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<SEC-DOCUMENT>0000950123-07-011144.txt : 20070809
<SEC-HEADER>0000950123-07-011144.hdr.sgml : 20070809
<ACCEPTANCE-DATETIME>20070809095903
ACCESSION NUMBER:		0000950123-07-011144
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20070630
FILED AS OF DATE:		20070809
DATE AS OF CHANGE:		20070809

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:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-51481
		FILM NUMBER:		071038155

	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>10-Q
<SEQUENCE>1
<FILENAME>y37964e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>10-Q</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 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 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: 18pt; margin-top: 12pt"><B>FORM 10-Q</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the quarterly period ended June&nbsp;30, 2007</B>
</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the transition period from </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>to</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number 000 &#151; 51481</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>ELECTRO-OPTICAL SCIENCES, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><I>(Exact name of Registrant as specified in its charter)</I></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>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>13-3986004</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><I>(State or Other Jurisdiction of <BR>
Incorporation or Organization)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>(I.R.S. Employer<BR>
Identification No.)</I></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>3 West Main Street, Suite&nbsp;201</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Irvington, New York</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>10533</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><I>(Address of Principal Executive offices)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>(Zip Code)</I></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Registrant&#146;s Telephone Number, including area code:<BR>
(914)&nbsp;591-3783</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the Registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the Registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Yes&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;&nbsp;No&nbsp;<FONT face="Wingdings">&#111;</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act. (Check one):
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Large accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated filer&nbsp;<FONT face="Wingdings">&#254;</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Exchange Act).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of August&nbsp;6, 2007, 15,401,882 shares of the Registrant&#146;s common stock were outstanding.
</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">&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>Electro-Optical Sciences, Inc.<BR>
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="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">PART I. FINANCIAL INFORMATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">ITEM 1. Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#302">Condensed Balance Sheets as of June&nbsp;30, 2007 (unaudited)&nbsp;and December&nbsp;31, 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#303">Condensed Statements of Operations (unaudited)&nbsp;for the three and six months
ended June&nbsp;30, 2007 and 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#304">Condensed Statements of Cash Flows (unaudited)&nbsp;for the six months ended June
30, 2007 and 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#305">Notes to Financial Statements (unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#306">ITEM 2. Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#307">ITEM 3. Quantitative and Qualitative Disclosures about Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#308">ITEM 4. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#309">PART II. OTHER INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#310">ITEM 1. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#311">ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#312">ITEM 3. Defaults Upon Senior Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#313">ITEM 4. Submission of Matters to a Vote of Security Holders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#314">ITEM 5. Other Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#315">ITEM 6. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#316">SIGNATURES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><A href="#317">EXHIBIT INDEX</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y37964exv31w1.htm">EX-31.1: CERTIFICATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y37964exv31w2.htm">EX-31.2: CERTIFICATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y37964exv32w1.htm">EX-32.1: CERTIFICATION</A></FONT></TD></TR>
</TABLE>
</DIV>

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


<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /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">
<A name="302"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTRO-OPTICAL SCIENCES, INC.<BR>
CONDENSED BALANCE SHEETS</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>*</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Assets:</B></DIV></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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents (includes $12,000,000 in certificates of
deposit as of June&nbsp;30, 2007 and December&nbsp;31, 2006)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,075,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,939,527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receivable from sale and licensing of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487,680</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">343,634</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Current Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,797,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,770,841</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564,471</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Patents and trademarks, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,758</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,628,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,475,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></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>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Liabilities:</B></DIV></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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable (includes related parties of $53,987 as of
December&nbsp;31, 2006)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">408,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">641,036</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued expenses (includes related parties of $34,527 as of
December&nbsp;31, 2006)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">504,670</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,077</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Current Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">910,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,161,783</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">COMMITMENTS
AND CONTINGENCIES (Note 7)</DIV></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>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Stockholders&#146; Equity</B></DIV></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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock &#151; $.001 par value; authorized 30,000,000 shares;
issued and outstanding 13,401,704 shares at June&nbsp;30, 2007 and
13,296,448 shares at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,296</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,019,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,525,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,314,999</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,224,787</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,717,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,313,917</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Liabilities and Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,628,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,475,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</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>Derived from the audited balance sheet as of December&nbsp;31, 2006</TD>
</TR>

</TABLE>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to the financial statements
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /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">
<A name="303"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTRO-OPTICAL SCIENCES, INC.<BR>
CONDENSED STATEMENTS OF OPERATIONS<BR>
(unaudited)</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="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Three months ended June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Six months ended June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses:</DIV></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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,885,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,020,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,839,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,005,876</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,439,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,080,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,750,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,164,283</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,324,863</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,101,239</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,589,421</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,170,159</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">499,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">353,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss per common
share, basic and diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,096,679</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,927,750</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,090,212</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,816,618</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted
net loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.27</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.46</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.54</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted
weighted average number
of common shares
outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,398,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,869,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,384,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,860,682</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to the financial statements
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /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">
<A name="304"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTRO-OPTICAL SCIENCES, INC.<BR>
CONDENSED STATEMENTS OF CASH FLOWS<BR>
(unaudited)</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Six Months Ended June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities:</DIV></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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,090,212</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,816,618</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net loss to net cash used in operating activities:</DIV></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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncash compensation and amortization of deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573,911</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock options issued for consulting fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of unearned interest income &#151; discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,320</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,146</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Decrease) increase in accounts payable and accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(246,386</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,650</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,082</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash used in operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,747,807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,196,328</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing activities:</DIV></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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Patent costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,321</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,377</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(191,162</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(315,930</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,483,335</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash used in investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(230,483</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,809,642</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities:</DIV></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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash provided by financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net decrease in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,863,763</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,968,320</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,939,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,505,030</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents at end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,075,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,536,710</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to the financial statements
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /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">
<A name="305"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTRO-OPTICAL SCIENCES, INC.<BR>
NOTES TO CONDENSED FINANCIAL STATEMENTS<BR>
(In thousands, except for share and per share data)<BR>
(unaudited)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1. ORGANIZATION AND BASIS OF PRESENTATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Electro-Optical Sciences, Inc., a Delaware corporation (&#147;EOS&#148; or the &#147;Company&#148;), is focused on the
design and development of a non-invasive, point-of-care instrument for assisting in the early
diagnosis of melanoma. The Company has entered into a Protocol Agreement with the Food and Drug
Administration (&#147;FDA&#148;) which is an agreement for the conduct of the pivotal clinical trial and
establishment of the safety and effectiveness of the MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> device. On
October&nbsp;12, 2006, the Company announced that the FDA informed the Company that when submitted, the
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> premarket approval, or PMA, application would receive expedited
review. Expedited review means that upon filing a PMA with the FDA, it is placed at the beginning
of the FDA&#146;s 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, there can be no assurance that this
will be the case. Upon obtaining premarket approval from the FDA, the Company plans to launch
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the United States. The pivotal clinical trial commenced at the end
of January&nbsp;2007. If the pivotal trial and FDA approval process proceeds as anticipated, management
believes that PMA approval could come as early as the second half of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To date the Company has not generated any revenues from MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. All of the
Company&#146;s historical revenues have come from activities and products that have since been
discontinued, including our DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> product, a non-invasive imaging device for
the detection of dental cavities. The Company discontinued all operations associated with its
DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> product effective as of April&nbsp;5, 2005 in order to focus its resources
on the development and commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. As more fully described
in Note 11, in December&nbsp;2006, the Company sold and licensed its rights to the
DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> assets and does not expect to have any significant continuing
responsibility for the DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> business or products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company anticipates that it will continue to incur net losses for the foreseeable future in the
development and commercialization of the Melafind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> device. From inception, the
Company has financed operations primarily through the sale of convertible preferred stock and
subsequently sold common stock as part of an initial public offering on October&nbsp;28, 2005 and a
private placement that closed in November&nbsp;2006 (refer to Note 8 for further details). Management
believes that the proceeds from these transactions will permit the Company to fund anticipated
levels of operations through mid-2008. However, the Company will require additional funds to
commercialize MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. The Company faces certain risks and uncertainties
which are present in many emerging medical device companies regarding future profitability, ability
to obtain future capital, protection of patents and intellectual property rights, competition,
rapid technological change, government regulations, changing health care marketplace, recruiting
and retaining key personnel, and reliance on third party manufacturing organizations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On
July&nbsp;31, 2007, and as more fully described in Note 12, the
Company entered into a securities
purchase agreement and a registration rights agreement for the private placement of 2,000,178
shares of the Company&#146;s common stock and warrants to purchase up to 500,041 shares of the Company&#146;s
common stock. Gross proceeds were approximately $11.5&nbsp;million, and net proceeds totaled
approximately $10.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The unaudited financial statements included herein have been prepared from the books and records of
the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the
&#147;SEC&#148;) for reporting on Form 10-Q. The information and note disclosures normally included in
complete financial statements prepared in accordance with generally accepted accounting principles
in the United States (&#147;GAAP&#148;) have been condensed or omitted pursuant to such rules and
regulations. The interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company&#146;s Annual Report on Form 10-K for the
year ended December&nbsp;31, 2006.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /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">The Company&#146;s management is responsible for the financial statements included in this document. The
Company&#146;s interim financial statements are unaudited. Interim results may not be indicative of the
results that may be expected for the year. However, the Company believes all adjustments
considered necessary for a fair presentation of these interim financial statements have been
included and are of a normal and recurring nature.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. USE OF ESTIMATES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in conformity with GAAP requires the use of estimates and
assumptions by management that affect reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. The most significant estimates relate to
stock based compensation arrangements and accrued expenses. Actual results could differ from these
estimates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2006, the Financial Accounting Standards Board issued Interpretation No.&nbsp;48, &#147;Accounting
for Uncertainty in Income Taxes-an Interpretation of FASB Statement No.&nbsp;109,&#148; (&#147;FIN 48&#148;) which
clarifies the accounting for uncertainty in tax positions. This Interpretation requires that we
recognize, in our condensed financial statements, the impact of a tax position if that position is
more likely than not of being sustained on audit, based on the technical merits of the position.
The provisions of FIN 48 were effective as of January&nbsp;1, 2007. We have evaluated our tax positions
and determined that the adoption of this pronouncement did not have a material impact on our
financial position or results of operations. Our tax return net operating loss carryforwards are
significant. The tax years in which losses arose may be subject to audit by the Internal Revenue
Service when such carryforwards are utilized to offset taxable income in future periods.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. RECENT ACCOUNTING DEVELOPMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2007, the Financial Accounting Standards Board (&#147;FASB&#148;) issued SFAS No.&nbsp;159, &#147;The Fair
Value Option for Financial Assets and Financial Liabilities, including an amendment to SFAS No.
115&#148; (SFAS No.&nbsp;159). This statement permits entities to choose to measure many financial
instruments and certain other items at fair value. The objective is to improve financial reporting
by providing entities with the opportunity to mitigate volatility in reporting earnings caused by
measuring related assets and liabilities differently without having to apply complex hedge
accounting provisions. This statement is expected to expand the use of fair value measurements,
which is consistent with the FASB&#146;s long-term measurement objectives for accounting for financial
instruments. SFAS No.&nbsp;159 is effective for fiscal years beginning after November&nbsp;15, 2007. The
Company does not expect that the adoption of SFAS No.&nbsp;159 will have a material impact on the
Company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, &#147;Fair Value Measurements&#148; (SFAS 157). This
statement defines fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. This statement is effective for financial statements
issued for fiscal years beginning after November&nbsp;15, 2007; however, earlier application is
encouraged. The Company does not expect the adoption of SFAS 157 to have a material impact on its
financial statements
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. NET LOSS PER COMMON SHARE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net loss per share is presented in accordance with the provisions of SFAS No.&nbsp;128, &#147;Earnings Per
Share&#148; (EPS). Basic EPS excludes dilution for potentially dilutive securities and is computed by
dividing net loss attributable to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted EPS gives effect to dilutive options, warrants and
other potential common shares outstanding during the period. Diluted net loss per common share is
equal to the basic net loss per common share since all potentially dilutive securities are
anti-dilutive for each of the periods presented. Potential common stock equivalents excluded
consist of stock options and warrants which are summarized as follows:
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /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="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,674,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,651,705</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">626,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,280</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,301,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,949,985</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. STOCK-BASED COMPENSATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has one stock-based compensation plan which allows the Board of Directors to grant
incentives to employees, consultants directors, officers and collaborating scientists in the form
of incentive stock options, nonqualified stock options and restricted stock awards. The Company
also has two other stock-based compensation plans pursuant to which stock options are outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;1, 2006, the Company began recording compensation expense associated with stock
options and other forms of equity compensation in accordance with SFAS No.&nbsp;123 (revised 2004),
&#147;Share-Based Payment&#148; (SFAS 123R), as interpreted by SEC Staff Accounting Bulletin No.&nbsp;107. Prior
to January&nbsp;1, 2006, the Company accounted for stock options according to the provisions of
Accounting Principles Board Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to Employees&#148; (APB 25),
and related interpretations, and therefore no related compensation expense was recorded for awards
granted with no intrinsic value. The Company has adopted the modified prospective transition method
provided for under SFAS 123R. Under this transition method, compensation cost associated with stock
options recognized in the three and six month periods ended June&nbsp;30, 2006 and 2007 includes: (1)
amortization related to the remaining unvested portion of all stock option awards granted prior to
January&nbsp;1, 2006 over the requisite service period based on the grant-date fair value estimated in
accordance with the original provisions of SFAS 123, &#147;Accounting for Stock-Based Compensation&#148;, and
(2)&nbsp;amortization related to all stock option awards granted on or subsequent to January&nbsp;1, 2006,
based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. For
performance-based grants, a compensation charge is recorded when it is probable that performance or
service conditions will be satisfied. The probability of vesting is updated at each reporting
period, and compensation is adjusted via a cumulative catch-up adjustment or prospectively
depending upon the nature of the change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The compensation expense recognized in the Statement of Operations in the second quarters of 2007
and 2006 for stock options and restricted stock awards amounted to $113 and $263, respectively.
For the six months ended June&nbsp;30, 2007 and 2006 compensation expense totaled $379 and $574
respectively. Cash received from options exercised under all share-based payment arrangements for
the three months ended June&nbsp;30, 2007 and 2006 were $29 and $10, respectively. For the corresponding
six month periods in 2007 and 2006, cash received from option exercises totaled $115 and $38,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Details regarding the valuation and accounting for stock options are as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were 106,316 options granted during the second quarter and no options granted in the first
quarter of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of each option award granted after the adoption of SFAS 123R is estimated on the
date of grant using the Black-Scholes option valuation model and assumptions as noted in the
following table:
</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="76%">&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 nowrap align="center" colspan="3"><B>For the six Months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>For the six Months</B></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"><B>Ended June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Ended June 30, 2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">60</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">60</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">4.54-5.02</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.15</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend Yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The expected life of the options is based on the observed and expected time to post-vesting,
forfeiture and exercise. Groups of employees that have similar historical exercise behavior are
considered separately for valuation purposes. The expected volatility is based on implied
volatility from other publicly-traded options and other factors. The risk-free interest rate is
based on the continuous rates provided by the U.S. Treasury with a term equal to the expected life
of the option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock awards under the Company&#146;s current plans are granted at prices which are no less than the
market value of the stock on the date of grant. Options granted under the 2005 Stock Incentive Plan
(&#147;2005 Plan&#148;) are generally time-based or performance-based options, and vesting varies
accordingly. Options under this plan expire five years from the date of grant.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /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">Since the Company has adopted the 2005 Plan, awards are not granted under the Company&#146;s previous
stock option plans; however, additional shares are reserved for issuance pursuant to the 2003 Stock
Incentive Plan (&#147;2003 Plan&#148;) in connection with a
formula-based option granted to the Company&#146;s CEO
Dr.&nbsp;Joseph Gulfo.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The status of the Company&#146;s stock option plans at June&nbsp;30, 2007 is summarized in the following
tables:
</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="52%">&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 nowrap align="center" colspan="3"><B>Weighted</B></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>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></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>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Remaining</B></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>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Aggregate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price per</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Term in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Intrinsic</B></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"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,689,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(105,256</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.09</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited or expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,146</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.82</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>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at June&nbsp;30, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,674,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,262</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested and exercisable at June&nbsp;30, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,992</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&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>
</TR>
<!-- End Table Body -->
</TABLE>
</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="40%">&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 nowrap align="center" colspan="3"><B>Options Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&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>Weighted-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Options Exercisable</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>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-</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>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Range of Exercise Prices</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Life</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Price</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$.01-$.46</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">818,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">2.2 years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$.47-$1.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4.6 years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$1.01-$7.75</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">736,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4.1 years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.99</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$.01-$7.75</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,674,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">3.9 years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&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 align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2007 the weighted average fair value of options granted,
estimated as of the grant date using the Black-Scholes option valuation model, was $2.86. There
were no options granted during the first three months of 2007. The total intrinsic value of
options exercised during the three and six month periods ended June&nbsp;30, 2007 was $117 and $558,
respectively. For the three and six months ended June&nbsp;30, 2006, the total intrinsic value of
options exercised was $100, and $228 respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2007, of the total 1,674,326 options outstanding 1,097,425 have not vested. Of this
total unvested amount, 972,025 will vest upon the attainment of certain milestones, and the balance
will vest over the requisite service period. Based on 15,702,875 shares outstanding (on a
fully-diluted basis) as of June&nbsp;30, 2007, and assuming such shares remain the total number of
shares outstanding on the date we receive PMA approval of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, the number
of shares subject to Dr.&nbsp;Gulfo&#146;s third stock option is 546,362. This third stock option vests 50%
at the time of PMA approval of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, and the remaining 50% in four equal
installments over the one-year period following such PMA approval of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>.
As of June&nbsp;30, 2007, there was $2,301 of total unrecognized compensation cost related to unvested
options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Although no new options are to be granted under the Company&#146;s 2003 Stock Incentive Plan, our
shareholders recently approved a 500,000 share increase in the plan in order to satisfy our
contractual obligation under Dr.&nbsp;Gulfo&#146;s existing employment contract (see Part&nbsp;II Item&nbsp;4
Submission of Matters to a Vote of Security Holders). Of the 844,559 shares now authorized and
available under the 2003 Stock Incentive Plan, 546,362 have been allocated to Dr.&nbsp;Gulfo as of June
30, 2007, in accordance with the provisions of his contract.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2007 there were a total of 1,278,787 option shares available; 980,590 shares
available for future grants under the Company&#146;s 2005 Stock Incentive Plan and 298,197 under the
2003 Stock Incentive Plan, which is the balance available for allocation to Dr.&nbsp;Gulfo in accordance
with the provisions of his employment contract.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /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: 12pt"><B>7. COMMITMENTS AND CONTINGENCIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the start of clinical trials, the Company has committed to several clinical
sites a total amount of approximately $150 in contracts that do not exceed one year. These
contracts are cancelable with 30&nbsp;days&#146; prior notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is party to two non-cancelable operating leases for office space expiring June&nbsp;2009 and
November&nbsp;2010. The leases are subject to escalations for increases in operating expenses. The
approximate aggregate minimum future payments under these leases are due as follows:
</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="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2010</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:15px; text-indent:-15px">$125
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$253
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$188
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$105</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;28, 2007 the Company announced the signing of an agreement with L&#146;Oreal to study and
assess the feasibility of using EOS&#146; novel multi-spectral imaging technology for the evaluation and
differentiation of pigmented skin lesions of cosmetic importance. EOS has granted L&#146;Oreal an option
to take an exclusive license to use EOS technology in the field covered by the research, on terms
to be mutually agreed. The option expires on the earlier to occur of six months after the
completion of the Feasibility Plan, as defined in the agreement, or August&nbsp;31, 2008. The laboratory
and clinical research will be funded by L&#146;Oreal. Pursuant to the agreement, L&#146;Oreal is responsible
for all costs and expenses incurred in connection with the Feasibility Program, and will reimburse
EOS for expenses incurred by EOS with respect to the Feasibility Program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August of 2006, the Company engaged Carl Zeiss Jena GmbH on usual commercial terms to build the
lenses and assemblies, as well as provide certain technical consulting, for the
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> units which will be used in the Company&#146;s pivotal clinical trial. We
expect this work to take place throughout 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2006, the Company entered into an agreement with ASKION GmbH (&#147;ASKION&#148;) to produce and
test commercial-grade MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> hand-held imaging device systems. Under the
agreement, ASKION is to produce up to forty MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> imaging devices for the
Company to be utilized in the Company&#146;s pivotal trial which will be conducted under the auspices of
the Protocol Agreement reached with FDA. The Company is required to make payments to ASKION upon
delivery of the MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> systems. The Company expects to maintain a
relationship, which has evolved into a month-to-month agreement, with ASKION and continue with
development activities throughout 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has an employment agreement with its President and Chief Executive Officer, Dr.&nbsp;Gulfo,
which provides for an annual base salary, stock options and performance bonuses at the discretion
of the Board of Directors. The agreement, which provides for automatic one-year renewal terms,
currently runs through the end of 2007. Effective May&nbsp;31, 2006 the Board of Directors decided to
increase Dr.&nbsp;Gulfo&#146;s annual base salary to $235, and awarded him a bonus in the amount of $50. On
May&nbsp;8, 2007, but effective April&nbsp;1, 2007, the Board of Directors increased Dr.&nbsp;Gulfo&#146;s annual base
salary to $260 and awarded him a bonus of $60.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is not currently subject to any material legal proceedings, nor to management&#146;s
knowledge is any material legal proceeding threatened against the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. PRIVATE PLACEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;31, 2006, the Company entered into securities purchase agreements and a registration
rights agreement with certain accredited investors for the private placement of 2,312,384 shares of
the Company&#146;s common stock and warrants to purchase up to 346,857 shares of the Company&#146;s common
stock for aggregate gross proceeds of approximately $13.2&nbsp;million and net proceeds of approximately
$12.5&nbsp;million. Pursuant to the securities purchase agreements, for a purchase price of $5.70 each
investor received one share of the Company&#146;s common stock and a warrant to purchase 0.15 of a share
of the Company&#146;s common stock. The warrants are five-year warrants with an exercise price of $6.70
per share. Pursuant to the registration rights agreement, the Company has filed a resale
registration statement covering the shares, including the shares issuable upon the exercise of the
warrants, with the SEC. In the event that the Company fails to meet certain deadlines, as described
in the registration rights agreement, the holders would be entitled to certain monetary damages.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /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">However, in no event is the Company obligated to make payments in excess of 10% of the aggregate
purchase price of the common shares. The Company has concluded that it is unlikely that the Company
would be required to remit any payments to its investors for failing to maintain its effectiveness.
The Company&#146;s resale registration statement on Form S-3 was declared effective by the Securities
and Exchange Commission (file #333-139056) February&nbsp;12, 2007.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. WARRANTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Warrants outstanding at June&nbsp;30, 2007 include a five-year warrant to purchase 75,000 shares of the
Company&#146;s common stock at an exercise price of $7.00 per share issued to one of the Company&#146;s
consultants in 2004, and seven-year warrants to purchase an aggregate of 54,988 shares the
Company&#146;s common stock at an exercise price of $4.52 per share issued in connection with the sale
of Series&nbsp;C redeemable convertible preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the Company&#146;s initial public offering which closed on November&nbsp;2, 2005, the
Company issued 150,000 warrants to the underwriters to purchase shares of the Company&#146;s common
stock at $6.25 per share which became exercisable commencing October&nbsp;28, 2006 and have a five-year
term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Additionally, as previously discussed, in connection with the Company&#146;s October&nbsp;31, 2006 financing,
warrants to purchase up to 346,857 shares of the Company&#146;s common stock were issued. The warrants
are five-year warrants with an exercise price of $6.70 per share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. RELATED PARTY CONSULTING AGREEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has in place the following consulting agreements with related parties:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Consulting Agreement with Breaux Castleman</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2003, the Company entered into a consulting agreement with Breaux Castleman, the Chairman
of the Company&#146;s Board of Directors, for consulting services related to the FDA approval of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, and the Company&#146;s business and financial strategy. Under this
agreement, Mr.&nbsp;Castleman receives compensation for each month of services rendered. The Company
made payments, pursuant to this consulting agreement, of $6 and $12, respectively, for the three
and six month periods ending June&nbsp;30, 2007, and $8 and $25 for the comparable periods in 2006.
This consulting agreement is terminable by either party by providing thirty days&#146; prior written
notice.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Consulting Agreement with Marek Elbaum, Ph.D.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to a consulting agreement effective as of May&nbsp;31, 2005, the Company retained Marek Elbaum,
Ph.D., the Company&#146;s founder and former President and Chief Science and Technology Officer, as the
Company&#146;s Chief Scientist. In consideration of the services to be provided, the Company agreed to
pay Dr.&nbsp;Elbaum a monthly fee of $15. The term of this agreement extended for a period of two years
and was automatically renewable for an additional one-year period. In the event of a non-renewal or
in the event that Dr.&nbsp;Elbaum&#146;s services terminate as a result of his death or disability, the
Company agreed to pay Dr.&nbsp;Elbaum a termination fee of $100. In May of 2007 and effective June&nbsp;1,
2007, Dr.&nbsp;Elbaum and the Company entered into an amended agreement. Under the terms of the amended
agreement Dr.&nbsp;Elbaum will be paid a monthly fee of $9 for the next 20&nbsp;months.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Consulting Agreement with Robert Friedman, M.D.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective as of June&nbsp;1, 2005, the Company retained the services of Robert Friedman, M.D., for an
initial term of one year as a consultant, medical advisor to our Board of Directors, and in
connection with the clinical testing of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. In consideration for these
services, Dr.&nbsp;Friedman will be paid at a rate of $5 per day.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This consulting agreement automatically renewed effective June&nbsp;1, 2006, and again June&nbsp;1, 2007 for
additional one-year terms, and continues to automatically renew for successive one-year terms
unless either party terminates the agreement at least 30&nbsp;days prior to the expiration of the
agreement. The Company made payments to Dr.&nbsp;Friedman totaling $12 and $12 for the three-and six
month periods ending June&nbsp;30, 2007, and $10 and $22 respectively for the same periods a year
earlier.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Consulting Agreement with Gerald Wagner, Ph.D.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;24, 2006, the Company entered into an amended and restated consulting agreement with
Gerald Wagner, Ph.D., a member of the Company&#146;s Board of Directors and its former Acting Chief
Operating Officer. Under this amended consulting agreement, the Company agreed to pay Dr.&nbsp;Wagner
the annual amount of $180 payable monthly over the term of the agreement. In addition, in
connection with his ongoing engagement as a consultant, Dr.&nbsp;Wagner received a stock option grant of
50,000 shares of the Company&#146;s common stock which vested upon commencement of the pivotal trial for
Melafind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> in January&nbsp;2007. The Company recorded a $140 charge to operations
during the quarter ended March&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, in connection with the start of the Company&#146;s pivotal clinical trial at the end of
January&nbsp;2007, Dr.&nbsp;Wagner has transitioned out of his role as our Acting Chief Operating Officer and
has entered into an amendment to his amended and restated consulting contract with the Company.
Under the terms of the amended contract, commencing February&nbsp;2007 Dr.&nbsp;Wagner will be paid a monthly
retainer of $2.5 and will be paid $2.5 for each additional consulting day. This amended agreement
will end at the option of Dr.&nbsp;Wagner or the Company at any time, by providing fifteen days&#146; prior
written notice, or immediately upon the mutual agreement of the Company and Dr.&nbsp;Wagner. The
Company incurred consulting costs pursuant to this agreement of $7.5 and $12.5 in the three and six
month periods ended June&nbsp;30, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. SALE AND LICENSING OF DISCONTINUED OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective April&nbsp;5, 2005, the Company decided to discontinue all operations associated with its
DIFOTI<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> product in order to focus its resources and attention on the
development and commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. In accordance with the
provisions of SFAS No.&nbsp;144, &#147;Accounting for the Impairment or Disposal of Long-lived Assets,&#148; the
results of operations of the DIFOTI<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> business have been excluded from
continuing operations and have been reported as discontinued operations. The assets and liabilities
of the business have been classified as held for sale. During December&nbsp;2006, the Company entered
into a sale and exclusive licensing agreement with KaVo Dental GmbH (&#147;KaVo&#148;), a leading dental
equipment manufacturer, which provides for KaVo to further develop and commercialize
DIFOTI<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. Upon execution of the agreement, KaVo paid the Company $500. The
second $500 payment was received on July&nbsp;20, 2007. Beginning in 2008 or earlier, KaVo is required
to pay to the Company a royalty stream based upon the worldwide aggregate net sales of the licensed
product, as defined in the license agreement, or a set minimum. During the year ended December&nbsp;31,
2006, the Company recorded a gain of $781 on the sale and licensing of its remaining
DIFOTI<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> assets based upon the cash proceeds and the discounted value of the
second payment. Royalties will be recorded when earned.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12. SUBSEQUENT EVENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On
July&nbsp;31, 2007, the Company entered into a securities purchase agreement and a registration rights
agreement with certain accredited investors for the private placement of 2,000,178 shares of the
Company&#146;s common stock and warrants to purchase up to 500,041 shares of the Company&#146;s common stock
for aggregate gross proceeds of approximately $11.5&nbsp;million. The private placement closed August
3, 2007. Pursuant to the securities purchase agreement, for a purchase price of $5.75 each
investor will receive one share of the Company&#146;s common stock and a warrant to purchase 0.25 of a
share of common stock. The warrants are five-year warrants with an exercise price of $8.00 per
share. The private placement was completed pursuant to an exemption from registration provided by
Section&nbsp;4(2) of the Securities Act of 1933, as amended, and Regulation&nbsp;D promulgated thereunder.
Pursuant to the terms of the registration rights agreement, the Company has agreed to cause a
resale registration statement covering the shares, including the shares issuable upon exercise of
the warrants, to be filed within 30&nbsp;days after closing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The approximately $10.8&nbsp;million in net proceeds from the closing will be used for general corporate
purposes.
</DIV>


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<DIV align="left">
<A name="306"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">ITEM 2.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTRO-OPTICAL SCIENCES, INC.<BR>
MANAGEMENT&#146;S DISCUSSION AND ANALYSIS<BR>
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This
management&#146;s discussion and analysis of financial condition and
results of operations is intended to provide information to help you
better understand and evaluate our financial condition and results of
operations. We recommend that you read this section in conjunction with our
Financial Statements and Notes to Financial Statements and with our Annual Report on Form 10-K for
the year ended December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This quarterly report on Form 10-Q, including the following management&#146;s discussion and analysis of
financial condition and results of operations, contains forward-looking statements that you should
read in conjunction with the financial statements and notes to financial statements that we have
included elsewhere in this report. These statements are based on our current expectations,
assumptions, estimates and projections about our business and our industry, and involve known and
unknown risks, uncertainties, and other factors that may cause our or our industry&#146;s results,
levels of activity, performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied in, or contemplated by, the
forward-looking statements. Words such as &#147;believe&#148;, &#147;anticipate,&#148; &#147;expect,&#148; &#147;intend,&#148; &#147;plan,&#148;
&#147;will,&#148; &#147;may,&#148; &#147;should,&#148; &#147;estimate,&#148; &#147;predict,&#148; &#147;potential,&#148; &#147;continue,&#148; or the negative of such
terms or other similar expressions, identify forward-looking statements. Our actual results and the
timing of events may differ significantly from the results discussed in the forward-looking
statements, and you should not place undue reliance on these statements. Factors that might cause
such a difference include those discussed below under the heading &#147;Risk Factors,&#148; as well as those
discussed elsewhere in this quarterly report on Form 10-Q. We disclaim any intent or obligation to
update any forward-looking statements as a result of developments occurring after the period
covered by this report or otherwise.
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, features a hand-held imaging device that emits multiple wavelengths
of light to capture images of suspicious pigmented skin lesions and extract data. We currently do
not have any commercialized products or any significant source of revenue; however, the financial
results for periods prior to December&nbsp;2006 discussed below account for the revenues and the related
expenses associated with our DIFOTI<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> product, a non-invasive imaging device for
the detection of dental cavities, as a discontinued operation. We decided to discontinue all
operations associated with our DIFOTI<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> product effective as of April&nbsp;5, 2005 in
order to focus our resources and attention on the development and commercialization of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. On December&nbsp;11, 2006 we announced that we had signed a sales and
exclusive licensing agreement with KaVo, a leading dental equipment manufacturer, to further
develop and commercialize DIFOTI<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. In accordance with the terms of the
agreement, KaVo paid us an up-front sum and has made a second payment to us on July&nbsp;20, 2007. KaVo
will pay us an annual royalty based on the number of systems sold or a set minimum per calendar
year following their commercial re-launch of DIFOTI<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. With the completion of
this transaction we do not expect to have any significant continuing responsibility for the
DIFOTI<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Unless otherwise indicated, the following discussion relates to our continuing operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our revenue for the foreseeable future will depend on the commercialization of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> and may vary substantially from year to year and quarter to quarter.
Our operating expenses may also vary substantially from year to year and quarter to quarter based
on the timing of the pivotal trial that began at the end of January&nbsp;2007 and its patient
enrollment. We believe that period-to-period comparisons of our results of operations may not be
meaningful and should not be relied on as indicative of our future performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We commenced operations in December&nbsp;1989 as a New York corporation and re-incorporated as a
Delaware corporation in September&nbsp;1997. Since our inception, we have generated significant losses.
As of June&nbsp;30, 2007, we had an accumulated deficit of $37.3&nbsp;million. We expect to continue to spend
significant amounts on 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">On October&nbsp;28, 2005, we completed an initial public offering. We issued 4,000,000 shares of common
stock on October&nbsp;28, 2005 and 262,300 shares of common stock on November&nbsp;15, 2005, both issuances
at $5.00 per share. After deducting underwriting discounts and expenses and offering-related expenses, the initial public offering
resulted in net proceeds to the Company of approximately $17.7&nbsp;million.
</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;31, 2006, we entered into securities purchase agreements and a registration rights
agreement with certain accredited investors for the private placement of 2,312,384 shares of the
Company&#146;s common stock and warrants to purchase up to 346,857 shares of the Company&#146;s common stock
for aggregate gross proceeds of approximately $13.2&nbsp;million and net proceeds of approximately $12.5
million. The transaction closed November&nbsp;3, 2006. We believe that the proceeds from these two
transactions will be sufficient to fund our anticipated level of operations through mid-2008. We
will however need to raise additional funds in order to achieve significant commercialization of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> and generate significant revenues.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Most of our expenditures to date have been for research and development activities and general and
administrative expenses. Research and development expenses represent costs incurred for product
development, clinical trials and activities relating to regulatory filings and manufacturing
development efforts. We expense all of our research and development costs as they are incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our research and development expenses incurred for the three and six months ended June&nbsp;30, 2007
were expenses related primarily to the development of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. We expect to
incur additional research and development expenses relating to MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> prior
to its commercial launch in the US and selected markets outside the US. We also continue to work
with ASKION, a company that has become an integral member of our MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>
development team. ASKION is currently producing additional MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> systems
for our pivotal clinical trial that started at the end of January&nbsp;2007, as well as for other
clinical studies of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. Our research and development expenses are
subject to the risks and uncertainties associated with clinical trials and the FDA regulatory
review and approval process. As a result, our research and development expenses could exceed our
estimated amounts, possibly materially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General and administrative expenses consist primarily of salaries and related expenses, general
corporate activities and costs associated with our efforts to obtain PMA approval for
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> and toward development of a commercial infrastructure to market and
sell MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. We anticipate that general and administrative expenses will
increase as a result of the expected expansion of our operations, facilities and other activities
associated with the planned expansion of our business, together with the additional costs
associated with operating as a public company. We expect selling, general and administrative
expenses to increase as we develop our sales and marketing capabilities to support placing
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> in selected markets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies and Significant Judgments and Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our management&#146;s discussion and analysis of our financial condition and results of operations are
based on our financial statements, which have been prepared in accordance with GAAP. The
preparation of these financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported revenues and expenses
during the reporting periods. On an ongoing basis, we evaluate our judgments related to accounting
estimates. We base our estimates on historical experience and on various other factors that we
believe are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different assumptions or
conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that the following accounting policies and significant judgments and estimates relating
to revenue recognition, stock-based compensation charges, and accrued expenses are most critical to
aid you in fully understanding and evaluating our reported financial results.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revenue Recognition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We currently do not have any commercialized products or any source of revenue.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock-Based Compensation and Deferred Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;1, 2006, the Company began recording compensation expense associated with stock
options and other forms of equity compensation in accordance with Statement of Financial Accounting
Standards No.&nbsp;123 (revised 2004), <I>Share-Based Payment </I>(SFAS 123R), as interpreted by SEC Staff
Accounting Bulletin No.&nbsp;107. Prior to January&nbsp;1, 2006, the Company accounted for stock options
according to the provisions of Accounting Principles Board Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees </I>(APB 25), and related interpretations, and
therefore no related compensation expense was recorded for awards granted with no intrinsic value.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company adopted the modified
prospective transition method provided for under SFAS 123R. Under this transition method,
compensation cost associated with stock options in 2006 and 2007 includes: (1)&nbsp;quarterly
amortization related to the remaining unvested portion of all stock option awards granted prior to
January&nbsp;1, 2006, over the requisite service period based on the grant-date fair value estimated in
accordance with the original provisions of SFAS 123, <I>Accounting for Stock-Based Compensation</I>; and
(2)&nbsp;quarterly amortization related to all stock option awards granted on or subsequent to January
1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS
123R.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have also granted to certain employees stock options that vest with the attainment of
development milestones not under the Company&#146;s control. Upon the attainment of the relevant
development milestones, there could be a significant compensation charge based on the fair value of
such options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Options or warrants issued to non-employees for services are recorded at fair value and accounted
for in accordance with Emerging Issues Task Force (EITF)&nbsp;Issue No.&nbsp;96-18, <I>Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services. </I>For equity instruments that are not immediately vested, compensation costs are
measured on the date such instruments vest or a performance commitment is reached, as defined in
EITF 96-18. The costs are classified in the accompanying Statement of Operations based on the
nature of the service performed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Accrued Expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As part of the process of preparing financial statements, we are required to estimate accrued
expenses. This process involves identifying services that have been performed on our behalf and
estimating the level of service performed and the associated cost incurred for such service where
we have not been invoiced or otherwise notified of the actual cost. Examples of estimated accrued
expenses include:
</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>professional service fees;</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>contract clinical service fees;</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>fees paid to contract manufacturers in conjunction with the production of clinical components
or materials; 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>fees paid to third party data collection organizations and investigators in conjunction with
the clinical trials.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with such service fees, our estimates are most affected by our projections of the
timing of services provided relative to the actual level of services incurred by such service
providers. The majority of our service providers invoice us monthly in arrears for services
performed. In the event that we do not identify certain costs that have begun to be incurred or we
are under or over our estimate of the level of services performed or the costs of such services,
our actual expenses could differ from such estimates. The date on which certain services commence,
the level of services performed on or before a given date, and the cost of such services are often
subjective determinations. We make these judgments based upon the facts and circumstances known to
us in accordance with GAAP. This is done as of each balance sheet date in our financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Results of Operations (in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As we work on developing MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, we continue to spend a majority of our time
and money in research and development related activities. Our overall spending during the first six
months of 2007 has remained relatively consistent with our spending
during the first six months
of 2006. However, as we increase the activity around the pivotal trial for
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, prepare for our PMA submission, and begin work towards the
commercial launch of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> our costs will increase.
</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>Three Months Ended June&nbsp;30, 2007 Compared to Three Months Ended June&nbsp;30, 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Research and Development Expense</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Research and Development expense for the three months ended June&nbsp;30, 2007 was $1,886 as compared to
$2,021 for the three months ending June&nbsp;30, 2006. In general, the second quarter 2007 costs were
consistent with second quarter 2006 with costs decreasing slightly by $135. We noted a similar
trend in the first three months of 2007 as compared to the first three months of 2006. However, the
components of spending within research and development have changed. While production spending
decreased by $257 our clinical trial expenses have increased by $145, and the technical support
services necessary to support our clinical trials increased by $60. Our software development
expenses also increased by $16 mainly in support of our clinical trials. These increases were
offset by decreases in our regulatory spending of $22 and share based compensation of $84
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General and Administrative Expense</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General and Administrative expense for the three months ended June&nbsp;30, 2007 was $1,439 as compared
to $1,081 for the three months ended June&nbsp;30, 2006. The increase
of $358 was the result of the
following: increased marketing expenses of $175 as we begin the work towards a commercial launch
of Melafind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, increased legal fees primarily related to patent work of $26,
travel expense of $51, salaries and bonuses of $128, employee recruiting of $54, and stock
maintenance fees of $28. This was offset by a decrease in share-based compensation of $93 and $24
in accounting related expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Six
Months Ended June&nbsp;30, 2007 Compared to Six Months Ended June&nbsp;30, 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Research and Development Expense</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Research and Development expense for the six months ended June&nbsp;30, 2007 was $3,839 as compared to
$4,006 for the six months ended June&nbsp;30, 2006; a decrease of $167. The components of spending are
consistent with the trend noted above. Production spending has decreased by $367 for the six
months ended June&nbsp;30, 2007, but this decrease was offset by increased clinical trial expenses of
$298 and technical support expenses necessary to support the clinical trial of $101. In addition,
our regulatory spending decreased by $76 and our share-based compensation expense decreased by
$134.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General and Administrative Expense</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General and Administrative expense for the six months ended June&nbsp;30, 2007 was $2,750 as compared to
$2,164 for the six months ended June&nbsp;30, 2006. The increase of $586 was mainly attributable to
higher marketing costs of $231 reflecting an increase in activity leading to commercial launch of
Melafind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, legal costs of $117 primarily related to new patent costs, an
increase in travel expenses of $111, bonuses and salary increases of $128, and employee recruiting
costs of $73. In addition our rent expense increased $19. Partially offsetting these increases
was a $56 decrease in accounting expenses and a $60 decrease in share-based compensation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Interest Income/Expense</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income for the three months and six months ended June&nbsp;30, 2007 was $228 and $499,
respectively, as compared to $173 and $354, respectively, for the comparable periods a year
earlier.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prior to our initial public offering, we financed our operations primarily through the use of
working capital from private placements of equity securities and by applying for and obtaining a
series of National Institute of Health Small Business Innovative Research grants and similar
grants. In October and November of 2005 we sold a total of 4,262,300 shares of common stock in an
initial public offering that resulted in approximately $17.7&nbsp;million in net proceeds. In addition,
on October&nbsp;31, 2006 we entered into securities purchase agreements and a registration rights
agreement with certain accredited investors for the private placement of 2,312,384 shares of the
Company&#146;s common stock and warrants to purchase up to 346,857 shares of the Company&#146;s common stock
for aggregate gross proceeds of approximately $13.2&nbsp;million and net proceeds of approximately $12.5
million. To date, we have not borrowed (other than by issuing convertible notes, all of which have
been converted into equity) or financed our operations through equipment leases, financing loans or
other debt instruments.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /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">As of June&nbsp;30, 2007, we had $15.1&nbsp;million in cash and cash equivalents as compared to
$20.9&nbsp;million at December&nbsp;31, 2006. The decrease was a result of cash used in operating activities
partially offset by interest income produced by our cash and certificates of deposit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our cash and cash equivalents at June&nbsp;30, 2007 are liquid investments in money market funds and
certificates of deposit with a commercial bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash Flows from Operating Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash used in operations was $5.7&nbsp;million for the six months ended June&nbsp;30, 2007. For the
corresponding period in 2006, net cash used in operations was $5.2&nbsp;million. Cash used in operations
was attributable to net losses after an adjustment for non-cash charges related to depreciation and
share-based compensation, and other changes in operating assets and liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash Flows from Investing Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the six months ended June&nbsp;30, 2007, net cash used in our investing activities was $230 and was
principally related to the purchase of scientific equipment and leasehold improvements in support
of our MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> development. For the corresponding period in 2006, net cash
used by our investing activities was $6.8&nbsp;million and was principally related to the purchase of
marketable securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash Flows from Financing Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the six months ended June&nbsp;30, 2007 and 2006, net cash provided by financing activities was $115
and $38, respectively, and reflects proceeds from the sale of common stock upon the exercise of
options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Capital and Capital Expenditure Requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We face certain risks and uncertainties, which are present in many emerging medical device
companies. At June&nbsp;30, 2007, we had an accumulated deficit of $37.3&nbsp;million. To date, we have not
commercialized our principal product, MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. We anticipate that we will
continue to incur net losses for the foreseeable future as we continue to develop the
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> system, expand our clinical development team and corporate
infrastructure, and prepare for the potential commercial launch of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>.
We do not expect to generate significant product revenue until we successfully obtain PMA approval
for and begin selling MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. In order to achieve significant
commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> we will need to obtain additional funding. We
believe that our current cash and cash equivalents and interest we earn on these balances, will be
sufficient to meet our anticipated cash needs for working capital and capital expenditures and
allow us to continue planned operations through mid-2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Existing cash and cash generated from our recently completed October&nbsp;31, 2006 financing and our
2005 initial public offering may not be sufficient to satisfy the liquidity requirements necessary
to commercially launch MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> or to develop additional products. We will
seek to sell additional equity or debt securities or obtain a credit facility. If additional funds
are raised through the issuance of debt securities, these securities could have rights senior to
those associated with our common stock and could contain covenants that would restrict our
operations. Any additional financing may not be available in amounts or on terms acceptable to us,
or at all. If we are unable to obtain this additional financing, we may be required to reduce the
scope of, delay or eliminate some or all of planned product research and development and
commercialization activities, which could harm our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because of the numerous risks and uncertainties associated with the development of medical devices
such as MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, we are unable to estimate the exact amounts of capital
outlays and operating expenditures associated with our current and anticipated clinical trials. Our
future funding requirements will depend on many factors, including, but not limited 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="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>

<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>The success of our research and development efforts;</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>The costs and timing of regulatory approval;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</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>Reimbursement amounts for the use of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>
that we are able to obtain from Medicare and third party payers, 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"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></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>The cost of commercialization activities, including product marketing
and building a domestic direct sales force;</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>The emergence of competing or complementary technological
developments;</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>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>

<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>The costs involved in defending any patent infringement actions
brought against us by third parties; 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>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: 12pt"><B>Contractual Obligations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes our outstanding contractual obligations as of June&nbsp;30, 2007 and the
effect those obligations are expected to have on our liquidity and cash flows in future periods:
</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="40%">&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 nowrap align="center" colspan="3"><B>Less than</B></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>More than</B></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"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>1 year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>1-3 years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>4-5 years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>5 years</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Included in the total operating leases are two non-cancelable operating leases for space expiring
June&nbsp;2009 and November&nbsp;2010. The lease on 5,000 square feet of office and laboratory space expires
in June&nbsp;2009, and the lease on 2,800 square feet of office space expires November&nbsp;2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the start of our clinical trials, we have committed to several clinical sites a
total of approximately $150 in contracts that do not exceed one year. These contracts are
cancelable by us with up to 30&nbsp;days&#146; prior notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;24, 2006, the Company entered into an amended and restated consulting agreement with
Gerald Wagner, Ph.D. which became effective as of April&nbsp;1, 2006. In connection with his ongoing
engagement as a consultant, Dr.&nbsp;Wagner received a stock option grant of 50,000 shares of the
Company&#146;s common stock which vested upon commencement of the pivotal trial for
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> at the end of January&nbsp;2007. As Dr.&nbsp;Wagner is a consultant to the
Company we utilize EITF 96-18 to account for this grant. Under this method, we calculate a charge
based on the fair market value of the option at the end of each quarter and adjust that charge each
subsequent quarter until the option vests. Since the pivotal clinical trial began at the end of
January&nbsp;2007, the Company recognized $140 in compensation expense for this grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, on March&nbsp;24, 2006, Dr.&nbsp;Wagner received another stock option grant of 49,500 shares of
the Company&#146;s common stock which vested immediately. The Company recorded a $162 compensation
charge during the first quarter ended March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The exercise price for these two stock option grants is the closing price per share of the
Company&#146;s common stock on the option grant date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">With the start of our pivotal clinical trial, Dr.&nbsp;Wagner has transitioned out of his role as our
Acting Chief Operating Officer and has signed an amendment to his amended and restated consulting
contract with the Company. Under the terms of the amended contract, Dr.&nbsp;Wagner will be paid a
monthly retainer of $2.5 and will be paid $2.5 for each additional
consulting day.
</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">This amended agreement will end at the option of Dr.&nbsp;Wagner or the Company at any time, by
providing fifteen days&#146; prior written notice, or immediately upon the mutual agreement of the
Company and Dr.&nbsp;Wagner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For a more detailed description of our related party transactions, see our financial statements and
the related notes to our financial statements in Note 10.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Off-Balance Sheet Arrangements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We do not currently have, nor have we ever had, any relationships with unconsolidated entities or
financial partnerships, such as entities often referred to as structured finance or special purpose
entities, which would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes. In addition, we do not engage in
trading activities involving non-exchange traded contracts. As such, we are not materially exposed
to any financing, liquidity, market or credit risk that could arise if we had engaged in these
relationships.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recently Adopted Accounting Pronouncements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2006, the Financial Accounting Standards Board issued Interpretation No.&nbsp;48, &#147;Accounting
for Uncertainty in Income Taxes-an Interpretation of FASB Statement No.&nbsp;109,&#148; (&#147;FIN 48&#148;) which
clarifies the accounting for uncertainty in tax positions. This Interpretation requires that we
recognize, in our condensed financial statements, the impact of a tax position if that position is
more likely than not of being sustained on audit, based on the technical merits of the position.
The provisions of FIN 48 are effective as of January&nbsp;1, 2007. We have evaluated our tax positions
and determined that the adoption of this pronouncement did not have a material impact on our
financial position or results of operations. Our tax return net operating loss carryforwards are
significant. The tax years in which losses arose may be subject to audit by the Internal Revenue
Service when such carryforwards are utilized to offset taxable income in future periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Accounting Developments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, &#147;The Fair Value Option for Financial Assets and
Financial Liabilities, including an amendment to SFAS No.&nbsp;115.&#148; This statement permits entities to
choose to measure many financial instruments and certain other items at fair value. The objective
is to improve financial reporting by providing entities with the opportunity to mitigate volatility
in reporting earnings caused by measuring related assets and liabilities differently without having
to apply complex hedge accounting provisions. This statement is expected to expand the use of fair
value measurements, which is consistent with the FASB&#146;s long-term measurement objectives for
accounting for financial instruments. SFAS No.&nbsp;159 is effective for fiscal years beginning after
November&nbsp;15, 2007. The Company does not expect that the adoption of SFAS No.&nbsp;159 will have a
material impact on the Company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, &#147;Fair Value Measurements.&#148; This statement defines
fair value, establishes a framework for measuring fair value, and expands disclosures about fair
value measurements. This statement is effective for financial statements issued for fiscal years
beginning after November&nbsp;15, 2007; however, earlier application is encouraged. The Company does not
expect the adoption of SFAS 157 to have a material impact on its financial statements.
</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: 12pt"><B>Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Our business and operations entail a variety of serious risks and uncertainties, including those
described in Item&nbsp;1A of our </I><I>Form 10-K</I><I> for the year ended December&nbsp;31, 2006. In addition, the
following risk factors have changed during the six months ended June&nbsp;30, 2007:</I>
</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">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"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. Our net loss for the six months
ended June&nbsp;30, 2007 was approximately $6.1&nbsp;million, and as of June&nbsp;30, 2007, we had an accumulated
deficit of approximately $37.3&nbsp;million. Our research and
development expenses may continue to increase in
connection with our clinical trials and other development activities related to
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. If we receive PMA approval for MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
</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 also 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 may be unable to complete the development and commence commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </I></B><SUP style="font-size: 85%; vertical-align: text-top">
</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">As of June&nbsp;30, 2007 we had $15.1&nbsp;million in cash and cash equivalents. Our operations have consumed
substantial amounts of cash for each of the last seven years. We currently believe that our
available cash and cash equivalents, including the proceeds from our November&nbsp;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 the pivotal clinical trial for
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></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"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP> and commence commercialization of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, and we will need additional funds to achieve significant
commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. Any additional financing may be dilutive to
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>

<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>the success of our research and development efforts;</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>the costs and timing of regulatory approval;</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>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 payers, 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>

<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>the cost of commercialization activities, including product marketing and building a domestic direct sales force;</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>the emergence of competing or complementary technological developments;</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</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="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>

<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>the costs involved in defending any patent infringement actions brought against us by third parties; 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>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">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">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>Our stock price is likely to 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">Our stock price is likely to be volatile. Between October&nbsp;28, 2005 (the date of our initial public
offering) and June&nbsp;30, 2007, our stock price has ranged from $4.29 to $8.92 per share. 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="3%" 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="3%" 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="3%" 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="3%" 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="3%" 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="3%" 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="3%" 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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in financial estimates or recommendations by securities analysts;</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>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="3%" 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="3%" 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="3%" 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="3%" 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="3%" 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>


</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="3%" 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="3%" 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="3%" 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="3%" 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">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, if brought, 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">As of June&nbsp;30, 2007, our directors, executive officers, holders of more than 10 % of our common
stock, and their affiliates in the aggregate, beneficially owned approximately 5.6% of our
outstanding common stock. As a result, these stockholders, subject to any fiduciary duties owed to
our other stockholders under Delaware law, could 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 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. 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. On June&nbsp;30, 2007 our market capitalization exceeded $75
million. As a result we must have our independent registered public accounting firm attest to our
compliance with Section&nbsp;404 of SOX for the year ending December&nbsp;31, 2007. In addition we will be
an accelerated filer effective December&nbsp;31, 2007. We have
retained a consultant experienced in SOX to assist us and
we are in the process of instituting changes to our internal procedures to satisfy the requirements
of the SOX. We are 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 believe we have made substantial progress on satisfying the
requirements, and 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. 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. 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>

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</DIV>

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



<DIV align="left">
<A name="307"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 3.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Quantitative and Qualitative Disclosures about Market Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our exposure to market risk is confined to our cash and cash equivalents. We invest in high-quality
financial instruments, primarily money market funds, federal agency notes, and US Treasury
obligations, with the effective duration of the portfolio within one year which we believe are
subject to limited credit risk. We currently do not hedge interest rate exposure. Due to the
short-term nature of our investments, we do not believe that we have any material exposure to
interest rate risk arising from our investments.
</DIV>
<DIV align="left">
<A name="308"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4.</B>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Evaluation of disclosure controls and procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based on their evaluation as of June&nbsp;30, 2007, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures as defined in Rules&nbsp;13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934, as amended, were sufficiently effective to
ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q
was recorded, processed, summarized and reported within the time periods specified in the SEC&#146;s
rules and Form l0-Q.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Change in internal control over financial reporting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were no changes in our internal control over financial reporting during the quarter ended
June&nbsp;30, 2007 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Limitations on the effectiveness of controls</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance
that the objectives of our disclosure control system are met. Because of inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance that all control
issues, if any, within a company have been detected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4T. Controls and Procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Not applicable.
</DIV>
<DIV align="left">
<A name="309"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PART II. OTHER INFORMATION</B>
</DIV>

<DIV align="left">
<A name="310"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;1. Legal Proceedings.</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are not currently subject to any material legal proceedings, nor, to our knowledge, is any
material legal proceeding threatened against us. From time to time, we may be a party to certain
legal proceedings, incidental to the normal course of our business.
</DIV>
<DIV align="left">
<A name="311"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Not applicable.
</DIV>
<DIV align="left">
<A name="312"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Defaults Upon Senior Securities.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Not applicable.
</DIV>

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</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">
<A name="313"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Submission of Matters to a Vote of Security Holders.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 2007 Annual Meeting of Stockholders of the Company was held on May&nbsp;21, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our stockholders voted on proposals to elect directors, ratify the selection by the audit committee
of our Board of Directors of Eisner LLP as the Company&#146;s independent registered public accounting
firm for the fiscal year ending December&nbsp;31, 2007, approve an amendment to our 2003 Stock Incentive
Plan and to ratify an amendment to our 2005 Stock Incentive Plan
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All nominees for election to the Board as Directors were elected to serve until the 2008 Annual
Meeting of Stockholders and until their respective successors are elected and qualified, or until
such director&#146;s earlier death, resignation or removal. The stockholders also ratified the selection
of the independent registered public accounting firm by the audit committee of our Board of
Directors. The number of votes cast for, against or withheld and the number of abstentions with
respect to each proposal is set forth below:
</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="76%">&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 nowrap align="left"><B>Proposal 1</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares For</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Withheld</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Election of Directors</DIV></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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joseph V. Gulfo, MD</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,596,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,175</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Breaux Castleman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,036,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">624,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sidney Braginsky</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,614,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,745</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gorge C. Chryssis</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,614,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,885</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Martin D. Cleary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,614,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dan W. Lufkin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,614,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,745</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gerald Wagner, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,414,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246,966</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</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="64%">&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 nowrap align="left"><B>Proposal 2</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares For</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Against</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Abstaining</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ratification of Eisner LLP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,613,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,561</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Proposal 3</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares For</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Against</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Abstaining</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amend 2003 Stock Incentive
Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,947,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,236,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177,976</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Proposal 4</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares For</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Against</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares Abstaining</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amend 2005 Stock Incentive
Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,940,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,748</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="314"></A>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. Other Information.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Not applicable.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Not applicable.

</DIV>


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

<DIV align="left">
<A name="315"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. Exhibits</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="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Exhibit Title</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>
</TR>
<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.(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">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amended and Restated Bylaws of the Registrant.(2)</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 Stock Certificate.(2)</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">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amended and Restated Investor&#146;s Rights Agreement dated as of October&nbsp;26, 2004 by
and among the Registrant and the parties listed therein.(3)</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">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Warrant.(7)</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">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Warrant.(13)</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">Form of Indemnification Agreement for directors and executive officers.(2)</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">1996 Stock Option Plan.(3)</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">2003 Stock Incentive Plan, as amended.(3)</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">2005 Stock Incentive Plan.(2)</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">10.5*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated as of January&nbsp;5, 2004 between the Registrant and Joseph V.
Gulfo.(3)</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">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of May&nbsp;31, 2005 between the Registrant and Marek Elbaum.(3)</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">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease Agreement dated as of December&nbsp;16, 1998, by and between the Registrant and Bridge
Street Properties LLC, for office space located at One Bridge Street, Irvington, New
York.(3)</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">10.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to the Lease Agreement dated as of May&nbsp;17, 2001 by and between the
Registrant and Bridge Street Properties LLC.(3)</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">10.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to the Lease Agreement dated as of June&nbsp;19, 2003 by and between the
Registrant and Bridge Street Properties LLC.(3)</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">10.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease Agreement dated as of November&nbsp;23, 2004, by and between the Registrant and Bridge
Street Properties LLC, for office space located at 3 West Main Street, Irvington, New
York.(3)</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">10.11*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of June&nbsp;1, 2005 between the Registrant and Gerald Wagner
Consulting, LLC.(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">10.12*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of June&nbsp;20, 2003 between the Registrant and Breaux
Castleman, as amended.(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">10.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement dated as of June&nbsp;1, 2005 between the Registrant and Robert Friedman,
M.D.(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">10.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Task Order Agreement dated as of July&nbsp;13, 2005 between the Registrant and Battelle
Memorial Institute.(2)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /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">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Exhibit Title</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>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment dated as of June&nbsp;6, 2005, by and between the Registrant and Bridge Street
Properties LLC, for office space located at 1 Bridge Street, Irvington, New York.(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">10.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Production Agreement between the Registrant and ASKION GmbH dated as of January&nbsp;25,
2006.(4)</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">10.17*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Consulting Agreement effective as of April&nbsp;1, 2006 between the
Registrant and Gerald Wagner Consulting LLC.(11)</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">10.18*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Resignation Agreement, dated April&nbsp;24, 2006, between the Registrant and Karen Krumeich.(5)</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">10.19*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Offer Letter, dated April&nbsp;24, 2006, between the Registrant and Richard I.
Steinhart.(5)</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">10.20*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Offer Letter, dated May&nbsp;30, 2006, between the Registrant and Christiano S.
Butler.(6)</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">10.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement among the Registrant and the purchasers identified on the
signature pages thereto, dated as of October&nbsp;31, 2006.(8)</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">10.22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement among the Registrant and the purchasers identified on the
signature pages thereto, dated as of October&nbsp;31, 2006.(8)</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">10.23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement among the Registrant and the purchasers identified on the
signature pages thereto, dated as of October&nbsp;31, 2006.(8)</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">10.24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Placement Agency Agreement by and between the Registrant and Jefferies &#038; Company, Inc.,
dated as of October&nbsp;31, 2006.(7)</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">10.25
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Licensing Agreement between the Registrant and KaVo Dental GmbH, dated as of December&nbsp;5,
2006.(9)</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">10.26*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;1 to Amended and Restated Consulting Agreement dated as of January&nbsp;30, 2007
by and among the Registrant, Gerald Wagner and Gerald Wagner Consulting LLC. (10)</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">10.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Research and Feasibility Agreement between the Registrant and L&#146;Oreal S.A. dated as of
March&nbsp;26, 2007. (12)</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">10.28
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement among the Registrant and the purchasers identified on the
signature pages thereto, dated as of July&nbsp;31, 2007.(13)</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">10.29
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement among the Registrant and the purchasers identified on the
signature pages thereto, dated as of July&nbsp;31, 2007.(13)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /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">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Exhibit Title</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>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1#
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive Officer
Pursuant to Section&nbsp;302 of the Sarbanes-Oxley
Act of 2002.</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">31.2#
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial Officer
Pursuant to Section&nbsp;302 of the Sarbanes-Oxley
Act of 2002.</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">32.1#
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive Officer and
Chief Financial Officer Pursuant to Section&nbsp;906
of the Sarbanes-Oxley Act of 2002.</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>
<!-- 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>Indicates management compensatory plan, contract or arrangement</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s 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">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s 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">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Registration Statement on Form S-1, as amended (File No.
&nbsp;333-125517), as filed on June&nbsp;3, 2005.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on January&nbsp;31, 2006.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on April&nbsp;27, 2006.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on June&nbsp;2, 2006.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on November&nbsp;1, 2006.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on November&nbsp;8, 2006.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on December&nbsp;11, 2006.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on January&nbsp;31, 2007.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Annual Report on Form 10-K filed on March&nbsp;29, 2006.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on March&nbsp;28, 2007.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on August&nbsp;1, 2007.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">#</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /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">
<A name="316"></A>
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
</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/ Richard I. Steinhart
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Richard I. Steinhart&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President and Chief Financial Officer<BR>
(Principal Accounting and Financial Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Date: August&nbsp;9, 2007
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /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">
<A name="317"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</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="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Exhibit No.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Description</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>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification by the Chief Executive Officer pursuant to
Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934</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">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification by the Chief Financial Officer pursuant to
Rule&nbsp;13a-14(a) under the Securities Exchange Act of 1934</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">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, as
adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act
of 2002</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>y37964exv31w1.htm
<DESCRIPTION>EX-31.1: CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-31.1</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: 12pt"><B>Exhibit&nbsp;31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO<BR>
RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">I, Joseph V. Gulfo, certify that:
</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">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this report on Form 10-Q of Electro-Optical Sciences, Inc.;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and
have:</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">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>designed such disclosure controls and
procedures, or caused such disclosure
controls and procedures to be
designed under our supervision, to
ensure that material information
relating to the registrant, including
its consolidated subsidiaries, is
made known to us by others within
those entities, particularly during
the period in which this report is
being prepared;</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)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>designed such internal control over
financial reporting, or caused such
internal control over financial
reporting to be designed under our
supervision, to provide reasonable
assurance regarding the reliability
of financial reporting and the
preparation of the financial
statements for external purposes in
accordance with generally accepted
accounting principles;</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">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evaluated the effectiveness of the
registrant&#146;s disclosure controls and
procedures and presented in this
report our conclusions about the
effectiveness of the disclosure
controls and procedures, as of the
end of the period covered by this
report based on such evaluation; 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">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disclosed in this report any change
in the registrant&#146;s internal control
over financial reporting that
occurred during the registrant&#146;s most
recent fiscal quarter that has
materially affected, or is reasonably
likely to materially affect, the
registrant&#146;s internal control over
financial reporting; 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="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant&#146;s auditors and the audit committee of the registrant&#146;s Board of
Directors (or persons performing the equivalent functions):</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">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all significant deficiencies and
material weaknesses in the design or
operations of internal control over
financial reporting which are
reasonably likely to adversely affect
the registrant&#146;s ability to record,
process, summarize and report
financial information; 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)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any fraud whether or not material,
that involves management or other
employees who have a significant role
in the registrant&#146;s internal control
over financial reporting.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Date: August&nbsp;9, 2007
</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="48%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Joseph V. Gulfo, M.D.
&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Joseph V. Gulfo, M.D.     &nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">President and Chief Executive Officer<BR>
(Principal Executive Officer)&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>y37964exv31w2.htm
<DESCRIPTION>EX-31.2: CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-31.2</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: 12pt"><B>Exhibit&nbsp;31.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO<BR>
RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">I, Richard I. Steinhart, certify that:
</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">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this report on Form 10-Q of Electro-Optical Sciences, Inc.;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</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">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by
others within those entities, particularly during the
period in which this report is being prepared;</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)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>designed such internal control over financial
reporting, or caused such internal control over
financial reporting to be designed under our
supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the
preparation of the financial statements for external
purposes in accordance with generally accepted
accounting principles;</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">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evaluated the effectiveness of the registrant&#146;s
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end
of the period covered by this report based on such
evaluation; 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">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disclosed in this report any change in the registrant&#146;s
internal control over financial reporting that occurred
during the registrant&#146;s most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant&#146;s internal control
over financial reporting; 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="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of the registrant&#146;s Board of Directors (or persons
performing the equivalent functions):</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">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all significant deficiencies and material weaknesses in
the design or operations of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant&#146;s ability to record,
process, summarize and report financial information;
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)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any fraud whether or not material, that involves
management or other employees who have a significant
role in the registrant&#146;s internal control over
financial reporting.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Date: August&nbsp;9, 2007
</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="48%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Richard I. Steinhart
&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Richard I. Steinhart&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Vice President and Chief Financial Officer<BR>
(Principal Accounting and Financial Officer)&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>y37964exv32w1.htm
<DESCRIPTION>EX-32.1: CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-32.1</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">


<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: 12pt"><B>Exhibit&nbsp;32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350<BR>
ELECTRO-OPTICAL SCIENCES, INC.<BR>
CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the undersigned officers of Electro-Optical Sciences, Inc. (the &#147;Company&#148;) hereby
certifies to his knowledge that the Company&#146;s quarterly report on Form 10-Q for the period ended
June&nbsp;30, 2007 (the &#147;Report&#148;), as filed with the Securities and Exchange Commission on the date
hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended, and that the information contained in the Report
fairly presents, in all material respects, the financial condition and results of operations of the
Company.
</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="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</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>
</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">/s/ Joseph V. Gulfo
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</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">Joseph V. Gulfo</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">President and Chief Executive Officer</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">(Principal Executive Officer)</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">August&nbsp;9, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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"><!-- 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">/s/ Richard I. Steinhart
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></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">Richard I. Steinhart</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">Vice President &#038; Chief Financial Officer<BR></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">(Principal Accounting and Financial Officer)</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">August&nbsp;9, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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>A signed original of this written statement required by Section&nbsp;906 of the Sarbanes-Oxley
Act of 2002 has been provided to Electro-Optical Sciences, Inc. and will be retained by
Electro-Optical Sciences, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request. This written statement accompanies the Form 10-Q to which it relates, is
not deemed filed with the Securities and Exchange Commission, and will not be incorporated by
reference into any filing of Electro-Optical Sciences, Inc. under the Securities Act of 1933
or the Securities Exchange Act of 1934, irrespective of any general incorporation language
contained in such filing.</TD>
</TR>

</TABLE>




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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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