<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


(Mark One)

X        Quarterly report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934:

         For the quarterly period ended March 31, 2001

                                       OR

__       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: 0-12128


                                 MATRITECH, INC.
             (Exact Name of Registrant as Specified in Its Charter)


<TABLE>
<CAPTION>
                  DELAWARE                           04-2985132
                  --------                           ----------
<S>                                                  <C>
                  (State or Other                    (I.R.S. Employer
                  Jurisdiction of                    Identification No.)
                  Incorporation or
                  Organization)
</TABLE>

                 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: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

         Yes X             No __

         As of May 1, 2001, there were 25,837,137 shares of Common Stock
outstanding.



                                  Page 1 of 19


                    The Exhibit Index is located on Page 19.
<PAGE>   2
                                 MATRITECH, INC.

                                      INDEX


PART I            FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                                 Page
                                                                                                 ----

<S>                                                                                              <C>
         ITEM 1.  FINANCIAL STATEMENTS


                  Consolidated Balance Sheets at December 31, 2000
                  and March 31, 2001                                                                 3


                  Consolidated Statements of Operations for the three months ended
                  March 31, 2000 and 2001                                                            5


                  Consolidated Statements of Cash Flows for the three months ended
                  March 31, 2000 and 2001                                                            6


                  Notes to Consolidated Financial Statements                                         8


         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                     11


         ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                  MARKET RISK                                                                       16


PART II  OTHER INFORMATION

         ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                                         16

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                                  17

         SIGNATURES                                                                                 18
</TABLE>



                                  Page 2 of 19
<PAGE>   3
                          PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

                                 MATRITECH, INC.
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                       DECEMBER 31,             MARCH 31,
                                                           2000                    2001
                                                        ----------              ----------
                                                                               (UNAUDITED)

<S>                                                     <C>                     <C>
CURRENT ASSETS:
  Cash and cash equivalents                             $4,661,005              $4,177,084
  Accounts receivable, net                                 250,937                 393,119
  Inventories                                              334,527                 333,415
  Interest receivable and prepaid expenses                 193,182                 166,551
                                                        ----------              ----------
        Total current assets                             5,439,651               5,070,169
                                                        ----------              ----------

PROPERTY AND EQUIPMENT, at cost:
  Laboratory equipment                                   1,831,109               1,839,394
  Office equipment                                         253,228                 256,371
  Laboratory furniture                                      62,739                  62,739
  Leasehold improvements                                    56,981                  88,865
  Automobiles                                               34,059                  32,465
                                                        ----------              ----------
                                                         2,238,116               2,279,834
       Less-Accumulated depreciation
              and amortization                           1,456,774               1,482,609
                                                        ----------              ----------
                                                           781,342                 797,225
                                                        ----------              ----------

GOODWILL, net                                              219,432                 200,743
OTHER ASSETS, net                                          155,043                 136,890
                                                        ----------              ----------
                                                        $6,595,468              $6,205,027
                                                        ==========              ==========
</TABLE>



          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                  Page 3 of 19
<PAGE>   4
                                 MATRITECH, INC.
                           CONSOLIDATED BALANCE SHEETS
                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                        DECEMBER 31,                MARCH 31,
                                                            2000                       2001
                                                        ------------               ------------
                                                                                    (UNAUDITED)
<S>                                                     <C>                        <C>
CURRENT LIABILITIES:
    Current maturities of notes payable                 $    110,322               $     86,423
    Accounts payable                                         365,811                    442,258
    Accrued expenses                                         367,474                    407,248
    Deferred revenue                                           8,433                      7,735
                                                        ------------               ------------
         Total current liabilities                           852,040                    943,664
                                                        ------------               ------------

NOTES PAYABLE, less current maturities                       157,381                    134,128
                                                        ------------               ------------
OTHER LONG-TERM LIABILITIES                                   18,039                     17,720
                                                        ------------               ------------

STOCKHOLDERS' EQUITY:
   Preferred stock, $1.00 par value -
      Authorized - 4,000,000 shares
      Issued and outstanding - none                               --                         --
   Common stock, $0.01 par value -
      Authorized - 40,000,000 shares
      Issued and outstanding - 25,541,282
       shares at December 31, 2000 and
       25,837,137 shares at March 31, 2001                   255,413                    258,371
   Additional paid-in capital                             59,611,684                 61,325,074
   Deferred compensation                                    (178,582)                  (160,723)
   Cumulative translation adjustment                          (9,021)                    (7,698)
   Accumulated deficit                                   (54,111,486)               (56,305,509)
                                                        ------------               ------------
            Total stockholders' equity                     5,568,008                  5,109,515
                                                        ------------               ------------
                                                        $  6,595,468               $  6,205,027
                                                        ============               ============
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                  Page 4 of 19
<PAGE>   5
                                 MATRITECH, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED
                                                        MARCH 31,

                                            2000                       2001
                                        ------------               ------------
<S>                                     <C>                        <C>
Revenue:
  Product sales                         $    140,030               $    596,947
                                        ------------               ------------

Operating Expenses:
  Cost of product sales                      172,628                    441,806
  Research and
     development                             514,234                    642,656
  Selling, general and
     administrative                          832,387                  1,767,853
                                        ------------               ------------
  Total operating expenses                 1,519,249                  2,852,315
                                        ------------               ------------
  Loss from operations                    (1,379,219)                (2,255,368)
                                        ------------               ------------

  Interest income                             79,246                     65,672
  Interest expense                             4,694                      4,327
                                        ------------               ------------

NET LOSS                                $ (1,304,667)              $ (2,194,023)
                                        ============               ============

BASIC/DILUTED
NET LOSS PER COMMON SHARE               $      (0.05)              $      (0.09)
                                        ============               ============

BASIC/DILUTED
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING                        23,977,169                 25,697,565
                                        ============               ============
</TABLE>



          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                  Page 5 of 19
<PAGE>   6
                                 MATRITECH, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED
                                                                                 MARCH 31,

                                                                     2000                      2001
                                                                  -----------               -----------
<S>                                                               <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

     Net loss                                                     $(1,304,667)              $(2,194,023)
     Adjustments to reconcile net loss to net cash
     Used in operating activities -
        Depreciation and amortization                                  27,137                    44,524
        Amortization of deferred compensation                              --                    17,859
        Expense related to issuance of common stock
        warrant to consultant                                              --                   510,342
        Changes in assets and liabilities -
           Accounts receivable, net                                    48,699                  (142,182)
           Inventories                                                 13,179                     1,112
           Interest receivable and prepaid expenses                     9,098                    26,631
           Other assets                                                    --                    18,153
           Accounts payable                                          (111,117)                   76,447
           Accrued expenses                                           159,401                    39,455
           Deferred revenue                                                --                      (698)
                                                                  -----------               -----------

               Net cash used in operating activities               (1,477,072)               (1,602,380)
                                                                  -----------               -----------



CASH FLOWS FROM INVESTING ACTIVITIES:

          Purchases of property and equipment                         (69,056)                  (41,719)
                                                                  -----------               -----------

               Net cash used in investing activities                  (69,056)                  (41,719)
                                                                  -----------               -----------
</TABLE>



          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                  Page 6 of 19

<PAGE>   7
                                 MATRITECH, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED
                                                                                      MARCH 31,

                                                                           2000                     2001
                                                                       -----------               -----------
<S>                                                                    <C>                       <C>
CASH FLOWS FROM FINANCING ACTIVITIES:

     Proceeds from sale of common stock, net                           $        --               $ 1,050,000
     Proceeds from exercise of common stock options                        381,189                     9,605
     Proceeds from exercise of common stock warrants                     2,750,243                   125,000

     Proceeds from issuance of common stock under
         Employee stock purchase plan                                        4,500                    21,402
     Payments on notes payable                                             (18,352)                  (47,152)
                                                                       -----------               -----------

           Net cash provided by financing activities                     3,117,580                 1,158,855
                                                                       -----------               -----------

  Effect of foreign exchange on cash and cash equivalents                       --                     1,323
                                                                       -----------               -----------

NET DECREASE IN CASH AND
  CASH EQUIVALENTS                                                       1,571,452                  (483,921)

CASH AND CASH EQUIVALENTS,
   BEGINNING OF PERIOD                                                   5,612,194                 4,661,005
                                                                       -----------               -----------
CASH AND CASH EQUIVALENTS,
    END OF PERIOD                                                      $ 7,183,646               $ 4,177,084
                                                                       ===========               ===========

SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
   Cash paid during the period for interest                            $     4,694               $     4,327
                                                                       ===========               ===========
</TABLE>



          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                  Page 7 of 19

<PAGE>   8
                                 MATRITECH, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. Operations and Basis of Presentation

         Matritech, Inc. ( the "Company") was incorporated on October 29, 1987
to develop, produce and distribute products for the diagnosis and potential
treatment of cancer based on its proprietary nuclear matrix protein technology.
This technology was licensed to the Company by the Massachusetts Institute of
Technology ("MIT").

         The Company is devoting substantially all of its efforts toward product
research and development, raising capital, securing partners and marketing
products. The Company is subject to risks common to companies in similar stages
of development, including history of operating losses and anticipated future
losses, fluctuation in operating results, uncertainties associated with future
performance, near-term dependence on a limited number of products, reliance on
sole suppliers, dependence on key individuals, competition from substitute
products and larger companies, the development of commercially usable products
and the need to obtain adequate additional financing necessary to fund its
operations and the development of its future products.

         The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC") and include, in the opinion of management, all
adjustments, consisting of normal, recurring adjustments, necessary for a fair
presentation of interim period results. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations. The results for the
interim periods presented are not necessarily indicative of results to be
expected for any future period. It is suggested that these consolidated
financial statements be read in conjunction with the audited financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2000 filed with the SEC (File No. 0-12128).

         On June 28, 2000, the Company acquired all of the outstanding shares of
capital stock of ADL GmbH, Gesellschaft fur Allergie, Diagnostika und
Laborkonzepte ("ADL"), now called Matritech GmbH ("Matritech GmbH"), a European
distributor of diagnostic testing products, including the Company's NMP22(R)
Test Kit for bladder bancer. Matritech GmbH is located in Freiburg, Germany. For
financial statement purposes, this acquisition was accounted for as a purchase,
and accordingly the results of operations of Matritech GmbH from June 28, 2000
forward are included in the Company's consolidated statements of operations.



                                  Page 8 of 19

<PAGE>   9
Pro Forma Results of Operations

The following unaudited pro forma combined results of operations of the Company
assume that the ADL acquisition was completed on January 1, 2000. These proforma
results represent the historical operating results of ADL prior to its date of
acquisition, combined with those of the Company with appropriate adjustments.
These pro forma results are not necessarily indicative of operating results
which would have occurred if the ADL acquisition had been operated by current
management during the periods presented.

<TABLE>
<CAPTION>
                                          Three months ended
                                                March 31,
                                  -------------------------------------
                                      2000                     2001
                                  -----------               -----------
<S>                               <C>                       <C>
Total revenue                     $   508,108               $   596,947

Net loss                          $(1,418,558)              $(2,194,023)
Net loss per share
 - basic and diluted              $      (.06)              $      (.09)
</TABLE>

2. Cash Equivalents

         The Company considers all highly liquid investments with original
maturities of 90 days or less to be cash equivalents. The Company follows the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 115,
Accounting for Certain Investments in Debt and Equity Securities, in accounting
for its marketable securities. Under SFAS No. 115, securities that the Company
has the positive intent and ability to hold to maturity are reported at
amortized cost, which approximates fair market value, and are classified as
held-to-maturity. Securities held at December 31, 2000 and March 31, 2001
include only cash and cash equivalents, which consist of auction market
preferred stocks and money market accounts.

3.  Inventories

         Inventories are stated at the lower of cost or market and consist of
the following:

<TABLE>
<CAPTION>
                                    December 31,           March 31,
                                        2000                  2001
                                      --------              --------
<S>                                 <C>                    <C>
         Raw materials                $150,981              $138,347
         Work-in-process                 1,796                 1,488
         Finished goods                181,750               193,580
                                      --------              --------
                                      $334,527              $333,415
                                      ========              ========
</TABLE>

4. Net Loss Per Common Share

         The Company computes earnings per share in accordance with SFAS No.
128, Earnings Per Share. Basic net loss per common share is computed by dividing
net loss by the weighted average number of common shares outstanding during the
year. Diluted loss per share is the same as basic loss per share as the effects
of the Company's potential common stock are antidilutive. Potential common stock
consists of stock options and warrants; and also at March 31, 2001, the 37,153
shares of common stock held in escrow in connection with the ADL acquisition, as
these shares are contingent upon future employment. The number of antidilutive
common stock equivalents were 1,372,805 and 1,258,991 for the periods ended
March 31, 2000 and 2001, respectively.



                                  Page 9 of 19
<PAGE>   10
5.  Notes Payable

The Company has a term note with Phoenix Leasing Incorporated for equipment
purchases. The term note is payable over 48 months, bears interest at 11.75% and
is secured by the underlying equipment. Remaining payments under this note total
$42,000, with the final payment in October 2001.

In connection with the acquisition of ADL, the Company assumed certain debt
obligations. At March 31, 2001, these obligations total $179,000, with balances
and details consisting of the following: a $113,000 loan from a bank, due in May
2004 which bears interest at 5.2% secured by trade receivables and inventory; a
$45,000 third-party demand note which will be repaid by the Company and for
which the Company will be reimbursed by a key ADL employee; a $13,000 car loan
from a bank bearing interest at 7.50% and due in March 2003; and a $8,000 car
loan from a bank bearing interest at 6.99% and due in November 2002.


6. Segment and Geographic Information

         The Company applies SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which establishes standards for reporting
information regarding operating segments in annual financial statements and
requires selected information for those segments to be presented in interim
financial reports issued to stockholders. SFAS No. 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker or decision making group, in making decisions
about how to allocate resources and assess performance. The Company's chief
decision maker, as defined under SFAS No. 131, is a combination of the Chief
Executive Officer, President and the Chief Financial Officer. The Company views
its operations and manages its business as principally one segment, the sale of
diagnostic products. Associated services are not significant. As a result, the
financial information disclosed herein represents all of the material financial
information related to the principal operating segment. All of the Company's
products were shipped either from its facilities located in the United States or
since June 28, 2000 from its facilities in Freiburg, Germany. Geographic
information on product sales by destination is as follows:

<TABLE>
<CAPTION>
                                             REVENUE ($ IN 000'S)
                                         Three Months Ended March 31,
                           -----------------------------------------------------------
                                     2000                                 2001
                           ----------------------               ----------------------
                             $                 %                  $                 %
                           ----              ----               ----              ----
<S>                        <C>               <C>                <C>               <C>
United States              $ 53                38%              $127                21%
Japan                        50                36                 37                 6
Europe                       16                11                419                70
Rest of world                21                15                 14                 3
                           ----              ----               ----              ----
Total                      $140               100%              $597               100%
                           ====              ====               ====              ====
</TABLE>

7. Reclassifications

             Certain reclassifications have been made to the prior years'
financial statements to conform to current presentation. These classifications
have no effect on the Company's results of operations or financial position.




                                  Page 10 of 19
<PAGE>   11
8.  Warrant Issuance

         In July 2000, the Company issued a fully vested, nonforfeitable warrant
to an investor relations consultant for the purchase of up to 450,000 shares of
the Company's common stock for a price of $2.50 per share expiring in July 2005.
These warrants were valued at $2.0 million in accordance with SFAS No. 123 and
are being expensed ratably over the one-year term of the agreement. The Company
expensed approximately $510,000 as a component of selling, general and
administrative expense on the accompanying statement of operations for the
quarter ended March 31, 2001. In December 2000 and January 2001, 200,000 and
50,000, respectively, of these warrants were exercised, providing proceeds to
the Company of $500,000 and $125,000, respectively.


9.  Future Issuance of Shares

         In August 2000, the Company entered into a common stock purchase
agreement with Acqua Wellington North American Equities Fund, Ltd. ("Acqua")
covering the sale of up to $30 million (a maximum of 2.45 million shares) of the
Company's common stock. Draw downs to purchase stock are initiated at the
Company's sole discretion, and the Company sets a minimum threshold price (not
less that $3.00 per share) beneath which Acqua is not required to purchase. Draw
downs are in effect for 20 consecutive trading days after authorization by the
Company, with a maximum of 12 draw downs, each not to exceed $10 million, during
the term of the agreement. Shares are purchased at a discount (ranging from 4.5
- 7.0% depending on the threshold price) to the market price at any time
beginning in August 2000 and ending in October 2001. If the Company has not
requested draw downs in the aggregate amount of $7.5 million by June 2001, the
Company must pay Acqua either $225,000 or issue warrants to purchase 112,500
shares. During 2000, Acqua purchased 281,082 shares, with net proceeds to the
Company of $1,476,000. In February 2001, Acqua purchased 198,594 shares, with
net proceeds to the Company of $900,000.

10.      Lease Commitments

         The Company's current lease on its space in Newton, Massachusetts
expires December 31, 2005, and the Company has a five-year option for the period
commencing January 1, 2006. Matritech GmbH's current lease on its space in
Freiburg, Germany expires January 31, 2006.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         This Quarterly Report on Form 10-Q, other reports and communications to
securityholders, as well as oral statements made by the Company's officers or
agents may contain forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
statements may relate to, among other things, the Company's future revenue,
operating income, EBITDA and the plans and objectives of management. In
particular, certain statements contained in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and in "Factors That
May Affect Future Results" constitute forward-looking statements. Actual events
or results may differ materially from those stated in any forward-looking
statement. Factors that may cause such differences are discussed below and in
the Company's other reports filed with the Securities and Exchange Commission.

         The Company was incorporated in 1987 to develop, manufacture and market
innovative cancer diagnostic products based on its proprietary NMP technology.
The Company has been unprofitable since inception and expects to incur
significant operating losses for at least the next several years. For the period
from inception to March 31, 2001, the Company incurred a cumulative net loss of
approximately $56 million.

         The results of operations for the quarter ended March 31, 2001 include
the activities of the Company's German subsidiary, Matritech GmbH, acquired in
June 2000. Matritech GmbH distributes the Company's product and other
third-party products in Europe.

         In the United States, the Company sells its NMP22 Test Kit through its
own direct sales force, and in 1998 entered into a distribution agreement with
Curtin Matheson Scientific, now Fisher Healthcare ("Fisher") granting Fisher the
right, co-exclusive with Matritech, to distribute the microtiter plate-based


                                  Page 11 of 19
<PAGE>   12
NMP22 Test Kit to hospitals and commercial laboratories within the United
States. Outside the United States, the Company sells the NMP22 Test Kit through
its European subsidiary and other distributors.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2000

             Product sales increased to $597,000 from $140,000 for the quarters
ended March 31, 2001 and 2000, respectively. This increase was primarily due to
the Company's acquisition of Matritech GmbH in June 2000 along with an increase
in sales to customers in the United States.

             Cost of product sales increased to $442,000 from $172,000 for the
quarters ended March 31, 2001 and 2000, respectively. As a percentage of product
sales, cost of sales decreased to 74% from 123% for the quarters ended March 31,
2001 and 2000, respectively. The decrease in cost of sales as a percentage of
sales is due to the inclusion of Matritech GmbH's sales of third-party products
in the 2001 period which carry higher margins than the products developed and
manufactured by Matritech. Matritech product margins are negatively affected by
costs related to excess capacity maintained by the Company to support expected
future sales increases.

             Research and development expenses increased to $643,000 from
$514,000 for the quarters ended March 31, 2001 and 2000, respectively. Clinical
consulting costs, site payments, and legal expense increased a total of $79,000
due to the increased number of active projects, and the allocated portion of
rent and utilities costs increased $29,000 under the amended lease agreement.

             Selling, general and administrative expenses increased to
$1,768,000 from $832,000 for the quarters ended March 31, 2001 and 2000,
respectively. This increase is primarily due to the following: a $510,000 charge
for compensation expense related to the issuance of a warrant to an investor
relations consultant in July 2000; $302,000 related to Matritech GmbH's
operations in 2001; increased annual report costs of $41,000; amortization of
goodwill and deferred compensation in 2001 of $40,000; and increased legal
expense of $25,000. These increases were offset by reductions in sales personnel
costs of $45,000 due to decreased headcount in the sales department.

             Interest income decreased to $66,000 from $79,000 for the quarters
ended March 31, 2001 and 2000, respectively. The decrease was due to lower
average cash balances available for investment.

             The Company incurred a net loss of $2,194,000 for the quarter ended
March 31, 2001, compared to a net loss of $1,305,000 for the quarter ended March
31, 2000. The increase of $889,000, or 68%, in the net loss was primarily the
result of the compensation expense related to the public relations warrant
issued in July 2000 and increased administrative expenses.


LIQUIDITY AND CAPITAL RESOURCES

             Since its inception, the Company has financed its operations
primarily through private and public offerings of its securities and through
funded development and marketing agreements. At March 31, 2001 and December 31,
2000, the Company had cash and cash equivalents of $4,177,000 and $4,661,000,
respectively, and working capital of $4,127,000 and $4,588,000, respectively.

             The Company's operating activities used cash of $1,602,000 and
$1,477,000 for the three months ended March 31, 2001 and 2000, respectively,
primarily to fund the Company's operating loss.


                                  Page 12 of 19
<PAGE>   13
             The Company's investing activities used cash of $42,000 and $69,000
for the three months ended March 31, 2001 and 2000, respectively, primarily for
the purchase of laboratory equipment. The Company currently estimates that
capital expenditures for fiscal 2001 will be approximately $300,000 primarily
consisting of additional lab equipment.


             The Company's financing activities provided cash of $1,159,000 and
$3,118,000 for the three months ended March 31, 2001 and 2000, respectively. The
activity in the 2001 period resulted primarily from proceeds received from the
sale of common stock under the equity financing agreement and to a business
partner as well as proceeds received from the exercise of common stock warrants,
net of payments on notes payable. The activity in the 2000 period was primarily
from proceeds from the exercise of common stock options and common stock
warrants, net of payments on notes payable.


             The Company has a term note with Phoenix Leasing Incorporated for
equipment purchases. The term note is payable over 48 months, bears interest at
11.75% and is secured by the underlying equipment. The outstanding balance of
this note at March 31, 2001 and December 31, 2000 is $42,000 and $63,000,
respectively.


             In connection with the acquisition of Matritech GmbH, the Company
assumed certain debt obligations. At March 31, 2001 these obligations consist of
a $131,000 loan from a bank, a $45,000 third-party demand note, and $26,000 of
car loans. The bank loan is due in June 2004, bears interest at 5.2% and is
secured by trade receivables and inventory. The demand note will be repaid by
the Company and the Company will be reimbursed by a key Matritech GmbH employee;
the Company has recorded a corresponding asset for this employee receivable. The
car loans bear interest between 6.99% and 7.50% and are due in monthly
installments totalling $1,000.


             The Company's current lease on its space in Newton, Massachusetts
expires December 31, 2005, and the Company has a five-year option for the period
commencing January 1, 2006. Matritech GmbH's current lease on its space in
Freiburg, Germany expires January 31, 2006.


             In August 2000, the Company entered into a common stock purchase
agreement with Acqua Wellington North American Equities Fund, Ltd. ("Acqua")
covering the sale of up to $30 million (a maximum of 2.45 million shares) of the
Company's common stock. Draw downs to purchase stock are initiated at the
Company's sole discretion, and the Company sets a minimum threshold price (not
less that $3.00 per share) beneath which Acqua is not required to purchase. Draw
downs are in effect for 20 consecutive trading days after authorization by the
Company, with a maximum of 12 draw downs, each not to exceed $10 million, during
the term of the agreement. Shares are purchased at a discount (ranging from 4.5
- 7.0% depending on the threshold price) to the market price at any time
beginning in August 2000 and ending in October 2001. If the Company has not
requested draw downs in the aggregate amount of $7.5 million by June 2001, the
Company must pay Acqua either $225,000 or issue warrants to purchase 112,500
shares. During 2000, Acqua purchased 281,082 shares, with net proceeds to the
Company of $1,476,000. In February 2001, Acqua purchased 198,594 shares, with
net proceeds to the Company of $900,000.

             The Company expects to incur continued research and development
expenses and other costs, including costs related to clinical studies to
commercialize additional products based upon its NMP


                                  Page 13 of 19
<PAGE>   14
technology. The Company will require substantial additional funds to fund
operations, complete new product development, conduct clinical trials and
manufacture and market its products.


             The Company's future capital requirements will depend on many
factors, including, but not limited to: continued scientific progress in its
research and development programs; the magnitude of its research and development
programs; progress with clinical trials for its diagnostic products; the
magnitude of product sales; the time involved in obtaining regulatory approvals;
the costs involved in filing, prosecuting and enforcing patent claims; the
competing technological and market developments; and the ability of the Company
to establish additional development and marketing arrangements to provide
funding for research and development and to conduct clinical trials, obtain
regulatory approvals, and manufacture and market certain of the Company's
products.


             At March 31, 2001, the Company had $4,177,000 in cash and cash
equivalents and $4,127,000 of working capital. The Company believes that its
existing cash resources and the existing equity arrangement with Acqua will
satisfy its capital needs through
2001.

             The Company is also actively seeking additional long-term funding
for its operations from public and private sources including strategic
collaborations and partnerships. There can be no assurance, however, that
capital will be available on terms acceptable to the Company, if at all. If the
Company uses equity to finance its capital needs, such a financing could result
in significant dilution to existing stockholders. The survival of the Company in
the long term is dependent on its ability to generate revenue from sales of its
products. There can be no assurance that, in the long term, the Company will be
able to generate sufficient revenue to achieve and maintain profitability.


FACTORS THAT MAY AFFECT FUTURE RESULTS

             The Company's future financial and operational results are subject
to a number of material risks and uncertainties that may affect such results or
conditions, including:

             Access to Capital. The Company needs to obtain additional long-term
financing to continue to manufacture and market its products, to conduct
research and development, and to conduct clinical trials as currently
contemplated. The amount of additional funding needed depends on several
variables that affect the Company's capital needs, including the results of
clinical trials, the actions of regulatory agencies like the FDA and market
acceptance of the Company's products and resulting revenue streams. Although the
Company entered into an equity financing agreement that should enable it to
obtain additional financing over the near-term, depending on market conditions,
the Company will also consider various financing alternatives, including equity
or debt financing and corporate partnering arrangements. There can be no
assurance, however, that this additional funding will be available on terms
acceptable to the Company, if at all. If additional financing is not available,
the Company may be required to further curtail expenses or take other steps that
adversely affect the Company's future performance.

             History of Operating Losses and Anticipated Future Losses. The
Company has incurred operating losses since its inception and anticipates future
losses. While the Company expects to improve operating results in future
periods, there can be no assurance that the Company will achieve or maintain
profitability or that its revenue will grow in the future.

             Fluctuation in Operating Results. The Company's future operating
results may vary significantly from quarter to quarter or from year to year
depending on a number of factors including: the


                                  Page 14 of 19
<PAGE>   15
timing and size of orders from the Company's customers and distributors;
regulatory approvals and the introduction of new products by the Company; and
the market acceptance of the Company's products. The Company's current planned
expense levels are based in part upon expectations as to future revenue.
Consequently, profits may vary significantly from quarter to quarter or year to
year based on the timing of revenue. Revenue or profits in any period will not
necessarily be indicative of results in subsequent periods.

             Uncertainties Associated with Future Performance. The Company's
success in the market for diagnostic products will depend, in part, on the
Company's ability to: successfully develop, test, produce and market its
products; obtain necessary governmental approvals in a timely manner; attract
and maintain key employees; and successfully respond to technological changes in
its marketplace. The Company has limited internal marketing and sales resources
and personnel. In order to market successfully the Company's current and future
products in the United States, Germany and other territories in which it does
not, or does not intend to, use third-party distributors, the Company will need
to develop a larger marketing and sales force with appropriate technical
expertise and distribution capability. The Company may be unable to establish
the marketing and sales capabilities that it needs, and the Company may be
unsuccessful in gaining wide market acceptance for its products.

             Near-Term Dependence Upon A Limited Number of Products. The Company
anticipates that in the near-term the Company's success will be substantially
dependent on the success of a limited number of products. The Company would
experience a material adverse effect on its business, financial condition and
results of operations if those products do not achieve wide market acceptance.
The Company's other products have not been approved by the FDA or are in
development, and there can be no assurance that the Company will be successful
with such regulatory approvals and product development.

             Reliance on Sole Suppliers. The Company currently relies on sole
suppliers for certain key components for its NMP22 Test Kit. In the event that
the components from such suppliers should become unavailable for any reason, the
Company would seek alternative sources of supply, which may entail making
regulatory submissions and obtaining regulatory approvals from the FDA or such
alternative suppliers. Although the Company attempts to maintain an adequate
level of inventory to provide for these and other contingencies, should its
manufacturing process be disrupted as a result of a shortage of key components
or a revalidation of new components, there can be no assurance that the Company
would be able to meet its customer commitments. The Company's failure or delay
in meeting its commitments could cause sales to decrease, market share to be
lost permanently, and could result in significant expenses to obtain alternative
sources of supply with the necessary facilities and know-how.

             Recent Acquisition. In June 2000, the Company completed the
acquisition of Matritech GmbH. The Company faces challenges relating to
integration of operations such as coordinating geographically separate
organizations, integrating personnel with disparate business backgrounds and
combining different corporate cultures. There can be no assurance that the
acquired business or its products will be successful, that the Company will
successfully integrate the acquired business into the Company, or that the
Company will achieve the desired synergies from the transaction.

             Foreign Exchange. To the extent that foreign currency exchange
rates fluctuate in the future, the Company may be exposed to continued financial
risk. These can be no assurance that the Company will be successful in limiting
its exposure.

             Euro Currency. In January 1999, certain member countries of the
European Union ("EU") established fixed conversion rates between their existing
currencies and the EU's common currency, the


                                  Page 15 of 19
<PAGE>   16
euro. The former currencies of the participating countries are scheduled to
remain legal tender as denominations of the euro until January 2002 when the
euro will be adopted as the sole legal currency. The Company is currently
assessing the impact that the conversion to the euro will have on its newly
acquired European operations. The Company is evaluating the potential impact in
several areas of its business including the ability of its information systems
to handle euro-denominated transactions and the impact on exchange costs and
currency exchange rate prices. The Company is also evaluating the impact that
cross-border price transparencies, which may affect the ability to price
products differently in various countries, will have on its margin. Although the
Company is still in the assessment phase, the conversion to the euro is not
expected to have a material impact on the Company's operations or financial
position.


ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

             Investment Portfolio. The Company owns financial instruments that
are sensitive to market and interest rate risks as part of its investment
portfolio. The investment portfolio is used to preserve the Company's capital
until it is required to fund operations including the Company's research and
development activities. None of these market-risk sensitive instruments are held
for trading purposes. The Company does not use derivative financial instruments
that meet high credit quality standards, as specified in the Company's
investment policy guidelines; the policy also limits the amount of credit
exposure to any one issue, issuer, and type of instrument. It is suggested that
this paragraph be read in conjunction with Note 1 of Notes to Consolidated
Financial Statements - "Operations and Significant Accounting Policies" of the
Company's Annual Report on Form 10-K for the year ended December 31, 2000 filed
with the SEC (File No. 0-12128).


             Foreign Exchange. The accounts of Matritech GmbH are translated in
accordance with SFAS No. 52, Foreign Currency Translation. In translating the
accounts of Matritech GmbH into U.S. dollars, assets and liabilities are
translated at the rate of exchange in effect at year-end, while stockholders'
equity is translated at historical rates. Revenue and expense accounts are
translated using the weighted-average exchange rate in effect during the period.
Foreign currency translation and transaction gains or losses for Matritech GmbH
are included in the accompanying consolidated statements of operations since the
functional currency for Matritech GmbH is the Deutsche Mark. The Company had
sales of approximately $414,000 denominated in foreign currency in the quarter
ended March 31, 2001.



PART II. OTHER INFORMATION

ITEM 2.      CHANGES IN SECURITIES AND USE OF PROCEEDS

               (c)  Recent Sales of Unregistered Securities

         On January 30, 2001, the Company issued 33,945 shares of Common Stock
at an aggregate purchase price of $150,000.

         No underwriters were involved in the foregoing sale of securities. Such
sale was made in reliance upon an exemption from the registration provisions of
the Securities Act of 1933, as amended (the "Securities Act"), set forth in
Section 4(2) thereof relative to sales by an issuer not involving any public
offering or the rules and regulations thereunder. All of the foregoing
securities are deemed restricted securities for purposes of the Securities Act.



                                  Page 16 of 19
<PAGE>   17
ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

             (a)  Exhibits:

             10.19**       Distribution Agreement between Matritech, Inc. and
                           Timm Medical Technologies, Inc., dated January 17,
                           2001.

             ** Confidential Treatment has been requested as to omitted portions
                pursuant to Rule 24b-2 promulgated under the Securities Exchange
                Act of 1934, as amended.

             (b)  Reports on Form 8-K:

                           None.



                                  Page 17 of 19
<PAGE>   18
                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        MATRITECH, INC.



Date:  May 8, 2001                      By:  /s/Stephen D. Chubb
                                             -------------------
                                             Stephen D. Chubb
                                             Director, Chairman and
                                             Chief Executive Officer
                                             (principal executive officer)


Date:  May 8, 2001                      By:  /s/John S. Doherty
                                             ------------------
                                             John S. Doherty
                                             Vice President,
                                             Chief Financial Officer and
                                             Treasurer
                                             (principal accounting and
                                             financial officer)



                                  Page 18 of 19
<PAGE>   19
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number                              Description
------                              -----------
<S>                        <C>
10.19**                    Distribution Agreement between Matritech, Inc. and
                           Timm Medical Technologies, Inc., dated January 17,
                           2001.
</TABLE>

** Confidential Treatment has been requested as to omitted portions pursuant to
   Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as
   amended.




                                  Page 19 of 19