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<SEC-DOCUMENT>0000950123-08-009142.txt : 20080808
<SEC-HEADER>0000950123-08-009142.hdr.sgml : 20080808
<ACCEPTANCE-DATETIME>20080808133809
ACCESSION NUMBER:		0000950123-08-009142
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20080630
FILED AS OF DATE:		20080808
DATE AS OF CHANGE:		20080808

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:		081001658

	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>y64943e10vq.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 style="font-size: 2pt" valign="bottom">
<TD>&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, 2008</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; <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>
<!-- 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="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>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><BR>
<I>(Address of Principal Executive offices)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>10533</B><BR>
<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: 6pt">Yes <FONT face="Wingdings">&#254;</FONT> <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, a non-accelerated filer, or a smaller reporting company. See the definitions
 of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting
 company&#148; in Rule&nbsp;12b-2 of the
 Exchange Act. (Check one):</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="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Large accelerated filer: <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated filer: <FONT face="Wingdings">&#254;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Non-accelerated filer: <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Smaller reporting company: <FONT face="Wingdings">&#111;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>(Do not check if a smaller reporting company)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</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 <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of August&nbsp;7, 2008, 17,551,745 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="88%">&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" style="border-bottom: 1px solid #000000">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PART I. FINANCIAL INFORMATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ITEM 1. Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#101">Condensed Balance Sheets as of June&nbsp;30, 2008 (unaudited)&nbsp;and December&nbsp;31, 2007
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#102">Condensed Statements of Operations (unaudited)&nbsp;for the three and six month
periods ended June&nbsp;30, 2008 and 2007
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#103">Condensed Statements of Cash Flows (unaudited) for the six month
periods ended June&nbsp;30, 2008 and 2007
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#104">Notes to Condensed Financial Statements (unaudited)
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#105">ITEM 2. Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#106">ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">22</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#107">ITEM 4. Controls and Procedures
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">22</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#108">PART II. OTHER INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#109">ITEM 1. Legal Proceedings
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">22</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#110">ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">30</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#111">ITEM 3. Defaults Upon Senior Securities
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#112">ITEM 4. Submission of Matters to a Vote of Security Holders
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#113">ITEM 5. Other Information
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#114">ITEM 6. Exhibits
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#115">SIGNATURES
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">35</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#116">EXHIBIT INDEX
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">36</TD>
    <TD nowrap 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EX-31.1: CERTIFICATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EX-31.2: CERTIFICATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EX-32.1: CERTIFICATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y64943exv31w1.htm">EX-31.1: CERTIFICATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y64943exv31w2.htm">EX-31.2: CERTIFICATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y64943exv32w1.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="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTRO-OPTICAL SCIENCES, INC.</B>
</DIV>

<DIV align="left">
<A name="101"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>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>2008</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>
</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:45px; 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</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,762,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,196,589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">893,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,719,905</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">152,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411,554</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">12,809,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,328,048</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">761,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">616,110</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">106,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,138</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">45,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,876</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">$</TD>
    <TD align="right">13,723,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,108,172</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:30px; 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">
    <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</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">884,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">567,987</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued expenses (includes related parties of
$15,000 as of June&nbsp;30, 2008 and $10,000 as of<BR>

December&nbsp;31, 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,034,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674,711</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,946</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,804</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 Current Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,966,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,336,448</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">COMMITMENTS AND CONTINGENCIES (Note 9)</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" style="background: #cceeff">
    <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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred stock &#151; $.10 par value; authorized
10,000,000 shares; none issued and outstanding
at<BR>
 June&nbsp;30, 2008 and at December&nbsp;31, 2007</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
15,418,294 shares at June&nbsp;30, 2008 and
15,401,882 at December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,402</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">64,134,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,930,689</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,401</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,136</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <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">(52,390,332</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43,162,231</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>Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,756,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,771,724</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 Liabilities and Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,723,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,108,172</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, 2007</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="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTRO-OPTICAL SCIENCES, INC.</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONDENSED STATEMENTS OF OPERATIONS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(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>2008</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>2008</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>
</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">$</TD>
    <TD align="right">3,623,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,885,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,669,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,839,059</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">1,474,679</TD>
    <TD>&nbsp;</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">2,914,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,750,362</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">(5,098,669</TD>
    <TD nowrap>)</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">(9,583,557</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,589,421</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">92,626</TD>
    <TD>&nbsp;</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">274,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">499,209</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,772</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">80,858</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 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">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,951,271</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,096,679</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,228,101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,090,212</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">
    <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">$</TD>
    <TD align="right">(0.32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.46</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" style="background: #cceeff">
    <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">15,407,137</TD>
    <TD>&nbsp;</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">15,404,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,384,141</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="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTRO-OPTICAL SCIENCES, INC.</B>
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONDENSED STATEMENTS OF CASH FLOWS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(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>2008</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>
</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">$</TD>
    <TD align="right">(9,228,101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,090,212</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">144,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncash compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,751</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,703</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,320</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of discount on marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">882</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">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">
    <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">259,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in deferred income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49,708</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">Increase (decrease)&nbsp;in accounts payable and accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">676,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(246,386</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,650</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 operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,014,041</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,747,807</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 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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Patent costs</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">(39,321</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">(278,133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(191,162</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">833,904</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 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 provided by (cash used) in investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(230,483</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 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" style="background: #cceeff">
    <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">14,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from exercise of stock warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,586</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 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">24,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,527</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">(7,433,614</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,863,763</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">19,196,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,939,527</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">$</TD>
    <TD align="right">11,762,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,075,764</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>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTRO-OPTICAL SCIENCES, INC.</B>
</DIV>

<DIV align="left">
<A name="104"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>NOTES TO CONDENSED FINANCIAL STATEMENTS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(In thousands, except for share and per share data)</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(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 and continues
into the third quarter of 2008. At the end of July&nbsp;2008, we completed the accrual phase of the
pivotal trial; follow-up and data analysis is ongoing. The results of the trial are expected to be
available in the fourth quarter. If the pivotal trial results and FDA approval process proceed as
anticipated, management believes that PMA approval could come as early as the middle of 2009.
</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 13, 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 two private
placements: one that closed in November&nbsp;2006, and a second that closed in August&nbsp;2007 (refer to
Note 10 for further details).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2008, total cash, cash equivalents and marketable securities were $12.7&nbsp;million. On
June&nbsp;26, 2008, the Company filed a Form S-3 shelf registration statement for an indeterminate
number of shares of common stock, warrants to purchase shares of common stock and units consisting
of a combination thereof having an aggregate initial offering price not to exceed $40&nbsp;million. The
Securities and Exchange Commission (&#147;SEC&#148;) declared the registration statement effective on July&nbsp;7,
2008 (file# 333-151935). Management utilized this shelf registration statement to raise additional
equity capital by completing a public offering of approximately $11.9&nbsp;million for 2,088,451 common shares ($11&nbsp;million
approximate net proceeds to the Company) on July&nbsp;31, 2008 (see Note 14). Management anticipates that the proceeds from this
offering combined with existing cash balances will allow the Company to fund anticipated levels of
operations into 2010. The Company will require additional funds to achieve significant
commercialization MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. However, there can be no assurances that the Company will
be able to raise additional capital in the future. Additional funds may not become available on
acceptable terms, and there can be no assurance that any additional funding that the Company does
obtain will be sufficient to meet the Company&#146;s needs in the long term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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>
<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /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">The unaudited condensed financial statements included herein have been prepared from the books and
records of the Company pursuant to the rules and regulations of the SEC 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, 2007.
</DIV>

<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. MARKETABLE SECURITIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s marketable securities consist of corporate debt securities and government bonds with
a weighted average maturity not in excess of twelve months. The Company classifies its marketable
securities as available-for-sale, as defined by Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;115, &#147;Accounting for Certain Investments in Debt and Equity Securities.&#148;
Available-for-sale securities are carried at fair value, with unrealized gains and losses reported
as a component of stockholders&#146; equity in accumulated other comprehensive loss. Interest income,
realized gains and losses, and declines in value of securities judged to be other-than-temporary
are included in the Company&#146;s statement of operations. As of June&nbsp;30, 2008, marketable securities
consisted of:
</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>June 30, 2008</B></TD>
    <TD>&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="2">Unrealized</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">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gain (Loss)</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">Corporate debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</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 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">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(3</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>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company evaluates declines in the fair value of its investments in available-for-sale
marketable securities to determine if these declines are other-than-temporary. When a decline in
value is determined to be other-than-temporary, an impairment charge would be recorded and a new
cost basis in the investment would be established.
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Comprehensive loss includes net loss and unrealized gains and losses on available-for-sale
marketable securities. Cumulative unrealized gains and losses on available-for-sale marketable
securities are reflected as accumulated other comprehensive loss in stockholders&#146; equity on the
Company&#146;s balance sheet. For the three months ended June&nbsp;30, 2008, comprehensive loss was $4,939
which includes a net loss of $4,951 and an unrealized gain on available-for-sale marketable
securities of $12. For the six months ended June&nbsp;30, 2008, comprehensive loss was $9,219 which
includes a net loss of $9,228 and an unrealized gain on available-for-sale marketable securities of
$9. The Company did not hold any marketable securities in the six months ended June&nbsp;30, 2007.
Hence, the comprehensive loss was the same as the net loss for the three and six months ended June
30, 2007.
</DIV>


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


<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

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





<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS</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; (&#147;SFAS No.&nbsp;159&#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
adoption of SFAS No.&nbsp;159 did not 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; (&#147;SFAS 157&#148;). This
statement defines fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. This statement relating to financial assets is effective
for financial statements issued for fiscal years beginning after November&nbsp;15, 2007. The adoption
of SFAS 157 did not have a material impact on the Company&#146;s financial statements. The provisions
of SFAS 157 related to other non-financial assets and liabilities will be effective for the Company
on January, 1, 2009, and will be applied prospectively. The Company is currently evaluating the
impact that these additional SFAS 157 provisions will have on the Company&#146;s financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. RECENT ACCOUNTING DEVELOPMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2008, the FASB issued SFAS No.&nbsp;161 &#147;Disclosures about Derivative Instruments and Hedging
Activities&#148; (&#147;SFAS 161&#148;). This new standard enhances disclosure requirements for derivative
instruments in order to provide users of financial statements with an enhanced understanding of (i)
how and why an entity uses derivative instruments, (ii)&nbsp;how derivative instruments and related
hedged items are accounted for under SFAS No.&nbsp;133 &#147;Accounting for Derivative Instruments and
Hedging Activities&#148; and its related interpretations, and (iii)&nbsp;how derivative instruments and
related hedged items affect an entity&#146;s financial position, financial performance, and cash flows.
SFAS 161 is to be applied prospectively for the first annual reporting period beginning on or after
November&nbsp;15, 2008. The Company believes that the adoption of SFAS 161 will not have a material
impact on the Company&#146;s financial statement disclosures since the Company does not currently have
any derivative instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141R, Business Combinations (&#147;SFAS 141R&#148;). SFAS 141R
replaces FASB SFAS No.&nbsp;141, and establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquired company. SFAS 141R also
provides guidance for recognizing and measuring the goodwill acquired in the business combination
and determines what information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS 141R applies prospectively to
business combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December&nbsp;15, 2008. The Company believes the adoption
of this pronouncement will not have a material impact on the Company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;160, Noncontrolling Interests in Consolidated Financial
Statements&#151;an amendment of ARB No.&nbsp;51 (&#147;SFAS 160&#148;). SFAS 160 amends ARB 51 to establish accounting
and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation
of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial
statements. In addition to the amendments to ARB 51, SFAS 160 amends FASB Statement No.&nbsp;128,
Earnings per Share, so that earnings-per-share data will continue to be calculated the same way
those data were
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /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">calculated before SFAS 160 was issued. SFAS 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December&nbsp;15, 2008. The Company believes the
adoption of this pronouncement will not have a material impact on the Company&#146;s financial
statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. NET LOSS PER COMMON SHARE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net loss per common share is presented in accordance with the provisions of SFAS No.&nbsp;128, &#147;Earnings
Per Share&#148; (&#147;EPS&#148;). 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>

<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="7" style="border-bottom: 1px solid #000000"><B>June 30,</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>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock options
</DIV></TD>
    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3">1,901,660</TD>

    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3">1,674,326</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Warrants
</DIV></TD>
    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3">1,124,544</TD>

    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3">626,845</TD>

</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3" style="border-top: 1px solid #000000">&nbsp;</TD>

    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3" style="border-top: 1px solid #000000">&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total
</DIV></TD>
    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3">3,026,204</TD>

    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3">2,301,171</TD>

</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3" style="border-top: 3px double #000000">&nbsp;</TD>

    <TD>&nbsp;</TD>

    <TD align="right" valign="top" colspan="3" style="border-top: 3px double #000000">&nbsp;</TD>

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


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. 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
but no new grants may be made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company records 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; (&#147;SFAS 123R&#148;),
as interpreted by SEC Staff Accounting Bulletin No.&nbsp;107. 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, 2008 and 2007 includes: (1)&nbsp;amortization related to the remaining unamortized 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 quarter of 2008
and 2007 for stock options and restricted stock awards amounted to $68 (of which $20 relates to
development milestones) and $113 (of which $36 relates to development milestones), respectively.
For the six months ended June&nbsp;30, 2008 and 2007, compensation expense totaled $180 (of which $53
relates to development milestones) and $379 (of which $91 relates to development milestones),
respectively. Cash received from options exercised under all share-based payment arrangements for
the three months ended June&nbsp;30, 2008 and 2007 were $14 and $29, respectively, and for the sixth
month periods ended June&nbsp;30, 2008 and 2007, $14 and $115, respectively.
</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: 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="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>For the Six Months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><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" style="border-bottom: 1px solid #000000"><B>Ended June 30, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Ended June 30, 2007</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 align="center" valign="top">5 years</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">60%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">60%</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 align="center" valign="top"><FONT style="white-space: nowrap">2.95&#150;3.72%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="white-space: nowrap"> 4.54&#150;5.02%  </FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0%</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 stock established at the time of our IPO. 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. The expected divided yield is zero as the Company has never paid
dividends and does not currently anticipate paying any in the foreseeable future.
</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>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since the Company adopted the 2005 Plan, the Company has ceased granting awards 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, 2008 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 valign="top"><DIV style="margin-left:0px; text-indent:-0px">Outstanding at December&nbsp;31, 2007
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,812,084</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.96</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Granted
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">127,083</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">4.61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exercised
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(14,070</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top">&#151;
</TD>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Forfeited or expired
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(23,437</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.54</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top">&#151;
</TD>
<TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Outstanding at June&nbsp;30, 2008
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,901,660</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">3.09</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">8,702</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Vested and exercisable at June&nbsp;30, 2008
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">633,056</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">3.70</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.0</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">2,512</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&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="7%">&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"><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"><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"><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"><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"><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" 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 valign="top"><DIV style="margin-left:0px; text-indent:-0px">$.01&#150;$.46
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">912,780</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.2&nbsp;years
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top"> .46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">171,753</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top"> .46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$.47&#150;$1.00
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">105,578</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.8&nbsp;years
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">105,578</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$1.01&#150;$7.75
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">883,302</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.4&nbsp;years
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">6.05</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">355,725</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">6.06</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$.01&#150;$7.75
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,901,660</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3.2&nbsp;years
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">3.09</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">633,056</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">3.70</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the three months and six months ended June&nbsp;30, 2008, the weighted average fair value of
options granted, estimated as of the grant date using the Black-Scholes option valuation model, was
$4.04 and $2.63, respectively. For both the three and six month periods ended June&nbsp;30, 2007, the
weighted average fair value of options granted was $2.86. For the three and six months ended June
30, 2008, the total intrinsic value of options exercised was $118. For the three and six months
ended June&nbsp;30, 2007, the total intrinsic value of options exercised was $117 and $558 respectively.

</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /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, 2008, of the total 1,901,660 options outstanding, 1,268,604 have not vested. Of this
total unvested amount, 1,140,429 will vest upon the attainment of certain milestones, and the
balance will vest over the requisite service period. Based on 18,444,498 shares outstanding (on a
fully-diluted basis) as of June&nbsp;30, 2008, 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">&#174;</SUP>, the number of
shares subject to Dr.&nbsp;Gulfo&#146;s formula-based stock option is 656,027. This formula-based option
vests 50% at the time of PMA approval of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</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">&#174;</SUP>. As of
June&nbsp;30, 2008, there was $2,990 of total unrecognized compensation cost related to unvested
options to be recognized over period to be determined by milestones.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2008, there were 833,851 shares available for future grants under the Company&#146;s 2005
Stock Incentive Plan. In addition, 203,532 shares are reserved under the 2003 Stock Incentive Plan
for future allocation to Dr.&nbsp;Gulfo in accordance with the provisions of his formula-based stock
option.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. COMMITMENTS AND CONTINGENCIES</B>
</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
January&nbsp;2011. 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">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>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2011</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">$ 161
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$256
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$186
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$16</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During March&nbsp;2007, the Company entered into 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 is being 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. During the three and
six months ended June&nbsp;30, 2008, the Company earned $42 and $52, respectively from L&#146;Oreal as other
income to offset expenses incurred by EOS under the Feasibility Program. No amounts were earned
during the three and six months ended June&nbsp;30, 2007.
</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 services 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 have been used in the Company&#146;s pivotal clinical trial. The
Company expects Carl Zeiss Jena GmbH to continue to supply lenses and assemblies throughout 2008.
</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 <SUP style="font-size: 85%; vertical-align: text-top"> </SUP>imaging devices for the Company to be utilized in the Company&#146;s
pivotal trial and data collection sites in the United States and Europe. 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 production and development activities throughout 2008.
</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 discretionary performance bonuses. The
agreement, which provides for automatic one-year renewal terms, currently runs through the end of
2008.
</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">Effective March&nbsp;1, 2008, the Board of Directors increased Dr.&nbsp;Gulfo&#146;s annual base salary to
$280 and awarded him a bonus of $65.
</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>10. PRIVATE PLACEMENTS</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. The private placement closed November&nbsp;3, 2006. 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.
</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 and net proceeds of approximately
$10.7&nbsp;million. The private placement closed August&nbsp;3, 2007. Pursuant to the securities purchase
agreement, for a purchase price of $5.75 each investor received 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the terms of the registration rights agreements, the Company filed resale registration
statements covering the shares in both private placements, including the shares issuable upon
exercise of the warrants, with the SEC. In the unlikely event that the Company fails to meet
certain deadlines, as described in the registration rights agreements, the holders would be
entitled to certain monetary damages. 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 statements
on Forms S-3 were declared effective by the SEC (file #333-139056 and file #333-145740) on February
12, 2007 and September&nbsp;11, 2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;26, 2008, the Company filed a Form S-3 shelf registration statement for an indeterminate
number of shares of common stock, warrants to purchase shares of common stock and units consisting
of a combination thereof having an aggregate initial offering price not to exceed $40&nbsp;million. The
SEC declared the registration statement effective on July&nbsp;7, 2008 (file# 333-151935) (See Note 14).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. WARRANTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Warrants outstanding at June&nbsp;30, 2008 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 52,646 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>


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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">Additionally, as previously discussed, in connection with the Company&#146;s two private placement
financings the following warrants have been granted and remain outstanding as of June&nbsp;30, 2008:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Financing that closed November&nbsp;3, 2006: 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: 6pt; margin-left: 2%">Financing that closed August&nbsp;3, 2007: warrants to purchase up to 500,041 shares of the
Company&#146;s common stock were issued. The warrants are five-year warrants with an exercise price
of $8.00 per share.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash received from warrants exercised for the both the three months and six months ended June&nbsp;30,
2008 and 2007 were $11 and $0, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12. 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">&#174;</SUP>, and the Company&#146;s business and financial strategy. Under this agreement, Mr.
Castleman receives compensation for each month of services rendered. The Company made payments,
pursuant to this consulting agreement, of $6 in each of the three month periods ending June&nbsp;30,
2008 and 2007 and $12 in each of the six month periods ending June&nbsp;30, 2008 and 2007. 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 through January&nbsp;2009.
</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">The Company has retained the services of Robert Friedman, M.D. as a consultant, medical advisor to
the Company&#146;s Board of Directors, and in connection with the clinical testing of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. In consideration for these services, Dr.&nbsp;Friedman is being paid at a rate of
$5 per day.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This consulting agreement continues to automatically renew for successive one-year terms unless
either party terminates the agreement at least 30&nbsp;days prior to its expiration. The Company made
payments to Dr.&nbsp;Friedman totaling $15 for the three month period ending June&nbsp;30, 2008. Payments of
$27.5 were made to Dr.&nbsp;Friedman in the six months ending June&nbsp;30, 2008. The Company paid Dr.
Friedman $12 for the three and six month periods ending June&nbsp;30, 2007.
</DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>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
six months ended June&nbsp;30, 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 transitioned out of his role as the Company&#146;s Acting Chief Operating
Officer and has entered into an amended 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. 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 $17.5 in the three month period ended June&nbsp;30, 2008 compared to $7.5 for the same
period a year earlier. For the six month period ending June&nbsp;30, 2008 and 2007, the Company paid
Dr.&nbsp;Wagner $25 and $30, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>13. SALE AND LICENSING OF DISCONTINUED OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;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">&#174;</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 were excluded from continuing operations and have been reported as
discontinued operations. The assets and liabilities of the business were 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">&#174;</SUP>. Upon execution of the agreement, KaVo paid
the Company $500. The second $500 payment was received on July&nbsp;20, 2007. Beginning in July&nbsp;2008,
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, 2007, the Company recorded $28 as the balance of the gain 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, $781 of the gain had been recorded in the
year ended December&nbsp;31, 2006. Royalties will be recorded when earned.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14. SUBSEQUENT EVENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> pivotal clinical trial commenced at the end of January&nbsp;2007 and
continues into the third quarter of 2008. At the end of July&nbsp;2008, we completed the accrual phase
of the pivotal trial; follow-up and data analysis is ongoing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;26, 2008, the Company filed a Form S-3 shelf registration statement for an indeterminate
number of shares of common stock, warrants to purchase shares of common stock and units consisting
of a combination thereof having an aggregate initial offering price not to exceed $40&nbsp;million. The
SEC declared the registration statement effective on July&nbsp;7, 2008 (file# 333-151935). Management
utilized this shelf registration statement to raise additional equity capital by completing a
public offering of $11.9&nbsp;million for 2,088,451 common shares ($11&nbsp;million approximate net proceeds to the Company) on July&nbsp;31,
2008. Management anticipates that the proceeds  from this offering combined with existing cash balances will allow the Company
to fund anticipated levels of operations into 2010. The Company will require additional funds to
achieve significant commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. However, there can be no assurances
that the Company will be able to raise additional capital in the future. Additional funds may not
become available on acceptable terms, and there can be no assurance that any additional funding
that the Company does obtain will be sufficient to meet the Company&#146;s needs in the long term. The
sale closed August&nbsp;8, 2008.
</DIV>


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</DIV>

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



<DIV align="left">
<A name="105"></A>
</DIV>

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


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><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, 2007.
</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">&#174;</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. We discontinued 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">&#174;</SUP>. On
December&nbsp;11, 2006, we announced that we had signed a sales and exclusive licensing agreement with
KaVo Dental GmbH (&#147;KaVo&#148;), a leading dental equipment manufacturer, to further develop and
commercialize DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. In accordance with the terms of the agreement, KaVo paid us an
up-front sum and made a second payment to us on July&nbsp;20, 2007. Beginning in the second half of
2008, KaVo is required to 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">&#174;</SUP>. With the
completion of this transaction, we do not 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">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, 2008, we had an accumulated deficit of $52.4&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">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
activities and approvals. At the end of July&nbsp;2008 we completed the accrual phase of the pivotal
trial; follow-up and data analysis is ongoing. We
</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">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: 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.
</DIV>

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

<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.
</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 and net proceeds of approximately
$10.7&nbsp;million. This transaction closed August&nbsp;3, 2007.
</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, activities related 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">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>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2008, total cash, cash equivalents and marketable securities were $12.7&nbsp;million. On
June&nbsp;26, 2008, the Company filed a Form S-3 shelf registration statement for an indeterminate
number of shares of common stock, warrants to purchase common stock and units consisting of a
combination thereof having an aggregate initial offering price not to exceed $40&nbsp;million. The SEC
declared the registration statement effective on July&nbsp;7, 2008 (file# 333-151935). Management
utilized this shelf registration statement to raise additional equity capital by completing a
public offering of approximately $11.9&nbsp;million for 2,088,451 common shares ($11&nbsp;million approximate net proceeds to the
Company) on July&nbsp;31, 2008. Management anticipates that the proceeds from this offering combined with existing cash balances
will allow the Company to fund anticipated levels of operations into 2010. The Company will
require additional funds to achieve significant commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
However, there can be no assurances that the Company will be able to raise additional capital in
the future. Additional funds may not become available on acceptable terms, and there can be no
assurance that any additional funding that the Company does obtain will be sufficient to meet the
Company&#146;s needs in the long term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our cash and cash equivalents at June&nbsp;30, 2008 are liquid investments in money market funds and deposits with a commercial bank.
</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, 2008, we had an accumulated deficit of $52.4&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 corporate infrastructure, and prepare for the potential commercial launch of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</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">&#174;</SUP>.


</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">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. If we are unable to obtain 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">&#174;</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>

<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"><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">&#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>

<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 (in thousands) </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, 2008, 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&#150;3 years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>4&#150;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">$</TD>
    <TD align="right">619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</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">The indicated operating leases are non-cancelable operating leases for space expiring June&nbsp;2009 and
January&nbsp;2011. The lease on 5,000 square feet of office and laboratory space expires in June&nbsp;2009.
The lease on 2,800 square feet of office space and the lease for an additional 2,500 square feet of
office space adjacent to our existing laboratory location expire January&nbsp;2011.
</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">Through the first six months of 2008, the Company continued the development of the
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> system, intensified the data accrual activity of the pivotal clinical trial
started in 2007, addressed the requirements of the FDA quality service regulation, and initiated the development of processes and equipment to
allow for the efficient manufacturing of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in quantities necessary for
commercialization. Even with the completion of the data accrual phase of the pivotal clinical
trial at the end of July&nbsp;2008, as we move toward PMA submission and the commercial launch of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> our overall costs will likely continue to rise due to increases in quality,
technical support, and marketing activities.



</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>Three Months Ended June&nbsp;30, 2008 Compared to Three Months Ended June&nbsp;30, 2007</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 increased 92% for the three month period ended June&nbsp;30, 2008
compared to the same period ended June&nbsp;30, 2007. These cost increases were principally
attributable 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="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>product development &#151; greater use was made of design consultants in 2008 than in 2007.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>clinical studies costs &#151; in 2008 the number of study sites was increased over the number in
2007 when the pivotal clinical trial was just commencing. Additionally, activity in the
collection and confirmation of data was intensified both through use of consultants and the
hiring of additional in-house clinical personnel.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>quality and regulatory &#151; as we moved closer to PMA submission, we made use of consultants
and added in-house personnel to address the requirements of the FDA quality service
regulation.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>development activities &#151; we focused on processes and equipment to increase manufacturing
capacity as we move toward MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> commercialization and product launch.
Extensive work was done on developing process instructions, targets, molds and fixtures to
increase the manufacturing through-put capability of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> manufacturing.</TD>
</TR>

</TABLE>
</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 expenses consist primarily of salaries and related expenses of general
corporate activities, certain 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">&#174;</SUP>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General and Administrative expense for the three months ended June&nbsp;30, 2008 increased 3% as
compared to the same period ended June&nbsp;30, 2007. This increase is reflective of year-to-year
compensation level adjustments and the additional rent following expansion of our leased space in
August of 2007. Marketing activities towards MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> product launch and technical
support capabilities for systems to be placed in doctor&#146;s offices were slowed during the quarter as
the pivotal clinical trial continued through the period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Six Months Ended June&nbsp;30, 2008 Compared to Six Months Ended June&nbsp;30, 2007</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 increased 74% for the six month period ended June&nbsp;30, 2008
compared to the same period ended June&nbsp;30, 2007, attributable to activities consistent with that
described for the three month period above. The percentage increase was less over the full six
month period as the intensified clinical studies and manufacturing process activities began late in
the first quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We 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
other clinical studies of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</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: 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, 2008 increased 6% as compared
to the same period ended June&nbsp;30, 2007. This increase is reflective of year-to-year compensation
level adjustments and the additional rent following the expansion of our leased space in August of
2007. In the second half of 2008, proposed new marketing activities toward MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> product launch
and technical support capabilities for systems to be placed in doctor&#146;s offices could increase the
level of general and administrative costs.


</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>Interest Income/Expense</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income for the three and six months ended June&nbsp;30, 2008 was 59% and 45% lower than the
comparable periods in 2007. The decrease is primarily related to the lower interest rates available
for investment of our cash balances as well our average cash balance being $1.8 and $1.2&nbsp;million
lower for the three months and six months ended June&nbsp;30, 2008, respectively, compared to the same
periods a year earlier.
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the three and six month periods ended June&nbsp;30, 2008, the Company&#146;s other income included $42
and $52 respectively from L&#146;Oreal as an offset to expenses the Company incurred under our joint
feasibility program, and $13 and $23 respectively from Kavo for product support of the discontinued
dental product line the Company sold to Kavo in 2006. There was
no other income earned during the first six months of 2007.
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2008, deferred income was $25, which included $22 received from L&#146;Oreal which has
not yet been earned as expense offset to our joint feasibility study, and $3 billed to Kavo but not
yet earned under our product support agreement. There was no deferred income recorded during the
six months ended June&nbsp;30, 2007.
</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 is
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</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>(&#147;SFAS 123R&#148;), 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</I>
<I>Employees </I>(&#147;APB 25&#148;), 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 2007 and 2008 includes:
(1)&nbsp;quarterly amortization related to the remaining unamortized 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&nbsp;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 milestones
not under the Company&#146;s control. Upon the attainment of the relevant 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 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>(&#147;EITF 96-18&#148;)<I>. </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>Cash Flows from Operating Activities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash used in operations was $8,014 for the six months ended June&nbsp;30, 2008. For the
corresponding period in 2007, net cash used in operations was $5,748. In both periods, cash used in
operations was attributable to net losses after an adjustment for non-cash charges related to
depreciation/amortization and share-based compensation, and other changes in operating assets and
liabilities.
</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>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, 2008, net cash provided by our investing activities was $556 and
was principally related to the redemption of marketable securities offset by the purchase of
information technology and manufacturing capabilities related equipment in support of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. For the corresponding period in 2007, net cash used by our investing
activities was $230 that was principally related to the purchase of property and equipment and
patent application related costs.
</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, 2008, net cash provided by financing activities was $25 and
reflects proceeds from the sale of common stock upon the exercise of options and warrants. For the
six months ended June&nbsp;30, 2007, net cash provided by financing activities was $115 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>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 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>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. As 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 June&nbsp;30, 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 is paid a monthly
retainer of $2.5 and will be paid $2.5 for each additional consulting day.
</DIV>

<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 12.
</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>



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<DIV style="font-family: 'Times New Roman',Times,serif">
<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 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; (&#147;SFAS No.&nbsp;159&#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 adoption of SFAS No.&nbsp;159 did not have a
material impact on our 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; (&#147;SFAS No.&nbsp;157&#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 adoption of SFAS No.&nbsp;157 did not have a material impact on our financial
statements.
</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 March&nbsp;2008, the FASB issued Statement of Financial Accounting Standards No.&nbsp;161 &#147;Disclosures
about Derivative Instruments and Hedging Activities&#148; (&#147;SFAS 161&#148;). This new standard enhances
disclosure requirements for derivative instruments in order to provide users of financial
statements with an enhanced understanding of (i)&nbsp;how and why an entity uses derivative instruments,
(ii)&nbsp;how derivative instruments and related hedged items are accounted for under Financial
Accounting Standards No.&nbsp;133 &#147;Accounting for Derivative Instruments and Hedging Activities&#148; and its
related interpretations, and (iii)&nbsp;how derivative instruments and related hedged items affect an
entity&#146;s financial position, financial performance, and cash flows. SFAS 161 is to be applied
prospectively for the first annual reporting period beginning on or after November&nbsp;15, 2008. We
believe that the adoption of SFAS 161 will not have a material impact on our financial statement
disclosures since we do not currently have any derivative instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141R, Business Combinations (&#147;SFAS 141R&#148;). This
statement replaces FASB SFAS No.&nbsp;141 and establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the acquire. SFAS 141R also
provides guidance for recognizing and measuring the goodwill acquired in the business combination
and determines what information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement applies prospectively
to business combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December&nbsp;15, 2008. We believe the adoption of this
pronouncement will not have a material impact on our financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;160, Noncontrolling Interests in Consolidated Financial
Statements&#151;an amendment of ARB No.&nbsp;51. This statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity that should be reported as equity in the consolidated financial
statements. In addition to the amendments to ARB 51, this statement amends FASB Statement No.&nbsp;128,
Earnings per Share, so that earnings-per-share data will continue to be calculated the same way
those data were calculated before this statement was issued. This statement is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after December&nbsp;15, 2008. We
believe the adoption of this pronouncement will not have a material impact on the our financial
statements.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="106"></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, cash equivalents, and short-term investments.
We invest in high-quality financial instruments, primarily money market funds, federal agency
notes, and US Treasury obligations, with the average 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.
The Company is exposed to credit risks in the event of default by the
financial institutions or issuers of investments in excess
 of FDIC insured limits. The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure
with any institution.
</DIV>
<DIV align="left">
<A name="107"></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, 2008, 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, 2008 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="108"></A>
</DIV>

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

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><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" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1A. 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, 2007. In addition, the
following risk factors have changed during the six months ended June&nbsp;30, 2008:</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We currently do not have, and may never develop, any commercialized products.</I></B>
</DIV>


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


</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>we may not be able to obtain regulatory approvals for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, or the approved
indication may be narrower than we seek;</TD>
</TR>

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

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

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

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

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

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

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

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We do not expect to be able to commercialize MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> before the middle of 2009. If we
are unable to develop, obtain regulatory approval for or successfully commercialize
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, we will be unable to generate revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Risk of delay in product development.</I></B>
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The final training of the classifier is required to be completed before the classifier is utilized
as described above. Accordingly, the classifier must be ready for final training when the data from
the pivotal trial become available. To date, there are over 400 melanoma lesions in the training
database. The current classifier has been trained on 221 of these melanoma lesions. Our schedule
for the acquisition of these lesions is based upon the projected numbers of imaging devices to be
located at participating sites, the projected productivity of those sites in terms of melanomas and
other lesions biopsied per month, and the projected efficiency of the study pathologists in
classifying the lesion slides presented for histological analysis (the microscopic examination of
excised or biopsied tissue specimens) and reporting their results. If we are unable to produce and
maintain a sufficient number of imaging devices at participating sites, if the clinicians do not
maintain sufficient productivity, or if the pathologists do not produce reports with sufficient
efficiency, then our ability to maintain our schedule will be adversely affected, the conclusion of
the pivotal trial may be delayed, and the submission of the completed PMA will be delayed.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We have not received, and may never receive, FDA approval to market MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I>.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We do not have the necessary regulatory approvals to market MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the US or in
any foreign market. We have not filed, and currently do not have plans to file, for regulatory
approval in any foreign market. We plan initially to launch MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, once approved, in
the US. The regulatory approval process for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the US involves, among other
things, successfully completing clinical trials and obtaining pre-market approval (PMA)&nbsp;from the
FDA. We commenced the PMA application process for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> by filing a proposed outline
for a Modular PMA application (a compilation of well-delineated components submitted separately) on
September&nbsp;30, 2002. The PMA process requires us to prove the safety and effectiveness of
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> to the FDA&#146;s satisfaction. This process is expensive and uncertain, and
requires detailed and comprehensive scientific and human clinical data. FDA review may take years
after a PMA application is filed. The FDA may never grant approval. The FDA can delay, limit or
deny approval of a PMA application for many reasons, including:
</DIV>

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

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

<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 data from our pre-clinical studies and clinical trials may be insufficient to support 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>the manufacturing process or facilities we use may not meet applicable requirements; 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>changes in FDA approval policies or adoption of new regulations may require additional data.</TD>
</TR>

</TABLE>
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the end of July&nbsp;2008, we completed the accrual phase of the pivotal trial; follow-up and data
analysis is ongoing.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We 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">&#174;</SUP>. Our net loss for the three and six months ended
June&nbsp;30, 2008 was approximately $5&nbsp;million and $9.2 million, respectively, and as of June&nbsp;30, 2008, we had an accumulated deficit
of approximately $52.4&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">&#174;</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</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></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, 2008, we had $11.8&nbsp;million in cash and cash equivalents and $0.9&nbsp;million in
marketable securities. Our operations have consumed substantial amounts of cash for each of the
last eight years. On June&nbsp;26, 2008, the Company filed a Form S-3 shelf registration statement for
an indeterminate number of shares of common stock, warrants to purchase common stock and units
consisting of a combination thereof having an aggregate initial offering price not to exceed $40
million. The SEC declared the registration statement effective on July&nbsp;7, 2008 (file# 333-151935).
Management utilized this shelf registration statement to raise additional equity capital by
completing a public offering of approximately $11.9&nbsp;million ($11&nbsp;million approximate net proceeds
to the Company) on July&nbsp;31, 2008. The proceeds from this offering combined with existing cash
balances will allow the Company to fund anticipated levels of operations into 2010. The Company
will require additional funds to achieve significant commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
However, there can be no assurances that the Company will be able to raise additional capital in
the future. Additional funds may not become available on acceptable terms, and there can be no
assurance that any additional funding that the Company does obtain will be sufficient to meet the
Company&#146;s needs in the long term.
</DIV>

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

<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>

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


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


<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">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>MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I> may not be commercially viable if we fail to obtain an adequate level of
reimbursement by Medicare and other third party payers. The markets for MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I> may
also be limited by the indications for which its use may be reimbursed.</I></B>
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Medicare reimburses for medical devices in a variety of ways, depending on where and how the device
is used. However, Medicare only provides reimbursement if the Centers for Medicare and Medicaid
Services (&#147;CMS&#148;) determines that the device should be covered and that the use of the device is
consistent with the coverage criteria. A coverage determination can be made at the local level by
the Medicare administrative contractor (formerly called carriers and fiscal intermediaries), a
private contractor that processes and pays claims on behalf of CMS for the geographic area where
the services were rendered, or at the national level by CMS through a national coverage
determination. There are statutory provisions intended to facilitate coverage determinations for
new technologies, but it is unclear how these provisions will be implemented. Coverage presupposes
that the device has been cleared or approved by the FDA and further, that the coverage will be no
broader than the approved intended uses of the device as approved or cleared by the FDA, but
coverage can be narrower. A coverage determination may be so limited that relatively few patients
will qualify for a covered use of the device. Should a very narrow coverage determination be made
for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, it may undermine the commercial viability of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>

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

</DIV>

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</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>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, 2008, our stock price has ranged from $3.84 to $9.99 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>

<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 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>

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</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If 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, 2008, our directors, executive officers, holders of more than 5% of our common
stock, and their affiliates in the aggregate, beneficially owned approximately 41% 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>We have limited manufacturing capabilities and manufacturing personnel, and if our manufacturing
capabilities are insufficient to produce an adequate supply of MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I>, our growth
could be limited and our business could be harmed.</I></B>
</DIV>

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

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is complex and may contain undetected design defects and errors when first
introduced, or errors that may be introduced when enhancements are released. Such defects and
errors may occur despite our testing, and may not be discovered until after our devices have been
shipped to and used by our customers. The existence of these defects and errors could result in
costly repairs, returns of devices,
</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">diversion of development resources and damage to our reputation in the marketplace. Any of these
conditions could have a material adverse impact on our business, financial condition and results of
operations. In addition, when we contract with third-party manufacturers for the production of our
products, these manufacturers may inadvertently produce devices that vary from devices we have
produced in unpredictable ways that cause adverse consequences.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We will not be able to sell MelaFind</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I> unless and until its design is verified and
validated in accordance with current good manufacturing practices as set forth in the US medical
device Quality System Regulation.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are in the process, but have not yet successfully completed, all the steps necessary to verify
and validate the design of the MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> system that are required to be performed prior
to commercialization. If we are delayed or unable to complete verification and validation
successfully, we will not be able to sell MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and we will not be able to meet our
plans for the commercialization of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the middle of 2009<B>. </B>Assuming that
regulatory approval of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is granted, the approval may be subject to limitations
on the indicated uses for which the product may be marketed, or may contain requirements for costly
post-marketing testing and surveillance to monitor the safety or effectiveness of the device. Later
discovery of previously unknown problems with MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, including manufacturing
problems, or failure to comply with regulatory requirements such as the FDA Quality System
Regulation (&#147;QSR&#148;), may result in restrictions on MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> or its manufacturing
processes, withdrawal of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> from the market, patient or physician notification,
voluntary or mandatory recalls, fines, withdrawal of regulatory approvals, refusal to approve
pending applications or supplements to approved applications, refusal to permit the import or
export of our products, product seizures, injunctions or the imposition of civil or criminal
penalties. Should any of these enforcement actions occur, our business, financial condition and
results of operations could be materially and adversely affected.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any product for which we obtain marketing approval, along with the manufacturing processes,
post-approval clinical data and promotional activities for such product, will be subject to
continuous review and periodic inspections by the FDA and other regulatory bodies. In particular,
we and our suppliers are required to comply with the QSR and other regulations which cover the
methods and documentation of the design, testing, production, control, quality assurance, labeling,
packaging, storage, promotion, distribution, and shipping of MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, and with record
keeping practices. We also will be subject to ongoing FDA requirements, including required
submissions of safety and other post-market information and reports and registration and listing
requirements. To the extent that we contract with third parties to manufacture some of our
products, our manufacturers will be required to adhere to current Good Manufacturing Practices
(&#147;cGMP&#148;) requirements enforced by the FDA as part of QSR, or similar regulations required by
regulatory agencies in other countries. The manufacturing facilities of our contract manufacturers
must be inspected or must have been inspected, and must be in full compliance with cGMP
requirements before approval for marketing. The FDA enforces the QSR and other regulatory
requirements through unannounced inspections. We have not yet been inspected by the FDA for
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and will have to complete such an inspection successfully before we ship any
commercial MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> devices. However, we were previously inspected in connection with
DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, which we have discontinued for business reasons, and were cited for failures to
comply fully with QSR mandated procedures. The FDA inspectors observed deficiencies that were
documented on FDA Form&nbsp;483 that was issued to us following the inspection. The DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
inspectional findings were discussed in a subsequent meeting with the FDA on April&nbsp;28, 2005. An
onsite consultant was hired to address these deficiencies and structure a compliant Quality System
for MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. Throughout 2006 we worked to address the deficiencies noted in accordance
with the agreement reached with the FDA. On May&nbsp;18, 2006, the FDA re-audited the Company&#146;s facility
for a follow-up inspection and audited our revised Quality System. No non-conformities or negative
observations were reported to the Company. On December&nbsp;5, 2006 we received correspondence from the
FDA that reported &#147;that all previous observations reported on the FDA-483 were corrected, and this
firm no longer manufactures or distributes the DIFOTI<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> 2.0 dental imaging system.&#148; A second follow-up inspection was conducted in
May&nbsp;2008; no deficiencies were cited by the FDA field inspector.


</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our director of quality assurance and regulatory affairs continues to work with several regulatory
consultants to address the inspectional findings, particularly as they relate to current
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> design development and ultimately MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> commercial
manufacturing. If we are not successful in convincing the FDA that we are capable of addressing any
concerns it might have relative to MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, or in our efforts to address any
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> deficiencies that might develop, we could be subject to additional FDA action
of a type described below, which could negatively affect our ability to commercialize
MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. There can be no assurance that the future interpretations of legal
requirements made by the FDA or other regulatory bodies with possible retroactive effect, or the
adoption of new requirements or policies, will not adversely affect us. We may be slow to adapt, or
may not be able to adapt, to these changes or new requirements. Failure by us or one of our
suppliers to comply with statutes and regulations administered by the FDA and other regulatory
bodies, or failure to take adequate response to any observations, could result in, among other
things, any of the following actions:
</DIV>

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

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

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

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in approving or refusal to approve MelaFind<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>withdrawal of approval by the FDA or other regulatory bodies;</TD>
</TR>

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

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

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

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

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

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If any of these actions were to occur, it would harm our reputation and cause our product sales and
profitability to suffer.
</DIV>
<DIV align="left">
<A name="110"></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">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 and net proceeds of approximately
$10.7&nbsp;million. This transaction closed on August&nbsp;3, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The proceeds from this financing are being used for general corporate purposes including research
and development activities.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /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="111"></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>
<DIV align="left">
<A name="112"></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 2008 Annual Meeting of Stockholders of the Company was held on May&nbsp;16, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our stockholders voted on proposals to elect directors and 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, 2008.
</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 2009 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:30px; 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:30px; text-indent:-15px">Joseph V. Gulfo, MD</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,244,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,062</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Breaux Castleman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,086,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sidney Braginsky</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,241,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gorge C. Chryssis</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,244,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,062</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Martin D. Cleary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,244,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,062</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dan W. Lufkin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,243,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,062</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gerald Wagner, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,244,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,062</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:30px; text-indent:-15px">Ratification of Eisner LLP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,329,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,936</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="113"></A>
</DIV>

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


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

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable</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>Not applicable</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /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 style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="left">
<A name="114"></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="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="94%">&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<BR>
 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 -->32<!-- /Folio -->
</DIV>

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

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

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="94%">&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<BR>
 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<BR>
 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">10.30
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fifth Amendment dated as of August&nbsp;24, 2007, by and between the Registrant and Bridge
Street Commercial, 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">10.31*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Offer Letter, dated February&nbsp;11, 2008, between the Registrant and Tina
Cheng-Avery.(14)</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">10.32*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Separation Agreement dated May&nbsp;1, 2008, between the Registrant and Jon I. Klippel. (15)</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">10.33
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Subscription Agreement between the Registrant and certain investors.(16)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /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="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="94%">&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 Rule&nbsp;13a-14(a) or Rule&nbsp;15d-14(a)
under the Securities Exchange Act of 1934, as
amended.</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 Rule&nbsp;13a-14(a) or Rule&nbsp;15d-14(a)
under the Securities Exchange Act of 1934, as
amended.</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 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>



<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.
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.
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.
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">(14)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on February&nbsp;12, 2008.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(15)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on May&nbsp;1, 2008.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(16)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to the Registrant&#146;s Current Report on Form 8-K filed on July&nbsp;31, 2008</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 -->34<!-- /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="115"></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"><BR>
<BR>
<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
(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;8, 2008

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /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="116"></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="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="94%">&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) or Rule&nbsp;15d-14(a) under the Securities Exchange
Act of 1934, as amended.</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) or Rule&nbsp;15d-14(a) under the Securities Exchange
Act of 1934, as amended.</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 -->36<!-- /Folio -->
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>y64943exv31w1.htm
<DESCRIPTION>EX-31.1: CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-31.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<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 RULE 13A-14(A) or<BR> RULE 15D-14(A) UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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="3%" 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="3%" 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="3%" 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="3%" 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="4%" 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="4%" 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="4%" 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="4%" 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="3%" 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="4%" 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="4%" 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;8, 2008

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ Joseph V. Gulfo, M.D.<BR>
Joseph V. Gulfo, M.D.<BR>
President and Chief Executive Officer<BR>
(Principal Executive Officer)

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->37<!-- /Folio -->
</DIV>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>y64943exv31w2.htm
<DESCRIPTION>EX-31.2: CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-31.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

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

<DIV align="right" style="font-size: 10pt; margin-top: 18pt"><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 RULE 13A-14(A) or<BR> RULE 15D-14(A) UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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="3%" 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="3%" 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="3%" 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="3%" 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="4%" 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="4%" 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="4%" 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="4%" 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="3%" 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="4%" 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="4%" 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;8, 2008

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ Richard I. Steinhart<BR>
Richard I. Steinhart<BR>
Vice President and Chief Financial Officer<BR>
(Principal Accounting and Financial Officer)

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->38<!-- /Folio -->
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>y64943exv32w1.htm
<DESCRIPTION>EX-32.1: CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-32.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

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

<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>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, 2008 (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="left" style="font-size: 10pt; margin-top: 6pt">/s/ Joseph V. Gulfo<BR>
Joseph V. Gulfo<BR>
President and Chief Executive Officer<BR>
(Principal Executive Officer)<BR>
August&nbsp;8, 2008

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">/s/ Richard I. Steinhart<BR>
Richard I. Steinhart<BR>
Vice President &#038; Chief Financial Officer<BR>
(Principal Accounting and Financial Officer)<BR>
August&nbsp;8, 2008

</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 -->39<!-- /Folio -->
</DIV>




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