##### Table of Contents





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

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007ORo

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)   (312) 222-9550
 (Issuers Telephone
    Number )
  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
        DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-KSB.
  o þ




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##### Table of Contents





CYTOCORE,
    INC.
  Annual
    Report on
    Form 10-KSB
 December 31,
    2007
  TABLE OF
    CONTENTS
  
   PagePART IItem 1.


Description of Business


1Overview


1Recent Developments


1Information About Industry Segments


2Description of Business


2Products


2The
CytoCore
Solutionstm
System


2The
SoftPAPtm
Cervical Cell Collector


3Biochemical
    Assays and Slide-Based Tests


4Automated
Imaging Proteomic System or
AIPStm


5Drug
    Delivery System


6Product
    Development


7Markets and Marketing Objectives


7Sales and Distribution


9Government Regulation, Clinical
    Studies and Regulatory Strategy


9Cost and Reimbursement


12Competition


13Operations


14Intellectual Property


14Research and Development
    Expenditures


15Components and Raw Materials


16Working Capital Practices


16Employees


16Financial Information About Foreign and
    Domestic Operations and Export Sales


17Risk Factors


17Item 2.


Description of Property


25Item 3.


Legal Proceedings


25Item 4.


Submission of Matters to a Vote of Security
    Holders


26PART IIItem 5.


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


27Market Information


27Holders


27Dividends


27Stock Transfer Agent


27Securities Authorized for Issuance under
    Equity Compensation Plans


28Recent Sales of Unregistered Securities and
    Use of Proceeds from Registered Securities


29Issuance of Securities


29Bridge and other Note Conversions


31Purchases of Equity Securities by the Small
    Business Issuer and Affiliated Purchasers


31




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PageItem 6.


Managements Discussion and Analysis
    or Plan of Operation


32Forward-Looking Statements


32Overview


32Critical Accounting Policies and Significant
    Judgments and Estimates


33Results of Operations


34Revenue


34Costs and Expenses


34Cost of Revenues


34Research and
    Development


34Selling, General
    and Administrative


34Other Income and
    Expense


35Interest
    Income


35Interest
    Expense


35Restructuring
    Settlements


35Net Loss


35Liquidity and Capital Resources


35Off-Balance Sheet Arrangements


36Item 7.


Financial Statements


36Item 8.


Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure


36Dismissal of Auditors


36Resignation of Auditors


37Item 8A.


Controls and Procedures


38Evaluation of Disclosure Controls and
    Procedures


38Management Report on Internal Control over
    Financial Reporting


38Changes in Internal Controls over Financial
    Reporting


38Item 8B.


Other Information


38PART IIIItem 9.


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


39Code of Ethics


39Item 10.


Executive Compensation


39Item 11.


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


39Item 12.


Certain Relationships and Related
    Transactions, and Director Independence


40Item 13.


Exhibits


40Item 14.


Principal Accountant Fees and
    Services


45Signatures


46Certificate of Amendment to Certificate of IncorporationCommon Stock Purchase Warrant in Favor of Azimuth CorporationCommon Stock Purchase Warrant in Favor of Cadmus CorporationForm of Common Stock Purchase Warrant Issued in 2006 and 2007 to VendorsRegistration Rights AgreementForm of WarrantCommon Stock Purchase Warrant Issued to Augusto OcanaCommon Stock Purchase Warrant Issued to Robert McCullough Jr.Form of Common Stock Purchase Warrants Issued to Richard A. DomanikForm of Common Stock Purchase Warrants Issued to Non-Executive EmployeesDistribution Agreement with M.O.S.S. S.r.L.Distribution Agreement with MUNDITER - Intercambio Mundial de Comercio, S. A.Distribution Agreement with Palex Medical S.A.Distribution Agreement with CoMedical, Inc.Distribution Agreement with HT Hospital Technologies GmbHExclusive License Agreement with University Hospitals of ClevelandAmendment to Employment Agreement with Augusto OcanaSecond Amendment to Employment Agreement with Augusto OcanaForm of Subscription Agreement and Letter of Investment IntentPurchase AgreementSubsidiariesConsent of L. J. Soldinger AssociatesConsent of Amper, Politziner & Mattia, P.C.Certification of the CEO and CFO Pursuant to Section 302Certification of the CEO and CFO Pursuant to Section 906    Index to Financial StatementsReports of Independent Registered Public
    Accounting Firms


F-1 - F-2Consolidated Balance Sheets at December 31,
    2007 and 2006


F-3Consolidated Statements of Operations for each of
    the two years ended December 31, 2007 and 2006


F-4Consolidated Statements of Cash Flows for each of
    the two years ended December 31, 2007 and 2006


F-5Consolidated Statements of Stockholders
    Deficit for each of the two years ended December 31, 2007
    and 2006


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


F-8




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##### Table of Contents



PART I  Item 1.
    Description
    of Business Overview  SoftPAPtm CytoCore
    Solutionstm
  SoftPAPtm CytoCore
    Solutionstm tm CytoCore
    Solutionstm
     Recent
    Developments  SoftPAPtm
  SoftPAPtm
  SoftPAPtm
  SoftPAPtm
 1




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SoftPAPtm
   Information
    About Industry Segments   Description
    of Business  SoftPAPtm CytoCore
    Solutionstm CytoCore
    Solutionstm
  Cocktail-CVXtm Cocktail-GCI tm
   Products The
    CytoCore
    SolutionstmSystem  CytoCore
    Solutionstm
  CytoCore
    Solutionstm
 2




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CytoCore
    Solutionstm
  
    The
    SoftPAPtm
    cervical cell collection device: The
    SoftPAPtm
    collector is a sample collection device approved by the FDA for
    sale and consists of a small disposable balloon that is shaped
    to fit the cervix. The device is intended to replace the spatula
    and brush currently used to collect patient cytology samples.
    Biochemical assays and slide-based tests: CytoCores
    Cocktail-CVXtm
    and
    Cocktail-GCItm
    are biochemical assays used to identify suspicious and abnormal
    cells. In the laboratory version of the system, these
    biochemical assays are applied to sample cells released from a
    collection device into a liquid preservative and deposited on a
    glass slide. The Company is currently working on two slide-based
    tests, one to screen women for endometrial cancer and another to
    screen for cervical cancer.
    The Automated Imaging Proteomic System or AIPS
    Workstation: The
    AIPStm
    instrument, a highly-integrated and fully-automated microscopy
    platform, performs an automated analysis of the sample collected
    by the collection device and deposited on the glass slide. The
    analysis is performed by means of an optical scan that detects
    spectral tags that are attached to certain components used in
    the
    Cocktail-CVXtm
    and
    Cocktail-GCItm
    biochemical assays. Custom-designed image analysis software then
    analyzes the captured images to determine whether abnormal cells
    are present on the specimen slide.
    Drug delivery system: The Companys drug delivery
    system is comprised of an applicator handle and drug-delivery
    modality in the form of a patch that provides a timed release of
    a therapeutic agent directly to the surface of the cervix,
    designed initially to treat cervical lesions.  CytoCore
    Solutionstm
 The
    SoftPAPtmCervical Cell Collector  SoftPAPtm
      and/or
 3




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SoftPAPtm
  SoftPAPtm SoftPAPtm
  SoftPAPtm
 Biochemical
    Assays and Slide-Based Tests    Cocktail-GCItm Cocktail-CVXtm
 4




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Cocktail-GCItm Cocktail-GCItm Cocktail-GCItm
    Cocktail-CVXtm Cocktail-GCItm CytoCore
    Solutionstm Cocktail-GCItm
  Cocktail-CVXtm Cocktail-CVXtm tm
 Automated
    Imaging Proteomic System or
    AIPStm     5




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Drug
    Delivery System        SoftPAPtm
  SoftPAPtm Cocktail-CVXtm Cocktail-GCItm
  AcCelltm
   6




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Product
    Development  CytoCore
    Solutionstm
    
    Assisting the expansion of the companys product offerings
    to include not only screening products but diagnostic products;
    Positioning CCI to develop commercial products based on the new
    P2XY apoptosis biomarker;
    Granting CCI rights to commercialize the drug delivery system to
    apply FDA-approved drugs to cervical lesions; and
    Leveraging CCI technology previously developed for the
    SoftPAPtm
    collector handle for use in other applications.   Markets
    and Marketing Objectives  Diagnostic
    Focus
  SoftPAPtm CytoCore
    Solutionstm
 7




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Point of
    Care for All Populations
      
    Increasing life spans, driving the demand for healthcare
    services up and increasing the emphasis on developing screening
    tests for the early detection of diseases;
    Limited infrastructure and the fact that a significant portion
    of the world population lives in locations where the
    infrastructure does not support the classical laboratory-based
    model of healthcare delivery, putting a premium on point of care
    diagnostic testing;
    An increasingly mobile population, which has increased the
    pressure to minimize the time between when a patient is tested
    and when the test result is available and delivered;
    Increasing worldwide shortage of physicians and laboratory
    professionals who have the skills and training needed to perform
    and interpret screening and diagnostic tests, increasing the
    need for tests that can be performed and interpreted by
    technicians and para-professionals; and
    Constrained funds available for healthcare, driving the need to
    reduce healthcare costs.    Sizes of Target Markets

US


Rest of World


TotalSoftPAPtm
Cervical Collector

$
300M


$
600M


$
900MAutomated Imaging Proteomic SystemEndometrial Cancer Scan

$
1.5B


$
3B


$
4.5BCervical Cancer Scan

$
900M


$
1.8B


$
2.7BDrug Delivery System

$
100M


$
250M


$
350MCytoCore
Solutionstm
System

$
2.80B


$
5.65B


$
8.45B  8




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Sales
    and Distribution  SoftPAPtm SoftPAPtm 12-month 12-month SoftPAPtm
   Government
    Regulation, Clinical Studies and Regulatory
    Strategy    and/or
  SoftPAPtm 2 SoftPAPtm
   9




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and/or
  CytoCore
    Solutionstm
    CytoCore
    Solutionstm
 10




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follow-up SoftPAPtm SoftPAPtm
    CytoCore
    Solutionstm 2 SoftPAPtm 2 SoftPAPtm Cocktail-CVXtm Cocktail-GCItm SoftPAPtm
  CytoCore
    Solutionstm CytoCore
    Solutionstm
  CytoCore
    Solutionstm Cocktail-CVXtm Cocktail-GCItm CytoCore
    Solutionstm CytoCore
    Solutionstm
  CytoCore
    Solutionstm
 11




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CytoCore
    Solutionstm System Product Introduction Timelines
  Product

Process

TimelineSoftPAPtm

Clinical trials

CompletedInitial regulatory submission & review

September 2001Initial regulatory clearance

May 2002Follow-up clinical trials

Q2 2007 - Q2 2008Sales (European)

Q4 2007Follow-up regulatory clearance

February 2008Sales (United States)

Q2 2008Cocktail-CVXtmand
Cocktail-GCItm

Clinical trials(1)

2008Regulatory submission & review(1)

Q3 2009Regulatory clearance projected(1)

Q4 2009U.S. Sales(1)

Q4 2009International Sales(1)

Q3 2009Product development and clinical trials(2, 3)

Q2 2008 - Q4 2009AIPS

Product development and pre-production mfg(2)

Q3 - Q4 2008Sales(2)

Q3 2009Drug Delivery System

Instrument development

Q2 2008 - Q3 2009Patient trials

Q1 - Q3 2010Regulatory submission & review

Q1 2010Regulatory clearance projected(1)

Q1 2011Sales

Q2 2012     (1)
    
    All of the above target dates pertain to the EndoScan test for
    uterine/ endometrial cancer.(2)
    
    Sales would pertain to the EndoScan cell based test for
    endometrial cancer in 2009 and 2010. Base product development
    and pre-production manufacturing would apply to all cancer
    recognition imaging software. Trials for bladder and cervical
    cancer would occur in 2009 and 2010 with expected FDA approval
    in late
    2010-2011
    time frame.(3)
    
    If trial and development expenses are not funded through
    SoftPAPtm
    and EndoScan sales, additional capital will be required. Cost
    and Reimbursement  CytoCore
    Solutionstm
   12




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and/or and/or
  CytoCore
    Solutionstm and/or
 Competition             13




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Operations  CytoCore
    Solutionstm
  CytoCore
    Solutionstm SoftPAPtm
  SoftPAPtm
 Intellectual
    Property    12-month continuation-in-part
   14




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CytoCore
    Solutionstm
      SoftPAPtm CytoCore
    Solutionstm Cocktail-CVXtm
     Research
    and Development Expenditures   15




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CytoCore
    Solutionstm
 Components
    and Raw Materials  SoftPAPtm SoftPAPtm
  CytoCore
    Solutionstm CytoCore
    Solutionstm
   Working
    Capital Practices  CytoCore
    Solutionstm CytoCore
    Solutionstm
  CytoCore
    Solutionstm
 Employees   16




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Financial
    Information About Foreign and Domestic Operations and Export
    Sales  CytoCore
    Solutionstm CytoCore
    Solutionstm
   Risk
    Factors    Risks
    Related to Our Business
  We
    have a history of operating losses and there are doubts as to
    our ability to continue as a going concern.
  CytoCore Solutions
  SoftPAP CytoCore Solutions
   17




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We
    have limited financial resources and we are not certain we will
    be able to obtain additional financing to maintain operations
    and fund the development of future products.
    We
    currently depend on the sale of a single product and product
    line.
  CytoCore
    Solutions SoftPAPtm CytoCore Solutions
  Our
    future success will depend on our ability to develop new
    products and respond to technological changes in the markets in
    which we compete.
  CytoCore Solutions
   18




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Our
    products are subject to government regulation and they may not
    receive necessary government approvals.
      SoftPAPtm follow-up SoftPAPtm
    and/or
    Changes
    in third-party reimbursement may negatively affect
    us.
  SoftPAPtm CytoCore Solutions
 19




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Our
    international operations expose us to additional
    risks.
    
    imposition of tariffs or embargoes,
    trade barriers and disputes,
    regulations related to customs and export/import matters,
    fluctuations in foreign economies and currency exchange rates,
    longer payment cycles and difficulties in collecting accounts
    receivable,
    the complexity and necessity of using foreign representatives
    and consultants,
    tax uncertainties and unanticipated tax costs due to foreign
    taxing regimes,
    the difficulty of managing and operating an enterprise spanning
    several countries, including difficulties in maintaining
    effective communications with employees and customers due to
    distance, language and cultural barriers,
    the uncertainty of protection for intellectual property rights
    and differing legal systems generally,
    compliance with a variety of laws, and
    economic and geopolitical developments and conditions, including
    international hostilities, armed conflicts, acts of terrorism
    and governmental reactions, inflation, trade relationships and
    military and political alliances.  We may
    not be able to compete with companies that are larger and have
    more resources.
    and/or
 20




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We may
    not be able to market our products.
  SoftPAPtm CytoCore Solutions
  The
    accuracy, performance and cost of our products are critical to
    our business and reputation, and we are subject to product
    liability.
  SoftPAPtm CytoCore Solutions and/or
      We may
    not be able to adequately protect our intellectual
    property.
       21




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We may
    not be able to maintain effective product distribution
    channels.
  SoftPAPtm
  Our
    quarterly operating results may fluctuate and our future
    revenues and profitability are uncertain.
    
    introduction and market acceptance of new products and product
    enhancements by both CytoCore and our competitors,
    timing and execution of distribution and sale contracts,
    competitive conditions in the medical device and diagnostic
    markets,
    product development, sales and marketing expenses,
    third-party reimbursement levels, and
    changes in general economic conditions.  The
    loss of existing key management and technical personnel or the
    inability to attract new hires could have a detrimental effect
    on the Company.
   22




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We may
    need to expand our operations and we may not effectively manage
    any future growth.
    Risks
    Related to Our Common Stock
  There
    is a limited market for penny stocks such as our
    common stock.
    The
    historically volatile market price of our common stock may
    affect the value of our stockholders
    investments.
    
    announcements of new products or technology by us or our
    competitors
    announcements of the FDA relating to products and product
    approvals;
    announcements of private or public sales of securities;
    ability to finance our operations;
    announcements of mergers, acquisitions, licenses and strategic
    agreements;
    fluctuations in operating results; and
    general economic and other external market factors.   23




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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.
          Investors
    may find it difficult to trade or obtain quotations for our
    common stock.
    Our
    authorized share capital may be used as an anti-takeover
    device.
   24




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The
    implementation of SFAS No. 123R has reduced and may
    continue to reduce our reported earnings, which could result in
    a decline in our stock price.
    Item 2.
    Description
    of Property    Item 3.
    Legal
    Proceedings  Settled
    in 2007
  Peter Gombrich.
  The Regents of the University of
    California.
 25




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Pending
    as of December 31, 2007
  Attorney General of Illinois. No. 2006-L-003353)
  NeoMed Innovation III L.P.
  Diamics, Inc.
  Other
    claims
  Other Creditors.
    Item 4.
    Submission
    of Matters to a Vote of Security Holders      FOR

AGAINST


ABSTAIN245,432,298


6,049,542



842,497   1-for-10
 26




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##### Table of Contents



PART II  Item 5.
    Market
    for Common Equity and Related Stockholder Matters and Small
    Business Issuer Purchases of Equity Securities Market
    Information  mark-ups,
  Range of Common StockHigh


LowYear Ended December 31, 20071st Quarter

$
3.00


$
7.502nd Quarter

$
3.30


$
6.003rd Quarter

$
2.20


$
4.104th Quarter

$
1.65


$
4.10Year Ended December 31, 20061st Quarter

$
1.50


$
0.502nd Quarter

$
2.50


$
1.103rd Quarter

$
2.30


$
1.504th Quarter

$
4.40


$
1.70  Holders   Dividends     Stock
    Transfer Agent  (312) 904-2000.
 27




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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)
     2,000,000 shares


160,786


$
3.05



1,675,2801999 Employee Stock Purchase Plan 
    20,000 shares










16,042Equity Compensation Plans Not Approved by Security
    HoldersWarrants issued with debt and equity(1)


1,590,422


$
1.54



Warrants issued for financial and IR services(2)


96,581


$
1.82



Warrants issued for officer, director and employee
    compensation(3)


1,181,000


$
1.82



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


359,020


$
1.88



Warrants from AccuMed acquisition(5)


3,983


$
150.60



Total


3,391,792


$
1.93



1,691,322     1)
    
    CCI has issued warrants in conjunction with the issuance of debt
    and equity. The issuance of warrants significantly reduces the
    cash costs that would otherwise be associated with raising
    capital.2)
    
    CCI has included warrants in 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)
    
    CCI has issued warrants in lieu of cash payment for employment
    services, for achieving certain goals or for other corporate
    reasons. During fiscal year 2007, 25,000 warrants were issued to
    our current CEO Robert McCullough Jr. and 50,000 warrants to our
    President-International Operations, Augusto Ocana M.D. In
    addition, Richard Domanik Ph.D., our President, was issued
    35,000 warrants, and our-non executive employees were issued
    96,000 warrants in the aggregate.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 is included
    in total options outstanding under the Companys 1999
    Equity Incentive Plan. 28




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Recent
    Sales of Unregistered Securities; Use of Proceeds from
    Registered Securities Issuance
    of Securities  Common Stock.  During fiscal 2007 and 2006, CCI
    offered common stock to foreign and accredited investors in
    exchange for cash.
                  Warrants.
       29




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30




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Bridge
    and other Note Conversions        Preferred Stock.
      and/or and/or
 Purchases
    of Equity Securities by the Small Business Issuer and Affiliated
    Purchasers   31




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Item 6.
    Managements
    Discussion and Analysis or Plan of Operation Forward-Looking
    Statements       Overview  SoftPAPtm CytoCore
    Solutionstm CytoCore
    Solutionstm
   32




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Cocktail-CVX tm Cocktail-GCI tm
    SoftPAP tm CytoCore Solutions
  follow-up
     Critical
    Accounting Policies and Significant Judgments and
    Estimates      Revenue Recognition.
 33




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Share-Based Payment.
 Results
    of Operations  Fiscal
    Year Ended December 31, 2007 as compared to Fiscal Year
    Ended December 31, 2006
 Revenue  SoftPAPtm
 Costs
    and Expenses Cost of
    Revenues     Research
    and Development  CytoCore
    Solutionstm
  SoftPAPtm
 Selling,
    General and Administrative   34




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SoftPAPtm
 Other
    Income and Expense Interest
    Income   Interest
    Expense   Restructuring
    Settlements   Net
    Loss   Liquidity
    and Capital Resources    CytoCore Solutions
 35




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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 Dismissal
    of Auditors      Regulation S-B
   36




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Regulation S-B.
  Resignation
    of Auditors
      Regulation S-B.
   37




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Regulation S-B.
  Item 8A.
    Controls
    and Procedures Evaluation
    of Disclosure Controls and Procedures   Managements
    Report on Internal Control Over Financial
    Reporting       Changes
    in Internal Control over Financial Reporting    Item 8B.
    Other
    Information  SoftPAP tm
  12-month 12-month
 38




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PART III  Item 9.
    Directors,
    Executive Officers, Promoters, Control Persons and Corporate
    Governance; Compliance with Section 16(a) of the Exchange
    Act   Code of
    Ethics  Code of Ethics and Business
    Conduct for Officers, Directors and Employees Form 10-KSB
  Item 10.
    Executive
    Compensation    Item 11.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Form 10-KSB
 39




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Item 12.
    Certain
    Relationships, Related Transactions and 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-4).)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-4.)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.)3
.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 Quarterly
    Report on
    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 Quarterly Report on
    Form 10-QSB
    for the quarter ended June 30, 2006, as filed on
    August 21, 2006) 40




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##### Table of Contents



Exhibit No.

Description3
.13

Certificate of Amendment to Certificate of Incorporation of the
    Company, as filed with the Delaware Secretary of State on
    June 22, 2007. (Incorporated herein by reference to
    Exhibit 3.1 to the Companys Quarterly Report on
    Form 10-QSB
    for the quarter ended June 30, 2007, as filed on
    August 17, 2007.)3
.14*

Certificate of Amendment to Certificate of Incorporation of the
    Company, as filed with the Delaware Secretary of State on
    November 19, 2007.4
.1

Common Stock Purchase Warrant issued to Holleb & Coff
    on July 14, 1999 representing the right to purchase
    25,000 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.)4
.2

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 Amendment No. 1 to
    the February 2002
    S-2 as filed
    on June 21, 2002.)4
.3

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
.4

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
.5

Form of Warrant issued in connection with Bridge III
    Offering. (Incorporated herein by reference to
    Exhibit 10.51 to the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2003, as filed on
    April 14, 2004 (the 2003
    10-KSB).)4
.6

Common Stock Purchase Warrant issued to Suzanne M. Gombrich on
    April 2, 2003 representing the right to purchase
    100,000 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.)4
.7

Common Stock Purchase Warrant issued to Don Hancock on
    June 4, 2004 representing the right to purchase
    25,000 shares of common stock of the Company. (Incorporated
    herein by reference to Exhibit 4.3 to the 2004 2Q
    10-QSB.4
.8

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
.9

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 48,398 shares of common stock of the Company.
    (Incorporated herein by reference to Exhibit 4.5 to the
    2004 2Q
    10-QSB.)4
.10

Common Stock Purchase Warrant issued to Ken Sgro on
    September 15, 2004 representing the right to purchase
    19,200 shares of common stock of the Company. (Incorporated
    herein by reference to Exhibit 4.2 to the Companys
    Quarterly Report on
    Form 10-QSB
    for the quarter ended September 30, 2004, as filed on
    November 15, 2004 (the 2004 3Q
    10-QSB).)4
.11

Common Stock Purchase Warrant issued to Jorge Leon, Ph.D.,
    on September 15, 2004 representing the right to purchase
    2,500 shares of common stock of the Company. (Incorporated
    herein by reference to Exhibit 4.4 to the 2004 3Q
    10-QSB.)4
.12

Common Stock Purchase Warrant issued to Jan L. Dorfman on
    September 15, 2004 representing the right to purchase
    2,000 shares of common stock of the Company. (Incorporated
    herein by reference to Exhibit 4.5 to the 2004 3Q
    10-QSB.)4
.13

Common Stock Purchase Warrant issued to Michael Pisani on
    February 15, 2005 representing the right to purchase
    20,000 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
.14

Form of subscription agreement to purchase common stock of the
    Company at $0.25 per share. (Incorporated herein by reference to
    Exhibit 4.38 to the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2005, as filed on
    April 17, 2006 (the 2005
    10-KSB).) 41




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##### Table of Contents



Exhibit No.

Description4
.15

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 $1.00 per share. (Incorporated herein by
    reference to Exhibit 4.39 to 2005
    10-KSB.)4
.16

Common Stock Purchase Warrant issued to Eric Gombrich on
    March 1, 2006 representing the right to purchase
    30,000 shares of common stock. (Incorporated herein by
    reference to Exhibit 4.41 to 2005
    10-KSB.)4
.17

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 $1.80 per share. (Incorporated herein by
    reference to Exhibit 4.42 to the Companys Annual
    Report on
    Form 10-KSB
    for the fiscal year ended December 31, 2006 as filed on
    April 17, 2007 (the 2006
    10-KSB).)4
.18

Form of subscription agreement used to purchase common stock of
    the Company during 2006. (Incorporated herein by reference to
    Exhibit 4.43 to the 2006
    10-KSB.)4
.19*

Common Stock Purchase Warrant dated December 8, 2006 in
    favor of Azimuth Corporation representing the right to purchase
    154,808 shares of common stock of the Company.4
.20*

Common Stock Purchase Warrant dated December 8, 2006 in
    favor of Cadmus Corporation representing the right to purchase
    195,192 shares of common stock of the Company.4
.21*

Form of common stock purchase warrant issued in 2006 and 2007 to
    vendors in consideration for services rendered.4
.22*

Registration Rights Agreement in connection with $7 million
    maximum offering of Units completed in March 2008.4
.23*

Form of Warrant in connection with $7 million maximum
    offering of Units completed in March 2008.10
.1+

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
.2+

1999 Employee Stock Purchase Plan. (Incorporated herein by
    reference to Appendix G to the 1999 Proxy Statement.)10
.3

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
.4

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
.5

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
.6

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
.7

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
.8

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 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).)10
.9

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
.10

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.) 42




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##### Table of Contents



Exhibit No.

Description10
.11

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
.12

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
.13

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
.14

Form of Subscription Agreement for Bridge IV Offering.
    (Incorporated herein by reference to Exhibit 4.3 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).)10
.15

Form of Note for Bridge IV Offering. (Incorporated herein
    by reference to Exhibit 4.4 to the 2004 1Q
    10-QSB.)10
.16

Form of General Security Agreement for Bridge IV Offering.
    (Incorporated herein by reference to Exhibit 4.5 to the
    2004 1Q
    10-QSB.)10
.17

Form of Registration Rights Agreement for Bridge IV
    Offering. (Incorporated herein by reference to Exhibit 4.6
    to the 2004 1Q
    10-QSB.)10
.18

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
.19

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 Quarterly Report on
    Form 10-QSB/A
    for the quarter ended September 30, 2004, as filed on
    November 17, 2004.)10
.20

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 Companys Annual
    Report on
    Form 10-KSB
    for the fiscal year ended December 31, 2004, as filed on
    April 14, 2005 (the 2004
    10-KSB).)10
.21

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-KSB.)10
.22

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-KSB.)10
.23

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-KSB.)10
.24

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-KSB.)10
.25

Strategic alliance agreement entered into by the Company in
    November 2004. (Incorporated herein by reference to
    Exhibit 10.33 to the 2004
    10-KSB.)10
.26

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 Companys Quarterly Report on
    Form 10-QSB
    for the quarter ended September 30, 2005, as filed on
    November 21, 2005 (the 2005 3Q
    10-QSB).)10
.27

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.) 43




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##### Table of Contents



Exhibit No.

Description10
.28

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
.29

Clinical Study Agreement, entered into January 2006, between
    University Hospitals of Cleveland and the Company. (Incorporated
    herein by reference to Exhibit 10.36 to 2005
    10-KSB.)10
.30

Separation Agreement, entered into December 31, 2005,
    between Denis M. ODonnell, M.D. and the Company.
    (Incorporated herein by reference to Exhibit 10.37 to 2005
    10-KSB.)10
.31

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 Companys Quarterly Report on
    Form 10-QSB
    for the quarter ended September 30, 2006, as filed on
    November 20, 2006 (the 2006 3Q
    10-QSB/A).)10
.32+

Employment agreement dated November 15, 2006 between
    Augusto Ocana and the Company. (Incorporated herein by reference
    to Exhibit 10.39 to the 2006
    10-KSB.)10
.33+

Employment agreement dated November 20, 2006 between Robert
    McCullough and the Company. (Incorporated herein by reference to
    Exhibit 10.40 to the 2006
    10-KSB.)10
.34

Consulting agreement dated November 20, 2006 between Future
    Wave Management and the Company. (Incorporated herein by
    reference to Exhibit 10.41 to the 2006
    10-KSB.)10
.35

Consulting agreement dated November 20, 2006 between EBM,
    Inc. and the Company. (Incorporated herein by reference to
    Exhibit 10.42 to the 2006
    10-KSB.)10
.36

Common Stock Purchase Warrant dated September 28, 2006
    issued to David Weissberg representing the right to purchase
    400,000 shares of common stock. (Incorporated herein by
    reference to Exhibit 10.2 to the 2006 3Q
    10-QSB/A.)10
.37+

Common Stock Purchase Warrant dated September 28, 2006
    issued to Robert McCullough Jr. representing the right to
    purchase 400,000 shares of common stock. (Incorporated
    herein by reference to Exhibit 10.45 to the 2006
    10-KSB.)10
.38+

Common Stock Purchase Warrant dated September 28, 2006
    issued to Alexander Milley representing the right to purchase
    62,500 shares of common stock. (Incorporated herein by
    reference to Exhibit 10.46 to the 2006
    10-KSB.)10
.39+

Common Stock Purchase Warrant dated September 28, 2006
    issued to John Abeles representing the right to purchase
    62,500 shares of common stock. (Incorporated herein by
    reference to Exhibit 10.47 to the 2006 3Q
    10-QSB/A.)10
.40*+

Common Stock Purchase Warrant dated January 22, 2007 issued
    to Augusto Ocana representing the right to purchase
    50,000 shares of common stock.10
.41*+

Common Stock Purchase Warrant dated February 12, 2007
    issued to Robert McCullough Jr. representing the right to
    purchase 25,000 shares of common stock.10
.42*+

Form of common stock purchase warrants issued to Richard A.
    Domanik on each of June 29, 2007, December 18, 2007
    representing the right to purchase an aggregate
    35,000 shares of common stock.10
.43*

Form of common stock purchase warrants issued to non-executive
    employees of the Company during the 2007 fiscal year
    representing the right to purchase an aggregate
    96,000 shares of common stock.10
.44

Form of warrant amendment (Incorporated by reference to
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-QSB
    for the quarter ended March 31, 207, as filed on
    May 15, 2007).10
.45*

Distribution Agreement with M.O.S.S. S.r.L.10
.46*

Distribution Agreement with MUNDITER  Intercambio
    Mundial de Comercio, S.A.10
.47*

Distribution Agreement with Palex Medical S.A.10
.48*

Distribution Agreement with CoMedical, Inc. dated
    February 16, 2008 and executed March 18, 2008.10
.49*

Distribution Agreement with HT Hospital Technologies GmbH.10
.50*

Exclusive License Agreement with University Hospitals of
    Cleveland.10
.51

Exclusive License Agreement, made as of January 27, 2006,
    by and between University Hospitals of Cleveland and the Company. 44




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##### Table of Contents



Exhibit No.

Description10
.52*+

Amendment to Employment Agreement dated as of December 15,
    2006 by and between the Company and Augusto Ocana dated as of
    July 15, 200710
.53*+

Second Amendment to Employment Agreement dated as of
    December 15, 2006 by and between the Company and Augusto
    Ocana10
.54*

Form of Subscription Agreement and Letter of Investment Intent
    in connection with $7 million maximum offering of Units
    completed in March 200810
.55*

Purchase Agreement in connection with $7 million maximum
    offering of Units completed in March 200814


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 L. J. Soldinger Associates23
.2*

Consent of Amper, Politziner & Mattia, P.C.31
.1*

Certification of the Chief Executive Officer and 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 and 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   45




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##### Table of Contents



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

Title

Date/s/  Daniel
    BurnsDaniel
    Burns

Chairman of the Board of Directors

March 31, 2008/s/  Robert
    McCullough, Jr.Robert
    McCullough, Jr

Chief Executive Officer and Chief Financial Officer (Principal
    Accounting Officer and Director)

March 31, 2008/s/  Alexander
    M. MilleyAlexander
    M. Milley

Director

March 31, 2008/s/  John
    AbelesJohn
    Abeles

Director

March 31, 2008/s/  Clint
    SeversonClint
    Severson

Director

March 31, 2008Floyd
    E. Taub M.D

Director  46




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##### 



ITEM 7.  FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA
  CYTOCORE
    INC.
    AND SUBSIDIARIES
  Consolidated Financial Statements
 December 31, 2007 and 2006
  
  Table of
    Contents
  Report of Independent Registered Public Accounting Firms


F-1Consolidated Balance Sheets


F-3Consolidated Statements of Operations


F-4Consolidated Statements of Cash Flows


F-5Consolidated Statements of Stockholders Equity (Deficit)
    and Comprehensive Loss


F-6Notes to Consolidated Financial Statements


F-8   47




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm                 
    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 31,2007


2006(Dollars in thousands, except per share amounts)ASSETSCurrent Assets:Cash and cash equivalents

$
316


$
874Accounts receivables


15



24Inventories


14



Prepaid expenses and other current assets


216



122Total current assets


561



1,020Fixed assets, net


532



242Licenses, patents, and technology, net of amortization


20



20Total assets

$
1,113


$
1,282LIABILITIES AND STOCKHOLDERS DEFICITCurrent Liabilities:Accounts payable

$
1,778


$
1,434Accrued payroll costs


589



421Accrued expenses


1,912



1,825Deferred revenue






25Notes payable


70



425Total current liabilities


4,349



4,130Long-term liabilitiesConvertible securities






567Stockholders Deficit:Preferred stock; $0.001 par value; shares authorized
    10,000,000; 403,272 and 574,642 shares issued and
    outstanding at December 31, 2007 and 2006, respectively
    (Liquidation value of all classes of preferred stock of $3,012
    at December 31, 2007)


1,628



2,920Common stock, $0.001 par value; 500,000,000 and
    375,000,000 shares authorized; 35,866,156 and
    31,242,958 shares issued and 35,846,947 and
    31,223,749 shares outstanding at December 31, 2007 and
    2006, respectively(1)


36



31Additional paid-in capital


80,917



71,206Treasury stock at cost; 19,209 shares at December 31,
    2007 and 2006


(327
)


(327
)Accumulated deficit


(85,413
)


(77,170
)Accumulated comprehensive loss  Cumulative
    translation adjustment


(77
)


(75
)Total stockholders deficit


(3,236
)


(3,415
)Total liabilities and stockholders deficit

$
1,113


$
1,282     (1)
    
    Reflects the one-for-ten reverse stock split effected on
    November 27, 2007. All periods have been restated to
    reflect the reverse stock split.   F-3




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##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2007


2006(Dollars in thousands,except per share amounts)Net Sales

$
83


$
94Operating 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)


30



19Research and development (net of settlement of trade debt of
    $207 and $342 for the years ended December 31, 2007 and
    2006, respectively)


2,599



854Selling, general and administrative (net of settlement of trade
    debt of $56 and $994 for the years ended December 31, 2007
    and 2006, respectively)


5,060



3,967Selling, general and administrative  related parties


239



Total costs and expenses


7,928



4,840Operating loss


(7,845
)


(4,746
)Other income (expense):Interest expense  related party


(93
)


(14
)Interest expense (net of settlement of interest of $85 and $70
    for the years ended December 31, 2007 and 2006,
    respectively)


(9
)


(1,818
)Unrealized gain on convertible securities


7



Interest income


21



12Total other income (expense)


(74
)


(1,820
)Loss from operations before income taxes


(7,919
)


(6,566
)Income taxes






Net loss


(7,919
)


(6,566
)Preferred stock dividends


(324
)


(693
)Net loss applicable to common stockholders

$
(8,243
)

$
(7,259
)Basic and fully diluted net loss per common share(1)

$
(.24
)

$
(.30
)Weighted average number of common shares outstanding(1)


34,259,161



24,143,146     (1)
    
    Reflects the one-for-ten reverse stock split effected on
    November 27, 2007. All periods have been restated to
    reflect the reverse stock split.   F-4




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2007


2006(Dollars in thousands)Operating Activities:Net loss

$
(7,919
)

$
(6,566
)Amortization of debt discount






173Depreciation


34



41Non-cash interest related to warrant modification


182



100Impairment charge of property asset






169Non-cash interest on beneficial note conversion settled in stock






1,321Stock and warrants issued for settlement of debt






210Stock and warrants issued to non-employees for services


530



832Non-cash compensation expense


549



1,270Gain on settlements of trade indebtedness


(349
)


(1,581
)Unrealized gain on convertible securities


(7
)


Changes in assets and liabilities:Accounts receivable


10



14Inventories


(14
)


26Prepaid expenses and other current assets


(94
)


(50
)Accounts payable


605



(745
)Deferred Revenue


(25
)


Lease obligation






(14
)Accrued expenses


807



(452
)Net cash used for operating activities


(5,691
)


(5,252
)Investing activities:Capital purchases


(324
)


(219
)Net cash used for investing activities


(324
)


(219
)Financing activities:Proceeds from issuance of common stock


3,760



7,362Financing costs in connection with private placement of stock


(249
)


(79
)Payments of notes payable


(355
)


(1,185
)Proceeds from exercise of warrants and options


2,301



247Net cash provided by financing activities


5,457



6,345Net (decrease) increase in cash and cash equivalents


(558
)


874Cash and cash equivalents at beginning of year


874



Cash and cash equivalents at end of year

$
316


$
874Supplemental disclosure of cash flow information:Cash paid during the year for:Interest

$
23


$
319Non-cash transaction during the year for:Preferred stock and cumulative dividends converted into common
    stock

$
1,616


$
5,489Convertible promissory notes and accrued interest converted into
    common stock

$



$
2,370Convertible securities related to shares issued in excess of
    amount authorized

$
567


$
Settlement of trade debt with stock

$
467


$
321    F-5




---



##### 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(1)


Treasury Stock(1)


Paid-In


Accumulated


Comprehensive


StockholdersShares


Amount


Shares


Amount


Shares


Amount


Capital(1)


Deficit


Loss


Deficit(Dollars in thousands)January 1, 2006


1,102,192


$
7,716



15,466,508


$
16



19,209


$
(327
)

$
52,525


$
(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
)


85,104















608



(51
)






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


(207,500
)


(264
)


151,759















365



(101
)






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


(180,680
)


(3,975
)


720,996



1











4,515



(541
)






Bridge I conversions










428,194















642











642Bridge II conversions










169,306















253











253Bridge III conversions










336,270















336











336Related party notes converted










90,019















120











120Monsun note conversion










762,433



1











2,339











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










8,006,429



8











7,275











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










3,821,050



4











(4
)










Exercise of warrants










202,308















247











247Common stock issued for services










680,903



1











518











519Common stock issued in settlement of debt










292,827















321











321Common stock issued for compensation










28,852















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



31,242,958


$
31



19,209


$
(327
)

$
71,206


$
(77,170
)

$
(75
)

$
(3,415
)     1)
    
    Reflects the one-for-ten reverse stock split effected on
    November 27, 2007. All periods have been restated to
    reflect the reverse stock split.   F-6




---



##### 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(1)


Treasury Stock(1)


Paid-In


Accumulated


Comprehensive


StockholdersShares


Amount


Shares


Amount


Shares


Amount


Capital(1)


Deficit


Loss


Deficit(Dollars in thousands)January 1, 2007


574,642


$
2,920



31,242,958


$
31



19,209


$
(327
)

$
71,206


$
(77,170
)

$
(75
)

$
(3,415
)Comprehensive Loss:Net loss






























(7,919
)






(7,919
)Foreign currency translation


































(2
)


(2
)Total net comprehensive loss






































(7,921
)Series A preferred stock converted to common stock


(35,405
)


(159
)


1,546















159











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


(103,250
)


(413
)


65,548















513



(100
)






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


(32,715
)


(720
)


135,050















944



(224
)






Sale of common stock, net of financing costs of $249,366










1,741,389



2











3,509











3,511Exercise of warrants










2,397,492



3











2,221











2,224Exercise of options










38,333















77











77Common stock issued for services










57,180















158











158Common stock issued in settlement of debt










186,660















467











467Warrant conversion exercise price modification


























182











182Convertible securities in excess of authorized


























560











560Warrants issued for compensation


























549











549Warrants issued for services


























372











372December 31, 2007


403,272


$
1,628



35,866,156


$
36



19,209


$
(327
)

$
80,917


$
(85,413
)

$
(77
)

$
(3,236
)     1)
    
    Reflects the one-for-ten reverse stock split effected on
    November 27, 2007. All periods have been restated to
    reflect the reverse stock split.   F-7




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
 NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007 and
    2006(Tabular data in thousands, except per share
    amounts) Note 1.
    The
    Company and Basis of Presentation      SoftPAPtm CytoCore
    Solutionstm CytoCore
    Solutionstm tm CytoCore
    Solutionstm CytoCore
    Solutionstm
  CytoCore
    Solutionstm tm
  Liquidity
     F-8




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  Increase
    in authorized shares
    Reverse
    Stock Split
    Note 2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
    Use of
    Estimates
    Revenue
    Recognition
    Cash
    and Cash Equivalents
    Inventory
  SoftPAPtm
 F-9




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  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
    Impairment
    or Disposal of Long-Lived Assets
    Research
    and Development Costs
    Stock
    Based Compensation
    Foreign
    Currency Translation
   F-10




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  Fair
    Value of Financial Instruments
    Other
    Comprehensive Income (Loss)
    Net
    Loss Per Share
    Income
    Taxes
      Risks
    from Concentrations
      Recent
    Accounting Pronouncements
   F-11




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
        Note 3.
    Fixed
    Assets    2007


2006Furniture and fixtures

$
124


$
124Laboratory equipment


622



595Computer and communications equipment


343



331Design and tooling


486



201Leasehold improvements


28



281,603



1,279Less accumulated depreciation and amortization


(1,071
)


(1,037
)Total

$
532


$
242    F-12




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  Note 4.
    Licenses,
    Patents, and Technology    2007


2006Licenses

$
20


$
20Patent costs


133



133LabCorp Technology Agreement


260



260Subtotal


413



413Less accumulated amortization


(393
)


(393
)Total

$
20


$
20     Note 5.
    Accrued
    Expenses    2007


2006Accrued interest

$
350


$
478Accrued settlement costs






438Accrued taxes (see Note 10)


707



589Accrued compensation


637



180Other accrued expenses


218



140Total

$
1,912


$
1,825  F-13




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  Note 6.
    Notes
    Payable    2007


2006Bridge II Convertible Promissory Notes; due July 31,
    2004; interest rate 12% or 15% per annum; convertible into
    common stock at $1.00 or $1.50 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
    $1.50 or $2.00 per share

$



$
50MonoGen, 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






305Xillix Technologies Corporation, $361,000 Promissory Note issued
    June 26, 1998; interest rate Canadian Prime plus 6% per
    annum; represents a debt of AccuMed due December 27, 1999


34



34Robert 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$
70


$
425   Bridge I.
  Bridge II.
   F-14




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
          Bathgate Capital Partners, LLC  Bridge
    III.
      Monsun.
     F-15




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
        MonoGen, Inc.
  Ungaretti & Harris LLP.
  Ernst & Young LLP.
  Western Economic Diversification.
    Defaults.
  Note 7.
    Stockholders
    Equity  Reverse
    Stock Split
  1-for-5 shares 1-for-10 shares. 1-for-10
 F-16




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
      Earnings
    (loss) per share
    For the Years EndedDecember 31,2007


2006Basic and Diluted:Net loss applicable to common stockholder (in thousands)

$
(8,243
)

$
(7,259
)Weighted average common shares outstanding


34,259,161



24,143,146Net loss per common share

$
(.24
)

$
(.30
)     Preferred
    Stock
    Shares Issued &


Shares Issued &Outstanding


OutstandingOffering

Shares Authorized


2007


2006Series A convertible


590,197



47,250



82,655Series B convertible, 10% cumulative


1,500,000



122,486



225,736Series C convertible, 10% cumulative


1,666,666



38,333



38,333Series D convertible, 10% cumulative


300,000



175,000



175,000Series E convertible, 10% cumulative


800,000



20,203



52,918Undesignated Preferred Series


5,143,137







Total Preferred Stock


10,000,000



403,272



574,642   Convertible
    Cumulative Preferred Stock Conversions:
   F-17




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
    Summary
    of Preferred Stock Terms
  Series A Convertible Preferred StockLiquidation Value:

$4.50 per shareConversion Price:

$103.034 per shareConversion Rate:

0.04367  Liquidation Value divided by Conversion
    Price ($4.50/$103.034)Voting Rights:

NoneDividends:

NoneConversion Period:

Any timeSeries B Convertible Preferred StockLiquidation Value:

$4.00 per shareConversion Price:

$10.00 per shareConversion Rate:

0.40  Liquidation Value divided by Conversion Price
    ($4.00/$10.00)Voting Rights:

NoneDividends:

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

Any timeCumulative dividends in arrears at December 31, 2007 were
    $336,161Series C Convertible Preferred StockLiquidation Value:

$3.00 per shareConversion Price:

$6.00 per shareConversion Rate:

0.50  Liquidation Value divided by Conversion Price
    ($3.00/$6.00)Voting Rights:

NoneDividends:

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

Any timeCumulative dividends in arrears at December 31, 2007 were
    $70,882Series D Convertible Preferred StockLiquidation Value:

$10.00 per shareConversion Price:

$10.00 per shareConversion Rate:

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

NoneDividends:

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

Any timeCumulative dividends in arrears at December 31, 2007 were
    $1,079,726 F-18




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  Series E Convertible Preferred StockLiquidation Value:

$22.00 per shareConversion Price:

$8.00 per shareConversion Rate:

2.75  Liquidation Value divided by Conversion Price
    ($22.00/$8.00)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, 2007 were
    $277,049   Issuance
    of Common Shares for Cash
  2007
          2006
     F-19




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
      Issuance
    of Common Stock for Services and as a Settlement of
    Debt
  2007
      2006
      Issuance
    of Common Stock as Payment for Employee
    Compensation
    Issuance
    of Warrants for Services and Settlement of Debt
  2007
   F-20




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  2006
          Issuance
    of warrants for debt
  120-day
   F-21




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  Issuance
    of Warrants as Payment for Employee Compensation
  2007
      2006
        Exchange
    of Certain Convertible Promissory Notes for Common
    Shares
     F-22




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  Application
    of Black-Scholes Valuation Model
    2007


2006Expected volatility


120
%  143%


84
%  206%Expected term (years)


11/2 
    2



3  5Risk-free interest rate


4.25
%


4.25
%  4.50%Expected dividend yield


0
%


0
%Forfeiture rate


0
%


0
%Resulting weighted average grant date fair value

$
2.80


$
1.20     Warrants
    Total Warrant


Warrant Shares


Exercise Price


Weighted AverageShares Outstanding


Exercisable


(Not Weighted)


Years Until Expiration480,304



480,304


$
1.00



0.96400,000



400,000


$
1.28



1.7512,500



12,500


$
1.30



1.705,000



5,000


$
1.33



3.00612,596



612,596


$
1.50



2.7429,498



29,498


$
1.60



1.5010,000



10,000


$
1.66



2.6242,500



42,500


$
1.70



1.45350,403



350,403


$
1.80



3.2519,000



19,000


$
1.89



2.9712,500



12,500


$
1.90



1.551,010,149



1,010,149


$
2.00



2.9675,000



75,000


$
2.60



2.1230,000



30,000


$
2.67



2.5030,000



30,000


$
2.80



2.5864,000



64,000


$
2.87



2.3025,000



25,000


$
3.30



1.5410,000



10,000


$
3.40



3.538,572



8,572


$
3.50



2.621,328



1,328


$
75.10



Perpetual1,328



1,328


$
150.50



Perpetual1,328



1,328


$
226.20



PerpetualTotal


3,231,006



3,231,006  F-23




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
    Convertible
    Securities
  EITF 00-19, EITF 00-19,
  Note 8.
    Equity
    Incentive Plan and Employee Stock Purchase Plan           F-24




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
            2007


2006Expected volatility


120
%  143%


84
%  206%Expected term (years)


11/2 
    2



3  5Risk-free interest rate


4.25
%


4.25  4.50
%Expected dividend yield


0
%


0
%Forfeiture rate


0
%


0
%Resulting weighted average grant date fair value

$
2.80


$
1.20    F-25




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
        1999
    Stock Option Plan
  Weighted





Weighted AverageAverage


Aggregate


RemainingExercise


Intrinsic


Contractual LifeOptions


Price


Value


(Years)Outstanding at December 31, 2005


400,398


$
4.412


$
0.00Granted


Exercised


Forfeited


(174,600
)

$
5.662Outstanding at December 31, 2006


225,798


$
2.767


$
433,500



1.68Granted


Exercised


(38,333
)

$
2.000Forfeited


(26,679
)

$
2.000Outstanding and exercisable atDecember 31, 2007


160,786


$
3.050


$
0.00



1.01   Warrants
    and options issued outside of the Plan for employee
    compensation
  Weighted





Weighted AverageAverage


Aggregate


RemainingOptions and


Exercise


Intrinsic


Contractual LifeWarrants


Price


Value


(Years)Outstanding at December 31, 2005


Granted


1,025,000


$
1.70Exercised


Forfeited


Outstanding at December 31, 2006


1,025,000


$
1.70


$
323,100Granted


206,000Exercised


(50,000
)

$
2.66Forfeited


Outstanding and exercisable atDecember 31, 2007


1,181,000


$
1.82


$
299,000



2.83    F-26




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
    Stock
    Appreciation Rights
    Note 9.
    Leases        OperatingYear

Leases2008

$
85   Note 10.
    Income
    Taxes   F-27




---



##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
    2007


2006Deferred tax assets related to:Net operating loss carryforwards

$
28,730


$
26,308Non-cash compensation


368



Writedown of intangibles


12



14Accrued liabilities


417



150Accrued expenses






13229,527



26,604Less valuation reserve


29,527



26,604Net deferred tax asset

$



$
             Income tax (benefit) at statutory rate

$
(2,693
)Other


(230
)Benefit not recognized due to valuation allowance


2,923Benefit for income taxes

$
   Note 11.
    Commitments
    and contingencies  Legal
    Proceedings
  Settled
    in 2007
  Peter Gombrich.
 F-28




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##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
    The Regents of the University of
    California.
  Pending
    as of December 31, 2007
  Attorney General of Illinois. No. 2006-L-003353)
  NeoMed Innovation III L.P.
  Diamics, Inc.
 F-29




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##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
  Other
    claims
  Other Creditors.
      Commitments
            Note 12.
    Related
    Party Transactions   F-30




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##### Table of Contents



CYTOCORE,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2007 and 2006 
    (Continued)
                Note 13.
    Subsequent
    Events   F-31