1051514--3/2/2009--ELECTRO_OPTICAL_SCIENCES_INC

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is approved by the FDA, it may be approved only for narrow indications. 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 may also be limited by the indications for which its use may be reimbursed. The FDA may require additional clinical trials and any adverse results in such clinical trials, or difficulties in conducting such clinical trials, could have a material adverse effect on our business. We have incurred losses for a number of years, and anticipate that we will incur continued losses for the foreseeable future. We expect to operate in a highly competitive market, we may face competition from large, well-established medical device manufacturers with significant resources, and we may not be able to compete effectively. Technological breakthroughs in the diagnosis or treatment of melanoma could render MelaFind For any additional clinical trials required for MelaFind by the FDA or with respect to clinical trials relating to the development of our core technology for other applications, we depend on clinical investigators and clinical sites and other third parties to manage the trials and to perform related data collection and analysis, and, as a result, we may face costs and delays that are outside of our control. is approved for reimbursement, we anticipate experiencing significant pressures on pricing. may never achieve market acceptance even if we obtain regulatory approvals. We may be unable to complete the development and commence commercialization of MelaFind or other products without additional funding and we will not be able to achieve significant commercialization without additional funding. If we are unable to establish sales, marketing and distribution capabilities or enter into and maintain arrangements with third parties to sell, market and distribute MelaFind , our business may be harmed. We have limited manufacturing capabilities and manufacturing personnel, and if our manufacturing capabilities are insufficient to produce an adequate supply of MelaFind , our growth could be limited and our business could be harmed. Our manufacturing operations are dependent upon third-party suppliers, making us vulnerable to supply problems and price fluctuations, which could harm our business. We anticipate contracting for final device assembly and integration, but no contract for such services on a commercial basis has yet been procured. We will not be able to sell MelaFind 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. 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 , it could be subject to restrictions or withdrawal from the market. We are involved in a heavily regulated sector, and our ability to remain viable will depend on favorable government decisions at various points by various agencies. We must comply with complex statutes prohibiting fraud and abuse, and both we and physicians utilizing MelaFind could be subject to significant penalties for noncompliance. The application of the privacy provisions of HIPAA is uncertain. We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from shipping affected products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief. Our patents may also be subject to challenge on validity grounds, and our patent applications may be rejected. New product development in the medical device industry is both costly and labor intensive with very low success rates for successful commercialization; if we cannot successfully develop or obtain future products, our growth would be delayed. We face the risk of product liability claims and may not be able to obtain or maintain adequate insurance. We may be adversely affected by a data center failure. We may be adversely affected by breaches of online security. We are dependent upon telecommunications and the internet. We will be obligated to comply with Federal Communications Commission regulations for radio transmissions used by our products. All of our operations are conducted at a single location. Any disruption at our facility could increase our expenses. We may be liable for contamination or other harm caused by materials that we handle, and changes in environmental regulations could cause us to incur additional expense. Failure to obtain and maintain regulatory approval in foreign jurisdictions will prevent us from marketing abroad. Our success will depend on our ability to attract and retain our personnel. Our financial results for future periods will be affected by the attainment of milestones. If we fail to maintain the adequacy of our internal controls, our ability to provide accurate financial statements could be impaired and any failure to maintain our internal controls could have an adverse effect on our stock price. Risks Relating to our Common Stock An active trading market for our common stock may not be sustained. Our stock price may be volatile, meaning purchasers of our common stock could incur substantial losses. 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. Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable and could also limit the market price of our stock.

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1051514--3/2/2009--ELECTRO_OPTICAL_SCIENCES_INC_/NY