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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 10-K
  (Mark One)þ

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

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    000-31745
    THIRD WAVE TECHNOLOGIES,
    INC.
 (Exact name of Registrant as
    specified in its charter)
  Delaware

39-1791034(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)502 S. Rosa Road,
    Madison, WI

53719(Address of principal executive
    offices)

(Zip Code)   (888) 898-2357
 (Registrants telephone
    number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Exchange Act:
 None
  Securities registered pursuant to Section 12(g) of the
    Exchange Act:
  Common stock, $.001 par value per share
 preferred stock purchase rights
 (Title of Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE
  Form 10-K: Form 10-K




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##### 



THIRD
    WAVE TECHNOLOGIES
  FORM 10-K
 FOR THE YEAR ENDED DECEMBER 31, 2006
  TABLE OF
    CONTENTS
  
  PagePART IItem 1.


Business


3Item 1A.


Risk
    Factors


12Item 1B.


Unresolved Staff
    Comments


23Item 2.


Properties


23Item 3.


Legal
    Proceedings


23Item 4.


Submission of
    Matters to a Vote of Security Holders


24PART IIItem 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


24Item 6.


Selected Financial
    Data


26Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


27Item 7A.


Quantitative and
    Qualitative Disclosures about Market Risk


35Item 8.


Financial
    Statements and Supplementary Data


36Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


61Item 9A.


Controls and
    Procedures


61Item 9B.


Other
    Information


62PART IIIItem 10.


Directors and Executive Officers
    of the Registrant


62Item 11.


Executive Compensation


62Item 12.


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


62Item 13.


Certain Relationships and Related
    Transactions


62Item 14.


Principal Accountant Fees and
    Services


62PART IVItem 15.


Exhibits, Financial
    Statements and Schedules


62Signatures


63Amendment to 2000 Stock PlanAmended and Restated Employment Agreement - Keven T. ConroyAmended and Restated Employment Agreement - Maneesh AroraEmployment Agreement - Cindy AhnEmployment Agreement - John BellanoEmployment Agreement - Jorge GarcesEmplyment Agreement - Greg HamiltonEmployment Agreement - Ivan Trifunovich2007 Incentive PlanLong Term Incentive Plan No. 4List of SubsidiariesConsent of Independent Registered Public Accounting FirmConsent of Independent Registered Public Accounting FirmCertificationCertificationCertificationCertification   2




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FORWARD-LOOKING
    STATEMENTS
  Form 10-K Form 10-K, Form 10-K
    Form 10-K,
  Form 10-K,
  ® ® ® ® ® tm tm tm
 PART I  ITEM 1.
    BUSINESS  OVERVIEW
      THIRD
    WAVE MISSION AND CORPORATE STRATEGY
      
    Grow our U.S. clinical molecular diagnostic revenue through
    our expanding product menu by using our strong
    U.S. distribution and thought-leader networks; 3




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
    Continue to expand our pipeline of molecular diagnostic products
    and enhance our product capabilities; and
    Partner when appropriate to optimize our opportunities in
    molecular diagnostics and in markets where the Invader chemistry
    can create unique competitive advantages.  TECHNOLOGY
  Invader
    Chemistry
      ®
    INDUSTRY
    BACKGROUND
         4




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LIMITATIONS
    OF CONVENTIONAL METHODS VERSUS THE THIRD WAVE SOLUTION
    Name

Platform

StatusPCR

Target Amplification

Most commonly used technologyTMA/NASBA

Target Amplification

Market leader for blood screeningHybrid Capture

Signal Amplification

Currently used primarily for HPV
    testingINVADER®

Signal Amplification

Adoption across multiple
    applicationsInvader
    Plus®

Target/Signal Amplification

New capability for numerous
    applications       
    Accuracy  In the study submitted to the FDA as part
    of the Companys application for clearance of its Invader
    UGT1A1 Molecular Assay, it was 100% accurate compared to DNA
    sequencing, the standard for genotype determination.
    Ease of Use  Invader products are extremely easy to
    use for technicians of any skill level. Assay setup requires a
    simple addition of the reagents to the prepared sample and can
    be completed with minimal
    hands-on
    time. During the incubation at a single temperature, technicians
    are free to perform additional duties.
    Flexibility/Scalability  The Invader chemistry is
    highly scalable, allowing any Clinical Laboratory Improvement
    Amendments (CLIA) certified high complexity lab, regardless of
    size, to take advantage of its benefits.  PRODUCTS
    AND PRODUCT CANDIDATES
    Molecular
    Diagnostics
  PRODUCTS
    ON THE MARKET  UNITED STATES
  InVitro
    Diagnostic (IVD) Devices
  
    Invader UGT1A1 Molecular Assay  Analyte
    Specific Reagents (ASRs)
  
    Hepatitis C virus (HCV)
    Cystic Fibrosis Transmembrane Conductance Regulator gene (CFTR)
    Human Papillomavirus (HPV)
    Connexin 26
    Factor V (Leiden)
    Factor II (prothrombin) 5




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
    Apolipoprotein E (ApoE) (C112R)
    Apolipoprotein E (ApoE) (R158C)
    Plasminogen Activator Inhibitor-1 (PAI-1) (4G/5G)
    Platelet Glycoprotein IIIa (PL A1/A2) (Leu 33 Pro, T1565C)
    Warfarin
    Rett
    Methylenetetrahydrofolate reductase (MTHFR gene)
    Apolipoprotein E (ApoE gene)  PRODUCTS
    ON THE MARKET  EUROPEAN ECONOMIC AREA (EEA)
  InVitro
    Diagnostic Devices  CE Mark
  
    Factor V Leiden (G1691A)
    Factor II (FII G20210A)
    Methylenetetrahydrofolate reductase (MTHFR) (C677T)
    Methylenetetrahydrofolate reductase (MTHFR) (A1298C)
    Apolipoprotein E (ApoE) (C112R)
    Apolipoprotein E (ApoE) (R158C)
    Plasminogen Activator Inhibitor-1 (PAI-1) (4G/5G)
    Platelet Glycoprotein IIIa (PL A1/A2) (Leu 33 Pro, T1565C)
    Connexin 26 (Gap Junction Beta 2 gene; 35delG)
    Connexin 26 (Gap Junction Beta 2 gene 167delT)  PRODUCTS
    IN DEVELOPMENT OR BEING ASSESSED FOR TECHNICAL FEASIBILITY AND
    COMMERCIAL VIABILITY
  
    Additional HPV offerings
    Additional CFTR offerings
    MRSA
    Chlamydia
    Gonorrhea
    Additional infectious disease targets
    Hepatitis B virus
    Mirco RNA panels
    Various additional CYP450 products (identification of genes
    associated with drug response)   6




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##### Table of Contents



MANUFACTURING
        MARKETING
    AND SALES
          and/or
    Form 10-K.
 7




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COLLABORATIVE
    RELATIONSHIPS
    BML
    MONOGRAM
    BIOSCIENCES (formerly ACLARA BIOSCIENCES, INC.)
  ® ® tm
    UNIVERSITY
    OF TOKYO/RIKEN
      INTELLECTUAL
    PROPERTY
   8




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and/or and/or
            COMPETITION
  and/or
 9




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GOVERNMENT
    REGULATION
         10




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in-vitro
         11




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RESEARCH
    AND DEVELOPMENT
    EMPLOYEES
    AVAILABLE
    INFORMATION
  Form 10-K, Form 10-Q, Form 8-K,
  ITEM 1A.
    RISK
    FACTORS  RISKS
    RELATED TO OUR BUSINESS
  WE HAD
    AN ACCUMULATED DEFICIT OF $177.7 MILLION AT DECEMBER 31,
    2006, AND EXPECT TO CONTINUE TO INCUR SUBSTANTIAL OPERATING
    LOSSES FOR THE FORESEEABLE FUTURE.
    FLUCTUATIONS
    IN OUR QUARTERLY REVENUES AND OPERATING RESULTS MAY NEGATIVELY
    IMPACT OUR STOCK PRICE.
    
    the volume and timing of orders for our products;
    changes in the mix of our products offered; 12




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
    the timing of payments we receive under collaborative
    agreements, as well as our ability to recognize these payments
    as revenues;
    the number, timing and significance of new products and
    technologies introduced by our competitors;
    third-party intellectual property, which may require significant
    investments in licensing or royalties, or which may materially
    impede our ability to sell products;
    our ability to develop, obtain regulatory clearance, market and
    introduce new and enhanced products on a timely basis;
    changes in the cost, quality and availability of equipment,
    reagents and components required to manufacture or use our
    products;
    availability of commercial and government funding to researchers
    who use our products and services, including our single-largest
    research customer in Japan; and
    availability of third-party reimbursement to users of our
    clinical products.  quarter-to-quarter
  OUR
    TECHNOLOGIES AND COMMERCIAL PRODUCTS MAY NOT BE COMMERCIALLY
    VIABLE OR SUCCESSFUL, WHICH COULD ADVERSELY AFFECT OUR
    BUSINESS.
    WE ARE
    RELIANT ON OUR ABILITY TO MANUFACTURE AND DEVELOP PRODUCTS. IF
    THERE IS A DISRUPTION TO THE MANUFACTURING OF OUR PRODUCTS, IT
    MAY HAVE AN ADVERSE AFFECT TO OUR BUSINESS.
   13




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WE MAY
    NOT BE ABLE TO CONTINUE TO OUTSOURCE THE MANUFACTURE OF
    COMPONENTS FOR OUR PRODUCTS ON FAVORABLE TERMS, IF AT ALL, AND
    EVEN SUCCESSFUL OUTSOURCING CREATES RISK DUE TO OUR RESULTING
    RELIANCE ON VENDORS.
    OUR
    LIMITED SALES AND MARKETING EXPERIENCE AND CAPACITY MAY
    ADVERSELY AFFECT OUR ABILITY TO GROW AND TO COMPETE SUCCESSFULLY
    IN COMMERCIALIZING OUR POTENTIAL PRODUCTS.
      OUR
    CUSTOMER BASE IS DOMINATED BY A SMALL NUMBER OF LARGE CLINICAL
    TESTING LABORATORIES AND MANY OF OUR CONTRACTS WITH KEY
    CUSTOMERS ARE SHORT-TERM CONTRACTS AND/OR SUBJECT TO EARLY
    TERMINATION.
   14




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and/or and/or
  WE MAY
    REQUIRE ADDITIONAL FINANCING FOR OUR FUTURE OPERATING PLANS.
    FINANCING MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS, IF AT
    ALL.
    
    our progress with our research and development programs;
    the needs we may have to pursue FDA clearances or approvals of
    our products;
    our level of success in selling our products and technologies;
    our ability to establish and maintain successful collaborations;
    the costs we incur in securing intellectual property rights,
    whether through patents, licenses or otherwise;
    the costs we incur in enforcing and defending our patent claims
    and other intellectual property rights;
    the timing of additional capital expenditures;
    the need to respond to competitive pressures; and
    the possible acquisition of complementary products, businesses
    or technologies.    FAILURE
    TO MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH
    SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL
    ADVERSE EFFECT ON OUR BUSINESS AND STOCK PRICE.
    COMMERCIALIZATION
    OF OUR TECHNOLOGIES MAY DEPEND ON STRATEGIC PARTNERSHIPS AND
    COLLABORATIONS WITH OTHER COMPANIES, AND IF OUR CURRENT OR
    FUTURE PARTNERSHIPS AND COLLABORATIONS ARE NOT SUCCESSFUL, WE
    MAY EXPERIENCE DIFFICULTY COMMERCIALIZING OUR TECHNOLOGIES AND
    PRODUCTS.
   15




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WE ARE
    IN A HIGHLY COMPETITIVE INDUSTRY AND MARKETPLACE. COMPETITIVE
    DEVELOPMENTS, INCLUDING NEW TECHNOLOGIES THAT RENDER OURS LESS
    COMPETITIVE OR OBSOLETE, COULD SERIOUSLY HARM OUR
    BUSINESS.
  and/or
  
    diagnostic, biotechnology, pharmaceutical, healthcare, chemical
    and other companies;
    academic and scientific institutions;
    governmental agencies;
    public and private research organizations; and
    clinical laboratories.     16




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WE MAY
    BE UNABLE TO PROTECT OUR PROPRIETARY METHODS AND TECHNOLOGIES
    AND MAY BE SUBJECT TO CLAIMS OF INFRINGEMENT OF THE INTELLECTUAL
    PROPERTY RIGHTS OF OTHERS.
           17




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OTHER
    RIGHTS AND MEASURES THAT WE RELY UPON TO PROTECT OUR
    INTELLECTUAL PROPERTY MAY NOT BE ADEQUATE TO PROTECT OUR
    PRODUCTS AND COULD REDUCE OUR ABILITY TO COMPETE IN THE
    MARKET.
    and/or
  
    the agreements may be breached;
    we may have inadequate remedies for any breach;
    the employees, collaborators, consultants and other third
    parties may apply for patents on improvements to our
    technologies without assigning ownership rights to us;
    proprietary information could be disclosed to our
    competitors; or
    others may independently develop substantially equivalent
    proprietary information and techniques or otherwise gain access
    to our trade secrets or disclose such technologies.    IF WE
    FAIL TO RETAIN OUR KEY PERSONNEL AND HIRE, TRAIN AND RETAIN
    QUALIFIED EMPLOYEES, WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY,
    WHICH COULD RESULT IN REDUCED REVENUES.
        WE
    PLAN TO CONTINUE TO INTRODUCE PRODUCTS FOR THE CLINICAL MARKET,
    AND WE MAY NEED TO OBTAIN FDA CLEARANCES AND APPROVALS AND
    COMPLY WITH FDA QUALITY SYSTEM REGULATIONS AND OTHER REGULATIONS
    RELATING TO THE MANUFACTURING, MARKETING AND SALE OF CLINICAL
    PRODUCTS.
     18




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
    administrative or judicially imposed sanctions;
    injunctions, civil penalties, recall or seizure of our products;
    total or partial suspension of production;
    failure of the government to grant premarket clearance or
    premarket approval for our products;
    withdrawal of marketing clearances or approvals; and
    criminal prosecution.   19




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OUR
    INTERNATIONAL SALES ARE SUBJECT TO CURRENCY, MARKET AND
    REGULATORY RISKS THAT ARE BEYOND OUR CONTROL.
      OUR
    FAILURE TO COMPLY WITH ANY APPLICABLE ENVIRONMENTAL, HEALTH,
    SAFETY AND RELATED GOVERNMENT REGULATIONS MAY AFFECT OUR ABILITY
    TO DEVELOP, PRODUCE OR MARKET OUR POTENTIAL PRODUCTS AND MAY
    ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
    WE MAY
    BE HELD LIABLE FOR ANY INACCURACIES ASSOCIATED WITH NUCLEIC ACID
    TESTS PERFORMED USING OUR PRODUCTS, WHICH MAY REQUIRE US TO
    DEFEND OURSELVES IN COSTLY LITIGATION.
    RELIANCE
    ON COMPUTER HARDWARE, SOFTWARE AND APPLICATIONS FOR
    OPERATIONS
   20




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FUTURE
    ISSUANCE OF OUR PREFERRED STOCK MAY DILUTE THE RIGHTS OF OUR
    COMMON STOCKHOLDERS.
    WE
    HAVE VARIOUS MECHANISMS IN PLACE THAT A STOCKHOLDER MAY NOT
    CONSIDER FAVORABLE AND WHICH MAY DISCOURAGE UNSOLICITED TAKEOVER
    ATTEMPTS.
    
    authorizing our Board of Directors to issue preferred stock and
    to determine the price, privileges and other terms of these
    shares without any further approval of our stockholders, which
    could increase the number of outstanding shares or thwart an
    unsolicited takeover attempt;
    a shareholders rights plan under which rights holders (except
    the acquirer) would be entitled to acquire Third Wave common
    stock at a significant discount upon the occurrence of a person
    or group acquiring 15 percent or more of Third Waves
    common stock and which discourages acquisitions of
    15 percent or more of Third Waves common stock
    without negotiation with the Board of Directors;
    establishing a classified Board of Directors with staggered,
    three-year terms, which may lengthen the time required to gain
    control of our Board of Directors;
    prohibiting cumulative voting in the election of directors,
    which would allow a majority of stockholders to control the
    election of all directors;
    requiring super-majority voting to effect certain amendments to
    our certificate of incorporation and bylaws;
    limiting who may call special meetings of stockholders;
    prohibiting stockholder action by written consent, which
    requires all actions to be taken at a meeting of stockholders;
    establishing advance notice requirements for nominations of
    candidates for election to the Board of Directors or for
    proposing matters that can be acted upon by stockholders at
    stockholder meetings; and
    payments due to executive officers and other employees under
    executive compensation plans, long-term incentive plans and
    employment and similar agreements that could be triggered by
    certain change of control events.    OUR
    DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS WILL
    HAVE SUBSTANTIAL CONTROL OVER OUR AFFAIRS.
   21




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RISKS
    RELATED TO THE BIOTECHNOLOGY INDUSTRY
  PUBLIC
    OPINION REGARDING ETHICAL ISSUES SURROUNDING THE USE OF GENETIC
    INFORMATION MAY ADVERSELY AFFECT DEMAND FOR OUR
    PRODUCTS.
    GOVERNMENT
    REGULATION OF GENETIC RESEARCH OR TESTING MAY ADVERSELY
    AFFECT THE DEMAND FOR OUR PRODUCTS AND IMPAIR OUR BUSINESS AND
    OPERATIONS.
    HEALTH
    CARE COST CONTAINMENT INITIATIVES COULD LIMIT THE ADOPTION OF
    GENETIC TESTING AS A CLINICAL TOOL, WHICH WOULD HARM OUR
    REVENUES AND PROSPECTS.
    REIMBURSEMENT
    FOR USE OF OUR PRODUCTS
   22




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ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS.     ITEM 2.
    PROPERTIES    Approx.SquareType of Facility

Footage


Lease ExpirationHeadquarters, research and
    development, manufacturing, selling, marketing, and
    administration


95,000



September 2014      ITEM 3.
    LEGAL
    PROCEEDINGS  out-of-court
  out-of-court
     23




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anti-trust
     ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    PART II   ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Fiscal Year Ended December 31, 2006

High


LowFirst Quarter

$
3.44


$
2.76Second Quarter

$
3.33


$
2.60Third Quarter

$
4.99


$
2.26Fourth Quarter

$
5.33


$
3.82   Fiscal Year Ended December 31, 2005

High


LowFirst Quarter

$
8.45


$
4.56Second Quarter

$
5.66


$
3.66Third Quarter

$
5.78


$
3.96Fourth Quarter

$
5.17


$
2.63      24




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STOCKHOLDER
    RETURN PERFORMANCE GRAPH
    
  12/31/01



12/31/02



12/31/03



12/31/04



12/31/05



12/31/06TWTI



100.00




36.60




61.90




117.01




40.54




65.44NASDAQ



100.00




68.47




102.72




111.54




113.07




123.84Peer Group



100.00




87.72




194.60




227.12




258.90




294.29    25




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K.
  For Year Ended December 31,2006


2005


2004


2003


2002(In thousands, except for per share amounts)STATEMENT OF OPERATIONS DATA:Revenues

$
28,027


$
23,906


$
46,493


$
36,320


$
32,355Operating expenses:Cost of goods sold


8,434



7,104



12,492



12,840



21,320Research and development


12,436



8,389



11,637



12,035



13,934Selling and marketing


11,082



12,772



10,803



8,859



9,578General and administrative


14,782



11,788



12,913



9,642



11,666Litigation


1,610



6,887



349



721



318Restructuring and other charges


(180
)






(98
)






11,087Impairment of goodwill and other
    intangible assets


















4,810Impairment of equipment






203



795







Total operating expenses


48,164



47,143



48,891



44,097



72,713Loss from operations


(20,137
)


(23,237
)


(2,398
)


(7,777
)


(40,358
)Other income (expense), net


1,036



891



513



(339
)


(506
)Loss before income taxes and
    minority interest


(19,101
)


(22,346
)


(1,885
)


(8,116
)


(40,864
)Minority interest


(214
)














Provision for income taxes










57







Net loss

$
(18,887
)

$
(22,346
)

$
(1,942
)

$
(8,116
)

$
(40,864
)Basic and diluted net loss per
    share

$
(0.45
)

$
(0.54
)

$
(0.05
)

$
(0.20
)

$
(1.04
)Shares used in computing basic and
    diluted net loss per share


41,512



41,125



40,463



39,749



39,457   December 31,2006


2005


2004


2003


2002(In thousands)BALANCE SHEET DATA:Cash, cash equivalents, and short
    term investments

$
44,199


$
38,717


$
66,690


$
57,816


$
60,315Working capital


39,931



32,997



52,901



42,655



43,518Total assets


64,234



58,405



88,068



80,422



89,223Long-term obligations, net of
    current portion


15,282



831



487



13



13Accumulated deficit


(177,738
)


(158,120
)


(135,774
)


(133,832
)


(125,715
)Total shareholders equity


30,673



40,074



62,735



59,288



65,287  26




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ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K.
  OVERVIEW
      ®
          CRITICAL
    ACCOUNTING POLICIES
   27




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REVENUE
    RECOGNITION
  No. 00-21
      RESTRUCTURING
    AND OTHER CHARGES
  No. 94-3,
 28




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LONG-LIVED
    ASSETS  IMPAIRMENT
  write-down
    DERIVATIVE
    INSTRUMENTS
    INVENTORIES 
    SLOW MOVING AND OBSOLESCENCE
    STOCK-BASED
    COMPENSATION EXPENSE
     29




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RESULTS
    OF OPERATIONS
  Years
    Ended December 31, 2006 and 2005
  Revenues.
        Significant Customers.
    Cost of Goods Sold.
  Research and Development Expenses.
 30




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Selling and Marketing Expenses.
  General and Administrative Expenses.
  Litigation Expense. Part 3-Legal
  Impairment Loss.
  Restructuring.
  Interest Income.
  Interest Expense.
  Other Income (Expense).
  Minority Interest.
  Years
    Ended December 31, 2005 and 2004
  Revenues.
     31




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Significant Customer.
  Cost of Goods Sold.
  Research and Development Expenses.
  Selling and Marketing Expenses.
  General and Administrative Expenses.
  Litigation Expense.
  Impairment Loss.
  Interest Income.
  Interest Expense.
  Provision for Income Taxes.
  LIQUIDITY
    AND CAPITAL RESOURCES
       32




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out-of-court
   33




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
    our progress with our research and development programs;
    the needs we may have to pursue FDA clearances or approvals of
    our products;
    our level of success in selling our products and technologies;
    our ability to establish and maintain successful collaborations;
    the costs we incur in securing intellectual property rights,
    whether through patents, licenses or otherwise;
    the costs we incur in enforcing and defending our patent claims
    and other intellectual property rights;
    the timing of additional capital expenditures;
    the need to respond to competitive pressures; and
    the possible acquisition of complementary products, businesses
    or technologies.  CONTRACTUAL
    OBLIGATIONS
    Less Than


Years


Years


OverTotal


1 Year


2-3


4-5


5 YearsCONTRACTUAL OBLIGATIONSNon-cancelable operating lease
    obligation

$
10,706


$
2,321


$
2,803


$
2,890


$
2,692Capital lease obligations


253



139



102



12



License arrangements


2,235



1,110



900



225



Long-term debt


20,673



392



281



20,000



Other long-term liabilities(1)


507



441



66







Total obligations

$
34,374


$
4,403


$
4,152


$
23,127


$
2,692     (1)
    
    The amounts shown represent contractual obligations that had
    original maturities beyond one year.   34




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##### Table of Contents



OFF-BALANCE
    SHEET ARRANGEMENTS
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     35




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ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  CONSOLIDATED
    FINANCIAL STATEMENTS
  REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board
    of Directors and Shareholders
 Third Wave Technologies, Inc.
  Internal Control 
    Integrated Framework,
            GRANT
    THORNTON LLP
    36




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   To the Board
    of Directors and Shareholders
 Third Wave Technologies, Inc.
          Internal Control 
    Integrated Framework,
  GRANT
    THORNTON LLP
    37




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
               38




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Consolidated
    Balance Sheets
  December 31, 2006


December 31, 2005ASSETSCurrent assets:Cash and cash equivalents

$
42,428,841


$
27,681,704Short-term investments


1,770,000



11,035,000Accounts receivables, net of
    allowance for doubtful accounts of $200,000 at December 31,
    2006 and December 31, 2005, respectively


4,756,497



3,764,519Inventories


3,513,909



2,248,183Prepaid expenses and other


463,139



235,794Total current assets


52,932,386



44,965,200Equipment and leasehold
    improvements:Machinery and equipment


16,623,560



15,563,119Leasehold improvements


2,362,676



2,346,93818,986,236



17,910,057Less accumulated depreciation


14,763,932



13,192,6174,222,304



4,717,440Restricted cash






805,184Intangible assets, net of
    accumulated amortization


2,135,884



2,641,620Indefinite-lived intangible assets






1,007,411Goodwill


489,873



489,873Capitalized license fees, net of
    accumulated amortization


2,624,580



2,797,046Other assets


1,828,949



980,954Total assets

$
64,233,976


$
58,404,728LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
7,095,860


$
6,850,207Accrued payroll and related
    liabilities


3,856,999



2,428,285Other accrued liabilities


1,446,500



2,075,420Deferred revenue


109,052



121,497Capital lease obligations due
    within one year


124,220



114,693Long-term debt due within one year


368,269



378,551Total current liabilities


13,000,900



11,968,653Long-term debt


15,182,478



639,564Deferred revenue 
    long-term


36,330



145,382Capital lease
    obligations  long-term


99,446



191,924Other liabilities


4,776,272



5,384,904Minority interest in subsidiary


465,134



Shareholders equity:Participating preferred stock,
    Series A, $.001 par value, 10,000,000 shares
    authorized, no shares issued and outstanding






Common stock, $.001 par value,
    100,000,000 shares authorized, 42,135,713 shares
    issued, 41,917,713 shares outstanding at December 31,
    2006 and 41,461,377 shares issued and
    41,243,377 shares outstanding at December 31, 2005


42,136



41,461Additional paid-in capital


209,355,204



199,097,187Unearned stock compensation


(6,354
)


(114,892
)Treasury stock 
    218,000 shares acquired at an average price of $4.02 per
    share


(877,159
)


(877,159
)Foreign currency translation
    adjustment


(102,186
)


47,442Accumulated deficit


(177,738,225
)


(158,119,738
)Total shareholders equity


30,673,416



40,074,301Total liabilities and
    shareholders equity

$
64,233,976


$
58,404,728    39




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Consolidated
    Statements of Operations
  Year Ended December 31,2006


2005


2004Revenues:Clinical product sales

$
20,926,092


$
15,665,519


$
14,950,815Research product sales


6,763,332



7,505,286



31,065,312License and royalty revenue


154,569



362,372



234,841Grant revenue


182,876



372,483



242,032Total revenues


28,026,869



23,905,660



46,493,000Operating expenses:Cost of goods sold (including
    amortization of intangible assets of $1,513,147 in 2006 and
    $1,504,752 in each of 2005 and 2004)


8,433,556



7,103,834



12,491,783Research and development


12,435,672



8,389,316



11,636,620Selling and marketing


11,082,427



12,772,439



10,803,381General and administrative


14,782,067



11,787,976



12,913,848Litigation


1,610,495



6,886,928



348,525Impairment of equipment






202,707



794,716Restructuring and other charges


(180,000
)






(98,000
)Total operating expenses


48,164,217



47,143,200



48,890,873Loss from operations


(20,137,348
)


(23,237,540
)


(2,397,873
)Other income (expense):Interest income


1,500,196



1,714,346



776,295Interest expense


(239,516
)


(457,004
)


(283,240
)Other


(224,568
)


(365,516
)


19,753Total other income (expense)


1,036,112



891,826



512,808Loss before income taxes and
    minority interest

$
(19,101,236
)

$
(22,345,714
)

$
(1,885,065
)Minority interest in subsidiary


(213,763
)






Provision for income taxes










57,341Net loss

$
(18,887,473
)

$
(22,345,714
)

$
(1,942,406
)Net loss per share 
    basic and diluted

$
(0.45
)

$
(0.54
)

$
(0.05
)Weighted average shares
    outstanding  basic and diluted


41,512,000



41,125,000



40,463,000    40




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Consolidated
    Statement of Shareholders Equity
  Common StockAdditional








ForeignPaid in


Unearned Stock





Currency


AccumulatedPar


Capital


Compensation


Treasury Stock


Translation


Deficit


TotalBalance at December 31, 2003

$
40,021


$
193,356,121


$
(309,996
)

$



$
33,307


$
(133,831,618
)

$
59,287,835Common stock issued for stock
    options and stock purchase plan  1,081,520 shares


1,082



2,363,289



















2,364,371Unearned stock compensation






3,270,752



(3,270,752
)














Amortization of unearned stock
    compensation










3,026,455















3,026,455Net loss






















(1,942,406
)


(1,942,406
)Foreign currency translation
    adjustment


















(1,358
)






(1,358
)Comprehensive loss


























(1,943,764
)Balance at December 31, 2004


41,103



198,990,162



(554,293
)






31,949



(135,774,024
)


62,734,897Common stock issued for stock
    options and stock purchase plan  358,613 shares


358



915,403



















915,761Unearned stock compensation






(808,378
)


808,378















Amortization of unearned stock
    compensation










(368,977
)














(368,977
)Common stock repurchased for
    treasury  218,000 shares














(877,159
)










(877,159
)Net loss






















(22,345,714
)


(22,345,714
)Foreign currency translation
    adjustment


















15,493







15,493Comprehensive loss


























(22,330,221
)Balance at December 31, 2005


41,461



199,097,187



(114,892
)


(877,159
)


47,442



(158,119,738
)


40,074,301Common stock issued for stock
    options and stock purchase plan  674,335 shares


675



1,630,263



















1,630,938Equity investment in subsidiary






4,389,918



















4,389,918Stock-based compensation






3,378,373



















3,378,373Unearned stock compensation






128,449



(128,449
)














Amortization of unearned stock
    compensation










236,987















236,987Adjustment of prior year
    stock-based compensation expense (see Note 2)






731,014















(731,014
)


Net loss






















(18,887,473
)


(18,887,473
)Foreign currency translation
    adjustment


















(149,628
)






(149,628
)Comprehensive loss


























(19,037,101
)Balance at December 31, 2006

$
42,136


$
209,355,204


$
(6,354
)

$
(877,159
)

$
(102,186
)

$
(177,738,225
)

$
30,673,416    41




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Consolidated
    Statements of Cash Flows
  Year Ended December 31,2006


2005


2004OPERATING ACTIVITIES:Net loss

$
(18,887,473
)

$
(22,345,714
)

$
(1,942,406
)Adjustments to reconcile net loss
    to net cash provided by (used in) operating activities:Minority interest in net loss of
    subsidiary


(213,763
)






Depreciation and amortization


1,657,678



1,705,252



2,107,466Amortization of intangible assets


1,513,147



1,504,752



1,504,752Amortization of licensed technology


1,244,804



398,132



623,956Noncash stock compensation


3,615,359



(368,977
)


3,026,455Interest accretion related to
    convertible note payable


29,356







Impairment charge and loss on
    disposal of equipment


28,562



208,681



888,817Changes in operating assets and
    liabilities:Accounts receivable


(1,182,665
)


1,937,853



(3,724,983
)Inventories


(1,269,026
)


(1,011,791
)


157,654Prepaid expenses and other assets


(823,645
)


131,298



390,645Accounts payable


13,560



(10,029
)


1,563,571Accrued expenses and other
    liabilities


192,687



195,852



1,664,244Deferred revenue


(121,627
)


(117,085
)


316,204Net cash provided by (used in)
    operating activities


(14,203,046
)


(17,771,776
)


6,576,375INVESTING ACTIVITIES:Purchases of equipment and
    leasehold improvements


(1,136,122
)


(404,934
)


(578,472
)Proceeds on sale of equipment






197,683



88,320Purchases of licensed technology


(890,323
)


(200,000
)


Purchases of short-term investments


(1,770,000
)


(11,835,000
)


(11,070,000
)Sales and maturities of short-term
    investments


11,035,000



11,870,000



10,800,000Change in restricted cash balance


805,184



(805,184
)


Net cash provided by (used in)
    investing activities


8,043,739



(1,177,435
)


(760,152
)FINANCING ACTIVITIES:Proceeds from long-term debt


14,881,878



800,000



470,000Payments on long-term debt


(378,602
)


(9,731,081
)


(34,137
)Payments on capital lease
    obligations


(141,610
)


(96,587
)


(12,222
)Proceeds from issuance of common
    stock, net


1,630,938



915,761



2,364,371Proceeds from minority equity
    investment in subsidiary


5,093,973







Repurchase of common stock for
    treasury






(877,159
)


Net cash provided by (used in)
    financing activities


21,086,577



(8,989,066
)


2,788,012Effect of exchange rate changes on
    cash


(180,133
)






Net increase (decrease) in cash and
    cash equivalents


14,747,137



(27,938,277
)


8,604,235Cash and cash equivalents at
    beginning of period


27,681,704



55,619,981



47,015,746Cash and cash equivalents at end of
    period

$
42,428,841


$
27,681,704


$
55,619,981Supplemental disclosure of cash
    flows information  Cash paid for interest

$
202,599


$
468,520


$
277,226Supplemental disclosure of cash
    flows information  Income taxes paid

$



$
52,754


$
     
    During the years ended December 31, 2006, 2005, and 2004,
    the Company entered into capital lease obligations of $58,659,
    $184,452 and $230,974, respectively.
    During the year ended December 31, 2006 the Company entered
    into a license agreement under which the Company will pay
    1,000,000 Euros over two years. The estimated present value of
    the license was $1,122,338.
    During the year ended December 31, 2005 the Company entered
    into a license agreement in which the Company will pay
    $2,000,000 over time through 2010. The estimated present value
    of the license obtained was $1,772,172.   42




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial Statements
 December 31, 2006
  1.
    NATURE OF
    OPERATIONS AND PRINCIPLES OF CONSOLIDATION  PRINCIPLES
    OF CONSOLIDATION
    NATURE
    OF OPERATIONS
      2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    CASH
    EQUIVALENTS, SHORT-TERM INVESTMENTS, AND RESTRICTED
    CASH
    available-for-sale
    INVENTORIES
  first-in,
  December 312006


2005Raw materials

$
2,283,852


$
1,486,166Finished goods and work in process


1,885,057



1,437,017Reserve for excess and obsolete
    inventory


(655,000
)


(675,000
)Total inventories

$
3,513,909


$
2,248,183  43




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  ADVERTISING
    COSTS
    FOREIGN
    CURRENCY TRANSLATION
    EQUIPMENT
    AND LEASEHOLD IMPROVEMENTS
    PATENTS
    GOODWILL
    AND OTHER INTANGIBLE ASSETS
        Technology license

$
915,828Trademark


91,583$
1,007,411  44




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    December 31, 2006


December 31, 2005Carrying


Accumulated


Carrying


AccumulatedAmount


Amortization


Amount


AmortizationCosts of settling patent litigation

$
10,533,248


$
9,396,380


$
10,533,248


$
7,891,628Technology license


915,828



7,632







Trademark


91,583



763







Customer agreements


38,000



38,000



38,000



38,000$
11,578,659


$
9,442,775


$
10,571,248


$
7,929,628     2007

$
1,237,6082008


100,7402009


100,7402010


100,7402011


100,740Thereafter


495,316   IMPAIRMENT
    OF LONG-LIVED ASSETS
    CAPITALIZED
    LICENSE FEES
    DERIVATIVE
    INSTRUMENTS AND HEDGING ACTIVITIES
   45




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   REVENUE
    RECOGNITION
  No. 00-21
      RESEARCH
    AND DEVELOPMENT
    SHIPPING
    AND HANDLING COSTS
    INCOME
    TAXES
    STOCK-BASED
    COMPENSATION
   46




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    No. 96-18,
      Year Ended December 312006


2005


2004Cost of goods sold

$
133,461


$
24,251


$
155,275Research and development


645,859



(501,754
)


1,133,617Selling and marketing


778,355



(5,256
)


144,519General and administrative


2,057,684



113,782



1,593,044$
3,615,359


$
(368,977
)

$
3,026,455    47




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
     2006


2005


2004Expected term (years)


5



5



5Risk-free interest rate


4.8
%


4.3
%


4.1
%Expected volatility


74
%


81
%


84
%Expected dividend yield


0
%


0
%


0
%Forfeiture rate


25
%


0
%


0
%       2005


2004Net loss:As reported

$
(22,345,714
)

$
(1,942,406
)Add: Stock-based compensation, as
    recognized


(368,977
)


3,026,455Add: Stock-based compensation
    expense related to stock options determined under
    SFAS No. 123


(10,050,950
)


(4,347,817
)Add: Stock-based compensation
    related to the employee stock purchase plan under
    SFAS No. 123


(207,989
)


(283,898
)SFAS No. 123 Pro forma

$
(32,973,630
)

$
(3,547,666
)Net loss per share:As reported, basic and diluted

$
(0.54
)

$
(0.05
)SFAS No. 123 pro forma,
    basic and diluted

$
(0.80
)

$
(0.09
)   Review of
    Stock Option Grants and Procedures
     48




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      FAIR
    VALUE OF FINANCIAL INSTRUMENTS
    USE OF
    ESTIMATES
    NET
    LOSS PER SHARE
      Year Ended December 312006


2005


2004Net loss

$
(18,887,473
)

$
(22,345,714
)

$
(1,942,406
)Weighted-average shares of common
    stock outstanding  basic and diluted


41,512,000



41,125,000



40,463,000Basic and diluted net loss per
    share

$
(0.45
)

$
(0.54
)

$
(0.05
)Weighted-average shares from
    options that could potentially dilute basic earnings per share
    in the future that are not included in the computation of
    diluted loss per share as their impact is antidilutive (computed
    under the treasury stock method)


777,000



1,591,000



2,091,000   NEW
    ACCOUNTING PRONOUNCEMENTS
   49




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Fair Value Measurements
    (SFAS No. 157
  RECLASSIFICATION
    3.
    CHANGE IN
    ACCOUNTING ESTIMATE   50




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   4.
    LONG-TERM
    DEBT    December 312006


2005Notes payable

$
15,550,747


$
1,018,115Less current portion


368,269



378,551$
15,182,478


$
639,564     2007


368,2692008


221,4902009


49,7542010


02011


14,911,234       5.
    SHAREHOLDERS
    EQUITY    MINORITY
    INTEREST IN SUBSIDIARY
   51




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      STOCK
    PURCHASE PLAN
    STOCK
    OPTION PLANS
      Shares available for grant at
    December 31, 2003


1,478,692Options granted


(2,127,255
)Options forfeited


1,161,928Increase in options available for
    grant


1,500,000Shares available for grant at
    December 31, 2004


2,013,365Options granted


(2,521,790
)Options forfeited


622,964Increase in options available for
    grant


1,800,000Shares available for grant at
    December 31, 2005


1,914,539Options granted


(930,250
)RSUs granted


(112,530
)Options forfeited


1,694,353RSUs forfeited


3,451Shares available for grant at
    December 31, 2006


2,569,563  52




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    WeightedAverage


AggregateNumber of


Exercise


IntrinsicShares


Price


ValueOutstanding at December 31,
    2003


7,256,505


$
4.37Granted


2,127,255



4.97Exercised


(775,309
)


2.42Forfeited


(1,161,928
)


5.57Outstanding at December 31,
    2004


7,446,523



4.55Granted


2,521,790



4.20Exercised


(244,051
)


2.22Forfeited


(622,964
)


7.20Outstanding at December 31,
    2005


9,101,298



4.34Granted


930,250



3.02Exercised


(549,588
)


2.39Forfeited


(1,694,353
)


5.24Outstanding at December 31,
    2006


7,787,607


$
4.12


$
9,512,989Options Exercisable at
    December 31, 2006


5,468,855


$
4.40


$
6,355,999     Number ofShares








Shares


WtdOutstanding at


Wtd Average


Remaining


Exercisable at


AverageDecember 31,


Exercise


Contractual


December 31,


Exercise2006


Price


Life


2006


PriceOptions granted between $1.11 and
    $2.20


801,800


$
1.94



5.3



801,800


$
1.94Options granted between $2.21 and
    $3.31


2,348,139


$
2.82



7.1



1,161,214


$
2.79Options granted between $3.32 and
    $4.42


2,766,505


$
3.92



6.6



1,828,054


$
3.89Options granted between $4.43 and
    $5.53


393,000


$
4.69



7.4



199,624


$
4.69Options granted between $5.54 and
    $6.64


562,800


$
6.35



4.9



562,800


$
6.35Options granted between $6.65 and
    $7.74


221,250


$
6.91



6.9



221,250


$
6.91Options granted between $7.75 and
    $8.85


665,400


$
8.73



3.8



665,400


$
8.73Options granted between $8.86 and
    $9.96


7,200


$
9.58



3.5



7,200


$
9.58Options granted between $9.97 and
    $11.06


21,513


$
10.79



4.2



21,513


$
10.797,787,607


$
4.12



6.3



5,468,855


$
4.40  53




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    No. 96-18,
  Restricted
    Stock Units
    WeightedAverageNumber of


FairShares


ValueNonvested shares of restricted
    stock units at December 31, 2005





$
Granted


112,530



2.84Vested






Forfeited


(3,451
)


2.84Nonvested shares of restricted
    stock units at December 31, 2006


109,079


$
2.84     6.
    INCOME
    TAXES     54




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
     December 312006


2005Deferred tax assets:Patent expense

$
2,395,000


$
1,930,000Stock compensation expense


267,000



203,000Deferred revenue


58,000



104,000Inventory obsolescence


262,000



270,000Accrued liabilities


1,456,000



1,891,000Other


274,000



227,000AMT credit carryforward


39,000



39,000Net operating loss carryforwards


58,433,000



53,440,000Total deferred tax assets


63,184,000



58,104,000Valuation allowance


(62,809,000
)


(56,934,000
)Net deferred tax assets


375,000



1,170,000Deferred tax liabilities:Equipment and leasehold
    improvements


76,000



(113,000
)Intangibles


(451,000
)


(1,057,000
)Deferred tax liabilities


(375,000
)


(1,170,000
)Net deferred tax
    assets/(liabilities)

$



$
     2006


2005


2004Federal statutory rate


(34.0
)%


(34.0
)%


(34.0
)%State taxes


(5.0
)%


(5.9
)%


(5.1
)%Foreign taxes


0.0
%


0.0
%


2.1
%Meals and entertainment


0.2
%


0.2
%


1.7
%Stock-based compensation


5.4
%






Other permanent differences


(0.3
)%


0.0
%


1.0
%Valuation allowance


33.7
%


39.7
%


37.3
%0.0
%


0.0
%


3.0
%    55




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##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   7.
    LEASE
    OBLIGATIONS        Capital


OperatingLeases


Leases2007

$
139,000


$
2,321,0002008


65,000



1,374,0002009


37,000



1,429,0002010


12,000



1,486,0002011






1,404,000Thereafter






2,692,000Total minimum lease obligations

$
253,000


$
10,706,000Less amounts representing interest


29,000Present value of minimum lease
    payments


224,000Less current portion of long-term
    lease obligations


124,000$
100,000    8.
    RESTRUCTURING
    AND OTHER CHARGES     56




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##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Equipment andLeaseholdImprovements


PrepaymentFacilities


Disposals


Penalties


Other


TotalCharge in 2002

$
2,470,438


$
7,175,995


$
494,930


$
945,870


$
11,087,233Payments made


(312,400
)






(469,300
)






(781,700
)Non-cash charges






(7,175,995
)


(25,630
)


(140,290
)


(7,341,915
)Accrued restructuring balance at
    December 31, 2002


2,158,038











805,580



2,963,618Payments made


(674,809
)










(874,765
)


(1,549,574
)Revision to estimate


(69,185
)










69,185



Accrued restructuring balance at
    December 31, 2003


1,414,044















1,414,044Payments made


(199,196
)














(199,196
)Revision to estimate


(98,000
)














(98,000
)Accrued restructuring balance at
    December 31, 2004


1,116,848















1,116,848Payments made


(159,285
)














(159,285
)Accrued restructuring balance at
    December 31, 2005


957,563















957,563Payments made


(146,303
)














(146,303
)Revision to estimate


(180,000
)














(180,000
)Accrued restructuring balance at
    December 31, 2006

$
631,260


$



$



$



$
631,260   9.
    LICENSE
    AGREEMENTS     57




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##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
       2007

$
450,0002008


450,0002009


450,0002010


225,000Total payments


1,575,000Less amount representing interest


144,058Present value of payments

$
1,430,942       and/or
  10.
    COLLABORATIVE
    AGREEMENTS    tm ® tm
 58




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##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   11.
    401(k)
    PLAN    12.
    LONG-TERM
    INCENTIVE PLANS      13.
    LONG-TERM
    LIABILITIES    December 31,


December 31,2006


2005License payments

$
1,048,260


$
1,430,942Long-term Incentive Plan


1,885,989



1,312,841Restructuring


505,681



775,174Rent


1,103,313



1,159,094Other


233,029



706,853$
4,776,272


$
5,384,904   14.
    SEGMENT
    DISCLOSURE    2006


2005


2004United States

$
23,064,642


$
17,027,952


$
13,759,367Japan


3,814,957



5,107,455



31,361,485Other


809,825



1,035,398



895,275$
27,689,424


$
23,170,805


$
46,016,127  59




---



##### Table of Contents



Third
    Wave Technologies, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  15.
    QUARTERLY
    FINANCIAL DATA (UNAUDITED)    Quarter EndedMarch 31


June 30


September 30


December 312006:Net revenues

$
7,875


$
6,759


$
6,601


$
6,792Gross margin


5,712



4,861



4,364



4,656Net loss


(4,383
)


(4,727
)


(5,153
)


(4,624
)Basic and diluted net loss per
    share

$
(0.11
)

$
(0.11
)

$
(0.12
)

$
(0.11
)2005:Net revenues

$
7,126


$
5,772


$
5,222


$
5,786Gross margin


5,126



3,960



3,646



4,070Net income (loss)


(4,421
)


(5,514
)


(7,380
)


(5,031
)Basic and diluted net income
    (loss) per share

$
(0.11
)

$
(0.13
)

$
(0.18
)

$
(0.12
)   16.
    SUBSEQUENT
    EVENT    out-of-court
   60




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  EVALUATION
    OF DISCLOSURE CONTROLS AND PROCEDURES
  Rule 13a-15(b) Rules 13a-15(e)
  EVALUATION
    OF INTERNAL CONTROL OVER FINANCIAL REPORTING
         61




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION  2007-2009 Form 10-K
  Form 10-K
 PART III    PART IV
  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENTS AND SCHEDULES    Financial Statements.
  Financial Statement Schedules.
  Schedule II  Valuation and Qualifying
    Accounts.  Schedules not included have been
    omitted because they are not applicable.  Exhibits.
 62




---



##### Table of Contents



SIGNATURES      By:
    /s/  Kevin
    T. Conroy     POWER OF
    ATTORNEY
  Form 10-K Form 10-K.
    Signature

Title

Date/s/  David
    A. ThompsonDavid
    A. Thompson

Chairman of the Board and Director

March 9, 2007/s/  Kevin
    T. ConroyKevin
    T. Conroy

President and Chief Executive
    Officer (Principal Executive Officer)

March 13, 2007/s/  Maneesh
    K. AroraManeesh
    K. Arora

Chief Financial Officer 
    (Principal Financial Officer)

March 13, 2007/s/  James
    ConnellyJames
    Connelly

Director

March 14, 2007/s/  Gordon
    F. BrunnerGordon
    F. Brunner

Director

March 14, 2007/s/  Lawrence
    MurphyLawrence
    Murphy

Director

March 12, 2007/s/  Katherine
    NapierKatherine
    Napier

Director

March 14, 2007/s/  Lionel
    SterlingLionel
    Sterling

Director

March 8, 2007  63




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description

Incorporated by Reference to3
.1

Amended and Restated Certificate
    of Incorporation of the Registrant, dated as of August 16,
    2000

Exhibit 3.1(b) to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended3
.2

Amended and Restated Bylaws of the
    Registrant, dated as of April 11, 2006

Exhibit 3.1 to the
    Registrants Current Report on
    Form 8-K
    filed April 17, 20064
.1

Rights Agreement between the
    Registrant and Computershare Investor Services (fka EquiServe
    Trust Company N.A.), dated as of October 24, 2001

Exhibit 4.9 to the
    Registrants Registration Statement on
    Form 8-A,
    File
    No. 000-31745,
    filed on November 30, 20014
.2

Amendment No. 1 to the Rights
    Agreement between the Registrant and Computershare Investor
    Services (fka EquiServe Trust Company N.A.) dated
    February 18, 2003

Exhibit 4.2 to the
    Registrants Registration Statement on
    Form 8-A/A,
    File
    No. 000-31745,
    filed on February 19, 200310
.1*

Incentive Stock Option Plan

Exhibit 10.1 to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended10
.2*

1997 Incentive Stock Option Plan

Exhibit 10.2 to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended10
.3*

1997 Nonqualified Stock Option Plan

Exhibit 10.3 to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended10
.4*

1998 Incentive Stock Option Plan

Exhibit 10.4 to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended10
.5*

1999 Incentive Stock Option Plan

Exhibit 10.5 to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended10
.6*

1999 Nonqualified Stock Option Plan

Exhibit 10.6 to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended10
.7*

2000 Stock Plan, as amended

Exhibit 4.1 to
    Registrants Registration Statement on
    Form S-8
    filed on June 6, 200610
.8*

First Amendment To Third Wave
    Technologies Inc. 2000 Stock Plan10
.9*

2000 Employee Stock Purchase Plan

Exhibit 10.8 to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended10
.10

Lease Agreement, dated as of
    April 1, 1997, between the Registrant and University
    Research Park Facilities Corp. and amendment, dated as of
    September 1, 2001

Exhibit 10.18 to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended 64




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##### Table of Contents



ExhibitNo.

Description

Incorporated by Reference to10
.11

Amendment to Lease between
    Registrant and University Research Park Facilities Corp. dated
    as of September 1, 2002

Exhibit 10.11 to the
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 200210
.12

Amendment No. 2 to Lease
    Agreement between University Research Park Facilities Corp. and
    Third Wave Technologies, Inc. dated September 1, 2006

Exhibit 10.1 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the fiscal year ended September 30, 200610
.13

Development and Commercialization
    Agreement, dated as of December 29, 2000, between the
    Registrant and BML, Inc.

Exhibit 10.26 to the
    Registrants Registration Statement on
    Form S-1,
    Registration
    No. 333-42694,
    filed on July 31, 2000, as amended10
.14

License Agreement dated as of
    October 15, 2002 between Registrant and Monogram
    Biosciences (fka Aclara Biosciences, Inc.)

Exhibit 10.14 to the
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 200210
.15*

Severance Agreement between John
    Puisis and Third Wave Technologies, Inc. effective
    December 20, 2005

Exhibit 10.17 to
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 200510
.16*

Third Wave Technologies, Inc.
    Amended Long Term Incentive Plan No. 2

Exhibit 10.19 to
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 200510
.17*

Third Wave Technologies, Inc.
    Amended Long Term Incentive Plan No. 3

Exhibit 10.29 to
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 200510
.18*

Severance Agreement between James
    J. Herrmann and Third Wave Technologies, Inc. dated
    January 31, 2006

Exhibit 10.26 to
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 200510
.19

Series A Preferred Stock and
    Warrant Purchase Agreement between Mitsubishi Corporation, CSK
    Institute for Sustainability, Ltd. and Third Wave Technologies
    Japan, K.K. dated March 31, 2006

Exhibit 10.3 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the fiscal year ended March 31, 200610
.20

Investor Rights Agreement between
    Registrant, Third Wave Technologies Japan, KK, Mitsubishi
    Corporation and CSK Institute for Sustainability, LTD. dated
    April 21, 2006

Exhibit 10.4 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the fiscal year ended March 31, 200610
.21

Securities Purchase Agreement
    between Stark Onshore Master Holding LLC and Third Wave
    Technologies, Inc. dated December 18, 2006

Exhibit 10.1 to
    Registrants Current Report on
    Form 8-K
    filed December 19, 200610
.22*

Second Amended and Restated
    Employment Agreement between Kevin T. Conroy and Third Wave
    Technologies, Inc. dated March 12, 200710
.23*

Amended and Restated Employment
    Agreement between Maneesh Arora and Third Wave Technologies,
    Inc. dated March 12, 200710
.24*

Employment Agreement between Cindy
    Ahn and Third Wave Technologies, Inc. dated March 12, 200710
.25*

Employment Agreement between John
    Bellano and Third Wave Technologies, Inc. dated March 12,
    2007 65




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##### Table of Contents



ExhibitNo.

Description

Incorporated by Reference to10
.26*

Employment Agreement between Jorge
    Garces and Third Wave Technologies, Inc. dated March 12,
    200710
.27*

Employment Agreement between Greg
    Hamilton and Third Wave Technologies, Inc. dated March 12,
    200710
.28*

Employment Offer between Ivan
    Trifunovich and Third Wave Technologies, Inc. dated
    December 6, 200110
.29*

Third Wave Technologies, Inc. 2007
    Incentive Plan10
.30*

Third Wave Technologies, Inc. Long
    Term Incentive Plan No. 421
.1

List of Subsidiaries23
.1

Consent of Independent Registered
    Public Accounting Firm  Grant Thornton LLP23
.2

Consent of Independent Registered
    Public Accounting Firm  Ernst & Young24
.1

Powers of Attorney (contained in
    the signature page hereto)31
.1

CEOs Certification Pursuant
    to Section 302 of the Sarbanes Oxley Act of 200231
.2

CFOs Certification pursuant
    to Section 302 of the Sarbanes Oxley Act of 200232
.1

CEOs Certification pursuant
    to 18 U.S.C. Section 1350, of Chapter 63 of
    Title 18 of the United States Code32
.2

CFOs Certification pursuant
    to 18 U.S.C Section 1350, of Chapter 63 of
    Title 18 of the United States Code     *
    
    Indicated a management contract or compensatory plan or
    arrangement. 66




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##### Table of Contents



SCHEDULE II:
    VALUATION AND QUALIFYING ACCOUNTS
    YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
  Balance at


AdditionsBeginning


Charged


(1)


Balance atDescription

of Year


to Expense


Deductions


End of Year(Dollars in thousands)Allowance for doubtful accounts
    receivable:2004

$
140


$
177


$
17


$
3002005

$
300


$
107


$
207


$
2002006

$
200


$
24


$
24


$
200Allowance for excess and obsolete
    inventory:2004

$
750


$
805


$
905


$
6502005

$
650


$
968


$
943


$
6752006

$
675


$
770


$
790


$
655     (1)
    
    Represents amounts written off or disposed, net of recoveries. 67