##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:
 For the quarterly period ended September 30, 2006
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:
 For the transition period from                    to
 Commission file number: 001-12128
 Matritech, Inc.
 
 Delaware
    
    04-2985132(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 330 Nevada Street, Newton, Massachusetts 02460
 
 (617) 928-0820
 
 Indicate by check mark whether the registrant: þ o
  o o þ
 o þ




---



##### 



MATRITECH, INC.
 INDEX
 PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of December 31, 2005
and September 30, 2006
    
    
    3Condensed Consolidated Statements of Operations for the three and nine
months ended September 30, 2005 and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2005 and 2006
    
    
    5Condensed Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About
Market Risk
    
    
    33Item 4.
    
    Controls and Procedures
    
    
    33PART II
    
    OTHER INFORMATIONItem 1A.
    
    Risk Factors
    
    
    33Item 6.
    
    Exhibits
    
    
    44SIGNATURES
    
    
    45EX-31.1 SECTION 302 CERTIFICATION OF THE C.E.O.EX-31.2 SECTION 302 CERTIFICATION OF THE C.F.O.EX-32.1 SECTION 906 CERTIFICATION OF THE C.E.O.EX-32.2 SECTION 906 CERTIFICATION OF THE C.F.O.




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
 
 MATRITECH, INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 December 31,
    
    
    September 30,2005
    
    
    2006ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,789,792
    
    
    $
    1,785,785Accounts receivable less allowance of $110,059 in 2005 and $76,311 in 2006
    
    
    1,534,096
    
    
    
    1,230,614Inventories
    
    
    756,079
    
    
    
    1,146,960Prepaid expenses and other current assets
    
    
    323,660
    
    
    
    255,738Total current assets
    
    
    4,403,627
    
    
    
    4,419,097Property and equipment, net of accumulated depreciation of $2,211,618 in 2005 and $2,430,085 in 2006
    
    
    881,243
    
    
    
    811,505Goodwill
    
    
    132,615
    
    
    
    132,615Debt issuance costs
    
    
    
    
    
    
    602,648Other assets
    
    
    206,948
    
    
    
    208,909Receivable from related party
    
    
    3,551
    
    
    
    Total assets
    
    $
    5,627,984
    
    
    $
    6,174,774LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS EQUITYCurrent Liabilities:Current maturities of notes payable
    
    $
    13,571
    
    
    $
    20,628Current maturities of convertible debt
    
    
    634,971
    
    
    
    2,486,730Accounts payable
    
    
    523,742
    
    
    
    423,864Accrued expenses
    
    
    1,301,719
    
    
    
    2,254,591Deferred revenue
    
    
    286,186
    
    
    
    133,884Registration rights liability
    
    
    
    
    
    
    318,914Total current liabilities
    
    
    2,760,189
    
    
    
    5,638,611Notes payable, less current maturities
    
    
    9,979
    
    
    
    24,057Convertible debt, less current maturities
    
    
    
    
    
    
    365,114Deferred revenue
    
    
    641,725
    
    
    
    643,793Other long term liabilities
    
    
    132,852
    
    
    
    138,096Total liabilities
    
    
    3,544,745
    
    
    
    6,809,671Commitments and ContingenciesPreferred StockAuthorized  4,000,000 shares
Designated as Series A Convertible Preferred, $1.00 par value  1,426,124 shares
Issued and outstanding  569,251 shares in 2005 and 81,399 shares in 2006
Liquidation preference of $5,009,409 and $716,311 for Series A as of December 31, 2005
and September 30, 2006, respectively
    
    
    729,495
    
    
    
    104,312729,495
    
    
    
    104,312Stockholders Equity (Deficit):Common stock, $0.01 par valueAuthorized90,000,000 shares in 2005 and 150,000,000 shares in 2006
Issued and outstanding47,498,008 shares in 2005 and 56,593,461 shares in 2006
    
    
    474,979
    
    
    
    565,935Additional paid-in capital
    
    
    98,800,393
    
    
    
    106,169,767Accumulated other comprehensive income
    
    
    65,367
    
    
    
    111,261Accumulated deficit
    
    
    (97,986,995
    )
    
    
    (107,586,172
    )Total stockholders equity (deficit)
    
    
    1,353,744
    
    
    
    (739,209
    )Total liabilities, convertible preferred stock and stockholders equity
    
    $
    5,627,984
    
    
    $
    6,174,774
  3




---



##### Table of Contents



MATRITECH, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2006
    
    
    2005
    
    
    2006Revenue:Product sales, net of allowances
    
    $
    2,751,657
    
    
    $
    2,805,390
    
    
    $
    7,513,864
    
    
    $
    8,483,598Alliance and collaboration revenue
    
    
    27,979
    
    
    
    24,555
    
    
    
    83,414
    
    
    
    78,070Total revenue
    
    
    2,779,636
    
    
    
    2,829,945
    
    
    
    7,597,278
    
    
    
    8,561,668Expenses:Cost of product sales
    
    
    752,346
    
    
    
    741,172
    
    
    
    2,247,579
    
    
    
    2,280,204Research & development and clinical & regulatory expense
    
    
    748,494
    
    
    
    699,536
    
    
    
    2,181,279
    
    
    
    2,256,884Selling, general and administrative expense
    
    
    3,013,321
    
    
    
    3,529,489
    
    
    
    9,103,138
    
    
    
    10,667,968Total operating expenses
    
    
    4,514,161
    
    
    
    4,970,197
    
    
    
    13,531,996
    
    
    
    15,205,056Loss from operations
    
    
    (1,734,525
    )
    
    
    (2,140,252
    )
    
    
    (5,934,718
    )
    
    
    (6,643,388
    )Interest income
    
    
    31,289
    
    
    
    27,928
    
    
    
    100,744
    
    
    
    119,614Interest expense
    
    
    (497,180
    )
    
    
    (816,451
    )
    
    
    (1,772,763
    )
    
    
    (3,026,817
    )Mark-to-market adjustment from warrants
    
    
    (27,204
    )
    
    
    
    
    
    
    1,899,698
    
    
    
    Mark-to-market adjustment from registration rights
    
    
    
    
    
    
    (10,682
    )
    
    
    
    
    
    
    (48,589
    )Gain on sale of fixed assets
    
    
    60,091
    
    
    
    
    
    
    
    60,091Net loss
    
    $
    (2,167,529
    )
    
    $
    (2,939,457
    )
    
    $
    (5,646,948
    )
    
    $
    (9,599,180
    )Beneficial conversion feature related to
series A convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (1,627,232
    )
    
    
    Net loss attributable to common shareholders
    
    $
    (2,167,529
    )
    
    $
    (2,939,457
    )
    
    $
    (7,274,180
    )
    
    $
    (9,599,180
    )Basic and diluted net loss per common share
    
    $
    (0.05
    )
    
    $
    (0.05
    )
    
    
    (0.16
    )
    
    $
    (0.18
    )Basic and diluted weighted average number of common shares outstanding
    
    
    45,370,972
    
    
    
    56,142,146
    
    
    
    44,345,812
    
    
    
    54,044,348
  4




---



##### Table of Contents



MATRITECH, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Nine Months EndedSeptember 30,2005
    
    
    2006Cash Flows from Operating Activities:Net loss
    
    $
    (5,646,948
    )
    
    $
    (9,599,180
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    182,355
    
    
    
    206,615Amortization of debt discount
    
    
    1,366,868
    
    
    
    1,861,842Amortization of deferred charges
    
    
    95,862
    
    
    
    316,475Stock option expense
    
    
    
    
    
    
    107,552Restricted stock & restricted stock unit expense
    
    
    
    
    
    
    41,750Issuance of common stock for interest on debt
    
    
    130,966
    
    
    
    12,811Noncash interest expense
    
    
    177,643
    
    
    
    829,593Mark-to-market adjustment on warrants
    
    
    (1,899,698
    )
    
    
    Mark-to-market adjustment on registration rights
    
    
    
    
    
    
    48,589Gain on sale of fixed assets
    
    
    (60,091
    )
    
    
    Noncash expense related to bonus plan
    
    
    44,119
    
    
    
    27,245Provision for bad debts
    
    
    100,988
    
    
    
    51,772Changes in assets and liabilities:Accounts receivable
    
    
    (711,154
    )
    
    
    272,600Inventories
    
    
    (46,563
    )
    
    
    (367,287
    )Prepaid expenses and other assets
    
    
    (66,020
    )
    
    
    62,792Accounts payable
    
    
    54,642
    
    
    
    (103,068
    )Accrued expenses and other liabilities
    
    
    143,489
    
    
    
    245,893Deferred revenue
    
    
    (156,099
    )
    
    
    (150,234
    )Net cash used in operating activities
    
    
    (6,289,641
    )
    
    
    (6,134,240
    )Cash Flows from Investing Activities:Purchases of property and equipment
    
    
    (137,178
    )
    
    
    (88,648
    )Proceeds from sale of fixed assets
    
    
    60,091
    
    
    
    Net cash used in investing activities
    
    
    (77,087
    )
    
    
    (88,648
    )Cash Flows from Financing Activities:Payments on notes payable
    
    
    (6,120
    )
    
    
    (20,690
    )Proceeds from sale of preferred stock and warrants, net
    
    
    5,287,721
    
    
    
    Proceeds from convertible debentures and warrants, net
    
    
    
    
    
    
    6,184,053Proceeds from exercise of warrants
    
    
    
    
    
    
    39,896Proceeds from issuance of common stock under employee stock purchase plan
    
    
    6,226
    
    
    
    Net cash provided by financing activities
    
    
    5,287,827
    
    
    
    6,203,259Effect of foreign exchange on cash and cash equivalents
    
    
    (32,083
    )
    
    
    15,622Increase in cash and cash equivalents
    
    
    (1,110,984
    )
    
    
    (4,007
    )Cash and cash equivalents, beginning of period
    
    
    4,906,178
    
    
    
    1,789,792Cash and cash equivalents, end of period
    
    $
    3,795,194
    
    
    $
    1,785,785Supplemental Cash Flow Information:Cash paid during the period for interest
    
    $
    1,425
    
    
    $
    10,388Supplemental Disclosure of Noncash Financing and Investing Activities:Non-cash dividends to preferred stockholders arising from the beneficial conversion feature
    
    $
    1,627,232
    
    
    $
    Beneficial conversion feature on convertible debt
    
    
    442,027
    
    
    
    2,974,992Issuance of common stock as payment on convertible debt:Number of shares issued
    
    
    2,433,656
    
    
    
    1,231,254Payment on debt in dollars
    
    $
    1,860,517
    
    
    $
    781,251Conversion of 61,419 and 487,852 shares of convertible preferred stock to 614,190 and 6,132,997 shares of common stock in 2005 and 2006, respectively
    
    $
    78,709
    
    
    $
    625,183Registration rights liability recorded as a debt discount
    
    
    
    
    
    $
    305,829Allocation of $1,285,000 closing cost related to the convertible debt:Registration rights liability
    
    
    
    
    
    $
    35,505Convertible debt (recorded in other assets)
    
    
    
    
    
    $
    912,403Purchase warrants (recorded in additional paid in capital)
    
    
    
    
    
    $
    337,712Payment of closing cost related to the convertible debt with issuance of warrant to Placement Agent
    
    
    
    
    
    $
    471,700Warrants issued to stockholders and recorded as debt discount to the convertible debt
    
    
    
    
    
    $
    1,807,876Conversion of convertible secured debt into common stock
    
    
    
    
    
    $
    785,000Purchase of fixed assets through capital lease
    
    
    
    
    
    $
    40,783
  5




---



##### Table of Contents



MATRITECH, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Operations and Basis of Presentation
    6




---



##### Table of Contents



2. Summary of Significant Accounting Policies
 (a) Principles of Consolidation
  ( b) Inventories
  December 31,
    
    
    September 30,2005
    
    
    2006Raw materials
    
    $
    206,200
    
    
    $
    228,213Work-in-process
    
    
    22,117
    
    
    
    12,170Finished goods
    
    
    462,732
    
    
    
    899,016Consignment inventory
    
    
    65,030
    
    
    
    7,561$
    756,079
    
    
    $
    1,146,960
 (c) Revenue Recognition
  December 31,
    
    
    September 30,2005
    
    
    2006Collaboration fees
    
    $
    715,608
    
    
    $
    712,534Deferred product revenue
    
    
    212,303
    
    
    
    65,143$
    927,911
    
    
    $
    777,677
 d) Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2006
    
    
    2005
    
    
    2006Net loss
    
    $
    (2,167,529
    )
    
    $
    (2,939,457
    )
    
    $
    (5,646,948
    )
    
    $
    (9,599,180
    )Other comprehensive lossForeign currency
translation
adjustments
    
    
    (5,265
    )
    
    
    (20,414
    )
    
    
    (65,344
    )
    
    
    45,894Comprehensive loss
    
    $
    (2,172,794
    )
    
    
    (2,959,871
    )
    
    $
    (5,712,292
    )
    
    $
    (9,553,286
    )
 7




---



##### Table of Contents



(e) Stock-Based Compensation
 Share-Based Payment Accounting for
Stock Issued to Employees Accounting for Stock-Based Compensation Accounting for Stock-Based CompensationTransition and Disclosure
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2006
    
    
    2006Cost of product sales
    
    $
    2,646
    
    
    $
    6,751Research & development and clinical &
regulatory expense
    
    
    9,225
    
    
    
    25,010Selling, general and administrative expense
    
    
    55,072
    
    
    
    144,786Share-based compensation expense
    
    $
    66,943
    
    
    $
    176,547
    Nine MonthsEndedSeptember 30,2006Risk-free interest rate (1)
    
    4.58  4.87%Expected dividend yield
    
    Expected life (2)
    
    4.75 yearsExpected volatility (3)
    
    68%
 
 (1)
    
    The risk-free interest rate for periods equal to the expected term of
the share option is based on the U.S. Treasury yield curve in effect
at the time of grant.(2)
    
    The option term was calculated using the simplified method for
estimating expected option life, in accordance with Staff Accounting
Bulletin No. 107, Share-Based Payment(SAB 107).(3)
    
    The stock volatility for each grant is an estimate of volatility we
expect to experience over the term of the option. Historical weekly
price changes of our common stock over the most recent 8




---



##### Table of Contents



period equal to
the expected option term play an important role in such estimates.
Such estimates have been and may continue to be adjusted for stock
market activity.  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
September 30, 2005Net loss attributable to common shareholders
    
    $
    (2,167,529
    )
    
    $
    (7,274,180
    )Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards
    
    
    (162,740
    )
    
    
    (529,274
    )Pro forma net loss attributable to common shareholders
    
    $
    (2,330,269
    )
    
    $
    (7,803,454
    )Net loss attributable to common shareholders per common share:Basic and diluted  as reported
    
    $
    (0.05
    )
    
    $
    (0.16
    )Basic and diluted  pro forma
    
    $
    (0.05
    )
    
    $
    (0.18
    )
   Nine Months EndedSeptember 30, 2005Risk-free interest rate
    
    3.61  4.09%Expected dividend yield
    
    Expected life
    
    5 yearsExpected volatility
    
    68%  85%
 Stock Incentive Plans
   9




---



##### Table of Contents



WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Life
    
    
    IntrinsicShares
    
    
    Price
    
    
    (in Years)
    
    
    ValueOutstanding at December 31, 2005
    
    
    3,115,584
    
    
    $
    2.82Granted
    
    
    352,900
    
    
    
    0.87
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Terminated:- Cancellation
    
    
    (11,816
    )
    
    
    1.56
    
    
    
    
    
    
    
    - Forfeitures
    
    
    (49,928
    )
    
    
    0.81
    
    
    
    
    
    
    
    - Expiration
    
    
    (41,913
    )
    
    
    10.58
    
    
    
    
    
    
    
    Outstanding at September 30, 2006
    
    
    3,364,827
    
    
    
    2.55
    
    
    
    5.3
    
    
    $
    397Options exercisable at September 30, 2006
    
    
    2,659,217
    
    
    
    2.99
    
    
    
    4.76
    
    
    $
    87Weighted average fair value of options
granted for the nine months ended
September 30, 2006
    
    
    
    
    
    $
    0.51
   WeightedNumber of
    
    
    AverageShares
    
    
    Fair ValueUnvested at December 31, 2005
    
    
    592,153
    
    
    $
    0.59Granted
    
    
    352,900
    
    
    
    0.51Vested
    
    
    (189,515
    )
    
    
    0.58Cancelled
    
    
    
    
    
    
    Forfeited
    
    
    (49,928
    )
    
    
    0.51Expired
    
    
    
    
    
    
    Unvested at September 30, 2006
    
    
    705,610
    
    
    
    0.56
    10




---



##### Table of Contents



Number ofSharesOutstanding at December 31, 2005
    
    
    Granted
    
    
    483,345Forfeitures
    
    
    (8,993
    )Outstanding at September 30, 2006
    
    
    474,352Vested restricted stock and restricted stock units at
September 30, 2006
    
    
    Weighted average fair value of restricted stock and
restricted stock units granted in 2006
    
    $
    0.79
   (f) Net Loss per Common Share
 Earnings per Share
 (g) Recent Accounting Pronouncements
 Accounting for Uncertainty in Income
Taxes Accounting for Income
Taxes
 Fair
Value Measurements
 Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
 11




---



##### Table of Contents



3. Stockholders Equity
    4. Convertible Debt Issued March 2003
  Proceeds at closing in March 2003
    
    $
    5,000,000Less:Fair value ascribed to the warrants and recorded as debt discount
    
    
    (950,000
    )Fair value ascribed to placement agent warrant and recorded as debt discount
    
    
    (131,000
    )Beneficial conversion feature calculated on date of closing and recorded as
debt discount
    
    
    (199,000
    )Additional beneficial conversion feature recorded in the fourth quarter of
2003 as debt discount
    
    
    (1,497,000
    )Additional beneficial conversion feature recorded in the first quarter of
2004 as debt discount
    
    
    (1,339,000
    )Additional beneficial conversion feature recorded in the first quarter of
2005 as debt discount
    
    
    (442,000
    )Cumulative principal payments made in stock
    
    
    (5,000,000
    )Add back:Cumulative amortization of debt discount and beneficial conversion features
    
    
    4,558,000Balance, March 31, 2006
    
    
    
    12




---



##### Table of Contents



5. Secured Convertible Notes
    ®
   
    
    our failure to make payments as they become due;
 13




---



##### Table of Contents




    
    our failure to remain listed on any of the Nasdaq Capital Market, New York Stock
Exchange (NYSE), AMEX or the Nasdaq Global Market;
    
    our failure to have an effective registration statement available for resale of the shares;
    
    failure to timely remove restrictive legends from any stock certificates delivered upon conversion;
    
    our written notice or public announcement of the intention not to issue shares upon conversion;
    
    our making an assignment for the benefit of creditors, or applying for or consenting
to the appointment of a receiver or trustee for a substantial portion of our property
or business or that of any subsidiary;
    
    bankruptcy, insolvency or similar proceedings being filed by or against us or any subsidiary;
    
    a sale or disposition of substantially all our assets;
    
    our default on our existing or future liabilities in excess of $250,000; and
    
    a breach of any material term of any other transaction document we entered into with
the purchasers of the Secured Convertible Notes.
     Allocation ofAllocation of
    
    
    AssociatedInstrument
    
    Proceeds
    
    
    CostsSecured Convertible Notes
    
    $
    4,884,000
    
    
    $
    912,000Purchaser Warrants
    
    
    1,808,000
    
    
    
    337,000Registration Rights Liability
    
    
    306,000
    
    
    
    36,000$
    6,998,000
    
    
    $
    1,285,000
 14




---



##### Table of Contents



Application of Issue No.
98-5 to Certain Convertible Instruments
 Face Value of Secured
Convertible Note
    
    $
    6,998,000Shares Upon Conversion
    
    
    10,766,092Conversion Price
    
    $
    0.65Value Allocated to
Secured Convertible Note
    
    $
    4,884,000Shares Upon Conversion
    
    
    10,766,092Effective Conversion Price
    
    $
    0.454
  Closing Price January 13, 2006
    
    $
    0.73Effective Conversion Price
    
    $
    0.454Discount to Market per Share
    
    $
    0.276Shares Upon Conversion
    
    
    10,766,092Beneficial Conversion Feature
    
    $
    2,975,000
      15




---



##### Table of Contents



Proceeds at closing in January 2006
    
    $
    6,998,000Less:Fair value ascribed to the Purchaser Warrants
    
    
    (1,808,000
    )Fair value of Registration Rights Liability
    
    
    (306,000
    )Beneficial conversion feature calculated on date of closing and recorded
as debt discount
    
    
    (2,975,000
    )Carrying value at closing in January 2006
    
    
    1,909,000Add back:Cumulative principal payments made in stock
    
    
    (785,000
    )Cumulative amortization of debt discount and beneficial conversion features
    
    
    1,728,000Balance, September 30, 2006
    
    $
    2,852,000
  Total payments
    
    $
    8,107,000Less: Portion related to periodic interest payments
    
    
    (1,894,000
    )Non-cash interest related to debt discount
    
    
    (3,361,000
    )Balance, September 30, 2006
    
    $
    2,852,000Less current portion
    
    
    2,487,000Long-term portion
    
    $
    365,000
 6. Contingencies
 Intellectual Property Rights
 ® ®
 7. Accrued Expenses
  December 31,
    
    
    September 30,2005
    
    
    2006Payroll and related costs
    
    $
    747,625
    
    
    $
    907,344Professional fees
    
    
    222,057
    
    
    
    163,174Interest on convertible debentures
    
    
    4,808
    
    
    
    668,685Royalties
    
    
    159,186
    
    
    
    160,239Other
    
    
    168,043
    
    
    
    355,149$
    1,301,719
    
    
    $
    2,254,591
 8. Subsequent Events
  16




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
 ® ®
     17




---



##### Table of Contents



Results of Operations
 Quarter Ended September 30, 2005 (Q3 2005) Compared with Quarter Ended September 30, 2006
(Q3 2006)
 Revenues
 Q3 2005
    
    
    Q3 2006
    
    

$ Change
    
    
    % ChangeProduct Sales (net of allowances):NMP22 BladderChek Test Sales
    
    $
    2,094,000
    
    
    $
    2,327,000
    
    
    $
    233,000
    
    
    
    11
    %NMP22 Lab Test Kit Sales
    
    
    233,000
    
    
    
    265,000
    
    
    
    32,000
    
    
    
    14
    %Other Product Sales
    
    
    425,000
    
    
    
    213,000
    
    
    
    (212,000
    )
    
    
    (50
    %)Total Product Sales
    
    
    2,752,000
    
    
    
    2,805,000
    
    
    
    53,000
    
    
    
    2
    %Alliance and Collaboration Revenue
    
    
    28,000
    
    
    
    25,000
    
    
    
    (3,000
    )
    
    
    (11
    %)Total Revenue
    
    $
    2,780,000
    
    
    $
    2,830,000
    
    
    $
    50,000
    
    
    
    2
    %
     December 31, 2005
    
    
    September 30, 2006
    
    
    $ Change
    
    
    % ChangeCollaboration fees
    
    $
    716,000
    
    
    $
    713,000
    
    
    $
    (3,000
    )
    
    
    (0.4
    %)Deferred product revenue
    
    
    212,000
    
    
    
    65,000
    
    
    
    (147,000
    )
    
    
    (69
    %)$
    928,000
    
    
    $
    778,000
    
    
    $
    (150,000
    )
    
    
    (16
    %)
 18




---



##### Table of Contents



Cost of Product Sales
 Q3 2005
    
    
    Q3 2006
    
    

$ Change
    
    
    % ChangeProduct Sales
    
    $
    2,752,000
    
    
    $
    2,805,000
    
    
    $
    53,000
    
    
    
    2
    %Cost of Product Sales
    
    
    752,000
    
    
    
    741,000
    
    
    
    (11,000
    )
    
    
    (2
    %)Gross Profit on Product Sales
    
    $
    2,000,000
    
    
    $
    2,064,000
    
    
    $
    64,000
    
    
    
    3
    %Gross Profit Margin on
Product Sales
    
    
    73
    %
    
    
    74
    %
  Research & Development and Clinical & Regulatory Expenses
 Q3 2005
    
    Q3 2006
    
    $ Change
    
    % ChangeResearch &
development and
clinical & regulatory
expenses
    
    $
    748,000
    
    
    $
    700,000
    
    
    $
    (48,000
    )
    
    
    (6
    %)
  Selling, General and Administrative Expenses
 Q3 2005
    
    Q3 2006
    
    $ Change
    
    % ChangeGross Profit on Product Sales
    
    $
    2,000,000
    
    
    $
    2,064,000
    
    
    $
    64,000
    
    
    
    3
    %Selling, General and
Administrative Expenses
    
    
    3,013,000
    
    
    
    3,529,000
    
    
    
    516,000
    
    
    
    17
    %SG&A as % of Gross Profit
    
    
    151
    %
    
    
    171
    %
   19




---



##### Table of Contents



Operating Loss
 Q3 2005
    
    Q3 2006
    
    $ Change
    
    % ChangeOperating Loss
    
    $
    1,735,000
    
    
    $
    2,140,000
    
    
    $
    405,000
    
    
    
    23
    %
  Interest Income
 Q3 2005
    
    Q3 2006
    
    $ Change
    
    % ChangeInterest Income
    
    $
    31,000
    
    
    $
    28,000
    
    
    $
    (3,000
    )
    
    
    (10
    %)
  Interest Expense
 Q3 2005
    
    
    Q3 2006
    
    
    $ Change
    
    
    % ChangeInterest Related to Convertible Debt:Interest Paid in Stock
    
    $
    29,000
    
    
    $
    1,000
    
    
    $
    (28,000
    )
    
    
    (97
    %)Interest Accrued on Debt
    
    
    
    
    
    
    235,000
    
    
    
    235,000
    
    
    
    100
    %Non-Cash Charges to Interest
Expense
    
    
    468,000
    
    
    
    575,000
    
    
    
    107,000
    
    
    
    23
    %Total
    
    
    497,000
    
    
    
    811,000
    
    
    
    314,000
    
    
    
    63
    %Interest Related to Other Debt:Interest Paid in Cash
    
    
    
    
    
    
    5,000
    
    
    
    5,000
    
    
    
    100
    %Total Interest
    
    $
    497,000
    
    
    $
    816,000
    
    
    $
    319,000
    
    
    
    64
    %
    January 2006 Secured Convertible Notes
   
    
    $87,000 of amortized deferred financing costs, which contributed to reducing the
original $912,000 balance of deferred financing costs to $603,000 at September 30,
2006; and
    
    $488,000 of amortized debt discount, which contributed to reducing the $5,088,000
of debt discount to $3,360,000 at September 30, 2006.
 20




---



##### Table of Contents



Value of NotesOriginal Value of Debt
    
    $
    6,998,000Discounts Recorded in 2006
    
    
    (5,089,000
    )2006 Amortization of Discounts
    
    
    1,728,000Payment in Stock
    
    
    (785,000
    )Carrying Value of Debt at 9/30/06
    
    $
    2,852,000
 Mark-to-Market Adjustment From Warrants
 Q3 2005
    
    Q3 2006
    
    $ Change
    
    % ChangeMark-to-market
adjustment from
warrants
    
    $
    (27,000
    )
    
    
    
    
    
    $
    27,000
    
    
    
    (100
    %)
  Mark-to-Market Adjustment From Registration Rights
 Q3 2005
    
    Q3 2006
    
    $ Change
    
    % ChangeMark-to-market adjustment
from registration rights
    
    
    
    
    
    $
    11,000
    
    
    $
    11,000
    
    
    
    100
    %
  Net Loss
 Q3 2005
    
    Q3 2006
    
    $ Change
    
    % ChangeNet Loss
    
    $
    2,168,000
    
    
    $
    2,939,000
    
    
    $
    771,000
    
    
    
    36
    %
  Nine Months Ended September 30, 2005 Compared with Nine Months Ended September 30, 2006
 Revenues
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2006
    
    
    $ Change
    
    
    % ChangeProduct Sales (net of allowances):NMP22 BladderChek Test Sales
    
    $
    5,433,000
    
    
    $
    6,944,000
    
    
    $
    1,511,000
    
    
    
    28
    %NMP22 Lab Test Kit Sales
    
    
    608,000
    
    
    
    804,000
    
    
    
    196,000
    
    
    
    32
    %Other Product Sales
    
    
    1,473,000
    
    
    
    736,000
    
    
    
    (737,000
    )
    
    
    (50
    %)Total Product Sales
    
    
    7,514,000
    
    
    
    8,484,000
    
    
    
    970,000
    
    
    
    13
    %Alliance and Collaboration Revenue
    
    
    83,000
    
    
    
    78,000
    
    
    
    (5,000
    )
    
    
    (6
    %)Total Revenue
    
    $
    7,597,000
    
    
    $
    8,562,000
    
    
    
    965,000
    
    
    
    13
    %
 21




---



##### Table of Contents



December 31, 2005
    
    
    September 30, 2006
    
    
    $ Change
    
    
    % ChangeCollaboration fees
    
    $
    716,000
    
    
    $
    713,000
    
    
    $
    (3,000
    )
    
    
    (0.4
    %)Deferred product revenue
    
    
    212,000
    
    
    
    65,000
    
    
    
    (147,000
    )
    
    
    (69
    %)$
    928,000
    
    
    $
    778,000
    
    
    $
    (150,000
    )
    
    
    (16
    %)
  22




---



##### Table of Contents



Cost of Product Sales
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2006
    
    
    $ Change
    
    
    % ChangeProduct Sales
    
    $
    7,514,000
    
    
    $
    8,484,000
    
    
    $
    970,000
    
    
    
    13
    %Cost of Product Sales
    
    
    2,248,000
    
    
    
    2,280,000
    
    
    
    32,000
    
    
    
    1
    %Gross Profit on
Product Sales
    
    $
    5,266,000
    
    
    $
    6,204,000
    
    
    $
    938,000
    
    
    
    18
    %Gross Profit Margin
on Product Sales
    
    
    70
    %
    
    
    73
    %
  Research & Development and Clinical & Regulatory Expenses
 Nine Months Ended
    
    Nine Months EndedSeptember 30, 2005
    
    September 30, 2006
    
    $ Change
    
    % ChangeResearch &
development and
clinical &
regulatory expenses
    
    $
    2,181,000
    
    
    $
    2,257,000
    
    
    $
    76,000
    
    
    
    3
    %
  Selling, General and Administrative Expenses
 Nine Months Ended
    
    Nine Months EndedSeptember 30, 2005
    
    September 30, 2006
    
    $ Change
    
    % ChangeGross Profit on Product Sales
    
    $
    5,266,000
    
    
    $
    6,204,000
    
    
    $
    938,000
    
    
    
    18
    %Selling, General and
Administrative Expenses
    
    
    9,103,000
    
    
    
    10,668,000
    
    
    
    1,565,000
    
    
    
    17
    %SG&A as % of Gross Profit on
Product Sales
    
    
    173
    %
    
    
    172
    %
   Operating Loss
 Nine Months Ended
    
    Nine Months EndedSeptember 30, 2005
    
    September 30, 2006
    
    $ Change
    
    % ChangeOperating Loss
    
    $
    5,935,000
    
    
    $
    6,643,000
    
    
    $
    708,000
    
    
    
    12
    %
 23




---



##### Table of Contents



Interest Income
 Nine Months Ended
    
    Nine Months EndedSeptember 30, 2005
    
    September 30, 2006
    
    $ Change
    
    % ChangeInterest Income
    
    $
    101,000
    
    
    $
    120,000
    
    
    $
    19,000
    
    
    
    19
    %
  Interest Expense
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2006
    
    
    $ Change
    
    
    % ChangeInterest Related to Convertible Debt:Interest Paid in Stock
    
    $
    119,000
    
    
    $
    36,000
    
    
    $
    (83,000
    )
    
    
    (70
    %)Interest Accrued on Debt
    
    
    
    
    
    
    671,000
    
    
    
    671,000
    
    
    
    100
    %Non-Cash Charges to Interest
Expense
    
    
    1,653,000
    
    
    
    2,310,000
    
    
    
    657,000
    
    
    
    40
    %Total
    
    $
    1,772,000
    
    
    $
    3,017,000
    
    
    $
    1,245,000
    
    
    
    70
    %Interest Related to Other Debt:Interest Paid in Cash
    
    $
    1,000
    
    
    $
    10,000
    
    
    $
    9,000
    
    
    
    900
    %Total Interest
    
    $
    1,773,000
    
    
    $
    3,027,000
    
    
    $
    1,254,000
    
    
    
    71
    %
     
    
    $310,000 of amortized deferred financing costs, which contributed to reducing the
original $912,000 balance of deferred financing costs to $603,000 at September 30,
2006;
    
    $1,728,000 of amortized debt discount, which contributed to reducing the
$5,088,000 of debt discount to $3,360,000 at September 30, 2006;
 March 2003 Convertible Debentures
  24




---



##### Table of Contents



Value ofDebenturesOriginal Value of Debt
    
    $
    5,000,000Discounts Recorded in 2003
    
    
    (2,777,000
    )2003 Amortization of Discounts
    
    
    644,000Carrying Value of Debt at 12/31/2003
    
    $
    2,867,000Discounts Recorded in 2004
    
    
    (1,339,000
    )2004 Amortization of Discounts
    
    
    2,150,000Payment in Stock
    
    
    (1,923,000
    )Carrying Value of Debt at 12/31/2004
    
    $
    1,755,000Discounts Recorded in 2005
    
    
    (442,000
    )2005 Amortization of Discounts
    
    
    1,630,000Payment in Stock
    
    
    (2,308,000
    )Carrying Value of Debt at 12/31/05
    
    $
    635,0002006 Amortization of Discounts
    
    
    134,000Payment in Stock
    
    
    (769,000
    )Carrying Value of Debt at 3/31/06
    
    $
    
 Mark-to-Market Adjustment From Warrants
 Nine Months Ended
    
    Nine Months EndedSeptember 30, 2005
    
    September 30, 2006
    
    $ Change
    
    % ChangeMark-to-market adjustment from warrants
    
    $
    1,900,000
    
    
    
    
    
    
    $
    (1,900,000
    )
    
    
    (100
    %)
  Mark-to-Market Adjustment From Registration Rights
 Nine Months Ended
    
    Nine Months EndedSeptember 30, 2005
    
    September 30, 2006
    
    $ Change
    
    % ChangeMark-to-market
adjustment from
registration rights
    
    
    
    
    
    $
    49,000
    
    
    $
    49,000
    
    
    
    100
    %
  Net Loss
 Nine Months Ended
    
    Nine Months EndedSeptember 30, 2005
    
    September 30, 2006
    
    $ Change
    
    % ChangeNet Loss
    
    $
    5,647,000
    
    
    $
    9,599,000
    
    
    $
    3,952,000
    
    
    
    70
    %Net Loss Attributable to Common Shareholders
    
    $
    7,274,000
    
    
    $
    9,599,000
    
    
    $
    2,325,000
    
    
    
    32
    %
 25




---



##### Table of Contents



Stock-Based Compensation
 Share-Based Payment
 Share-Based Payment
   Liquidity and Capital Resources
  Summary Cash Flow
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2006Net Loss
    
    $
    (5,647,000
    )
    
    $
    (9,599,000
    )Non-cash Charges
    
    
    139,000
    
    
    
    3,504,000Changes in Assets and Liabilities
    
    
    (782,000
    )
    
    
    (39,000
    )Net Operating Uses
    
    
    (6,290,000
    )
    
    
    (6,134,000
    )Net Investment Uses
    
    
    (77,000
    )
    
    
    (89,000
    )Net Financing Sources
    
    
    5,288,000
    
    
    
    6,203,000Foreign exchange effect
    
    
    (32,000
    )
    
    
    16,000Change in cash and cash
equivalents
    
    $
    (1,111,000
    )
    
    $
    (4,000
    )
  26




---



##### Table of Contents



27




---



##### Table of Contents



ConversionOr Exercise PriceSecurity
    
    Common Shares
    
    Low
    
    HighCommon stock outstanding
    
    
    56,593,000
    
    
    
    
    
    
    
    Stock reserved for converting notes
    
    
    16,415,000
    
    
    $
    .50
    
    
    $
    .65Stock reserved for warrant exercises
    
    
    17,426,000
    
    
    
    .65
    
    
    
    2.70Stock reserved for potential warrant shares
    
    
    631,000
    
    
    
    .01
    
    
    
    .01Stock reserved for outstanding stock
options and restricted stock units
    
    
    3,425,000
    
    
    
    .55
    
    
    
    7.88Stock available for issuance under stock
plans
    
    
    4,853,000
    
    
    
    
    
    
    
    Stock reserved for Series A Preferred Stock
    
    
    1,023,000
    
    
    
    .70
    
    
    
    .70Total
    
    
    100,366,000
 28




---



##### Table of Contents



Financings
  Contractual Obligations
  Payment Due by PeriodLess than
    
    
    1-3
    
    
    3-5
    
    
    More thanTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsOperating Lease Arrangements
    
    $
    2,312,000
    
    
    $
    592,000
    
    
    $
    1,584,000
    
    
    $
    136,000
    
    
    $
    Capital Lease Arrangements
    
    
    46,000
    
    
    
    19,000
    
    
    
    27,000
    
    
    
    
    
    
    
    Debt Obligations
    
    
    8,114,000
    
    
    
    4,015,000
    
    
    
    4,099,000
    
    
    
    
    
    
    
    Total
    
    $
    10,472,000
    
    
    $
    4,626,000
    
    
    $
    5,710,000
    
    
    $
    136,000
    
    
    $
    
    Off-Balance Sheet Arrangements
  29




---



##### Table of Contents



Critical Accounting Policies and Estimates
   Stock-Based Compensation Expense
  Revenue Recognition
 Revenue Recognition Revenue Arrangements with Multiple Deliverables
 1.
    
    Persuasive evidence of an arrangement exists;2.
    
    Delivery has occurred and risk of loss has passed to the buyer;3.
    
    The sellers price to the buyer is fixed or determinable; and4.
    
    Collectibility is reasonably assured.
   30




---



##### Table of Contents



1.
    
    The delivered items have value to a customer on a stand-alone basis;2.
    
    There is objective and reliable evidence of the fair value of the undelivered
items; and3.
    
    Delivery or performance is probable and within the control of the vendor for
any delivered items that have a right of return.
    Recent Accounting Pronouncements
 Accounting for Uncertainty in Income
Taxes Accounting for Income
Taxes
 Fair
Value Measurements
 Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
 31




---



##### Table of Contents



Research and Development
   Spending on Research and Development Projects.
 Bladder Cancer.
 Cervical Cancer.
 Breast Cancer.
 Prostate Cancer
 Other existing programs
 32




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk.
 Investment Portfolio.
  Foreign Exchange. Foreign Currency Translation
 
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting
 
 PART II. OTHER INFORMATION
 
 Item 1A. Risk Factors
 The following risk factors should be considered carefully along with the other information
contained or incorporated by reference in this Prospectus. The risk and uncertainties described or
incorporated by reference herein are not the only ones we face. Additional risks and uncertainties
not currently known to us or that we currently deem immaterial may also affect our business.
  33




---



##### Table of Contents



We may need to obtain additional capital in the near future in order to continue our
operations.
  We have a history of operating losses, are continuing to lose money and may never be
profitable.
  Nine Months Ended2003
    
    2004
    
    2005
    
    September 30, 2006Product Sales
    
    $
    4,018,000
    
    
    $
    7,275,000
    
    
    $
    10,290,000
    
    
    $
    8,484,000Operating Losses
    
    $
    6,856,000
    
    
    $
    8,368,000
    
    
    $
    7,670,000
    
    
    $
    6,643,000Net Losses
    
    $
    7,878,000
    
    
    $
    11,123,000
    
    
    $
    7,865,000
    
    
    $
    9,599,000
  We may need to continue to obtain additional capital in the future until we become profitable
and, if we are unable to obtain such capital on acceptable terms or at the appropriate time, we may
not be able to continue our operations.
    We may be unable to comply with provisions of our Secured Convertible Notes and could suffer
significant consequences in the event of non-compliance.
  34




---



##### Table of Contents




    
    our failure to make payments as they become due;
    
    our failure to remain listed on any of the Nasdaq Capital Market, NYSE, AMEX or the
Nasdaq Global Market;
    
    our failure to have an effective registration statement available for resale of the shares;
    
    failure to timely remove restrictive legends from any stock certificates delivered upon conversion;
    
    our written notice or public announcement of the intention not to issue shares upon conversion;
    
    our making an assignment for the benefit of creditors, or applying for or consenting to
the appointment of a receiver or trustee for a substantial portion of our property or
business or that of any subsidiary;
    
    bankruptcy, insolvency or similar proceedings being filed by or against us or any subsidiary;
    
    a sale or disposition of substantially all our assets;
    
    our default on our existing or future liabilities in excess of $250,000; and
    
    a breach of any material term of any other transaction document we entered into with the
purchasers of the Secured Convertible Notes.
  We may not be able to meet our payment obligations on our outstanding debt if we are required
to make these payments in cash.
  We have incurred substantial indebtedness and may be unable to service our debt.
  
    
    make it difficult for us to make payments on this debt and other obligations;
    
    make it difficult for us to obtain future financing;
    
    require us to redirect significant amounts of cash flow from operations to servicing our indebtedness;
    
    require us to take measures such as the reduction in scale of our operations that might
hurt our future performance in order to satisfy our debt obligations; and
    
    make us more vulnerable to bankruptcy.
 35




---



##### Table of Contents



We have granted a security interest in our NMP22 product line to the purchasers of our Secured
Convertible Notes which restricts our operation of this product line and could result in the loss
of all assets related to this product line if we default on our obligations.
  We may fail to meet the standards for continued listing of our shares of common stock on the
American Stock Exchange or for listing of such shares on another national exchange.
  Market volatility and fluctuations in our stock price and trading volume may cause sudden
decreases in the value of an investment in our common stock.
   36




---



##### Table of Contents



Future equity or convertible debt financings will result in additional dilution of the
ownership interest of our existing investors and may have an adverse impact on the price of our
common stock.
     We will not be able to significantly increase revenue or achieve profitability unless we
increase the number of urologists using our NMP22 BladderChek Test, increase the per-urologist
usage of our tests and/or successfully penetrate markets other than urologists.
  Our inability to develop and commercialize additional products may limit our future prospects
for our business, sales and profits.
  37




---



##### Table of Contents



If we are unable to manufacture or otherwise obtain the product volumes we need, we may be
unable to achieve profitability.
  
    
    production yields;
    
    quality control and assurance;
    
    component supply; and
    
    shortages of qualified personnel.
  If we lose the services of our suppliers or assemblers, we may be unable to meet commitments
to our customers and our results of operations would suffer.
  We may need to stop selling our NMP22 BladderChek Tests if we cannot obtain necessary licenses
or waivers to use lateral flow technology, and we may need to stop selling other products if third
parties assert infringement claims against us.
  38




---



##### Table of Contents



We compete with other methods of diagnosing cancer that are already in existence or may be
successfully developed by others and our products may not prevail as the method of choice.
  ® TM TM
 Low reimbursement rates could limit the per-unit revenues for our products and make it
uneconomical to sell or distribute them, and limitations on the medical circumstances for which
reimbursement is provided could reduce the potential market for our products.
    39




---



##### Table of Contents



We and our distributors are subject to extensive government regulation which adds to the cost
and complexity of our business, may result in unexpected delays and difficulties, may impose severe
penalties for violations and may prevent the ultimate sale or distribution of our products in
certain countries.
   
    
    keeping records and reporting adverse experiences with the use of the devices we make
and distribute;
    
    registering our establishments and listing our devices with the FDA. Manufacturing
establishments are subject to periodic inspections by the FDA and certain state agencies;
and
 40




---



##### Table of Contents




    
    requiring our products to be manufactured in accordance with complex regulations known
as Quality System Regulations which include procedural and documentation requirements for
our manufacturing and quality assurance activities.
  
    
    fines;
    
    injunctions;
    
    civil penalties;
    
    recall or seizure of products;
    
    total or partial suspension of production;
    
    delay or refusal of the agency to grant premarket clearance or premarket approval for other devices in our development pipeline;
    
    withdrawal of marketing approvals; and
    
    criminal prosecution.
    We may encounter insurmountable obstacles or incur substantially greater costs and delays than
anticipated in the development process.
  41




---



##### Table of Contents



We often face challenges in replicating the research results we obtain in our laboratories in
clinical trials and, as a result, we may have difficulty commercializing our products.
  
    
    obtaining acceptable specimens from patients and healthy individuals;
    
    testing a much larger population of individuals than we tested in early discovery which
will be likely to include more biologic variability;
    
    preparation methods for the specimens using lower cost, high throughput procedures which
might result in performance different from those used in early discovery; and
    
    inability to develop economic and reproducible test methods for the substance to be
measured.
  Successful technical development of our products does not guarantee successful
commercialization.
  
    
    failure to obtain the required regulatory approvals for their use;
    
    prohibitive production costs;
    
    clinical trial results might differ from discovery phase data; and
    
    variation of perceived clinical value of products from physician to physician.
  We have no demonstrated success in developing cellular analysis systems and any future success
in this area will be highly dependent upon Sysmex Corporation.
  If our intellectual property is not adequately protected, we could lose our ability to compete
in the marketplace.
  42




---



##### Table of Contents



If we are unable to recruit and retain key management, scientific and sales personnel, our
business would be negatively affected.
  We may be unable to establish distributor relationships with high revenue potential in
jurisdictions where we do not have a direct sales force.
  The operations of our European subsidiary involve currency exchange rate variability and other
risks that could negatively affect our results of operations .
   If we are sued for product-related liabilities, the cost could be prohibitive to us.
  43




---



##### Table of Contents



If the products we distribute which are made by other companies become unavailable or do not
meet quality standards, we may lose revenues and may face liability claims.
  Our activities involve the use of hazardous materials and we may be held liable for any
accidental injury from these hazardous materials.
  
 Item 6. Exhibits.
 Exhibit No:
    
    Description10.1
    
    2006 Equity and Incentive Plan, as amended September 15, 2006
(filed as Exhibit 10.1 to our Form 8-K filed on September 19,
2006 and incorporated herein by reference).10.2
    
    2002 Stock Option and Incentive Plan, as amended September 15,
2006 (filed as Exhibit 10.2 to our Form 8-K filed on September
19, 2006 and incorporated herein by reference).10.3
    
    Supply Agreement dated November 3, 2006 by and between
Matritech, Inc. and Inverness Medical Innovations, Inc. (filed
as Exhibit 10.1 to our Form 8-K filed on November 9, 2006 and
incorporated herein by reference).10.4
    
    Distribution Agreement dated November 3, 2006 by and between
Matritech, Inc. and Inverness Medical Innovations, Inc. (filed
as Exhibit 10.2 to our Form 8-K filed on November 9, 2006 and
incorporated herein by reference).31.1
    
    Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 44




---



##### Table of Contents



SIGNATURES
  MATRITECH, INC.Date: November 13, 2006
    By:
    /s/ Stephen D. ChubbStephen D. ChubbDirector, Chairman and Chief Executive Officer
(principal executive officer)Date: November 13, 2006
    By:
    /s/ Richard A. SandbergRichard A. SandbergDirector, Vice President, Chief Financial
Officer and Treasurer
(principal accounting and financial officer) 45




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No:
    
    Description10.1
    
    2006 Equity and Incentive Plan, as amended September 15, 2006
(filed as Exhibit 10.1 to our Form 8-K filed on September 19,
2006 and incorporated herein by reference).10.2
    
    2002 Stock Option and Incentive Plan, as amended September 15,
2006 (filed as Exhibit 10.2 to our Form 8-K filed on September
19, 2006 and incorporated herein by reference).10.3
    
    Supply Agreement dated November 3, 2006 by and between
Matritech, Inc. and Inverness Medical Innovations, Inc. (filed
as Exhibit 10.1 to our Form 8-K filed on November 9, 2006 and
incorporated herein by reference).10.4
    
    Distribution Agreement dated November 3, 2006 by and between
Matritech, Inc. and Inverness Medical Innovations, Inc. (filed
as Exhibit 10.2 to our Form 8-K filed on November 9, 2006 and
incorporated herein by reference).31.1
    
    Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 46