##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:
 For the quarterly period ended June 30, 2007
 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.
 (Exact Name of Registrant as Specified in Its Charter)
 Delaware
    
    04-2985132(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 330 Nevada Street, Newton, Massachusetts 02460  (Address of Principal Executive Offices) (Zip Code)
 (617) 928-0820  (Registrants Telephone Number, Including Area Code)
 Indicate by check mark whether the registrant: þ o
  o o þ
 o þ




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##### 



MATRITECH, INC.
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of December 31, 2006
and June 30, 2007
    
    
    3Condensed Consolidated Statements of Operations for the three and six
months ended June 30, 2006 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 2006 and 2007
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    36Item 4. Submission of Matters to a Vote of Security Holders
    
    
    37Item 6. Exhibits
    
    
    37SIGNATURES
    
    
    39EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 MATRITECH, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 December
31,
    
    

June
30,2006
    
    

2007ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,460,403
    
    
    $
    1,666,950Accounts receivable less allowance of $152,043 and $65,108 in 2006 and 2007, respectively
    
    
    1,266,481
    
    
    
    1,412,656Inventories
    
    
    968,737
    
    
    
    1,114,467Prepaid expenses and other current assets
    
    
    140,338
    
    
    
    181,459Total current assets
    
    
    3,835,959
    
    
    
    4,375,532Property and equipment, net of accumulated depreciation of $2,512,627 and $2,653,228 in 2006 and 2007, respectively
    
    
    768,038
    
    
    
    658,242Goodwill
    
    
    132,615
    
    
    
    132,615Debt issuance costs
    
    
    493,164
    
    
    
    438,372Other assets
    
    
    276,099
    
    
    
    228,110Total assets
    
    $
    5,505,875
    
    
    $
    5,832,871LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS DEFICITCurrent Liabilities:Current maturities of notes payable
    
    $
    17,884
    
    
    $
    19,243Current maturities of secured convertible notes
    
    
    3,298,976
    
    
    
    6,235,103Accounts payable
    
    
    1,271,534
    
    
    
    1,421,863Accrued expenses
    
    
    2,373,006
    
    
    
    2,360,291Deferred revenue
    
    
    156,335
    
    
    
    138,642Registration rights liability
    
    
    324,953
    
    
    
    Total current liabilities
    
    
    7,442,688
    
    
    
    10,175,142Notes payable, less current maturities
    
    
    26,740
    
    
    
    16,775Secured convertible notes, less current maturities
    
    
    68,487
    
    
    
    Deferred revenue
    
    
    640,346
    
    
    
    628,159Other long term liabilities
    
    
    123,754
    
    
    
    104,042Total liabilities
    
    
    8,302,015
    
    
    
    10,924,118Commitments and ContingenciesPreferred StockAuthorized  4,000,000 sharesDesignated as Series A Convertible Preferred, $1.00 par value  1,426,124 sharesIssued and outstanding  81,399 shares in 2006 and 2007Liquidation preference of $716,311 for
Series A as of December 31, 2006 and June 30, 2007, respectively
    
    
    104,312
    
    
    
    104,312104,312
    
    
    
    104,312Stockholders Deficit:Common stock, $0.01 par valueAuthorized150,000,000 shares in 2006 and 2007Issued and outstanding56,759,061 shares in 2006 and 62,077,523 in 2007
    
    
    567,590
    
    
    
    620,775Additional paid-in capital
    
    
    106,313,122
    
    
    
    112,337,369Accumulated other comprehensive income
    
    
    140,633
    
    
    
    167,621Accumulated deficit
    
    
    (109,921,797
    )
    
    
    (118,321,324
    )Total stockholders deficit
    
    
    (2,900,452
    )
    
    
    (5,195,559
    )Total liabilities, convertible preferred stock and stockholders deficit
    
    $
    5,505,875
    
    
    $
    5,832,871
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MATRITECH, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenue:Product sales, net of allowances
    
    $
    2,799,041
    
    
    $
    3,265,377
    
    
    $
    5,678,208
    
    
    $
    6,647,165Alliance and collaboration revenue
    
    
    24,071
    
    
    
    34,254
    
    
    
    53,515
    
    
    
    66,205Total revenue
    
    
    2,823,112
    
    
    
    3,299,631
    
    
    
    5,731,723
    
    
    
    6,713,370Expenses:Cost of product sales
    
    
    748,957
    
    
    
    785,280
    
    
    
    1,539,032
    
    
    
    1,544,713Research & development and clinical & regulatory expense
    
    
    725,886
    
    
    
    592,928
    
    
    
    1,557,347
    
    
    
    1,233,302Selling, general and administrative expense
    
    
    3,654,126
    
    
    
    4,154,704
    
    
    
    7,138,479
    
    
    
    8,190,803Total operating expenses
    
    
    5,128,969
    
    
    
    5,532,912
    
    
    
    10,234,858
    
    
    
    10,968,818Loss from operations
    
    
    (2,305,857
    )
    
    
    (2,233,281
    )
    
    
    (4,503,135
    )
    
    
    (4,255,448
    )Interest income
    
    
    50,133
    
    
    
    16,318
    
    
    
    91,687
    
    
    
    39,814Interest expense
    
    
    (1,297,091
    )
    
    
    (2,363,663
    )
    
    
    (2,210,366
    )
    
    
    (4,508,845
    )Mark-to-market adjustment from registration rights
    
    
    (14,248
    )
    
    
    
    
    
    
    (37,908
    )
    
    
    Net loss
    
    $
    (3,567,063
    )
    
    $
    (4,580,626
    )
    
    $
    (6,659,722
    )
    
    $
    (8,724,479
    )Basic and diluted net loss per common share
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    
    (0.13
    )
    
    $
    (0.15
    )Basic and diluted weighted average number of common shares outstanding
    
    
    55,121,109
    
    
    
    60,686,458
    
    
    
    52,978,064
    
    
    
    59,596,621
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##### Table of Contents



MATRITECH, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Six Months EndedJune 30,2006
    
    
    2007Cash Flows from Operating Activities:Net loss
    
    $
    (6,659,722
    )
    
    $
    (8,724,479
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    133,685
    
    
    
    134,351Amortization of debt discount
    
    
    1,374,166
    
    
    
    2,999,665Amortization of deferred charges
    
    
    229,037
    
    
    
    449,558Stock option expense
    
    
    61,619
    
    
    
    77,966Restricted stock and restricted stock unit expense
    
    
    29,364
    
    
    
    13,302Issuance of
common stock for interest on convertible debentures and secured convertible notes
    
    
    12,811
    
    
    
    1,184,656Non-cash interest expense
    
    
    616,320
    
    
    
    910,465Mark-to-market adjustment on registration rights
    
    
    37,908
    
    
    
    Non-cash expense related to bonus plan
    
    
    18,621
    
    
    
    25,753Provision for bad debts
    
    
    63,078
    
    
    
    (15,953
    )Changes in assets and liabilities:Accounts receivable
    
    
    242,451
    
    
    
    (117,263
    )Inventories
    
    
    (322,478
    )
    
    
    (135,630
    )Prepaid expenses and other assets
    
    
    18,177
    
    
    
    6,868Accounts payable
    
    
    139,260
    
    
    
    149,119Accrued expenses and other liabilities
    
    
    80,103
    
    
    
    (551,434
    )Deferred revenue
    
    
    (169,306
    )
    
    
    (29,880
    )Net cash used in operating activities
    
    
    (4,094,906
    )
    
    
    (3,622,936
    )Cash Flows from Investing Activities:Purchases of property and equipment
    
    
    (80,518
    )
    
    
    (22,224
    )Net cash used in investing activities
    
    
    (80,518
    )
    
    
    (22,224
    )Cash Flows from Financing Activities:Payments on notes payable
    
    
    (17,571
    )
    
    
    (8,606
    )Proceeds from issuance of secured convertible notes and warrants, net of issuance costs
    
    
    6,184,053
    
    
    
    3,845,500Proceeds from exercise of warrants
    
    
    39,896
    
    
    
    Net cash provided by financing activities
    
    
    6,206,378
    
    
    
    3,836,894Effect of foreign exchange on cash and cash equivalents
    
    
    33,597
    
    
    
    14,813Increase in cash and cash equivalents
    
    
    2,064,551
    
    
    
    206,547Cash and cash equivalents, beginning of period
    
    
    1,789,792
    
    
    
    1,460,403Cash and cash equivalents, end of period
    
    $
    3,854,343
    
    
    $
    1,666,950Supplemental Cash Flow Information:Cash paid during the period for interest
    
    $
    4,779
    
    
    $
    23,955Supplemental Disclosure of Non-cash Financing and Investing Activities:Beneficial conversion feature on secured convertible notes
    
    $
    2,974,292
    
    
    $
    1,671,466Issuance of common stock as payment of principal on convertible debentures:Number of shares issued
    
    
    1,215,304
    
    
    
    Payment on debt in dollars
    
    $
    769,231
    
    
    $
    Issuance of common stock as payment of interest on convertible debentures:Number of shares issued
    
    
    15,950
    
    
    
    Payment on debt in dollars
    
    $
    12,020
    
    
    $
    Issuance of common stock as payment of principal on the 2006 secured convertible notes:Number of shares issued
    
    
    
    
    
    
    2,984,809Payment on debt in dollars
    
    $
    
    
    
    $
    1,431,365Issuance of common stock as payment of interest on the 2006 secured convertible notes:Number of shares issued
    
    
    
    
    
    
    2,239,732Payment on debt in dollars
    
    $
    
    
    
    $
    1,184,656Conversion of 487,852 and 0 shares of convertible preferred stock to 6,133,000 and 0 shares of common stock in 2006 and 2007, respectively
    
    $
    625,183
    
    
    $
    Registration rights liability recorded as a debt discount
    
    $
    305,829
    
    
    $
    Allocation of $1,285,000 and $542,000 closing cost related to the 2006 and 2007 secured convertible notes:Registration rights liability
    
    $
    35,505
    
    
    $
    2006 and 2007 secured convertible notes (recorded in other assets)
    
    $
    912,403
    
    
    $
    394,765Purchase warrants (recorded in additional paid in capital)
    
    $
    337,712
    
    
    $
    147,356Payment of closing cost related to the 2006 and 2007 secured convertible notes with issuance of warrant to Placement Agent
    
    $
    471,700
    
    
    $
    22,620Warrants issued to stockholders and recorded as debt discount to the 2006 and 2007 secured convertible notes
    
    $
    1,807,876
    
    
    $
    1,186,466Conversion of 2006 secured convertible notes into common stock
    
    $
    755,000
    
    
    $
    Purchase of fixed assets through capital lease
    
    $
    40,783
    
    
    $
    
  5




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##### Table of Contents



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




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##### Table of Contents



2. Summary of Significant Accounting Policies
 (a) Principles of Consolidation
  (b) Inventories
  December 31,
    
    
    June 30,2006
    
    
    2007Raw materials
    
    $
    195,724
    
    
    $
    197,631Work-in-process
    
    
    10,647
    
    
    
    14,292Finished goods
    
    
    752,605
    
    
    
    894,990Consignment inventory
    
    
    9,761
    
    
    
    7,554$
    968,737
    
    
    $
    1,114,467
 (c) Revenue Recognition
  December 31,
    
    
    June 30,2006
    
    
    2007Collaboration fees
    
    $
    706,038
    
    
    $
    689,827Deferred product revenue
    
    
    90,643
    
    
    
    76,974$
    796,681
    
    
    $
    766,801
 (d) Comprehensive Loss
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Net loss
    
    $
    (3,567,063
    )
    
    $
    (4,580,626
    )
    
    $
    (6,659,722
    )
    
    $
    (8,724,479
    )Other comprehensive loss:Foreign currency translation adjustments
    
    
    33,362
    
    
    
    9,017
    
    
    
    66,308
    
    
    
    26,988Comprehensive loss
    
    $
    (3,533,701
    )
    
    $
    (4,571,609
    )
    
    $
    (6,593,414
    )
    
    $
    (8,697,491
    )
 7




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##### Table of Contents



(e) Stock-Based Compensation
 Share-Based Payment
 (f) Net Loss per Common Share
 Earnings per Share
 (g) Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No.
109
   8




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The Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115
 Accounting for Nonrefundable Advance Payments for Goods or Services to be Used in Future
Research and Development Activities
 3. Stockholders Deficit
 
   4. Convertible Debentures 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
    
    $
    
 9




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##### Table of Contents



5. Secured Convertible Notes
 2006 Secured Convertible Notes Issued January 2006
   Allocation of
    
    
    Allocation ofof
    
    
    AssociatedInstrument
    
    Proceeds
    
    
    Costs2006 Secured Convertible Notes
    
    $
    4,884,000
    
    
    $
    912,0002006 Purchaser Warrants
    
    
    1,808,000
    
    
    
    337,000Registration Rights Liability
    
    
    306,000
    
    
    
    36,000$
    6,998,000
    
    
    $
    1,285,000
 10




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##### Table of Contents



Application of Issue No. 98-5 to Certain Convertible Instruments
 Face Value of 2006
Secured Convertible
Notes
    
    $
    6,998,000
    
    
    Value Allocated to 2006
Secured Convertible Notes
    
    $
    4,884,000Shares Upon Conversion
    
    
    10,766,092
    
    
    Shares Upon Conversion
    
    
    10,766,092Conversion Price
    
    $
    0.65
    
    
    Effective 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
    11




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##### Table of Contents



Proceeds at closing in January 2006
    
    $
    6,998,000Less:Fair value ascribed to the 2006 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
    
    
    (2,311,000
    )Cumulative amortization of debt discount and beneficial conversion features
    
    
    3,851,000Less:Additional beneficial conversion feature calculated and recorded as debt discount
    
    
    (208,000
    )Balance, June 30, 2007
    
    $
    3,241,000
  Total payments
    
    $
    5,028,000Less: Portion related to periodic interest payments
    
    
    (342,000
    )Non-cash interest related to debt discount
    
    
    (1,445,000
    )Balance, June 30, 2007
    
    $
    3,241,000Current portion
    
    $
    3,241,000
 Accounting for
Registration Payment Arrangements Accounting for Contingencies Accounting for Derivative Instruments and Hedging Activities Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, to include scope exceptions for registration payment
arrangements.
 12




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##### Table of Contents



2007 Secured Convertible Notes Issued January 2007
       13




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
    
    our failure to make payments as they become due;
    
    our failure to remain listed on any of the Nasdaq Markets, New York Stock Exchange (NYSE) or AMEX;
    
    our failure under certain circumstances to have an effective registration statement
available (after a valid demand for registration) for resale of the shares upon
conversion of the 2007 Secured Convertible Notes;
    
    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, including
the 2006 Secured Convertible Notes; and
    
    a breach of any material term of any other transaction document we entered into with
the purchasers of the 2007 Secured Convertible Notes.
  14




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Allocation of
    
    
    Allocation ofOf
    
    
    AssociatedInstrument
    
    Proceeds
    
    
    Costs2007 Secured Convertible Notes
    
    $
    3,178,000
    
    
    $
    395,0002007 Purchaser Warrants
    
    
    1,187,000
    
    
    
    147,000$
    4,365,000
    
    
    $
    542,000
    Face Value of 2007
Secured Convertible
Notes
    
    $
    4,365,000
    
    
    Value Allocated to 2007
Secured Convertible Notes
    
    $
    3,178,000Shares Upon Conversion
    
    
    6,928,571
    
    
    Shares Upon Conversion
    
    
    6,928,571Conversion Price
    
    $
    0.63
    
    
    Effective Conversion Price
    
    $
    0.459
  Closing Price January 22, 2007
    
    $
    0.70Effective Conversion Price
    
    $
    0.459Discount to Market per Share
    
    $
    0.241Shares Upon Conversion
    
    
    6,928,571Beneficial Conversion Feature
    
    $
    1,670,000
 15




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Proceeds at closing in January 2007
    
    $
    4,365,000Less:Fair value ascribed to the 2007 Purchaser Warrants
    
    
    (1,187,000
    )Beneficial conversion feature calculated on date of closing and recorded as debt discount
    
    
    (1,670,000
    )Carrying value at closing in January 2007
    
    
    1,508,000Add back:Cumulative principal payments made in stock
    
    
    Cumulative amortization of debt discount and beneficial conversion features
    
    
    1,486,000Balance, June 30, 2007
    
    $
    2,994,000
  Total payments
    
    $
    4,803,000Less: Portion related to periodic interest payments
    
    
    (438,000
    )Non-cash interest related to debt discount
    
    
    (1,371,000
    )Balance, June 30, 2007
    
    $
    2,994,000Current portion
    
    $
    2,994,000
 6. Stock-Based Compensation
   16




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Cost of product sales
    
    $
    2,586
    
    
    $
    3,450
    
    
    $
    4,105
    
    
    $
    5,565Research & development and clinical & regulatory
expense
    
    
    7,178
    
    
    
    10,070
    
    
    
    15,785
    
    
    
    16,735Selling, general and administrative expense
    
    
    45,469
    
    
    
    56,801
    
    
    
    89,714
    
    
    
    94,721Stock-based compensation expense included in net loss
    
    $
    55,233
    
    
    $
    70,321
    
    
    $
    109,604
    
    
    $
    117,021
  Weighted AverageExercise Price PerNumber of Options
    
    
    ShareOptions outstanding, December 31, 2006
    
    
    2,947,767
    
    
    $
    1.92Granted
    
    
    773,166
    
    
    
    0.49Exercised
    
    
    
    
    
    
    Terminated
    
    
    (188,288
    )
    
    
    2.02Options outstanding, June 30, 2007
    
    
    3,532,645
    
    
    $
    1.60
 Restricted Stock and Restricted Stock Units
  Number ofShares/UnitsUnvested at December 31, 2006
    
    
    474,352Granted
    
    
    142,251Vested
    
    
    (89,857
    )Forfeitures
    
    
    (29,400
    )Unvested at June 30, 2007
    
    
    497,346Weighted average fair value of restricted stock and
restricted stock units granted in 2007
    
    $
    0.56
 7. Contingencies
 Intellectual Property Rights
  17




---



##### Table of Contents



8. Accrued Expenses
  December 31,
    
    
    June 30,2006
    
    
    2007Payroll and related costs
    
    $
    659,809
    
    
    $
    884,662Professional fees
    
    
    218,865
    
    
    
    319,879Interest on Secured Convertible Notes
    
    
    889,844
    
    
    
    363,448Royalties
    
    
    203,236
    
    
    
    251,430Deferred offering costs
    
    
    10,402
    
    
    
    154,482Other
    
    
    390,850
    
    
    
    386,390$
    2,373,006
    
    
    $
    2,360,291
 9. Subsequent Events
 Warrant Repurchase
    Consent to Permit Additional Financing
   Deferrals of Payments by Holders of Secured Convertible Notes
 18




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
      19




---



##### Table of Contents



Results of Operations
 Quarter Ended June 30, 2006 (Q2 2006) Compared with Quarter Ended June 30, 2007 (Q2 2007)
 Revenues
 Q2 2006
    
    
    Q2 2007
    
    

$ Change
    
    
    % ChangeProduct Sales (net of allowances):NMP22 BladderChek Test Sales
    
    $
    2,230,000
    
    
    $
    2,681,000
    
    
    $
    451,000
    
    
    
    20
    %NMP22 Lab Test Kit Sales
    
    
    286,000
    
    
    
    283,000
    
    
    
    (3,000
    )
    
    
    (1
    %)Other Product Sales
    
    
    283,000
    
    
    
    301,000
    
    
    
    18,000
    
    
    
    6
    %Total Product Sales
    
    
    2,799,000
    
    
    
    3,265,000
    
    
    
    466,000
    
    
    
    17
    %Alliance and Collaboration Revenue
    
    
    24,000
    
    
    
    34,000
    
    
    
    10,000
    
    
    
    42
    %Total Revenue
    
    $
    2,823,000
    
    
    $
    3,299,000
    
    
    $
    476,000
    
    
    
    17
    %
  20




---



##### Table of Contents



December 31, 2006
    
    
    June 30, 2007
    
    
    $ Change
    
    
    % ChangeAlliance and Collaboration revenue
    
    $
    706,000
    
    
    $
    690,000
    
    
    $
    (16,000
    )
    
    
    (2
    %)Deferred product revenue
    
    
    91,000
    
    
    
    77,000
    
    
    
    (14,000
    )
    
    
    (15
    %)$
    797,000
    
    
    $
    767,000
    
    
    $
    (30,000
    )
    
    
    (4
    %)
  Cost of Product Sales
 Q2 2006
    
    
    Q2 2007
    
    

$ Change
    
    
    % ChangeProduct Sales
    
    $
    2,799,000
    
    
    $
    3,265,000
    
    
    $
    466,000
    
    
    
    17
    %Cost of Product Sales
    
    
    749,000
    
    
    
    785,000
    
    
    
    36,000
    
    
    
    5
    %Gross Profit on Product Sales
    
    $
    2,050,000
    
    
    $
    2,480,000
    
    
    $
    430,000
    
    
    
    21
    %Gross Profit Margin on Product Sales
    
    
    73
    %
    
    
    76
    %Cost of Product Sales as a % of
Product Sales
    
    
    27
    %
    
    
    24
    %
  21




---



##### Table of Contents



Research & Development and Clinical & Regulatory Expenses
 Q2 2006
    
    Q2 2007
    
    $ Change
    
    % ChangeResearch &
development and
clinical &
regulatory expenses
    
    $
    726,000
    
    
    $
    593,000
    
    
    $
    (133,000
    )
    
    
    (18
    %)
  Selling, General and Administrative Expenses (SG&A)
 Q2 2006
    
    Q2 2007
    
    $ Change
    
    % ChangeGross Profit on Product Sales
    
    $
    2,050,000
    
    
    $
    2,480,000
    
    
    $
    430,000
    
    
    
    21
    %SG&A
    
    
    3,654,000
    
    
    
    4,155,000
    
    
    
    501,000
    
    
    
    14
    %SG&A as % of Gross Profit on
Product Sales
    
    
    178
    %
    
    
    168
    %
   Operating Loss
 Q2 2006
    
    Q2 2007
    
    $ Change
    
    % ChangeOperating Loss
    
    $
    2,306,000
    
    
    $
    2,233,000
    
    
    $
    (73,000
    )
    
    
    (3
    %)
  Interest Income
 Q2 2006
    
    Q2 2007
    
    $ Change
    
    % ChangeInterest Income
    
    $
    50,000
    
    
    $
    16,000
    
    
    $
    (34,000
    )
    
    
    (68
    %)
  22




---



##### Table of Contents



Interest Expense
 Q2 2006
    
    
    Q2 2007
    
    
    $ Change
    
    
    % ChangeInterest Related to Convertible Debentures and Secured
Convertible Notes:Interest on Debt
    
    $
    238,000
    
    
    $
    349,000
    
    
    $
    111,000
    
    
    
    47
    %Non-Cash Charges to Interest Expense
    
    
    1,054,000
    
    
    
    2,013,000
    
    
    
    959,000
    
    
    
    91
    %Total
    
    $
    1,292,000
    
    
    $
    2,362,000
    
    
    $
    1,070,000
    
    
    
    83
    %Interest Related to Other Debt:Interest Paid in Cash
    
    $
    5,000
    
    
    $
    2,000
    
    
    $
    (3,000
    )
    
    
    (60
    %)Total Interest Expense
    
    $
    1,297,000
    
    
    $
    2,364,000
    
    
    $
    1,067,000
    
    
    
    82
    %
   2007 Secured Convertible Notes
   
    
    $133,000 of amortized deferred financing costs, which reduced the original
$395,000 balance of deferred financing costs to $189,000 at June 30, 2007; and
    
    $961,000 of amortized debt discount, which reduced the $2,857,000 of debt
discount to $1,371,000 at June 30, 2007.
  Value of NotesPrincipal Value 2007 Secured Convertible Notes
    
    $
    4,365,000Discounts Recorded in 2007
    
    
    (2,857,000
    )2007 Amortization of Discounts
    
    
    1,486,000Payments in Stock
    
    
    Carrying Value of 2007 Secured Convertible Notes at 6/30/07
    
    $
    2,994,000
 2006 Secured Convertible Notes
  23




---



##### Table of Contents




    
    $128,000 of amortized deferred financing costs, which contributed to the
reduction of the original $912,000 of deferred financing costs to $249,000 at June
30, 2007;
    
    $743,000 of amortized debt discount, which contributed to the reduction of the
$5,296,000 of debt discount to $1,445,000 at June 30, 2007; and
    
    $49,000 of non-cash charges to record the discount from fair value when making
the principal and interest repayments on the 2006 Secured Convertible Notes in stock
rather than cash.
  Value of NotesPrincipal Value of Debt
    
    $
    6,998,000Discounts Recorded in 2006
    
    
    (5,089,000
    )2006 Amortization of Discounts
    
    
    2,338,000Payments in Stock
    
    
    (880,000
    )Carrying Value of Debt at 12/31/06
    
    $
    3,367,000Discounts Recorded in 2007
    
    
    (208,000
    )2007 Amortization of Discounts
    
    
    1,513,000Payment in Stock
    
    
    (1,431,000
    )Carrying Value of Debt at 6/30/07
    
    $
    3,241,000
 Mark-to-Market Adjustment From Registration Rights
 Q2 2006
    
    Q2 2007
    
    $ Change
    
    % ChangeMark-to-market
adjustment from
registration rights
    
    $
    14,000
    
    
    $
    
    
    
    $
    (14,000
    )
    
    
    (100
    %)
  Net Loss
 Q2 2006
    
    Q2 2007
    
    $ Change
    
    % ChangeNet Loss
    
    $
    3,567,000
    
    
    $
    4,581,000
    
    
    $
    1,014,000
    
    
    
    28
    %
  24




---



##### Table of Contents



Six Months Ended June 30, 2006 Compared with Six Months Ended June 30, 2007
 Revenues
 Six Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2007
    
    

$ Change
    
    
    % ChangeProduct Sales (net of allowances):NMP22 BladderChek Test Sales
    
    $
    4,617,000
    
    
    $
    5,473,000
    
    
    $
    856,000
    
    
    
    19
    %NMP22 Lab Test Kit Sales
    
    
    538,000
    
    
    
    626,000
    
    
    
    88,000
    
    
    
    16
    %Other Product Sales
    
    
    523,000
    
    
    
    548,000
    
    
    
    25,000
    
    
    
    5
    %Total Product Sales
    
    
    5,678,000
    
    
    
    6,647,000
    
    
    
    969,000
    
    
    
    17
    %Alliance and Collaboration Revenue
    
    
    54,000
    
    
    
    66,000
    
    
    
    12,000
    
    
    
    22
    %Total Revenue
    
    $
    5,732,000
    
    
    $
    6,713,000
    
    
    $
    981,000
    
    
    
    17
    %
      December 31, 2006
    
    
    June 30, 2007
    
    
    $ Change
    
    
    % ChangeAlliance and Collaboration revenue
    
    $
    706,000
    
    
    $
    690,000
    
    
    $
    (16,000
    )
    
    
    (2
    %)Deferred product revenue
    
    
    91,000
    
    
    
    77,000
    
    
    
    (14,000
    )
    
    
    (15
    %)$
    797,000
    
    
    $
    767,000
    
    
    $
    (30,000
    )
    
    
    (4
    %)
  25




---



##### Table of Contents



Cost of Product Sales
 Six Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2007
    
    

$ Change
    
    
    % ChangeProduct Sales
    
    $
    5,678,000
    
    
    $
    6,647,000
    
    
    $
    969,000
    
    
    
    17
    %Cost of Product Sales
    
    
    1,539,000
    
    
    
    1,545,000
    
    
    
    6,000
    
    
    
    0.4
    %Gross Profit on Product Sales
    
    $
    4,139,000
    
    
    $
    5,102,000
    
    
    $
    963,000
    
    
    
    23
    %Gross Profit Margin on
Product Sales
    
    
    73
    %
    
    
    77
    %Cost of Product Sales as a %
of Product Sales
    
    
    27
    %
    
    
    23
    %
  Research & Development and Clinical & Regulatory Expenses
 Six Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2007
    
    $ Change
    
    % ChangeResearch &
development and
clinical &
regulatory expenses
    
    $
    1,557,000
    
    
    $
    1,233,000
    
    
    $
    (324,000
    )
    
    
    (21
    %)
  Selling, General and Administrative Expenses  (SG&A)
 Six Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2007
    
    $ Change
    
    % ChangeGross Profit on Product Sales
    
    $
    4,139,000
    
    
    $
    5,102,000
    
    
    $
    963,000
    
    
    
    23
    %SG&A
    
    
    7,138,000
    
    
    
    8,191,000
    
    
    
    1,053,000
    
    
    
    15
    %SG&A as % of Gross Profit on
Product Sales
    
    
    172
    %
    
    
    161
    %
   26




---



##### Table of Contents



Operating Loss
 Six Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2007
    
    $ Change
    
    % ChangeOperating Loss
    
    $
    4,503,000
    
    
    $
    4,255,000
    
    
    $
    (248,000
    )
    
    
    (6
    %)
  Interest Income
 Six Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2007
    
    $ Change
    
    % ChangeInterest Income
    
    $
    92,000
    
    
    $
    40,000
    
    
    $
    (52,000
    )
    
    
    (57
    %)
  Interest Expense
 Six Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2007
    
    
    $ Change
    
    
    % ChangeInterest Related to Convertible Debentures and
Secured Convertible Notes:Interest on Debt
    
    $
    471,000
    
    
    $
    676,000
    
    
    $
    205,000
    
    
    
    44
    %Non-Cash Charges to Interest Expense
    
    
    1,734,000
    
    
    
    3,826,000
    
    
    
    2,092,000
    
    
    
    121
    %Total
    
    $
    2,205,000
    
    
    $
    4,502,000
    
    
    $
    2,297,000
    
    
    
    104
    %Interest Related to Other Debt:Interest Paid in Cash
    
    $
    5,000
    
    
    $
    7,000
    
    
    $
    2,000
    
    
    
    40
    %Total Interest Expense
    
    $
    2,210,000
    
    
    $
    4,509,000
    
    
    $
    2,299,000
    
    
    
    104
    %
   2007 Secured Convertible Notes
   27




---



##### Table of Contents




    
    $206,000 of amortized deferred financing costs, which reduced the original
$395,000 balance of deferred financing costs to $189,000 at June 30, 2007; and
    
    $1,486,000 of amortized debt discount, which reduced the $2,857,000 of debt
discount to $1,371,000 at June 30, 2007.
  Value of NotesPrincipal Value 2007 Secured Convertible Notes
    
    $
    4,365,000Discounts Recorded in 2007
    
    
    (2,857,000
    )2007 Amortization of Discounts
    
    
    1,486,000Payments in Stock
    
    
    Carrying Value of 2007 Secured Convertible Notes at June
30, 2007
    
    $
    2,994,000
 2006 Secured Convertible Notes
   
    
    $244,000 of amortized deferred financing costs, which contributed to the
reduction of the original $912,000 of deferred financing costs to $249,000 at June
30, 2007;
    
    $1,513,000 of amortized debt discount, which contributed to the reduction of the
$5,296,000 of debt discount to $1,445,000 at June 30, 2007; and
    
    $378,000 of non-cash charges to record the discount from fair value when making
the principal and interest repayments on the 2006 Secured Convertible Notes in stock
rather than cash.
  Value of NotesPrincipal Value of Debt
    
    $
    6,998,000Discounts Recorded in 2006
    
    
    (5,089,000
    )2006 Amortization of Discounts
    
    
    2,338,000Interest and Principal Payments in Stock
    
    
    (880,000
    )Carrying Value of Debt at December 31, 2006
    
    $
    3,367,000Discounts Recorded in 2007
    
    
    (208,000
    )2007 Amortization of Discounts
    
    
    1,513,000Payment in Stock
    
    
    (1,431,000
    )Carrying Value of Debt at June 30, 2007
    
    $
    3,241,000
 March 2003 Convertible Debentures
 28




---



##### Table of Contents




    
    $7,000 of amortized deferred financing costs, which contributed to the reduction
of the $475,000 deferred financing costs to $0 at March 31, 2006;
    
    $132,000 of non-cash charges to record the discount from fair value when making
the principal and interest repayments on the Convertible Debentures in stock rather
than cash; and
    
    $134,000 of amortized debt discount, which contributed to the reduction of the
$4,558,000 of debt discount on our $5,000,000 Note to $0 at March 31, 2006. This
debt discount comprises the following: the fair value allocated to the warrants
issued in conjunction with the Convertible Debenture, the charge to account for the
beneficial conversion feature recorded at the date the Convertible Debenture was
entered into and additional charges to account for the beneficial conversion feature
recorded in the fourth quarter of 2003, the first quarter of 2004 and the first
quarter of 2005 as a result of the triggering of the anti-dilution protection
provisions.
  Value ofDebenturesPrincipal Value of Debenture
    
    $
    5,000,000Discounts Recorded in 2003
    
    
    (2,777,000
    )2003 Amortization of Discounts
    
    
    644,000Carrying Value of Debenture at December 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 Debenture at December 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 Debenture at December 31, 2005
    
    $
    635,0002006 Amortization of Discounts
    
    
    134,000Payment in Stock
    
    
    (769,000
    )Carrying Value of Debenture at March 31, 2006
    
    $
    
 Mark-to-Market Adjustment From Registration Rights
 Six Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2007
    
    $ Change
    
    % ChangeMark-to-market
adjustment from
registration rights
    
    $
    38,000
    
    
    $
    
    
    
    $
    (38,000
    )
    
    
    (100
    %)
 29




---



##### Table of Contents



Net Loss
 Six Months Ended
    
    Six Months EndedJune 30, 2006
    
    June 30, 2007
    
    $ Change
    
    % ChangeNet Loss
    
    $
    6,660,000
    
    
    $
    8,724,000
    
    
    $
    2,064,000
    
    
    
    31
    %
  Research and Development Programs
  Liquidity and Capital Resources
  Summary Cash Flow
 Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2006
    
    
    June 30, 2007Net Loss
    
    $
    (6,660,000
    )
    
    $
    (8,724,000
    )Non-cash Charges
    
    
    2,577,000
    
    
    
    5,779,000Changes in Assets and Liabilities
    
    
    (12,000
    )
    
    
    (678,000
    )Net Operating Uses
    
    
    (4,095,000
    )
    
    
    (3,623,000
    )Net Investment Uses
    
    
    (80,000
    )
    
    
    (22,000
    )Net Financing Sources
    
    
    6,206,000
    
    
    
    3,837,000Foreign exchange effect
    
    
    34,000
    
    
    
    15,000Change in cash and cash equivalents
    
    $
    2,065,000
    
    
    $
    207,000
   30




---



##### Table of Contents



Original
    
    
    Conversions andIssuance
    
    
    Repayments
    
    
    Outstanding2006 Secured Convertible Notes
    
    $
    6,998,000
    
    
    $
    2,311,000
    
    
    $
    4,687,0002007 Secured Convertible Notes
    
    $
    4,365,000
    
    
    
    
    
    
    
    4,365,000Other indebtedness
    
    
    
    
    
    
    
    
    
    
    36,000$
    9,088,000
     31




---



##### Table of Contents



ConversionCommon
    
    
    or Exercise PriceSecurity
    
    Shares
    
    
    Low
    
    
    HighCommon stock outstanding
    
    
    62,078,000
    
    
    
    
    
    
    
    Stock reserved for 2006 Secured
Convertible Notes
    
    
    11,025,000
    
    
    $
    .40
    
    
    $
    .63Stock reserved for 2007 Secured
Convertible Notes
    
    
    7,497,000
    
    
    
    .63
    
    
    
    .63Stock reserved for warrant exercises
    
    
    21,639,000
    
    
    
    .63
    
    
    
    2.70Stock reserved for potential warrant shares
    
    
    631,000
    
    
    
    .01
    
    
    
    .01Stock reserved for outstanding stock
options and restricted stock units
    
    
    3,611,000
    
    
    
    .39
    
    
    
    6.69Stock available for issuance under stock
plans
    
    
    4,168,000
    
    
    
    
    
    
    
    Stock reserved for Series A Preferred Stock
    
    
    1,023,000
    
    
    
    .70
    
    
    
    .70Total
    
    
    111,672,000
  32




---



##### 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
    
    $
    2,045,000
    
    
    $
    636,000
    
    
    $
    1,134,000
    
    
    $
    275,000
    
    
    $
    Capital Lease Arrangements
    
    
    44,000
    
    
    
    24,000
    
    
    
    20,000
    
    
    
    
    
    
    
    Convertible Note Obligations
    
    
    9,832,000
    
    
    
    9,832,000
    
    
    
    
    
    
    
    
    
    
    
    Purchase Commitments
    
    
    1,170,000
    
    
    
    134,000
    
    
    
    1,036,000Service Agreement Commitments
    
    
    20,000
    
    
    
    15,000
    
    
    
    5,000Total
    
    $
    13,111,000
    
    
    $
    10,641,000
    
    
    $
    2,195,000
    
    
    $
    275,000
    
    
    $
    
       Off-Balance Sheet Arrangements
 33




---



##### Table of Contents



Critical Accounting Policies and Estimates
    Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109
  Accounting for Nonrefundable Advance Payments for Goods or Services to be Used in Future
Research and Development Activities
 Subsequent Events
 34




---



##### Table of Contents



Warrant Repurchase
    Consent to Permit Additional Financing
   Deferrals of Payments by Holder of Secured Convertible Notes
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
 Investment Portfolio.
  Foreign Exchange. Foreign Currency Translation
 35




---



##### Table of Contents



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.
   We expect that we will need to obtain additional capital in the near future in order to
continue our operations.
  We may be unable to comply with payment provisions of our Secured Convertible Notes.
  36




---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 6. Exhibits.
 Exhibit No:
    
    Description4.1
    
    Election regarding Payments due April 13, 2007 on 15% Secured
Convertible Promissory Notes (filed as Exhibit 4.1 to our
Current Report on Form 8-K filed April 16, 2007 and
incorporated herein by reference).4.2
    
    Election regarding Payments due June 13, 2007 on 15% Secured
Convertible Promissory Notes (filed as Exhibit 4.1 to our
Current Report on Form 8-K filed June 14, 2007 and
incorporated herein by reference).4.3
    
    Election regarding Payments due June 13, 2007 on Series B 15%
Secured Convertible Promissory Notes (filed as Exhibit 4.2 to
our Current Report on Form 8-K filed June 14, 2007 and
incorporated herein by reference).4.4
    
    Election regarding Payments due July 13, 2007 on 15% Secured
Convertible Promissory Notes (filed as Exhibit 4.1 to our
Current Report on Form 8-K filed July 13, 2007 and
incorporated herein by reference).4.5
    
    Election regarding Payments due July 13, 2007 on Series B 15%
Secured Convertible Promissory Notes (filed as Exhibit 4.2 to
our Current Report on Form 8-K filed July 13, 2007 and
incorporated herein by reference).4.6
    
    Election regarding Payments due July 13, 2007 on both 15%
Secured Convertible Promissory Notes and Series B 15% Secured
Convertible Promissory Notes (filed as Exhibit 4.3 to our
Current Report on Form 8-K filed July 13, 2007 and
incorporated herein by reference).4.7
    
    Form of Agreement and Amendment to 15% Secured Convertible
Promissory Notes dated January 13, 2006 and Series B 15%
Secured Convertible Promissory Notes dated January 22, 2007
(filed as Exhibit 4.1 to our Current Report of Form 8-K filed
August 2, 2007 and incorporated herein by reference).4.8
    
    Form of Purchase and Sale Agreement dated July 31, 2007 by and
between Matritech, Inc. and holders of warrants originally
issued March 31, 2003 (filed as Exhibit 4.2 to our Current
Report of Form 8-K filed August 2, 2007 and incorporated
herein by reference).4.9
    
    Consent of Majority Holders of 15% Secured Convertible
Promissory Notes dated January 13, 2006 and January 22, 2007
(filed as Exhibit 4.1 to our Current Report on Form 8-K filed
August 10, 2007 and incorporated herein by reference).4.10
    
    Amendment to Certificate of Designations, Preferences and
Rights of Series A Convertible Preferred Stock of Matritech,
Inc. (filed as Exhibit 4.2 to our Current Report on Form 8-K
filed August 10, 2007 and incorporated herein by reference).4.11
    
    Consent of Holders of a Majority of Outstanding Principal
Value of 15% Secured Convertible Promissory Notes dated
January 13, 2006 and dated January 22, 2007 to Defer Payments
(filed as Exhibit 4.3 to our Current Report on Form 8-K filed
August 10, 2007 and incorporated herein by reference).10.1**
    
    Contract Amendment No. 1 dated June 1, 2007 to Supply
Agreement dated November 3, 2006 by and between Matritech,
Inc. and Inverness Medical Innovations, Inc. (filed as Exhibit
10.1 to our Current Report on Form 8-K filed June 7, 2007 and
incorporated herein by reference).10.2#
    
    Amended and Restated Change of Control Agreement by and
between Matritech, Inc. and Franz Maier (filed as Exhibit 10.1
to our Current Report on Form 8-K filed June 13, 2007 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.
 37




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##### Table of Contents



Exhibit No:
    
    Description32.2
    
    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.
 
 #
    
    Indicates management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Form
10-Q pursuant to Item 6 of this report.**
    
    Confidential Treatment has been requested as to omitted
portions pursuant to Rule 24b-2 promulgated under the
Securities and Exchange Act of 1934, as amended. A complete
copy of this agreement has been filed separately with the SEC. 38




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##### Table of Contents



SIGNATURES
  MATRITECH, INC.Date: August 14, 2007
    By:
    /s/ Stephen D. ChubbStephen D. ChubbDirector, Chairman and Chief Executive Officer
(principal executive officer)Date: August 14, 2007
    By:
    /s/ Richard A. SandbergRichard A. SandbergDirector, Vice President, Chief Financial
Officer and Treasurer
(principal accounting and financial officer) 39




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No:
    
    Description4.1
    
    Election regarding Payments due April 13, 2007 on 15% Secured
Convertible Promissory Notes (filed as Exhibit 4.1 to our
Current Report on Form 8-K filed April 16, 2007 and
incorporated herein by reference).4.2
    
    Election regarding Payments due June 13, 2007 on 15% Secured
Convertible Promissory Notes (filed as Exhibit 4.1 to our
Current Report on Form 8-K filed June 14, 2007 and
incorporated herein by reference).4.3
    
    Election regarding Payments due June 13, 2007 on Series B 15%
Secured Convertible Promissory Notes (filed as Exhibit 4.2 to
our Current Report on Form 8-K filed June 14, 2007 and
incorporated herein by reference).4.4
    
    Election regarding Payments due July 13, 2007 on 15% Secured
Convertible Promissory Notes (filed as Exhibit 4.1 to our
Current Report on Form 8-K filed July 13, 2007 and
incorporated herein by reference).4.5
    
    Election regarding Payments due July 13, 2007 on Series B 15%
Secured Convertible Promissory Notes (filed as Exhibit 4.2 to
our Current Report on Form 8-K filed July 13, 2007 and
incorporated herein by reference).4.6
    
    Election regarding Payments due July 13, 2007 on both 15%
Secured Convertible Promissory Notes and Series B 15% Secured
Convertible Promissory Notes (filed as Exhibit 4.3 to our
Current Report on Form 8-K filed July 13, 2007 and
incorporated herein by reference).4.7
    
    Form of Agreement and Amendment to 15% Secured Convertible
Promissory Notes dated January 13, 2006 and Series B 15%
Secured Convertible Promissory Notes dated January 22, 2007
(filed as Exhibit 4.1 to our Current Report of Form 8-K filed
August 2, 2007 and incorporated herein by reference).4.8
    
    Form of Purchase and Sale Agreement dated July 31, 2007 by and
between Matritech, Inc. and holders of warrants originally
issued March 31, 2003 (filed as Exhibit 4.2 to our Current
Report of Form 8-K filed August 2, 2007 and incorporated
herein by reference).4.9
    
    Consent of Majority Holders of 15% Secured Convertible
Promissory Notes dated January 13, 2006 and January 22, 2007
(filed as Exhibit 4.1 to our Current Report on Form 8-K filed
August 10, 2007 and incorporated herein by reference).4.10
    
    Amendment to Certificate of Designations, Preferences and
Rights of Series A Convertible Preferred Stock of Matritech,
Inc. (filed as Exhibit 4.2 to our Current Report on Form 8-K
filed August 10, 2007 and incorporated herein by reference).4.11
    
    Consent of Holders of a Majority of Outstanding Principal
Value of 15% Secured Convertible Promissory Notes dated
January 13, 2006 and dated January 22, 2007 to Defer Payments
(filed as Exhibit 4.3 to our Current Report on Form 8-K filed
August 10, 2007 and incorporated herein by reference).10.1**
    
    Contract Amendment No. 1 dated June 1, 2007 to Supply
Agreement dated November 3, 2006 by and between Matritech,
Inc. and Inverness Medical Innovations, Inc. (filed as Exhibit
10.1 to our Current Report on Form 8-K filed June 7, 2007 and
incorporated herein by reference).10.2#
    
    Amended and Restated Change of Control Agreement by and
between Matritech, Inc. and Franz Maier (filed as Exhibit 10.1
to our Current Report on Form 8-K filed June 13, 2007 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.
 
 #
    
    Indicates management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Form
10-Q pursuant to Item 6 of this report.**
    
    Confidential Treatment has been requested as to omitted
portions pursuant to Rule 24b-2 promulgated under the
Securities and Exchange Act of 1934, as amended. A complete
copy of this agreement has been filed separately with the SEC. 40