##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                    to
 Commission file number 333125517
 ELECTRO-OPTICAL SCIENCES, INC.
  Delaware
    
    13-3986004(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)3 West Main Street, Suite 201Irvington, New York
    
    10533(Address of Principal Executive offices)
    
    (Zip Code)
 (914) 591-3783
  o þ
  o þ
 o þ
  
 *
    
    The registrant has not been subject to the filing requirements for the past 90 days as it
commenced trading following its initial public offering on October 28, 2005, but has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 since
such time.




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Electro-Optical Sciences, Inc.
Table of Contents
 PagePART I. FINANCIAL INFORMATIONITEM 1.
    
    Financial StatementsBalance sheets as of September 30, 2005 (unaudited) and December 31, 2004
    3Statements of
Operations (unaudited) for the three months and nine months ended September 2005 and 2004
    4Statements of Cash Flows (unaudited) for the nine months ended September 30, 2005 and 2004
    5Notes to Financial Statements (unaudited)
    6ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    16ITEM 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    41ITEM 4.
    
    Controls and Procedures
    41PART II. OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    42ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    42ITEM 3.
    
    Defaults Upon Senior Securities
    42ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    43ITEM 5.
    
    Other Information
    43ITEM 6.
    
    Exhibits
    44SIGNATURES
    45EXHIBIT
INDEX
    46EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATION
  2




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ELECTRO-OPTICAL SCIENCES, INC.
 
 BALANCE SHEETS
 September 30,
    
    
    December 31,2005
    
    
    2004(unaudited)
    
    
    *ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,345,773
    
    
    $
    108,705Marketable securities
    
    
    
    
    
    
    6,594,751Accounts receivable, net
    
    
    
    
    
    
    7,128Inventories
    
    
    
    
    
    
    69,755Prepaid expenses and other current assets
    
    
    5,779
    
    
    
    32,844Assets held for sale
    
    
    156,677
    
    
    
    Deferred registration costs
    
    
    1,836,610
    
    
    
    Total Current Assets
    
    
    3,344,839
    
    
    
    6,813,183Property and equipment, net
    
    
    180,095
    
    
    
    89,306Patents and trademarks, net
    
    
    84,041
    
    
    
    163,459Other assets
    
    
    33,612
    
    
    
    30,201Total Assets
    
    $
    3,642,587
    
    
    $
    7,096,149LIABILITIES AND STOCKHOLDERS DEFICIENCYCurrent Liabilities:Accounts payable (includes related parties $26,258 as of September
30,2005 and $2,000 as of December 31, 2004)
    
    $
    302,813
    
    
    $
    338,821Accrued expenses
    
    
    303,096
    
    
    
    228,583Accrued registration costs
    
    
    701,488
    
    
    
    Deferred revenues
    
    
    
    
    
    
    106,335Other current liabilities
    
    
    10,876
    
    
    
    17,284Total Current Liabilities
    
    
    1,318,273
    
    
    
    691,023REDEEMABLE CONVERTIBLE PREFERRED STOCKRedeemable Preferred Stock Series B convertible
992, 986 shares designated (liquidation preference $2.26
per share); issued and outstanding 992,986 shares at September 30,
2005 and December 31, 2004
    
    
    2,244,147
    
    
    
    2,244,147Redeemable Preferred Stock Series C convertible
5,744,340 shares designated (liquidation preference
$2.26 per share); issued and outstanding 5,414,779 shares
at September 30, 2005 and December 31, 2004
    
    
    8,680,769
    
    
    
    7,711,027COMMITMENTS AND CONTINGENCIESStockholders Deficiency:Preferred stock  $.10 par value; authorized 16,936,704 shares:Series A Convertible Preferred Stock, 199,380 shares
designated  (liquidation preference $5.00 per share);
issued and outstanding 198,000 shares at September 30, 2005
and December 31, 2004
    
    
    972,311
    
    
    
    972,311Common stock  $.001 par value; authorized 30,000,000 shares;issued and outstanding 3,125,079 shares at September 30, 2005 and
1,809,758 shares at December 31, 2004
    
    
    3,125
    
    
    
    1,810Additional paid-in capital
    
    
    8,718,136
    
    
    
    9,611,094Notes receivable for stock subscriptions
    
    
    
    
    
    
    (69,000
    )Deferred compensation
    
    
    (135,405
    )
    
    
    (159,300
    )Accumulated deficit
    
    
    (18,158,769
    )
    
    
    (13,906,963
    )Stockholders Deficiency
    
    
    (8,600,602
    )
    
    
    (3,550,048
    )Total Liabilities and Stockholders Deficiency
    
    $
    3,642,587
    
    
    $
    7,096,149
  
 *Derived from the audited balance sheet as of December 31, 2004 3




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ELECTRO-OPTICAL SCIENCES, INC.
 
 STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Operating expenses:Research and development
    
    
    876,193
    
    
    
    422,509
    
    
    
    2,422,017
    
    
    
    1,115,561General and administrative
    
    
    491,976
    
    
    
    203,567
    
    
    
    1,487,907
    
    
    
    842,646Operating loss from continuing
operations
    
    
    (1,368,169
    )
    
    
    (626,076
    )
    
    
    (3,909,924
    )
    
    
    (1,958,207
    )Interest income
    
    
    2,574
    
    
    
    (530
    )
    
    
    (60,195
    )
    
    
    (1,073
    )Interest expense
    
    
    
    
    
    
    900
    
    
    
    
    
    
    
    83,2402,574
    
    
    
    370
    
    
    
    (60,195
    )
    
    
    82,167Loss from continuing operations
    
    
    (1,370,743
    )
    
    
    (626,446
    )
    
    
    (3,849,729
    )
    
    
    (2,040,374
    )Loss from discontinued operations
    
    
    (71,966
    )
    
    
    (119,643
    )
    
    
    (402,077
    )
    
    
    (221,496
    )Net loss
    
    
    (1,442,709
    )
    
    
    (746,089
    )
    
    
    (4,251,806
    )
    
    
    (2,261,870
    )Less:Preferred stock deemed dividends
    
    
    359,531
    
    
    
    132,347
    
    
    
    1,078,595
    
    
    
    375,040Preferred stock accretion
    
    
    323,247
    
    
    
    12,614
    
    
    
    969,743
    
    
    
    37,842Net Loss Attributable to
Common Stockholders
    
    $
    (2,125,487
    )
    
    $
    (891,050
    )
    
    $
    (6,300,144
    )
    
    $
    (2,674,752
    )Net loss per share, basic and diluted:Continuing operations
    
    
    (1.10
    )
    
    
    (0.43
    )
    
    
    (3.22
    )
    
    
    (1.40
    )Discontinued operations
    
    
    (0.04
    )
    
    
    (0.07
    )
    
    
    (0.22
    )
    
    
    (0.13
    )Basic and diluted net loss per
common share
    
    $
    (1.14
    )
    
    $
    (0.50
    )
    
    $
    (3.44
    )
    
    $
    (1.53
    )Basic and diluted weighted average
number of shares outstanding
    
    
    1,869,011
    
    
    
    1,809,758
    
    
    
    1,829,726
    
    
    
    1,752,067Pro forma basic and diluted loss
from continuing operations per
common share
    
    $
    (0.21
    )
    
    $
    (0.18
    )
    
    $
    (0.59
    )
    
    $
    (0.60
    )Pro forma basic and diluted
weighted average number of common
shares
outstanding
    
    
    6,515,664
    
    
    
    3,497,800
    
    
    
    6,514,006
    
    
    
    3,396,151
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ELECTRO-OPTICAL SCIENCES, INC.
 
 STATEMENTS OF CASH FLOWS
 Nine Months Ended
September 30,
(Unaudited)
 2005
    
    
    2004Cash flows from operating activities:Loss from continuing operations
    
    $
    (3,849,729
    )
    
    
    (2,040,374
    )Loss from discontinued operations
    
    
    (402,077
    )
    
    
    (221,496
    )Net loss
    
    $
    (4,251,806
    )
    
    $
    (2,261,870
    )Adjustments to reconcile net loss to net cash used in operating activities:Allowance for doubtful accounts
    
    
    (1,000
    )
    
    
    Depreciation and amortization
    
    
    36,480
    
    
    
    25,442Noncash compensation and amortization of deferred compensation
    
    
    94,695
    
    
    
    16,875Retirement of stock subscription receivable for consulting services
    
    
    34,500
    
    
    
    Amortization of discount on marketable securities
    
    
    (33,502
    )
    
    
    Imputed interest expense from bridge loan
    
    
    
    
    
    
    80,000Changes in operating assets and liabilities:Decrease (increase) in receivables
    
    
    8,128
    
    
    
    (6,209
    )Increase in inventories
    
    
    (16,122
    )
    
    
    (9,312
    )Decrease (increase) in prepaid expenses and other
current assets
    
    
    23,654
    
    
    
    (685
    )Deferred registration costs
    
    
    (1,135,122
    )
    
    
    (190,000
    )Increase in accounts payable and accrued
expenses
    
    
    38,505
    
    
    
    256,628(Decrease) increase in deferred revenues
    
    
    (106,335
    )
    
    
    10,000Decrease in other current liabilities
    
    
    (6,408
    )
    
    
    (8,736
    )Net cash used in operating activities
    
    
    (5,314,333
    )
    
    
    (2,087,867
    )Cash flows from investing activities:Patent costs
    
    
    (2,822
    )
    
    
    (3,167
    )Purchases of property and equipment
    
    
    (115,830
    )
    
    
    (18,706
    )Sale of marketable securities
    
    
    6,628,253
    
    
    
    Net cash provided by (used in) investing activities
    
    
    6,509,601
    
    
    
    (21,873
    )Cash flows from financing activities:Proceeds from issuance of Series C preferred stock
    
    
    
    
    
    
    1,100,000Proceeds from issuance of notes payable
    
    
    
    
    
    
    1,120,000Proceeds from sale of common stock
    
    
    7,300
    
    
    
    137,500Payment for stock subscription receivable
    
    
    34,500
    
    
    
    Net cash provided by financing activities
    
    
    41,800
    
    
    
    2,357,500Net increase in cash and cash equivalents
    
    
    1,237,068
    
    
    
    247,760Cash and cash equivalents at beginning of period
    
    
    108,705
    
    
    
    116,691Cash and cash equivalents at end of period
    
    $
    1,345,773
    
    
    $
    364,451Supplemental Schedule of Noncash Financing Activities:Preferred stock accretion
    
    $
    969,743
    
    
    $
    37,842Accrued registration costs
    
    $
    701,488
    
    
    
    Reclassification of inventories and patents to assets held for sale
    
    $
    156,677
    
    
    
    
  5




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ELECTRO-OPTICAL SCIENCES, INC.
 
 NOTES TO FINANCIAL STATEMENTS
 (In thousands, except
for share and per share data)
(Unaudited)
 1. ORGANIZATION AND BASIS OF PRESENTATION
     2. REVERSE STOCK SPLIT AND CONVERSION OF PREFERRED STOCK
   3. MARKETABLE SECURITIES
  6




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4. DEFERRED REGISTRATION COSTS
  5. USE OF ESTIMATES
  6. RECENT ACCOUNTING DEVELOPMENTS
 ), Share-Based Payment , , Stock-Based Payment, .
 7. STOCK-BASED COMPENSATION
 Accounting for Stock-Based
Compensation Accounting for Stock-Based Compensation, Transition and
Disclosure
  7




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7. STOCK-BASED COMPENSATION (cont)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss attributable to common
stockholders, as reported
    
    $
    (2,125
    )
    
    $
    (891
    )
    
    $
    (6,300
    )
    
    $
    (2,675
    )Add: Stock-based employee compensation
expense included in reported net loss
    
    
    8
    
    
    
    6
    
    
    
    95
    
    
    
    17Deduct: Employee stock-based compensation
expense under fair-value based method
    
    
    (9
    )
    
    
    (16
    )
    
    
    (99
    )
    
    
    (24
    )Pro forma net loss attributable to common
stockholders
    
    $
    (2,126
    )
    
    $
    (901
    )
    
    $
    (6,304
    )
    
    $
    (2,682
    )Pro forma basic and diluted net loss per share
of common stock
    
    $
    (1.14
    )
    
    $
    (0.50
    )
    
    $
    (3.45
    )
    
    $
    (1.53
    )Basic and diluted net loss per share of common
stock, as reported
    
    $
    (1.14
    )
    
    $
    (0.50
    )
    
    $
    (3.44
    )
    
    $
    (1.53
    )
  Three Months Ended September 30,
    

Nine Months Ended September 30,2005
    
    2004
    
    2005
    
    2004Expected stock price volatility
    
    
    
    
    
    
    60
    %
    
    
    
    
    
    
    60
    %Expected term until exercise
    
    
    
    
    

5
years
    
    
    
    
    


5
yearsRisk-free interest rate
    
    
    
    
    
    
    3.39
    %
    
    
    
    
    
    
    3.39
    %Expected dividend yield
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %
 8. DEFERRED COMPENSATION
  9. NET LOSS PER COMMON SHARE
 Earnings Per
Share
 8




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9. NET LOSS PER COMMON SHARE (cont)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Common stock options
    
    
    895,674
    
    
    
    407,182
    
    
    
    919,035
    
    
    
    394,793Warrants
    
    
    2,671,902
    
    
    
    673,663
    
    
    
    2,729,916
    
    
    
    640,152Redeemable convertible preferred stock
    
    
    3,398,105
    
    
    
    1,387,853
    
    
    
    3,398,105
    
    
    
    1,345,728Total
    
    
    6,965,681
    
    
    
    2,468,698
    
    
    
    7,047,056
    
    
    
    2,380,673
 10. PRO FORMA NET LOSS PER SHARE
   11. COMMITMENTS AND CONTINGENCIES
    12. STOCKHOLDERS (DEFICIENCY) EQUITY AND REDEEMABLE PREFERRED STOCK
(AS RESTATED  SEE NOTE 16)
  9




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12. STOCKHOLDERS (DEFICIENCY) EQUITY AND REDEEMABLE PREFERRED STOCK
(AS RESTATED  SEE NOTE 16) (cont)
         10




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12. STOCKHOLDERS (DEFICIENCY) EQUITY AND REDEEMABLE PREFERRED STOCK
(AS RESTATED  SEE NOTE 16) (cont)
   Voting Rights
  Liquidation Preference
  Deemed Dividends
  Redemption Provisions
   Series C Preferred Stock Carrying Value
  Balance at December 31, 2004
    
    $
    7,711Preferred stock accretion
    
    
    970Balance at September 30, 2005
    
    $
    8,681
 11




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13. STOCK OPTIONS AND WARRANTS
 Warrants
    Stock Options
   14. RELATED PARTY CONSULTING AGREEMENTS:
  Consulting Agreement with Breaux Castleman
  Consulting Agreement with Marek Elbaum, Ph.D.
  12




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14. RELATED PARTY CONSULTING AGREEMENTS (cont)
 Consulting Agreement with Robert Friedman, M.D.
  Consulting Agreement with Gerald Wagner, Ph.D.
  15. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
    13




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16. REVISIONS TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS AS OF AND FOR THE
YEAR ENDED DECEMBER 31, 2004.
  As previouslyreported
    
    
    As restated
    
    
    AdjustmentValue of warrants
    
    $
    3,159
    
    
    $
    2,643
    
    
    $
    516Value of beneficial
conversion feature
    
    
    2,385
    
    
    
    1,465
    
    
    
    920
  Series C
    
    
    Additional
    
    
    Stockholderspreferred
    
    
    paid-in
    
    
    (deficiency)stock
    
    
    capital
    
    
    equityAs previously reported, December 31, 2004
    
    $
    6,341
    
    
    $
    10,981
    
    
    $
    (2,180
    )Adjustment of relative fair value of
warrants issued with Series C preferred
stock
    
    
    516
    
    
    
    (516
    )
    
    
    (516
    )Adjustment of amount of beneficial
conversion feature
    
    
    920
    
    
    
    (920
    )
    
    
    (920
    )1,436
    
    
    
    (1,436
    )
    
    
    (1,436
    )Adjustment of accretion applicable to
Series C preferred stock
    
    
    (66
    )
    
    
    66
    
    
    
    66As restated, December 31, 2004
    
    $
    7,711
    
    
    $
    9,611
    
    
    $
    (3,550
    )
  Year endedDecember 31, 2004Per CommonTotal
    
    
    ShareAs previously reported
    
    $
    (4,619
    )
    
    $
    (2.61
    )Reduction in accretion
applicable to preferred
stock
    
    
    66
    
    
    
    (.03
    )As restated
    
    $
    (4,553
    )
    
    $
    (2.58
    )
 14




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17. SUBSEQUENT EVENT
   As ofSeptember 30, 2005Actual
    
    
    Pro formaTotal current assets
    
    $
    3,345
    
    
    $
    20,383Total noncurrent assets
    
    
    298
    
    
    
    298Total assets
    
    $
    3,643
    
    
    $
    20,681Total current liabilities
    
    $
    1,318
    
    
    $
    616Series B & C Redeemable convertible
preferred stock
    
    
    10,925
    
    
    
    Stockholders (deficiency)/equity:Series A preferred stock
    
    
    973
    
    
    
    Common stock
    
    
    2
    
    
    
    11Additional paid-in capital
    
    
    8,719
    
    
    
    38,348Deferred compensation
    
    
    (135
    )
    
    
    (135
    )Accumulated deficit
    
    
    (18,159
    )
    
    
    (18,159
    )Total stockholders (deficiency) equity
    
    
    (8,600
    )
    
    
    20,065Total liabilities and stockholders(deficiency) equity
    
    $
    3,643
    
    
    $
    20,681
 15




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ITEM 2.
 ELECTRO-OPTICAL SCIENCES, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Overview
    16




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Critical Accounting Policies and Significant Judgments and Estimates
   Revenue Recognition
   Stock-Based Compensation
  17




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Accrued Expenses
  
    
    professional service fees;
    
    contract clinical service fees;
    
    fees paid to contract manufacturers in conjunction with the production
of clinical components or materials; and
    
    fees paid to third party data collection organizations and
investigators in conjunction with the clinical trials.
  Results of Operations (in thousands)
 Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
 Research and Development Expense
 18




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General and Administrative Expense
 Interest (Income)/Expense.
 Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
 Research and Development Expense
 General and Administrative Expense
 Interest (Income)/Expense
 Liquidity and Capital Resources (in thousands)
   Cash Flows from Operating Activities.
 Cash Flows from Investing Activities.
 Cash Flows from Financing Activities.
 19




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Operating Capital and Capital Expenditure Requirements
   
    
    the schedule, costs and results of our clinical trials;
    
    the success of our research and development efforts;
    
    the costs and timing of regulatory approval;
    
    the cost of commercialization activities, including product marketing and building a
domestic direct sales force;
    
    the emergence of competing or complementary technological developments;
    
    the costs of filing, prosecuting, defending and enforcing any patent claims and other
rights, including litigation cost and the results of such litigation;
    
    the cost involved in defending any patent infringement actions brought against us by
third parties, and
    
    our ability to establish and maintain any collaborative, licensing or other
arrangements, and the terms and timing of any such arrangements.
 Contractual Obligations
  Contractual Obligations
 Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    

5 years(dollars in thousands)Operating Leases
    
    $
    952
    
    
    $
    205
    
    
    $
    608
    
    
    $
    139
    
    
    
    Total
    
    $
    952
    
    
    $
    205
    
    
    $
    608
    
    
    $
    139
    
    
    $
    
  Related Party Transactions
  20




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Off-Balance Sheet Arrangements
  21




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Risk factors
 Investing in our common stock involves a high degree of risk. You should carefully consider
the following risk factors, as well as the other information contained in this report. If any of
the following risks actually occur, our business, financial condition and results of operations
would suffer. In that case, the trading price of our common stock would likely decline and you
might lose all or part of your investment in our common stock.
 Risks Relating to Our Business
 We currently do not have, and may never develop, any commercialized products.
  
    
    we may not be able to obtain regulatory approvals for MelaFind®, or the approved indication may
be narrower than we seek;
    
    MelaFind® may not prove to be safe and effective in clinical trials;
    
    physicians may not receive any reimbursement from third-party payors, or the level of
reimbursement may be insufficient to support widespread adoption of MelaFind®;
    
    we may experience delays in our development program;
    
    any products that are approved may not be accepted in the marketplace by physicians or patients;
    
    we may not have adequate financial or other resources to complete the development or to
commence the commercialization of MelaFind® and will not have adequate financial or other
resources to achieve significant commercialization of MelaFind®;
    
    we may not be able to manufacture our products in commercial quantities or at an acceptable
cost; and
    
    rapid technological change may make our technology and products obsolete.
  We have not received, and may never receive, FDA approval to market MelaFind®
  
    
    MelaFind® may not be safe or effective to the FDAs satisfaction;
    
    the data from our pre-clinical studies and clinical trials may be insufficient to support approval;
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
    
    the manufacturing process or facilities we use may not meet applicable requirements; and
    
    changes in FDA approval policies or adoption of new regulations may require additional data.
  If MelaFind® is approved by the FDA, it may be approved only for narrow indications.
   MelaFind® may not be commercially viable if we fail to obtain an adequate level of reimbursement by
Medicare and other third party payors. The markets for MelaFind® may also be limited by the
indications for which its use may be reimbursed.
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Any adverse results in our clinical trials, or difficulties in conducting our clinical trials,
could have a material adverse effect on our business.
  Risk of delay in product development.
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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.
  
    
    significantly greater name recognition;
    
    established relations with healthcare professionals, customers and third-party payors;
    
    established distribution networks;
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
    
    additional lines of products, and the ability to offer rebates, higher discounts or
incentives to gain a competitive advantage;
    
    greater experience in conducting research and development, manufacturing, clinical
trials, obtaining regulatory approval for products, and marketing approved products;
and
    
    greater financial and human resources for product development, sales and marketing,
and patent litigation.
  Technological breakthroughs in the diagnosis or treatment of melanoma could render MelaFind®
obsolete.
  We depend on clinical investigators and clinical sites to enroll patients in our clinical trials
and other third parties to manage the trials and to perform related data collection and analysis,
and, as a result, we may face costs and delays that are outside of our control.
   
    
    the FDA, an Institutional Review Board (IRB), or other regulatory authorities place our clinical
trial on hold;
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
    
    patients do not enroll in clinical trials at the rate we expect;
    
    patient follow-up is not at the rate we expect;
    
    IRBs and third-party clinical investigators delay or reject our trial protocol;
    
    third-party organizations do not perform data collection and analysis in a timely or accurate manner;
    
    regulatory inspections of our clinical trials or manufacturing facilities, among other things,
require us to undertake corrective action or suspend or terminate our clinical trials, or invalidate
our clinical trials;
    
    changes in governmental regulations or administrative actions; and
    
    the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or
effectiveness.
 If MelaFind® is approved for reimbursement, we anticipate experiencing significant pressures on
pricing.
   MelaFind® may never achieve market acceptance even if we obtain regulatory approvals.
  
    
    perceived effectiveness of MelaFind®;
    
    convenience of use;
    
    cost of the use of MelaFind®;
    
    availability and adequacy of third-party coverage or reimbursement;
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
    
    approved indications and product labeling;
    
    publicity concerning MelaFind® or competitive products;
    
    potential advantages over alternative diagnostic methodologies;
    
    introduction and acceptance of competing products or technologies; and
    
    extent and success of our sales, marketing and distribution efforts.
   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.
  
    
    the schedule, costs, and results of our clinical trials;
    
    the success of our research and development efforts;
    
    the costs and timing of regulatory approval;
    
    reimbursement amounts for the use of MelaFind® that we are able to
obtain from Medicare and third party payors, or the amount of direct
payments we are able to obtain from patients and/or physicians
utilizing MelaFind®;
    
    the cost of commercialization activities, including product marketing
and building a domestic direct sales force;
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
    
    the emergence of competing or complementary technological developments;
    
    the costs of filing, prosecuting, defending and enforcing any patent
claims and other rights, including litigation costs and the results of
such litigation;
    
    the costs involved in defending any patent infringement actions
brought against us by third parties; and
    
    our ability to establish and maintain any collaborative, licensing or
other arrangements, and the terms and timing of any such arrangements.
  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.
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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.
  
    
    suppliers may make errors in manufacturing components that could negatively affect the
effectiveness or safety of our products, or cause delays in shipment of our products;
    
    we may not be able to obtain adequate supply in a timely manner or on commercially reasonable
terms;
    
    we may have difficulty locating and qualifying alternative suppliers for our sole-source suppliers;
    
    switching components may require product redesign and submission to the FDA of a PMA supplement or
possibly a separate PMA, either of which could significantly delay production;
    
    our suppliers manufacture products for a range of customers, and fluctuations in demand for the
products these suppliers manufacture for others may affect their ability to deliver components to
us in a timely manner; and
    
    our suppliers may encounter financial hardships unrelated to our demand for components, which
could inhibit their ability to fulfill our orders and meet our requirements.
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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.
   Assuming that MelaFind® 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.
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
    
    warning letters;
    
    fines and civil penalties;
    
    unanticipated expenditures;
    
    delays in approving or refusal to approve MelaFind®;
    
    withdrawal of approval by the FDA or other regulatory bodies;
    
    product recall or seizure;
    
    interruption of production;
    
    operating restrictions;
    
    injunctions; and
    
    criminal prosecution.
  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.
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
    
    billing for services;
    
    quality of medical equipment and services;
    
    confidentiality, maintenance and security issues associated with
medical records and individually identifiable health information;
    
    false claims; and
    
    labeling products.
  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.
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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.
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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.
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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.
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Our success will depend on our ability to attract and retain our personnel.
   Our financial results for future periods may be adversely affected by changes required by financial
and accounting regulatory agencies.
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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 and
provide accurate financial statements could cause our stock price to decrease substantially.
  Risks Relating to our Common Stock
 An active trading market for our common stock may not develop.
  Our stock price will be volatile, meaning purchasers of our common stock could incur substantial
losses.
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
    
    results of our research and development efforts and our clinical trials;
    
    the timing of regulatory approval for our products;
    
    failure of any of our products, if approved, to achieve commercial success;
    
    the announcement of new products or product enhancements by us or our competitors;
    
    regulatory developments in the US and foreign countries;
    
    ability to manufacture our products to commercial standards;
    
    developments concerning our clinical collaborators, suppliers or marketing partners;
    
    changes in financial estimates or recommendations by securities analysts;
    
    public concern over our products;
    
    developments or disputes concerning patents or other intellectual property rights;
    
    product liability claims and litigation against us or our competitors;
    
    the departure of key personnel;
    
    the strength of our balance sheet;
    
    variations in our financial results or those of companies that are perceived to be similar to us;
    
    changes in the structure of and third-party reimbursement in the US and other countries;
    
    changes in accounting principles or practices;
    
    general economic, industry and market conditions; and
    
    future sales of our common stock.
  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.
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If there are substantial sales of our common stock, our stock price could decline.
  
    
    beginning on October 28, 2005, in addition to the 4,000,000 shares
sold in our initial public offering, approximately 1,229,577 of our
restricted shares will be eligible for sale under Rule 144, of which
approximately 408,402 shares will be eligible for sale subject to the
volume, manner of sale and other limitations under Rule 144 and
approximately 821,175 shares will be eligible for sale as unrestricted
shares under Rule 144(k);
    
    beginning 270 days after October 28, 2005, approximately 6,347,015 of
our restricted shares will be eligible for sale under Rule 144 (which
includes the 1,229,577 restricted shares referred to above), of which
approximately 3,226,819 shares will be eligible for sale subject to
the volume, manner of sale and other limitations under Rule 144 and
approximately 3,120,196 shares will be eligible for sale as
unrestricted shares under Rule 144(k); and
    
    beginning October 27, 2006, approximately an additional 176,149 of our
restricted shares will be eligible for sale subject to the volume,
manner of sale and other limitations under Rule 144.
  Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable
and could also limit the market price of our stock.
  
    
    set limitations on the removal of directors;
    
    limit who may call a special meeting of stockholders;
    
    establish advance notice requirements for nominations for election to
our board of directors or for proposing matters that can be acted upon
at stockholder meetings;
    
    do not permit cumulative voting in the election of our directors,
which would otherwise permit less than a majority of stockholders to
elect directors;
    
    prohibit stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and
    
    provide our board of directors the ability to designate the terms of
and issue a new series of preferred stock without stockholder
approval.
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ITEM 3.
 Quantitative and Qualitative Disclosures about Market Risk
  
 ITEM 4.
 Controls and Procedures
 Evaluation of disclosure controls and procedures
  Change in internal control over financial reporting
  Limitations on the effectiveness of controls
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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
        
 Item 3. Defaults Upon Senior Securities.
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Item 4. Submission of Matters to a Vote of Security Holders
   For
    
    Not Received1. Series A Preferred Stock holders
    
    
    195,497
    
    
    
    34,9082. Series B Preferred Stock holders
    
    
    863,144
    
    
    
    287,9283. Series C Preferred Stock holders
    
    
    5,076,221
    
    
    
    338,5584. Common Stock holders
    
    
    3,540,991
    
    
    
    78,525TOTAL
    
    
    9,675,853
    
    
    
    739,919
 
 Item 5. Other Information.
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ITEM 6. Exhibits
 3.1
    
    Fourth Amended and Restated Certificate of Incorporation. *3.2
    
    By-laws. **4.1
    
    Specimen Common Stock Certificate. **4.2
    
    Specimen Warrant Certificate (incorporated by reference from Exhibit 4.3). ***4.3
    
    Form of Warrant Agreement entered into by and between the Registrant,
ThinkEquity Partners LLC and Stanford Group Company. ***31.1
    
    Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934.31.2
    
    Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) under
the Securities Exchange Act of 1934.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
 *
    
    Previously filed in connection with Amendment No. 1 to Electro-Optical Sciences, Inc.
Registration Statement on Form S-1 (File No. 333-125517) filed on July 15, 2005.**
    
    Previously filed in connection with Amendment No. 2 to Electro-Optical Sciences, Inc.
Registration Statement on Form S-1 (File No. 333-125517) filed on August 8, 2005.***
    
    Previously filed in connection with Amendment No. 4 to Electro-Optical Sciences, Inc.
Registration Statement on Form S-1 (File 333-125517) filed on September 27, 2005,
as an exhibit to the Form of Underwriting Agreement.
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SIGNATURES
  ELECTRO-OPTICAL SCIENCES, INC.By:
    
    /s/ Karen KrumeichKaren KrumeichVice President & Chief Financial Officer(Principal Financial and Accounting Officer)Date: December 2, 2005
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EXHIBIT INDEX
 Exhibit Number
    
    Description31.1
    
    Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 193431.2
    
    Certification by the Principal Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 193432.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 46