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 DOBI Medical International, Inc. Releases 2005 Q&A Progress Summary

General Update To Shareholders

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Mahwah, NJ, December 19, 2005 – In a year-end update to shareholders, DOBI Medical International, Inc. (DBMI.OB) reports progress.

QUESTIONS & ANSWERS

What is the mission of DOBI Medical International?

Our mission is to aid in the improvement of breast cancer diagnosis and treatment for millions of women worldwide. To this end, we are developing our dynamic optical breast imaging system, known as the ComfortScan® system. The ComfortScan system, designed as an adjunct to mammography, utilizes near infrared light, a sensitive CCD camera, and proprietary software to identify increased vascularity (tumor angiogenesis) in the breast. It is designed to do so without x-ray radiation or significant patient discomfort. The immediate goal is to aid physicians in improving breast cancer diagnosis by providing important new diagnostic information regarding key elements associated with breast cancer within the breast.

Can you tell me more about the ComfortScan system?

The ComfortScan system is an all-digital imaging system designed to identify the presence of vascular changes associated with tumor angiogenesis in breast tissue. Such vascular changes are often associated with cancer and other breast disease conditions. Currently undergoing the clinical trial which will be the subject of the fifth and final module of its Pre-Market Approval Application (PMA) with the Food and Drug Administration (FDA), this noninvasive system uses high-intensity, light-emitting diodes (LEDs) and gentle external pressure to image the breast. The FDA PMA study is evaluating the ComfortScan system as an adjunct to x-ray mammography to aid in improved breast cancer diagnosis.

How does the ComfortScan system work?

As near infrared light from the ComfortScan system passes through the breast, the system captures approximately two images per second for a period of less than one minute; images are digitally recorded and stored within the onboard computer. After the scan process is completed, the breast images are processed and displayed on the flat panel monitor of the system. The resulting images depict changes in light absorption that may correspond to blood pooling and deoxygenation of hemoglobin in angiogenic areas of the breast. Broad medical research has linked the formation of this type of angiogenesis to the presence of malignant tumors.

How does the ComfortScan system compare to mammography?

Mammography has been used for over 35 years for breast cancer diagnosis and is presently used largely to identify abnormal anatomical or morphological structures in the breast, such as tumors, cysts, and other architectural distortions. According to industry reports, in cases referred for biopsy, studies have shown that mammographic specificity (ability to correctly detect a benign lesion) can be as low as approximately 20%, especially in younger women.

To help improve healthcare for women worldwide, the ComfortScan system focuses on physiologically-based, dynamic functional imaging (i.e., what is occurring physiologically within the breast in near real-time) rather than a singular morphological image (i.e., a static anatomical snapshot showing physical details at a single point in time) such as those created by mammography. When used in combination with mammography, it is anticipated that the ComfortScan system’s images will provide physicians with a more comprehensive data set, which is expected to help improve breast cancer diagnosis.

How long has DOBI Medical been developing the ComfortScan system?

The Company has been working on the development of the ComfortScan imaging system for over six years and has obtained approximately $33 million in net proceeds from a series of financing transactions. Of this, over $15 million has been spent directly for Research & Development and product development-related Clinical Research, including testing over 2,000 women in various locations within the United States, Europe and Asia. We recently concluded development efforts for version 2.0 of the software, and continue to make progress towards the release of this version by performing the requisite verification and validation testing. If the testing is successful, V. 2.0 of the ComfortScan system will be released for distribution.

Inasmuch as this product is substantially different from existing technologies, it is not eligible for 510(k) treatment by the FDA; hence, it is a much longer and more expensive product development and approval process than many other medical devices on the market today. However, the nature of the FDA PMA process can also represent a significant barrier to entry for other companies who strive to emulate these technological capabilities and obtain FDA approval. This can be helpful to the Company in terms of competitive positioning and the overall value of the Company.

How is the Company’s FDA clinical trial proceeding?

DOBI Medical initiated its large, multi-site clinical trial, which is the subject of the fifth and final module of its PMA application with the FDA, in the fourth quarter of 2004. Approximately 1,000 patients have now been enrolled in the trial at more than 20 sites nationwide.

When can you expect FDA approval of the ComfortScan system?

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We have submitted and received acceptance of four of the five PMA data submission modules. The final module is a 1,200 patient clinical study to generate patient data relative to the performance of the ComfortScan system in a defined clinical setting. The current schedule has the clinical data gathering concluding in the first quarter of 2006, after which the final PMA module will be submitted to the FDA for their review. How long the FDA takes to review our PMA submission and render a final decision is unknown.

What is the overall market potential for diagnostic imaging equipment?

The worldwide market for diagnostic imaging equipment has been forecasted to reach over $16 billion in sales in 2006, according to a 2002 MedTech Insight report. MedTech Insight also estimates that approximately $600 million is spent for breast disease detection and diagnostic technologies in the United States. Since breast cancer continues to be a significant problem worldwide, the total market need represents an attractive marketing and sales opportunity for the Company.

What is the target market for the ComfortScan system?

According to reports from industry sources such as MedTech Insight, over 100 million women worldwide receive mammograms annually with about 40 million women in the United States receiving either a screening and/or a diagnostic mammogram each year for breast cancer. In the millions of cases where the mammographic finding is suspicious, ambiguous, or where a suspicious lesion is discovered by other means, further testing is often required. This adjunctive role is where the ComfortScan system, in its present configuration, is expected to play a meaningful part.

What foreign markets are being targeted by DOBI Medical?

The Company has begun to build a global distribution network of international distributors representing a number of large and important countries, including India, Russia, Canada, Brazil, the Czech Republic, Greece, Italy, Portugal, Switzerland and the Netherlands. This core group of nations will be expanded as the Company grows.

In addition to the U.S. market, China holds significant potential for ComfortScan sales due to its large, expanding and underserved population. What is the Company doing in China?

As previously announced, the Company recently signed an agreement with the China Center for Pharmaceutical International Exchange to aid in efforts to receive approval for the ComfortScan system from China’s SFDA authorities. The Company has built and shipped two ComfortScan systems for delivery at two major medical centers in Beijing, China, where clinical trials commenced on schedule. This trial is expected to conclude in the near future and the Company will be providing an update, when appropriate. The Company is currently considering several options for distribution of the ComfortScan system in China.

It should be noted that, according to the Chinese Anti-Cancer Association (CACA), more than 300 million women are at risk for breast cancer in China, increasing 3% annually in recent years. Approximately 40% of Chinese women diagnosed with breast cancer die within five years because the cancer is often very advanced when diagnosed. The highest risk age group for Chinese women is between the ages of 40 and 49.

Does DOBI Medical contemplate any other applications for its optical imaging technology?

The present focus for the ComfortScan system technology is on breast cancer, but the technology may be applicable to other types of cancer, such as skin cancer. Furthermore, we believe there may be potential opportunities for our technology in the areas of therapeutic monitoring of breast cancer patients and breast cancer screening. We have initiated R&D efforts in these areas. In addition, industry experts indicate that angiogenesis has been identified in over 70 other diseases.

What is DOBI Medical’s revenue potential for 2006?

As noted herein, the Company is an early stage development company with minimal revenues historically. We anticipate an increase in revenues after our product development and local regulatory approval efforts hopefully culminate in the ability of the Company and its international distributors to begin marketing and sales activities to physicians, hospitals and clinics in a number of countries. Because we are still a development stage company, and as is the case with a growing number of public companies, we have elected not to make forward-looking revenue projections for 2006.

The Company has invested over $33 million in more than six years while generating insignificant sales.

Spending those sums over six years to develop, test and bring to market a new and unique medical product is not, in our opinion, unreasonable or extraordinary. Industry experts understand that FDA approval of a PMA product is an expensive and time-consuming proposition.

The Company’s auditors have issued numerous warnings signaling doubt that the Company can survive without additional investment.

DOBI Medical International is a developmental stage company with no significant revenues and, as such, our independent auditors render a going concern opinion in connection with the audit of the Company’s financial statements. This is common for companies with insignificant revenues in our stage of development. We point out the fact that we are a development stage company in our financial statements and public SEC filings.

How does Management assess DOBI Medical’s future?

We have been working very hard towards U.S. FDA approval of our ComfortScan system as an adjunct to mammography, as well as moving forward in the regulatory approval processes for other nations in various parts of the world. We believe our technology has the potential to become an integral part of overall health management programs for women worldwide. Furthermore, various members of the management team and Board are also significant “hard cash” investors in the Company; several members of Management and the Board have purchased substantial amounts of stock and dedicated many years of their lives to the mission of the Company. Thus, our interests are aligned with those of our fellow shareholders. We have done this, and continue to do so, because we believe in the mission of the Company and the future of our technology.

Some investors bought shares last year at the equivalent of $2 each, and the current price is less than $.25. What’s going on?

We acknowledge and do not offer any excuses that some key milestones have been delayed. However, as with almost any new medical technology development, especially those activities as complex as the ones we are engaged in, some delays are not uncommon. To help minimize this, we focus on daily, consistent progress in a number of important areas and, as we continue to make progress, it is anticipated that our stock price will reflect those value-building efforts.

It is noteworthy to mention that last March, the Board Chairman, CEO, and CFO all purchased meaningful amounts of shares in the financing transaction which occurred at that time. They believed the Company’s stock was an attractive price then, and now that it is lower, some investors may think it is even more attractive. Furthermore, no members of management or the Board have ever sold shares in the open market or otherwise benefited financially from stock price fluctuations despite the fact that some have held shares since the inception of the Company in 1999.

A lawsuit – recently dismissed by the court – alleged that DOBI Medical, its former investment bank, a large shareholder and certain others engineered a scheme to drive up the share price so some stockholders could dump their shares.

After an oral hearing and upon consideration, the federal judge in Texas recently dismissed the case without prejudice. There has been no further action in this case to date. Should it be necessary, we will continue to aggressively defend any other actions and allegations as we believe this case and the allegations made are without merit.

In an article published Dec. 4th in the American-Statesman of Austin, Texas, it implies that DOBI Medical trades on the over-the-counter exchange which is lightly regulated.

The over-the-counter market is a publicly traded market regulated by the Securities and Exchange Commission and its rules and regulations. The Company believes that it is in compliance with those rules and regulations.

In addition, DOBI Medical, being a technology-based, medical device company, is subject to regulatory oversight by the FDA, which includes such regulations as QSR (Quality System Regulations), GMP (Good Manufacturing Practices) and GCP (Good Clinical Practices) as well as various U.S./international regulations such as ISO, CE, UL, CUL and other requirements. We are a public company in a highly regulated industry that requires significant adherence to various performance standards. The Company retains an independent public auditing firm and an outside securities counsel who regularly review its financial statements and SEC filings, as well as an outside FDA legal counsel and patent counsel.

Does the Company have any comment about the recent newspaper article that said that DOBI Medical's outside scientific expert, Dr. William Li of Cambridge, Massachusetts, is a paid Director for the Company and owns 63,000 shares of its stock, and that Dr. Li also claims in Company documents to be a Harvard Medical School professor, yet reportedly Kate Butler, a spokeswoman for the school, said there is no record of him.

The article contains blatant and irresponsibly misstated facts about Dr. Li. Dr. Li is an independent Director of the Company and does not own shares of DOBI Medical stock. He provides leadership and advice on a variety of issues to the Board and Management on behalf of Company shareholders, but is not an outside scientific advisor. Dr. Li served on the faculty of Harvard Medical School as a clinical fellow (1991-1996) and clinical instructor (1996-2001); he is not and has never claimed to be a professor to DOBI Medical. His faculty appointments are verified by Harvard Medical School’s office of faculty affairs. A typographical error on the Company website has been corrected to accurately indicate Dr. Li “has served on” the Harvard Medical School’s faculty. The Company and the entire Board of Directors regret that Dr. Li’s excellent reputation and integrity were so inappropriately misrepresented.

For more information on DOBI Medical International or the ComfortScan system, visit igaot.pt.

About DOBI Medical International, Inc.
DOBI Medical is a developmental stage, medical imaging company working to create a new means for the improved diagnosis of high risk and malignant breast disease through the identification of abnormal vascularization ("angiogenesis") associated with tumors. DOBI Medical International’s first application of the technology is the ComfortScan┬« system, a gentle, noninvasive, and nonionizing, optical imaging system designed to assist physicians in the identification and management of breast disease. The ComfortScan system is intended to achieve this by providing new, physiology-based imagery of abnormal vascularization in the breast that is not readily available today. The ComfortScan system has CE Mark and UL designations, and DOBI Medical is a certified ISO 9001:2000 and ISO 13485:2003 company. The Company currently sells ComfortScan systems to international distributors for installation at international clinical trial sites. The ComfortScan system is used as an adjunct to mammography and is not yet commercially available in the U.S. as it is limited by U.S. law to investigational use until approved by the FDA, which cannot be guaranteed. For more information on DOBI Medical International or the ComfortScan system, visit igaot.pt.

CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

Statements contained in this press release contain information that includes or is based upon certain "forward-looking statements" relating to our business. These forward-looking statements represent management's current judgment and assumptions, and can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are frequently accompanied by the use of such words as "anticipates," "plans," "believes," "expects," "projects," "intends," and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, including without limitation, those relating to our ability to timely and successfully complete our U.S. Food and Drug Administration (“FDA”) patient Pre-Market Approval (“PMA”) clinical trials, as well as our other clinical trials being conducted around the world, including China; our ability to timely and successfully complete and submit to the FDA our PMA application of the PMA clinical trial results; the timely and final approval by local foreign governments of our ComfortScan system as an adjunct to mammography in various international markets; the success and continued improvements of our product development and research efforts, including without limitation, our ability to timely and successfully release version 2.0 and subsequent versions of our ComfortScan system; our ability to timely meet U.S. and foreign government laws and industry standards; our ability to meet U.S. and foreign medical device quality regulation standards required to maintain our CE Mark, and our ISO, UL and FDA export certifications; our ability to timely deliver our products into international markets; the acceptance, adoption, and use of our ComfortScan system by physicians, imaging clinics, and patients; and our ability to obtain third-party reimbursement from U.S. and foreign governments and private payers.
Any one of these or other risks, uncertainties, other factors, and any inaccurate assumptions, may cause actual results to be materially different from those described herein or elsewhere by us. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they were made. Certain of these risks, uncertainties, and other factors are described in greater detail in our filings from time to time with the Securities and Exchange Commission, which we strongly urge you to read and consider, including the "Investment Considerations" and the "Cautionary Factors That May Affect Future Results" as set forth in our 2004 Annual Report on Form 10-KSB, as amended, and the "Risk Factors" in our Registration Statement on Form SB-2 declared effective on May 11, 2005, our Quarterly Reports on 10-QSB, and our Current Reports on Form 8-K, all of which may be accessed from our website at igaot.pt. Subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above and elsewhere in our reports filed with the Securities and Exchange Commission. We expressly disclaim any intent or obligation to update any forward-looking statements.

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For further information:
Please contact: Michael Jorgensen, Chief Financial Officer
201-760-6464
mike@igaot.pt

DOBI Medical International
1200 MacArthur Blvd.
Mahwah, New Jersey 07430
Voice: (201) 760 6464
Fax: (201) 760 8860
e-mail: information@igaot.pt

 
 


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