**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**











**FORM
      10-QSB**











**QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





**For
      the quarterly period ended March 31, 2006**





**Commission
      File Number: 000-23017**









**(Exact
      name of small business issuer as specified in its charter)**











**MINNESOTA**
            **41-1649949*****(State
                or other jurisdiction of***
              ***incorporation
                or organization)***
            ***(I.R.S.
                Employer***
              ***Identification
                Number)***





**10
                Forge Parkway, Franklin, MA**
            **02038*****(Address
                of principal executive offices)***
            ***(Zip
                Code)***





**(508)
      553-8850**


***(Issuer’s
      telephone number, including area code)***









Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
      for
      such shorter period that the registrant was required to file such reports),
      and
      (2) has been subject to such filing requirements for the past 90
      days.    Yes x No  ̈




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  ̈ No x





As
      of May
      10, 2006, the Registrant had 27,141,897 shares of Common Stock outstanding.




Transitional
      Small Business Disclosure Format (Check
      one):    Yes  ̈ No x















**FORM
      10-QSB -Table of Content**





**Page**
                **Number****Part
                I - Financial Information**Item 1.
            Consolidated
                Financial StatementsConsolidated
                Balance Sheets as of March 31, 2006 (Unaudited)
                and December 31, 2005
            3Consolidated
                Statements of Loss for the three months ended
                March 31, 2006 and 2005 (Unaudited)
            4Consolidated
                Statements of Cash Flows for the three months
                ended March 31, 2006 and 2005 (Unaudited)
            5Notes
                to Consolidated Financial Statements
                (Unaudited)
            6Item 2.
            Management’s
                Discussion and Analysis or Plan of
                Operation
            12Item 3.
            Controls
                and Procedures
            21**Part
                II - Other Information**Item 2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            22Item 5.
            Other
                Information
            22Item 6.
            Exhibits
            22Signatures
            23




2


**SONTRA
                MEDICAL CORPORATION****Consolidated
                Balance Sheets****As
                of,****March
                31,**
            
            **December
                31,****2006**
            
            **2005****(Unaudited)****ASSETS:**Current
                Assets:Cash
                and cash
                equivalents
            
            $
            2,023,187
            
            $
            1,016,792Short
                term investments
            
            
            2,300,000
            
            
            3,000,000Accounts receivable
            
            
            11,590
            
            
            1,129Inventory,
                net of reserve for obsolescence
            
            
            49,010
            
            
            31,250Prepaid expenses and other current assets
            
            
            104,320
            
            
            65,468Total
                current assets
            
            
            4,488,107
            
            
            4,114,639Property
                and Equipment, at cost:Computer equipment
            
            
            245,365
            
            
            241,324Office and laboratory equipment
            
            
            593,576
            
            
            593,576Furniture and fixtures
            
            
            14,288
            
            
            14,288Manufacturing equipment
            
            
            490,455
            
            
            224,888Leasehold improvements
            
            
            177,768
            
            
            177,7681,521,452
            
            
            1,251,844Less
                - accumulated depreciation and amortization
            
            
            (933,943
            )
            
            (894,658
            )Net
                property and equipment
            
            
            587,509
            
            
            357,186Other
                Assets:Restricted cash
            
            
            19,949
            
            
            29,248Deposits
                and other assets
            
            
            2,000
            
            
            207,012Total
                other assets
            
            
            21,949
            
            
            236,260Total
                assets
            
            $
            5,097,565
            
            $
            4,708,085**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                Liabilities:Accounts payable
            
            $
            229,714
            
            $
            210,208Deferred revenue
            
            
            32,499
            
            
            45,000Current portion of note payable
            
            
            55,059
            
            
            53,653Accrued expenses
            
            
            185,697
            
            
            416,936Total
                current liabilities
            
            
            502,969
            
            
            725,797Note
                Payable, net of current portion
            
            
            134,740
            
            
            149,043CommitmentsStockholders'
                Equity:Series A Convertible Preferred Stock, $0.01 par value, authorized
                7,000,000 shares,issued and outstanding 73,334 shares at March 31, 2006 and December
                31,
                2005(preference in liquidation of $77,738)
            
            
            77,738
            
            
            76,291Common stock, $0.01 par value, authorized 60,000,000 shares, issued
                and
                outstanding27,103,491 shares at March 31, 2006 and 22,261,830 shares at December
                31,
                2005
            
            
            271,035
            
            
            222,618Additional paid-in capital
            
            
            34,458,521
            
            
            32,658,192Deferred stock-based compensation
            
            
            -
            
            
            (4,159
            )Accumulated deficit
            
            
            (30,347,438
            )
            
            (29,119,697
            )Total
                stockholders' equity
            
            
            4,459,856
            
            
            3,833,245Total
                liabilities and stockholders' equity
            
            $
            5,097,565
            
            $
            4,708,085*The
                accompanying notes are an integral part of these consolidated financial
                statements.*




3
 Table
          of Contents


**SONTRA
                MEDICAL CORPORATION****Consolidated
                Statements of
                Loss****(Unaudited)****Three
                Months Ended****March
                31,****2006**
            
            **2005**Revenue:Product revenue
            
            $
            14,526
            
            $
            116,053Licensing revenue
            
            
            12,501
            
            
            -Total
                revenue
            
            
            27,027
            
            
            116,053Cost
                of product revenue
            
            
            30,513
            
            
            80,154Gross
                (loss) profit
            
            
            (3,486
            )
            
            35,899Operating
                Expenses:Research and development
            
            
            763,358
            
            
            906,300Selling, general and administrative
            
            
            495,061
            
            
            473,809Total
                operating expenses
            
            
            1,258,419
            
            
            1,380,109Loss
                from operations
            
            
            (1,261,905
            )
            
            (1,344,210
            )Other
                income (expense), netInterest income
            
            
            39,318
            
            
            53,030Interest expense
            
            
            (5,154
            )
            
            -Net
                loss
            
            
            (1,227,741
            )
            
            (1,291,180
            )Accretion
                of dividend on Series A Convertible Preferred Stock
            
            
            (1,447
            )
            
            (1,447
            )Net
                loss applicable to common shareholders
            
            $
            (1,229,188
            )
            $
            (1,292,627
            )Net
                loss per common share, basic and diluted
            
            $
            (0.05
            )
            $
            (0.06
            )Basic
                and diluted weighted average common shares outstanding
            
            
            23,597,289
            
            
            22,131,657*The
                accompanying notes are an integral part of these consolidated financial
                statements.*







4
 Table
          of Contents






**Sontra
                Medical Corporation****ConsolidatedStatements
                of Cash Flows****(Unaudited)****Three
                Months Ended****March
                31,****2006**
            
            **2005****Cash
                Flows From Operating Activities:**Net
                loss
            
            $
            (1,227,741
            )
            $
            (1,291,180
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation and amortization
            
            
            39,285
            
            
            41,414Stock-based compensation (benefit)
            
            
            5,006
            
            
            (207,795
            )Provision for excess or obsolete inventory
            
            
            20,000
            
            
            -Changes in assets and liabilities:Accounts receivable
            
            
            (10,461
            )
            
            (79,022
            )Legal settlement receivable
            
            
            -
            
            
            250,000Inventory
            
            
            (37,760
            )
            
            31,191Prepaid expenses and other current assets
            
            
            (38,852
            )
            
            (68,509
            )Accounts payable
            
            
            19,505
            
            
            (79,709
            )Deferred revenue
            
            
            (12,501
            )
            
            -Accrued expenses
            
            
            (10,558
            )
            
            (239,259
            )Net
                cash used in operating activities
            
            
            (1,254,077
            )
            
            (1,642,869
            )**Cash
                Flows from Investing Activities:**Purchase
                of property and equipment
            
            
            (64,596
            )
            
            (112,521
            )Decrease
                in restricted cash
            
            
            9,299
            
            
            -Purchases
                of short term investments
            
            
            -
            
            
            (2,950,000
            )Sales
                of short term investments
            
            
            700,000
            
            
            2,950,000Net
                cash provided by (used in) investing activities
            
            
            644,703
            
            
            (112,521
            )**Cash
                Flows From Financing Activities**Proceeds
                from the sale of common stock, net of expenses
            
            
            1,628,666
            
            
            (15,658
            )Payments
                on note payable
            
            
            (12,897
            )
            
            -Proceeds
                from the exericse of warrants
            
            
            -
            
            
            127,500Proceeds
                from the exericse of stock options
            
            
            -
            
            
            20,000Net
                cash provided by financing activities
            
            
            1,615,769
            
            
            131,842Net
                Increase (Decrease) in Cash and Cash Equivalents
            
            
            1,006,395
            
            
            (1,623,548
            )Cash
                and Cash Equivalents, beginning of period
            
            
            1,016,792
            
            
            2,565,244Cash
                and Cash Equivalents, end of period
            
            $
            2,023,187
            
            $
            941,696Supplemental
                Disclosure of Non Cash Financing Transactions:Accretion
                of dividend on Series A Convertible Preferred Stock
            
            $
            1,447
            
            $
            1,447Fair
                value of common stock issued for accrued 401(k) plan
                contributions
            
            $
            220,680
            
            $
            243,910Deposits
                reclassified to property and equipment
            
            $
            205,012
            
            $
            -*The
                accompanying notes are an integral part of these consolidated financial
                statements.*







5
 Table
          of Contents





**SONTRA
      MEDICAL CORPORATION**


**Notes
      to Consolidated Financial Statements**


**March
      31, 2006**


**(Unaudited)**








****  **(1)
      ORGANIZATION AND BASIS OF PRESENTATION**




The
      Company is a medical company engaged in the development of transdermal
      diagnostic and drug delivery products based on its SonoPrep ® ultrasonic skin permeation technology. On an historical basis since its
      inception, the Company has devoted substantially all of its efforts toward
      product research and development, raising capital and marketing products under
      development. The Company has incurred significant losses from operations since
      its inception and has primarily funded these losses through issuances of equity
      and convertible promissory notes.




The
      accompanying consolidated financial statements include the accounts of Sontra
      Medical Corporation (the “Company”) and its wholly-owned subsidiary, Sontra
      Medical, Inc. ("SMI"). All significant inter-company balances and
      transactions have been eliminated in consolidation. These
      financial statements should be read in conjunction with theCompany's
      audited financial statements and related footnotes for thefiscal
      year ended December 31, 2005, which are included in the Company'sAnnual
      Report on Form 10-KSB filed with the SEC on March 15, 2006. Inthe
      opinion of the Company's management, the unaudited condensedconsolidated
      financial statements have been prepared on the same basisas
      the
      audited consolidated financial statements and include alladjustments
      (consisting only of normal recurring accruals) necessary topresent
      fairly the Company's financial position as of March 31, 2006 andthe
      results of operations and cash flows for the three ended March 31,2006
      and
      2005. Certain information and footnote disclosures normallyincluded
      in the financial statements prepared in accordance withgenerally
      accepted accounting principles have been condensed or omittedpursuant
      to the relevant SEC rules and regulations. However, the Companybelieves
      that its disclosures are adequate to make the informationpresented
      not misleading. The results of operations for the interimperiods
      are not necessarily indicative of the results of operations forthe
      full
      fiscal year or any other interim period.




**(2)
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




The
      accompanying financial statements reflect the application of certain accounting
      policies as described in this note and elsewhere in the accompanying financial
      statements.




(a)
      Use
      of Estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities at the date
      of
      the financial statements and the amounts of revenues and expenses recorded
      during the reporting period. Actual results could differ from those estimates.
      Material estimates that are particularly susceptible to significant changes
      in
      the near term relate to the valuation of inventory, the recoverability of
      long-lived assets, the realizability of deferred tax assets and the fair value
      of equity instruments issued.




(b)
      Cash
      and Cash Equivalents





The
      Company considers all highly liquid investments with maturities of ninety days
      or less to be cash equivalents. Cash equivalents consist of money market funds
      as of March 31, 2006 and December 31, 2005. The Company maintains its cash
      in
      bank deposit accounts which, at times, may exceed the federally insured limits.
      Restricted cash represents a security deposit on the Company’s leased offices.





(c)
      Short
      Term Investments





Short
      term investments consist of auction rate preferred shares and are classified
      as
“available for sale” under the provisions of Statement of Financial Accounting
      Standards (“SFAS”) No. 115, *Accounting
      for Certain Investments in Debt and Equity Securities* .
      Accordingly, these investments are carried at fair value which approximates
      cost. The auction rate preferred shares have maturities up to 90
      days.




(d)
      Accounts Receivable




The
      Company provides credit terms to customers in connection with sales of the
      Company’s products. Credit terms, for approved customers, are generally on a net
      30-day basis. Management periodically reviews customer account activity in
      order
      to assess the adequacy of the allowances provided for potential losses. Factors
      considered include economic conditions and each customer’s payment history and
      credit worthiness. Adjustments, if any, are made to reserve balances following
      the completion of these reviews to reflect management’s best estimate of
      potential losses. No allowance for doubtful accounts was considered necessary
      at
      March 31, 2006 and December 31, 2005.






6
 Table
          of Contents




**SONTRA
      MEDICAL CORPORATION**


**Notes
      to Consolidated Financial Statements**


**March
      31, 2006**


**(Unaudited)**





(    
      e) Inventory




Inventories
      are stated at the lower of cost (first in, first out) or market.  Work-in-process
      and finished goods consist of material, labor and overhead. Finished goods
      consist of completed SonoPrep units and procedure trays. Demo inventory consists
      of SonoPrep units owned by Sontra in use by customers as well as units used
      for
      demonstration purposes. The cost of SonoPrep demo units is amortized to cost
      of
      sales over a one year period. The reserve for obsolescence represents inventory
      that may become obsolete as a result of possible design changes and product
      enhancements as well as inventory that the Company may use in prototype
      manufacturing as well as anticipated design changes and product enhancements
      that will make certain inventory obsolete. The Company increased its reserve
      for
      obsolete or excess inventory by $20,000 during the quarter ended March 31,
      2006
      and had a reserve of $160,000 at March 31, 2006.




(f)
      Depreciation and Amortization




The
      Company provides for depreciation and amortization by charges to operations
      for
      the cost of assets using the straight-line method based on the estimated useful
      lives of the related assets, as follows:





**Asset
                Classification**
            **Estimated Useful Life**Computer
                equipment
            3 yearsOffice
                and laboratory equipment
            3-5 yearsFurniture
                and fixtures
            7
                yearsManufacturing
                equipment
            5
                yearsLeasehold
                improvements
            Life of lease






(g) Stock-Based Compensation





On
      January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), *Share-Based
      Payment* ,
      which
      is a revision of SFAS No. 123, *Accounting
      for Stock Based Compensation* .
      There
      was no cumulative effect to the Company as a result of adopting this new
      accounting principle. Under SFAS No. 123(R), the Company now recognizes
      compensation costs resulting from the issuance of stock-based awards to
      employees and directors as an expense in the statement of loss based on a
      measurement of fair value for each stock award. Prior to January 1, 2006, the
      Company accounted for its stock-based employee and director awards under the
      recognition and measurement principles of Accounting Principles Board (“APB”)
      Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      as
      permitted under SFAS No. 123. Under this intrinsic value method,
      compensation expense represented the excess, if any, of the quoted market price
      of the Company’s common stock at the grant date over the exercise price.




The
      Company’s policy is to grant employee and director stock options with an
      exercise price equal to the fair value of the Company’s common stock at the date
      of grant, therefore recording no compensation expense under APB No. 25. Prior
      to
      the adoption of SFAS No. 123(R), the Company had expensed all share-based
      payments to non-employees, as defined under SFAS No. 123, based upon the fair
      value of such grants.





SFAS
      No.
      123(R) permits public companies to adopt one of two transition methods; a
“modified prospective” approach or a “modified retrospective” approach. Under
      the modified prospective approach, compensation cost is recognized beginning
      with the effective date of SFAS 123(R) for all share-based payments granted
      after the effective date of SFAS No. 123(R) and for all awards granted to
      employees prior to the effective date of SFAS No. 123(R) that remain unvested
      on
      the effective date. The Company adopted the modified prospective
      approach.







7
 Table
          of Contents




**SONTRA
      MEDICAL CORPORATION**


**Notes
      to Consolidated Financial Statements**


**March
      31, 2006**


**(Unaudited)**





For
      the
      quarter ended March 31, 2005, the Company applied APB No. 25 and related
      interpretations in accounting for stock options issued to employees and
      directors. Had compensation cost for the Company’s stock options issued to
      employees and directors been determined based on the fair value at the grant
      dates consistent with SFAS No. 123, the Company’s net loss and net loss per
      share would have been adjusted to the pro forma amounts indicated below:





**Three
                Months Ended**
              **March
                31,****2005**Net
                loss—as reported
            
            $
            (1,291,180
            )Add:
                stock-based employee compensation expense (benefit) under APB No.
                25
            
            
            (213,429
            )Deduct:
                stock-based employee compensation determined under SFAS No.
                123
            
            
            (311,752
            )Pro
                forma net loss applicable to common stockholders
            
            
            (1,816,361
            )Accretion
                of preferred stock dividend and beneficial conversion feature of
                preferred
                stock
            
            
            (1,447
            )Pro
                forma net loss
            
            $
            (1,817,808
            )Basic
                and diluted loss per share, as reported
            
            $
            (0.06
            )Basic
                and diluted loss per share, pro forma
            
            $
            (0.08
            )





On
      May
      24, 2005, the Company approved the acceleration of vesting of all outstanding
      unvested stock options with exercise prices equal to or greater than $1.45
      per
      share previously awarded to its employees, including its executive officers,
      and
      its directors under the Company’s equity compensation plans. The acceleration of
      vesting was effective for stock options outstanding as of May 24, 2005. Options
      to purchase an aggregate of 836,441 shares of common stock (of which options
      to
      purchase an aggregate of 481,266 shares of common stock were held by executive
      officers of the Company and options to purchase an aggregate of 16,900 shares
      of
      common stock were held by directors of the Company) have been accelerated.
      The
      weighted average exercise price of the accelerated options was $1.95. There
      was
      no charge to the income statement on the modification date as the exercise
      price
      of the modified options exceeded the fair value of the common stock.





On
      March
      16, 2006, the Company issued to employees options to purchase 1,019,639 shares
      of common stock at $0.51 per share. The options have a 10 year contractual
      life
      and vest over 3.5 years . The Company determined the fair value of these options
      to be approximately $420,000 using the Black-Scholes option pricing model.
      This
      amount, which is net of estimated forfeitures will be charged to expense over
      the vesting period. In the three months ended March 31, 2006 the Company
      recorded $5,000 of non-cash stock compensation expense selling, general and
      administrative expense in the statement of loss.




The
      assumptions used for options granted in the three months ended March 31, 2006
      and 2005 were as follows:




**2006**
            
            **2005**Risk-free
                interest rate
            
            
            5.00
            %
            
            4.50
            %Expected
                dividend yield
            
            
            —
            
            
            —Expected
                lives
            
            
            6.75
                years
            
            
            10
                yearsExpected
                volatility
            
            
            105.85
            %
            
            55.97
            %





In
      the
      three months ended March 31, 2006, the Company used the average of the
      contractual term of the options and the vesting period as its estimate of the
      expected life, as permitted under SEC Staff Accounting Bulletin No. 107. The
      Company estimated the forfeiture rate using historical information since
      inception for the Company.







8
 Table
          of Contents


**SONTRA
      MEDICAL CORPORATION**


**Notes
      to Consolidated Financial Statements**


**March
      31, 2006**


**(Unaudited)**


Information
          with respect to all option activity is as follows:
  **Number
                      of**
                  
                  **Weighted
                      Average****Shares**
                  
                  **Exercise
                      Price**Balance
                      December 31, 2005
                  
                  
                  3,134,657
                  
                  $
                  1.72Granted
                  
                  
                  1,019,639
                  
                  $
                  0.51Cancelled
                  
                  
                  (30,000
                  )
                  $
                  2.10Exercised
                  
                  
                  -
                  
                  
                  -Balance
                      March 31, 2006
                  
                  
                  4,124,296
                  
                  $
                  1.42Options
                      exercisable at March 31, 2006
                  
                  
                  2,965,913Options
                      available for future grant, March 31, 2006
                  
                  
                  151,452
  The
          weighted average fair value of the options granted in the three months
          ended
          March 31, 2006 is $0.44.
  A
          summary
          of options outstanding at March 31, 2006, is as follows:
  **March
                      31, 2006****Options
                      Outstanding**
                  
                  **Options
                      Exercisable****Weighted**
                  
                  **Weighted**
                  
                  
                  
                  **Weighted****Average
                      Remaining**
                  
                  **Average
                      Exercise**
                  
                  
                  
                  **Average
                        Exercise****Exercise
                      Price**
                  
                  **Number**
                  
                  **Live
                      (years)**
                  
                  **Price**
                  
                  **Number**
                  
                  **Price**$.10-.$52
                  
                  
                  1,489,927
                  
                  
                  8.80
                  
                  $
                  0.50
                  
                  
                  331,544
                  
                  $
                  0.48$1.05-$1.99
                  
                  
                  1,473,455
                  
                  
                  7.19
                  
                  $
                  1.54
                  
                  
                  1,473,455
                  
                  $
                  1.54$2-$2.55
                  
                  
                  1,160,914
                  
                  
                  6.93
                  
                  $
                  2.43
                  
                  
                  1,160,914
                  
                  $
                  2.43**Outstanding
                      at March 31, 2006**
                  
                  
                  4,124,296
                  
                  
                  7.27
                  
                  $
                  1.42
                  
                  
                  2,965,913
                  
                  $
                  1.42




(h)
      Net
      Loss per Common Share




Basic
      and
      diluted net loss per share of the Company’s common stock is presented in
      conformity with SFAS No. 128, *Earnings
      per Share* ,
      for all
      periods presented. For the periods presented, options, warrants and convertible
      securities were anti-dilutive and excluded from diluted loss per share
      calculations. Accordingly, basic and diluted net loss per share of common stock
      has been computed by dividing the net loss applicable to common stockholders
      in
      each period by the weighted average number of shares of common stock outstanding
      during such period.





(i)
      Research and Development Expenses




The
      Company charges research and development expenses to operations as incurred.
      Research and development expenses primarily consist of salaries and related
      expenses for personnel and consulting services. Other research and development
      expenses include fees paid to consultants and outside service providers, the
      costs of materials used in research and development, prototype manufacturing,
      information technology and facilities costs.





In
      the
      quarter ended March 31, 2006, the Company billed $12,000 under a Small Business
      Innovation Research (“SBIR”) grant totaling $70,000 from the U.S. Army. This
      amount has been net against research and development expenses.




(j)
      Deferred Revenue





Deferred
      revenue consists of the unearned portion of a $50,000 payment received from
      The
      Horticulture and Food Research Institute of New Zealand Limited (“HortResearch”)
      in conjunction with a license and collaboration agreement. In November 2005,
      HortResearch paid the Company $50,000 for a one year option to license the
      Company’s ultrasonic skin permeation technology. Under the agreement, the
      Company is obligated to perform certain training and consulting services over
      the one year period. Accordingly, the $50,000 payment is being recognized as
      revenue ratably over the one year service period.




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**SONTRA
          MEDICAL CORPORATION**
 **Notes
          to Consolidated Financial Statements**
 **March
          31, 2006**
 **(Unaudited)**


(k)
      Revenue Recognition




For
      product revenue, revenues are recognized when persuasive evidence of an
      arrangement exists in the form of a signed non-cancelable purchase order, the
      product is shipped, the selling price is fixed and determinable, and collection
      is reasonably assured. For licensing payments the Company will defer revenue
      if
      a performance obligation exists and will recognize revenue in the future as
      the
      Company meets the obligation.





(l)
      Reclassifications





Certain
      comparative amounts have been reclassified to correspond with the current year's
      presentation.





**(3)
      NOTE PAYABLE**




In
      May
      2005, the Company entered in a note payable agreement with a third-party lender
      in the amount of $237,000. The note is repayable over a four year term and
      the
      Company is obligated to make monthly interest and principal payments of $6,017.
      Interest accrues at annual rate of 10.39% and the note is secured by certain
      property and equipment of the Company. Interest expense related to this note
      was
      $5,154 for the three months ended March 31, 2006.





**(4)
      COMMITMENTS**




The
      Company leases 12,999 square feet of office, laboratory and manufacturing space
      in Franklin, Massachusetts under a lease expiring March 10, 2008. Future minimum
      rental payments under this operating lease are approximately as follows:




**Amount**For
                the years ended December 31,2006
            
            $
            163,0002007
            
            
            171,0002008
            
            
            33,000Total
            
            $
            367,000





**(5)
      COMMON STOCK FINANCING**





In March
       2006, the Company completed a financing (the “Financing”) with selected
      qualified purchasers that provided the Company with net proceeds of $1,629,000
      pursuant to the terms of a Common Stock and Warrant Purchase Agreement (the
      “Purchase Agreement”). Under the terms of the Purchase Agreement, investors
      purchased 4,456,354 shares of the Company’s Common Stock in a private
      placement at a per share purchase price of $0.40. The investors also received
      warrants (the “Warrants”) to purchase up to 4,456,354 shares of Common
      Stock. The Warrants are exercisable beginning six months from the issue date
      at
      a per share price of $0.58 and will expire no later than the fifth anniversary
      of the issue date. In addition, the Company shall have the right to terminate
      the Warrants, upon thirty days notice, in the event that the closing price
      of
      the Company’s common stock for twenty consecutive trading days is equal to or
      greater than $1.16 per share.





The
      Company agreed to pay to the placement agent for the Financing for its services:
      (a) a cash fee equal to 7% of the aggregate capital raised by the Company from
      investors introduced to the Company by the placement agent, excluding the
      proceeds from any Warrant exercises; (b) warrants to purchase a number of shares
      of Common Stock of the Company equal to 7% of the total number of shares of
      Common Stock issued to investors introduced to the Company by the placement
      agent, excluding shares of Common Stock to be issued upon Warrant exercises
      or
      in connection with the payment of dividends or interest, on the identical terms
      and conditions (including exercise price) with the Warrants issued to the
      investors in the Financing; and (c) a $25,000 legal expense allowance. The
      fair
      value of these warrants using the Black-Scholes option pricing model was
      approximately $167,000 which was recorded as a debit and credit to additional
      paid-in capital.





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**SONTRA
      MEDICAL CORPORATION**


**Notes
      to Consolidated Financial Statements**


**March
      31, 2006**


**(Unaudited)**





**** **(6)
      BAYER LICENSE AGREEMENT**




On
      July
      28, 2003, the Company and Bayer Diagnostics Division of Bayer Healthcare LLC
      (“Bayer”) executed a definitive license agreement pursuant to which the Company
      granted to Bayer an exclusive worldwide right and license of the Company’s
      intellectual property rights to make, have made, use, import and sell the
      continuous transdermal glucose monitoring system utilizing ultrasonic
      techniques. In consideration of the license and the Company’s delivery of all
      information, materials and know-how related to the licensed technology in 2003,
      Bayer paid the Company a one-time, non-refundable license fee of $1.5 million
      in
      January 2004. On December 14, 2005, the parties amended the license agreement,
      pursuant to which the Company reacquired the co-exclusive rights to make, have
      made, use, import and sell the continuous transdermal glucose monitoring system
      utilizing ultrasonic techniques in the worldwide hospital intensive care unit
      (ICU) market, and the Company granted Bayer a right of first refusal to market
      any hospital ICU product(s) that we may develop. If Bayer does not market
      Sontra’s hospital ICU product(s), then Sontra shall pay Bayer a royalty equal to
      1% of Sontra’s net product sales. In addition, upon Bayer’s completion of the
      first phase of its development of the continuous glucose monitoring system,
      Bayer shall pay a $2.0 million milestone payment to Sontra. Such milestone
      payment shall be paid no later than December 31, 2007, otherwise Bayer’s
      exclusive license rights under the amended license agreement shall become
      co-exclusive and Bayer’s marketing rights to Sontra’s hospital ICU product(s)
      shall terminate. The parties are no longer obligated under the amended license
      agreement to enter into one or more joint development agreements related to
      the
      continuous transdermal glucose monitoring system; however, in the second phase
      of Bayer’s product development process, the parties will agree upon reasonable
      royalty rates to be paid to Sontra for product sales by Bayer and the parties
      may also negotiate a commercially reasonable manufacturing agreement pursuant
      to
      which Sontra would supply Bayer with the SonoPrep ultrasonic skin permeation
      component of the continuous glucose monitoring system.





**(7)
      LITIGATION**





In
      December 2004, the Company entered into an agreement with the Puerto Rican
      Telephone Company (“PRTC”) regarding alleged rate overcharges by PRTC related to
      the activity of ChoiceTel prior to the Merger of ChoiceTel with the Company.
      Pursuant to the agreement, the Company agreed to waive certain legal claims
      against PRTC in exchange for $250,000. The Company recorded the $250,000 payment
      as an adjustment to increase the net assets of ChoiceTel as it related to the
      resolution of a pre-acquisition contingency and consequently the Company
      recorded a receivable and additional paid in capital of $250,000 in 2004. The
      Company subsequently received the $250,000 settlement payment in January 2005.








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**Item
      2.Management’sDiscussion and Analysis or Plan of Operation**




**Forward-Looking
      Statements**




*The
      following discussion of the consolidated financial condition and results of
      operations of the Company should be read in conjunction with the unaudited
      condensed consolidated financial statements and the related notes thereto
      included elsewhere in this Form 10-QSB. Except for the historical information
      contained herein, the following discussion, as well as other information in
      this
      report, contain forward-looking statements within the meaning of Section 27A
      of
      the Securities Act of 1933, as amended, and Section 21E of the Securities
      Exchange Act of 1934, as amended, and are subject to the “safe harbor” created
      by those sections. Some of the forward-looking statements can be identified
      by
      the use of forward-looking terms such as “believes,” “expects,” “may,” “will,”
“should,” “could,” “seek,” “intends,” “plans,” “estimates,” “anticipates” or
      other comparable terms. Forward-looking statements involve inherent risks and
      uncertainties. A number of important factors could cause actual results to
      differ materially from those in the forward-looking statements. We urge you
      to
      consider the risks and uncertainties described in “Factors That May Affect
      Future Results” in this report. We undertake no obligation to update our
      forward-looking statements to reflect events or circumstances after the date
      of
      this report. We caution readers not to place undue reliance upon any such
      forward-looking statements, which speak only as of the date made.*




**Overview**




On
      June
      20, 2002, the Company (previously operating under the name ChoiceTel
      Communications, Inc.) consummated a merger with Sontra Medical, Inc. (“SMI”),
      pursuant to which SMI merged with and into a wholly owned subsidiary of the
      Company (the “Merger”). Subsequent to the consummation of the Merger, the
      Company changed its name to Sontra Medical Corporation and began operating
      in
      SMI’s line of business.




Sontra
      Medical Corporation is the pioneer of SonoPrep ® ,
      a
      non-invasive ultrasonic skin permeation technology for medical and therapeutic
      applications. Our proprietary ultrasound mediated skin permeation technology
      is
      a non-invasive and painless method of enhancing the flow of fluids and molecules
      across the protective membrane of the stratum corneum, the outer layer of the
      skin. To date, we have tested the feasibility of our SonoPrep technology for
      various applications, including glucose monitoring, transdermal drug delivery,
      vaccination and topical lidocaine delivery. The Company has received 510(k)
      marketing clearance from the FDA for our SonoPrep device for the transdermal
      delivery of 4% topical lidocaine and in electrophysiology applications. In
      September 2004, we launched our SonoPrep Topical Anesthetic System, which
      consists of the SonoPrep device and a topical anesthetic procedure tray for
      usage with OTC 4% topical lidocaine. During the three months ended March 31,
      2006, we recorded product revenue of $15,000.




A
      significant portion of the Company’s research and development expenses includes
      salaries paid to personnel and outside consultants and service providers, as
      well as the cost of materials used in research and development, and information
      technology and facilities costs.




Selling,
      general and administrative expenses consist primarily of non-research personnel
      salaries and related expenses, facilities costs and professional fees.




In
      2006,
      stock-based compensation expense, a non-cash expense, represents the fair value
      of the options on the grant date. Prior to 2006, stock-based compensation
      expense represented the fair value or intrinsic value (the difference between
      the exercise price and fair value of common stock) of the option on the grant
      date. Certain stock-based compensation expense was remeasured each period and
      amortized over the vesting period of the applicable options.








**Results
      of Operations**




**Comparison
      of the three months ended March 31, 2006 and 2005**




*Licensing
      Revenue*





** License
      Revenue consists of the $13,000 earned portion of a $50,000 payment received
      in
      November 2005 from HortResearch.





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*Gross
      Profit*




The
      Company recorded product revenue of $15,000 and a gross loss of $3,000 for
      the
      three months ended March 31, 2006 versus $116,000 of revenue and a gross profit
      of $36,000 for the three months ended March 31, 2005. Due to the low level
      of
      sales experienced to date that might result in future obsolescence, the Company
      increased its inventory obsolescence reserve in the first quarter of 2006 by
      $20,000 and recorded a charge to Cost of Product Revenue in the Statement of
      Loss.





*Research
      and Development Expenses*




Research
      and development expenses decreased by $143,000 to $763,000 for the three months
      ended March 31, 2006 from $906,000 for the three months ended March 31, 2005.
      The decrease was primarily attributable to a decrease in clinical trial costs
      of
      $41,000 and a decrease in personnel costs of $80,000. The Company billed $12,000
      to the U.S. Army under a SBIR grant that was recorded as a reduction of Research
      and Development expenses in the three months ended March 31, 2006.




*Selling,
      General and Administrative Expenses*




Selling,
      general and administrative expenses increased by $21,000 to $495,000 for the
      three months ended March 31, 2006 from $474,000 for the three months ended
      March
      31, 2005. The increase for the three months ended March 31, 2006 was primarily
      attributable to the Company recognizing a stock-based compensation benefit
      of
      $208,000 in the quarter ended March 31, 2005, versus recognizing stock
      compensation expenses of $5,000 in the first quarter of 2006. This increase
      in
      stock compensation expense was offset by decreases in selling and marketing
      personnel costs of $59,000, topical lidocaine marketing promotional costs of
      $44,000, general and administrative personnel costs of $29,000, consulting
      costs
      of $31,000 and public company expenses of $15,000.





*Interest
      Income and Interest Expense*




Interest
      income was $39,000 for the three months ended March 31, 2006 compared to
      interest income of $53,000 for the three months ended March 31, 2005. The
      decrease in interest income for the three months ended March 31, 2006 was
      primarily attributable to the Company having a lower amount of cash and short
      term investments on hand in 2006 as compared to 2005.




Interest
      expense of $5,000 for the three months ended March 31, 2006 was related to
      the
      note payable issued in May 2005.




**Liquidity
      and Capital Resources**




The
      Company has financed its operations since inception primarily through private
      sales of its common and preferred stock, the issuance of convertible promissory
      notes, and the cash it received in connection with the Merger. As of March
      31,
      2006, the Company had $4,323,000 of cash and cash equivalents and short term
      investments.




Net
      cash
      used in operating activities was $1,254,000 for the three months ended March
      31,
      2006. The net loss for the three months ended March 31, 2006 was $1,228,000
      and
      included in this loss were non-cash expenses of $39,000 for depreciation and
      amortization, $20,000 provision for obsolete or excess inventory and stock
      compensation expense of $5,000. Increases in accounts receivable, inventory
      and
      prepaid expenses used $87,000 of cash and while an increase in accounts payable
      provided $20,000 and decreases in deferred revenue and accrued expenses used
      $23,000 of cash.





Net
      cash
      provided by investing activities was $645,000 for the three months ended March
      31, 2006. The proceeds from the sales of short term investments provided
      $700,000. Purchases of property and equipment used $65,000.





Net
      cash
      provided by financing activities was $1,616,000 for the three months ended
      March
      31, 2006. The issuance of common stock provided $1,629,000 and payments on
      the
      note payable used $13,000.




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The
      Company expects that the cash and short term investments of $4,323, 000 at
      March
      31, 2006 will be sufficient to meet its cash requirements through January 2007.
      The Company will be required to raise a substantial amount of capital in the
      future before it completes the commercialization of its products and achieves
      profitability. The Company’s ability to fund its future capital requirements
      will depend on many factors, including the following:




•  its
      ability to obtain funding from third parties, including any future collaborative
      partners;




•  its
      progress on research and development programs and pre-clinical and clinical
      trials;




•  the
      time
      and costs required to gain regulatory approvals;




•  the
      costs
      of manufacturing, marketing and distributing its products, if successfully
      developed and approved;




•  the
      costs
      of filing, prosecuting and enforcing patents, patent applications, patent claims
      and trademarks;




•  the
      status of competing products; and




•  the
      market acceptance and third-party reimbursement of its products, if successfully
      developed and approved.





**Factors
      That May Affect Future Results**





We
      operate in a rapidly changing environment that involves a number of risks,
      some
      of which are beyond our control. Forward-looking statements in this document
      and
      those made from time to time by us through our senior management are made
      pursuant to the safe harbor provisions of the Private Securities Litigation
      Reform Act of 1995. Forward-looking statements concerning the expected future
      revenues or earnings or concerning projected plans, performance, or development
      of products and services, as well as other estimates related to future
      operations are necessarily only estimates of future results and there can be
      no
      assurance that actual results will not materially differ from expectations.
      Forward-looking statements represent management’s current expectations and are
      inherently uncertain. We do not undertake any obligation to update
      forward-looking statements. Factors that could cause actual results to differ
      materially from results anticipated in forward-looking statements include,
      but
      are not limited to, the following:




**We
      have a history of operating losses, and we expect our operating losses to
      continue for the foreseeable future.**




We
      have
      generated limited revenue and have had operating losses since our inception.
      Our
      historical accumulated deficit was approximately $30,347,438 as of March 31,
      2006. It is possible that the Company will never generate sufficient revenue
      to
      achieve and sustain profitability. Even if the Company reaches profitability,
      it
      may not be able to sustain or increase profitability. We expect our operating
      losses to continue for the foreseeable future as we continue to expend
      substantial resources to conduct research and development, feasibility and
      clinical studies, obtain regulatory approvals for specific use applications
      of
      our SonoPrep ® technology, identify and secure collaborative partnerships, and manage and
      execute our obligations in strategic collaborations.




**If
      we fail to raise additional capital, we will be unable to continue our
      development efforts and operations.**




Our
      development efforts to date have consumed and will continue to require
      substantial amounts of capital in connection with our SonoPrep ® technology. Our product development programs require substantial capital outlays
      in order to reach product commercialization. As we enter into more advanced
      product development of our SonoPrep device and our continuous transdermal
      glucose monitoring system, we will need significant funding to pursue our
      product commercialization plans. Our ability to continue our research,
      development and testing activities and commercialize our products in development
      is highly dependent on our ability to obtain additional sources of financing,
      including by entering into and maintaining collaborative arrangements with
      third
      parties who have the resources to fund such activities. Any future equity
      financing, if available, may result in substantial dilution to existing
      shareholders, and future debt financing, if available, may include restrictive
      covenants or may require us to grant a lender a security interest in our assets.
      To the extent that we attempt to raise additional funds through third party
      collaborations and/or licensing arrangements, we may be required to relinquish
      some rights to our technologies or products currently in various stages of
      development, or grant licenses or other rights on terms that are not favorable
      to the Company. Any failure by the Company to timely procure additional
      financing or investment adequate to fund the Company’s ongoing operations,
      including planned product development initiatives, clinical studies and
      commercialization efforts, will have material adverse consequences on the
      Company’s business operations and as a result, on our consolidated financial
      condition, results of operations and cash flows.





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**Our
      products are based on new technologies and are in early stages of development,
      and may not be successfully developed or achieve market acceptance.**




Most
      of
      our products under development have a high risk of failure because they are
      based on new technologies and are in the early stages of development. To date,
      we have tested the feasibility of our SonoPrep ® technology for various applications, including glucose monitoring, transdermal
      drug delivery and certain anesthetic applications. The Company has received
      510(k) marketing clearance from the FDA for our SonoPrep ® device
      for the transdermal delivery of 4% topical lidocaine and in electrophysiology
      applications. However, to develop additional products or additional uses,
      substantial expenditures will be required, including for feasibility studies,
      pre-clinical studies, prototype development and clinical testing. Projected
      costs for such development are difficult to estimate and they may change and
      increase frequently.




Our
      success is dependent on further developing new and existing products and
      obtaining favorable results from pre-clinical studies and clinical trials and
      satisfying regulatory standards and approvals required for the market
      introduction of such products, including our continuous transdermal glucose
      monitoring system. There can be no assurance that the Company will not encounter
      unforeseen problems in the development of the SonoPrep ® technology, or that we will be able to successfully address the problems that
      do
      arise. The SonoPrep technology may not prove effective in connection with
      diagnostics, vaccine delivery, glucose monitoring and/or transdermal drug
      delivery. There can be no assurance that any of our potential products will
      be
      successfully developed, proven safe and efficacious in clinical trials, meet
      applicable regulatory standards, be capable of being produced in commercial
      quantities at acceptable costs, or be eligible for third-party reimbursement
      from governmental or private insurers. Even if we successfully develop new
      products, there can be no assurance that such products will be successfully
      marketed or achieve market acceptance, or that expected markets will develop
      for
      such products. If any of our development programs are not successfully
      completed, required regulatory approvals or clearances are not obtained, or
      potential products for which approvals or clearances are obtained are not
      commercially successful, our business, financial condition and results of
      operations would be materially adversely affected.





In
      addition, because our products are based on new technologies, they are subject
      to lengthy sales cycles and may take substantial time and effort to achieve
      market acceptance, especially at hospitals, which typically have a lengthy
      and
      rigorous approval process for adopting new technologies.  For example, our
      SonoPrep Topical Anesthetic System, which consists of the SonoPrep device and
      a
      topical anesthetic procedure tray for usage with OTC 4% topical lidocaine,
      has
      been marketed through independent medical device distributors. However, the
      required selling effort and lengthy sales cycle for this product have caused
      us
      to reevaluate our distribution strategy. We are currently exploring additional
      sales and marketing channels, including potentially licensing the product to
      a
      larger medical products company. There can be no assurance that we will
      establish successful sales and marketing methods for our products or that any
      independent distributors will actively promote our products or be successful
      in
      generating sales.




**Our
      future success is dependent upon successful development of our continuous
      glucose monitor for the hospital intensive care unit market.**





We
      recently amended our license agreement with the Diabetes Care Division of Bayer
      Healthcare LLC (“Bayer”) and reacquired the worldwide co-exclusive rights to
      develop and market our continuous transdermal glucose monitoring system
      utilizing the SonoPrep ultrasonic skin permeation technology for the hospital
      intensive care unit (ICU) market. The Company has completed the first prototypes
      and expects to begin human clinical studies in 2006 at leading Boston-area
      hospitals, with members of our Clinical Advisory Board serving as principal
      investigators. Although we believe the clinical rationale exists for our
      continuous transdermal glucose monitoring system for the ICU market, there
      can
      be no assurance that such a market will be established, or that we will be
      able
      to successfully develop a product that will prove effective for the ICU market
      or gain market acceptance should such a market develop. The product development
      process may take several years and will require substantial capital outlays.
      If
      the ICU market does not develop as we expect, or if we are unable to
      successfully develop a product for such market on a timely basis and within
      cost
      constraints, then our business and financial results will be materially
      adversely affected. In addition, under the terms of our license agreement,
      Bayer
      has rights to our technology and has retained co-exclusive rights to the
      hospital ICU market and may compete with the Company in such market. If Bayer
      determines to compete with the Company in the ICU market, our financial results
      will be adversely affected.







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**Our
      future success is dependent upon successful collaborations with strategic
      partners.**




Our
      future success is dependent upon our ability to selectively enter into and
      maintain collaborative arrangements with third parties for technology research
      and development, clinical testing, product development and sales and marketing.
      If we are unable to enter into any additional development agreements or
      collaborative arrangements with strategic partners, we will be required to
      internally fund all of our product development activities, significantly
      increasing business risk and capital requirements in the development, clinical
      testing, manufacturing, marketing and commercialization of new products. 
The Company could also encounter significant delays in introducing products
      into
      markets or find that the development, manufacture or sale of proposed products
      in such markets is adversely affected by the absence of those collaborative
      arrangements.




The
      process of establishing collaborative partners is difficult, time-consuming
      and
      involves significant uncertainty. Discussions with potential collaborators
      may
      not lead to the establishment of new collaborative relationships on favorable
      terms, if at all.  If successful in establishing a collaborative agreement,
      such agreement may never result in the successful development of products or
      the
      generation of significant revenue.  Any such agreements could limit the
      Company’s flexibility in pursuing alternatives for the development or
      commercialization of its products. Even if we were to enter into additional
      collaborative arrangements with third parties, there can be no assurance that
      the financial condition or results of operations of the Company will
      significantly improve.





The
      risks
      involved with collaborating with strategic partners include, but are not limited
      to, the following:




•
            
            such
                strategic partners are likely to be larger, better capitalized companies
                and therefore have significant leverage in negotiating terms of such
                collaborative arrangements;




•
            
            such
                collaborative arrangements could terminate upon the expiration of
                certain
                notice periods;




•
            
            collaboration
                partners may insist on and obtain significant interests in our
                intellectual property rights, for example, Bayer received an exclusive
                worldwide right and license of Sontra’s intellectual property rights to
                make, have made, use, import and sell a continuous transdermal glucose
                monitoring system utilizing ultrasonic techniques;




•
            
            funding
                by collaborative partners may be dependent upon the satisfaction
                of
                certain goals or “milestones” by certain specified dates, the realization
                or satisfaction of which may be outside of our control, for example,
                our
                receipt of future milestone payments from Bayer is dependent on Bayer’s
                successful product development efforts, which may not occur on a
                timely
                basis, if at all;




•
            
            collaborative
                partners may retain a significant degree of discretion regarding
                the
                timing of these activities and the amount and quality of financial,
                personnel and other resources that they devote to these activities;




•
            
            disputes
                may arise between the Company and any future collaborative partner
                regarding their respective rights and obligations under the collaborative
                arrangements, which may be costly; and




•
            
            any
                future collaborative partner may not be able to satisfy its obligations
                under its arrangement with the Company or may intentionally or
                unintentionally breach its obligations under the arrangement.




**Failure
      to obtain necessary regulatory clearances or approvals will prevent the Company
      from commercializing our products under development.**




The
      design, manufacturing, labeling, distribution, marketing, sales and usage of
      our
      products will be subject to extensive and rigorous government regulation in
      the
      United States and certain other countries. The process of obtaining and
      maintaining required regulatory clearances and approvals in the United States
      is
      lengthy, expensive and uncertain. In order for us to market our potential
      products in the United States, we must obtain clearance by means of a 510(k)
      pre-market notification, or approval by means of a pre-market approval (“PMA”)
      application, or a new drug application (“NDA”), from the United States Food and
      Drug Administration (“FDA”). In February 2004, we received 510(k) marketing
      clearance from the FDA for our SonoPrep ® device
      for use in electrophysiology applications. In August 2004, we received 510(k)
      marketing clearance from the FDA for the SonoPrep device and procedure tray
      for
      use with topical lidocaine. We will need to obtain additional marketing
      clearances or approvals from the FDA in order to market new products and new
      uses of existing products. In order to obtain marketing approval for our
      continuous transdermal glucose monitoring system, we will be required to file
      a
      PMA application that demonstrates the safety and effectiveness of the product.
      If the SonoPrep device is used for the transdermal delivery of a drug for an
      indication for which the drug has not already been approved, an NDA would be
      required to be filed and approved by the FDA for such drug before marketing.
      The
      PMA and the NDA processes are more rigorous and more comprehensive than the
      510(k) clearance process and can take several years from initial filing and
      require the submission of extensive supporting data and clinical information.




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Even
      if
      we receive 510(k) clearance or PMA or NDA approval, there can be no assurance
      that the FDA will not impose strict labeling or other requirements as a
      condition of our clearance or approval, any of which could limit our ability
      to
      market our products under development. Further, if we wish to modify a product
      after FDA clearance or approval, including changes in indications or other
      modifications that could affect safety and efficacy, additional clearances
      or
      approvals could be required from the FDA. No assurance can be given that such
      clearances or approvals will be granted by the FDA on a timely basis, or at
      all.
      Further, we may be required to submit extensive pre-clinical and clinical data
      depending on the nature of the changes. Any request by the FDA for additional
      data or any requirement by the FDA that we conduct additional clinical studies
      could significantly delay the commercialization of our products and require
      us
      to make substantial additional research, development and other expenditures.
      Similarly, any labeling or other conditions or restrictions imposed by the
      FDA
      on the marketing of our potential products could hinder the Company’s ability to
      effectively market these products.




From
      time
      to time, legislation is drafted and introduced in Congress that could
      significantly change the statutory provisions governing the approval,
      manufacturing and marketing of drug products and medical devices. In addition,
      FDA regulations and guidance are often revised or reinterpreted by the FDA
      in
      ways that may significantly affect our business and our products. It is
      impossible to predict whether legislative changes will be enacted or FDA
      regulations, guidance or interpretations changed, and what the impact of such
      changes, if any, may be.





**We
      must maintain our regulatory clearances and approvals in order to continue
      marketing our products.**




Regulatory
      authorities subject a marketed product, its manufacturer and the manufacturing
      facilities to continual review and periodic inspections. We will be subject
      to
      ongoing FDA requirements, including required submissions of safety and other
      post-market information and reports, registration requirements, Quality Systems
      regulations, and recordkeeping requirements. The Quality Systems regulations
      include requirements relating to quality control and quality assurance, as
      well
      as the corresponding maintenance of records and documentation. Our distributors,
      depending on their activities, are also subject to certain requirements under
      the Federal Food, Drug, and Cosmetic Act and the regulations promulgated
      thereunder, and state laws and registration requirements covering the
      distribution of our products. Regulatory agencies may change existing
      requirements or adopt new requirements or policies that could affect our
      regulatory responsibilities or the regulatory responsibilities of our
      distributors. We may not be able to adapt to these changes or new requirements
      on a timely basis, or at all.




Later
      discovery of previously unknown problems with our products, manufacturing
      processes, or our failure to comply with applicable regulatory requirements
      may
      result in enforcement actions by the FDA including, but not limited to: warning
      letters; patient or physician notification; restrictions on our products or
      manufacturing processes; product recalls or seizures; refusal to approve pending
      applications or supplements to approved applications that we submit; suspension
      or withdrawal of marketing approvals or clearances; and civil and criminal
      injunctions, fines and penalties.




**We
      may need to obtain further regulatory approval in connection with the usage
      of
      4% topical lidocaine with our SonoPrep Topical Anesthetic System.**




In
      August
      2004, we received 510(k) marketing clearance from the FDA to market our SonoPrep
      device and procedure tray for use with over-the-counter (OTC) 4% topical
      lidocaine for dermal anesthesia prior to the insertion of needles or intravenous
      catheters. In September 2004, we launched our SonoPrep Topical Anesthetic
      System, which consists of the SonoPrep device and a topical anesthetic procedure
      tray for usage with OTC 4% topical lidocaine. However, OTC 4% topical lidocaine
      has not yet been approved by the FDA for the indications covered by the
      Company’s 510(k) marketing clearance, namely needle sticks or venipuncture. The
      FDA may require an NDA in order for Sontra to continue to market OTC 4% topical
      lidocaine for dermal anesthesia prior to the insertion of needles or intravenous
      catheters.




The
      Company intends to continue to market the SonoPrep Topical Anesthetic System
      pursuant to its 510(k) marketing clearance; however if the FDA determines that
      approval of the NDA is required, the FDA may determine to limit, restrict or
      delay our ability to market the system, or may rescind our 510(k) marketing
      clearance. If the FDA determines that an NDA is required, it is likely that
      our
      510(k) marketing clearance would be rescinded, which would have a material
      adverse effect on our business and results of operations.




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**We
      must regain compliance with the listing requirements of Nasdaq or we will be
      delisted.**




Our
      Common Stock is currently listed for trading on the Nasdaq Capital Market.
      We
      must continue to satisfy Nasdaq’s continued listing requirements, including the
      minimum $2.5 million shareholder equity requirement and the $1 minimum closing
      bid price requirement, or risk delisting which would have an adverse effect
      on
      the Company’s business.





On
      November 23, 2005, we received notice from Nasdaq that the Company is not in
      compliance with the $1 minimum closing bid price requirement for continued
      listing on the Nasdaq Capital Market, as the bid price of our Common Stock
      closed below $1 per share for 30 consecutive business days.  In accordance
      with Nasdaq rules, if at any time before May 22, 2006 the bid price of our
      Common Stock closes at or above $1 per share for a minimum of ten consecutive
      business days, the Company will be provided written notice that it has regained
      compliance with the minimum bid price requirement. Based on our current stock
      price we do not expect that we will be in compliance with such $1 minimum
      closing bid price requirement by May 22, 2006 and we expect to then receive
      a
      notice from Nasdaq that our Common Stock will be delisted. We expect that
      we will then file an appeal with Nasdaq if we obtain such a notice. 
In addition, our Board of Directors has adopted resolutions, subject to
      shareholder approval at our annual meeting of shareholders to be held on May
      23,
      2006, to allow the Board to effect, in its discretion, a 1-for-10 or a 1-for-5
      reverse stock split of our Common Stock in the event that it determines that
      such reverse stock split is appropriate and in the best interests of the Company
      and its shareholders.




If
      the
      Company’s Common Stock is delisted from the Nasdaq Capital Market, it may trade
      on the over-the-counter market, which may be a less liquid market. In such
      case,
      our shareholders’ ability to trade, or obtain quotations of the market value of,
      shares of Sontra’s Common Stock would be severely limited because of lower
      trading volumes and transaction delays. These factors could contribute to lower
      prices and larger spreads in the bid and ask prices for our Common Stock. In
      addition, the delisting of the Common Stock from the Nasdaq Capital Market
      may
      impair our ability to raise capital in the public markets in the future.





**Our
      potential markets are highly competitive and most participants are larger,
      better capitalized, and more experienced than Sontra.**




The
      markets in which our products are and may be marketed and sold are intensely
      competitive, subject to rapid change and significantly affected by new product
      introductions. Our continuous transdermal glucose monitoring system will compete
      directly with glucose monitoring products from Roche Diagnostics, LifeScan,
      Inc., a division of Johnson & Johnson, Bayer Corporation, MediSense, a
      division of Abbott Laboratories, Medtronic, Inc., Dexcom, SpectRx and
      TheraSense, Inc. The Company’s SonoPrep ® device
      will also compete with numerous companies developing drug delivery products
      such
      as Nektar Therapeutics, Alkermes, Inc., Bioject, Inc., PowderJect
      Pharmaceuticals PLC, Antares Pharma, Inc., Becton Dickinson & Co., Aerogen,
      Inc., ALZA Corporation, a division of Johnson & Johnson, Norwood Abbey
      Limited, Vyteris, Iomed and 3M Company. In the topical lidocaine market, Sontra
      competes with the existing topical lidocaine products manufactured by Astra
      and
      others, and also competes with Norwood Abbey, who has received clearance from
      the FDA to market a laser poration device and Vyteris, who has received FDA
      approval to market an iontophoretic device.




Most
      of
      these companies are already producing and marketing glucose monitoring or drug
      delivery products, are either publicly traded or a division of a publicly traded
      company, and enjoy several competitive advantages over the Company. In addition,
      several of our competitors have products in various stages of development and
      commercialization similar to our SonoPrep ® device
      and our continuous transdermal glucose monitoring system. At any time, these
      companies and others may develop products that compete directly with our
      proposed product concepts. In addition, Bayer has retained co-exclusive rights
      to the hospital ICU market and may compete with the Company in such market.
      Many
      of our competitors have resources allowing them to spend significantly greater
      funds for the research, development, marketing and sale of new or existing
      products, thereby allowing them to respond more quickly to new or emerging
      technologies and changes in customer requirements. For all of the foregoing
      reasons, we may not be able to compete successfully against our current and
      future competitors. If any of our competitors succeeds in developing a
      commercially viable product and obtaining government approval, our competitive
      position may be materially adversely affected.








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**A
      substantial portion of the intellectual property used by the Company is owned
      by
      the Massachusetts Institute of Technology.**




We
      have
      an exclusive worldwide license from the Massachusetts Institute of Technology
      (MIT) under certain licensed patents to practice our ultrasound-mediated skin
      permeation technology. These licensed patents, which include eight issued
      patents in the United States, three issued foreign patents, two pending U.S.
      patents and three pending foreign patent applications, comprises a substantial
      portion of our patent portfolio relating to our technology.




While,
      under the license agreement, we have the right to advise and cooperate with
      MIT
      in the prosecution and maintenance of the foregoing patents, we do not control
      the prosecution of such patents. Instead, the Company relies upon MIT to
      determine the appropriate strategy for prosecuting these patents. If MIT does
      not adequately protect our patent rights, our ability to manufacture and market
      our products, currently in various stages of development, would be adversely
      affected.




**We
      will need to protect the proprietary information on which our
      SonoPrep** **®** **technology relies.**




In
      addition to the exclusive license from MIT, as of March 31, 2006 we owned four
      issued patents and six pending patent applications in the United States and
      two
      foreign patent and fifteen pending foreign applications. We can provide no
      assurance that patents will be issued from the patent applications, or, if
      issued, that they will be issued in a form that will be advantageous to the
      Company.




There
      can
      be no assurance that one or more of the patents owned or licensed by the Company
      will not be successfully challenged, invalidated or circumvented or that we
      will
      otherwise be able to rely on such patents for any reason. If any of our patents
      or any patents licensed from MIT are successfully challenged or our right or
      ability to manufacture our products or future products (if successfully
      developed and commercialized) were to be limited, our ability to manufacture
      and
      market these products could be adversely affected, which would have a material
      adverse effect upon our business, financial condition and results of operations.




In
      addition to patent protection, we rely on a combination of copyright, trade
      secret and trademark laws, and nondisclosure, confidentiality agreements and
      other contractual restrictions to protect our proprietary technology. However,
      these legal means afford only limited protection and may not adequately protect
      the rights or competitive advantage of the Company. We may not be able to
      prevent the unauthorized disclosure or use of our technical knowledge or other
      trade secrets by our employees. Nondisclosure and confidentiality agreements
      with third parties may be breached, and there is no assurance that the Company
      would have adequate remedies for any such breach.




If
      we
      fail to protect our intellectual property rights, our competitors may take
      advantage of our ideas and compete directly against the Company. There can
      be no
      assurance that competitors, many of whom have substantial resources and have
      made substantial investments in competing technologies, will not seek to apply
      for and obtain patents that limit our ability to make, use and sell our products
      either in the United States or in foreign markets. Furthermore, if our
      intellectual property is not adequately protected, our competitors may be able
      to use our intellectual property to enhance their products and compete more
      directly with the Company, which could prevent us from entering our products
      into the market or result in a decrease in our eventual market share.




**We
      have limited manufacturing experience, which could limit our growth.**




To
      successfully commercialize our SonoPrep skin permeation technology we will
      have
      to manufacture or engage others to manufacture the particular device in
      compliance with regulatory requirements. We have limited manufacturing
      experience and resources that would enable us to make products in the volumes
      that would be necessary for us to achieve significant commercial sales, and
      there can be no assurance that we will be able to establish and maintain
      reliable, efficient, full scale manufacturing at commercially reasonable costs,
      in a timely fashion. There are technical challenges to increasing manufacturing
      capacity, including equipment design, materials procurement, problems with
      production yields, quality control and assurance and compliance with
      environmental regulations. Developing and scaling manufacturing facilities
      will
      require the investment of substantial additional funds and is subject to risks
      and uncertainties, including suitability of facility space, design, installation
      and maintenance of equipment and increased management responsibility.
      Difficulties we encounter in manufacturing scale-up, or our failure to implement
      and subsequently maintain our manufacturing facilities in accordance with good
      manufacturing practice regulations, international quality standards or other
      regulatory requirements, could result in a delay or termination of production.




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**We
      may be subject to litigation or other proceedings relating to our intellectual
      property rights.**




The
      medical device industry has experienced extensive litigation regarding patents
      and other intellectual property rights. Third parties could assert infringement
      or misappropriation claims against us with respect to our products. Any
      litigation or interference proceedings involving the Company may require us
      to
      incur substantial legal and other fees and expenses. Such proceedings would
      also
      be time consuming and can be a significant distraction for employees and
      management, resulting in slower product development and delays in
      commercialization. In addition, an adverse determination in litigation or
      interference proceedings could subject the Company to significant liabilities
      to
      third parties, require us to obtain licenses from third parties or prevent
      us
      from selling our products in certain markets, or at all, which would have a
      material adverse effect on our reputation, business, financial condition and
      results of operations.




**We
      operate in an industry with significant product liability risk.**




Our
      business will expose us to potential product liability claims that are inherent
      in the testing, production, marketing, sale and usage of human diagnostic and
      ultrasonic transdermal drug delivery products. Claims may be made by patients,
      healthcare providers or distributors of our products. Although we have product
      liability insurance that we believe is appropriate, this insurance is subject
      to
      deductibles and coverage limitations and may not be adequate to protect us
      against all product liability claims. If we are unable to maintain insurance
      at
      an acceptable cost or on acceptable terms with adequate coverage or otherwise
      protect against potential product liability claims, we will be exposed to
      significant liabilities, which may harm our business. A product liability claim,
      recall or other claim with respect to uninsured liabilities or for amounts
      in
      excess of insured liabilities could result in significant costs and significant
      harm to our business. A product liability claim in excess of our product
      liability insurance would have to be paid out of our cash reserves, if any,
      and
      would harm our reputation in the industry and adversely affect our ability
      to
      raise additional capital. In addition, defending a suit, regardless of merit,
      could be costly, could divert management attention and might result in adverse
      publicity, which would adversely affect our business and financial condition.




**Our
      stock price has been volatile and may fluctuate in the future.**




The
      trading price of our Common Stock may fluctuate significantly. This price may
      be
      influenced by many factors, including:




•
            
            our
                financial condition, performance and prospects;




•
            
            the
                depth and liquidity of the market for our Common Stock;




•
            
            our
                ability to enter into successful collaborative arrangements with
                strategic
                partners for research and development, clinical testing, and sales
                and
                marketing;




•
            
            sales
                by selling shareholders of shares issued and issuable in connection
                with
                our private placements in 2003, 2004 and 2006;




•
            
            investor
                perception of us and the industry in which we operate;




•
            
            general
                financial and other market conditions; and




•
            
            domestic
                and international economic conditions.




Public
      stock markets have experienced extreme price and trading volume volatility,
      particularly in the technology and life sciences sectors of the market. This
      volatility has significantly affected the market prices of securities of many
      technology companies for reasons frequently unrelated to or disproportionately
      impacted by the operating performance of these companies. These broad market
      fluctuations may adversely affect the market price of our Common Stock. In
      addition, fluctuations in our stock price may have made our stock attractive
      to
      momentum, hedge or day-trading investors who often shift funds into and out
      of
      stocks rapidly, exacerbating price fluctuations in either direction particularly
      when viewed on a quarterly basis.




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**Securities
      we issue to fund our operations could dilute or otherwise adversely affect
      our
      shareholders.**




We
      will
      likely need to raise additional funds through public or private debt or equity
      financings to fund our operations. If we raise funds by issuing equity
      securities, the percentage ownership of current shareholders will be
      significantly reduced and the new equity securities may have rights senior
      to
      those of the shares of our Common Stock. If we raise funds by issuing debt
      securities, we may be required to agree to covenants that substantially restrict
      our ability to operate our business. We may not obtain sufficient financing
      on
      terms that are favorable to investors or us. We may delay, limit or eliminate
      some or all of our proposed operations if adequate funds are not available.




In
      addition, upon issuance of the shares of Common Stock issuable upon conversion
      of the outstanding shares of Series A Preferred Stock and the exercise of
      outstanding warrants, the percentage ownership of current shareholders will
      be
      diluted substantially.




**The
      availability of preferred stock for issuance may adversely affect our
      shareholders.**




Our
      Articles of Incorporation, as amended, authorize our Board of Directors to
      fix
      the rights, preferences and privileges of, and issue up to 10,000,000 shares
      of,
      preferred stock with voting, conversion, dividend and other rights and
      preferences that could adversely affect the voting power or other rights of
      our
      shareholders. An aggregate of 7,000,000 shares of Series A Preferred Stock
      were
      issued in our private placement in 2003, of which 73,334 shares were issued
      and
      outstanding as of March 31, 2006. The issuance of additional preferred stock
      or
      rights to purchase preferred stock may have the effect of delaying or preventing
      a change in control of the Company. In addition, the possible issuance of
      additional preferred stock could discourage a proxy contest, make more difficult
      the acquisition of a substantial block of the Company’s Common Stock or limit
      the price that investors might be willing to pay for shares of the Company’s
      Common Stock.




**Anti-takeover
      effects of Minnesota law could discourage, delay or prevent a change in control.**




As
      a
      publicly traded company, we are prohibited by the Minnesota Business Corporation
      Act, except under certain specified circumstances, from engaging in any merger,
      significant sale of stock or assets or business combination with any shareholder
      or group of shareholders who own at least 10% of our Common Stock.





**Item
      3. Controls and Procedures**




***Disclosure
      Controls and Procedures.*** Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end
      of
      the period covered by this report. Based on that evaluation, our Chief Executive
      Officer and Chief Financial Officer concluded that our disclosure controls
      and
      procedures as of the end of the period covered by this report were effective
      in
      ensuring that information required to be disclosed by us in reports that we
      file
      or submit under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the Securities and Exchange Commission’s
      rules and forms.




***Internal
      Control Over Financial Reporting.*** There
      was no change in our internal control over financial reporting (as defined
      in
      Rule 13a-15(f) of the Exchange Act) that occurred during the fiscal quarter
      to
      which this report relates that has materially affected, or is reasonably likely
      to materially affect, our internal control over financial reporting.








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**PART
      II: OTHER INFORMATION**








**Item
      2. UnregisteredSales of Equity Securities and Use of Proceeds**





*2006
      Private Placement*





On
      March
      7, 2006 and March 16, 2006, the Company completed a financing (the “Financing”)
      with selected qualified purchasers that provided the Company with net proceeds
      of approximately $1.6 million pursuant to the terms of a Common Stock and
      Warrant Purchase Agreement, dated as of March  7, 2006 (the
“Purchase Agreement”). Under the terms of the Purchase Agreement, investors
      purchased 4,456,354 shares of the Company’s Common Stock in a private
      placement at a per share purchase price of $0.40. The investors also received
      warrants (the “Warrants”) to purchase up to 4,456,354 shares of Common Stock.
      The Warrants are exercisable beginning six months from the issue date at a
      per
      share price of $0.58 and will expire no later than the fifth anniversary of
      the
      issue date. In addition, the Company shall have the right to terminate the
      Warrants, upon thirty days notice, in the event that the closing price of the
      Company’s common stock for twenty consecutive trading days is equal to or
      greater than $1.16 per share.  In the Financing, a trust for the
      benefit of the children of Michael R. Wigley, Chairman of the Board of Directors
      of the Company, purchased 375,000 shares of Common Stock and Warrants for the
      purchase of 375,000 shares of Common Stock, for an aggregate purchase price
      of
      $150,000.00. The Company intends to use the net proceeds from the Financing
      for
      working capital and general corporate purposes.





The
      Company agreed to pay to the placement agent for the Financing for its services:
      (a) a cash fee equal to 7% of the aggregate capital raised by the Company from
      investors introduced to the Company by the placement agent, excluding the
      proceeds from any Warrant exercises; (b) warrants to purchase a number of shares
      of Common Stock of the Company equal to 7% of the total number of shares of
      Common Stock issued to investors introduced to the Company by the placement
      agent, excluding shares of Common Stock to be issued upon Warrant exercises
      or
      in connection with the payment of dividends or interest, on the identical terms
      and conditions (including exercise price) with the Warrants issued to the
      investors in the Financing; and (c) a $25,000 legal expense
      allowance.





The
      shares of Common Stock and the warrants to purchase shares of Common Stock
      were
      issued and sold in reliance on Section 4(2) of the Securities Act of 1933,
      as
      amended, and Rule 506 of Regulation D promulgated thereunder, as a sale by
      the
      Company not involving a public offering. No underwriters were involved with
      the
      issuance and sale of such securities in the Financing.





We
      did
      not repurchase any shares of Common Stock during the first quarter of fiscal
      2006.







**Item
      5. Other Information**




During
      the first quarter of fiscal 2006, we made no material changes to the procedures
      by which shareholders may recommend nominees to our Board of Directors, as
      described in our most recent proxy statement.







**Item
      6. Exhibits**




The
      Exhibits listed in the Exhibit Index immediately preceding such Exhibits are
      filed with or incorporated by reference in this report.




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**SIGNATURES**




In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      Registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




SONTRA
                MEDICAL CORPORATIONDate:
                May 11, 2006
            
            By:
            
            /s/
                THOMAS W. DAVISON**Thomas
                W. Davison**
              **President
                and Chief Executive Officer**Date:
                May 11, 2006
            
            By:
            
            /s/
                SEAN F. MORAN**Sean
                F. Moran**
              **Chief
                Financial Officer**







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**EXHIBIT
      INDEX**




10.1
            
            Common
                Stock and Warrant Purchase Agreement, dated as of March 7, 2006,
                by and
                among the Company and the investors listed on Schedule 1 thereto
                is
                incorporated herein by reference to Exhibit 99.1 to the Registrant’s
                Current Report on Form 8-K dated March 7, 2006 (File No.
                000-23017).10.2
            
            Form
                of Common Stock Purchase Warrant is incorporated herein by reference
                to
                Exhibit 99.2 to the Registrant’s Current Report on Form 8-K dated March 7,
                2006 (File No. 000-23017).31.1
            
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                of the Chief Executive Officer 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 pursuant to 18 U.S.C. Section 1350,
                as
                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.






24