##### 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, 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.
 (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
  Large Accelerated o
    
    Accelerated o
    
    Non-accelerated þ
 o þ




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##### Table of Contents



MATRITECH, INC.
 INDEX
 PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of December 31, 2005
and June 30, 2006
    
    
    3Condensed Consolidated Statements of Operations for the three and six
months ended June 30, 2005 and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the six
months ended June 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
    
    
    16Item 3. Quantitative and Qualitative Disclosures About
Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    30PART II OTHER INFORMATIONItem 1A. Risk Factors
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    41Item 6. Exhibits
    
    
    41SIGNATURES
    
    
    42EX-31.1 Section 302 Certification of C.E.O.EX-31.2 Section 302 Certification of C.F.O.EX-32.1 Section 906 Certification of C.E.O.EX-32.2 Section 906 Certification of C.F.O.
 2




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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 30,2005
    
    
    2006ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,789,792
    
    
    $
    3,854,343Accounts receivable less allowance of $110,059 in 2005 and $86,512 in 2006
    
    
    1,534,096
    
    
    
    1,251,597Inventories
    
    
    756,079
    
    
    
    1,104,571Prepaid expenses and other current assets
    
    
    323,660
    
    
    
    295,454Total current assets
    
    
    4,403,627
    
    
    
    6,505,965Property and equipment, net of accumulated depreciation of $2,211,618 in 2005 and $2,358,556 in 2006
    
    
    881,243
    
    
    
    876,426Goodwill
    
    
    132,615
    
    
    
    132,615Debt issuance costs
    
    
    
    
    
    
    690,086Other assets
    
    
    206,948
    
    
    
    213,808Receivable from related party
    
    
    3,551
    
    
    
    Total assets
    
    $
    5,627,984
    
    
    $
    8,418,900LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS EQUITYCurrent Liabilities:Current maturities of notes payable
    
    $
    13,571
    
    
    $
    19,742Current maturities of convertible debt
    
    
    634,971
    
    
    
    1,674,484Accounts payable
    
    
    523,742
    
    
    
    666,519Accrued expenses
    
    
    1,301,719
    
    
    
    1,909,148Deferred revenue
    
    
    286,186
    
    
    
    118,310Registration rights liability
    
    
    
    
    
    
    308,232Total current liabilities
    
    
    2,760,189
    
    
    
    4,696,435Notes payable, less current maturities
    
    
    9,979
    
    
    
    28,107Convertible debt, less current maturities
    
    
    
    
    
    
    719,695Deferred revenue
    
    
    641,725
    
    
    
    640,295Other long term liabilities
    
    
    132,852
    
    
    
    100,538Total liabilities
    
    
    3,544,745
    
    
    
    6,185,070Commitments 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 June 30, 2006, respectively
    
    
    729,495
    
    
    
    104,312729,495
    
    
    
    104,312Stockholders Equity:Common stock, $0.01 par valueAuthorized90,000,000 shares in 2005 and 150,000,000 shares in 2006Issued and outstanding47,498,008 shares in 2005 and 56,551,824 shares in 2006
    
    
    474,979
    
    
    
    565,518Additional paid-in capital
    
    
    98,800,393
    
    
    
    106,079,042Accumulated other comprehensive income
    
    
    65,367
    
    
    
    131,675Accumulated deficit
    
    
    (97,986,995
    )
    
    
    (104,646,717
    )Total stockholders equity
    
    
    1,353,744
    
    
    
    2,129,518Total liabilities, convertible preferred stock and stockholders equity
    
    $
    5,627,984
    
    
    $
    8,418,900
  3




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MATRITECH, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2006
    
    
    2005
    
    
    2006Revenue:Product sales, net of allowances
    
    $
    2,619,022
    
    
    $
    2,799,041
    
    
    $
    4,762,206
    
    
    $
    5,678,208Alliance and collaboration revenue
    
    
    24,751
    
    
    
    24,071
    
    
    
    55,436
    
    
    
    53,515Total revenue
    
    
    2,643,773
    
    
    
    2,823,112
    
    
    
    4,817,642
    
    
    
    5,731,723Expenses:Cost of product sales
    
    
    777,208
    
    
    
    748,957
    
    
    
    1,495,233
    
    
    
    1,539,032Research & development and clinical & regulatory expense
    
    
    703,035
    
    
    
    725,886
    
    
    
    1,432,785
    
    
    
    1,557,347Selling, general and administrative expense
    
    
    3,198,296
    
    
    
    3,654,126
    
    
    
    6,089,816
    
    
    
    7,138,479Total operating expenses
    
    
    4,678,539
    
    
    
    5,128,969
    
    
    
    9,017,834
    
    
    
    10,234,858Loss from operations
    
    
    (2,034,766
    )
    
    
    (2,305,857
    )
    
    
    (4,200,192
    )
    
    
    (4,503,135
    )Interest income
    
    
    42,079
    
    
    
    50,133
    
    
    
    69,454
    
    
    
    91,687Interest expense
    
    
    (603,933
    )
    
    
    (1,297,091
    )
    
    
    (1,275,583
    )
    
    
    (2,210,366
    )Mark-to-market adjustment from warrants
    
    
    1,212,598
    
    
    
    
    
    
    
    1,926,902
    
    
    
    Mark-to-market adjustment from registration rights
    
    
    
    
    
    
    (14,248
    )
    
    
    
    
    
    
    (37,908
    )Net loss
    
    $
    (1,384,022
    )
    
    $
    (3,567,063
    )
    
    $
    (3,479,419
    )
    
    $
    (6,659,722
    )Beneficial conversion feature related to series A convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (1,627,232
    )
    
    
    Net loss attributable to common shareholders
    
    $
    (1,384,022
    )
    
    $
    (3,567,063
    )
    
    $
    (5,106,651
    )
    
    $
    (6,659,722
    )Basic and diluted net loss per common share
    
    $
    (0.03
    )
    
    $
    (0.06
    )
    
    
    (0.12
    )
    
    $
    (0.13
    )Basic and diluted weighted average number of common shares outstanding
    
    
    44,178,048
    
    
    
    55,121,109
    
    
    
    43,824,736
    
    
    
    52,978,064
  4




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MATRITECH, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Six Months EndedJune 30,2005
    
    
    2006Cash Flows from Operating Activities:Net loss
    
    $
    (3,479,419
    )
    
    $
    (6,659,722
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    120,339
    
    
    
    133,685Amortization of debt discount
    
    
    982,769
    
    
    
    1,374,166Amortization of deferred charges
    
    
    71,313
    
    
    
    229,037Stock option expense
    
    
    
    
    
    
    61,619Restricted stock & restricted stock unit expense
    
    
    
    
    
    
    29,364Issuance of common stock for interest on debt
    
    
    107,991
    
    
    
    12,811Noncash interest expense
    
    
    119,664
    
    
    
    616,320Mark-to-market adjustment on warrants
    
    
    (1,926,902
    )
    
    
    Mark-to-market adjustment on registration rights
    
    
    
    
    
    
    37,908Noncash expense related to bonus plan
    
    
    30,393
    
    
    
    18,621Provision for bad debts
    
    
    85,140
    
    
    
    63,078Changes in assets and liabilities:Accounts receivable
    
    
    (373,198
    )
    
    
    242,451Inventories
    
    
    27,833
    
    
    
    (322,478
    )Prepaid expenses and other assets
    
    
    (91,668
    )
    
    
    18,177Accounts payable
    
    
    40,638
    
    
    
    139,260Accrued expenses and other liabilities
    
    
    (147,653
    )
    
    
    80,103Deferred revenue
    
    
    (35,305
    )
    
    
    (169,306
    )Net cash used in operating activities
    
    
    (4,468,065
    )
    
    
    (4,094,906
    )Cash Flows from Investing Activities:Purchases of property and equipment
    
    
    (118,340
    )
    
    
    (80,518
    )Net cash used in investing activities
    
    
    (118,340
    )
    
    
    (80,518
    )Cash Flows from Financing Activities:Payments on notes payable
    
    
    (6,120
    )
    
    
    (17,571
    )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
    
    
    
    6,206,378Effect of foreign exchange on cash and cash equivalents
    
    
    (27,693
    )
    
    
    33,597Increase in cash and cash equivalents
    
    
    673,729
    
    
    
    2,064,551Cash and cash equivalents, beginning of period
    
    
    4,906,178
    
    
    
    1,789,792Cash and cash equivalents, end of period
    
    $
    5,579,907
    
    
    $
    3,854,343Supplemental Cash Flow Information:Cash paid during the period for interest
    
    $
    1,059
    
    
    $
    4,779Supplemental 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
    
    
    1,420,473
    
    
    
    1,231,254Payment on debt in dollars
    
    $
    1,251,204
    
    
    $
    781,251Conversion of 487,852 shares of convertible preferred stock to 6,133,000 shares of common stock
    
    
    
    
    
    $
    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
    
    
    
    
    
    $
    755,000Purchase of fixed assets through capital lease
    
    
    
    
    
    $
    40,783
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##### Table of Contents



MATRITECH, INC.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Operations and Basis of Presentation
   2. Summary of Significant Accounting Policies
 (a) Principles of Consolidation
  (b) Inventories
  6




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December 31,
    
    
    June 30,2005
    
    
    2006Raw materials
    
    $
    206,200
    
    
    $
    218,936Work-in-process
    
    
    22,117
    
    
    
    12,428Finished goods
    
    
    462,732
    
    
    
    868,368Consignment inventory
    
    
    65,030
    
    
    
    4,839$
    756,079
    
    
    $
    1,104,571
 (c) Revenue Recognition
  December 31,
    
    
    June 30,2005
    
    
    2006Collaboration fees
    
    $
    715,608
    
    
    $
    712,092Deferred product revenue
    
    
    212,303
    
    
    
    46,513$
    927,911
    
    
    $
    758,605
 d) Comprehensive Loss
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2006
    
    
    2005
    
    
    2006Net loss
    
    $
    (1,384,022
    )
    
    $
    (3,567,063
    )
    
    $
    (3,479,419
    )
    
    $
    (6,659,722
    )Other comprehensive lossForeign currency
translation
adjustments
    
    
    (50,296
    )
    
    
    33,362
    
    
    
    (60,078
    )
    
    
    66,308Comprehensive loss
    
    $
    (1,434,318
    )
    
    $
    (3,533,701
    )
    
    $
    (3,539,497
    )
    
    $
    (6,593,414
    )
 (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
  7




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##### Table of Contents



Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2006
    
    
    2006Cost of product sales
    
    $
    2,586
    
    
    $
    4,105Research & development and clinical &
regulatory expense
    
    
    7,178
    
    
    
    15,785Selling, general and administrative expense
    
    
    45,469
    
    
    
    89,714Share-based compensation expense
    
    $
    55,233
    
    
    $
    109,604
    Six MonthsEnded June 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), where the expected
life is equal to the sum of the vesting period and the contractual
term divided by two.(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 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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2005Net loss attributable to common shareholders
    
    $
    (1,384,022
    )
    
    $
    (5,106,651
    )Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards
    
    
    (187,372
    )
    
    
    (366,534
    )Pro forma net loss attributable to common shareholders
    
    $
    (1,571,394
    )
    
    $
    (5,473,185
    )
 8




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2005Net loss attributable to common shareholders per common share:Basic and diluted  as reported
    
    $
    (0.03
    )
    
    $
    (0.12
    )Basic and diluted  pro forma
    
    $
    (0.04
    )
    
    $
    (0.12
    )
   Six Months EndedJune 30,2005Risk-free interest rate
    
    3.61  4.09%Expected dividend yield
    
    Expected life
    
    5 yearsExpected volatility
    
    68%  85%
 Stock Incentive Plans
     WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Life
    
    
    IntrinsicShares
    
    
    Price
    
    
    (in Years)
    
    
    ValueOutstanding at December 31, 2005
    
    
    3,115,584
    
    
    $
    2.82Granted
    
    
    340,400
    
    
    
    0.87
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 9




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##### Table of Contents



WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Life
    
    
    IntrinsicShares
    
    
    Price
    
    
    (in Years)
    
    
    ValueTerminated:- Cancellation
    
    
    (5,875
    )
    
    
    1.28
    
    
    
    
    
    
    
    - Forfeitures
    
    
    (9,825
    )
    
    
    0.77
    
    
    
    
    
    
    
    - Expiration
    
    
    (46,954
    )
    
    
    9.59
    
    
    
    
    
    
    
    Outstanding at June 30, 2006
    
    
    3,393,330
    
    
    
    2.54
    
    
    
    5.7
    
    
    
    201,555Options exercisable at June 30, 2006
    
    
    2,622,842
    
    
    
    3.02
    
    
    
    5.1
    
    
    
    39,934Weighted average fair value of options granted
    
    
    
    
    
    $
    0.50
   WeightedNumber of
    
    
    Average FairShares
    
    
    ValueUnvested at December 31, 2005
    
    
    592,153
    
    
    $
    0.59Granted
    
    
    340,400
    
    
    
    0.50Vested
    
    
    (152,240
    )
    
    
    0.59Cancelled
    
    
    
    
    
    
    Forfeited
    
    
    (9,825
    )
    
    
    0.48Expired
    
    
    
    
    
    
    Unvested at June 30, 2006
    
    
    770,488
    
    
    
    0.56
    Number ofSharesOutstanding at December 31, 2005
    
    
    Granted
    
    
    483,345Terminated
    
    
    Outstanding at June 30, 2006
    
    
    483,345Vested restricted stock and restricted stock units at June 30, 2006
    
    
    Weighted average fair value of restricted stock and restricted stock units granted in 2006
    
    $
    0.79
  10




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##### Table of Contents



(f) Net Loss per Common Share
 Earnings per Share
 (g) Recent Accounting Pronouncements
 Inventory Costs, an amendment of ARB 43, Chapter
4
 Accounting for Certain Hybrid Financial
Instruments-an amendment of FASB Statements No. 133 and 140 ( ), Accounting for Derivative Instruments and Hedging Activities Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (a replacement of FASB Statement No. 125),
 Accounting for Uncertainty in Income
Taxes Accounting for Income
Taxes
 How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross versus Net Presentation)
 3. Stockholders Equity
  11




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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
    
    
    
    5. Secured Convertible Notes
  12




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##### Table of Contents



®
   
    
    our failure to make payments as they become due;
    
    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;
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##### Table of Contents




    
    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 of
    
    
    Allocation ofof
    
    
    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




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##### Table of Contents



Application of Issue No.
98-5 to Certain Convertible Instruments
 Face Value of Secured Convertible Note
    
    $
    6,998,000
    
    
    Value Allocated to Secured Convertible Note
    
    $
    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
     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
    
    
    (755,000
    )Cumulative amortization of debt discount and beneficial conversion features
    
    
    1,240,000Balance, June 30, 2006
    
    $
    2,394,000
  15




---



##### Table of Contents



Total payments
    
    $
    8,147,000Less: Portion related to periodic interest payments
    
    
    (1,904,000
    )Non-cash interest related to debt discount
    
    
    (3,849,000
    )Balance, June 30, 2006
    
    $
    2,394,000Less current portion
    
    
    1,674,000Long-term portion
    
    $
    720,000
 6. Contingencies
 Intellectual Property Rights
 ® ®
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
 ® ®
  16




---



##### Table of Contents



Results of Operations
 Quarter Ended June 30, 2005 (Q2 2005) Compared with Quarter Ended June 30, 2006 (Q2 2006)
 Revenues
 Q2 2005
    
    
    Q2 2006
    
    
    $ Change
    
    
    % ChangeProduct Sales (net of allowances):NMP22 BladderChek Test Sales
    
    $
    1,862,000
    
    
    $
    2,230,000
    
    
    $
    368,000
    
    
    
    20
    %NMP22 Lab Test Kit Sales
    
    
    187,000
    
    
    
    286,000
    
    
    
    99,000
    
    
    
    53
    %Other Product Sales
    
    
    570,000
    
    
    
    283,000
    
    
    
    (287,000
    )
    
    
    (50
    %)Total Product Sales
    
    
    2,619,000
    
    
    
    2,799,000
    
    
    
    180,000
    
    
    
    7
    %Alliance and Collaboration Revenue
    
    
    25,000
    
    
    
    24,000
    
    
    
    (1,000
    )
    
    
    (4
    %)Total Revenue
    
    $
    2,644,000
    
    
    $
    2,823,000
    
    
    $
    179,000
    
    
    
    7
    %
   17




---



##### Table of Contents



December 31, 2005
    
    
    June 30, 2006
    
    
    $ Change
    
    
    % ChangeCollaboration fees
    
    $
    716,000
    
    
    $
    712,000
    
    
    $
    (4,000
    )
    
    
    (1
    %)Deferred product revenue
    
    
    212,000
    
    
    
    47,000
    
    
    
    (165,000
    )
    
    
    (78
    %)$
    928,000
    
    
    $
    759,000
    
    
    $
    (169,000
    )
    
    
    (18
    %)
  Cost of Product Sales
 Q2 2005
    
    
    Q2 2006
    
    
    $ Change
    
    
    % ChangeProduct Sales
    
    $
    2,619,000
    
    
    $
    2,799,000
    
    
    $
    180,000
    
    
    
    7
    %Cost of Product Sales
    
    
    777,000
    
    
    
    749,000
    
    
    
    (28,000
    )
    
    
    (4
    %)Gross Profit
    
    $
    1,842,000
    
    
    $
    2,050,000
    
    
    $
    208,000
    
    
    
    11
    %Gross Profit Margin
    
    
    70
    %
    
    
    73
    %
  Research & Development and Clinical & Regulatory Expenses
 Q2 2005
    
    Q2 2006
    
    $ Change
    
    % ChangeResearch &
development and
clinical &
regulatory expenses
    
    $
    703,000
    
    
    $
    726,000
    
    
    $
    23,000
    
    
    
    3
    %
  18




---



##### Table of Contents



Selling, General and Administrative Expenses


Q2 2005
    
    Q2 2006
    
    $ Change
    
    % ChangeGross Profit
    
    $
    1,842,000
    
    
    $
    2,050,000
    
    
    $
    208,000
    
    
    
    11
    %Selling, General and
Administrative Expenses
    
    
    3,198,000
    
    
    
    3,654,000
    
    
    
    456,000
    
    
    
    14
    %SG&A as % of Gross Profit
    
    
    174
    %
    
    
    178
    %
   Operating Loss
 Q2 2005
    
    Q2 2006
    
    $ Change
    
    % ChangeOperating Loss
    
    $
    2,035,000
    
    
    $
    2,306,000
    
    
    $
    271,000
    
    
    
    13
    %
  Interest Income
 Q2 2005
    
    Q2 2006
    
    $ Change
    
    % ChangeInterest Income
    
    $
    42,000
    
    
    $
    50,000
    
    
    $
    8,000
    
    
    
    19
    %
  Interest Expense
 Q2 2005
    
    
    Q2 2006
    
    
    $ Change
    
    
    % ChangeInterest Related to Convertible Debt:Interest Paid in Stock
    
    $
    40,000
    
    
    $
    27,000
    
    
    $
    (13,000
    )
    
    
    (33
    %)Interest Accrued on Debt
    
    
    
    
    
    
    211,000
    
    
    
    211,000
    
    
    
    100
    %Non-Cash Charges to Interest
Expense
    
    
    563,000
    
    
    
    1,054,000
    
    
    
    491,000
    
    
    
    87
    %Total
    
    
    603,000
    
    
    
    1,292,000
    
    
    
    689,000
    
    
    
    114
    %Interest Related to Other Debt:Interest Paid in Cash
    
    
    1,000
    
    
    
    5,000
    
    
    
    4,000
    
    
    
    400
    %Total Interest
    
    $
    604,000
    
    
    $
    1,297,000
    
    
    $
    693,000
    
    
    
    115
    %
    19




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##### Table of Contents



January 2006 Secured Convertible Notes
   
    
    $160,000 of amortized deferred financing costs, which contributed to reducing the
original $912,000 balance of deferred financing costs to $690,000 at June 30, 2006;
and
    
    $894,000 of amortized debt discount, which contributed to reducing the $5,088,000
of debt discount to $3,848,000 at June 30, 2006.
  Value of NotesOriginal Value of Debt
    
    $
    6,998,000Discounts Recorded in 2006
    
    
    (5,089,000
    )2006 Amortization of Discounts
    
    
    1,240,000Payment in Stock
    
    
    (755,000
    )Carrying Value of Debt at 6/30/06
    
    $
    2,394,000
 Mark-to-Market Adjustment From Warrants
 Q2 2005
    
    Q2 2006
    
    $ Change
    
    % ChangeMark-to-market
adjustment from
warrants
    
    $
    1,213,000
    
    
    
    
    
    
    $
    (1,213,000
    )
    
    
    (100
    %)
  Mark-to-Market Adjustment From Registration Rights
 Q2 2005
    
    Q2 2006
    
    $ Change
    
    % ChangeMark-to-market
adjustment from
registration rights
    
    
    
    
    
    $
    14,000
    
    
    $
    14,000
    
    
    
    100
    %
  Net Loss
 Q2 2005
    
    Q2 2006
    
    $ Change
    
    % ChangeNet Loss
    
    $
    1,384,000
    
    
    $
    3,567,000
    
    
    $
    2,183,000
    
    
    
    158
    %Net Loss Attributable to Common Shareholders
    
    $
    1,384,000
    
    
    $
    3,567,000
    
    
    $
    2,183,000
    
    
    
    158
    %
 20




---



##### Table of Contents



Six Months Ended June 30, 2005 Compared with Six Months Ended June 30, 2006
 Revenues
 Six Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2006
    
    
    $ Change
    
    
    % ChangeProduct Sales (net of allowances):NMP22 BladderChek Test Sales
    
    $
    3,339,000
    
    
    $
    4,617,000
    
    
    $
    1,278,000
    
    
    
    38
    %NMP22 Lab Test Kit Sales
    
    
    376,000
    
    
    
    538,000
    
    
    
    162,000
    
    
    
    43
    %Other Product Sales
    
    
    1,048,000
    
    
    
    523,000
    
    
    
    (525,000
    )
    
    
    (50
    %)Total Product Sales
    
    
    4,763,000
    
    
    
    5,678,000
    
    
    
    915,000
    
    
    
    19
    %Alliance and Collaboration Revenue
    
    
    55,000
    
    
    
    54,000
    
    
    
    (1,000
    )
    
    
    (2
    %)Total Revenue
    
    $
    4,818,000
    
    
    $
    5,732,000
    
    
    
    914,000
    
    
    
    19
    %
     21




---



##### Table of Contents



December 31, 2005
    
    
    June 30, 2006
    
    
    $ Change
    
    
    % ChangeCollaboration fees
    
    $
    716,000
    
    
    $
    712,000
    
    
    $
    (4,000
    )
    
    
    (1
    %)Deferred product revenue
    
    
    212,000
    
    
    
    47,000
    
    
    
    (165,000
    )
    
    
    (78
    %)$
    928,000
    
    
    $
    759,000
    
    
    $
    (169,000
    )
    
    
    (18
    %)
 Cost of Product Sales
 Six Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2006
    
    
    $ Change
    
    
    % ChangeProduct Sales
    
    $
    4,762,000
    
    
    $
    5,678,000
    
    
    $
    916,000
    
    
    
    19
    %Cost of Product Sales
    
    
    1,495,000
    
    
    
    1,539,000
    
    
    
    44,000
    
    
    
    3
    %Gross Profit
    
    $
    3,267,000
    
    
    $
    4,139,000
    
    
    $
    872,000
    
    
    
    27
    %Gross Profit Margin
    
    
    69
    %
    
    
    73
    %
  Research & Development and Clinical & Regulatory Expenses
 Six Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2006
    
    $ Change
    
    % ChangeResearch & development and clinical & regulatory expenses
    
    $
    1,433,000
    
    
    $
    1,557,000
    
    
    $
    124,000
    
    
    
    9
    %
  Selling, General and Administrative Expenses
 Six Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2006
    
    $ Change
    
    % ChangeGross Profit
    
    $
    3,267,000
    
    
    $
    4,139,000
    
    
    $
    872,000
    
    
    
    27
    %Selling, General and Administrative Expenses
    
    
    6,090,000
    
    
    
    7,138,000
    
    
    
    1,048,000
    
    
    
    17
    %SG&A as % of Gross Profit
    
    
    186
    %
    
    
    172
    %
   22




---



##### Table of Contents



Operating Loss
 Six Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2006
    
    $ Change
    
    % ChangeOperating Loss
    
    $
    4,200,000
    
    
    $
    4,503,000
    
    
    $
    303,000
    
    
    
    7
    %
  Interest Income
 Six Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2006
    
    $ Change
    
    % ChangeInterest Income
    
    $
    69,000
    
    
    $
    92,000
    
    
    $
    23,000
    
    
    
    33
    %
  Interest Expense
 Six Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2006
    
    
    $ Change
    
    
    % ChangeInterest Related to Convertible Debt:Interest Paid in Stock
    
    $
    90,000
    
    
    $
    35,000
    
    
    $
    (55,000
    )
    
    
    (61
    %)Interest Accrued on Debt
    
    
    
    
    
    
    436,000
    
    
    
    436,000
    
    
    
    100
    %Non-Cash Charges to Interest Expense
    
    
    1,185,000
    
    
    
    1,734,000
    
    
    
    549,000
    
    
    
    46
    %Total
    
    $
    1,275,000
    
    
    $
    2,205,000
    
    
    $
    930,000
    
    
    
    73
    %Interest Related to Other Debt:Interest Paid in Cash
    
    $
    1,000
    
    
    $
    5,000
    
    
    $
    4,000
    
    
    
    400
    %Total Interest
    
    $
    1,276,000
    
    
    $
    2,210,000
    
    
    $
    934,000
    
    
    
    73
    %
     
    
    $222,000 of amortized deferred financing costs, which contributed to reducing the
original $912,000 balance of deferred financing costs to $690,000 at June 30, 2006;
    
    $1,240,000 of amortized debt discount, which contributed to reducing the
$5,088,000 of debt discount to $3,848,000 at June 30, 2006;
 March 2003 Convertible Debentures
  23




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##### 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
 Six Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2006
    
    $ Change
    
    % ChangeMark-to-market adjustment from warrants
    
    $
    1,927,000
    
    
    
    
    
    
    $
    (1,927,000
    )
    
    
    (100
    %)
  Mark-to-Market Adjustment From Registration Rights
 Six Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2006
    
    $ Change
    
    % ChangeMark-to-market adjustment from registration rights
    
    
    
    
    
    $
    38,000
    
    
    $
    38,000
    
    
    
    100
    %
  Net Loss
 Six Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2006
    
    $ Change
    
    % ChangeNet Loss
    
    $
    3,479,000
    
    
    $
    6,660,000
    
    
    $
    3,181,000
    
    
    
    91
    %Net Loss Attributable to Common Shareholders
    
    $
    5,107,000
    
    
    $
    6,660,000
    
    
    $
    1,553,000
    
    
    
    30
    %
 24




---



##### Table of Contents



Stock-Based Compensation
 Share-Based Paymen
 Share-Based Payment
   Liquidity and Capital Resources
  Summary Cash Flow
 Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2005
    
    
    June 30, 2006Net Loss
    
    $
    (3,479,000
    )
    
    $
    (6,660,000
    )Non-cash Charges
    
    
    (410,000
    )
    
    
    2,577,000Changes in Assets and Liabilities
    
    
    (579,000
    )
    
    
    (12,000
    )Net Operating Uses
    
    
    (4,468,000
    )
    
    
    (4,095,000
    )Net Investment Uses
    
    
    (118,000
    )
    
    
    (80,000
    )Net Financing Sources
    
    
    5,288,000
    
    
    
    6,206,000Foreign exchange effect
    
    
    (28,000
    )
    
    
    34,000Change in cash and cash equivalents
    
    $
    674,000
    
    
    $
    2,065,000
 25




---



##### Table of Contents



26




---



##### Table of Contents



Common
    
    ConversionSecurity
    
    Shares
    
    Or Exercise PriceLow
    
    HighCommon stock outstanding
    
    
    56,552,000
    
    
    
    
    
    
    
    Stock reserved for converting notes
    
    
    16,466,000
    
    
    
    .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
    
    
    3,453,000
    
    
    
    .55
    
    
    
    13.13Stock available for issuance under stock
plans
    
    
    4,816,000
    
    
    
    
    
    
    
    Stock reserved for Series A Preferred Stock
    
    
    1,023,000
    
    
    
    .70
    
    
    
    .70Total
    
    
    100,367,000
   Financings
  Contractual Obligations
  27




---



##### Table of Contents



Payment Due by PeriodTotal
    
    
    Less than
    
    
    1-3
    
    
    3-5
    
    
    More than1 year
    
    
    years
    
    
    years
    
    
    5 yearsOperating Lease Arrangements
    
    $
    2,735,000
    
    
    $
    584,000
    
    
    $
    1,633,000
    
    
    $
    518,000
    
    
    $
    Capital Lease Arrangements
    
    
    60,000
    
    
    
    19,000
    
    
    
    41,000
    
    
    
    
    
    
    
    Debt Obligations
    
    
    8,153,000
    
    
    
    942,000
    
    
    
    4,025,000
    
    
    
    3,186,000
    
    
    
    Total
    
    $
    10,948,000
    
    
    $
    1,545,000
    
    
    $
    5,699,000
    
    
    $
    3,704,000
    
    
    $
    
   Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
  Stock-Based Compensation Expense
  Recent Accounting Pronouncements
 Inventory Costs, an amendment of ARB 43, Chapter
4.
 Accounting for Certain Hybrid Financial
Instruments-an amendment of FASB Statements No. 133 and 140 , Accounting for Derivative Instruments and Hedging
 28




---



##### Table of Contents



Activities Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (a replacement of FASB Statement No. 125),
 Accounting for Uncertainty in Income
Taxes Accounting for Income
Taxes
 How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross versus Net Presentation)
 Research and Development
   Spending on Research and Development Projects.
 Bladder Cancer.
 Cervical Cancer.
 29




---



##### Table of Contents



Breast Cancer.
 Prostate Cancer
 Other existing programs
 
 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
 30




---



##### Table of Contents



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.
  We may be unable to comply with provisions of our Secured Convertible Notes and could suffer
significant consequences in the event of non-compliance.
  
    
    our failure to make payments as they become due;
    
    our failure to remain listed on any of the Nasdaq Capital Market, New York Stock
Exchange, American Stock Exchange (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.
  31




---



##### Table of Contents



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.
 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.
  We have a history of operating losses, are continuing to lose money and may never be
profitable.
  32




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##### Table of Contents



2003
    
    
    2004
    
    
    2005
    
    
    1st half 2006Product Sales
    
    $
    4,018,000
    
    
    $
    7,275,000
    
    
    $
    10,290,000
    
    
    $
    5,678,000Net Losses
    
    $
    7,878,000
    
    
    $
    11,123,000
    
    
    $
    7,865,000
    
    
    $
    6,660,000
  We will need to obtain additional capital in the future 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.
    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.
   33




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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.
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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.
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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.
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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
    
    requiring our products to be manufactured in accordance with complex regulations known
as Quality System
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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.
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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.
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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.
  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.
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Our activities involve the use of hazardous materials and we may be held liable for any
accidental injury from these hazardous materials.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 6. Exhibits.
 Exhibit No:
    
    Description3.1
    
    Certificate of Amendment, dated June 9, 2006, of Amended and
Restated Certificate of Incorporation of Matritech, Inc.
(filed as Exhibit 3.1 to our Form 8-K filed on June 13, 2006
and incorporated herein by reference).10.1
    
    2006 Equity and Incentive Plan (filed as Exhibit 10.1 to our
Form 8-K filed on June 13, 2006 and incorporated herein by
reference).10.2
    
    Form of Stock Option Agreement with executive officer (filed
as Exhibit 10.2 to our Form 8-K filed on June 13, 2006 and
incorporated herein by reference).10.3
    
    Extension Agreement, dated June 12, 2006, by and between the
Registrant and Unotech Diagnostics, Inc., amending the
termination date of the Letter Agreement regarding Contract
Manufacturing Arrangement between the parties dated March 2001
(filed as Exhibit 10.3 to the our Form 8-K filed on June 13,
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.
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SIGNATURES
  MATRITECH, INC.Date: August 10, 2006
    By:
    /s/ Stephen D. ChubbStephen D. ChubbDirector, Chairman and Chief Executive Officer
(principal executive officer) Date: August 10, 2006
    By:
    /s/ Richard A. SandbergRichard A. SandbergDirector, Vice President, Chief Financial Officer and Treasurer
(principal accounting and financial officer) 42




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EXHIBIT INDEX
 Exhibit No:
    
    Description31.1
    
    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.
 43