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

ANNUAL REPORT UNDER SECTION 13 OR 15(d)  OF THE SECURITIES
    EXCHANGE ACT OF 1934For the fiscal year ended:
    December 31, 2008o

TRANSITION REPORT UNDER SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934    COMMISSION FILE NUMBER
    000-23017
  ECHO THERAPEUTICS,
    INC.
 (Exact name of registrant as
    specified in its charter)
  DELAWARE

41-1649949(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)10 Forge Parkway, Franklin, Massachusetts

02038(Address of principal executive
    offices)

(Zip Code)    (Registrants telephone number, including area code)
 (508) 553-8850
  Securities registered pursuant to Section 12(b) of the
    Act:
 None
  Securities registered pursuant to Section 12(g) of the
    Act:
 Common Stock, $.01 par value per share
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company þ(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





ECHO
    THERAPEUTICS, INC.
    2008 Annual Report on
    Form 10-K
    TABLE OF CONTENTS
  
  Item



PagePART I1.

Business


31A.

Risk Factors


162.

Properties


313.

Legal Proceedings


31PART II5.

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


317.

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


328.

Financial Statements and Supplementary Data


449.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


459A(T).

Controls and Procedures


45PART III10.

Directors, Executive Officers and Corporate
    Governance


4611.

Executive Compensation


4612.

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


4613.

Certain Relationships and Related Transactions,
    and Director Independence


4614.

Principal Accounting Fees and Services


46PART IV15.

Exhibits and Financial Statement Schedules


46SIGNATURES


47EX-14Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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tm tm ® tm tm
  Form 10-K




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PART I  ITEM 1.
    BUSINESS.  Overview
    tm
  tm and/or tm
  SymphonytmtCGMSystem
    
 3




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Symphonytm Skin Permeation Technology
    Preludetm SkinPrep System
  tm Symphony Diabetes Home Use Pilot Studies
  
   SonoPrep®

    System
    Skin
    Permeation Control Feedback Technology
    Symphonytm Transdermal Glucose Sensor Technology
   4




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Symphonytm Wireless Transmitter
    Symphonytm Monitor
  warm-up
    Symphonytm Market Opportunities
  Importance
    of Continuous Blood Glucose Monitoring
     5




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Hospital
    Critical Care Market
        Symphonytm Hospital Critical Care Pilot Studies
         6




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Diabetes
    Home Use Market
         7




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Symphonytm Diabetes Home Use Pilot Studies
    ® warm-up
  tm 24-hour 15-minute
  tm
  Specialty
    Pharmaceuticals
     8




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AzoneTStm Transdermal Drug Reformulation Technology
  and/or
      
    ease of reformulation of the API with AzoneTS;
    how close the current route of administration is to the proposed
    route;
    the level of additional toxicology information required by the
    FDA; and
    clinical burden needed to show adequate safety and efficacy of
    the new product.  Durhalievetm
     9




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##### Table of Contents



AzoneTS
    Section 505(b)(2) Development Strategy
      
    smaller patient exposure database;
    reliance upon the established safety database of the APIs;
    reduction of data to support efficacy;
    minimum requirement of one adequate and well-controlled study
    compared to two for a NCE;
    limited if any requirement for additional nonclinical studies;
    reliance upon previous findings of nonclinical safety for the
    APIs and the AzoneTS Type V nonclinical DMF; and
    3-year period of marketing exclusivity (in addition to existing
    patent protection) if the NDA contains reports of new clinical
    studies other than bioavailability.  Additional
    AzoneTS Drug Candidates
    4/48
    Partnering Program
    Prelude
    for Transdermal Drug Delivery
  tm
 10




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SonoPrep
    for Transdermal Drug Delivery
    Government
    Regulation
    FDA
    Approval Process for Medical Devices
     11




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FDA
    Approval Process for Pharmaceuticals Products
    
    completion of preclinical laboratory tests, animal studies and
    formulation studies under the FDAs current good laboratory
    practices;
    submission to the FDA of an investigational new drug for human
    clinical testing, which must become effective before human
    clinical trials may begin and must include independent
    institutional review board approval at each clinical site before
    the trial is initiated;
    performance of adequate and well-controlled clinical trials to
    establish the safety and efficacy of the product for each
    indication;
    submission to the FDA of a new drug application;
    satisfactory completion of an FDA Advisory Committee review, if
    applicable;
    satisfactory completion of an FDA inspection of the
    manufacturing facility or facilities at which the product is
    produced to assess compliance with current Good Manufacturing
    Practices (GMP), or current GMP, to assure that the facilities,
    methods and controls are adequate to preserve the drugs
    identity, strength, quality and purity; and
    FDA review and approval of the new drug application.         12




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Post-Approval
    Requirements
        Foreign
    Regulation
   13




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Related
    Matters
    Research
    and Development
    Manufacturing
        Competition
     14




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Intellectual
    Property
      tm
    Employees
      Company
    Information
   15




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(508) 553-8850.
    Form 10-K, Form 10-Q, Form 8-K
  ITEM 1A.
    RISK
    FACTORS.  Risk
    Factors
    If we
    fail to raise additional capital, we will be unable to continue
    our business.
       16




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and/or
  Our
    indebtedness under our Secured Notes is secured by substantially
    all of our assets, including our rights to our
    SymphonytmtCGM System and
    AzoneTStm transdermal drug reformulation technology. If an event of
    default occurs under our Secured Notes, the holder of the
    Secured Notes may foreclose on our assets.
    
    our failure to make a payment when due or payable;
    a breach or notice of intent to breach of any material term,
    covenant or condition in the Secured Note or any of the
    transaction documents and such breach is not cured within five
    business days after notice;
    any false, incorrect or breach in any material respect of any
    material representation or warranty;
    the default of more than $25,000 of any other of our
    indebtedness that causes such amount to become due and
    payable; or
    our bankruptcy (whether voluntary or involuntary) or general
    assignment for the benefit of its creditors.    A
    failure to maintain a sufficient level of stockholders
    equity could result in an event of default and seizure of our
    assets.
       17




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The
    terms of our Secured Notes requiring that we maintain a level of
    stockholders equity could impede or prohibit our ability
    to develop our products.
    We
    have a history of operating losses, and we expect our operating
    losses to continue for the foreseeable future and we may not
    continue as a going concern.
    Our
    principal shareholders own a significant percentage of our stock
    and will be able to exercise significant
    influence.
   18




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Our
    future success is dependent upon successful collaborations with
    strategic partners.
      The
    trading price of our common stock entails additional regulatory
    requirements, which may negatively affect such trading
    price.
  over-the-counter
  Our
    stock price has been volatile and may fluctuate in the
    future.
    
    our financial condition, performance and prospects;
    the depth and liquidity of the market for our common stock;
    our ability to enter into successful collaborative arrangements
    with strategic partners for research and development, clinical
    testing, and sales and marketing;
    sales by selling shareholders of shares issued and issuable in
    connection with our private placements in 2003, 2004, 2006, 2007
    and 2008;
    investor perception of us and the industry in which we operate;
    general financial and other market conditions; and
    domestic and international economic conditions.   19




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Securities
    we issue to fund our operations could dilute or otherwise
    adversely affect our shareholders.
    Risks
    related to our discovery, development and commercialization of
    new medical products
  Our
    medical device products are based on new technologies and are in
    early stages of development, and may not be successfully
    developed or achieve market acceptance.
        Our
    future success may be dependent in part upon successful
    development of our continuous glucose monitor for the hospital
    intensive care unit and critical care unit
    markets.
  2006-2008
  Our
    pharmaceutical products are in various stages of development and
    may not be successfully developed or obtain regulatory
    approval.
  tm tm tm
 20




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tm
  tm
    Our
    results to date provide no basis for predicting whether any of
    our product candidates will be safe or effective, or receive
    regulatory approval.
    We may
    not be able to gain market acceptance of our product candidates,
    which would prevent us from becoming profitable.
    
    Our establishment and demonstration to the medical community of
    the clinical efficacy and safety of our product candidates;
    Our ability to create products that are superior to alternatives
    currently on the market; and
    Our ability to establish in the medical community the potential
    advantage of our treatments over alternative treatment methods.   21




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We
    have limited manufacturing capabilities and manufacturing
    personnel, and if our manufacturing capabilities are
    insufficient to produce, or have produced by third-parties, an
    adequate supply of our pharmaceutical product candidates in
    nonclinical, clinical or commercial quantities, our development
    and commercialization activities will be limited and our
    business will be harmed.
    We may
    not be able to obtain and maintain the third party relationships
    that are necessary to develop, commercialize and manufacture
    some or all of our product candidates.
         22




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We
    have no experience in sales, marketing and distribution and may
    have to enter into agreements with third parties to perform
    these functions, which could prevent us from successfully
    commercializing our product candidates.
    We may
    fail to select or capitalize on the most scientifically,
    clinically or commercially promising or profitable
    pharmaceutical product candidates.
    If we
    are not able to retain our current senior management team and
    our scientific and medical advisors or continue to attract and
    retain qualified scientific, technical and business personnel,
    our business will suffer.
    Disputes
    under key agreements or conflicts of interest with our
    scientific advisors or clinical investigators could delay or
    prevent development or commercialization of our product
    candidates.
   23




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We may
    have challenges in managing our outside contractors for product
    and regulatory accomplishments.
    Risks
    related to regulatory approvals
  None
    of our product candidates has received regulatory approvals. If
    we are unable to obtain regulatory approvals to market one or
    more of our product candidates, our business will be adversely
    affected.
      If we
    are unable to successfully complete the preclinical studies or
    clinical trials necessary to support PMA or NDA submissions to
    the FDA, we may be unable to commercialize our tCGM system or
    AzoneTS products under development, which could impair our
    financial position.
   24




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
    the FDA or other regulatory authorities do not approve a
    clinical trial protocol or a clinical trial, or place a clinical
    trial on hold;
    patients do not enroll in clinical trials at the rate we expect;
    patients do not comply with trial protocols;
    patient
    follow-up is
    not at the rate we expect;
    patients experience adverse side effects;
    patients die during a clinical trial, even though their death
    may not be related to our products;
    institutional review boards, or IRBs, and third-party clinical
    investigators may delay or reject our trial protocol;
    third-party clinical investigators decline to participate in a
    trial or do not perform a trial on our anticipated schedule or
    consistent with the investigator agreements, clinical trial
    protocol, good clinical practices or other FDA or IRB
    requirements;
    third-party organizations do not perform data collection,
    monitoring and analysis in a timely or accurate manner or
    consistent with the clinical trial protocol or investigational
    or statistical plans;
    regulatory inspections of our clinical trials or manufacturing
    facilities may, among other things, require us to undertake
    corrective action or suspend or terminate our clinical trials;
    changes in governmental regulations or administrative actions;
    the interim or final results of the clinical trial are
    inconclusive or unfavorable as to safety or efficacy; and
    the FDA concludes that our trial design is inadequate to
    demonstrate safety and efficacy.    We
    depend on clinical investigators and clinical sites to enroll
    patients in our clinical trials and other third parties to
    manage the trials and to perform related data collection and
    analysis, and, as a result, we may face costs and delays that
    are outside of our control.
   25




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The
    regulatory approval process is costly and lengthy and we may not
    be able to successfully obtain all required regulatory
    approvals.
    
    failure of our product candidates to meet a regulatory
    entitys requirements for safety, efficacy and quality;
    limitation on the indicated uses for which a product may be
    marketed;
    unforeseen safety issues or side effects; and
    governmental or regulatory delays and changes in regulatory
    requirements and guidelines.  Even
    if we receive regulatory approvals for marketing our product
    candidates, if we fail to comply with continuing regulatory
    requirements, we could lose our regulatory approvals, and our
    business would be adversely affected.
   26




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Even
    if we are able to obtain regulatory approvals for any of our
    product candidates, if they exhibit harmful side effects after
    approval, our regulatory approvals could be revoked or otherwise
    negatively impacted, and we could be subject to costly and
    damaging product liability claims.
    Failure
    to obtain regulatory and pricing approvals in foreign
    jurisdictions could delay or prevent commercialization of our
    products abroad.
    Healthcare
    reform measures could adversely affect our
    business.
    New
    federal legislation may increase the pressure to reduce prices
    of pharmaceutical products paid for by Medicare, which could
    adversely affect our revenues, if any.
     27




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New
    federal laws or regulations on drug importation could make lower
    cost versions of our future products available, which could
    adversely affect our revenues, if any.
        If we
    fail to obtain adequate reimbursement for our product
    candidates, the use of our potential products could be severely
    limited.
    Risks
    related to competition
  We
    operate in highly competitive medical device and specialty
    pharmaceuticals markets and face competition from large,
    well-established companies with significantly more resources,
    and, as a result, we may not be able to compete
    effectively.
   28




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
    significantly greater name recognition;
    established relations with healthcare professionals, customers
    and third-party payors;
    established distribution networks;
    additional lines of products, and the ability to offer rebates
    or bundle products to offer higher discounts or incentives to
    gain a competitive advantage;
    greater experience in conducting research and development,
    manufacturing, clinical trials, obtaining regulatory approval
    for products and marketing approved products; and
    greater financial and human resources for product development,
    sales and marketing, and patent litigation.    No
    continuous glucose monitoring system has yet received FDA
    clearance as a replacement for
    single-point
    finger stick devices, and our
    SymphonytmtCGM System may never be approved for that
    indication.
    Technological
    breakthroughs in the glucose monitoring market could render our
    products obsolete.
   29




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Risks
    related to products liability exposure
  We may
    have significant product liability exposure which may harm our
    business and our reputation.
    Risks
    related to our intellectual property
  Our
    inability to adequately protect our intellectual property could
    allow our competitors and others to produce products based on
    our technology, which could substantially impair our ability to
    compete.
        We are
    subject to claims of infringement or misappropriation of the
    intellectual property rights of others, which could prohibit us
    from commercializing our product candidates, require us to
    obtain licenses from third parties or to develop non-infringing
    alternatives, and subject us to substantial monetary damages and
    injunctive relief.
  and/or and/or
 30




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ITEM 2.
    PROPERTIES.    ITEM 3.
    LEGAL
    PROCEEDINGS.   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES.  Over-The-Counter
  Fiscal Year Ended December 31, 2007

High


LowFirst Quarter

$
1.55


$
0.22Second Quarter

$
2.40


$
1.04Third Quarter

$
2.74


$
2.10Fourth Quarter

$
2.14


$
1.25   Fiscal Year Ended December 31, 2008

High


LowFirst Quarter

$
1.90


$
1.10Second Quarter

$
2.14


$
1.00Third Quarter

$
1.94


$
0.66Fourth Quarter

$
0.81


$
0.35  31




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*
    
    The quotations reflect inter-dealer prices, without retail
    mark-up,
    mark-down or commission, and may not represent actual
    transactions.              ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS.  The following discussion of our consolidated financial
    condition and results of operations should be read in
    conjunction with the financial statements and the related notes
    thereto included elsewhere in this
    Form 10-K.
    The matters discussed herein contain forward-looking statements
    within the meaning of Section 21E of the Securities
    Exchange Act of 1934, as amended, and Section 27A of the
    Securities Act of 1933, as amended, which involve risks and
    uncertainties. All statements other than statements of
    historical information provided herein may be deemed to be
    forward-looking statements. Without limiting the foregoing, the
    words believes, anticipates,
    plans, expects and similar expressions
    are intended to identify forward-looking statements. Factors
    that could cause actual results to differ materially from those
    reflected in the forward-looking statements include, but are not
    limited to, those discussed in Risk Factors and
    elsewhere in this report and the risks discussed in our other
    filings with the SEC. Readers are cautioned not to place undue
    reliance on these forward-looking statements, which reflect
    managements analysis, judgment, belief or expectation only
    as of the date hereof. We undertake no obligation to publicly
    revise these forward-looking statements to reflect events or
    circumstances that arise after the date hereof.
  Organization
       32




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Series A-2
  Operating
    Plan
        tm and/or tm
 33




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Research
    and Development
        Critical
    Accounting Policies and Estimates
      Summary of Significant Accounting
    Policies.
  Intangible Assets and Other Long-Lived Assets 
 34




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Purchased Research and Development 
  Accounting for Impairment and Disposal of Long-Lived
    Assets 
       35




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Share-based Payments
    Results
    of Operations
        Comparison
    of the years ended December 31, 2008 and 2007
  Licensing Revenue
  Product Revenue and Cost of Product Revenue
  Research and Development Expenses
 36




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Purchased Research and Development Expenses 
  Selling, General and Administrative Expenses
  Other Income (Expense)
  Interest Expense
 37




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Derivative Loss No. 00-19, Accounting for Derivative Financial Instruments Indexed
    to, and Potentially Settled in, a Companys Own
    Stock.
  Loss on Extinguishment of Debt No. 96-19, Debtors Accounting for a Modification or Exchange
    of Debt Instruments,
  Net Loss
  Liquidity
    and Capital Resources
        Series A-1
 38




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
    our ability to obtain funding from third parties, including any
    future collaborative partners, on reasonable terms;
    our progress on research and development programs;
    the time and costs required to gain regulatory approvals;
    the costs of manufacturing, marketing and distributing our
    products, if successfully developed and approved;
    the costs of filing, prosecuting and enforcing patents, patent
    applications, patent claims and trademarks;
    the status of competing products; and
    the market acceptance and third-party reimbursement of our
    products, if successfully developed and approved.  Discount and Credit Arrangement with Cato
    Research 
 39




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January 2007 Strategic Private Placement
      June and July 2007 Private Placements
  Senior Promissory Bridge Notes
 40




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Senior Convertible Notes
  Senior Convertible Notes
              2008 Secured Note and Warrant Financing 
   41




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2008 Series A Preferred Stock Exchange
    Agreement 
   42




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2008 Vendor Obligation Conversion 
  2009
    Series A-2
    Preferred Stock Financing  A-2 A-2 A-2 Series A-2 A-2 Shares) A-2 Shares A-2 Series A-2 A-2
  2008
    Series A-1
    Preferred Stock Financing  A-1 A-1 A-1 Series A-1 A-1 Shares) A-1 Shares A-1 Series A-1 A-1
  Series A-1 Shares
      Off-Balance
    Sheet Arrangements
    Effect of
    Inflation and Changes in Prices
   43




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ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA.  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
 Echo Therapeutics, Inc. Consolidated Financial Statements
  PageReport of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets as of
    December 31, 2008 and 2007


F-2Consolidated Statements of Operations for the
    years ended December 31, 2008 and 2007


F-3Consolidated Statements of Changes in
    Stockholders Equity for the years ended December 31,
    2008 and 2007


F-4Consolidated Statements of Cash Flows for the
    years ended December 31, 2008 and 2007


F-5Notes to Consolidated Financial Statements


F-7  44




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REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 
 F-1




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Echo
    Therapeutics, Inc.
    (Formerly Sontra Medical Corporation)
    Consolidated Balance Sheets  As of,December 31,


December 31,2008


2007ASSETSCurrent Assets:Cash and cash equivalents

$
242,867


$
1,193,163Prepaid expenses and other current assets


17,132



25,263Total current assets


259,999



1,218,426Property and Equipment, at cost:Computer equipment


242,495



233,946Office and laboratory equipment


609,029



588,498Furniture and fixtures


14,288



14,288Manufacturing equipment


129,320



197,888Leasehold improvements


177,768



177,7681,172,900



1,212,388Less-Accumulated depreciation and amortization


(1,105,330
)


(1,100,507
)Net property and equipment


67,570



111,881Other Assets:Restricted cash


10,250



10,250Intangible assets, net of accumulated amortization


9,827,154



9,945,486Deferred financing costs, net of accumulated amortization


141,373



Deposits and other assets


2,000



2,000Total other assets


9,980,777



9,957,736Total assets

$
10,308,346


$
11,288,043LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
1,177,719


$
382,308Current portion of notes payable, net of discounts


2,054,062



386,458Accrued expenses


174,768



451,136Total current liabilities


3,406,549



1,219,902Notes Payable, net of current portion and discounts


300,467



CommitmentsStockholders Equity:Convertible Preferred Stock, $0.01 par value, authorized
    10,000,000 and 7,000,000 shares at December 31, 2008
    and 2007, respectively:Series A, authorized 2,636,363 shares and none, issued
    and outstanding 1,570,194 shares and none, at
    December 31, 2008 and 2007, respectively (preference in
    liquidation of $2,119,762 at December 31, 2008)


15,702



Series A-1,
    authorized 2,000,000 and none, issued and outstanding
    778,136 shares and none, at December 31, 2008 and
    2007, respectively (preference in liquidation of $778,136 at
    December 31, 2008)


7,781



Common stock, $0.01 par value, authorized
    60,000,000 shares, issued and outstanding
    19,095,838 shares and 17,870,804 shares at
    December 31, 2008 and 2007, respectively


190,960



178,710Additional paid-in capital


64,668,550



57,575,593Accumulated deficit


(58,281,663
)


(47,686,162
)Total stockholders equity


6,601,330



10,068,141Total liabilities and stockholders equity

$
10,308,346


$
11,288,043    F-2




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Echo
    Therapeutics, Inc.
    (Formerly Sontra Medical Corporation)
    Consolidated Statements of Operations  For the Years EndedDecember 31,2008


2007Revenue:Product revenue

$



$
12,120Licensing revenue






45,833Total revenue






57,953Operating Expenses:Cost of product revenue






1,556Research and development


3,191,060



1,306,424Purchased research and development






6,994,578Selling, general and administrative


3,735,640



4,600,627Total operating expenses


6,926,700



12,903,185Loss from operations


(6,926,700
)


(12,845,232
)Other Income (Expense):Interest income


24,641



55,635Interest expense


(1,049,953
)


(435,904
)Loss on extinguishment of debt


(2,056,773
)


Derivative loss


(586,716
)


Other income (expense), net


(3,668,801
)


(380,269
)Net loss


(10,595,501
)


(13,225,501
)Accretion of dividend on Series A and
    A-1Convertible Preferred Stock


(53,371
)


(483
)Net loss applicable to common shareholders

$
(10,648,872
)

$
(13,225,984
)Net loss per common share, basic and diluted

$
(0.57
)

$
(1.12
)Basic and diluted weighted average common shares outstanding


18,608,905



11,769,951    F-3




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Echo
    Therapeutics, Inc.
    (Formerly Sontra Medical Corporation)
    Consolidated Statements of Changes in Stockholders
    Equity
    Years Ended December 31, 2008 and 2007  ConvertiblePreferred Stock


Common Stock


Additional





TotalNumber of


Carrying


Number of


Carrying


Paid-in


Accumulated


StockholdersShares


Value


Shares


Value


Capital


Deficit


EquityBalance December 31, 2006


73,334


$
76,291



2,776,192


$
27,762


$
34,822,306


$
(34,460,661
)

$
465,698Dividend paid on Series A preferred stock






(3,440
)


10,487



105



3,335







Accretion of Series A preferred stock dividend






483











(483
)






Repurchase of Series A preferred stock


(73,334
)


(73,334
)


















(73,334
)Exercise of stock warrants to purchase common stock










312,500



3,126



61,576







64,702Exercise of stock options










5,000



50



1,300







1,350Issuance of common stock in private placement, net of issuance
    costs of $241,674










8,415,000



84,150



2,149,176







2,233,326Issuance of common stock and warrants for placement agent fees
    (fair value of $241,539)










54,750



548



(548
)






Issuance of common stock in connection with ETI acquisition










6,250,000



62,500



15,500,000







15,562,500Fair value of warrants issued in connection with ETI acquisition


















989,215







989,215Share-based payments  options, net of forfeitures


















2,609,811







2,609,811Share-based payments  restricted stock for services,
    net of forfeitures










46,875



469



114,905







115,374Beneficial Conversion Feature  Senior Notes


















1,325,000







1,325,000Net Loss






















(13,225,501
)


(13,225,501
)Balance December 31, 2007










17,870,804



178,710



57,575,593



(47,686,162
)


10,068,141Issuance of Common Stock for conversion of Bridge Notes










52,041



520



51,521







52,041Issuance of Common Stock in settlement of accounts payable and
    accrued expenses










318,905



3,189



137,129







140,318Intrinsic value of conversion feature on Bridge Notes upon
    conversion to Senior Convertible Notes


















(212,328
)






(212,328
)Beneficial Conversion Feature  Senior Convertible
    Notes


















121,320







121,320Issuance of Series A Preferred


1,539,161



15,392











2,062,476







2,077,868Issuance of
    Series A-1
    Preferred, net of issuance cost of $63,333


766,667



7,667











697,667







705,334Dividends on Preferred Stock


42,502



424











(433
)






(9
)Exercise of January 2007 PIPE Warrants










705,873



7,059



107,020







114,079Exercise of Stock Options










9,465



95



(95
)






Warrants issued to Bridge Note holders upon conversion to Senior
    Convertible Notes


















626,480







626,480Warrants issued to Senior Convertible Note holders


















219,838







219,838Fair value of warrants issued in connection with exchange of
    Senior Convertible Notes for Series A Preferred Stock


















106,182







106,182Fair value of warrants reclassified from derivative liability


















919,593







919,593Fair value of warrants issued for services


















185,667







185,667Share-based payments  restricted stock for services,
    net of forfeitures










138,750



1,387



246,113







247,500Share-based payments  options and restricted stock,
    net of forfeitures


















1,824,807







1,824,807Net Loss






















(10,595,501
)


(10,595,501
)Balance December 31, 2008


2,348,330


$
23,483



19,095,838


$
190,960


$
64,668,550


$
(58,281,663
)

$
6,601,330    F-4




---



##### Table of Contents



Echo
    Therapeutics, Inc
    (Formerly Sontra Medical Corporation)
    Consolidated Statements of Cash Flows  Year Ended December 31,2008


2007Cash Flows From Operating Activities:Net loss

$
(10,595,501
)

$
(13,225,501
)Adjustments to reconcile net loss to net cash used in operating
    activities:Depreciation and amortization


191,723



151,571Share-based compensation


1,824,807



2,725,185Purchased research and development






6,994,578Fair value of common stock and warrants issued for services


247,500



Derivative loss


586,716



Loss on extinguishment of debt


2,056,773



Non-cash interest expense


1,037,019



386,458Changes in assets and liabilities:Inventory






1,556Prepaid expenses and other current assets


8,131



(8,317
)Accounts payable


933,049



336,491Deferred revenue






(45,833
)Accrued expenses


(234,858
)


140,771Net cash used in operating activities


(3,944,641
)


(2,543,041
)Cash Flows from Investing Activities:Cash paid for Acquisition of Durham






(219,815
)Purchase of property and equipment


(29,080
)


(19,425
)Decrease(Increase) in restricted cash






9,699Net cash used in investing activities


(29,080
)


(229,541
)Cash Flows From Financing ActivitiesRepurchase of Series A preferred stock






(73,334
)Proceeds from the sale of
    Series A-1
    preferred stock


705,334



Proceeds from the sale of common stock, net of expenses






2,233,326Proceeds from Secured Senior Convertible Notes and Warrants


2,000,000



Proceeds from Senior Convertible Promissory Notes


700,000



1,325,000Deferred financing costs


(495,979
)


Dividends paid on Series A and
    A-1
    preferred stock


(9
)


Payments on equipment note payable






(144,316
)Proceeds from exercise of stock options






1,350Proceeds from the exercise of warrants


114,079



64,702Net cash provided by financing activities


3,023,425



3,406,728Net (Decrease) Increase in Cash and Cash Equivalents


(950,296
)


634,146Cash and Cash Equivalents, beginning of period


1,193,163



559,017Cash and Cash Equivalents, end of period

$
242,867


$
1,193,163    F-5




---



##### Table of Contents



Echo
    Therapeutics, Inc
    (Formerly Sontra Medical Corporation)
  Consolidated
    Statements of Cash Flows
  Year Ended December 31,2008


2007Supplemental Disclosure of Cash Flow Information and Non Cash
    Financing Cash paid for interest

$
9,831


$
10,041Accretion of dividend on Series A and
    A-1
    Convertible Preferred Stock

$
53,371


$
483Fair value of common stock issued for Durham acquisition

$



$
15,562,500Fair value of warrants issued for costs of Durham acquisition

$



$
989,215Fair value of common stock and warrants issued for equity
    financing costs

$
166,901


$
241,539Beneficial conversion feature on Senior Convertible Notes

$
121,320


$
1,325,000Common stock issued for conversion of Senior Convertible Notes
    and accrued interest

$
52,041


$
Fair value of warrants issued for deferred financing costs

$
185,667


$
Excess of fair value of the Series A Convertible Preferred
    Stock over the carrying value of the Senior Convertible Notes
    included in extinguishment loss

$
738,578


$
Fair value of warrants issued in connection with Senior
    Convertible Notes included in extinguishment loss

$
626,480


$
Adjustment to fair value of Bridge Notes exchanged for Senior
    Convertible notes included in extinguishment loss

$
585,533


$
Fair value of warrants issued in connection with exchange of
    Senior Convertible Notes for preferred stock included in
    extinguishment loss

$
106,182


$
Intrinsic value of the conversion feature of the Bridge Notes
    when converted to Senior Convertible Notes recorded as a
    reduction of additional paid-in capital

$
212,328


$
Relative fair value of warrants issued with Secured Notes

$
219,838


$
Reclassification of derivative liability to additional paid-in
    capital

$
919,593


$
Senior Convertible Notes issued for accrued interest

$
116,875


$
Conversion of Senior Convertible Notes to Series A
    preferred stock

$
2,077,868


$
Issuance of common stock in settlement of accounts payable and
    accrued expenses

$
140,318


$
    F-6




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Years Ended December 31, 2008 and 2007
  (1)  ORGANIZATION,
    BASIS OF PRESENTATION AND GOING CONCERN
  Organization
    and Basis of Presentation
            Going
    Concern
  Series A-2
  (See report of independent
    registered public accounting firm.)
 F-7




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (2)
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    Use of
    Estimates
    Cash
    and Cash Equivalents
    Intangible
    Assets and Other Long-Lived Assets
      Accounting for the
    Impairment and Disposal of Long-Lived Assets
  (See report of independent
    registered public accounting firm.)
 F-8




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Purchased
    Research and Development
    Depreciation
    and Amortization
    Asset Classification

Estimated Useful LifeComputer equipment

3 yearsOffice and laboratory equipment

3-5 yearsFurniture and fixtures

7 yearsManufacturing equipment

5 yearsLeasehold improvements

Life of lease   Share-Based
    Payments
        (See report of independent
    registered public accounting firm.)
 F-9




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Derivative
    Instruments
  No. 00-19,
    Concentration
    of Credit Risk
  Disclosure of Information about
    Financial Instruments with Off-Balance-Sheet Risk and Financial
    Instruments with Concentrations of Credit Risk
  Financial
    Instruments
  Disclosures about Fair Value of
    Financial Instruments
  Net
    Loss per Common Share
  Earnings per Share
  (See report of independent
    registered public accounting firm.)
 F-10




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Segment
    Information
  Disclosures about Segments of an
    Enterprise and Related Information
  Research
    and Development Expenses
    Income
    Taxes
        Revenue
    Recognition
    Reclassifications
    (See report of independent
    registered public accounting firm.)
 F-11




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Recent
    Accounting Pronouncements
        No. 07-5, (EITF 07-5). EITF 07-5
  (See report of independent
    registered public accounting firm.)
 F-12




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  EITF 07-5
  (3)
    ACQUISITION
    OF ETI  tm tm
    Consideration:Cash

$
60,000Common stock


15,562,500Total consideration


15,622,500Transaction costs:Fair value of warrants


989,215Cash (including $157,000 included in accrued expenses at
    December 31, 2007)


316,815Total transaction costs


1,306,030Total acquisition cost

$
16,928,530   (See report of independent
    registered public accounting firm.)
 F-13




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Category

CostInvestment banker fees

$
150,000Legal expenses


130,967Asset valuation consultants


27,600Accountants


8,000Corporate services fees


248Total

$
316,815     Current assets acquired

$
3,952Purchased research and development


6,994,578Technology related intangible assets


9,625,000Contract related intangible asset


355,000Current liabilities assumed


(50,000
)$
16,928,530       (See report of independent
    registered public accounting firm.)
 F-14




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (4)
    INTANGIBLE
    ASSETS    2008


2007Estimated





AccumulatedLife


Cost


Amortization


Net


NetContract related intangible asset:Cato Research discounted contract


3 years


$
355,000


$
152,846


$
202,154


$
320,486Technology related intangible assets:Patents for the AzoneTS-based product candidates and formulation


8 years



1,305,000







1,305,000



1,305,000Drug Master Files containing formulation, clinical and safety
    documentation used by the FDA


8 years



1,500,000







1,500,000



1,500,000In-process pharmaceutical products for two(2) indications


8 years



6,820,000







6,820,000



6,820,000Total technology related intangible assets






9,625,000







9,625,000



9,625,000Total





$
9,980,000


$
152,846


$
9,827,154


$
9,945,486       EstimatedAmortizationYear Ending December 31:

Expense2009

$
118,0002010


84,0002011


1,203,0002012


1,203,0002013


1,203,000   (See report of independent
    registered public accounting firm.)
 F-15




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (5)
    OPERATING
    LEASE COMMITMENTS    AmountFor the years ended December 31,2009

$
193,0002010


49,000Total

$
242,000       (6)
    PATENT
    LICENSE AGREEMENT    (See report of independent
    registered public accounting firm.)
 F-16




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (7)
    NOTES PAYABLE    2008


2007Senior Notes:Senior promissory bridge notes

$



$
1,325,000Unamortized discount






(938,542
)



386,458Senior Convertible Notes:Senior Convertible notes


331,448



Unamortized Discount


(30,981
)


300,467



Senior Secured Notes:Senior Secured notes


2,209,426



Unamortized Discounts


(155,364
)


2,054,062



Total notes payable


2,354,529



386,458Less current portion of notes payable


2,054,062



386,458Notes Payable, net of current portion

$
300,467


$
   Equipment
    Note Payable
    2007
    and 2008 Senior Promissory Bridge Notes and Senior Convertible
    Notes
    (See report of independent
    registered public accounting firm.)
 F-17




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            No. 96-19, Debtors Accounting for a Modification or Exchange
    of Debt Instruments No. 98-5,
    (See report of independent
    registered public accounting firm.)
 F-18




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008
    Senior Secured Note and Warrant Financing
              (See report of independent
    registered public accounting firm.)
 F-19




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      No. 00-19, No. 00-19
    2008
    Exchange Agreement
      (See report of independent
    registered public accounting firm.)
 F-20




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (8)
    FAIR
    VALUES OF ASSETS AND LIABILITIES  Fair Value
    Measurements
              Year EndedDecember 31,2008Balance as of January 1, 2008

$
Total realized/unrealized loss included in net loss


17,349
(1)Purchases, sales, issuances and settlements


902,244Reclassification to equity


(919,593
)Balance as of December 31, 2008

$
     (1)
    
    Included in derivative loss on the statement of operations for
    the year ended December 31, 2008.  (See report of independent
    registered public accounting firm.)
 F-21




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     (9)
    SERIES A
    CONVERTIBLE PREFERRED STOCK    Series A
    Preferred Stock  Echo-MN
    Series A
    Preferred Stock and Warrant Financing
      Series A-1 Series A-2
      (See report of independent
    registered public accounting firm.)
 F-22




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Series A-1
    Preferred Stock and Warrant Financing
  Series A-1 Series A-1 (Series A-1
  Series A-1 Series A-1 Series A-1 Series A-1
  Series A-1 Series A-1 Series A-1
  Series A-1 Series A-1 Series A-1 Series A-1 Series A-2 Series A-1 Series A-1
  A-1 Series A-1 A-1 A-1
    (See report of independent
    registered public accounting firm.)
 F-23




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    A-1 A-1 A-1
  Series A-1 Series A-1
  (10)
    COMMON
    STOCK    ETI
    Acquisition
    Burnham
    Hill Partners Investment Banking and Financial Advisory
    Agreements
      (See report of independent
    registered public accounting firm.)
 F-24




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Series A-1 A-1 A-1 A-1 A-1 A-1
    2008
    Private Placements of Common Stock
        2007
    Private Placements of Common Stock
      (See report of independent
    registered public accounting firm.)
 F-25




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Legend
    Merchant Group Placement Agent and Financial Advisory
    Agreements
      (See report of independent
    registered public accounting firm.)
 F-26




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Common
    Stock Reserves
    Reserve for exercise of warrants


4,432,828Reserve for the issuance of restricted stock grants


292,875Reserve for the issuance of stock options outside of a qualified
    plan


2,900,000Reserve for the exercise of stock options


3,518,138Total Reserves


11,143,841   (11)
    STOCK
    OPTION PLANS  and/or
    and/or
  (See report of independent
    registered public accounting firm.)
 F-27




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Share-Based
    Compensation
        2008

2007Risk-free interest rate

2.25% - 4.11%

4.11% - 4.72%Expected dividend yield



Expected term (employee grants)

6 - 6.75 years

6 - 6.75 yearsForfeiture rate (excluding fully vested options)

11% - 33%

11% - 33%Expected volatility

151% - 156%

118% - 164%     Weighted-Weighted-


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicOptions

Shares


Price


Term


ValueOutstanding at January 1, 2008


4,066,271


$
1.99Granted


265,000


$
1.52Exercised


(66,666
)

$
1.39Forfeited or expired


(320,075
)

$
3.27Outstanding at December 31, 2008


3,944,530


$
1.87



8.76 years


$
33,950Exercisable at December 31, 2008


2,661,959


$
1.92



8.69 years


$
29,698   (See report of independent
    registered public accounting firm.)
 F-28




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Weighted-AverageGrant-DateNonvested Shares

Shares


Fair ValueNonvested at January 1, 2008


16,875


$
1.77Granted






Vested


(1,875
)

$
1.77Forfeited


(11,250
)

$
1.77Nonvested at December 31, 2008


3,750


$
1.77       (12)
    WARRANTS    2008

2007Risk-free interest rate

3.34%

4.72%Expected dividend yield



Expected term (contractual term)

5 years

5 yearsForfeiture rate

0%

0%Expected volatility

155%

159% - 161%       (See report of independent
    registered public accounting firm.)
 F-29




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Number ofShares


ExerciseExercisable


Price


Date of ExpirationGranted to investors and placement agent in private placement


118,620


$
24.50



12/8/2009Granted to investor in former subsidiary


15,000


$
50.00



2/23/2010Granted to investors and placement agent in private placement


476,830


$
5.80



3/16/2016Granted to investors in private placement


611,250


$
0.21



1/30/09Granted to investors and placement agent in private placement


599,250


$
1.40



6/15-7/16/2012Granted to financial investment advisor


60,000


$
1.58



7/25/2012Granted to financial advisor in connection with an acquisition


425,000


$
2.18



9/14/2012Granted to financial investment advisor


175,013


$
1.49



2/11/2013Granted to financial investment advisor


26,833


$
1.10



10/31/2013Granted to investors in private placement


849,059


$
1.00



2/11/2013Granted to investors in private placement


653,728


$
1.94



3/14/2013Granted to investors in private placement of preferred stock


153,912


$
1.00



9/30/2013Granted to investors in private placement of preferred stock


268,333


$
1.50



10/28-10/31/2013Total


4,432,828Weighted average exercise price





$
2.57Weighted average duration in years










3.21 years     Weighted-AverageExerciseWarrants

Shares


PriceOutstanding at January 1, 2008


3,574,459


$
4.66Granted


2,231,878


$
1.40Exercised


(726,250
)

$
0.21Forfeited or expired


(647,259
)

$
6.08Outstanding at December 31, 2008


4,432,828


$
2.57     (13)
    INCOME
    TAXES    (See report of independent
    registered public accounting firm.)
 F-30




---



##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      December 31,2008


2007Deferred Tax Assets/(Liabilities)Net operating loss carryforwards

$
16,842,000


$
14,656,000Research credit carryforward


827,000



834,000Acquired intangible assets, net


(3,785,000
)


(3,800,000
)Other temporary differences


132,000



154,000Total deferred tax assets, net


14,016,000



11,844,000Valuation allowance


(14,016,000
)


(11,844,000
)Net deferred tax asset

$



$
       December 31,2008


2007Benefit at Statutory rate

$
3,708,000


$
4,629,000State Tax Benefit


344,000



430,000IPR&D






(2,448,000
)Other Permanent Items


(1,930,000
)


(1,137,000
)R&D Credits


50,000



100,000Benefit at Effective Rate


2,172,000



1,574,000Acquired intangible assets






(3,800,000
)Acquired net operating loss carryforward






331,000Changes in Valuation Allowance


(2,172,000
)


1,895,000$



$
   (See report of independent
    registered public accounting firm.)
 F-31




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##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (14)
    SUBSEQUENT
    EVENTS  Series A-2
    Preferred Stock and Warrant Financing
  Series A-2 Series A-2 (Series A-2
  Series A-2 Series A-2 Series A-2 Series A-2
  Series A-2 Series A-2 Series A-2 Series A-2 Series A-1 Series A-2
  Series A-2 Series A-2 Series A-2 Series A-2 Series A-1 Series A-2 Series A-1 Series A-2
  A-2 A-2 Series A-2 Series A-2 Series A-2 A-2 A-2 A-2 A-2
  A-2 A-2 A-2 A-2 A-2
  (See report of independent
    registered public accounting firm.)
 F-32




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##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Re-pricing
    of Warrants to Financial Advisor and Affiliates
  and/or and/or
  and/or and/or
  Grant
    of Restricted Stock and Re-pricing of Certain Nonqualified Stock
    Options
    lock-up
  (See report of independent
    registered public accounting firm.)
 F-33




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##### Table of Contents



ECHO
    THERAPEUTICS, INC.
    (Formerly Sontra Medical Corporation)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Grant
    of Warrants to Vendor
    Grant
    of Warrants to Service Provider
    Extension
    of Maturity Date for Senior Secured Note
    Re-pricing
    of Warrants to Investor
    (See report of independent
    registered public accounting firm.)
 F-34




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE.    ITEM 9A(T).
    CONTROLS
    AND PROCEDURES.  Rules 13a-15(e) 15d-15(e)
  Changes
    in Internal Control over Financial Reporting
    Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
  
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of our assets;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that our receipts and expenditures are being made only in
    accordance with authorizations of our management and
    directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.   45




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##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.    www.echotx.com.
  ITEM 11.
    EXECUTIVE
    COMPENSATION.    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS.    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE.    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES.   PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES.   46




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##### Table of Contents



SIGNATURES      By:
    /s/  Patrick
    T. Mooney   Title:
    Chief Executive Officer      By: /s/  Patrick
    T. Mooney

By: /s/  Shawn
    K. SinghName:    Patrick
    T. Mooney, M.D.

Name:    Shawn
    K. Singh, J.D.Title:      Chief Executive
    Officer and Chairman 
    of the Board
    (Principal Executive Officer)

Title:      President and DirectorBy: /s/  Walter
    W. Witoshkin

By: /s/  Robert
    S. LangerName:    Walter
    W. Witoshkin

Name:    Robert
    S. Langer, Sc.DTitle:      Director

Title:      DirectorBy: /s/  Vincent
    D. Enright

By: /s/  Harry
    G. MitchellName:    Vincent
    D. Enright

Name:    Harry
    G. MitchellTitle:      Director

Title:      Chief Operating
    Officer,
    Chief Financial Officer and Treasurer
    (Principal Financial Officer and 
    Principal Accounting Officer)  47




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description of Document2
.1

Agreement and Plan of Merger and Reorganization by and among the
    Registrant, Durham Pharmaceuticals Ltd. (d/b/a Echo
    Therapeutics, Inc.) and Durham Pharmaceuticals Acquisition Co.
    dated as of September 14, 2007 is incorporated herein by
    reference to Exhibit 2.1 of the Registrants Current
    Report on
    Form 8-K
    dated September 14, 2007.2
.2

Asset Purchase Agreement by and between the Registrant and DP
    Pharmaceuticals, LLC dated as of September 14, 2007 is
    incorporated herein by reference to Exhibit 2.2 of the
    Registrants Current Report on
    Form 8-K
    dated September 14, 2007.2
.3

Agreement and Plan of Merger, dated June 9, 2008, between
    Echo Therapeutics, Inc., a Minnesota corporation, and Echo
    Therapeutics, Inc., a Delaware corporation, is incorporated
    herein by reference to Exhibit 2.1 to the Registrants
    Current Report on
    Form 8-K
    dated June 9, 2008.2
.4

Certificate of Ownership and Merger merging Echo Therapeutics,
    Inc., a Minnesota corporation, with and into Echo Therapeutics,
    Inc., a Delaware corporation, is incorporated herein by
    reference to Exhibit 2.2 to the Registrants Current
    Report on
    Form 8-K
    dated June 9, 2008.2
.5

Articles of Merger merging Echo Therapeutics, Inc., a Minnesota
    corporation, with and into Echo Therapeutics, Inc., a Delaware
    corporation, is incorporated herein by reference to
    Exhibit 2.3 to the Registrants Current Report on
    Form 8-K
    dated June 9, 2008.3
.1

Certificate of Incorporation of the Registrant is incorporated
    herein by reference to Exhibit 3.1 to the Registrants
    Current Report on
    Form 8-K
    dated June 9, 2008.3
.2

Bylaws of the Registrant is incorporated herein by reference to
    Exhibit 3.2 to the Registrants Current Report on
    Form 8-K
    dated June 9, 2008.4
.1

Form of Warrant to Purchase Common Stock is incorporated herein
    by reference to Exhibit 4.1 to the Registrants
    Current Report on
    Form 8-K
    dated September 30, 2008.4
.2

Form of Warrant to Purchase Common Stock is incorporated herein
    by reference to Exhibit 4.1 to the Registrants
    Current Report on
    Form 8-K
    dated October 28, 2008.10
.1*

2003 Stock Option and Incentive Plan, as amended, is
    incorporated herein by reference to Appendix I of the
    Registrants Definitive Schedule 14A filed on
    April 17, 2007.10
.2*

Form of Restricted Stock Agreement for use under the
    Registrants 2003 Stock Option and Incentive Plan is
    incorporated herein by reference to Exhibit 99.1 to the
    Registrants Current Report on
    Form 8-K
    dated August 14, 2006.10
.3*

1999 Stock Option and Incentive Plan is incorporated herein by
    reference to Exhibit 10.31 of the Registrants
    Registration Statement on
    Form S-4
    filed on April 24, 2002.10
.4*

1997 Long-Term Incentive and Stock Option Plan, as amended, is
    incorporated herein by reference to Exhibit 10.3 of the
    Registrants Quarterly Report on
    Form 10-QSB
    for the period ended June 30, 2002.10
.5

Lease Agreement between the Registrant and Forge Park Investors
    LLC dated January 24, 2003 is incorporated herein by
    reference to Exhibit 10.13 to the Registrants Annual
    Report on
    Form 10-K
    for the fiscal year ended December 31, 2002.10
.6

Patent License Agreement (Exclusive) between Sontra Medical,
    Inc. and the Massachusetts Institute of Technology dated as of
    June 30, 1998 is incorporated herein by reference to
    Exhibit 10.39 of the Registrants Registration
    Statement on
    Form S-4
    filed on April 24, 2002.10
.7

Form of Common Stock Purchase Warrant is incorporated herein by
    reference to Appendix E to the Registrants Definitive
    Schedule 14A filed September 8, 2003.10
.8

Form of Placement Agent Common Stock Purchase Warrant is
    incorporated herein by reference to Exhibit 99.4 to the
    Registrants Registration Statement on
    Form S-3
    filed on October 15, 2003.10
.9

Common Stock and Warrant Purchase Agreement dated as of
    December 8, 2004 by and among the Registrant and the
    investors listed on Schedule 1 thereto is incorporated
    herein by reference to Exhibit 10.1 to the
    Registrants Current Report on
    Form 8-K
    dated December 8, 2004.10
.10

Form of Common Stock Purchase Warrant is incorporated herein by
    reference to Exhibit 10.2 to the Registrants Current
    Report on
    Form 8-K
    dated December 8, 2004. 48




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##### Table of Contents



ExhibitNumber

Description of Document10
.11

Common Stock and Warrant Purchase Agreement dated as of
    March 7, 2006 by and among the Registrant and the investors
    listed on Schedule 1 thereto is incorporated herein by
    reference to Exhibit 99.1 to the Registrants Current
    Report on
    Form 8-K
    dated March 7, 2006.10
.12

Form of Common Stock Purchase Warrant is incorporated herein by
    reference to Exhibit 99.2 to the Registrants Current
    Report on
    Form 8-K
    dated March 7, 2006.10
.13

Common Stock and Warrant Purchase Agreement dated as of
    January 2, 2007 by and among the Registrant, Sherbrooke
    Partners, LLC and the purchasers named therein is incorporated
    herein by reference to Exhibit 10.1 of the
    Registrants Current Report on
    Form 8-K
    dated January 1, 2007.10
.14

Form of Warrant to Purchase Shares of Common Stock is
    incorporated herein by reference to Exhibit 10.2 of the
    Registrants Current Report on
    Form 8-K
    dated January 1, 2007.10
.15

Form of Subscription Agreement is incorporated herein by
    reference to Exhibit 10.1 of the Registrants Current
    Report on
    Form 8-K
    dated June 15, 2007.10
.16

Form of Warrant to Purchase Shares of Common Stock is
    incorporated herein by reference to Exhibit 10.2 of the
    Registrants Current Report on
    Form 8-K
    dated June 15, 2007.10
.17

Strategic Master Services Agreement by and between the
    Registrant and Cato Research Ltd. dated September 14, 2007
    is incorporated herein by reference to Exhibit 10.1 of the
    Registrants Current Report on
    Form 8-K
    dated September 14, 2007.10
.18*

Employment Agreement by and between the Registrant and Patrick
    T. Mooney dated as of September 14, 2007 is incorporated
    herein by reference to Exhibit 10.4 to the
    Registrants Current Report on
    Form 8-K
    dated September 14, 2007 (including Nonqualified Stock
    Option Agreement).10
.19*

Employment Agreement by and between the Registrant and Shawn K.
    Singh dated as of September 14, 2007 is incorporated herein
    by reference to Exhibit 10.5 to the Registrants
    Current Report on
    Form 8-K
    dated September 14, 2007 (including Nonqualified Stock
    Option Agreement).10
.20*

Employment Agreement by and between the Registrant and Harry G.
    Mitchell dated as of September 14, 2007 is incorporated
    herein by reference to Exhibit 10.6 to the
    Registrants Current Report on
    Form 8-K
    dated September 14, 2007 (including Nonqualified Stock
    Option Agreement).10
.21

Form of Warrant to Purchase Shares of Common Stock is
    incorporated herein by reference to Exhibit 10.1 to the
    Registrants Quarterly Report on
    Form 10-QSB
    for the period ended September 30, 2007.10
.22*

Form of Nonqualified Stock Option Agreement is incorporated
    herein by reference to Exhibit 10.1 to the
    Registrants Current Report on
    Form 8-K
    dated December 22, 2007.10
.23

First Amendment to Lease dated February 11, 2008 by and
    between the Registrant and CRP-2 Forge, LLC, as successor in
    interest to Forge Park Investors LLC is incorporated herein by
    reference to Exhibit 10.1 to the Registrants Current
    Report on
    Form 8-K
    dated March 13, 2008.10
.24

Note and Warrant Purchase Agreement by and among the Registrant
    and the Purchasers named therein dated as of February 11,
    2008 is incorporated herein by reference to Exhibit 10.1 to
    the Registrants Current Report on
    Form 8-K
    dated February 11, 2008.10
.25

Guaranty dated as of February 11, 2008 executed by Sontra
    Medical, Inc. is incorporated herein by reference to
    Exhibit 10.2 to the Registrants Current Report on
    Form 8-K
    dated February 11, 2008.10
.26

Guaranty dated as of February 11, 2008 executed by Echo
    Therapeutics, Inc. is incorporated herein by reference to
    Exhibit 10.3 to the Registrants Current Report on
    Form 8-K
    dated February 11, 2008.10
.27

Form of Senior Convertible Promissory Note is incorporated
    herein by reference to Exhibit 10.4 to the
    Registrants Current Report on
    Form 8-K
    dated February 11, 2008.10
.28

Form of Warrant is incorporated herein by reference to
    Exhibit 10.5 to the Registrants Current Report on
    Form 8-K
    dated February 11, 2008.10
.29

Securities Purchase and Loan Agreement by and among the
    Registrant and the Purchaser named therein dated as of
    March 24, 2008 is incorporated herein by reference to
    Exhibit 10.1 to the Registrants Current Report on
    Form 8-K
    dated March 24, 2008.10
.30

Form of Original Issue Discount Senior Secured Note is
    incorporated herein by reference to Exhibit 10.2 to the
    Registrants Current Report on
    Form 8-K
    dated March 24, 2008. 49




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##### Table of Contents



ExhibitNumber

Description of Document10
.31

Form of Warrant is incorporated herein by reference to
    Exhibit 10.3 to the Registrants Current Report on
    Form 8-K
    dated March 24, 2008.10
.32

Guaranty dated as of March 24, 2008 executed by Echo
    Therapeutics, Inc., Sontra Medical, Inc., Imperium Advisers,
    LLC, and Imperium Master Fund, Ltd. is incorporated herein by
    reference to Exhibit 10.4 to the Registrants Current
    Report on
    Form 8-K
    dated March 24, 2008.10
.33

Security Agreement by and among the Registrant, Imperium
    Advisers, LLC, Imperium Master Fund, Ltd., Echo Therapeutics,
    Inc. and Sontra Medical, Inc. dated as of March 24, 2008 is
    incorporated herein by reference to Exhibit 10.5 to the
    Registrants Current Report on
    Form 8-K
    dated March 24, 2008.10
.34

Registration Rights Agreement by and among the Registrant and
    the Purchaser dated as of March 24, 2008 is incorporated
    herein by reference to Exhibit 10.6 to the
    Registrants Current Report on
    Form 8-K
    dated March 24, 2008.10
.35*

Nonqualified Stock Option Agreement by and between the
    Registrant and Vincent D. Enright dated as of March 25,
    2008 is incorporated herein by reference to Exhibit 10.1 to
    the Registrants Current Report on
    Form 8-K
    dated March 25, 2008.10
.36

Dermatology Right of First Offer Agreement between the
    Registrant and Cato BioVentures dated as of April 21, 2008
    is incorporated herein by reference to Exhibit 10.1 to the
    Registrants Current Report on
    Form 8-K
    dated April 21, 2008.10
.37

Amendment No. 1 to Registration Rights Agreement by and
    among the Registrant and Imperium Master Fund, Ltd. dated as of
    May 14, 2008 is incorporated herein by reference to
    Exhibit 10.1 to the Registrants Current Report on
    Form 8-K
    dated May 14, 2008.10
.38*

2008 Equity Incentive Plan is incorporated herein by reference
    to Exhibit 10.1 to the Registrants Current Report on
    Form 8-K
    dated April 20, 2008.10
.39

Exchange Agreement between the Registrant and the Investors
    named therein dated as of September 30, 2008 is
    incorporated herein by reference to Exhibit 10.1 to the
    Registrants Current Report on
    Form 8-K
    dated September 30, 2008.10
.40

Stock and Warrant Purchase Agreement between the Registrant and
    the Purchasers named therein dated as of October 28, 2008
    is incorporated herein by reference to Exhibit 10.1 to the
    Registrants Current Report on
    Form 8-K
    dated October 28, 2008.10
.41

Letter agreement between the Registrant and Burnham Hill
    Partners LLC dated January 30, 2009 is incorporated herein
    by reference to Exhibit 10.1 to the Registrants
    Current Report on
    Form 8-K
    dated January 30, 2009.10
.42

Letter agreement between the Registrant and Imperium Master
    Fund, Ltd. dated March 23, 2009 is incorporated herein by
    reference to Exhibit 10.1 to the Registrants Current
    Report on
    Form 8-K
    dated March 23, 2009.14


Code of Business Conduct and Ethics of the Registrant (filed
    herewith).21


Subsidiaries of the Registrant (filed herewith).23


Consent of Wolf & Company, P.C. (filed herewith).31
.1

Certification of the Chief Executive Officer and Chairman of the
    Board pursuant to
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    of the Securities and Exchange Act of 1934 as adopted under
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of the Chief Operating Officer, Chief Financial
    Officer and Treasurer pursuant to
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    of the Securities and Exchange Act of 1934 as adopted under
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of the Chief Executive Officer and Chairman of the
    Board 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 Operating Officer, Chief Financial
    Officer and Treasurer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.     *
    
    Management contract or compensatory plan or arrangement filed in
    response to Item 13 of
    Form 10-K. 50