.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A decline in the market price of our common stock could cause you to lose some or all of your
investment and may adversely impact our ability to attract and retain employees and raise capital.
In addition, stockholders may initiate securities class action lawsuits if the market price of our
stock drops significantly. Whether or not meritorious, litigation brought against us could result
in substantial costs and could divert the time and attention of our management. Our insurance to
cover claims of this sort may not be adequate.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If our directors, executive officers, and principal stockholders choose to act together, they may
have the ability to influence all matters submitted to stockholders for approval.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2006, our directors, executive officers, holders of more than 5% of our
common stock, and their affiliates in the aggregate, beneficially owned approximately 44% of our
outstanding common stock. As a result, these stockholders, subject to any fiduciary duties owed to
our other stockholders under Delaware law, will be able to exercise a controlling influence over
matters requiring stockholder approval, including the election of directors and approval of
significant corporate transactions, and will have significant control over our management and
policies. Some of these persons or entities may have interests that are different from yours. For
example, these stockholders may support proposals and actions with which you may disagree or which
are not in your interests. The concentration of ownership could delay or prevent a change in
control of our company or otherwise discourage a potential acquirer from attempting to obtain
control of our company, which in turn could reduce the price of our common stock. In addition,
these stockholders, some of whom have representatives sitting on our board of directors, could use
their voting influence to maintain our existing management and directors in office, delay or
prevent changes of control of our company, or support or reject other management and board
proposals that are subject to stockholder approval, such as amendments to our employee stock plans
and approvals of significant financing transactions.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If there are substantial sales of our common stock, our stock price could decline.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If our existing stockholders sell a large number of shares of our common stock or the public
market perceives that these sales may occur, the market price of our common stock could decline
significantly. At September&nbsp;30, 2006, we had 10,952,602 shares of common stock outstanding. All of
the shares offered in our initial public offering completed on November&nbsp;2, 2005 are freely
tradeable without restriction or further registration under the federal securities laws, unless
purchased by our affiliates. Beginning October&nbsp;27, 2006 virtually all of our common stock, issued
prior to our October&nbsp;31, 2006 financing, not previously eligible for sale pursuant to Rule 144(k)
became available for sale under either Rule&nbsp;144 or Rule&nbsp;144(k).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;31, 2006, we registered 1,899,875 shares of common stock on Form S-8 that are
authorized for issuance under our stock option plans. We intend to register up to 325,135 shares
of our common stock available for issuance pursuant to our 2005 stock option plan on Form S-8 in
the fourth quarter of 2006 or therafter. We intend to register additional shares of our common
stock on Form S-8 to the extent necessary to cover any additional shares that may be authorized for
issuance under our stock option plans by our board of directors (or compensation committee) in accordance
with the terms of our stock option plans. As of September&nbsp;30, 2006, 1,571,934 shares were subject
to outstanding options, of which options for 532,524 shares were vested.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable
and could also limit the market price of our stock.</I></B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provisions of our restated certificate of incorporation and bylaws and applicable provisions
of Delaware law may make it more difficult for or prevent a third party from acquiring control of
us without the approval of our board of directors. These provisions:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>set limitations on the removal of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limit who may call a special meeting of stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>establish advance notice requirements for nominations for election to our board of
directors or for proposing matters that can be acted upon at stockholder meetings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>do not permit cumulative voting in the election of our directors, which would
otherwise permit less than a majority of stockholders to elect directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prohibit stockholder action by written consent, thereby requiring all stockholder
actions to be taken at a meeting of our stockholders; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provide our board of directors the ability to designate the terms of and issue a new
series of preferred stock without stockholder approval.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, Section&nbsp;203 of the Delaware General Corporation Law generally limits our ability
to engage in any business combination with certain persons who own 15% or more of our outstanding
voting stock or any of our associates or affiliates who at any time in the past three years have
owned 15% or more of our outstanding voting stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These provisions may have the effect of entrenching our management team and may deprive you of
the opportunity to sell your shares to potential acquirers at a premium over prevailing prices.
This potential inability to obtain a control premium could reduce the price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt"><B>Risks Related to the Private Placement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If
we fail to maintain registration of the common stock issued, or issuable pursuant to the
exercise of warrants, which we issued in connection with the securities purchase agreements we entered
into with certain investors as of October&nbsp;31, 2006, we may be obligated to pay the investors of
those securities liquidated damages.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the securities purchase agreements we entered into with certain investors
as of October&nbsp;31, 2006, we entered into a registration rights agreement pursuant to which, if we
fail to: (i)&nbsp;file this registration statement on or before the date that is 30&nbsp;days after November
3, 2006 (a &#147;Filing Failure&#148;), (ii)&nbsp;have this registration statement declared effective by the SEC
on or before the date that is 120&nbsp;days after November&nbsp;3, 2006 (an &#147;Effectiveness Failure&#148;) or (iii)
maintain the effectiveness of this registration statement while shares of common stock covered by
it remain unsold (a &#147;Maintenance Failure&#148;), then, unless the grace periods set forth in the
registration rights agreement apply, as partial relief for the damages to any holder by any such
delay in or reduction of its ability to sell the shares of common
stock, we must pay to
each holder an amount equal to 1% of the aggregate purchase price (as defined in the securities
purchase agreements) of such holder&#146;s securities included in this registration statement on each of
the following dates: (i)&nbsp;the day of a Filing Failure and on every 30<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day thereafter
until such Filing Failure is cured; (ii)&nbsp;the day of an Effectiveness Failure and on every
30<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day thereafter until such Maintenance Failure is cured; and (iii)&nbsp;the initial day
of a Maintenance Failure and on every 30<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day thereafter until such Maintenance Failure
is cured. In the event that we fail to make these registration delay payments in a
timely manner, such registration delay payments will bear interest at the rate of 1% per month
until paid in full. However, the aggregate amount of registration delay payments may not exceed
10% of the aggregate purchase price of shares of our common stock purchased pursuant to the
securities purchase agreements.
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The statements contained or incorporated by reference in this prospectus that are not
historical facts are forward-looking. These statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">statements include, without limitation, our expectations regarding sales, earnings or other future financial
performance and liquidity, conduct and completion of clinical trials, product introductions, entry
into new geographic regions, and general optimism about future operations or operating results.
Some of these statements can be identified by the use of forward-looking terminology such as
&#147;prospects,&#148; &#147;outlook,&#148; &#147;believes,&#148; &#147;estimates,&#148; &#147;intends,&#148; &#147;may,&#148; &#147;will,&#148; &#147;should,&#148; &#147;anticipates,&#148;
&#147;expects&#148; or &#147;plans,&#148; or the negative or other variation of these or similar words, or by
discussion of trends and conditions, strategy or risks and uncertainties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These forward-looking expectations are based on current assumptions within the bounds of
management&#146;s knowledge of our business and operations and which management believes are reasonable.
These assumptions are subject to risks and uncertainties, and actual results could differ
materially from expectations because of issues and uncertainties such as those listed under the
caption &#147;Risk Factors&#148; and elsewhere in this prospectus and in documents incorporated into this
prospectus which, among others, should be considered in evaluating our future financial
performance. All subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the cautionary statements
in this prospectus. Readers are advised to consult any further disclosures we may make on related
subjects in subsequent reports filed with the SEC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional information on factors that may affect our business and financial results can be
found in our filings with the SEC. All forward-looking statements should be considered in light of
these risks and uncertainties. We assume no responsibility to update forward-looking statements
made in this prospectus.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>USE OF PROCEEDS</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares of common stock being offered are solely for the accounts of the selling
stockholders pursuant to their contractual registration rights. We will not receive any proceeds
from the resale of the shares of the selling stockholders. We will receive the exercise price
payable in connection with exercises of the warrants if exercised for cash, which we intend to use
for general corporate purposes. See &#147;Selling Stockholders.&#148;
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>SELLING STOCKHOLDERS</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares of common stock being offered by the selling stockholders are those previously
issued to the selling stockholders and those issuable to the selling stockholders upon exercise of
the warrants. We are registering the shares of common stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the ownership of the
shares of common stock and the warrants, and except for Mr.&nbsp;Lufkin who serves on our Board of
Directors, the selling stockholders have not had any material relationship with us within the past
three years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below lists the selling stockholders and other information regarding the beneficial
ownership of the shares of common stock by each of the selling stockholders. The second column
lists the number of shares of common stock beneficially owned by each selling shareholder, based on
its ownership of the shares of common stock and the warrants, as of November&nbsp;29, 2006, assuming
exercise of the warrants held by the selling stockholders on that date, without regard to any
limitations on exercise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The third column lists the shares of common stock being offered by this prospectus by the
selling stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with the terms of registration rights agreement with the holders of the shares
of common stock and the warrants, this prospectus generally covers the resale of that number of
shares of common stock equal to the number of shares of common stock issued and the shares of
common stock issuable upon exercise of the related warrants, determined as if the outstanding
warrants were exercised, as applicable, in full, in each case, as of the trading day immediately
preceding the date this registration statement was initially filed with the SEC. The fifth and
sixth columns assume the sale of all of the shares offered by the selling stockholders pursuant to
this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of the warrants, a selling shareholder may not exercise the warrants, to
the extent such exercise would cause such selling shareholder, together with its affiliates, to
beneficially own a number of shares of common stock which would exceed 4.99% of our then
outstanding shares of common stock following such exercise, excluding for purposes of such
determination shares of common stock issuable upon exercise of the warrants which have not been
exercised. The number of
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>


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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shares in the fourth column does not reflect this limitation. The selling stockholders may sell all, some or none of their
shares in this offering. See &#147;Plan of Distribution.&#148;
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common Shares to be</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Warrants to be Sold</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage of Class</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Owned Prior to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sold Pursuant to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Pursuant to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Owned After</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Owned After</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name of Selling Stockholder</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Offering</B><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>this Prospectus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>this Prospectus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Offering</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR>    <TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dan W. Lufkin<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">490,418</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">70,175</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10,526</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">490,418</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.5</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(2</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lake Union Capital Fund, LP<SUP style="font-size: 85%; vertical-align: text-top">3</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">100,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">15,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="bottom">&#151;
</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(3</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wasatch Ultra Growth Fund<SUP style="font-size: 85%; vertical-align: text-top">4</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">103,400</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">15,510</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="bottom">&#151;
</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wasatch Micro Cap Value Fund<SUP style="font-size: 85%; vertical-align: text-top">4</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">35,300</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">5,295</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="bottom">&#151;
</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(5</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Variable Insurance Products Fund <BR>
IV: Health Care Portfolio<SUP style="font-size: 85%; vertical-align: text-top">5</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">50,420</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">7,563</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="bottom">&#151;
</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(6</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fidelity Select Portfolios:
Medical Equipment and
Systems<SUP style="font-size: 85%; vertical-align: text-top">5</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">602,089</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">90,313</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="bottom">&#151;
</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(7</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fidelity Advisor Series&nbsp;VII:
Fidelity Advisor Health Care
Fund<SUP style="font-size: 85%; vertical-align: text-top">5</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">400,123</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">60,018</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="bottom">&#151;
</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(8</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Eric S. Dobkin
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">358,538</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">87,719</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">13,158</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">358,538</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">3.3</TD>
    <TD nowrap valign="bottom">%</TD>
</TR>













<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(9</TD>
    <TD nowrap valign="top">)</TD>


    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Phronesis Partners, LP<SUP style="font-size: 85%; vertical-align: text-top">6</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">100,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">600,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">90,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">100,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(10</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John Hancock Trust <BR>
Emerging Growth Trust<SUP style="font-size: 85%; vertical-align: text-top">7</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">5,736</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">860</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="bottom">&#151;
</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(11</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John Hancock Health <BR>
Sciences Fund<SUP style="font-size: 85%; vertical-align: text-top">7</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">250,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">43,860</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">6,579</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">250,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">2.3</TD>
    <TD nowrap valign="bottom">%</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(12</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John Hancock Small Cap <BR>
Equity Fund<SUP style="font-size: 85%; vertical-align: text-top">7</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">177,590</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">26,639</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="bottom">&#151;
</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(13</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">John Hancock Funds II <BR>
Emerging Growth Fund<SUP style="font-size: 85%; vertical-align: text-top">7</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">35,972</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">5,396</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="bottom">0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="bottom">&#151;
</TD>
</TR>













<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Less than 1.0%</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Beneficial ownership is determined in accordance with the
rules of the SEC.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Includes 252,257 shares of common stock held
by trusts the beneficiaries of which are family members of Mr.&nbsp;Lufkin. Mr.
Lufkin expressly disclaims ownership of the shares held by these trusts.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Michael Self has voting and investment power
of the shares that this selling stockholder owns.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Wasatch Advisors, Inc. is the investment adviser to Wasatch
Funds, Inc., a registered investment company comprised of a series of funds
under the Investment Company Act of 1940, and to a number of private separate
client accounts which are the beneficial owners of our  stock.
John Malooly or another designee of Wasatch Advisors, Inc. has voting and
investment power of the shares that this selling stockholder beneficially owns.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">5</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>The entity is a registered investment fund (the
&#147;Fund&#148;) advised by Fidelity Management &#038; Research Company
(&#147;FMR Co.&#148;), a registered investment adviser under the Investment
Advisers Act of 1940, as amended. FMR Co., 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and an investment
adviser registered under Section&nbsp;203 of the Investment Advisers Act of 1940, is
the beneficial owner of the shares of our common stock outstanding as a result of acting as investment adviser to various investment companies
registered under Section&nbsp;8 of the Investment Company Act of 1940. Edward C.
Johnson 3d, FMR Corp., through its control of FMR Co., and the Fund each has
sole power to dispose of the securities owned by the Fund. Neither FMR Corp.
nor Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote or
direct the voting of the shares owned directly by the Fund, which power resides
with the Fund&#146;s Board of Trustees. The Fund is an affiliate of a
broker-dealer. The Fund purchased the securities in the ordinary course.</TD>
</TR>
 <TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">6</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>James E. Wiggins has voting and investment power of the shares that this selling
stockholder owns.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">7</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Ismail Gunes of MF Global Investment Management U.S., LLC has voting and investment
power of the shares that this selling stockholder owns.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>PLAN OF DISTRIBUTION</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are registering the shares of common stock previously issued and the shares of common
stock issuable upon exercise of the warrants to permit the resale of these shares of common stock
by the holders of the common stock and warrants from time to time after the date of this
prospectus. We will not receive any of the proceeds from the resale by the selling stockholders of
the shares of common stock. We will bear all fees and expenses incident to our obligation to
register the shares of common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders may sell all or a portion of the shares of common stock beneficially
owned by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock are sold through underwriters or
broker-dealers, the selling stockholders will be responsible for underwriting discounts or
commissions or agent&#146;s commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on any national securities exchange or quotation service on which the securities
may be listed or quoted at the time of sale;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the over-the-counter market;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through the writing of options, whether such options are listed on an options
exchange or otherwise;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate the
transaction;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through purchases by a broker-dealer as principal and resale by the broker-dealer for its account;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt"></DIV>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through an exchange distribution in accordance with the rules of the
applicable exchange;
</TD>
</TR>




<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">






<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through privately negotiated transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through short sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through sales pursuant to Rule&nbsp;144;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in which broker-dealers may agree with the selling securityholders to sell a specified
number of such shares at a stipulated price per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in a combination of any such methods of sale; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in any other method permitted pursuant to applicable law.</TD>
</TR>









</TABLE>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the selling stockholders effect such transactions by selling shares of common stock to or
through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from the selling
stockholders or commissions from purchasers of the shares of common stock for whom they may act as
agent or to whom they may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the shares of common stock or otherwise,
the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of common stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of common stock short and deliver shares of
common stock covered by this prospectus to close out short positions and to return borrowed shares
in connection with such short sales. The selling stockholders may also loan or pledge shares of
common stock to broker-dealers that in turn may sell such shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders may pledge or grant a security interest in some or all of the
warrants or shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time pursuant to this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933, as amended (the &#147;Securities
Act&#148;), amending, if necessary, the list of selling stockholders to include the pledgee, transferee
or other successors in interest as selling stockholders under this prospectus. The selling
stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders and any broker-dealer participating in the distribution of the shares
of common stock may be deemed to be &#147;underwriters&#148; within the meaning of the Securities Act, and
any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a prospectus supplement, if required,
will be distributed which will set forth the aggregate amount of shares of common stock being
offered and the terms of the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from the selling stockholders
and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in some states the
shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied
with.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that any selling stockholder will sell any or all of the shares of
common stock registered pursuant to the registration statement, of which this prospectus forms a
part.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended (the &#147;Exchange
Act&#148;), and the rules and regulations thereunder, including, without limitation, Regulation&nbsp;M of the
Exchange Act, which may limit the timing of purchases and sales of any of the shares of common
stock by the selling stockholders and any other participating person. Regulation&nbsp;M may also
restrict the ability of any person engaged in the distribution of the shares of common stock to
engage in market-making activities with respect to the
shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person
or entity to engage in market-making activities with respect to the shares of common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will pay all expenses of the registration of the shares of common stock pursuant to the
registration rights agreement, estimated to be $62,077.13 in total, including, without limitation, Securities
and Exchange Commission filing fees and expenses of compliance with state securities or &#147;blue sky&#148;
laws; provided, however, that a selling stockholder will pay all underwriting discounts and selling
commissions, if any. We will indemnify the selling stockholders against liabilities, including
some liabilities under the Securities Act, in accordance with the registration rights agreement, or
the selling stockholders will be entitled to contribution. We may be indemnified by the selling
stockholders against civil liabilities, including liabilities under the Securities Act, that may
arise from any written information furnished to us by the selling stockholder specifically for use
in this prospectus, in accordance with the related registration rights agreement, or we may be
entitled to contribution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once sold under the registration statement, of which this prospectus forms a part, the shares
of common stock will be freely tradable in the hands of persons other than our affiliates.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>LEGAL MATTERS</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the purposes of this offering, Dreier LLP, New York, New York is passing upon the
validity of the common stock offered by this prospectus.
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>EXPERTS</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eisner LLP, independent registered public accounting firm, has audited our balance sheets
included in our Annual Report on Form 10-K for the years ended December&nbsp;31, 2005 and December&nbsp;31,
2004, and the related statements of operations, stockholders&#146; equity/(deficiency), and cash flows
for each of the years in the three-year period ended December&nbsp;31, 2005, which are incorporated by
reference in this prospectus and elsewhere in the registration statement of which this prospectus forms a part. Our
financial statements are incorporated by reference in reliance upon the report of Eisner LLP and
upon their authority as experts in accounting and auditing.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>WHERE YOU CAN FIND MORE INFORMATION</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal securities laws require us to file information with the SEC concerning our
business and operations. Accordingly, we file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any document we file at the
SEC&#146;s public reference rooms, including those located at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on public reference rooms.
Our SEC filings are also available to the public from the SEC&#146;s web site at
<U><I>http://www.sec.gov</I></U><I>.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the SEC a registration statement on Form S-3 under the Securities Act
with respect to the securities being offering under this prospectus. This prospectus, which is a
part of that registration statement, does not include all the information contained in the
registration statement and its exhibits. For further information with respect to our company and
the securities, you should consult the registration statement and its exhibits. Statements
contained in this prospectus concerning the provisions of any documents are summaries of those
documents, and we refer you to the document filed with the SEC for more information. The
registration statement and any of its amendments, including exhibits filed as a part of the
registration statement or an amendment to the registration statement, are available for inspection
and copying as described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC allows us to &#147;incorporate by reference&#148; certain information we file with them in this
prospectus. This means that we can disclose important information to you by referring you to the
other information we have filed with the SEC. The information that we incorporate by reference is
considered to be part of this prospectus. Information that we file later with the SEC will
automatically update and supersede this information. Further, all filings we make under the
Exchange Act prior to the termination of the offering shall be deemed to be incorporated by
reference into this prospectus. The following documents filed by us with the SEC and any future
filings under Sections&nbsp;13(a), 13(c), 14 or 15(d) of the Exchange Act (File No.&nbsp;000-51481) made
prior to the termination of this offering are incorporated by reference:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Annual Report on Form 10-K for the year ended December&nbsp;31, 2005, filed March
29, 2006;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Quarterly Report on Form 10-Q for the quarter ended March&nbsp;31, 2006, filed May
10, 2006;
</TD>
</TR>
</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Quarterly Report on Form 10-Q for the quarter ended June&nbsp;30, 2006, filed August
10, 2006;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Quarterly Report on Form 10-Q for the quarter ended September&nbsp;30, 2006, filed
November&nbsp;14, 2006;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Current Reports on Form 8-K filed on January&nbsp;31, 2006, March&nbsp;6, 2006, April&nbsp;27,
2006, June&nbsp;2, 2006, October&nbsp;12, 2006, November&nbsp;1, 2006 and
November&nbsp;8, 2006; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the description of our common stock contained in our
registration statement on Form 8-A,
filed on August&nbsp;8, 2005, as it may be amended from time to time.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus may contain information that updates, modifies or is contrary to information
in one or more of the documents incorporated by reference in this prospectus. Reports we file with
the SEC after the date of this prospectus may also contain information that updates, modifies or is
contrary to information in this prospectus or in documents incorporated by reference in this
prospectus. Investors should review these reports as they may disclose a change in our business,
prospectus, financial condition or other affairs after the date of this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our website is <U><I>http://www.eosciences.com</I></U>. Our website links to our
filings available on the SEC website. We will also provide electronic or paper copies of our
filings free of charge upon written or oral request. Information contained on our website or any
other website is not incorporated into this prospectus and does not constitute a part of this
prospectus. You can request a free copy of the above filings or any filings subsequently
incorporated by reference into this prospectus by writing or calling us at:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Electro-Optical Sciences, Inc.<BR>
3 West Main Street, Suite&nbsp;201<BR>
Irvington, New York 10533<BR>
Attention: Richard I. Steinhart, Chief Financial Officer<BR>
(914)&nbsp;591-3783</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>WE HAVE NOT AUTHORIZED ANY DEALER, SALES PERSON OR OTHER PERSON TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER
OF THESE SECURITIES IN ANY STATE WHERE AN OFFER IS NOT PERMITTED. THE INFORMATION IN THIS
PROSPECTUS IS CURRENT AS OF DECEMBER&nbsp;1, 2006. YOU SHOULD NOT ASSUME THAT THIS PROSPECTUS IS
ACCURATE AS OF ANY OTHER DATE.</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ELECTRO-OPTICAL SCIENCES, INC.<BR><BR>
2,659,241 SHARES<BR><BR>
COMMON STOCK<BR><BR>
PROSPECTUS<BR>
December&nbsp;1, 2006
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>PART II<BR>
INFORMATION NOT REQUIRED IN PROSPECTUS</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. Other Expenses Of Issuance And Distribution</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the costs and expenses, other than placement agent commissions,
if any, which will be paid by us, in connection with the distribution of the common stock being
registered. All amounts are estimated, except the SEC registration fee:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SEC registration fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,077.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounting fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,000.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,000.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miscellaneous</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,000.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">62,077.13</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. Indemnification Of Directors And Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145 of the Delaware General Corporation Law permits a corporation to include in its
charter documents, and in agreements between the corporation and its directors and officers,
provisions expanding the scope of indemnification beyond that specifically provided by the current
law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;VIII of our fourth amended and restated certificate of incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;IX of our third amended and restated bylaws provides for the indemnification of
officers, directors or other agents acting on our behalf if such person acted in good faith and in
a manner reasonably believed to be in and not opposed to our best interest and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe his or her conduct
was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed to enter into Indemnification Agreements with each of our current directors and
officers to provide such directors and officers additional contractual assurances regarding the
scope of the indemnification set forth in our amended and restated certificate of incorporation and
amended and restated bylaws and to provide additional procedural protections. At present, there is
no pending litigation or proceeding involving any of our directors, officers or employees regarding
which indemnification is sought. The indemnification provision in our amended and restated
certificate of incorporation, amended and restated bylaws and the indemnification agreements
between us and each of our directors and officers may be sufficiently broad to permit
indemnification of our directors and officers for liabilities arising under the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for liabilities arising under the Securities Act may be permitted
to our directors, officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act, and is, therefore,
unenforceable.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Item&nbsp;16. Exhibits</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>EXHIBIT NO. DESCRIPTION</I></B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fourth Amended and Restated
Certificate of Incorporation of the Registrant.<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amended and Restated By-laws
of the Registrant.<SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen common stock
certificate.<SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Dreier LLP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement, dated October&nbsp;31, 2006, by and among the Registrant and the
Purchasers listed on Exhibit&nbsp;A thereto.<SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement, dated October&nbsp;31, 2006, by and among the Registrant and the
Purchasers listed on Exhibit&nbsp;A thereto.<SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement, dated October&nbsp;31, 2006, by and among the Registrant and the
Purchasers listed on Exhibit&nbsp;A thereto.<SUP style="font-size: 85%; vertical-align: text-top"> 3</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Placement Agency Agreement, dated October&nbsp;31, 2006, by and between the Registrant and Jefferies
&#038; Company,
Inc.<SUP style="font-size: 85%; vertical-align: text-top"> 3</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Dreier LLP (included in Exhibit&nbsp;5.1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Eisner LLP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">24.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (included as part of the signature page of this Registration Statement).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Registration Statement on Form S-1, as amended (File
No.&nbsp;333-125517), as filed on July&nbsp;15, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Registration Statement on Form S-1, as amended (File
No.&nbsp;333-125517), as filed on August&nbsp;8, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>


<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Form 8-K, as filed  on November&nbsp;3, 2006.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Item&nbsp;17. Undertakings</I></B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The undersigned registrant hereby undertakes:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) To include any prospectus required by Section&nbsp;10(a)(3) of the Securities Act of
1933.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) To reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the &#147;Calculation of
Registration Fee&#148; table in the effective registration statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) To include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to such
information in the registration statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><I>provided, however, </I>that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this
section do not apply if the registration statement is on Form S-3 and the information
required to be included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the registrant pursuant to Section&nbsp;13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement, or is contained in a form of prospectus filed pursuant to
Rule 424(b) that is part of the registration statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) That, for the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial <I>bona fide </I>offering thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) To remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) That, for the purpose of determining liability under the Securities Act of 1933 to any
purchaser, if the registrant is subject to Rule&nbsp;430C, each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements
relying on Rule&nbsp;430B or other than prospectuses filed in reliance on Rule&nbsp;430A, shall be deemed to
be part of and included in the registration statement as of the date it is first used after
effectiveness. <I>Provided, however, </I>that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such
date of first use.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The undersigned registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the registrant&#146;s annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan&#146;s annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial <I>bona fide </I>offering
thereof.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>SIGNATURES</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in Irvington, New York, on this 30<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day of
November, 2006.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>ELECTRO-OPTICAL SCIENCES, INC.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Joseph V. Gulfo
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Joseph V. Gulfo&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>POWER OF ATTORNEY</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each person whose signature appears below hereby constitutes and appoints Joseph V. Gulfo and
Richard I. Steinhart, and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including, without limitation, post-effective
amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the date indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>SIGNATURE</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>TITLE</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>DATE</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Joseph V. Gulfo
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
<B>Joseph V. Gulfo, M.D.</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, President and
Chief Executive Officer
(Principal Executive Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">November&nbsp;30, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Richard I. Steinhart
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
<B>Richard I. Steinhart</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">November&nbsp;30, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Breaux Castleman<BR>
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
<B>Breaux Castleman</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board of Directors
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">November&nbsp;30, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Sidney Braginsky<BR>
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
<B>Sidney Braginsky</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">November&nbsp;30, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ George C. Chryssis
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
<B>George C. Chryssis</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">November&nbsp;30, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Martin D. Cleary
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
<B>Martin D. Cleary</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">November&nbsp;30, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Dan W. Lufkin
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
<B>Dan W. Lufkin</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">November&nbsp;30, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Gerald Wagner, Ph.D.
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
<B>Gerald Wagner, Ph.D.</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">November&nbsp;30, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT NO. DESCRIPTION</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fourth Amended and Restated
Certificate of Incorporation of the Registrant.<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amended and Restated By-laws
of the Registrant.<SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen common stock
certificate.<SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Dreier LLP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement, dated October&nbsp;31, 2006, by and among the Registrant and the
Purchasers listed on Exhibit&nbsp;A thereto.<SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement, dated October&nbsp;31, 2006, by and among the Registrant and the
Purchasers listed on Exhibit&nbsp;A thereto.<SUP style="font-size: 85%; vertical-align: text-top"> 3</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement, dated October&nbsp;31, 2006, by and among the Registrant and the
Purchasers listed on Exhibit&nbsp;A thereto.<SUP style="font-size: 85%; vertical-align: text-top"> 3</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Placement Agency Agreement, dated October&nbsp;31, 2006, by and between the Registrant and Jefferies
&#038; Company,
Inc.<SUP style="font-size: 85%; vertical-align: text-top"> 3 </SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Dreier LLP (included in Exhibit&nbsp;5.1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Eisner LLP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">24.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (included as part of the signature page of this Registration Statement).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Registration Statement on Form S-1, as amended (File
No.&nbsp;333-125517), as filed on July&nbsp;15, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Registration Statement on Form S-1, as amended (File
No.&nbsp;333-125517), as filed on August&nbsp;8, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>


<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Form 8-K, as filed on
November&nbsp;3, 2006.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>2
<FILENAME>y27678exv5w1.htm
<DESCRIPTION>EX-5.1: OPINION OF DREIER LLP
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-5.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 6pt"><b>Exhibit 5.1</b>

</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>&#091;Dreier
LLP Letterhead&#093;</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">December&nbsp;1, 2006

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Electro-Optical Sciences, Inc.<BR>
3 West Main Street<BR>
Suite&nbsp;201<BR>
Irvington, New York 10533
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ladies and Gentlemen:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have acted as counsel to Electro-Optical Sciences, Inc., a Delaware corporation (the
&#147;Company&#148;), in connection with the preparation and filing with the Securities and Exchange
Commission (the &#147;SEC&#148;) of a Registration Statement on Form S-3 (the &#147;Registration Statement&#148;) under
the Securities Act of 1933, as amended (the &#147;Securities Act&#148;), relating to the sale, from time to
time, by certain stockholders of the Company (the &#147;Selling Stockholders&#148;) identified in the
prospectus (the &#147;Prospectus&#148;) which forms a part of the Registration Statement, in the manner
described in the Prospectus, of up to an aggregate of 2,659,241 shares of the Company&#146;s common
stock, par value $0.001 per share (the &#147;Common Stock&#148;), which includes an aggregate of 2,312,384
shares of Common Stock (the &#147;Shares&#148;) held by the Selling Stockholders and 346,857 shares of Common
Stock (subject to adjustment as described in the Prospectus, the &#147;Warrant Shares&#148;) that may be
issued from time to time upon the exercise of certain warrants held by the Selling Stockholders and
described in the Prospectus (the &#147;Warrants&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In rendering the opinion set forth below, we have examined and relied upon originals or
copies, certified or otherwise identified to our satisfaction, of such documents, corporate
records, certificates of public officials and other instruments of the Company as we have deemed
necessary or advisable for the purpose of rending this opinion. In our examination, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted to us as originals
and the conformity to the original of all documents submitted to us as copies. As to various
questions of fact material to our opinion, we have relied on the representations of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with our opinion expressed below, we have assumed that, at or prior to the time
of the delivery of any shares of Common Stock, the Registration Statement will have been declared
effective under the Securities Act of 1933, that the registration will apply to the Shares and the
Warrant Shares and will not have been modified or rescinded and that there will not have occurred
any change in law affecting the validity of the issuance of the Shares or the Warrant Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the foregoing, we are of the opinion that (a)&nbsp;the Shares to be sold by the Selling
Stockholders in the manner described in the Prospectus under the captions &#147;Selling Stockholders&#148;
and &#147;Plan of Distribution&#148; are validly issued, fully paid and non-assessable, and (b)&nbsp;subject to
the availability of a sufficient number of then authorized and unissued shares of Common Stock, the
Warrant Shares to be sold by the Selling Stockholders in the manner described in the Prospectus
under the captions &#147;Selling Stockholders&#146; and &#147;Plan of Distribution,&#148; when the Warrants have been
exercised and the Warrant Shares have been duly issued and paid for in accordance with the terms of
the Warrants, will be validly issued, fully paid and non-assessable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our opinion expressed above is limited to the General Corporation Law of the State of
Delaware. We express no opinions as to any other laws, statutes, rules or regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We hereby consent to the use of this opinion as Exhibit&nbsp;5.1 to the Registration Statement and
to the reference to this firm under the caption &#147;Legal Matters.&#148; In giving such opinion, we do not
thereby admit that we are acting within the category of persons whose consent is required under
Section&nbsp;7 of the Securities Act or the rules and regulations of the SEC thereunder.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Very truly yours,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3"  align="left">/s/ Dreier LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>3
<FILENAME>y27678exv23w2.htm
<DESCRIPTION>EX-23.2: CONSENT OF EISNER LLP
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-23.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>
<DIV align="right" style="font-size: 10pt; margin-top: 6pt"><b>Exhibit 23.2</b>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors<BR>
Electro-Optical Sciences, Inc.

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We consent to the incorporation by reference in the Registration Statement on Form S-3 of
Electro-Optical Sciences, Inc. of our report dated March&nbsp;17, 2006 (March&nbsp;24, 2006 as to the second
paragraph of Note 15) with respect to the financial statements of Electro-Optical Sciences, Inc.
included in its Annual Report (Form 10-K) for the year ended December&nbsp;31, 2005 filed with the
Securities and Exchange Commission. We also consent to the reference of our firm under the caption
&#147;Experts&#148; in the Registration Statement.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #ffffff" align="left">/s/ Eisner LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">New York, New York&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">November&nbsp;30, 2006
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
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<SEQUENCE>4
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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
