##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, DC 20549
      Form 10-KSB/A
  þ

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number 0-935
      CYTOCORE, INC.
 (Name of small business issuer
    in its charter)
  Delaware

36-4296006(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)414 N. Orleans St.,
    Suite 502, Chicago, IL

60610(Address of principal executive
    offices)

(Zip
    Code)   (Issuers Telephone Number,
    Including Area Code)
 (312) 222-9550
  Securities registered under Section 12(b) of the
    Exchange Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredNone

Not Applicable   Securities registered under Section 12(g) of the
    Exchange Act:
  Common Stock, $0.001 par value
 (Title of class)
  o
  þ o
  Regulation S-B Form 10-KSB Form 10-KSB. o
  Rule 12b-2 o þ
    Over-the-Counter
    DOCUMENTS INCORPORATED BY REFERENCE
    o þ
  EXPLANATORY NOTE
  Form 10-KSB




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CYTOCORE,
    INC.
    Annual Report on
    Form 10-KSB
    December 31, 2006
    TABLE OF CONTENTS
  
  PagePART
    IItem
    1.


Description
    of Business


1Overview


1Recent
    Developments


1Information
    About Industry Segments


2Description of
    Business


2Products


2InPathtmSystems


2Automated
    Microscopy Instruments


3AcCelltm


3AIPStm


3Drug
    Delivery System


4Markets
    and Distribution Methods


4Government
    Regulation, Clinical Studies and Regulatory Strategy


5Competition


8Operations


8Intellectual
    Property


9Research
    and Development


10Component
    and Raw Materials


11Working
    Capital Practices


11Employees


11Financial
    Information About Foreign and Domestic Operations and Export
    Sales


11Risk
    Factors


11Item
    2.


Description
    of Property


15Item
    3.


Legal
    Proceedings


15Item
    4.


Submission of
    Matters to a Vote of Security Holders


18PART
    IIItem
    5.


Market for
    Common Equity and Related Stockholder Matters and Small Business
    Issuer Purchases Of Equity Securities


18Market
    Information


18Holders


18Dividends


18Stock Transfer
    Agent


19Securities
    Authorized for Issuance under Equity Compensation
    Plans


19Recent Sales of
    Unregistered Securities and Use of Proceeds from Registered
    Securities


20Issuance
    of Securities


20Conversions


21Purchases of
    Equity Securities by the Small Business Issuer and Affiliated
    Purchasers


22




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##### Table of Contents



PageItem
    6.


Managements
    Discussion and Analysis or Plan of Operation


22Forward-Looking
    Statements


22Overview


23Critical
    Accounting Policies and Significant Judgments and
    Estimates


24Results of
    Operations


24Revenue


24Costs
    and Expenses


25Cost
    of Goods Sold


25Research
    and Development


25Selling,
    General and Administrative


25Other
    Income and Expense


25Interest
    Income


25Interest
    Expense


25Restructuring
    Settlements


26Net
    Loss


26Liquidity and
    Capital Resources


26Off-Balance
    Sheets Arrangements


27Item
    7.


Financial
    Statements


27Item
    8.


Changes in
    and Disagreements with Accountants on Accounting and Financial
    Disclosure


27Resignation of
    Auditors


27Item
    8A.


Controls and
    Procedures


28Evaluation of
    Disclosure Controls and Procedures


28Changes in
    Internal Controls


28Item
    8B.


Other
    Information


29PART
    IIIItem
    9.


Directors,
    Executive Officers, Promoters, Control Persons and Corporate
    Governance; Compliance with Section 16(a) of the Exchange
    Act


29Code of
    Ethics


30Item
    10.


Executive
    Compensation


32Item
    11.


Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters


42Item
    12.


Certain
    Relationships and Related Transactions, and Director
    Independence


44Item
    13.


Exhibits


46Item
    14.


Principal
    Accountant Fees and Services


51Signatures


53Employment AgreementEmployment AgreementConsulting AgreementConsulting AgreementCommon Stock Purchase WarrantCommon Stock Purchase WarrantCommon Stock Purchase WarrantCommon Stock Purchase WarrantSubsidiariesConsent of Amper, Politziner & Mattia P.C.Consent of Altshuler, Melvoin and Glasser LLPCertification of CEOCertification of CFOSection 906 Certification of CEOSection 906 Certification of CFO    Index to Financial StatementsReports of
    Independent Registered Public Accounting Firms


F-1 - F-2Consolidated
    Balance Sheets at December 31, 2006 and 2005


F-3Consolidated
    Statements of Operations for the two years ended
    December 31, 2006 and 2005


F-4Consolidated
    Statements of Cash Flows for the two years ended
    December 31, 2006 and 2005


F-5Consolidated
    Statements of Stockholders Deficit for the two years ended
    December 31, 2006 and 2005


F-6-F-7Notes to
    Consolidated Financial Statements


F-8




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PART I  Item 1.
    Description
    of Business Overview  2 tm .
      2 tm tm tm
  fee-for-use
 Recent
    Developments  2
 1




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Information
    About Industry Segments   Description
    of Business    tm tm .
   Products The
    InPathtmSystem  tm tm
   2




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
    CCIs FDA-approved unique sample collection device, the
    e2
    Collector consisting of a small disposable balloon, shaped to
    fit the cervix. The device is intended to replace the spatula
    and brush currently used to collect patient cytology samples.
    The Cocktail-CVX and Cocktail-GCI and other protein markers,
    which are fully-automated biochemical assays that get applied to
    a sample to identify abnormal cells. In the laboratory version
    of the InPath System slide-based test, this biochemical assay is
    applied to sample cells released from the collection device into
    a liquid preservative and deposited on a glass slide. An
    instrument then performs an automated analysis of the sample by
    means of an optical scan that detects the presence of multiple
    wavelengths of fluorescent light. This light is produced by
    fluorescent reporter tags, which are attached to certain
    components used in the
    Cocktail-CVXtm
    and
    Cocktail-GCItm
    and other biochemical assays. In the laboratory version of the
    InPath System, our new fully-integrated workstation 
    the Automated Image Proteomic System or AIPS
    workstation  uses a camera to read the various
    wavelengths of light from the sample.
    Custom-designed image analysis software which controls the
    automated instruments and analyzes the captured wavelengths of
    light. Automated
    Microscopy Instruments AcCelltm       AIPStm    
    Robotic slide-feeding systems to load and unload multiple
    cassettes and slides to the image system;
    Bar code readers to ensure proper identification of samples
    being analyzed;
    Unique image analysis software; 3




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
    Electro-mechanical scanning stages to facilitate accurate slide
    screening;
    Automated cellular focusing on slides; and
    Data management software to facilitate primary or secondary
    review of samples and report results into record-keeping systems.   Drug
    Delivery System  2
  Research
    and Product Development
    
    Positioning CCI to grow from a cyto screening focused company to
    a bio pharmaceutical company
    Positioning CCI to develop commercial products based on a new
    biomarker that detects both cervical, bladder and endometrial
    cancers
    Granting CCI rights to commercialize a unique drug delivery
    system to apply FDA approved drugs to existing cervical lesions
    Leveraging CCI technology previously developed for the
    e2
    Collector handle
    Additional applications may develop in other types of epithelial
    cancers and could become the basis for diagnostic testing rather
    than screen testing
    Providing physicians with a non-surgical therapeutic treatment
    option for cervical lesions Markets
    and Distribution Methods     4




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Government
    Regulation, Clinical Studies and Regulatory
    Strategy    and/or
  2
             5




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i.e.,
          2 2 follow-up
     6




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InPath
    System Product Introduction Timelines
  Product

Process

Timelinee2
    Collector

Clinical trials

CompletedRegulatory submission &
    review

September 2001Regulatory clearance

May 2002Follow up clinical trial

Q4 2006Sales

Q3 2007Cocktail-CVX & GCI

Clinical trials(1)

Q1-4 2007Regulatory submission &
    review(1)

Q1 2008Regulatory clearance projected(1)

Q3 2008U.S. sales(1)

Q4 2008International sales(1)

Q4 2008Product development and clinical
    trials(2,3)

Q2 2008 - Q4 2009AIPS

Product development & pre
    production mfg(2)

Q1 2007 - Q1 2008Sales(2)

Q2 2008Drug Delivery System(3)

Instrument Development

Q2-4 2008Patient Trials

Q1-3 2009Regulatory submission &
    review

Q4 2009Regulatory clearance

Q2 2010Sales

Q3 2010     (1)
    
    All of the above target dates pertain to the EndoScan test for
    uterine/ endometrial cancer.(2)
    
    Sales would pertain to the EndoScan test in 2008 and 2009. Base
    product development and pre production manufacturing would apply
    to all cancer recognition imaging software. Trials for bladder
    and cervical cancer would occur in 2008 and 2009 with expected
    FDA approval in late
    2009-2010
    time frame. 7




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(3)
    
    If trial and development expenses are not funded through
    e2
    Collector and EndoScan sales additional capital will be required.   Competition        fee-for-use
   Operations     8




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2
     Intellectual
    Property    12-month continuation-in-part
     9




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2
     Research
    and Development       10




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Components
    and Raw Materials  2
   Working
    Capital Practices  fee-for-use
   Employees   Financial
    Information About Foreign and Domestic Operations and Export
    Sales     Risk
    Factors   11




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There
    is a limited market for penny stocks such as our
    common stock.
  Over-the-Counter
  The
    historically volatile market price of our common stock may
    affect the value of our stockholders
    investments.
    
    general economic and other external market factors;
    announcements of mergers, acquisitions, licenses and strategic
    agreements;
    announcements of private or public sales of securities;
    announcements of new products or technology by us or our
    competitors;
    ability to finance our operations;
    fluctuations in operating results; and
    announcements of the FDA relating to products.  Our
    common stock is unlikely to produce dividend income for the
    foreseeable future.
    Our
    common stock is subject to dilution, and an investors
    ownership interest and related value may decline.
       12




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We
    have a history of operating losses and there are doubts as to
    our ability to continue as a going concern.
        We
    continue to have the need to raise funds for operating
    purposes.
    We are
    unable to issue more common stock
   13




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We may
    not be able to meet our long-term capital
    requirements.
    Our
    products are subject to government regulation and they may not
    receive necessary government approvals.
  2 2
    We may
    not be able to compete with companies that are larger and have
    more resources.
    We may
    not be able to market our products.
   14




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We may
    not be able to adequately protect our intellectual
    property.
        Management
    turnover could cause our business to suffer.
    Item 2.
    Description
    of Property    Item 3.
    Legal
    Proceedings  Settled
    in 2006
  Ungaretti & Harris LLP.
  Hill & Barlow LLP.
 15




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Medical College of Georgia Research Institute,
    Inc. (Case No. 2003-RCCV-1211)
  Account Resource.
  Arthur Lipper III.
  The Lumber Company (formerly Garrett Realty,
    Inc.).
  The Lash Group, Inc.
  Reid Jilek.
 16




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Pending
    as of December 31, 2006; Subsequent Events
  Peter Gombrich.
  The Regents of the University of
    California.
  No. 2006-L-003353)
    Other
    claims
  Other Creditors.
 17




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Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Common Equity and Related Stockholder Matters and Small
    Business Issuer Purchase of Equity Securities Market
    Information  Over-the-Counter Over-the-Counter mark-ups,
  Range of Common StockHigh


LowYear Ended December 31, 20061st Quarter

$
0.15


$
0.052nd Quarter

$
0.25


$
0.113rd Quarter

$
0.23


$
0.154th Quarter

$
0.44


$
0.17Year Ended December 31, 20051st Quarter

$
0.12


$
0.072nd Quarter

$
0.07


$
0.053rd Quarter

$
0.16


$
0.024th Quarter

$
0.10


$
0.04  Holders   Dividends     18




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Stock
    Transfer Agent  (312) 904-2000.
 Securities
    Authorized for Issuance under Equity Compensation
    Plans    Equity
    Compensation Plan Information
  Number of SecuritiesRemaining Availablefor Future IssuanceNumber of Securities


Weighted-Average


Under Equityto be Issued Upon Exercise of


Exercise Price of


Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesPlan Category

Warrants and Rights


Warrants, and Rights


Reflected in Column (a))(a)


(b)


(c)Equity Compensation Plans
    Approved by Security Holders1999 Equity Incentive Plan (as
    amended)  20,000,000 shares


2,257,991


$
0.2767



16,869,3421999 Employee Stock Purchase
    Plan  200,000 shares










160,415Equity Compensation Plans
    Not Approved by Security HoldersWarrants issued with debt and
    equity(1)


35,828,718


$
0.1614



Warrants issued for financial
    and IR services(2)


5,270,125


$
0.1566



Warrants issued for officer and
    director compensation(3)


10,250,000


$
0.1683



Warrants issued in forgiveness
    of debt and other services(4)


3,697,660


$
0.1232



Warrants from AccuMed
    acquisition(5)


39,834


$
15.0600



Total


57,344,328


$
0.3309



17,029,757     (1)
    
    CCI has issued warrants in conjunction with the issuance of debt
    and equity. The issuance of warrants significantly reduced the
    cash costs that would otherwise be associated with raising
    capital.(2)
    
    CCI has generally included warrants in compensation agreements
    for providers of investor relations
    and/or
    public relations services. Warrants were also issued to
    financial advisors as remuneration for the procurement of
    equity, debt and preferred stock convertible into equity. This
    practice significantly reduces the cash costs to CCI to obtain
    these services.(3)
    
    In lieu of cash payment for employment services during fiscal
    year 2006, 4,000,000 warrants each were issued to the former CEO
    David Weissberg M.D., and our current CFO Robert McCullough Jr.
    In addition, Augusto Ocana M.D., our current CEO, was issued
    500,000 warrants. Directors John Abeles M.D. and Alexander
    Milley 19




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were issued 625,000 warrants each for services rendered. Former
    Vice President of Legal and Regulatory Affairs, Edward Renner
    was issued 500,000 warrants for services.  (4)
    
    CCI has issued warrants to settle debt and pay for services
    rendered.(5)
    
    In September 2001, CCI completed the acquisition of AccuMed by
    merging it into a wholly-owned subsidiary of CCI. As a result,
    CCI assumed stock options and warrants outstanding on the
    records of AccuMed at the time of the acquisition. The remainder
    of the options that were assumed in the acquisition are included
    in total options outstanding under the Companys 1999
    Equity Incentive Plan. Recent
    Sales of Unregistered Securities; Use of Proceeds from
    Registered Securities Issuance
    of Securities  Common Stock
      Warrants.
           20




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paid-in-capital 
   Conversions      Bridge I.
 21




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Bridge III.
  Bridge IV.
    Preferred Stock.
    and/or
 Purchases
    of Equity Securities by the Small Business Issuer and Affiliated
    Purchasers    Item 6.
    Managements
    Discussion and Analysis or Plan of Operation Forward-Looking
    Statements   22




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start-ups;
   Overview  2 tm
  2
    2
  2 2 2
 23




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Critical
    Accounting Policies and Significant Judgments and
    Estimates      Revenue Recognition.
  Share-Based Payment.
 Results
    of Operations  Fiscal
    Year Ended December 31, 2006 as compared to Fiscal Year
    Ended December 31, 2005
 Revenue   24




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Costs
    and Expenses Cost of
    Revenues



Cost of revenues for 2006 represented a net charge of $19,000.
    No cost of revenues was incurred with regard to the generation
    of licensing  related revenues from the
    slide  based installed systems. Forgiveness of trade
    debt of $176,000 was credited against a property impairment
    charge of $169,000 related to design and tooling equipment and
    an increase in the reserve for inventory of $26,000. Research
    and Development   Selling,
    General and Administrative   Other
    Income and Expense Interest
    Income   Interest
    Expense   25




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Restructuring
    Settlements   Net
    Loss   Liquidity
    and Capital Resources         26




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Off-Balance
    Sheet Arrangements    Item 7.
    Financial
    Statements  Form 10-KSB page F-1
  Item 8.
    Changes
    In and Disagreements With Accountants on Accounting and
    Financial Disclosure Resignation
    of Auditors      Regulation S-B.
  Regulation S-B.
 27




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Item 8A.  Controls
    and Procedures Evaluation
    of Disclosure Controls and Procedures  Limitation
    On Effectiveness of Controls
    Rules 13a-15(e) 15d-15(e)
                Remediation
    Plans
     28




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Item 8B.Other
    Information   PART III  Item 9.
    Directors,
    Executive Officers, Promoters, Control Persons and Corporate
    Governance; Compliance with Section 16(a) of the Exchange
    Act  The Board
    of Directors and Executive Officers
  Positions and Offices, if any, HeldName

Age

with the Company

Director SinceDr. Augusto Ocana


63


Chief Executive Officer and
    Director


2006Robert F.
    McCullough, Jr.


52


Chief Financial Officer and
    Director


2005Clinton H. Severson


59


Director


2006John H. Abeles, M.D.


62


Director


1999Alexander M. Milley


54


Director


1989   Dr. Augusto Ocana
  Robert F. McCullough, Jr.
  Clinton H. Severson
  John H. Abeles, M.D.
 29




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Alexander M. Milley
  Relationships
    and Interests in Proposals; Involvement in Certain Legal
    Proceedings
    Section 16(a)
    Beneficial Ownership Reporting Compliance
     Code of
    Ethics  Code of Ethics and Business
    Conduct for Officers, Directors and Employees Form 10-KSB
  Board of
    Directors and Committee Information
   30




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Audit
    Committee
      Compensation
    Matters
    Nomination
    Matters
   31




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Item 10.
    Executive
    Compensation  Named
    Executive Officers
    Summary
    Compensation Table
  Non-


Non-Equity


QualifiedIncentive


Deferred


AllStock


Option


Plan


Compensation


OtherSalary


Bonus


Awards


Awards


Compensation


Earnings


Compensation


TotalName and Principal Position

Year


($)


($)


($)(1)


($)(1)


($)(1)


($)(1)


($)


($)Dr. Augusto Ocana


2006


$
15,000
(2)

$
2,500
(3)





$
68,200
(4)













$
85,700CEO and Chairman


2005






























$
0David J. Weissberg,
    M.D.


2006


$
87,500
(5)









$
483,200
(6)









$
1,412
(7)

$
572,112Former CEO


2005






























$
0Robert F.
    McCullough, Jr.


2006


$
90,000
(8)









$
460,400
(9)













$
550,400CFO


2005






























$
0Edward G. Renner


2006


$
31,750
(10)





















$
129,600
(11)

$
161,350Former VP of Legal


2005






























$
0and Regulatory Affairs     (1)
    
    CytoCore does not have a formal compensation program (equity or
    non-equity) that includes long-term incentive payouts or other
    forms of long-term or deferred compensation. Any amounts
    included in these columns represent the number of shares that
    may be acquired pursuant to warrants or options granted in the
    particular year.(2)
    
    Dr. Ocana was elected Chief Executive Officer in November
    2006. His initial base salary was set at $180,000 per year
    effective November 15, 2006.(3)
    
    Represents Dr. Ocanas monthly bonus payment of
    $2,500. Per the terms of his employment agreement,
    Dr. Ocana is entitled to receive a $45,000 bonus, payable
    in 18 equal monthly installments of $2,500.(4)
    
    Represents warrants to purchase 500,000 shares of common
    stock at $.13 per share granted on December 1, 2006,
    exercisable immediately with a term of three years. The dollar
    amount presented represents the aggregate fair value of such
    award on the date of grant. The fair value of the warrant was
    estimated on the date of grant using the Black-Scholes option
    pricing model with the following weighted average assumptions
    used for grants in 2006: dividend yield of zero, expected
    volatility of 103%, risk-free interest rate of 4.25%, and
    expected life of three years. Such warrants were exercised in
    full in April 2007.(5)
    
    Dr. Weissberg was elected Chief Executive Officer in August
    2005. He did not receive any salary or bonus with respect to
    2005. His salary for 2006 was $120,000, of which $87,500 was
    paid and $30,000 was forgiven. Dr. Weissberg resigned as
    CEO and director in October 2006.(6)
    
    Represents warrants to purchase 4,000,000 shares at
    $0.20 per share that were issued on September 28, 2006
    and expire five years from the date of issuance. The dollar
    amount presented represents the aggregate fair value of such
    award on the date of grant. The fair value of the warrant was
    estimated on the date of grant using the Black-Scholes option
    pricing model with the following weighted average assumptions
    used for grants in 2006: dividend yield of zero, expected
    volatility of 83.7%, risk-free interest rate of 4.50%, and
    expected life of five years. Such warrants were amended in
    November 2006 to permit a cashless exercise. These warrants
    originally fully vested on, and were exercisable as of,
    January 1, 2007. In March 2007, Dr. Weissberg agreed
    to further amend the warrants to provide that they could not be
    exercised until such time as certain conditions were met,
    including approval by the stockholders of an increase in the
    number of authorized shares of common stock. Stockholders are
    expected to vote on such increase at the Companys annual
    meeting of stockholders currently scheduled for June 21,
    2007. 32




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(7)
    
    Represents the value of a laptop computer that
    Dr. Weissberg was permitted to keep upon his resignation.(8)
    
    Mr. McCullough was elected Chief Financial Officer in
    September 2005. He did not receive any salary or bonus with
    respect to 2005. His salary for 2006 was $120,000, of which
    $90,000 was paid and $30,000 forgiven.(9)
    
    Represents warrants to purchase 4,000,000 shares at
    $0.1275 per share that were issued on September 28,
    2006 and expire three years from the date of issuance. The
    dollar amount presented represents the aggregate fair value of
    such award on the date of grant. The fair value of the warrant
    was estimated on the date of grant using the Black-Scholes
    option pricing model with the following weighted average
    assumptions used for grants in 2006: dividend yield of zero,
    expected volatility of 83.7%, risk-free interest rate of 4.50%,
    and expected life of three years. Such warrants were amended in
    November 2006 to permit a cashless exercise. These warrants
    originally fully vested on, and were exercisable as of,
    January 1, 2007. In March 2007, Mr. McCullough agreed
    to further amend the warrants to provide that they could not be
    exercised until such time as certain conditions were met,
    including approval by the stockholders of an increase in the
    number of authorized shares of common stock. Stockholders are
    expected to vote on such increase at the Companys annual
    meeting of stockholders currently scheduled for June 21,
    2007.(10)
    
    Mr. Renner was elected Vice President of Legal and
    Regulatory Affairs in April 2006 and became an executive officer
    of the Company in August 2006; Mr. Renner resigned in
    October 2006. Mr. Renners base salary was $54,000.
    During 2006, he was paid $27,250 in cash and was issued
    38,514 shares (valued at $4,500) in lieu of cash for salary.(11)
    
    Includes the following compensation received as severance:
    (i) $27,000 cash payment; (ii) warrants to purchase
    500,000 shares at $0.20 per share that were issued on
    October 6, 2006, were originally fully vested and
    exercisable beginning January 1, 2007, and expire five
    years from the date of issuance; and (iii) an award of
    250,000 shares of unregistered, restricted common stock in
    October 2006. The fair value of the warrant grant ($68,850) was
    estimated on the date of grant using the Black-Scholes option
    pricing model with the following weighted average assumptions
    used for grants in 2006: dividend yield of zero, expected
    volatility of 103%, risk-free interest rate of 4.25%, and
    expected life of five years. Such warrants were amended in
    November 2006 to permit a cashless exercise. In April 2007,
    Mr. Renner agreed to further amend the warrants to provide
    that they could not be exercised until such time as certain
    conditions were met, including approval by the stockholders of
    an increase in the number of authorized shares of common stock.
    Stockholders are expected to vote on such increase at the
    Companys annual meeting of stockholders currently
    scheduled for June 21, 2007. The fair value of the
    250,000 share award ($33,750) was estimated on the date of
    grant using the Black-Scholes option pricing model with the
    following weighted average assumptions used for grants in 2006:
    dividend yield of zero, expected volatility of 103%, risk-free
    interest rate of 4.25%, and expected life of five years. Amounts
    presented exclude payments made by the Company to Muriel Renner,
    LLC, of which Mr. Renner was a member prior to being
    employed by the Company, for legal services performed on behalf
    of the Company by such firm.  Compensation
    Philosophy
    Compensation
    Components
   33




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##### Table of Contents



Base
    Salary
          Annual
    Bonuses
        
    raising capital to support the Companys initiatives;
    reducing liabilities and expenses; and
    renewing the Companys focus on product development and
    commercialization. 34




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##### Table of Contents



Equity
    Incentives
      
    the job and responsibility level of the employee,
    grants awarded by competitors to employees at comparable job
    levels, and
    past, current and prospective services rendered, or to be
    rendered, to the Company by the employee.         35




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##### Table of Contents



Retirement,
    Severance, Change in Control and Similar
    Compensation
            Perquisites
    and Other Benefits
    Chief
    Executive Officer Compensation
  Dr. Augusto
    Ocana
   36




---



##### Table of Contents



1 3 1 3 1 3 1 3 1 3
       37




---



##### Table of Contents



David
    J. Weissberg, M.D.
    Chief
    Financial Officer Compensation
  Robert
    F. McCullough, Jr.
  out-of-pocket
  2
   38




---



##### Table of Contents



Outstanding
    Equity Awards at Fiscal Year-End
    Option Awards


Stock AwardsEquityIncentiveEquity


PlanIncentive


Awards:Plan


MarketEquity














Awards:


or PayoutIncentive














Number of


Value ofPlan











Market


Unearned


UnearnedAwards:








Number of


Value of


Shares,


Shares,Number of


Number of


Number of








Shares or


Shares or


Units or


Units orSecurities


Securities


Securities








Units of


Units of


Other


OtherUnderlying


Underlying


Underlying


Option





Stock


Stock That


Rights


RightsUnexercised


Unexercised


Unexercised


Exercise


Option


That


Have Not


That


That HaveOptions (#)


Options (#)


Unearned


Price


Expiration


Have Not


Vested


Have Not


Not VestedName

Exercisable


Unexercisable


Options (#)


($)


Date


Vested (#)


($)


Vested (#)


($)Dr. Augusto Ocana


500,000(1
)









$
.13



12/1/09















David J. Weissberg, M.D.






4,000,000
(2)





$
.20



9/28/11















Robert F. McCullough, Jr.






4,000,000
(3)





$
.1275



9/28/09















Edward G. Renner






500,000
(4)





$
.20



10/6/11















     (1)
    
    Represents grant of warrants to purchase 500,000 shares of
    common stock at $.13 per share, vested immediately, with a
    term of three years. Dr. Ocana exercised such warrants in
    full in April 2007.(2)
    
    Represents grant of warrants to purchase 4,000,000 shares
    of common stock at $.20 per share with a term of five
    years. Such warrants were amended in November 2006 to permit a
    cashless exercise. These warrants originally fully vested on,
    and were exercisable as of, January 1, 2007. In March 2007,
    Dr. Weissberg agreed to further amend the warrants to
    provide that they could not be exercised until such time as
    certain conditions were met, including approval by stockholders
    of an increase in the number of authorized shares of common
    stock. Stockholders are expected to vote on such increase at the
    Companys annual meeting of stockholders currently
    scheduled for June 21, 2007.(3)
    
    Represents grant of warrants to purchase 4,000,000 shares
    of common stock at $.1275 per share with a term of three
    years. Such warrants were amended in November 2006 to permit a
    cashless exercise. These warrants originally fully vested on,
    and were exercisable as of, January 1, 2007. In March 2007,
    Mr. McCullough agreed to further amend the warrants to
    provide that they could not be exercised until such time as
    certain conditions were met, including approval by stockholders
    of an increase in the number of authorized shares of common
    stock. Stockholders are expected to vote on such increase at the
    Companys annual meeting of stockholders currently
    scheduled for June 21, 2007.(4)
    
    Represents grant of warrants to purchase 500,000 shares of
    common stock at $.20 per share with a term of five years.
    Such warrants were amended in November 2006 to permit a cashless
    exercise. These warrants originally fully vested on, and were
    exercisable as of, January 1, 2007. In March, 2007,
    Mr. Renner agreed to further amend the warrants to provide
    that they could not be exercised until such time as certain
    conditions were met, including approval by stockholders of an
    increase in the number of authorized shares of common stock.
    Stockholders are 39




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##### Table of Contents



expected to vote on such increase at the Companys annual
    meeting of stockholders currently scheduled for June 21,
    2007.  Retirement,
    Severance and Similar Compensation
        Compensation
    of Directors
    NonqualifiedFees Earned








Non-Equity


Deferredor Paid


Stock


Option


Incentive Plan


Compensation


All Otherin Cash


Awards


Awards


Compensation


Earnings


Compensation


TotalName

($)


($)


($)


($)


($)


($)


($)Dr. Augusto Ocana


























David J. Weissberg, M.D.


























John Abeles, M.D.









$
75,500
(1)













$
75,500Alexander Milley









$
75,500
(1)













$
75,500Clinton H. Severson


























Robert F.
    McCullough, Jr.


























     (1)
    
    Amount represents an award to each independent director of the
    Company on September 28, 2006 of a warrant to purchase
    625,000 shares of common stock at $.20 per share,
    immediately exercisable with a term of five years. The fair
    value of the warrants was estimated on the date of grant using
    the Black-Scholes option pricing model with the following
    weighted average assumptions used for grants in 2006: dividend
    yield of zero, expected volatility of 83.7%, risk-free interest
    rate of 4.50%, and expected life of five years. Such warrants
    were amended in November 2006 to permit a cashless exercise.
    Dr. Abeles and Mr. Milley subsequently agreed to
    further amend their warrants to provide that they could not be
    exercised until such time as certain conditions were met,
    including approval by the stockholders of an increase in the
    number of authorized shares of common stock. Stockholders are
    expected to vote on such increase at the Companys annual
    meeting of stockholders currently scheduled for June 21,
    2007.  2007 Director
    Compensation
   40




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##### Table of Contents



Over-the-Counter
     41




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##### Table of Contents



Item 11.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Common
    Stock  Five Percent Holders
    Amount and Nature of


PercentName and Address of Beneficial Owner

Beneficial Ownership(1)


of ClassMonsun, AS


33,788,648



10.0
%Torvveien 12, 1372 AskerNorwayStandard General Holdings, LLC


25,343,152



7.5
%P.O. Box 2050Fair Oaks, CA 95628David J. Weissberg, M.D(2)


20,303,263



5.9
%100 Goose Hill RoadCold Springs Harbor, NY 11724BSI Multihelvetia


18,642,857



5.5
%c/o Kredietbank S.A.
    Luxembourtgeoise43 Boulevard RoyaleL-2955 Luxembourg     (1)
    
    Unless otherwise indicated, each of the persons named in the
    table has sole voting and investment power with respect to the
    shares set forth opposite such persons name. With respect
    to each person or group, percentages are calculated based on the
    number of shares beneficially owned, including shares that may
    be acquired by such person or group within 60 days of
    April 25, 2007 upon the exercise of stock options, warrants
    or other purchase rights, but not the exercise of options,
    warrants or other purchase rights held by any other person.(2)
    
    Includes: (i) an aggregate 1,600,002 shares held in
    trust for Dr. Weissbergs minor children
    (533,334 shares held in each of three trusts), for which
    Dr. Weissberg acts as trustee; and (ii) warrants to
    purchase 4,000,000 shares. Such warrants will become
    exercisable upon approval by the Companys stockholders of
    an increase in the number of authorized shares of common stock
    at the Companys annual meeting of stockholders currently
    scheduled to be held on June 21, 2007; such approval is
    assumed for the purpose of this table. If shareholder approval
    is not obtained, such warrants will remain unexercisable until
    the conditions to vesting are satisfied.  Common
    Stock  Management
    Amount and Nature of


PercentName of Beneficial Owner

Beneficial Ownership(1)


of ClassJohn H. Abeles, M.D.(2)


3,140,323



*
%Robert F. McCullough, Jr.(3)


11,343,728



3.3
%Alexander M. Milley(4)


9,427,769



2.8
%Dr. Augusto Ocana(5)


1,000,000



*Edward G. Renner(6)


1,671,206



*Clinton H. Severson


0



*David J. Weissberg, M.D.(7)


20,303,263



5.9
%All current directors and
    executive officers as a group (5 persons)


24,911,820



7.2
%  42




---



##### Table of Contents



*
    
    Less than one percent of the common stock outstanding.(1)
    
    Unless otherwise indicated, each of the persons named in the
    table has sole voting and investment power with respect to the
    shares set forth opposite such persons name. With respect
    to each person or group, percentages are calculated based on the
    number of shares beneficially owned, including shares that may
    be acquired by such person or group within 60 days of
    April 25, 2007 upon the exercise of stock options, warrants
    or other purchase rights, but not the exercise of options,
    warrants or other purchase rights held by any other person. The
    address of each current director, nominee and current executive
    officer of the Company is c/o CytoCore, Inc.,
    414 N. Orleans, Suite 502, Chicago, IL 60610.(2)
    
    Includes: (i) 2,167,282 shares owned by Northlea
    Partners, Ltd. (Northlea Partners), of which
    Dr. Abeles is General Partner; (ii) 98,041 shares
    underlying warrants granted by the Company to Northlea Partners
    that are exercisable within 60 days; and
    (iii) 875,000 shares issuable upon exercise of options
    and warrants granted by the Company to Dr. Abeles. Of the
    875,000 shares issuable upon exercise of options and
    warrants, warrants with respect to 625,000 shares will
    become exercisable upon shareholder approval of an increase in
    the number of authorized shares of common stock at the
    Companys annual meeting of stockholders currently
    scheduled to be held on June 21, 2007; such approval is
    assumed for the purpose of this table. If shareholder approval
    is not obtained, such warrants will become exercisable on
    June 26, 2007. The remaining 250,000 shares may be
    acquired upon exercise of outstanding options within
    60 days. Dr. Abeles disclaims beneficial ownership of
    all shares owned by, or issuable to, Northlea Partners except
    shares attributable to his 1% interest in Northlea Partners as
    General Partner.(3)
    
    Includes: (i) 4,032,500 shares owned by Summitcrest
    Capital L.P., of which Mr. McCullough is President of the
    General Partner; (ii) 1,037,049 shares owned by MPC
    Trust, of which Mr. McCullough is a trustee; and
    (iii) 4,250,000 shares issuable upon the exercise of
    warrants. Such warrants will become exercisable upon approval by
    the Companys stockholders of an increase in the number of
    authorized shares of common stock at the Companys annual
    meeting of stockholders currently scheduled to be held on
    June 21, 2007; such approval is assumed for the purpose of
    this table. If shareholder approval is not obtained, such
    warrants will remain unexercisable until the conditions to
    vesting are satisfied.(4)
    
    Includes: (i) 4,763,484 shares issued upon conversion
    of 119,460 shares of Series E Stock, including shares
    issued in payment of an aggregate $1,477,986 cumulative
    dividends, held by Mr. Milley, Cadmus Corporation, Azimuth
    Corporation, Milley Management, Inc. and Winchester National,
    Inc.; (ii) 289,285 shares issuable to Cadmus
    Corporation under stock appreciation rights granted by the
    Company; and (iii) 875,000 shares subject to options
    and warrants granted by the Company to Mr. Milley. Of the
    875,000 shares issuable upon exercise of options and
    warrants, warrants with respect to 625,000 shares will
    become exercisable upon shareholder approval of an increase in
    the number of authorized shares of common stock at the
    Companys annual meeting of stockholders currently
    scheduled to be held on June 21, 2007; such approval is
    assumed for the purpose of this table. If shareholder approval
    is not obtained, such warrants will become exercisable within
    90 days. The remaining 250,000 shares may be acquired
    upon exercise of outstanding options within 60 days. In
    2006, CytoCore agreed to amend warrants held by Azimuth
    Corporation and Cadmus Corporation and issue new warrants
    entitling the holders to purchase an aggregate
    3,500,000 shares of common stock. The number of shares
    beneficially held by Mr. Milley includes the shares
    issuable under these warrants. (See Item 12 below for
    additional details concerning this transaction.) Of the shares
    shown, an aggregate 4,028,896 held by Mr. Milley, Cadmus
    Corporation, Winchester National, Inc. and Milley Management,
    Inc. have been pledged to ELXSI Corp.(5)
    
    Includes warrants to purchase 500,000 shares that are
    exercisable within 60 days.(6)
    
    Includes (i) 307,692 shares beneficially owned by
    Muriel Renner LLC, received from the Company in lieu of cash
    payment for legal services rendered by the firm, of which
    138,462 shares are held for the benefit of Mr. Renner;
    (ii) 575,000 shares received by Mr. Renner
    directly from the Company for his proportionate share of fees
    owed to Muriel Renner; (iii) 250,000 shares received
    as severance; and (iv) 38,514 shares received in lieu
    of cash salary. Also includes 500,000 shares subject to
    warrants granted by the Company to Mr. Renner . Such
    warrants will become exercisable upon approval by the
    Companys stockholders of an increase in the number of
    authorized shares of common stock at the Companys annual
    meeting of stockholders currently scheduled to be held on
    June 21, 2007; such approval is assumed for the purpose of
    this table. If shareholder 43




---



##### Table of Contents



approval is not obtained, such warrants will remain
    unexercisable and outstanding until the conditions to vesting
    are satisfied.(7)
    
    Includes: (i) an aggregate 1,600,002 shares held in
    trust for Dr. Weissbergs minor children
    (533,334 shares held in each of three trusts), for which
    Dr. Weissberg acts as trustee; and (ii) warrants to
    purchase 4,000,000 shares. Such warrants will become
    exercisable upon approval by the Companys stockholders of
    an increase in the number of authorized shares of common stock
    at the Companys annual meeting of stockholders currently
    scheduled to be held on June 21, 2007; such approval is
    assumed for the purpose of this table. If shareholder approval
    is not obtained, such warrants will remain unexercisable until
    the conditions to vesting are satisfied.  Series E
    Stock  All Holders
    Name and Address of Beneficial Owner(1)

Beneficial Ownership


Of ClassKevin F. Flynn June 1992
    Non-Exempt Trust(2)


6,667



29.9
%120 South LaSalle StreetChicago, IL 60602Rolf Lagerquist(3)


2,000



9.0
%4522 CO Road 21 NEElgin, MN 55932Robert L. & Loise
    Cecchini TTEES(4)


2,000



9.0
%3 Winterberry LaneNorth Reading, MA 01864All current directors and
    executive officers as a group (5 persons)


0



*     *
    
    Less than one percent of the Series E Stock outstanding.(1)
    
    No director, nominee or Named Executive Officer of the Company
    owns any shares of any series of preferred stock of the Company.(2)
    
    Converts into 279,735 shares of common stock, including
    shares issuable upon payment of cumulative dividends.(3)
    
    Converts into 83,916 shares of common stock, including
    shares issuable upon payment of cumulative dividends.(4)
    
    Converts into 83,916 shares of common stock, including
    shares issuable upon payment of cumulative dividends.  Form 10-KSB/A
  Item 12.
    Certain
    Relationships, Related Transactions and Director
    Independence   44




---



##### Table of Contents



David
    J. Weissberg, M.D., former CEO and Director, and Lantana
    Small Capital Growth, LLC
    John
    H. Abeles, M.D., director, and Northlea Partners,
    Ltd.
    Alexander
    Milley, director, and affiliated entities
    Robert
    F. McCullough, Chief Financial Officer and director, and
    Summitcrest Capital LP
    Edward
    G. Renner, former Vice President of Legal and Regulatory
    Affairs, and Muriel Renner LLC
   45




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##### Table of Contents



Director
    Independence
    Item 13.
    Exhibits      Exhibit No.

Description2
.1

Stock and Membership Interest
    Exchange Agreement dated as of December 4, 1998 among Bell
    National Corporation, InPath, LLC and the InPath Members (as
    such term is defined therein). (Incorporated herein by reference
    to Appendix A to the Bell National Corporation Definitive
    Proxy Statement on Schedule 14A, filed on April 30,
    1999 (the 1999 Proxy Statement).)2
.2

Agreement and Plan of Merger of
    Bell National Corporation and Ampersand Medical Corporation.
    (Incorporated herein by reference to Appendix C to 1999
    Proxy Statement.)2
.3

Agreement and Plan of Merger by
    and among AccuMed International, Inc., AccuMed Acquisition Corp.
    and Ampersand Medical Corporation, dated as of February 7,
    2001, and Amendment No. 1 thereto. (Incorporated herein by
    reference to Appendix I to Registration Statement (as
    amended) on
    Form S-4,
    No. 333-61666,
    as filed on May 25, 2001 (the May 2001
    S-2).)3
.1

Certificate of Incorporation of
    Ampersand Medical Corporation, as amended. (Incorporated herein
    by reference to Exhibit 3.1 to the Companys Current
    Report on
    Form 8-K
    dated September 26, 2001.)3
.2

By-laws of Ampersand Medical
    Corporation. (Incorporated herein by reference to
    Appendix E to the 1999 Proxy Statement.)3
.3

Certificate of Designation,
    Preferences and Rights of Series A Convertible Preferred
    Stock of Ampersand Medical Corporation. (Incorporated herein by
    reference to Exhibit 3.5 to the Ampersand Medical
    Corporation Annual Report on
    Form 10-K
    (as amended) for the fiscal year ended December 31, 2000,
    as filed on March 29, 2001 (the 2000
    10-K).)3
.4

Certificate of Designation,
    Preferences and Rights of Series B Convertible Preferred
    Stock of Ampersand Medical Corporation. (Incorporated herein by
    reference to Exhibit 3.6 to the 2000
    10-K.)3
.5

Section 6 of Article VII
    of the By-laws of Ampersand Medical Corporation, as amended.
    (Incorporated herein by reference to Exhibit 3.3 to the May
    2001 S-2.)3
.6

Certificate of Designation,
    Preferences and Rights of Series C Convertible Preferred
    Stock (Incorporated herein by reference to Exhibit 3.4 to
    the Companys Registration Statement on
    Form S-2
    (as amended), File
    No. 333-83578,
    as filed on February 28, 2002 (the February 2002
    S-2).)3
.7

Certificate of Amendment of
    Certificate of Designation, Preferences and Rights of
    Series C Convertible Preferred Stock. (Incorporated herein
    by reference to Exhibit 3.5 to the February 2002
    S-2.) 46




---



##### Table of Contents



Exhibit No.

Description3
.8

Certificate of Amendment of
    Amended Certificate of Designation, Preferences and Rights of
    Series C Convertible Preferred Stock. (Incorporated herein
    by reference to Exhibit 3.6 to the February 2002
    S-2.)3
.9

Certificate of Designations,
    Preferences and Rights of Series D Convertible Preferred
    Stock. (Incorporated herein by reference to Exhibit 3.7 to
    the February 2002
    S-2.)3
.10

Certificate of Designation,
    Preferences and Rights of Series E Convertible Preferred
    Stock. (Incorporated herein by reference to Exhibit 3.8 to
    the February 2002
    S-2.)3
.11

Certificate of Amendment to
    Certificate of Incorporation of the Company, dated
    August 5, 2004. (Incorporated herein by reference to
    Exhibit 3.1 to the Companys
    Form 10-QSB
    for the quarter ended June 30, 2004, as filed on
    August 16, 2004 (the 2004 2Q
    10-QSB).)3
.12

Certificate of Amendment to
    Certificate of Incorporation, as filed on June 22, 2006.
    (Incorporated herein by reference to Exhibit 3.1 to the
    Companys
    Form 10-QSB
    for the Quarter end June 30,2006, as filed on
    August 21, 2006)4
.2

Common Stock Purchase Warrant
    issued to Holleb & Coff on July 4, 1999
    representing the right to purchase 250,000 shares of Common
    Stock of Ampersand Medical Corporation. (Incorporated herein by
    reference to Exhibit 4.3 to the Ampersand Medical
    Corporation Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1999, as filed on
    March 31, 2000 (the 1999
    10-K).)4
.10

Common Stock Purchase Warrant
    issued to Monsun AS on April 1, 2002 representing the right
    to purchase 200,000 shares of common stock of the Company.
    (Incorporated herein by reference to Exhibit 4.31 to the
    June 2002
    S-2.)4
.12

Form of Common Stock Purchase
    Warrant issued in connection with certain Bridge I financing in
    June 2002. (Incorporated herein by reference to
    Exhibit 4.33 to the June 2002
    S-2.)4
.13

Common Stock Purchase Warrant
    issued to Richard A. Domanik, M.D, with an issue date of
    May 31, 2002, representing the right to purchase
    51,493 shares of common stock of the Company. (Incorporated
    herein by reference to Exhibit 4.34 to the Registration
    Statement on
    Form S-2,
    File
    No. 333-100150,
    as filed on September 27, 2002 (the September 2002
    S-2).)4
.14

Amendment No. 1, dated
    August 19, 2002, to the Common Stock Purchase Warrant
    issued in connection with certain Bridge I financing.
    (Incorporated herein by reference to Exhibit 4.36 to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2002, as filed on
    July 21, 2003 (the 2002
    10-K).)4
.15

Form of Common Stock Purchase
    Warrant to be issued in connection with certain Bridge II
    Financing beginning in October 2002. (Incorporated herein by
    reference to Exhibit 4.37 to the 2002
    10-K.)4
.16

Common Stock Purchase Warrant
    issued to Qwestar Resources on November 1, 2002
    representing the right to purchase 200,000 shares of common
    stock of the Company. (Incorporated herein by reference to
    Exhibit 4.38 to the 2002
    10-K.)4
.17

Common Stock Purchase Warrant
    issued to Suzanne M. Gombrich on April 2, 2003 representing
    the right to purchase 1,000,000 shares of common stock of
    the Company. (Incorporated herein by reference to
    Exhibit 4.39 to the Companys Quarterly Report on
    Form 10-QSB
    for the quarter ended June 30, 2003, as filed on
    August 13, 2003 (the 2003 2Q
    10-QSB).)4
.18

Common Stock Purchase Warrant
    issued to Dan Burns on August 20, 2003 representing the
    right to purchase 1,100,000 shares of common stock of the
    Company. (Incorporated herein by reference to Exhibit 4.40
    to the Companys Quarterly Report on
    Form 10-QSB
    for the quarter ended September 30, 2003, as filed on
    November 19, 2003 (the 2003 3Q
    10-QSB).)4
.19

Common Stock Purchase Warrant
    issued to Dan Burns on September 16, 2003 representing the
    right to purchase 935,000 shares of common stock of the
    Company. (Incorporated herein by reference to Exhibit 4.41
    to the 2003 3Q
    10-QSB.)4
.20

Common Stock Purchase Warrant
    issued to David Weissberg on September 16, 2003
    representing the right to purchase 400,000 shares of common
    stock of the Company. (Incorporated herein by reference to
    Exhibit 4.42 to the 2003 3Q
    10-QSB.)4
.21

Common Stock Purchase Warrant
    issued to Reid Jilek on September 2, 2003 representing the
    right to purchase 500,000 shares of common stock of the
    Company. (Incorporated herein by reference to Exhibit 4.43
    to the 2003 3Q
    10-QSB.) 47




---



##### Table of Contents



Exhibit No.

Description4
.22

Common Stock Purchase Warrant
    issued to Dan Burns on March 19, 2004 representing the
    right to purchase 500,000 shares of common stock of the
    Company. (Incorporated herein by reference to Exhibit 4.1
    to the Companys Quarterly Report on
    Form 10-QSB
    for the quarter ended March 31, 2004, as filed on
    May 18, 2004 (the 2004 1Q
    10-QSB).)4
.23

Common Stock Purchase Warrant
    issued to Dan Burns on March 4, 2004 representing the right
    to purchase 67,000 shares of common stock of the Company.
    (Incorporated herein by reference to Exhibit 4.2 to the
    2004 1Q
    10-QSB.)4
.24

Common Stock Purchase Warrant
    issued to Dan Burns on May 5, 2004 representing the right
    to purchase 500,000 shares of common stock of the Company.
    (Incorporated herein by reference to Exhibit 4.1 to the
    Companys
    Form 10-QSB
    for the quarter ended June 30, 2004, as filed on
    August 16, 2004 (the 2004 2Q
    10-QSB).)4
.25

Common Stock Purchase Warrant
    issued to Dan Burns on June 4, 2004 representing the right
    to purchase 530,000 shares of common stock of the Company.
    (Incorporated herein by reference to Exhibit 4.2 to the
    2004 2Q
    10-QSB.)4
.26

Common Stock Purchase Warrant
    issued to Don Hancock on June 4, 2004 representing the
    right to purchase 250,000 shares of common stock of the
    Company. (Incorporated herein by reference to Exhibit 4.3
    to the 2004 2Q
    10-QSB.)4
.27

Form of common stock purchase
    warrant issued to private placement agents on June 15, 2004
    representing the right to purchase an aggregate
    681,625 shares of common stock of the Company.
    (Incorporated herein by reference to Exhibit 4.4 to the
    2004 2Q
    10-QSB.)4
.28

Form of common stock purchase
    warrant issued to vendors as part of restructuring settlements
    during the quarter ended June 30, 2004 representing the
    right to purchase an aggregate 483,984 shares of common
    stock of the Company. (Incorporated herein by reference to
    Exhibit 4.5 to the 2004
    2Q 10-QSB.)4
.30

Common Stock Purchase Warrant
    issued to Ken Sgro on September 15, 2004 representing the
    right to purchase 192,000 shares of common stock of the
    Company. (Incorporated herein by reference to Exhibit 4.2
    to the 2004 3Q
    10-QSB.)4
.32

Common Stock Purchase Warrant
    issued to Jorge Leon, Ph.D., on September 15, 2004
    representing the right to purchase 25,000 shares of common
    stock of the Company. (Incorporated herein by reference to
    Exhibit 4.4 to the 2004 3Q
    10-QSB.)4
.33

Common Stock Purchase Warrant
    issued to Jan L. Dorfman on September 15, 2004 representing
    the right to purchase 20,000 shares of common stock of the
    Company. (Incorporated herein by reference to Exhibit 4.5
    to the 2004 3Q
    10-QSB.)4
.34

Common Stock Purchase Warrant with
    an issue date of July 18, 2003 in favor of Azimuth
    Corporation representing the right to purchase
    2,875,000 shares of common stock of the Company.
    (Incorporated herein by reference to Exhibit 4.39 of the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004, as filed on
    April 14, 2005 (the 2004
    10-K).)4
.35

Common Stock Purchase Warrant with
    an issue date of July 18, 2003 in favor of Cadmus
    Corporation representing the right to purchase
    3,625,000 shares of common stock of the Company.
    (Incorporated herein by reference to Exhibit 4.40 to the
    2004 10-K.)4
.36

Common Stock Purchase Warrant
    issued to Michael Pasini on February 15, 2005 representing
    the right to purchase 200,000 shares of common stock of the
    Company. (Incorporated herein by reference to Exhibit 4.1
    to the Companys Quarterly Report on
    Form 10-QSB
    for the quarter ended March 31, 2005, as filed on
    August 16, 2005.)4
.37

Common Stock Purchase Warrant
    issued to Dan Burns on May 2, 2005 representing the right
    to purchase 556,500 shares of common stock. (Incorporated
    herein by reference to Exhibit 4.1 to Companys
    Quarterly Report on
    Form 10-QSB
    for the quarter ended June 30, 2005, as filed on
    May 20, 2005.)4
.38

Form of subscription agreement to
    purchase common stock of the Company at $0.025 per share.4
.39

Form of common stock purchase
    warrant issued as part of 2005 financings representing the right
    to purchase shares of common stock of the Company at
    $0.10 per share 48




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##### Table of Contents



Exhibit No.

Description4
.40

Common Stock Purchase Warrant
    issued to Reid Jilek on March 1, 2006 representing the
    right to purchase 1,000,000 shares of common stock.4
.41

Common Stock Purchase Warrant
    issued to Eric Gombrich on March 1, 2006 representing the
    right to purchase 300,000 shares of common stock.4
.42

Form of common stock purchase
    warrant issued as part of 2006 financings representing the right
    to purchase shares of common stock of the Company at
    $0.18 per share4
.43

Form of subscription agreement
    used to purchase common stock of the Company during 2006.10
.2+

1999 Equity Incentive Plan
    established as of June 1, 1999, as amended. (Incorporated
    herein by reference to Appendix B to the Companys
    Definitive Proxy Statement on Schedule 14A, as filed on
    July 1, 2004.)10
.3+

1999 Employee Stock Purchase Plan.
    (Incorporated herein by reference to Appendix G to the 1999
    Proxy Statement.)10
.4

$500,000 Convertible Promissory
    Note issued to Monsun, AS on November 1, 2000.
    (Incorporated herein by reference to Exhibit 10.23 to the
    2000 10-K.)10
.5

Lease Agreement between Ampersand
    Medical Corporation and O.P., L.L.C, dated May 18, 2000,
    pertaining to premises located at 414 N. Orleans,
    Suite 510, Chicago, Illinois 60610. (Incorporated by
    reference to Exhibit 10.32 to the 2000
    10-K.)10
.6

First Amendment to Lease Agreement
    between Ampersand Medical Corporation and O.P., L.L.C., dated
    February 13, 2001, pertaining to additional premises at
    414 N. Orleans, Suite 503, Chicago, Illinois
    60610 and extending the term of the original lease until
    February 28, 2006. (Incorporated by reference to
    Exhibit 10.33 to the 2000
    10-K.)10
.7

$25,000 Promissory Note issued to
    Northlea Partners, Ltd. on August 6, 2001. (Incorporated
    herein by reference to Exhibit 10.41 to the August 2001
    S-4.)10
.8

Form of Convertible Promissory
    Note issued in connection with certain Bridge I financing
    beginning in March 2002. (Incorporated herein by reference to
    Exhibit 10.42 to the 2002
    10-K.)10
.9

Amendment No. 1 to
    Convertible Promissory Note issued in connection with certain
    Bridge I financing dated August 20, 2003. (Incorporated
    herein by reference to Exhibit 10.43 to the 2002
    10-K.)10
.10

Form of Bridge II Convertible
    Promissory Note Indenture, including Form of Convertible
    Promissory Note, Form of Security Agreement, Form of Collateral
    Sharing Agreement, and Form of Warrant issued in connection with
    certain Bridge II Financing beginning in October 2002.
    (Incorporated herein by reference to Exhibit 10.44 to the
    2002 10-K.)10
.12

Amendment No. 1 to the
    12% Convertible Secured Promissory Note issued in
    connection with certain Bridge II financing in October
    2002. (Incorporated herein by reference to Exhibit 10.47 to
    the 2003 3Q
    10-QSB.)10
.13

Amendment No. 1 dated
    July 31, 2003 to the Indenture dated October 1, 2002
    issued in connection with certain Bridge II financing in
    October 2002 (Incorporated herein by reference to
    Exhibit 10.48 to the 2003 3Q
    10-QSB.)10
.15

Proposal for consulting agreement
    with Reid Jilek. (Incorporated herein by reference to
    Exhibit 10.50 to the 2003 3Q
    10-QSB.)10
.16

Form of Subscription Agreement for
    Bridge III $1,500,000 minimum offering/$4,000,000 Maximum
    Offering placed by Bathgate Capital Partners LLC. (Incorporated
    herein by reference to Exhibit 10.47 to the 2003
    10-KSB.)10
.17

Form of Note for Bridge III
    $1,500,000 minimum offering/$4,000,000 Maximum Offering placed
    by Bathgate Capital Partners LLC. (Incorporated herein by
    reference to Exhibit 10.48 to the 2003
    10-KSB.)10
.18

Form Registration Rights
    Agreement issued in connection with Bridge III Offering.
    (Incorporated herein by reference to Exhibit 10.49 to the
    2003 10-KSB.)10
.19

Form of General Security Agreement
    by the Company in connection with Bridge III Offering.
    (Incorporated herein by reference to Exhibit 10.50 to the
    2003 10-KSB.)10
.20

Form of Warrant issued in
    connection with Bridge III Offering. (Incorporated herein
    by reference to Exhibit 10.51 to the 2003
    10-KSB.) 49




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##### Table of Contents



Exhibit No.

Description10
.21

Form of Subscription Agreement for
    Bridge IV Offering. (Incorporated herein by reference to
    Exhibit 4.3 to the 2004 1Q
    10-QSB.)10
.22

Form of Note for Bridge IV
    Offering. (Incorporated herein by reference to Exhibit 4.4
    to the 2004 1Q
    10-QSB.)10
.23

Form of General Security Agreement
    for Bridge IV Offering. (Incorporated herein by reference
    to Exhibit 4.5 to the 2004 1Q
    10-QSB.)10
.24

Form of Registration Rights
    Agreement for Bridge IV Offering. (Incorporated herein by
    reference to Exhibit 4.6 to the 2004 1Q
    10-QSB.)10
.25

Form of Subscription Agreement for
    the Companys August 2004 common stock offering.
    (Incorporated herein by reference to Exhibit 4.6 to the
    2004 3Q
    10-QSB.)10
.26

Settlement Agreement, effective as
    of October 14, 2004, by and among the Company, AccuMed and
    MonoGen, Inc. and accompanying License Agreement, made as of
    October 14, 2004, by and between MonoGen, Inc., the Company
    and AccuMed. (Incorporated herein by reference to
    Exhibit 4.8 to the Companys
    Form 10-QSB/A
    for the quarter ended September 30, 2004, as filed on
    November 17, 2004.)10
.27

Form of Subscription Agreement for
    the Companys common stock offering beginning in December
    2004. (Incorporated herein by reference to Exhibit 10.28 to
    the 2004
    10-K.)10
.28

General Release and Settlement
    Agreement, effective as of July 18, 2003, by and among the
    Company, Azimuth Corporation and Cadmus Corporation.
    (Incorporated herein by reference to Exhibit 10.29 to the
    2004 10-K.)10
.29

Agreement, made as of
    December 31, 2004, between British Columbia Cancer Agency
    Branch and the Company, AccuMed and Oncometrics. (Incorporated
    herein by reference to Exhibit 10.30 to the 2004
    10-K.)10
.30

Settlement Agreement, entered into
    as of December 2004, by and between Bruce Patterson and
    Invirion, Inc. and the Company. (Incorporated herein by
    reference to Exhibit 10.31 to the 2004
    10-K.)10
.31

Lease proposal letter agreement,
    dated September 22, 2004 from Spectrum Real Estate Services
    to the Company pertaining to the lease of premises located at
    414 N. Orleans, Suite 510, Chicago, Illinois
    60610 to be effective as third amendment to original lease.
    (Incorporated herein by reference to Exhibit 10.32 to the
    2004 10-K.)10
.32

Strategic alliance agreement
    entered into by the Company in November 2004. (Incorporated
    herein by reference to Exhibit 10.33 to the 2004
    10-K.)10
.33

Settlement Agreement and Mutual
    Release effective June 7, 2005, by and between the
    Cleveland Clinic Foundation and the Company. (Incorporated
    herein by reference to Exhibit 10.1 to the 2005 3Q
    10-QSB.)10
.34

General Release and
    Confidentiality Agreement, entered into October 2005, by and
    between Eric Gombrich and the Company. (Incorporated herein by
    reference to Exhibit 10.2 to the 2005 3Q
    10-QSB.)10
.35

Settlement Agreement and Mutual
    Release, entered into October 2005, by and among the Lash Group
    Inc., Peter Gombrich and the Company. (Incorporated herein by
    reference to Exhibit 10.3 to the 2005 3Q
    10-QSB.)10
.36

Clinical Study Agreement, entered
    into January 2006, between University Hospitals of Cleveland and
    the Company.10
.37

Separation Agreement, entered into
    December 31, 2005, between Denis M.
    ODonnell, M.D. and the Company.10
.38

Consulting Agreement, dated
    January 27, 2006 and effective March 1, 2006, by and
    between the Company and GSG Enterprises LLC (Incorporated herein
    by reference to Exhibit 10.1 to the 2006 3Q
    10-QSB/A.)10
.39+*

Employment agreement dated
    November 15, 2006 between Augusto Ocana and the Company.10
.40+*

Employment agreement dated
    November 20, 2006 between Robert McCullough and the Company.10
.41*

Consulting agreement dated
    November 20, 2006 between Future Wave Management and the
    Company. 50




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##### Table of Contents



Exhibit No.

Description10
.42*

Consulting agreement dated
    November 20, 2006 between EBM, Inc. and the Company.10
.43+*

Common Stock Purchase Warrant
    dated December 1, 2006 issued to Augusto Ocana representing
    the right to purchase 500,000 shares of common stock10
.44+

Common Stock Purchase Warrant
    dated September 28, 2006 issued to David Weissburg
    representing the right to purchase 4,000,000 shares of
    common stock10
.45+*

Common Stock Purchase Warrant
    dated September 28, 2006 issued to Robert Mccullough Jr.
    representing the right to purchase 4,000,000 shares of
    common stock10
.46+*

Common Stock Purchase Warrant
    dated September 28, 2006 issued to Alexander Milley.
    representing the right to purchase 625,000 shares of common
    stock10
.47+*

Common Stock Purchase Warrant
    dated September 28, 2006 issued to John Ables. representing
    the right to purchase 625,000 shares of common stock14


Code of Ethics and Business
    Conduct of Officers, Directors and Employees of CytoCore, Inc.
    (Incorporated herein by reference to Exhibit 99.1 to the
    2003 10-KSB.)21*


Subsidiaries of the Company23
.1*

Consent of Amper,
    Politziner & Mattia P.C.23
.2*

Consent of Altschuler, Melvoin and
    Glasser LLP31
.1*

Certification of the Chief
    Executive Officer of CytoCore, Inc. pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.31
.2*

Certification of the Chief
    Financial Officer of CytoCore, Inc. pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.32
.1*

Certification of the Chief
    Executive Officer of CytoCore, Inc. Pursuant to 18 U.S.C.
    Section 1350, As Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.32
.2*

Certification of the Chief
    Financial Officer of CytoCore, Inc., Pursuant to 18 U.S.C.
    Section 1350, As Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.   Item 14.
    Principal
    Accountant Fees and Services  Independent
    Registered Public Accounting Firm
    Fees
  Audit Fees. Forms 10-QSB
  Forms 10-QSB
 51




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##### Table of Contents



Audit-Related Fees.
  Tax Fees.
  All Other Fees.
  Pre-Approval
    Policies
     52




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##### Table of Contents



SIGNATURES    CYTOCORE, INC.
  By:
    /s/  Augusto
    Ocana     By:
    /s/  Robert
    McCullough, Jr.         Signature

Title

Date/s/  Augusto
    OcanaAugusto
    Ocana

Chief Executive Officer 
    (Principal Executive Officer and Director)

April 27, 2007/s/  Robert
    McCullough, Jr.Robert
    McCullough, Jr.

Chief Financial Officer
    (Principal Accounting Officer and Director)

April 27, 2007/s/  Alexander
    M. MilleyAlexander
    M. Milley

Director

April 27, 2007/s/  John
    AbelesJohn
    Abeles

Director

April 27, 2007/s/  Clint
    SeversonClint
    Severson

Director

April 27, 2007  53




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm



We have audited the accompanying consolidated balance sheet of
    CytoCore, Inc. and Subsidiaries as of December 31, 2006,
    and the related consolidated statement of operations,
    stockholders deficit, and cash flow for the year then
    ended. These financial statements are the responsibility of the
    Companys management. Our responsibility is to express an
    opinion on these financial statements based on our audit.



We conducted our audit in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. The Company is not required to
    have, nor were we engaged to perform, an audit of its internal
    control over financial reporting. Our audit included
    consideration of internal control over financial reporting as a
    basis for designing audit procedures that are appropriate in the
    circumstances, but not for the purpose of expressing an opinion
    on the effectiveness of the Companys internal control over
    financial reporting. Accordingly we express no such opinion. An
    audit includes examining, on a test basis, evidence supporting
    the amounts and disclosures in the financial statements. An
    audit also includes assessing the accounting principles used and
    significant estimates made by management, as well as evaluating
    the overall financial statement presentation. We believe that
    our audit provides a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred
    to above present fairly, in all material respects, the
    consolidated financial position of CytoCore, Inc. and
    Subsidiaries as of December 31, 2006, and the results of
    their operations and their cash flows for the year then ended,
    in conformity with U.S. generally accepted accounting
    principles.



The accompanying consolidated financial statements have been
    prepared assuming the Company will continue as a going concern.
    As discussed in Note 1 to the consolidated financial
    statements, the Companys recurring losses from operations
    and resulting dependence upon access to additional external
    financing, raise substantial doubt concerning its ability to
    continue as a going concern. Managements plans in regard
    to these matters are also described in Note 1. The
    consolidated financial statements do not include any adjustments
    that might result from the outcome of this uncertainty.



As discussed in Note 9 to the consolidated financial
    statements, effective January 1, 2006, the Company adopted
    the provisions of Statement of Financial Accounting Standards
    No. 123(R), Share-Based Payment applying the
    modified-prospective method.



/s/  Amper,
    Politziner & Mattia, P.C.



April 16, 2007

Edison, New Jersey

F-1




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
             
    F-2




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##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2006


2005(Dollars in thousands,except per share amounts)ASSETSCurrent Assets:Cash and cash equivalents

$
874


$
Accounts receivables


24



38Inventories






26Prepaid expenses and other current
    assets


122



73Total current assets


1,020



137Fixed Assets, net


242



233Licenses, patents, and technology,
    net of amortization


20



20Total assets

$
1,282


$
390LIABILITIES AND
    STOCKHOLDERS DEFICITCurrent Liabilities:Checks issued in excess of amounts
    on deposit

$



$
5Accounts payable


1,434



3,714Accrued payroll costs


421



643Accrued expenses


1,825



2,292Deferred revenue


25



25Due to stockholder






37Lease obligation






96Notes payable  related
    parties






70Notes payable


425



3,557Total current liabilities


4,130



10,439Long-term liabilitiesConvertible securities


567



Stockholders Deficit:Preferred stock; $0.001 par
    value; shares authorized 10,000,000; 574,642 and
    1,102,192 shares issued and outstanding at
    December 31, 2006 and 2005, respectively (Liquidation value
    of all classes of preferred stock of $5,005 at December 31,
    2006)


2,920



7,716Common stock, $0.001 par
    value; 375,000,000 shares authorized; 312,429,579 and
    154,665,084 shares issued and 312,237,491 and
    154,472,996 shares outstanding at December 31, 2006
    and 2005, respectively


312



155Additional paid-in capital


70,925



52,386Treasury stock at cost;
    192,088 shares at December 31, 2006 and 2005


(327
)


(327
)Accumulated deficit


(77,170
)


(69,911
)Accumulated comprehensive
    loss  Cumulative translation adjustment


(75
)


(68
)Total stockholders deficit


(3,415
)


(10,049
)Total liabilities and
    stockholders deficit

$
1,282


$
390    F-3




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##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2006


2005(Dollars in thousands,except per share amounts)Net Sales

$
94


$
117Operating expenses:Cost of revenues (includes
    impairment charge of property assets of $169, net of settlement
    of trade debt of $176 for the year ended December 31, 2006)


19



21Research and development (net of
    settlement of trade debt of $342 and $274 for the year ended
    December 31, 2006 and 2005, respectively)


854



(100
)Selling, general and
    administrative expenses (net of settlement of trade debt of $994
    and $255 for the year ended December 31, 2006 and 2005,
    respectively)


3,967



1,346Total costs and expenses


4,840



1,267Operating loss


(4,746
)


(1,150
)Other income (expense):Interest expense 
    related party


(14
)


(9
)Interest expense (net of interest
    settlement of $70 and $0 for the year ended December 31,
    2006 and 2005, respectively)


(1,818
)


(3,167
)Interest income


12



Total other income (expense)


(1,820
)


(3,176
)Loss from operations before income
    taxes


(6,566
)


(4,326
)Income taxes






Net loss


(6,566
)


(4,326
)Preferred stock dividends


(693
)


(20
)Net loss applicable to common
    stockholders

$
(7,259
)

$
(4,346
)Basic and fully diluted net loss
    per common share

$
(.03
)

$
(.04
)Weighted average number of common
    shares outstanding


241,431,458



110,037,893    F-4




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##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2006


2005(Dollars in thousands)Operating Activities:Net loss

$
(6,566
)

$
(4,326
)Amortization of debt discount


173



2,673Depreciation and amortization


41



117Amortization of fees






80Non-cash interest related to
    warrant modification


100



Loss on sale of fixed assets






3Impairment charge of property asset


169



Non-cash interest on beneficial
    note conversion settled in stock


1,321



Stock and warrants issued for
    legal settlements


210



421Stock and warrants issued to
    non-employees for services


832



58Non-cash compensation expense


1,270



Gain on settlements of trade
    indebtedness


(1,581
)


Stock returned for settlement






(47
)Changes in assets and liabilities:Accounts receivable


14



(8
)Inventories


26



21Due from stockholder






(1
)Prepaid expenses and other current
    assets


(50
)


(58
)Checks issued in excess of amounts
    on deposit


(5
)


5Accounts payable


(745
)


(713
)Lease obligation


(14
)


(13
)Accrued expenses


(447
)


425Net cash used for operating
    activities


(5,252
)


(1,363
)Cash used in investing activities:Capital purchases


(219
)


(27
)Net cash used for investing
    activities


(219
)


(27
)Cash flows from financing
    activities:Proceeds from issuance of common
    stock


7,362



1,483Financing costs in connection with
    private placement of stock


(79
)


Payments of notes payable


(1,185
)


(104
)Proceeds from exercise of warrants


247



Net cash provided by financing
    activities


6,345



1,379Net increase/(decrease) in cash
    and cash equivalents


874



(11
)Cash and cash equivalents at
    beginning of year






11Cash and cash equivalents at end
    of year

$
874


$
Supplemental disclosure of cash
    flow information:Cash paid during the year
    for:Interest

$
319


$
3Non-cash transaction during the
    year for:Preferred stock and cumulative
    dividends converted into common stock

$
5,489


$
71Convertible promissory notes and
    accrued interest converted into common stock

$
2,370


$
4,494Settlement of trade debt with stock

$
321


$
    F-5




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##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS DEFICIT
  AccumulatedPreferred Stock


Common Stock








Additional





Other


TotalPar Value $0.001


Par Value $0.001


Treasury Stock


Paid-In


Accumulated


Comprehensive


StockholdersShares


Amount


Shares


Amount


Shares


Amount


Capital


Deficit


Loss


Deficit(Dollars in thousands)January 1, 2005


1,119,192


$
7,767



99,792,292


$
100



192,088


$
(327
)

$
45,961


$
(65,565
)

$
(59
)

$
(12,123
)Comprehensive Loss:Net loss






























(4,326
)






(4,326
)Foreign currency translation


































(9
)


(9
)Total net comprehensive loss






































(4,335
)Series C preferred stock and
    cumulative dividends converted to common stock


(17,000
)


(51
)


118,260















71



(20
)






Bridge I conversions










2,008,962



2











292











294Bridge III conversions










15,282,236



15











1,560











1,575Bridge IV conversions










25,605,000



26











2,599











2,625Sale of common stock










11,858,334



12











1,471











1,483Common stock subscribed for services


























16











16Common stock returned for settlement


























(47
)










(47
)Warrants issued for services


























42











42Warrants issued in settlement of
    debt


























421











421December 31, 2005


1,102,192


$
7,716



154,665,084


$
155



192,088


$
(327
)

$
52,386


$
(69,911
)

$
(68
)

$
(10,049
)    F-6




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##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS
    DEFICIT  (Continued)
  AccumulatedPreferred Stock


Common Stock








Additional





Other


TotalPar Value $0.001


Par Value $0.001


Treasury Stock


Paid-In


Accumulated


Comprehensive


StockholdersShares


Amount


Shares


Amount


Shares


Amount


Capital


Deficit


Loss


Deficit(Dollars in thousands)January 1, 2006


1,102,192


$
7,716



154,665,084


$
155



192,088


$
(327
)

$
52,386


$
(69,911
)

$
(68
)

$
(10,049
)Comprehensive Loss:Net loss






























(6,566
)






(6,566
)Foreign currency translation


































(7
)


(7
)Total net comprehensive loss






































(6,573
)Series B preferred stock and
    cumulative dividends converted to common stock


(139,370
)


(557
)


851,040



1











607



(51
)






Series C preferred stock and
    cumulative dividends converted to common stock


(207,500
)


(264
)


1,517,593



2











363



(101
)






Series E preferred stock and
    cumulative dividends converted to common stock


(180,680
)


(3,975
)


7,209,963



7











4,509



(541
)






Bridge I conversions










4,281,941



4











638











642Bridge II conversions










1,693,056



1











252











253Bridge III conversions










3,362,701



3











333











336Related party notes converted










900,188



1











119











120Monsun note conversion










7,624,327



8











2,332











2,340Sale of common stock, net of
    financing costs of $79,317










80,064,292



80











7,203











7,283Stock issued for sale of stock in
    prior year










38,210,498



38











(38
)










Exercise of warrants










2,023,079



2











245











247Common stock issued for services










6,809,032



7











512











519Common stock issued in settlement
    of debt










2,928,271



3











318











321Common stock issued for compensation










288,514















38











38Warrant conversion exercise price
    modification


























100











100Convertible securities in excess of
    authorized


























(567
)










(567
)Stock appreciation rights liability


























(180
)










(180
)Warrants issued for compensation


























1,232











1,232Warrants issued for services


























313











313Warrants issued in settlement of
    trade debt


























210











210December 31, 2006


574,642


$
2,920



312,429,579


$
312



192,088


$
(327
)

$
70,925


$
(77,170
)

$
(75
)

$
(3,415
)    F-7




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
 NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2006 and
    2005(Tabular data in thousands, except per share
    amounts) Note 1.
    The
    Company and Basis of Presentation      tm .
  tm tm
  Liquidity
   F-8




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
  Note 2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
    Use of
    Estimates
    Revenue
    Recognition
    Cash
    and Cash Equivalents
    Inventory
    of Instruments, Component Parts and Labor
    Property
    and Equipment
    Furniture and fixtures

5 yearsLaboratory equipment

5 yearsComputer and communications
    equipment

3 yearsDesign and tooling

5 yearsLeasehold improvements

Useful life or term of lease,
    whichever is shorter     Licenses,
    Patents, and Technology
   F-9




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
    Impairment
    or Disposal of Long-Lived Assets
    Research
    and Development Costs
    Stock
    Based Compensation
    Foreign
    Currency Translation
    Fair
    Value of Financial Instruments
    Other
    Comprehensive Income (Loss)
    Net
    Loss Per Share
   F-10




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
   Income
    Taxes
    Risks
    from Concentrations
      Recent
    Accounting Pronouncements
  Accounting
    for Uncertainty in Income Taxes.
    Fair
    Value Measurements.
   F-11




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
   Note 3.
    Fixed
    Assets    2006


2005Furniture and fixtures

$
124


$
116Laboratory equipment


595



595Computer and communications
    equipment


331



320Design and tooling


201



170Leasehold improvements


28



281,279



1,229Less accumulated depreciation and
    amortization


(1,037
)


(996
)Total

$
242


$
233     Note 4.
    Licenses,
    Patents, and Technology    2006


2005Licenses

$
20


$
20Patent costs


133



133LabCorp. Technology Agreement


260



260Subtotal


413



413Less accumulated amortization


(393
)


(393
)Total

$
20


$
20     Note 5.
    Accrued
    Expenses    2006


2005Accrued interest

$
478


$
898Accrued interest 
    related party






34Accrued settlement costs


438



438Accrued taxes (see Note 11)


589



589Accrued Compensation


180



Other accrued expenses


140



333Total

$
1,825


$
2,292  F-12




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
  Note 6.
    Notes Payable 
    Related Parties    2006


2005Northlea Partners, Ltd., $25,000
    Promissory Note issued August 6, 2001; interest rate
    15% per annum

$



$
25Northlea Partners, Ltd., $15,000
    Promissory Note issued September 20, 2001; interest rate
    9% per annum






15Northlea Partners, Ltd., $15,000
    Bridge II convertible promissory note issued May 1,
    2003; interest rate 12% per annum (see description under
    Bridge II notes in
    Note 7-Notes Payable
    for other terms and conditions)






15Northlea Partners, $25,000
    Bridge III convertible promissory note issued May 21,
    2004; interest rate 10% per annum (see description under
    Bridge III notes in
    Note 7-
    Notes Payable for other terms and conditions)






15$



$
70     Peter
    Gombrich Amounts Due.
   F-13




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
   Note 7.
    Notes Payable    2006


2005Bridge I Convertible Promissory
    Notes; due December 31, 2002; interest rate 7% per
    annum; convertible into common stock at 75% of the market price
    on date of conversion; beneficial conversion feature valued at
    $1,042,000 at June 30, 2002; warrants at an exercise price
    of $0.25 per share; additional warrants at an exercise
    price of $0.20

$



$
500Bridge II Convertible
    Promissory Notes; due July 31, 2004; interest rate 12% or
    15% per annum; convertible into common stock at $0.10 or
    $0.15 per share; beneficial conversion feature valued at
    $1,777,000 and $330,000 at December 31, 2003 and 2002,
    respectively; warrants at an exercise price of $0.15 or
    $0.20 per share


50



1,285Bridge III Convertible
    Promissory Notes; due December 31, 2008; interest rate 10%
    per annum; convertible into common stock at $0.10 per
    share; beneficial conversion feature valued at $1,604,000 at
    June 30, 2004; warrants at an exercise price of
    $0.15 per share






115Monsun, AS, $500,000 Promissory
    Note issued November 1, 2000; due July 31, 2002;
    interest rate 20% per annum, compounded into principal
    amount; beneficial conversion feature valued at $125,000 at
    November 1, 2000






953MonoGen, Inc., $305,000 Promissory
    Note issued October 14, 2004; interest at 14% per
    annum; first installment of $25,000 due November 1, 2004
    with monthly principal and interest installments of $10,000
    thereafter; due January 1, 2007


305



305Xillix Technologies Corporation,
    $361,000 Promissory Note issued June 26, 1998; interest
    rate Canadian Prime plus 6% per annum; represents a debt of
    AccuMed


34



34Ungaretti & Harris LLP,
    $211,368 Secured Promissory Note issued May 8, 2003;
    interest at 12% per annum; due September 30, 2003






51Ernst & Young LLP,
    $30,800 Promissory Note issued July 17, 2003; interest at
    12% per annum commencing January 1, 2003; due
    December 31, 2003






31Western Economic Diversification,
    $221,000 Promissory Note issued June 1989; no interest;
    represents a debt of Oncometrics






247Robert Shaw, $25,000 Promissory
    Note issued September 20, 2001; interest rate 9% per
    annum.


15



15Ventana Medical Systems, Inc.,
    $62,946 Promissory Note issued November 30, 2003; due
    December 31, 2003; interest at 8% per annum payable
    after December 31, 2003


21



21$
425


$
3,557   Bridge I.
 F-14




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
        Bridge II.
       F-15




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
    Bathgate Capital Partners, LLC 
    Bridge III.
        Bridge IV.
   F-16




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
     Monsun.
      MonoGen, Inc.
  Ungaretti & Harris LLP.
  Ernst & Young LLP.
  Western Economic Diversification.
    Defaults.
 F-17




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
    Note 8.
    Stockholders
    Equity      For the Years EndedDecember 31,2006


2005Basic and Diluted:Net loss applicable to common
    stockholder

$
(7,259
)

$
(4,346
)Weighted average common shares
    outstanding


241,431,458



110,037,893Net loss per common share

$
(.03
)

$
(.04
)     Preferred
    Stock
    Shares Issued &


Shares Issued &Outstanding


OutstandingOffering

Shares Authorized


2006


2005Series A convertible


590,197



82,655



82,655Series B convertible, 10%
    cumulative


1,500,000



225,736



365,106Series C convertible, 10%
    cumulative


1,666,666



38,333



245,833Series D convertible, 10%
    cumulative


300,000



175,000



175,000Series E convertible, 10%
    cumulative


800,000



52,918



233,598Undesignated Preferred Series


5,143,137







Total Preferred Stock


10,000,000



574,642



1,102,192   Convertible
    Cumulative Preferred Stock Conversions:
     F-18




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
   Summary
    of Preferred Stock Terms
  Series A Convertible
    Preferred StockLiquidation Value:

$4.50 per shareConversion Price:

$10.3034 per shareConversion Rate:

0.4367  Liquidation
    Value divided by Conversion Price ($4.50/$10.3034)Voting Rights:

NoneDividends:

NoneConversion Period:

Any timeSeries B Convertible
    Preferred StockLiquidation Value:

$4.00 per shareConversion Price:

$1.00 per shareConversion Rate:

4.00  Liquidation Value
    divided by Conversion Price ($4.00/$1.00)Voting Rights:

NoneDividends:

10% 
    Quarterly  Commencing March 31, 2001Conversion Period:

Any timeCumulative dividends in arrears at
    December 31, 2006 were $529,649Series C Convertible
    Preferred StockLiquidation Value:

$3.00 per shareConversion Price:

$0.60 per shareConversion Rate:

5.00  Liquidation Value
    divided by Conversion Price ($3.00/$0.60)Voting Rights:

NoneDividends:

10% 
    Quarterly  Commencing March 31, 2002Conversion Period:

Any timeCumulative dividends in arrears at
    December 31, 2006 were $59,382Series D Convertible
    Preferred StockLiquidation Value:

$10.00 per shareConversion Price:

$1.00 per shareConversion Rate:

10.00  Liquidation
    Value divided by Conversion Price ($10.00/$1.00)Voting Rights:

NoneDividends:

10% 
    Quarterly  Commencing April 30, 2002Conversion Period:

Any timeCumulative dividends in arrears at
    December 31, 2006 were $904,726 F-19




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
  Series E Convertible
    Preferred StockLiquidation Value:

$22.00 per shareConversion Price:

$0.80 per shareConversion Rate:

27.50  Liquidation
    Value divided by Conversion Price ($22.00/$0.80)Voting Rights:

Equal in all respects to holders
    of common sharesDividends:

10% 
    Quarterly  Commencing May 31, 2002Conversion Period:

Any timeCumulative dividends in arrears at
    December 31, 2006 were $591,067   Issuance
    of Common Shares for Cash
  2006
        2005
    paid-in-capital 
   F-20




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
    Issuance
    of Common Stock for Services and as a Settlement of
    Debt
  2006
      2005
    Issuance
    of Common Stock as Payment for Employee
    Compensation
    Issuance
    of Warrants for Services and Settlement of Debt
  2006
         F-21




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
   2005
      Issuance
    of warrants for debt
  120-day
    Issuance
    of Warrants as Payment for Employee Compensation
     F-22




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
    Exchange
    of Certain Convertible Promissory Notes for Common
    Shares
        Application
    of Black-Scholes Valuation Model
    2006


2005Expected volatility


84
%  206%


277
%Expected term (years)


3  5



2.5  5Risk-free interest rate


4.25
%-4.50%


4.61
%Expected dividend yield


0
%


0
%Forfeiture rate


0
%


0
%Resulting weighted average grant
    date fair value

$
0.12



    F-23




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
   Warrants
    Total Warrant


Warrant Shares


Exercise Price


Weighted AverageShares Outstanding


Exercisable


(Not Weighted)


Years Until Expiration51,493



51,493


$
0.01



0.411,000,000



1,000,000


$
0.04



4.17556,500



556,500


$
0.06



3.349,335,751



9,335,751


$
0.10



2.574,000,000






$
0.1275



2.75500,000



500,000


$
0.13



2.9215,070,917



15,070,917


$
0.15



3.09474,984



474,984


$
0.16



2.274,457,000



4,457,000


$
0.17



1.985,792,303



5,792,303


$
0.18



3.72166,667



166,667


$
0.19



2.5610,021,797



6,021,797


$
0.20



3.802,885,000



2,885,000


$
0.25



0.31284,091



284,091


$
0.32



5.00250,000



250,000


$
0.33



2.54200,000



200,000


$
0.70



0.2513,278



13,278


$
7.51



Perpetual13,278



13,278


$
15.05



Perpetual13,278



13,278


$
22.62



PerpetualTotal


55,086,337



47,086,337     Convertible
    Securities
  00-19,
 F-24




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
   Note 9.
    Equity
    Incentive Plan and Employee Stock Purchase Plan           F-25




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
     2006


2005Expected volatility


84
%  206%


277
%Expected term (years)


3  5



2.5  5Risk-free interest rate


4.25
%-4.50%


4.61
%Expected dividend yield


0
%


0
%Forfeiture rate


0
%


0
%Resulting weighted average grant
    date fair value

$
0.12



         For the Year EndedDecember 31, 2005(In thousands exceptfor per share amounts)Net loss applicable to common
    shareholders as reported

$
(4,326
)Deduct: Total stock-based
    compensation expense determined under the fair value based
    method for all awards and forfeitures, net of related taxes


(9
)Pro forma net loss applicable
    to common shareholders

$
(4,335
)Basic loss and diluted per share
    applicable to common shareholders  as reported

$
(.04
)Basic and diluted loss per share
    applicable to common shareholders  pro forma

$
(.04
)  F-26




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
    1999
    Stock Option Plan
  Weighted





Weighted AverageAverage


Aggregate


RemainingExercise


Intrinsic


Contractual LifeOptions


Price


Value


(Years)Outstanding at
    December 31, 2004


4,947,727Granted


Exercised


Forfeited


(943,736
)

$
1.9032Outstanding at
    December 31, 2005


4,003,991


$
0.4412


$
0.00Granted


Forfeited


(1,746,000
)

$
0.5662Outstanding and exercisable
    atDecember 31,
    2006


2,257,991


$
0.2767


$
433,500



1.68     Weighted





Weighted AverageAverage


Aggregate


RemainingOptions and


Exercise


Intrinsic


Contractual LifeWarrants


Price


Value


(Years)Outstanding at
    December 31, 2004


Granted


Exercised


Forfeited


Outstanding at
    December 31, 2005


Granted


10,250,000


$
0.17Forfeited


Outstanding at
    December 31, 2006


10,250,000


$
0.17


$
323,100



3.86Exercisable at
    December 31, 2006


2,250,000


$
0.18


$
71,000     Stock
    Appreciation Rights
   F-27




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
    Note 10.
    Leases        OperatingYear

Leases2007

$
912008

$
62Total lease payments

$
153   Note 11.
    Income
    Taxes    2006


2005Deferred tax assets related to:Net operating loss carryforwards

$
26,308


$
24,271Writedown of intangibles


14



16Accrued liabilities


150



231Accrued expenses


132



12226,604



24,640Less valuation reserve


26,604



24,640Net deferred tax asset

$



$
    F-28




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
         Note 12.
    Commitments
    and contingencies  Legal
    Proceedings
  Settled
    in 2006
  Ungaretti & Harris LLP.
  Hill & Barlow LLP.
  Medical College of Georgia Research Institute,
    Inc. No. 2003-RCCV-1211)
  Account Resource.
  Arthur Lipper III.
 F-29




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
    The Lumber Company (formerly Garrett Realty,
    Inc.).
  The Lash Group, Inc.
  Reid Jilek.
  Pending
    as of December 31, 2006
  Peter Gombrich.
 F-30




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
    The Regents of the University of
    California.
  No. 2006-L-003353)
    Other
    claims
  Other Creditors.
    Commitments
   F-31




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2006 and 2005 
    (Continued)
          Note 13.
    Related
    Party Transactions        Note 14.
    Subsequent
    Events       F-32