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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended June 30, 2003



Commission File Number: 000-23017



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SONTRA MEDICAL CORPORATION

(Exact name of registrant 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                                      
|----------------------------------------------------
|                                                    
|(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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 ̈



As of August 11, 2003, the Registrant had 9,458,917 shares of Common Stock outstanding.



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



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##### Table of Contents

SONTRA MEDICAL CORPORATION



FORM 10-QSB
INDEX



|                                                                                                                                                                                       |  | PageNumber
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------
|Part IFinancial Information                                                                                                                                                           |  |           
|                                                                                                                                                                                       | 
|Item 1.    Consolidated Financial Statements                                                                                                                                           |  |           
|                                                                                                                                                                                       | 
|Consolidated Balance Sheets as of June 30, 2003 (Unaudited) and December 31, 2002                                                                                                      |  | 3         
|                                                                                                                                                                                       | 
|Consolidated Statements of Loss for the Three and Six Months Ended June 30, 2003 and 2002 and for the Cumulative Period from Inception (January 29, 1996) to June 30, 2003 (Unaudited) |  | 4         
|                                                                                                                                                                                       | 
|Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 and for the Cumulative Period from Inception (January 29, 1996) to June 30, 2003 (Unaudited)     |  | 5         
|                                                                                                                                                                                       | 
|Notes to Consolidated Financial Statements (Unaudited)                                                                                                                                 |  | 6         
|                                                                                                                                                                                       | 
|Item 2.    Managements Discussion and Analysis or Plan of Operation                                                                                                                   |  | 11        
|                                                                                                                                                                                       | 
|Item 3.    Controls and Procedures                                                                                                                                                     |  | 18        
|                                                                                                                                                                                       | 
|Part IIOther Information                                                                                                                                                              |  |           
|                                                                                                                                                                                       | 
|Item 1.    Legal Proceedings                                                                                                                                                           |  | 18        
|                                                                                                                                                                                       | 
|Item 4.    Submission of Matters to a Vote of Security Holders                                                                                                                         |  | 18        
|                                                                                                                                                                                       | 
|Item 6.    Exhibits and Reports on Form 8-K                                                                                                                                            |  | 19        
|                                                                                                                                                                                       | 
|Signatures                                                                                                                                                                             |  | 20        



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##### Table of Contents

SONTRA MEDICAL CORPORATION

(A Development Stage Company)

Consolidated Balance Sheets



|                                                                                                                                                                                                                   |  | As of         |            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | -----------
|                                                                                                                                                                                                                   |  | June 30, 2003 |            
|                                                                                                                                                                                                                   |  | (Unaudited)   |            
|ASSETS                                                                                                                                                                                                             |  |               |            
|Current Assets:                                                                                                                                                                                                    |  |               |            
|Cash and cash equivalents                                                                                                                                                                                          |  | $             | 674,811    
|Prepaid expenses and other current assets                                                                                                                                                                          |  |               | 44,480     
|                                                                                                                                                                                                                   |  |               |            
|Total current assets                                                                                                                                                                                               |  |               | 719,291    
|                                                                                                                                                                                                                   |  |               |            
|Property and Equipment, at cost                                                                                                                                                                                    |  |               |            
|Computer equipment                                                                                                                                                                                                 |  |               | 162,407    
|Office and laboratory equipment                                                                                                                                                                                    |  |               | 406,495    
|Furniture and fixtures                                                                                                                                                                                             |  |               | 14,288     
|Leasehold improvements                                                                                                                                                                                             |  |               | 161,802    
|                                                                                                                                                                                                                   |  |               |            
|                                                                                                                                                                                                                   |  |               | 744,992    
|                                                                                                                                                                                                                   |  |              
|Less-accumulated depreciation and amortization                                                                                                                                                                     |  |               | (430,477   
|                                                                                                                                                                                                                   |  |               |            
|Net property and equipment                                                                                                                                                                                         |  |               | 314,515    
|Restricted Cash                                                                                                                                                                                                    |  |               | 148,746    
|Other Assets                                                                                                                                                                                                       |  |               |           
|                                                                                                                                                                                                                   |  |               |            
|Total Assets                                                                                                                                                                                                       |  | $             | 1,182,552  
|                                                                                                                                                                                                                   |  |               |            
|                                                                                                                                                                                                                   |  |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                               |  |               |            
|Current Liabilities:                                                                                                                                                                                               |  |               |            
|Accounts payable                                                                                                                                                                                                   |  | $             | 577,697    
|Accrued expenses                                                                                                                                                                                                   |  |               | 546,052    
|                                                                                                                                                                                                                   |  |               |            
|Total current liabilities                                                                                                                                                                                          |  |               | 1,123,749  
|                                                                                                                                                                                                                   |  |               |            
|                                                                                                                                                                                                                   |  |              
|Stockholders Equity:                                                                                                                                                                                              |  |               |            
|Common stock, $0.01 par value, Authorized 40,000,000 shares at June 30, 2003 and20,000,000 shares at December 31, 2002, issued
and outstanding 9,387,595 sharesat June 30, 2003 and 9,355,880 at December 31, 2002 |  |               | 93,876     
|Additional paid-in capital                                                                                                                                                                                         |  |               | 17,960,335 
|Deferred stock-based compensation                                                                                                                                                                                  |  |               | (423,253   
|Subscriptions receivable                                                                                                                                                                                           |  |               | (17,294    
|Deficit accumulated during the development stage                                                                                                                                                                   |  |               | (17,554,861
|                                                                                                                                                                                                                   |  |               |            
|Total stockholders equity                                                                                                                                                                                         |  |               | 58,803     
|                                                                                                                                                                                                                   |  |               |            
|Total liabilities and stockholders equity                                                                                                                                                                         |  | $             | 1,182,552  
|                                                                                                                                                                                                                   |  |               |            



The accompanying
notes are an integral part of these consolidated financial statements.



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##### Table of Contents

SONTRA MEDICAL CORPORATION

(A Development Stage Company)

Consolidated Statements of Loss

(Unaudited)



|                                                            |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |   |            | Cumulative PeriodFrom Inception(January 29, 1996)to June 30, 2003 | 
|----------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ----------------------------------------------------------------- | 
|                                                            |  | 2003                        |            |   | 2002                      |   |            | 2003                                                              | 
|Revenue                                                     |  | $                           |           |   |                           | $ |           |                                                                   | 
|                                                            |  |                             |            |   |                          
|Operating Expenses:                                         |  |                             |            |   |                           |   |            |                                                                   | 
|Research and development                                    |  |                             | 432,496    |   |                           |   | 426,255    |                                                                   | 
|General and administrative                                  |  |                             | 631,792    |   |                           |   | 621,296    |                                                                   | 
|                                                            |  |                             |            |   |                           |   |            |                                                                   | 
|Total operating expenses                                    |  |                             | 1,064,288  |   |                           |   | 1,047,551  |                                                                   | 
|                                                            |  |                             |            |   |                           |   |            |                                                                   | 
|Loss from operations                                        |  |                             | (1,064,288 | ) |                           |   | (1,047,551 | )                                                                 | 
|                                                            |  |                             |            |   |                          
|Interest income                                             |  |                             | 3,031      |   |                           |   | 1,596      |                                                                   | 
|Interest expense                                            |  |                             |           |   |                           |   |           |                                                                   | 
|                                                            |  |                             |            |   |                           |   |            |                                                                   | 
|Net loss                                                    |  |                             | (1,061,257 | ) |                           |   | (1,045,955 | )                                                                 | 
|                                                            |  |                             |            |   |                          
|Accretion of dividend on Series B                           |  |                             |            |   |                           |   |            |                                                                   | 
|Redeemable Convertible Preferred Stock                      |  |                             |           |   |                           |   | (53,126    | )                                                                 | 
|                                                            |  |                             |            |   |                           |   |            |                                                                   | 
|Net loss applicable to common shareholders                  |  | $                           | (1,061,257 | ) |                           | $ | (1,099,081 | )                                                                 | 
|                                                            |  |                             |            |   |                           |   |            |                                                                   | 
|Net loss per common share, basic and diluted                |  | $                           | (0.11      | ) |                           | $ | (0.27      | )                                                                 | 
|                                                            |  |                             |            |   |                           |   |            |                                                                   | 
|Basic and diluted weighted average commonshares outstanding |  |                             | 9,376,808  |   |                           |   | 4,028,525  |                                                                   | 
|                                                            |  |                             |            |   |                           |   |            |                                                                   | 



The accompanying
notes are an integral part of these consolidated financial statements.



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##### Table of Contents

SONTRA MEDICAL CORPORATION

(A Development Stage Company)

Consolidated Statements of Cash Flows

|                                                                             |  | Six Months Ended June 30, |            |   | Cumulative PeriodFrom Inception(January 29, 1996)to June 30, 2003 |  
|---------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ----------------------------------------------------------------- | -
|                                                                             |  | 2003                      |            |   | 2002                                                              |  
|                                                                             |  | (unaudited)               |            |   | (unaudited)                                                       |  
|Cash Flows From Operating Activities:                                        |  |                           |            |   |                                                                   |  
|Net loss                                                                     |  | $                         | (2,011,936 | ) |                                                                   | $
|Adjustments to reconcile net loss to net cash used in operating activities:  |  |                           |            |   |                                                                   |  
|Depreciation and amortization                                                |  |                           | 87,068     |   |                                                                   |  
|Gain on sale of property and equipment                                       |  |                           | (4,239     | ) |                                                                   |  
|Stock based compensation                                                     |  |                           | 52,107     |   |                                                                   |  
|Stock issued to 401(k) plan                                                  |  |                           | 21,494     |   |                                                                   |  
|Amortization of discount on convertible promissory notes                     |  |                           |           |   |                                                                   |  
|Changes in assets and liabilities:                                           |  |                           |            |   |                                                                   |  
|Prepaid expenses and other current assets                                    |  |                           | 93,974     |   |                                                                   |  
|Accounts payable                                                             |  |                           | 408,329    |   |                                                                   |  
|Accrued expenses                                                             |  |                           | 5,121      |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Net cash used in operating activities                                        |  |                           | (1,348,082 | ) |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|                                                                             |  |                           |           
|Cash Flows from Investing Activities:                                        |  |                           |            |   |                                                                   |  
|Purchase of property and equipment                                           |  |                           | (218,307   | ) |                                                                   |  
|Sale of fixed assets                                                         |  |                           | 16,300     |   |                                                                   |  
|(Increase) decrease in restricted cash                                       |  |                           | (48,746    | ) |                                                                   |  
|Decrease in other assets                                                     |  |                           | 31,675     |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Net cash used in investing activities                                        |  |                           | (219,078   | ) |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|                                                                             |  |                           |           
|Cash Flows From Financing Activities                                         |  |                           |            |   |                                                                   |  
|Proceeds from equipment loan                                                 |  |                           |           |   |                                                                   |  
|Repayment of equipment loan                                                  |  |                           |           |   |                                                                   |  
|Net proceeds from the sale of common stock                                   |  |                           |           |   |                                                                   |  
|Cash received and adjustments to net assets related to ChoiceTel merger      |  |                           |           |   |                                                                   |  
|Net proceeds from the sale of preferred stock                                |  |                           |           |   |                                                                   |  
|Proceeds from issuance of Series B stock                                     |  |                           |           |   |                                                                   |  
|Proceeds from stock option exercise                                          |  |                           | 10,867     |   |                                                                   |  
|Distribution to shareholders                                                 |  |                           |           |   |                                                                   |  
|Payment of subscription receivable                                           |  |                           |           |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Net cash provided by financing activities                                    |  |                           | 10,867     |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Net Increase (Decrease) in Cash and cash equivalents                         |  |                           | (1,556,293 | ) |                                                                   |  
|Cash and cash equivalents, beginning of period                               |  |                           | 2,231,104  |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Cash and cash equivalents, end of period                                     |  | $                         | 674,811    |   |                                                                   | $
|                                                                             |  |                           |            |   |                                                                   |  
|                                                                             |  |                           |           
|Supplemental Disclosure of Non Cash Financing Transactions:                  |  |                           |            |   |                                                                   |  
|Conversion of note in Series A pfd stock                                     |  |                           |           |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Conversion of note in Series B pfd stock                                     |  |                           |           |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Accretion of dividend on Series B pfd stock                                  |  |                           |           |   |                                                                   | $
|                                                                             |  |                           |            |   |                                                                   |  
|Issuance of common stock in connection with the convertible promissory notes |  |                           |           |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Beneficial conversion feature on convertible promissory notes                |  |                           |           |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Conversion of Series A and B Preferred Stock into common stock               |  |                           |           |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  
|Supplemental Disclosure of Cash Flow Information:                            |  |                           |            |   |                                                                   |  
|Cash paid for interest                                                       |  |                           |           |   |                                                                   |  
|                                                                             |  |                           |            |   |                                                                   |  



The accompanying
notes are an integral part of these consolidated financial statements.





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SONTRA MEDICAL CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

June 30, 2003

(Unaudited)



(1)    ORGANIZATION AND BASIS OF PRESENTATION



On June 20, 2002, the Company (previously operating under the name ChoiceTel Communications, Inc. (ChoiceTel)) consummated the 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. For accounting purposes, the Merger was treated as a capital transaction and a recapitalization, whereby the historical financial statements of SMI became the historical financial
statements of the Company. Accordingly, from an historical accounting perspective, the period from inception for the Company begins on January 29, 1996, upon the inception of SMI. The accounting treatment for the recapitalization is similar to that
resulting from a business combination, except that goodwill and other intangible assets were not recorded. Because the financial statements of the Company presented above only reflect the historical results of SMI prior to the Merger, and of the
combined entities following the Merger, they do not include the historical financial results of ChoiceTel prior to the consummation of the Merger on June 20, 2002. Accordingly, the financial statements may not be indicative of future results of
operations or the historical results that would have resulted if the Merger had occurred at the beginning of a historical financial period.



The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission (the SEC). These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, SMI. All significant inter-company balances and transactions have been
eliminated in consolidation. These financial statements should be read in conjunction with the Companys audited financial statements and related footnotes for the fiscal year ended December 31, 2002, which are included in the Companys
Annual Report on Form 10-KSB filed with the SEC on March 31, 2003. In the opinion of the Companys management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial
statements and include all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Companys financial position as of June 30, 2003 and the results of operations and cash flows for the three months and six
months ended June 30, 2003 and 2002. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the
relevant SEC rules and regulations. However, the Company believes that its disclosures are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results of
operations for the full fiscal year or any other interim period.



The Company is a development stage medical device 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 Companys cash and cash equivalents balance was approximately $675,000 at June 30, 2003 and as of this date current liabilities exceeded its current assets by $405,000. The
Company will need an immediate infusion of cash to continue its operations. The Company is actively seeking to procure additional financing or investment, or strategic investment, adequate to fund its ongoing operations. (See Note 6). If the Company
is not able to raise substantial additional capital before September 30, 2003, via a private financing or investment, strategic partnership or otherwise, it will not be able to continue its operations. The uncertainty related to procuring additional
financing caused the Companys auditor, in their audit report on the financial statements for the year ended December 31, 2002, to raise substantial doubt about the Companys ability to continue as a going concern. The accompanying
financial statements do not include any adjustments that might result from the outcome of this uncertainty.



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SONTRA MEDICAL CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

June 30, 2003

(Unaudited)



(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 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 reported amounts of expenses 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 recoverability of long-lived assets, value of intellectual property and the realizability of
deferred tax assets.



(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 primarily of money market funds as of June 30, 2003 and December 31, 2002.



(c)    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 years               |  |  |  |  |  | 
|Office and laboratory equipment |  | 3-5 years             |  |  |  |  |  | 
|Furniture and fixtures          |  | 7 years               |  |  |  |  |  | 
|Leasehold improvements          |  | Life of lease         |  |  |  |  |  | 



(d)    Merger
Ratio



On June 20, 2002, in connection with the Merger
Agreement with SMI, SMIs stockholders approved a merger ratio in which 0.1927 shares of the Companys common stock were issued for each share of SMIs common stock. All common stock information presented herein has been retroactively
adjusted to reflect the 0.1927 merger ratio (see Note 3).



(e)    Stock-Based Compensation



In December 2002, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation Transition and Disclosure, an Amendment of FASB Statement No. 123.
This Statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends disclosure requirements to require prominent
disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.



SFAS No. 123, Accounting for Stock-Based Compensation encourages all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also
allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation cost
is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Companys stock option plans generally have
no intrinsic value at the grant date, and under Opinion No. 25 no compensation cost is recognized for them.





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SONTRA MEDICAL CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

June 30, 2003

(Unaudited)



The Company does not plan to adopt
the fair value accounting model for stock-based employee compensation under SFAS No. 123. The Company applies Opinion No. 25 and related interpretations in accounting for stock options issued to employees, consultants 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 June 30, |            |   | Six months ended June 30, |  
|------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | -
|                                                                                                        |  | 2003                        |            |   | 2002                      |  
|                                                                                                        |  | (unaudited)                 |            |   | (unaudited)               |  
|                                                                                                        |  |                             |            |  
|Net loss, as reported                                                                                   |  | $                           | (1,061,257 | ) |                           | $
|Add: stock-based employee compensation expense included inreported loss                                 |  |                             | 203,262    |   |                           |  
|Deduct: Total stock-based employee compensation determinedunder fair value based methods for all awards |  |                             | (187,252   | ) |                           |  
|                                                                                                        |  |                             |            |   |                           |  
|Pro forma net loss                                                                                      |  | $                           | (1,045,247 | ) |                           | $
|                                                                                                        |  |                             |            |   |                           |  
|Basic and diluted net loss per common shareas reported                                                 |  | $                           | (0.11      | ) |                           | $
|                                                                                                        |  |                             |            |   |                           |  
|Basic and diluted net loss per common sharepro forma                                                   |  | $                           | (0.11      | ) |                           | $
|                                                                                                        |  |                             |            |   |                           |  



In 1997, the Company
adopted the 1997 Long-term Incentive and Stock Option Plan (the 1997 Plan). Pursuant to the 1997 Plan, the Board of Directors (or committees and/or executive officers delegated by the Board) may grant incentive and nonqualified stock
options to the Companys employees, officers, directors, consultants and advisors. The Company has reserved an aggregate of 1,500,000 shares of common stock for issuance upon exercise of options granted under the 1997 Plan. As of June 30, 2003,
there were options to purchase an aggregate of 1,394,281 shares of common stock outstanding under the 1997 Plan, and 27,179 shares available for option grants thereunder.



In connection with the Merger, the Company assumed all outstanding options under the 1999 Sontra Medical, Inc. Stock Option
and Incentive Plan (the 1999 Plan). The Company may not grant any additional options under the 1999 Plan. The Company assumed options to purchase an aggregate of 845,172 shares of common stock under the 1999 Plan. As of June 30, 2003,
there were options to purchase an aggregate of 765,177 shares of common stock outstanding under the 1999 Plan.



In 2003, the Company adopted the 2003 Stock Option and Incentive Plan (the 2003 Plan). Pursuant to the 2003 Plan, the Board of Directors (or
committees and/or executive officers delegated by the Board) may grant incentive and nonqualified stock options, restricted stock and other stock-based awards to the Companys employees, officers, directors, consultants and advisors. The
Company has initially reserved an aggregate of 750,000 shares of common stock for issuance upon exercise of options granted under the 2003 Plan. The 2003 Plan provides that the number of shares authorized for issuance will automatically increase
each January 1 (beginning in 2004) by the greater of 4% of the outstanding number of shares of common stock on the immediately preceding December 31 or the aggregate number of shares made subject to equity-based awards during the one year prior to
such January 1;  or, in either case, such lesser number as may be approved by the Board. The maximum aggregate number of shares that may be authorized for issuance under the 2003 Plan for all periods is 2,500,000. As of June 30, 2003, there
were options to purchase an aggregate of 290,000 shares of common stock outstanding under the 2003 Plan, and 460,000 shares available for option grants thereunder.



On July 24, 2002 the Company granted an option to purchase 50,000 shares of common stock to a member of the Scientific
Advisory Board with a four year vesting schedule. On May 21, 2003 the Company granted an option to purchase 50,000 shares of common stock to a member of the Scientific Advisory Board with a four year vesting schedule. The Company re-measures the
fair value of these options each quarter using the Black-Scholes option pricing model and records the corresponding non-cash expense throughout the vesting period of these options. As a result, for the quarter ended June 30, 2003, the Company
increased additional paid-in capital and deferred compensation by $99,000 and $85,000, respectively, and recorded a non-cash compensation charge in the Statement of Loss of $14,000.



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##### Table of Contents

SONTRA MEDICAL CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

June 30, 2003

(Unaudited)



On September 23, 2002, the Company
repriced and/or exchanged certain options previously granted, pursuant to the Plans, to the Chief Executive Officer and Chief Financial Officer, which relate to a total of 850,000 shares of the Companys common stock. The new exercise prices
for these options are between $.5189 and $2.55 per share. As a result, the Company records the compensation expense over the vesting period and re-measures the intrinsic value of these options each period throughout the life of these options. As a
result, for the quarter ended June 30, 2003, the Company increased additional paid-in capital and deferred compensation by $112,000 and $52,000 respectively and recorded a non-cash compensation charge of $60,000 in the Statement of Loss. This
re-measurement may result in unpredictable charges or credits to the statement of operations, which will depend on the fair value of the Companys common stock.



On May 21, 2003 the Company granted options to purchase a total of 60,000 shares of Common Stock at an exercise price of
$0.10 per share to two Board members that had provided consulting services to the Company. These options were fully vested upon grant. In the quarter ended June 30, 2003 the Company recorded additional paid-in capital and a non-cash compensation
charge to the Statement of Loss of $130,000.



(f)    Net Loss per Common Share



Basic and diluted net loss per share of the Companys common stock are presented in conformity with SFAS No. 128, Earnings per Share, for all periods presented. For the periods represented, options, warrants and
convertible securities were anti-dilutive and excluded from diluted earnings (loss) per share calculation. 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.



(g)    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, information technology and
facilities costs.



(h)    Income Taxes



The Company accounts for federal and state income taxes in accordance
with SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and the tax basis of assets and
liabilities. Deferred income taxes are based upon prescribed rates and enacted laws applicable to periods in which differences are expected to reverse. Valuation allowances are provided as needed to reduce deferred tax assets to the amount expected
to be realized. SFAS No. 109 requires that a valuation allowance be recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, since the Company cannot be assured of realizing the
deferred tax asset, a full valuation allowance has been provided. No provision or benefit for federal or state income taxes has been recorded, as the Company has incurred a net loss for all periods presented.



(3)    MERGER AGREEMENT WITH SONTRA MEDICAL, INC.



On June 20, 2002, the Company consummated the Merger with SMI, pursuant to
which SMI merged with and into a wholly-owned subsidiary of the Company. 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. For accounting
purposes, the Merger was treated as a capital transaction and a recapitalization, whereby the historical financial statements of SMI became the historical financial statements of the Company. The accounting treatment for the recapitalization is
similar to that resulting from a business combination, except that goodwill and other intangible assets were not recorded.



Pursuant to the recapitalization and in consideration for the $4,612,480 of net assets that SMI received from ChoiceTel on June 20, 2002, the shareholders
of ChoiceTel were deemed, for accounting purposes, to have received 3,035,795 shares of SMIs common stock.SMI incurred $480,500 of merger costs which was reflected as a reduction in paid-in capital. In addition, the preferred
stockholders of SMI converted their shares of Series A Preferred Stock and Series B Preferred Stock into common stock of SMI. Thereafter, 32,227,829 shares of SMIs common stock were exchanged at a ratio of 0.1927 for 6,210,289 shares of the
Companys common stock. In addition, all outstanding options of SMI were assumed by the Company in connection with the Merger with no modifications other than to reflect the exchange ratio. Upon completion of the Merger, 9,246,084 shares of the
Companys common stock were issued and outstanding, with the former ChoiceTel shareholders owning approximately 32.83% of the Companys common stock and the former SMI shareholders owning approximately 67.17% of the Companys
outstanding common stock. The share data for all periods presented have been retroactively adjusted by the 0.1927 exchange ratio to reflect the recapitalization. Since the Merger date, certain adjustments including an additional litigation liability
were made to the net





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##### Table of Contents

SONTRA MEDICAL CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

June 30, 2003

(Unaudited)



assets of ChoiceTel. These adjustments, which
reduced net assets acquired by $184,714, were recorded as a reduction in additional paid in capital.



(4)    LITIGATION



Based on the Companys activities in the public payphone market in Puerto Rico, commencing in August 2002, the Company has been participating in a lawsuit against GTE International Telecommunications, Inc. and
Puerto Rico Telephone Company in the United States District Court for the District of Puerto Rico for violations of federal and Commonwealth antitrust laws, among others. The Companys lawsuit is joined by two other Puerto Rican payphone
providers, Pan American Telephone Co., Inc. and In Touch Telecommunications, Inc. The lawsuit alleges that Puerto Rico Telephone Company and its operating company, GTE International Telecommunications, Inc., engaged in a pattern of unlawful
exclusionary acts in order to maintain its monopoly position in the market for the provision of payphones to payphone location owners in Puerto Rico. The defendants have filed a motion to dismiss the case. The Company has reached an agreement with
plaintiffs counsel in the case that limits the Companys legal costs to $150,000 for this case in exchange for sharing a portion of any proceeds the Company may receive with plaintiffs counsel. Under the agreement with
Plaintiffs counsel (as amended on each of April 4, 2003, May 7, 2003 and July 11, 2003), the Company deposited 33,529 shares of its common stock with an initial value of $150,000 in an escrow account. If the Company completes a financing
before August 30, 2003 that raises at least $2 million then the Company is required to pay $150,000 in cash for legal fees and the escrow shares will be returned to the Company. If the financing is not completed before August 30, 2003, the Company
is required to file a Registration Statement with the SEC by September 10, 2003 and register sufficient shares in plaintiff counsels name with a fair value of $150,000. Upon the effectiveness of the registration statement listing such shares,
the Company will be required to issue a number of shares to the plaintiffs counsel that will equal $150,000 divided by then price per share for the Companys common stock. The July 11, 2003 amendment to the Companys agreement with
plaintiffs counsel additionally provided that if the registration statement has not been declared effective by the SEC by October 30, 2003, then the Company will be obligated to pay a penalty to the Plaintiffs counsel in the amount of
$50,000, provided that the payment of such penalty shall not alter the Companys obligation to have such registration statement declared effective.



(5)    COMMITMENTS



On January 24, 2003, the Company entered into a five-year lease agreement for 12,999 square feet of office, laboratory and manufacturing space in a single
facility located at 10 Forge Parkway, Franklin, Massachusetts. Future minimum rental payments under this lease are approximately as follows:



| |  |                                  |  | Amount |         | 
| |  | -------------------------------- |  | ------ | ------- | 
| |  | For the years ended December 31, |  |        |         | 
| |  | 2003                             |  | $      | 142,000 | 
| |  | 2004                             |  |        | 142,000 | 
| |  | 2005                             |  |        | 163,000 | 
| |  | 2006                             |  |        | 164,000 | 
| |  | 2007                             |  |        | 172,000 | 
| |  | Thereafter                       |  |        | 33,000  | 
| |  |                                  |  |        |         | 
| |  | Total                            |  | $      | 816,000 | 
| |  |                                  |  |        |         | 



|(6) |  | SUBSEQUENT EVENT
|--- |  | ----------------



On July 28, 2003, Sontra and Bayer Diagnostics Division of Bayer Healthcare LLC (Bayer) executed a license agreement pursuant to which Sontra
granted to Bayer an exclusive worldwide right and license of Sontras intellectual property rights to make, have made, use, import and sell the Symphony Diabetes Management System. In consideration of the license, Bayer shall pay to Sontra, no
later than January 15, 2004, a one-time license fee of $1,500,000, subject to (i) Sontras receipt from the Nasdaq Listing Qualifications Panel of an exception from the Nasdaq SmallCap Markets minimum $2.5 million stockholders
equity continued listing requirement, (ii) Sontras receipt of a minimum of $1,500,000 in financing from third parties prior to such date, and (iii) Sontra having stockholders equity on September 30, 2003 of at least $2.5 million.



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##### Table of Contents

SONTRA MEDICAL CORPORATION

(A Development Stage Company)

Notes to Consolidated Financial Statements

June 30, 2003

(Unaudited)



Sontra and Bayer are also expected
to enter into one or more additional agreements to continue the joint development of the Symphony Diabetes Management System. Such agreements are expected to include, among other things, a $3,000,000 milestone payment to Sontra after the first phase
of development of the product, a royalty agreement providing for the payment by Bayer to Sontra of royalties based on net sales of the product and a manufacturing and supply agreement providing Sontra with the exclusive manufacturing rights of the
SonoPrep device.



Bayer has the right to terminate the license
agreement at any time following the payment of the one-time license fee. In the event that Bayer does not complete the development of the product necessary to obtain FDA approval, the license shall convert to a co-exclusive license to which Sontra
will still be entitled to royalties based on net sales of the product. In the event Bayer terminates the license agreement after completing development of the product, Bayer will retain a worldwide exclusive license and Sontra cannot convert the
license to a co-exclusive license.



Item 2.    Managements Discussion 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 have no plans 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, we consummated the Merger with SMI, pursuant to which SMI merged with and into a wholly-owned subsidiary
of the Company. Subsequent to the consummation of the Merger, we changed our name to Sontra Medical Corporation and began operating in SMIs line of business. For accounting purposes, the Merger was treated as a capital transaction and a
recapitalization, whereby the historical financial statements of SMI became the historical financial statements of the Company. The accounting treatment for the recapitalization is similar to that resulting from a business combination, except that
goodwill and other intangible assets were not recorded. Because the financial results of the Company discussed herein reflect the historical results of only SMI prior to the Merger, and the combined company following the Merger on June 20, 2002,
they do not include the historical financial results of ChoiceTel prior to the consummation of the Merger. Accordingly, the financial results may not be indicative of future results or the historical results that would have resulted if the Merger
had occurred at the beginning of a historical financial period.



We are a development stage life sciences company that is working to develop non-invasive, transdermal, diagnostic and drug delivery products based on our SonoPrep®ultrasound-mediated skin permeation technology. Our lead product in development is our SymphonyDiabetes Management System for the continuous non-invasive monitoring of glucose levels in diabetic patients. Other
products in development that are based upon the our SonoPrep®skin permeation technology
include skin preparation to improve electrophysiology tests, the enhanced transdermal delivery of topically applied drugs, and the transdermal drug delivery of large molecule injectable biopharmaceuticals.



On an historical basis, we have incurred net losses since the inception of
SMI in 1996. As of June 30, 2003, we had an historical accumulated deficit of $17,555,000. Our losses have resulted principally from costs incurred in conjunction with our research and development initiatives. We expect additional losses in the
foreseeable future primarily as a result of our research and development activities and other administrative-related expenses. As discussed below in the Liquidity and Capital Resources section of this Management Discussion and Analysis
or Plan of Operations, we need an immediate infusion of cash to sustain our operations. As of June 30, 2003 our cash and cash equivalents balance was approximately $675,000 and our current liabilities



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##### Table of Contents

exceeded our current assets by $405,000. We will need an immediate infusion of cash to sustain our operations. We are
actively seeking to procure additional financing or investment, or strategic investment, adequate to fund our ongoing operations. (See Note 6). If we are not able to raise substantial additional capital before September 30, 2003, via a private
financing or investment, strategic partnership or otherwise, we will not be able to continue our operations. The uncertainty related to procuring additional financing caused our auditor, in their audit report on the financial statements for the year
ended December 31, 2002, to raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Critical Accounting Policies



Financial Reporting Release No. 60, which was recently issued by the
Securities and Exchange Commission, requires all registrants to discuss critical accounting policies or methods used in the preparation of the financial statements. Management has determined that, at this stage of development, its only critical
accounting policy relates to the accounting for equity instruments. As described in more detail in the notes to the consolidated financial statements, the Company has elected to continue to apply the provisions of APB No. 25 rather than adopt SFAS
No. 123. This means that for options granted to employees and board members with an exercise price equal to the fair value on the grant date, the Company does not record any compensation expense in its consolidated financial statements. For options
granted to non-employees, the Company is required to make a number of estimates in order to determine the fair value of the options. These estimates include a risk-free interest rate, the volatility of the Companys stock and, in certain cases,
expectations about the number of shares that will eventually vest.



Further, we have made a number of estimates and assumptions that affect reported amounts of assets, liabilities and expenses, and actual results may differ from those estimates. As we are a development stage company, the areas that require
the greatest degree of management judgment are the assessment of the recoverability of long-lived assets, value of intellectual property, and the realization, if any, of our net deferred tax assets.



We believe that full consideration has been given to all relevant
circumstances that we may be subject to, and the financial statements accurately reflect our best estimate of the results of operations, financial position and cash flows for the periods presented.



Results of Operations



Comparison of the quarter and six months ended June 30, 2003 versus 2002



Research and Development Expenses.    Research
and development expenses increased by $6,000 to $432,000 for the quarter ended June 30, 2003 from $426,000 for the quarter ended June 30, 2002. This increase was primarily due to an increase in clinical trial expenses, partially offset by a
reduction in consulting costs.



Research and development
expenses increased by $113,000 to $974,000 for the six months ended June 30, 2003 from $861,000 for the six months ended June 30, 2002. This increase was primarily due to an increase in clinical trial expenses partially offset by a reduction in
consulting costs.



General and Administrative
Expenses.    General and administrative expenses increased by $11,000 to $632,000 for the quarter ended June 30, 2003 from $621,000 for the quarter ended June 30, 2002. The increase was primarily attributable to the hiring of
additional members of the Companys senior management team in June 2002 as well as expenses related to the filing and reporting obligations of a public company.



General and administrative expenses increased by $224,000 to $1,050,000 for the six months ended June 30, 2003 from $826,000
for the six months ended June 30, 2002. The increase was primarily attributable to the hiring of additional members of the Companys senior management team in June 2002 as well as expenses related to the filing and reporting obligations of a
public company.



Interest
Income.    Interest income was $3,000 for the quarter ended June 30, 2003 compared to interest income of $2,000 for the quarter ended June 30, 2002. This increase in interest income was primarily attributable to the Company
having a larger average cash balance in 2003 compared to 2002.



Interest income was $12,000 for the six months ended June 30, 2003 compared to interest income $3,000 for the six months ended June 30, 2002. This increase in interest income was primarily attributable to the Company having a larger average
cash balance in 2003 compared to 2002.



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Liquidity and Capital Resources



We are a development stage company and, on an historical basis, have financed our operations, since the inception of SMI,
primarily through private sales of preferred stock, the issuance of convertible promissory notes, and the cash received in connection with the Merger. As of June 30, 2003, we had approximately $675,000 of cash and cash equivalents and our current
liabilities exceeded our current assets by $405,000. We will need an immediate infusion of cash to sustain our operations. We are actively seeking to procure additional financing or investment, or strategic investment, adequate to fund our ongoing
operations. (See Note 6). If we are not able to raise substantial additional capital before September 30, 2003, via a private financing or investment, strategic partnership or otherwise, we will not be able to continue our operations. The
uncertainty related to procuring additional financing caused our auditor, in their audit report on the financial statements for the year ended December 31, 2002, to raise substantial doubt about our ability to continue as a going concern. The
accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Net cash used in operating activities was $1,348,000 for the six months ended June 30, 2003. The net loss for the six months ended June 30, 2003 was
$2,012,000 and included in this loss were non-cash expenses of $87,000 for depreciation and amortization and a $52,000 non-cash expense for stock compensation. Also, an increase in accounts payable provided $408,000 of operating cash.



Net cash used in investing activities was $219,000 for the six
months ended June 30, 2003. Purchases of property and equipment, primarily related to the build-out of the Companys new office space, used $206,000 of cash. There was a $49,000 increase in restricted cash due to cash collateralizing a letter
of credit related to the new office space partially offset by a decrease in long term assets of $32,000 representing the return of the deposit on the Companys former office space.



As discussed above, as of June 30, 2003 we had an accumulated deficit of $17,555,000 from an historical accounting
perspective. Our current liabilities at June 30, 2003 exceeded our current assets by $405,000. We will need an immediate infusion of cash to sustain our operations. We have recently reduced our headcount and are implementing other cost reductions
and are actively seeking to procure additional financing or investment, or strategic investment, adequate to fund our ongoing operations. If we are not able to raise substantial additional capital by September 30, 2003 we will not be able to
continue our operations. Even if we obtain funding sufficient to continue functioning as a going concern beyond September 30, 2003, we will be required to raise a substantial amount of capital in the future in order to reach profitability and to
complete the commercialization of our products. Our ability to fund these future capital requirements will depend on many factors, including the following:



| | q |  | our ability to obtain funding from third parties, including any future collaborative partners;
| | - |  | ----------------------------------------------------------------------------------------------

| | q |  | our progress on research and development programs and pre-clinical and clinical trials;
| | - |  | ---------------------------------------------------------------------------------------

| | q |  | the time and costs required to gain regulatory approvals;
| | - |  | ---------------------------------------------------------

| | q |  | the costs of manufacturing, marketing and distributing our products, if successfully developed and approved;
| | - |  | ------------------------------------------------------------------------------------------------------------

| | q |  | the costs of filing, prosecuting and enforcing patents, patent applications, patent claims and trademarks;
| | - |  | ----------------------------------------------------------------------------------------------------------

| | q |  | the status of competing products; and
| | - |  | -------------------------------------

| | q |  | the market acceptance and third-party reimbursement of our products, if successfully developed and approved.
| | - |  | ------------------------------------------------------------------------------------------------------------



Factors That May Affect Future Results



The Company operates in a rapidly changing environment that involves a
number of risks, some of which are beyond our control. The following discussion highlights some of these risks, which may adversely affect our future operating results.



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



We have generated limited revenues and have had operating losses since our
inception. Our historical accumulated deficit was approximately $17,555,000 as of June 30, 2003. It is possible that the Company will never generate any additional revenue or generate enough additional revenue to achieve 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 its obligations in strategic collaborations.



Our independent accountants have noted concerns about our ability to continue as a going concern in their report on our audited financial statements for the year ended
December 31, 2002, which may have an adverse impact on our ability to raise necessary additional capital and on our stock price.



The Company has generated limited revenue since inception (from an historical accounting perspective), and does not expect to generate revenues in the
near future. Our development efforts to date have consumed and will continue to require substantial amounts of capital to complete the development of its SonoPrep®technology and to meet other cash requirements in the future.



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Our current liabilities exceeded our current assets by $405,000 at June 30, 2003. We will need an immediate infusion of
cash no later than September 30, 2003 to sustain our operations. We are implementing measures to decrease our operating expenses and are actively seeking to procure additional financing or investment, or strategic investment, adequate to fund our
ongoing operations. However, raising capital has become increasingly difficult for many companies. Any future equity financing, if available, may result in substantial dilution to existing shareholders, and 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 on terms that are not favorable to the Company. If the Company is unable to raise sufficient additional financing before September 30, 2003 we
will not be able to continue our operations.



Given these
future capital requirements, our auditors have added a going concern paragraph to their audit report for our financial statements for the fiscal year ended December 31, 2002.A going concern paragraph with an audit
opinion means that the auditor has identified certain conditions or events that indicate there could be substantial doubt about our ability to continue as a going entity for a period of one year from the date of the financial statements. The
inclusion of this explanatory paragraph in the report of our auditors on our 2002 financial statements may have an adverse impact on our ability to raise necessary additional capital and on our stock price. We cannot assure you that we will be able
to continue as a going concern. Even if we successfully raise adequate financing to continue as a going concern beyond September 30, 2003, we will need substantial additional capital to reach product commercialization and profitability. 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 and clinical studies, 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.



We have received a delisting notice from Nasdaq because of our failure to meet the stockholders equity continued listing requirement.



The Companys common stock is currently listed for trading on the
Nasdaq SmallCap Market. On June 18, 2003 we received a letter from Nasdaq stating the Company has failed to comply with the minimum $2.5 million stockholders equity requirement for continued listing set forth in Marketplace Rule 4310(c)(2)(B)
and that as a result, its common stock is subject to delisting from the Nasdaq SmallCap Market. On July 31, 2003 the Company had a hearing with the Nasdaq Listing Qualifications Panel and our stock will continue to trade on the Nasdaq SmallCap
Market pending the Panels determination. There is no assurance that the Company will receive a positive determination from the Panel. If the Companys common stock is removed from the Nasdaq SmallCap Market, stockholders ability to
sell, or obtain quotations of the market value of, shares of Sontras common stock would be severely limited. In addition, the delisting of the common stock from the Nasdaq SmallCap Market would significantly impair its ability to raise capital
in the public markets in the future.



The price of the Companys stock
may be volatile and trading in the stock is likely to be limited.



The trading price of the Companys common stock has fluctuated in the past and is expected to continue to do so in the future as a result of a number of factors, many of which are outside the Companys control. The Companys
common stock reached a high of $5.70 per share and traded as low as $0.83 per share between June 20, 2002 and June 30, 2003. Historically, the volume of trading in the Companys common stock has been limited and fluctuations in price have been
volatile.



In addition, the stock market has experienced price
and volume fluctuations that have affected the market prices of many companies, and that have often been unrelated or disproportionate to the operating performance of these companies. These broad market fluctuations could adversely affect the market
price of the Companys common stock. In the past following periods of volatility in the market, price of a particular companys securities, securities class action litigation has often been brought against that company. Potential
securities class action litigation brought against the Company could result in substantial costs and a diversion of the Companys managements attention and resources.



We have limited publicly available historical financial information, which makes it difficult to evaluate our business.



Because limited publicly available historical financial information is
available on our business, it may be difficult to evaluate our business and prospects. Our business and prospects must be considered in light of the substantial risks, expenses, uncertainties and difficulties encountered by entrants into the medical
device industry, which is characterized by increasingly intense competition and a high failure rate. To date, we have engaged primarily in research and development efforts, prototype development and testing, and human clinical feasibility studies.
Our results of operations will depend on, among other things, the following factors:



| |  |  | research and development activities and outcomes;
| | - |  | -------------------------------------------------



| |  |  | results of feasibility and pre-clinical studies;
| | - |  | ------------------------------------------------



| |  |  | the ability to enter into collaborative agreements;
| | - |  | ---------------------------------------------------



| |  |  | the timing of payments, if any, under future collaborative agreements; and
| | - |  | --------------------------------------------------------------------------



| |  |  | costs related to obtaining, defending and enforcing patents.
| | - |  | ------------------------------------------------------------



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The development and commercialization of our potential products, including the SonoPrep®device and the Symphony Diabetes Management System, will require the formation of strategic partnerships with third parties, as well as
substantial capital expenditures either by the Company or the strategic partner of the Company on research, regulatory compliance, sales and marketing and manufacturing.



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 leading medical device and pharmaceutical companies, such as Bayer. On July 28, 2003, Sontra and Bayer executed a definitive license agreement pursuant to which Sontra granted to Bayer an exclusive
worldwide right and license of Sontras intellectual property rights to make, have made, use, import and sell the Symphony Diabetes Management System. Sontra and Bayer are also expected to enter into one or more additional agreements to
continue the joint development of the Symphony Diabetes Management System. We may not be able to enter into any additional collaborative arrangements on acceptable terms, if at all. If we are not able to collaborate with Bayer or additional
partners, the business, financial condition and results of operation of the Company could be materially adversely affected.



Even if we were to enter into a collaborative arrangement, there can be no assurance that the financial condition or results of operation of the Company
will significantly improve. The risks involved with collaborating with strategic partners include, but are not limited to, the following risks:



| |  |  | such collaborative arrangements could terminate upon the expiration of certain notice periods;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | funding by collaborative partners may be dependent upon the satisfaction of certain goals or milestones by certain specified dates, some of which may be outside of our
control;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the Bayer
license agreement and strategic collaboration has significant conditions attached. In consideration of the license, Bayer has agreed to pay to Sontra, no later than January 15, 2004, a one-time license fee of $1,500,000, subject to (i) Sontras
receipt from the Nasdaq Listing Qualifications Panel of an exception from the Nasdaq SmallCap Markets minimum $2.5 million stockholders equity continued listing requirement, (ii) Sontras receipt of a minimum of $1,500,000 in
financing from third parties prior to such date, and (iii) Sontra having stockholders equity on September 30, 2003 of at least $2.5 million. In the event that Sontra fails to satisfy any of these conditions, Bayers obligation to pay the
$1.5 million to Sontra would terminate. Failure to receive such $1.5 million would have a material adverse effect on the business and financial condition of the Company, and could result in delisting from the Nasdaq SmallCap Market.



All of our products are in initial stages of development, and we face risks
of failure inherent in developing products based on new technologies.



Our products under development have a high risk of failure because they are in the early stages of development. To date, we have only tested the feasibility of our SonoPrep®technology for various applications, including glucose monitoring, transdermal drug delivery and certain aesthetic applications.
Although the Company has filed a 510(k) application seeking marketing clearance from the FDA for our SonoPrep® device for use in electrophysiology applications, none of the products currently being developed by the Company have received regulatory approval or clearance for commercial sale.
Substantial expenditures for additional research and development, including feasibility studies, pre-clinical studies and clinical testing, the establishment of collaborative partnerships and regulatory, manufacturing, sales and marketing activities
by collaborative partners will be necessary before commercial production of any of our technologies or their incorporation into products of third parties. Our future prospects are substantially dependent on forming collaborative partnerships,
further developing our products and obtaining favorable results from pre-clinical studies and clinical trials and satisfying regulatory standards and approvals required for the market introduction of the SonoPrep®device and Symphony Diabetes Management System.



There can be no assurance that the Company or any strategic partner of the Company will not encounter unforeseen problems in the development of the
SonoPrep®technology, or that we or any such strategic partner will be able to
successfully address the problems that do arise. In addition, 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, be eligible for third-party reimbursement from governmental or private insurers, be successfully marketed or achieve market acceptance. If any of our development programs are
not successfully completed, required regulatory



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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.



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



The design, manufacturing, labeling, distribution and marketing of our
potential 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 clearance 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, from the United States Food and Drug Administration (FDA). In November 2002, we filed a 510(k) application seeking marketing clearance from the FDA for our SonoPrep® device for use in electrophysiology applications. In order to obtain marketing
clearance for our Symphony Diabetes Management
System, we will be required to file a PMA application that demonstrates the safety and effectiveness of the product. The PMA process is more rigorous and lengthier 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.



Even if we receive 510(k) clearance or PMA 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. 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 by the Company. 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.



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



We have an exclusive world-wide license to use and sell certain technology owned by the Massachusetts Institute of Technology (MIT) related to our
ultrasound-mediated skin permeation technology. This license, which includes eight issued patents in the United States, three issued foreign patents, one pending U.S. patent 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 in MIT with the prosecution and maintenance of the foregoing patents, we do not control the prosecution of such patents or the strategy for determining when such
licensed patents should be enforced. Instead, the Company relies upon MIT to determine the appropriate strategy for prosecuting and enforcing these patents. If MIT does not adequately protect or enforce 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 obtain and protect the proprietary information on which our SonoPrep® technology relies.



We have an exclusive license from MIT on eight issued patents in the United States, three issued foreign patents, one pending U.S. patent and three
pending foreign patent applications, and as of May 15, 2003, we owned three issued patents and seven pending patent applications in the United States and sixteen PCT 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 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 potential
products either in the United States or in foreign markets. Furthermore, if our intellectual property is not



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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 SonoPrepñ device and Symphony Diabetes Management System, we will have to
manufacture or engage others to manufacture the particular device in compliance with regulatory requirements. We have limited manufacturing experience 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. 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. Companies, and especially small companies in the medical device field, often encounter these types of difficulties in scaling up production, including problems involving production yield, quality control and
assurance, and shortages of qualified personnel.



We may be subject
to litigation or other proceedings relating to its patent rights.



The medical device industry has experienced extensive litigation regarding patents and other intellectual property rights. In addition, the United States Patent and Trademark Office may institute litigation or interference proceedings
against the Company. The defense and prosecution of intellectual property proceedings are both costly and time consuming.



Litigation may be necessary to enforce patents issued to the Company, to protect trade secrets or know how owned by or licensed to the Company or to
determine the enforceability, scope and validity of the proprietary rights of others. 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 it from selling our products, once developed, in certain markets, or at all, which would have a material adverse effect on
our business, financial condition and results of operations.



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



The industries in which our potential products may eventually be marketed are intensely competitive, subject to rapid change and significantly affected by
new product introductions. Our Symphony Diabetes
Management System will compete directly with glucose monitoring products manufactured by Roche Diagnostics, LifeScan, Inc., a division of Johnson & Johnson, Bayer Corporation, MediSense, a division of Abbott Laboratories, Cygnus, Inc., SpectRx
and TheraSense, Inc. The Companys SonoPrep®
device will also compete with numerous companies developing drug delivery products such as Nektar Therapeutic Systems, Inc., Alkermes, Inc., Bioject, Inc., PowderJect Pharmaceuticals PLC, Antares Pharma, Inc., Becton Dickinson & Co., Aerogen,
Inc. ALZA Corporation, a division of Johnson and Johnson, Norwood Abbey Limited and 3M Company.



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 our competitors have products in various stages of development and commercialization similar to our SonoPrep® device and Symphony Diabetes Management System. At any time, these companies and others may develop
products that compete directly with our proposed product concepts. In addition, many of our competitors have resources allowing them to spend significantly greater funds for the research, development, promotion 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, the business, financial condition and results of operations of the Company would be materially adversely affected.



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 and sale of human diagnostic and ultrasonic transdermal drug delivery products. While we intend to take steps to insure against these risks, there can be no assurance that we will be able to obtain
insurance in amounts or scope sufficient to provide us with adequate coverage against all potential liabilities. Our current product liability insurance provides for coverage in the amount of $2,000,000 and upon successful development and
commercialization of our products, we intend to obtain product liability insurance in the amount of $5,000,000. 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.



Our Management has significant influence over the control the Company.



Our officers and directors beneficially own approximately 48.8% of the outstanding shares of our common stock. Accordingly, our officers and directors
will have significant influence over the outcome of any corporate transaction or other



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matters submitted to the shareholders for approval, including mergers, consolidations and the sale of all or
substantially all of the Companys assets, and also could prevent or cause a change in control. Third parties may be discouraged from making a tender offer or bid to acquire the Company because of this concentration of ownership.



If we are unable to retain or hire additional key personnel, we may not be able to sustain
or grow our business.



Our future success will depend upon
our ability to successfully attract and retain key scientists, engineers and other highly skilled personnel. With the exception of Dr. Thomas W. Davison, our President and Chief Executive Officer, and Sean Moran, our Chief Financial Officer, our
employees are at-will and not subject to employment contracts and may terminate their employment with the Company at any time. In addition, our current management team is understaffed and has very limited experience managing a public company subject
to the Securities and Exchange Commissions periodic reporting obligations. Hiring qualified management and technical personnel will be difficult due to the limited number of qualified professionals in the work force in general and the intense
competition for these types of employees in the medical device industry, in particular. We have in the past experienced difficulty in recruiting qualified personnel and there can be no assurance that we will be successful in attracting and retaining
additional members of management if the business begins to grow. Failure to attract and retain personnel, particularly management and technical personnel would materially harm our business, financial condition and results of operations.



Item 3.    Controls and Procedures



Evaluation of disclosure
controls and procedures.    Based on their evaluation as of the end of the fiscal quarter covered by this report, the Companys principal executive officer and principal financial officer have concluded that the
Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act (i)
is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to the Companys management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions regarding required disclosure.



Changes in internal controls.    There were no significant changes in the Companys internal controls or in other
factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses in the Companys internal controls, and therefore there were no corrective actions
taken.



Part
IIOther Information



Item 1.    Legal Proceedings



Based on the Companys activities in the public payphone market in Puerto Rico, commencing in August 2002, the Company has been participating in a lawsuit against GTE International Telecommunications, Inc. and
Puerto Rico Telephone Company in the United States District Court for the District of Puerto Rico for violations of federal and Commonwealth antitrust laws, among others. The Companys lawsuit is joined by two other Puerto Rican payphone
providers, Pan American Telephone Co., Inc. and In Touch Telecommunications, Inc. The lawsuit alleges that Puerto Rico Telephone Company and its operating company, GTE International Telecommunications, Inc., engaged in a pattern of unlawful
exclusionary acts in order to maintain its monopoly position in the market for the provision of payphones to payphone location owners in Puerto Rico. Along with its co-plaintiffs, the Company is seeking monetary damages and injunctive relief. The
defendants have filed a motion to dismiss the case.



Item 4.    Submission of Matters to a Vote of Security Holders



At the 2003 Annual Meeting of Stockholders of the Company (the Annual Meeting) on May 21, 2003, the following matters were acted upon by the
stockholders of the Company:



| | 1. |  | The election of eight Directors for a term of one year;
| | -- |  | -------------------------------------------------------



| | 2. |  | The approval of an amendment to the amended and restated articles of incorporation of the Company to increase the authorized Common Stock of the Company from 20,000,000 to
40,000,000 shares;
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | The approval of an amendment to the amended and restated articles of incorporation of the Company to increase the authorized Preferred Stock of the Company from 5,000,000 to
10,000,000 shares;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The approval and adoption of second amended and restated articles of incorporation and amended and restated bylaws of the Company that, together with certain administrative
amendments, provide that the bylaws may be amended by majority vote of the directors present at any meeting of the board of directors at which a quorum is present or upon the vote of 75% of the shares of the Companys capital stock entitled to
vote generally in the election of directors, voting together as a single class;
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The approval of the Companys 2003 Stock Option and Incentive Plan; and
| | -- |  | -----------------------------------------------------------------------



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| | 6. |  | Ratification of the appointment of Wolf & Company, P.C. as independent auditors of the Company for the current year.
| | -- |  | --------------------------------------------------------------------------------------------------------------------



The number of shares of Common Stock issued, outstanding and eligible to vote
as of the record date of April 7, 2003 was 9,400,935. The results of the voting on each of the matters presented to stockholders at the Annual Meeting are set forth below:



|                                                                     |  | VOTESFOR  |  | VOTESWITHHELD |  | VOTESAGAINST |  | ABSTENTIONS |  | BROKERNON-VOTES
|-------------------------------------------------------------------- |  | --------- |  | ------------- |  | ------------ |  | ----------- |  | ---------------
|1.    Election of eight Directors:                                   |  |           |  |               |  |              |  |             |  |                
|James R. McNab Jr.                                                   |  | 8,445,104 |  | 1,000         |  | N.A.         |  | N.A.        |  | N.A.           
|Thomas W. Davison                                                    |  | 8,445,104 |  | 1,000         |  | N.A.         |  | N.A.        |  | N.A.           
|Gary S. Kohler                                                       |  | 8,445,104 |  | 1,000         |  | N.A.         |  | N.A.        |  | N.A.           
|Robert S. Langer                                                     |  | 8,445,104 |  | 1,000         |  | N.A.         |  | N.A.        |  | N.A.           
|Martin P. Sutter                                                     |  | 8,445,104 |  | 1,000         |  | N.A.         |  | N.A.        |  | N.A.           
|W. Leigh Thompson                                                    |  | 8,445,104 |  | 1,000         |  | N.A.         |  | N.A.        |  | N.A.           
|Michael R. Wigley                                                    |  | 8,445,104 |  | 1,000         |  | N.A.         |  | N.A.        |  | N.A.           
|Joseph Amaral                                                        |  | 8,445,104 |  | 1,000         |  | N.A.         |  | N.A.        |  | N.A.           
|                                                                     |  |           |  |               | 
|2.    Charter Amendment increase in common stock:                   |  | 8,442,804 |  | N/A           |  | 3,250        |  | 50          |  | 0              
|                                                                     |  |           |  |               | 
|3.    Charter Amendment  increase in preferred stock:               |  | 6,636,776 |  | N/A           |  | 4,750        |  | 50          |  | 1,804,528      
|                                                                     |  |           |  |               | 
|4.    Amended and Restated Charter and Amended and Restated By-laws: |  | 6,621,336 |  | N/A           |  | 19,190       |  | 1,050       |  | 1,804,528      
|                                                                     |  |           |  |               | 
|5.    2003 Stock Option and Incentive Plan:                          |  | 6,633,726 |  | N/A           |  | 5,850        |  | 2,000       |  | 1,804,528      
|                                                                     |  |           |  |               | 
|6.    Ratification of Independent Auditors:                          |  | 8,427,014 |  | N/A           |  | 650          |  | 18,440      |  | 0              



Item 6.    Exhibits and Reports on Form 8-K



(a)    Exhibits.



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



(b)    Reports on Form 8-K.



On April 4, 2003, the Company filed a Current Report on Form 8-K dated March 31, 2003 to furnish under Item 12 (Results of Operations and Financial
Condition) the Companys press release announcing financial results for the fourth quarter and fiscal year ended December 31, 2002. No financial statements were filed with such report.



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                      |  |  |  | SONTRA MEDICAL CORPORATION
|--------------------- |  |  |  | --------------------------
|                      |  |  | 
|Date: August 14, 2003 |  |  |  | By:                       
|                      |  |  |  |                           





|                      |  |  | 
|--------------------- |  |  | 
|Date: August 14, 2003 |  |  | 
|                      |  |  | 



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EXHIBIT INDEX



|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                      
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1           |  | License Agreement, dated as of July 28, 2003, by and between Sontra Medical Corporation and Bayer Healthcare LLC is incorporated herein by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K dated July 28, 2003 (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.                                                                                                        



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