10KSB/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-KSB/A

þ	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
OR
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number 0-935

CYTOCORE, INC.

(Name of small business issuer in its charter)

Delaware	36-4296006
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
414 N. Orleans St., Suite 502, Chicago, IL	60610
(Address of principal executive offices)	(Zip Code)

(Issuer’s Telephone Number, Including Area Code)

(312) 222-9550

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
None	Not Applicable

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

(Title of class)

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  o

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 þ      No o

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

The Company’s revenues for the fiscal year ended December 31, 2006 were $94,000.

The aggregate market value of the common stock held by non-affiliates of the Company as of March 30, 2007 was $138,496,514, based upon the closing price of shares of the Company’s common stock, $0.001 par value per share, of $0.50 as reported on the Over-the-Counter Bulletin Board on such date.

The number of shares of common stock outstanding as of March 30, 2007 was 330,092,335.

DOCUMENTS INCORPORATED BY REFERENCE

Not applicable.

Transitional Small Business Disclosure Format (Check one):  Yes o     No þ

EXPLANATORY NOTE

This amendment to the CytoCore, Inc. Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006, as originally filed with the Commission on April 17, 2007, is being filed to include the information called for by Part III, Items 9 through 12 and 14, which information originally was to be incorporated by reference to the Company’s definitive proxy statement. The Company is unable to timely file its definitive proxy statement and therefore is including herewith the information required by such Items. Other than the addition of such information, and updates to the cover page, signatures and certifications, no other changes have been made to this filing.

CYTOCORE, INC.

Annual Report on Form 10-KSB
December 31, 2006

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Description of Business		1
		Overview		1
		Recent Developments		1
		Information About Industry Segments		2
		Description of Business		2
		Products		2
		InPathtm Systems		2
		Automated Microscopy Instruments		3
		AcCelltm		3
		AIPStm		3
		Drug Delivery System		4
		Markets and Distribution Methods		4
		Government Regulation, Clinical Studies and Regulatory Strategy		5
		Competition		8
		Operations		8
		Intellectual Property		9
		Research and Development		10
		Component and Raw Materials		11
		Working Capital Practices		11
		Employees		11
		Financial Information About Foreign and Domestic Operations and Export Sales		11
		Risk Factors		11
	Item 2.	Description of Property		15
	Item 3.	Legal Proceedings		15
	Item 4.	Submission of Matters to a Vote of Security Holders		18
PART II
	Item 5.	Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases Of Equity Securities		18
		Market Information		18
		Holders		18
		Dividends		18
		Stock Transfer Agent		19
		Securities Authorized for Issuance under Equity Compensation Plans		19
		Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities		20
		Issuance of Securities		20
		Conversions		21
		Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers		22

			Page
	Item 6.	Management’s Discussion and Analysis or Plan of Operation		22
		Forward-Looking Statements		22
		Overview		23
		Critical Accounting Policies and Significant Judgments and Estimates		24
		Results of Operations		24
		Revenue		24
		Costs and Expenses		25
		Cost of Goods Sold		25
		Research and Development		25
		Selling, General and Administrative		25
		Other Income and Expense		25
		Interest Income		25
		Interest Expense		25
		Restructuring Settlements		26
		Net Loss		26
		Liquidity and Capital Resources		26
		Off-Balance Sheets Arrangements		27
	Item 7.	Financial Statements		27
	Item 8.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		27
		Resignation of Auditors		27
	Item 8A.	Controls and Procedures		28
		Evaluation of Disclosure Controls and Procedures		28
		Changes in Internal Controls		28
	Item 8B.	Other Information		29
PART III
	Item 9.	Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act		29
		Code of Ethics		30
	Item 10.	Executive Compensation		32
	Item 11.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		42
	Item 12.	Certain Relationships and Related Transactions, and Director Independence		44
	Item 13.	Exhibits		46
	Item 14.	Principal Accountant Fees and Services		51
Signatures				53
Employment Agreement
Employment Agreement
Consulting Agreement
Consulting Agreement
Common Stock Purchase Warrant
Common Stock Purchase Warrant
Common Stock Purchase Warrant
Common Stock Purchase Warrant
Subsidiaries
Consent of Amper, Politziner & Mattia P.C.
Consent of Altshuler, Melvoin and Glasser LLP
Certification of CEO
Certification of CFO
Section 906 Certification of CEO
Section 906 Certification of CFO

Index to Financial Statements
Reports of Independent Registered Public Accounting Firms	F-1 - F-2
Consolidated Balance Sheets at December 31, 2006 and 2005	F-3
Consolidated Statements of Operations for the two years ended December 31, 2006 and 2005	F-4
Consolidated Statements of Cash Flows for the two years ended December 31, 2006 and 2005	F-5
Consolidated Statements of Stockholder’s Deficit for the two years ended December 31, 2006 and 2005	F-6-F-7
Notes to Consolidated Financial Statements	F-8

PART I

Item 1.   Description of Business

Overview

CytoCore, Inc. (“CCI” or the “Company”), formerly Molecular Diagnostics, Inc., is a life sciences company engaged in the design, development and commercialization of cost-effective screening systems to assist in the early detection of cancer. CCI is currently focused on the design and development of a fully-automated, objective analysis and screening systems for cervical, bladder, endometrial and uterine cancer screening that can be used at the point of service. CCI is also preparing to launch production and sales of its cervical cell collection device, the e² Collector^tm.

CCI was incorporated in Delaware in December 1998 as the successor to Bell National Corporation, a company incorporated in California in 1958. In December 1998, Bell National, which was then a shell corporation without any business activity, acquired InPath, LLC, a development stage company engaged in the design and development of products used in screening for cervical and other types of cancer. For accounting purposes, the acquisition was treated as if InPath had acquired Bell National. However, Bell National continued as the legal entity and the registrant for Securities and Exchange Commission filing purposes. Bell National merged into Ampersand Medical Corporation its wholly-owned subsidiary, in May 1999 in order to change the state of incorporation of the company to Delaware.

In September 2001, we acquired 100% of the outstanding stock of AccuMed International, Inc. by means of a merger of AccuMed into a wholly-owned subsidiary of the Company. Shortly after the AccuMed merger we changed our corporate name to Molecular Diagnostics, Inc. The name change was effected by the merger of our wholly-owned subsidiary, Molecular Diagnostics, Inc., with and into Ampersand. On June 16, 2006, the shareholders approved a proposal to change the Company’s corporate name from Molecular Diagnostics, Inc. to CytoCore, Inc., which change was effected in Delaware on June 22, 2006. Except where the context requires, “CCI,” the “Company,” “we” and “our” refers to CytoCore, Inc. and our subsidiaries and predecessors except where otherwise noted.

CCI is primarily focused on the e² cervical cell collection device, which it hopes to begin selling in mid 2007 and the design and development of its various cancer screening systems which are intended to screen for, at the earliest possible stage, cancer and cancer-related diseases and may be used in a laboratory, clinic or doctor’s office. The screening systems primarily consist of the company’s next generation specialized computer-guided image recognition microscope system- the Automated Image Proteomic Systems or AIPS^tm, combined with the new P2X7 genetic marker. CCI through participating hospitals has commenced patient enrollment for a clinical trial involving the Inpath product as a screening tool for endometrial cancer and a follow up clinical trial for the FDA (Food and Drug Administration) approved cervical cell collection device. The company hopes to integrate the next generation AIPS system into the Inpath product, which consists of the AIPS system, an image analysis instrument, and the various genetic P2X7 biomarkers. The Inpath product will be used for various cancer screening tests. As a result, the Company has discontinued production and sales of the AcCell Savant^tm System. We had designed and manufactured the AcCell^tm computer-aided automated microscopy instrument and the AcCell Savant, an instrument that includes an AcCell instrument and software and which collects quantitative cellular information used in support of a diagnostic process. These instruments have been sold to laboratories and medical diagnostic companies for use in the customers’ proprietary applications. Based on a settlement entered into with MonoGen, Inc. in 2004, we have transferred certain patents and intellectual property rights for the AcCell instrument to MonoGen. CCI also entered into a settlement agreement in 2004 with Dr. Bruce Patterson and Invirion, Inc. over the validity of a certain technology license. CCI agreed to the termination and return of the license to Dr. Patterson and Invirion.

The Automated Image Proteomic System or “AIPS” — based on updated technology automates and analyzes cytological and histological specimen slides in conjunction with a wide variety of biomarkers. We expect that the new platform will be marketed through a distribution partner and, in certain instances, will be placed in a customers’ facility on a fee-for-use basis. We believe the “AIPS” platform may be an integral component of most of our screening systems. Nearly all of our reported revenue to date has been from single customer slide review and the sale of AcCell products and services.

Recent Developments

CCI has commenced patient clinical trials on the e² cervical cell collector and the Inpath system specifically named as “EndoScan” as a screening tool for the detection of endometrial cancer. Also, through settlements with

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creditors, conversion of notes to equity and satisfaction of various legal judgments by way of cash payment or acceptance of common stock and warrants, the Company has reduced debt from $10.439 million at December 31, 2005 to $4.13 million at December 31, 2006. $7.6 million in cash was raised through the issuance of common stock and conversion of warrants.

Information About Industry Segments

We operate in one industry segment involving medical screening devices, diagnostics, and supplies. All of our operations during the reporting period were conducted and managed within this segment, with a single management team that reports directly to our Chief Executive Officer.

Description of Business

CCI is a life sciences company engaged in the design, development and commercialization of cost-effective screening systems to assist in the early detection and treatment of cancer. CCI is currently focused on the production and anticipated mid 2007 sales launch of the cervical collection device and the design, and development of its screening systems for cervical, endometrial, and bladder precancerous and cancerous conditions through the InPath System which utilizes the AIPS image analysis that provides for automated slide screening of the P2X7 genetic biomarker from cytological and histological specimens. The InPath System and its components are intended to screen for cancer and eventually treat cancer through the administration of an FDA (Food and Drug Administration) approved therapeutic agent from CCI’s drug delivery system. We believe the Inpath system or its components may be used in a laboratory, clinic or doctor’s office.

The science of medical diagnostics has advanced significantly during the past decade. Much of this advance has come as a result of new knowledge of the human genome and related proteins, which form the foundation of cell biology and the functioning of the human body. Our goal is to utilize this research as a base to develop screening and diagnostic testing products for cancer and cancer-related diseases. Our biological marker, the P2X7, in conjunction with the AIPS system is being tested as a lead biological screening marker for various cancers. The P2X7 is the lead marker in the assay Cocktail-CVX^tm and Cocktail- GCI^tm. We believe that the success of these products will improve patient care through more accurate test performance, wider product availability and more cost-effective service delivery. We have developed an FDA-approved sample collection device, and are developing and testing the cocktail assay markers which include the P2X7 genetic marker for use with the AIPS system to screen for various cancers.. We look to begin the product development of the drug delivery system in 2008 for the therapeutic treatment of various cancers with FDA (Food and Drug Administration) approved agents.

Our strategy is to develop products through internal development processes, strategic partnerships, licenses and acquisitions of companies. This strategy has required and will continue to require additional capital. As a result, we will incur substantial operating losses until we are able to successfully market some, or all, of our products.

Products

The InPath^tm System

We are currently developing and testing a family of products for use in cancer screening and diagnosis. We call this family of products the InPath System. The core of the InPath System is a combination of protein antibodies — the Cocktail-CVX^tm and Cocktail-GCI^tm and others — that allow the system to detect and highlight abnormal cancerous cells in a rapid and objective fashion. This technology will be primarily based on CCI’s AIPS system which screens cancerous cells by utilizing the Cocktail-CVX and Cocktail-GCI which incorporates the lead assay, the P2X7 genetic marker. In the future, we hope to use different antibody combinations to detect and diagnose different types of cancer and other cancer-related diseases.

The initial applications of the InPath System are designed to provide a noninvasive screening test for the detection of endometrial and uterine cancer (EndoScan) and to enhance the current cervical cancer screening process performed in laboratories, commonly referred to as the Pap test. Our ultimate goal is to perform this

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screening test in less time, possibly at the point of service, either in a doctor’s office, clinic or mobile medical vehicle. The InPath System includes the following components:

•  CCI’s FDA-approved unique sample collection device, the e² Collector consisting of a small disposable balloon, shaped to fit the cervix. The device is intended to replace the spatula and brush currently used to collect patient cytology samples.

•  The Cocktail-CVX and Cocktail-GCI and other protein markers, which are fully-automated biochemical assays that get applied to a sample to identify abnormal cells. In the laboratory version of the InPath System slide-based test, this biochemical assay is applied to sample cells released from the collection device into a liquid preservative and deposited on a glass slide. An instrument then performs an automated analysis of the sample by means of an optical scan that detects the presence of multiple wavelengths of fluorescent light. This light is produced by fluorescent reporter tags, which are attached to certain components used in the Cocktail-CVX^tm and Cocktail-GCI^tm and other biochemical assays. In the laboratory version of the InPath System, our new fully-integrated workstation — the Automated Image Proteomic System or “AIPS” workstation — uses a camera to read the various wavelengths of light from the sample.

•  Custom-designed image analysis software which controls the automated instruments and analyzes the captured wavelengths of light.

Automated Microscopy Instruments

AcCell^tm

In November 2001, Ventana Medical Systems, Inc. (“Ventana”) agreed to purchase and distribute AcCell instruments with their image analysis software. The AcCell product is a computer-aided automated microscopy instrument designed to help medical specialists examine and diagnose specimens of human cells. During 2002, we agreed that Ventana would assume responsibility for manufacturing the AcCell 2500 instruments directly, rather than purchasing them from us. CCI subsequently elected not to develop the 2500 model and, in November 2003, CCI and Ventana entered into a settlement agreement providing for a non-exclusive, royalty-free license from CCI to Ventana to the source code for the AcCell 2500 for Ventana’s internal use or in the creation of executable code for its customers. In addition, as part of the settlement, CCI agreed to provide two workstations valued at $49,500 and issued a promissory note for approximately $63,000 in return for forgiveness of approximately $375,000 of advances against future sales. As of December 31, 2006, CCI still owes Ventana approximately $21,000 of principal.

In October 2004, CCI agreed to settle an arbitration proceeding instituted by MonoGen, Inc. (“MonoGen”) against the Company through the transfer to MonoGen of certain patents, patent applications and other intellectual property rights relating to the AcCell technology as well as inventory and an unsecured installment note in the principal amount of $305,000. MonoGen granted CCI a non-exclusive license agreement for the use of the patent rights and technology as they relate to cervical and ovarian cancer in exchange for a three percent royalty on all gross sales of licensed products. As of December 31, 2006, CCI still owes MonoGen $305,000 on the promissory note. Subsequent to December 31, 2006, MonoGen, Inc. accepted payment of $325,000 and transfer of the AcCell and Savant trademark ownership rights as settlement of all outstanding principal and interest.

The Company has discontinued any development and sales of systems incorporating the AcCell technology as CCI develops and tests the next generation automated microscope, its AIPS platform.

AIPS^tm

CCI is proceeding with the development of its new, fully-integrated AIPS workstation. This product may be delivered with a variety of features including:

•  Robotic slide-feeding systems to load and unload multiple cassettes and slides to the image system;

•  Bar code readers to ensure proper identification of samples being analyzed;

•  Unique image analysis software;

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•  Electro-mechanical scanning stages to facilitate accurate slide screening;

•  Automated cellular focusing on slides; and

•  Data management software to facilitate primary or secondary review of samples and report results into record-keeping systems.

This workstation is a key tool of our research process, clinical trials, and the InPath System laboratory-based test.

Drug Delivery System

The drug delivery system is comprised of an applicator handle and drug-delivery modality in the form of a patch that provides a timed release of a therapeutic agent directly to the surface of the cervix. The applicator handle is a further development of CCI’s e² Collector handle, which has been designed to quickly, safely and accurately position and deposit the patch on the cervix.

Research and Product Development

In January 2006, the Company entered into a research license agreement with University Hospitals of Cleveland (“UHC”). Under the professional guidance of Dr. George Gorodeski, UHC will perform core research for various cancers involving epithelial cells such as gynecological disorders including cervical dysplasia and cervical cancer, bladder and uterine cancers. This research license agreement provides CCI with what it believes are significant strategic advantages, such as:

•  Positioning CCI to grow from a cyto screening focused company to a bio pharmaceutical company

•  Positioning CCI to develop commercial products based on a new biomarker that detects both cervical, bladder and endometrial cancers

•  Granting CCI rights to commercialize a unique drug delivery system to apply FDA approved drugs to existing cervical lesions

•  Leveraging CCI technology previously developed for the e² Collector handle

•  Additional applications may develop in other types of epithelial cancers and could become the basis for diagnostic testing rather than screen testing

•  Providing physicians with a non-surgical therapeutic treatment option for cervical lesions

Markets and Distribution Methods

We do not plan to develop and train a large direct sales force to distribute and sell our products. Our initial strategy is to market and distribute the cervical collection device through third party distributors world wide. The laboratory version of the InPath System will be marketed to participants in the principal market for the system — namely, major laboratory organizations in the United States. Once the InPath System has been successfully established in the laboratory market, our strategy is to form alliances with these laboratories and other medical products distribution companies and utilize their sales forces to broaden sales of the InPath System to other markets, including hospitals, clinics, managed care organizations and office-based physician groups. Marketing strategy to these organizations will vary depending upon the applicable cancer screening test.

The cost of the Pap test outside of the United States varies widely from country to country. Outside of the United States, most healthcare services are provided by governmental organizations. Healthcare in many of these countries is managed by governmental agencies, often at the local level, making the precise number of tests performed difficult to validate. In developing countries where healthcare, especially cancer screening, may be minimal, non-profit organizations often supplement government health programs. We intend to distribute the InPath System worldwide pursuant to any statutory regulatory approvals we receive.

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Government Regulation, Clinical Studies and Regulatory Strategy

The development, manufacture, sale, and distribution of some of our products is regulated by the U.S. Food and Drug Administration and comparable authorities in certain states and foreign countries. In the United States, the Food, Drug and Cosmetic Act (the “FD&C Act”) and related regulations apply to some of our products. These products cannot be shipped in interstate commerce without prior authorization from the FDA.

Medical devices may be authorized by the FDA for marketing in the United States either pursuant to a pre-market notification under Section 510(k) of the FD&C Act, commonly referred to as a “510(k) notification,” or a pre-market approval application or “PMA”. The process of obtaining FDA marketing clearance and approval from other applicable regulatory authorities is costly and there can be no guarantee that the process will be successful. The 510(k) notifications and PMAs typically require preliminary internal studies, field studies, and/or clinical trials, in addition to the submission of other design and manufacturing documentation. We manage the regulatory process through the use of consultants and clinical research organizations.

A 510(k) notification, among other things, requires an applicant to show that its products are “substantially equivalent” in terms of safety and effectiveness to an existing FDA-cleared predicate product. An applicant may only market a product submitted through a 510(k) notification after the FDA has issued a written notification determining the product has been found to be substantially equivalent. The Company’s e² Collector was approved for marketing by the FDA on May 31, 2002 under the 510(k) notification process.

To obtain PMA approval for a device, an applicant must demonstrate, independent of other similar devices, that the device in question is safe and effective for its intended uses. A PMA must be supported by extensive data, including pre-clinical and clinical trial data, as well as extensive literature and design and manufacturing documentation to prove the safety and effectiveness of the device. The PMA process is substantially longer than the 510(k) notification process. During the review period, the FDA may conduct in-depth reviews of our clinical trial center documentation and our manufacturing facilities and processes or those of our strategic partners. In addition, the FDA may request additional information and clarifications and convene a medical advisory panel to assist in its determination.

The FD&C Act generally bars advertising, promoting, or other marketing of medical devices that the FDA has not approved or cleared. Moreover, FDA enforcement policy strictly prohibits the promotion of known or approved medical devices for non-approved or “off-label” uses. In addition, the FDA may withdraw product clearances or approvals for failure to comply with regulatory standards.

Our prospective foreign operations are also subject to government regulation, which varies from country to country. Many countries, directly or indirectly through reimbursement limitations, control the price of most healthcare products. Developing countries put restrictions on the importation of finished products, which may delay such importation. European directives establish the requirements for medical devices in the European Union. The specific directives are the Medical Device Directive (MDD 93/42/EEC) and the In-Vitro Diagnostics Device Directive (IVDD/98/79/EEC). The International Organization for Standardization (“ISO”) establishes standards for compliance with these directives, particularly for quality system requirements.

The FDA has adopted regulations governing the design and manufacture of medical devices that are, for the most part, harmonized with the good manufacturing practices and ISO quality system standards for medical devices. The FDA’s adoption of the ISO’s approach to regulation and other changes to the manner in which the FDA regulates medical devices will increase the cost of compliance with those regulations.

We will also be subject to certain registration, record-keeping and medical device reporting requirements of the FDA. Our manufacturing facilities, or those of our strategic partners, will be obligated to follow the FDA’s Quality System Regulation and be subject to periodic FDA inspections. Any failure to comply with the FDA’s Quality System Regulation or any other FDA or other government regulations could have a material adverse effect on our future operations.

The InPath System also may be subject to regulation in the United States under the Clinical Laboratory Improvement Act (“CLIA”). CLIA establishes quality standards for laboratories conducting testing to ensure the accuracy, reliability and timeliness of patient test results, regardless of where the test is performed. The

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requirements for laboratories vary depending on the complexity of the tests performed. Thus, the more complicated the test, the more stringent the requirement. Tests are categorized as high complexity, moderate complexity (including the category of provider-performed microscopy) and waived tests. CLIA specifies quality standards for laboratory proficiency testing, patient test management, quality control, personnel qualifications and quality assurance, as applicable.

The FDA is responsible for the categorization of commercially-marketed laboratory tests. The Centers for Disease Control is responsible for categorization of laboratory procedures such as provider-performed microscopy. For commercially-marketed tests, the FDA now determines the appropriate complexity category as it reviews pre-market submissions for clinical laboratory devices. Manufacturers are asked to include an extra copy of the package insert identified as “FOR CLIA CLASSIFICATION” in the submission for product commercialization (i.e., 510(k) or PMA). Manufacturers are notified of the assigned complexity through routine FDA correspondence (that is, as an enclosure with a clearance or approval letter or as a separate letter in response to other submissions). Categorization is effective as of the date of the written notification to the manufacturer.

We are developing the InPath System to be user-friendly, require minimum operator training, and have safety and operating checks built into the functionality of the instruments. We believe that our efforts may result in receiving the lowest possible classification for the InPath System. If, however, these products are classified into a higher category, it may have a significant impact on our ability to market the products in the United States.

We are currently enrolling patients for the resumption of our clinical studies and trials on our InPath System during its development. These studies and trials vary in terms of number of patient samples, individual product components, specific processes and conditions, purpose, and other factors, which may affect the results.

We have publicly reported the results of some of the studies of the InPath System and Cocktail-CVX at various medical meetings, in publications and in public announcements. Such studies demonstrate the system’s capability to detect cervical cellular abnormalities. The sensitivity factor, the test’s performance in detecting versus missing actual diseases, commonly called false negatives, is critical in terms of patient health.

In each of the reported studies and trials, the InPath System demonstrated superior sensitivity in detecting high-grade cervical disease and cancer. In addition, the results demonstrate that the InPath System produces more accurate results than the current PAP test. A statistical analysis conducted in 2000 on the PAP test, which reviewed the results of 94 previous studies, showed an average sensitivity of 74% and an average specificity of 68%.

In a presentation of early results of the clinical trial of the InPath System’s e² Collector, data showed that the cytology reports on samples collected with the e² Collector were at least as accurate as those collected with the conventional brush/spatula method. The collector also proved to be more comfortable for the patient, provided less blood and mucus, and required only one device to collect both endocervical and ectocervical cells. The results of the additional clinical tests were submitted in January 2002 and we received FDA clearance to market the collector on May 31, 2002. We are in the process of conducting a follow-up clinical trial for the purpose of accumulating enough statistically significant data to support our marketing claims. We expect this study to be completed by the second quarter of 2007.

We believe the results of these studies support the continued development of the InPath System. We moved ahead with additional studies and clinical trials in late 2001 and others began in 2002. Due to capital limitations we were forced to suspend all of our ongoing studies during the last half of 2002. From 2004 to the present, CCI has continued to refine and optimize the Cocktail-CVX and develop the AIPS platform as a screening device for various cancers.

We plan to begin the resumption of our clinical studies for the InPath System during the first quarter of 2007 for uterine / endometrial cancer and we hope to complete these trials during the second half of 2008. During the first half of 2008, we plan to commence patient trial utilizing the InPath System for cervical and bladder cancer. At the conclusion of the studies, the data will be submitted to the FDA as a PMA and will form the basis of our substantiation of the clinical and economic value of the InPath System. The product may also be offered for sale as an Analyte Specific Reagent (“ASR”), which is defined as the specific ingredient required for a laboratory to create its own screening test, in the United States and for full-scale commercial and clinical use in selected international markets, where import and regulatory approvals allow. We are not permitted to market non-ASR products in the

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United States with clinical or diagnostic claims until we have received clearance from the FDA. ASR tests make no medical claims but may be used by laboratories that are qualified to perform highly complex tests, and by physicians as components of ASR procedures. In other countries, we may need regulatory and importation approval; however, such approvals are generally based on the data submitted to the FDA.

We plan to pursue regulatory approval of the InPath System products through a series of submissions and, in some cases, using data from a single clinical study. This tiered approach is designed to accelerate revenue opportunities for the InPath System in the short term and to drive adoption of our innovative products over the long term, while minimizing the expense and time involved in undertaking the appropriate study.

Our overall strategy involves the continuing study of the InPath System and Cocktail-CVX and Cocktail-GCI, as described above. This research will determine whether the InPath System is able to eliminate true negative samples from further review for cervical cancer. We believe the Inpath System could also become a primary screening device for uterine, endometrial and bladder cancer. We anticipate completion of this portion of the study and submission of the data to the FDA during 2008 for uterine and endometrial cancer and during 2009 or 2010 for bladder and cervical cancer contingent on our securing adequate financing for our operations. We will also submit the data to foreign regulatory authorities that have jurisdiction over these products. Subsequently, we will continue to collect and submit data for the InPath System point of service test.

If the submissions for the various InPath System products are cleared by the FDA for sale in the U.S. market or approved for sale by foreign regulatory agencies, we intend to sell the cleared products in their respective clinical markets.

InPath System Product Introduction Timelines

Product	Process	Timeline
e2 Collector	Clinical trials	Completed
	Regulatory submission & review	September 2001
	Regulatory clearance	May 2002
	Follow up clinical trial	Q4 2006
	Sales	Q3 2007
Cocktail-CVX & GCI	Clinical trials(1)	Q1-4 2007
	Regulatory submission & review(1)	Q1 2008
	Regulatory clearance projected(1)	Q3 2008
	U.S. sales(1)	Q4 2008
	International sales(1)	Q4 2008
	Product development and clinical trials(2,3)	Q2 2008 - Q4 2009
AIPS	Product development & pre production mfg(2)	Q1 2007 - Q1 2008
	Sales(2)	Q2 2008
Drug Delivery System(3)	Instrument Development	Q2-4 2008
	Patient Trials	Q1-3 2009
	Regulatory submission & review	Q4 2009
	Regulatory clearance	Q2 2010
	Sales	Q3 2010

(1)	All of the above target dates pertain to the EndoScan test for uterine/ endometrial cancer.
(2)	Sales would pertain to the EndoScan test in 2008 and 2009. Base product development and pre production manufacturing would apply to all cancer recognition imaging software. Trials for bladder and cervical cancer would occur in 2008 and 2009 with expected FDA approval in late 2009-2010 time frame.

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(3) If trial and development expenses are not funded through e² Collector and EndoScan sales additional capital will be required.

We currently distribute automated microscopy instruments into commercial markets that do not require regulatory clearance. In order to distribute products not yet approved by the FDA for use in certain clinical applications, we will be required to conduct clinical trials and to make submissions to applicable regulatory agencies for clearance. We do not have any current plans to make any submissions to the FDA or foreign regulatory agencies covering these products. In the future, some of our customers may include these products in submissions to the FDA or foreign regulatory agencies covering their use in a customer’s proprietary diagnostic or clinical process.

Competition

Historically, competition in the healthcare industry has been characterized by the search for technological innovations and efforts to market such innovations. The cost of healthcare delivery has always been a significant factor in markets outside of the United States. In recent years, the U.S. market has also become much more cost conscious. We believe technological innovations incorporated into certain of our products offer cost-effective benefits that address this particular market opportunity.

Competitors may introduce new products that compete with ours, or those which we are developing. We believe the portion of our research and development efforts devoted to continued refinement and cost reduction of our products will permit us to remain or become competitive in the markets in which we presently distribute or intend to distribute our products.

The market for our cancer screening and diagnostic product line is significant, but highly competitive. We are unaware of any other company that is duplicating our efforts to develop a fully-automated, objective analysis and diagnostic system for cervical, endometrial, uterine and bladder cancer screening that can be used at the point of service. Our competition includes many companies with financial, marketing, and research and development resources substantially greater than ours. There can be no assurance that our technological innovations will provide us with a competitive advantage.

There are several U.S. and foreign companies that produce automated and quantitative microscopy instruments. In the past, the market for these instruments has been primarily limited to research applications. However, as a result of recent advances in the area of molecular diagnostics, we believe the market for such instruments and applications will increase over the next several years. We believe our instruments are the most versatile and cost-effective platforms available in the current market whether as an outright purchase or a fee-for-use application.

In general, we believe that our products must compete primarily on the basis of accuracy, functionality, product features and effectiveness of the product in standard medical applications. We also believe that cost control and cost effectiveness are additional key factors in achieving or maintaining a competitive advantage. We focus a significant amount of product development effort on producing systems and tests that will not add to overall healthcare cost. Specifically, there are several companies whose technologies are similar, adjunctive to, or may overlap with that of CCI. These include Cytyc Corporation, Tripath Imaging Inc., Digene Corporation, Ventana Medical Systems, Inc., Clarient, Inc., and Applied Imaging Corp. However, we do not believe any of these companies have developed the fully-integrated solution necessary to deliver a fully-automated, proteomic-based solution. To develop fully-automated solutions, companies must have technologies that fully integrate microscopy instruments, imaging software and cancer-detecting biochemistry. It is difficult to assess our competitive position in the market since we are not aware of the development stages if any of competitors’ products.

Operations

We conduct research and development work for the InPath System using a combination of our full-time and part-time employees and contract workers in our Chicago, Illinois location and contracted researchers operating laboratory through University Hospitals — Cleveland.

We do not intend to invest capital to develop our own distribution and sales organizations, or construct and maintain a medical-products manufacturing facility and all its related quality systems requirements. Our strategy is to utilize the operations, quality systems and facilities of a contract manufacturer specializing in medical products

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manufacturing to meet our current and future needs in the United States and international markets. This strategy covers manufacturing requirements related to the InPath System’s chemical components, plastic and silicone parts for the e² Collector, InPath System instruments and the AIPS instruments.

To this end, we have agreements, including for design and development work, with manufacturers of medical-grade components to supply the silicone balloon and other components of the sample collection device. We also have contracts with manufacturers to supply much higher volumes that will be needed once we begin to sell the sample collection device. These manufacturers have the capacity to handle high volume production through facilities in both the United States and several foreign countries.

We currently have a sufficient supply of workstation platforms. The computers, cameras, automated slide staining equipment and slide preparation equipment, which make up the remainder of the laboratory version of the InPath System, are available from several manufacturers. These instruments are used in a sequential process. The platform on which the actual sample screening is done is computer-controlled by our proprietary software.

Intellectual Property

We rely on a combination of patents, licenses, trade names, trademarks, know-how, proprietary technology and policies and procedures to protect our intellectual property. We consider such security and protection a very important aspect of the successful development and marketing of our products in the U.S. and foreign markets.

In the United States, we follow the practice of filing a provisional patent application for each invention as soon as it has been determined that the invention meets the minimum standards for patentability. While a provisional patent application does not provide any formal rights or protections, it does establish an official priority date for the invention that carries over to any utility patent applications that are derived from the provisional application within the next 12 months. A utility patent application begins the process that can culminate in the issuance of a U.S. patent. We convert each outstanding provisional patent application into some number of utility patent applications within this 12-month period. In most cases each provisional application results in one utility filing. However, in some cases a single provisional application has generated two independent utility filings or multiple (up to five) provisional applications have been consolidated into a single utility application. During the examination of a utility application, the U.S. Patent and Trademark Office may require us to divide the application into two or more separate applications or we may file a continuation-in-part patent application that expands upon the technology disclosed in an earlier patent application and which has the potential of superseding the disclosure of the earlier application. For these reasons, estimating the number of patents that are likely to be issued based upon the numbers of provisional and utility applications filed is difficult.

Prior to filing a utility application in the United States, we review the application to determine whether obtaining patent coverage for the invention outside of the United States is necessary or desirable to support our business model. If so, a patent application is filed under the Patent Cooperation Treaty (“PCT”) at the same time that the U.S. filing is made. Depending upon the nature of the invention and business considerations, we typically specify the patent offices in three to six countries to which the PCT application is to be submitted and file in individual foreign patent offices after the PCT application term has expired. As of December 2006, six PCT applications had been filed — the terms of which have all expired.

As of December 2006, we had filed eleven U.S. utility patent applications. Three of the U.S. utility applications have been issued as U.S. patents and seven have been abandoned. One China patent had been issued and one European case has been abandoned. One U.S. and five foreign patent applications are filed and pending. In order to reduce the expenses related to patent prosecution, we are currently taking only those actions needed to keep them in effect. This group of patents and patent applications covers all aspects of the InPath System including, but not limited to, the point of service instrument, the personal and physicians’ collectors, and the slide-based test. As a result of the acquisition of AccuMed, we acquired 33 issued U.S. patents, one U.S. patent application, and nine foreign patents, of which a combined total of 17 were transferred to a third party under a license agreement. Twenty-four additional foreign patent applications primarily covering the AcCell and AcCell Savant technology and related software were also acquired. We also held an exclusive license from Invirion, Inc. and Dr. Bruce Patterson covering a patent and certain medical technology for detection of certain genes in cancer-causing types of Human Papilloma Virus (“HPV”). We purchased the license for cash, future royalties, and other considerations. Pursuant to a

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settlement agreement entered into with Dr. Patterson and Invirion in the fourth quarter of 2004, however, the Company agreed to the termination of such license and related agreements, the transfer and assignment back to Invirion of such patent and medical technology and all of CCI’s right, title and interest therein and intellectual property rights associated therewith, and to cease the development or sale of any such technology.

We intend to prepare additional patent applications for processes and inventions arising from our research and development process. The protections provided by a patent are determined by the claims that are allowed by the patent office that is processing the application. During the patent prosecution process it is not unusual for the claims made in the initial application to be modified or deleted or for new claims to be added to the application. For this reason, it is not possible to know the exact extent of protection provided by a patent until it issues.

Patent applications filed prior to November 29, 2000 in the United States are maintained in secrecy until any resulting patent is issued. As there have been examples of U.S. patent applications that have remained “in prosecution” and, therefore, secret for decades, it is not possible to know with certainty that any U.S. patent that we may own, file for or have issued to us will not be pre-empted or impaired by patents filed before ours and that subsequently are issued to others. Utility patent applications filed in the United States after November 29, 2000 are published 18 months after the earliest applicable filing date. As this revised standard takes full effect, the chances that such a “submarine” patent will impair our intellectual property portfolio are significantly reduced. Foreign patent applications are automatically published 18 months after filing. As the time required to prosecute a foreign utility patent application generally exceeds 18 months and the foreign patents use a “first to file” rather than a “first to invent” standard, we do not consider submarine patents to be a significant consideration in our patent protection outside of the United States.

Our products are or may be sold worldwide under trademarks that we consider to be important to our business. We own the trade names “InPath,” “e² Collector,” and “Cocktail-CVX.” We may file additional U.S. and foreign trademark applications in the future.

Our future technology acquisition efforts will be focused toward those technologies that have strong patent or trade secret protection.

We cannot be sure that patents or trademarks issued or which may be issued in the future will provide us with any significant competitive advantages. We cannot be sure any of our patent applications will be granted or that their validity or enforceability will not be successfully challenged. The cost of any patent-related litigation could be substantial even if we were to prevail. In addition, we cannot be sure that someone will not independently develop similar technologies or products, duplicate our technology or design around the patented aspects of our products. The protection provided by patents depends upon a variety of factors, which may severely limit the value of the patent protection, particularly in foreign countries. We intend to protect much of our core technology as trade secrets, either because patent protection is not possible or, in our opinion, would be less effective than maintaining secrecy. However, we cannot be sure that our efforts to maintain secrecy will be successful or that third parties will not be able to develop the technology independently.

Research and Development

Our research and development efforts are focused on introducing new products as well as enhancing our existing product line. We utilize both in-house and contracted research and development efforts. We believe research and development is critical to the success of our business strategy. During the years 2006 and 2005, our research and development expenditures were approximately $854,000 and a credit of $(100,000), respectively, all of which were charged to expense in our consolidated statement of operations. Settlement to vendors related to research and development activities for less than the recorded amounts were credited to expenses.

Our research work in the area of chemical and biological components will continue for the foreseeable future as we seek to refine the current process and add additional capabilities to our analysis procedure, including the detection of other forms of cancer and precursors to cancer.

We anticipate the need to invest a substantial amount of capital in the research and development process, including the cost of clinical trials, required to complete the development and use of the InPath System and bring it to market.

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Components and Raw Materials

Low-cost products are a key component of our business strategy. We designed the e² cervical collection device using widely available and inexpensive silicone and plastic materials. These materials are available from numerous sources and can be fabricated into finished devices by a variety of worldwide manufacturers based on our proprietary designs.

The instrument components of the laboratory version of the InPath System are also available from a number of sources. Computers, cameras, automated slide-staining instruments and automated slide-preparation instruments are currently available from several large manufacturers. We currently have an adequate supply of workstations used in the InPath System and have contracted for the design and manufacture of the next generation of the workstation platform.

Working Capital Practices

During the fiscal year ended December 31, 2006, we did not sell any InPath System products. During 2005, we sold several AcCell instrument platforms and billed and received fees under an AcCell fee-for-use contract. Based on certain settlement agreements, we have given up all our rights to sell the AcCell instrument platforms. CCI has instead elected to proceed with the development of its new fully-integrated AIPS workstation and all the Inpath System applications. We have financed our U.S. operations and research and development efforts by raising funds through the sale of debt or equity securities. We will continue to use these methods to fund our operations until such time as we are able to generate adequate revenues and profits from the sale of some or all of our products.

We believe that future sales of the InPath System or other products into foreign markets may result in collection periods that may be longer than those expected for domestic sales of these products. Our strategy will be to use letters of credit or other secured forms of payment, whenever possible, in sales of products in foreign markets.

Employees

As of April 12, 2007, we employed a total of five full-time employees and three part-time employees supplemented by additional consultants in the United States.

Financial Information About Foreign and Domestic Operations and Export Sales

Markets outside of North America are an important factor in our business strategy. Any business that operates on a worldwide basis and conducts its business in one or more local currencies is subject to the risk of fluctuations in the value of those currencies against the dollar. Such businesses are also subject to changing political climates, differences in culture and the local practices of doing business, as well as North American and foreign government actions such as export and import rules, tariffs, duties, embargoes and trade sanctions. We do not regard these risks, however, as a significant deterrent to our strategy to introduce our InPath System to foreign markets in the future. As we begin to market and sell our InPath System, we will closely review our foreign operational practices. We will attempt to adopt strategies to minimize the risks of changing economic and political conditions within foreign countries.

During the fiscal year ended December 31, 2006, the Company did not have any foreign operations and was not conducting any foreign sales of its products.

Risk Factors

The risks described below are not the only ones we face. Additional risks are described elsewhere in this report under the Recent Developments and Legal Proceedings sections, among others. There may also be risks not presently known to us or that we currently deem immaterial that may also impair our business operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks, and the trading price of our common stock could decline.

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There is a limited market for “penny stocks” such as our common stock.

Our common stock is considered a “penny stock” because, among other things, our price is below $5 per share, it trades on the Over-the-Counter Bulletin Board and we have net tangible assets of less than $2,000,000. As a result, there may be little or no coverage by security analysts, the trading price may be lower, and it may be more difficult for our stockholders to dispose of, or to obtain accurate quotations as to the market value of, the common stock. Being a penny stock also could limit the liquidity of our common stock.

The historically volatile market price of our common stock may affect the value of our stockholders’ investments.

The market price of our common stock, like that of many other life science and biotechnology companies, has in the past been highly volatile. This volatility is likely to continue for the foreseeable future. Factors affecting potential volatility include:

•  general economic and other external market factors;

•  announcements of mergers, acquisitions, licenses and strategic agreements;

•  announcements of private or public sales of securities;

•  announcements of new products or technology by us or our competitors;

•  ability to finance our operations;

•  fluctuations in operating results; and

•  announcements of the FDA relating to products.

Our common stock is unlikely to produce dividend income for the foreseeable future.

We have never paid a cash dividend on our common stock and we do not anticipate paying cash dividends for the foreseeable future; our ability to declare dividends on our common stock is further limited by the terms of certain of the Company’s other securities, including several series of its preferred stock. We intend to reinvest any funds that might otherwise be available for the payment of dividends in further development of our business.

Our common stock is subject to dilution, and an investor’s ownership interest and related value may decline.

We are authorized to issue up to 10,000,000 shares of preferred stock. As of December 31, 2006, we had 82,655 shares of Series A convertible preferred stock outstanding, which convert into approximately 36,099 shares of our common stock; 225,736 shares of Series B convertible preferred stock outstanding, which convert into approximately 902,944 shares of our common stock; 38,333 shares of Series C convertible preferred stock outstanding, which convert into approximately 191,665 shares of our common stock; 175,000 shares of Series D convertible preferred stock outstanding, which convert into approximately 1,750,000 shares of our common stock; and 52,918 shares of Series E convertible preferred stock outstanding, which convert into approximately 1,455,224 shares of our common stock. There are cumulative dividends due on the Series B, Series C, Series D, and Series E convertible preferred stock, which may be paid in kind in shares of our common stock. Our Certificate of Incorporation (as amended to date) gives our board of directors authority to issue the remaining 5,143,137 undesignated shares of preferred stock with such voting rights, if any, designations, rights, preferences and limitations as the Board may determine.

At December 31, 2006, we had outstanding warrants to purchase an aggregate 55,086,337 shares of our common stock, outstanding options to purchase approximately 2,257,991 shares of our common stock, and 450,000 stock appreciation rights, which are convertible into approximately 289,286 shares of common stock.

At December 31, 2006, outstanding convertible promissory notes, including interest due were convertible into approximately 510,000 shares of our common stock. Under the provisions of certain outstanding convertible promissory notes, the holders have the right to receive a warrant to purchase additional shares of common stock

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upon exercise of the conversion right. Because warrants are due upon conversion but not upon repayment of the convertible promissory notes, we are unable to determine the exact number of additional warrants to purchase shares of our common stock that will be issuable upon conversion of the notes, although it could be approximately 170,000 shares.

At December 31, 2006, we had approximately 16,869,342 shares of our common stock reserved for future stock options under our 1999 Equity Incentive Plan and 160,415 shares of our common stock reserved for future sale to employees under our 1999 Employee Stock Purchase Plan.

The issuance of shares of our common stock upon the conversion of our preferred stock or notes, or upon exercise of outstanding options and warrants, would cause dilution of existing stockholders’ percentage ownership of the Company. Holders of our common stock do not have preemptive rights, meaning that current stockholders do not have the right to purchase any new shares in order to maintain their proportionate ownership in the Company. Such stock issuances and the resulting dilution could also adversely affect the price of our common stock.

We have a history of operating losses and there are doubts as to our ability to continue as a going concern.

Our revenues, from inception in March 1998 through 2003, were derived almost entirely from sales by Samba Technologies SARL (“Samba”), our former wholly-owned subsidiary. The assets of Samba were sold in December 2003 as part of the French Commercial Court ordered liquidation and CCI lost all rights and title to the assets, including Samba’s software. CCI has sold only a very limited amount of our InPath System products to date and cannot be certain as to when sales of the Company’s products might occur in the future.

We expect to devote substantial resources to product development. We anticipate that we will continue to incur significant losses unless and until some or all of our products have been successfully introduced, if ever, into the marketplace.

We have incurred substantial losses and have limited financial resources. Consequently, our independent auditors have noted that these conditions raise substantial doubt as to our ability to continue as a going concern in the report of our independent auditors. Our financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result from the outcome of this uncertainty. Moreover, the going concern explanatory paragraph may make obtaining additional financing more difficult or costly.

We continue to have the need to raise funds for operating purposes.

We have a history of losses and continue to experience the need to raise funds for operating purposes until we generate significant sales revenue. Lack of funding may affect our overall ability to operate our business, including the ability to employ adequate staff and conduct ongoing studies and clinical trials of our products. Failure to raise adequate financing to meet our business needs could materially jeopardize CCI and its ability to conduct business. There can be no assurance that we will be able to secure necessary funds.

We are unable to issue more common stock

As of December 31, 2006, we were authorized to issue 375,000,000 shares of common stock. If the holders of our preferred stock outstanding and the holders of the convertible promissory notes outstanding elect to convert their holdings into common stock, and the holders of the stock options and warrants outstanding elect to exercise their rights to purchase common stock, the Company is obligated to have issued approximately 377,000,000 shares of commons stock, which is in excess of what we currently have authorized. We plan to ask the Company’s shareholders to authorize the issuance of additional shares or reverse split our common stock at our annual meeting. However there is no guarantee that we will be able to obtain the votes needed to obtain the additional authorized shares.

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We may not be able to meet our long-term capital requirements.

We believe that our existing capital resources may not be sufficient to meet the long-term requirements of the Company. The sale of product and services may not provide the capital needed to meet our long-term funding requirements. We anticipate that these long-term funding needs may require the sale or issuance of additional shares of common stock (subject to authorization to issue additional common shares from our shareholders or approval for a reverse split of the common shares outstanding) or instruments convertible into common stock. Such sales or issuances, if any, would have a dilutive effect on the holdings of our stockholders and the value of our common stock. We cannot be certain what level of dilution, if any, may occur or if we will be able to complete any such sales of common stock or other securities in the future. At April 12, 2007, we believe we have the necessary capital to fund operations for the next nine to twelve months. Due to unforeseen circumstances, additional needs for funds may arise over the next 12 months. Whether we will need to raise additional funds to support our long-term operations is influenced by many factors, including the costs, timing and success of efforts to develop products and market acceptance of our products.

Our products are subject to government regulation and they may not receive necessary government approvals.

The sale and use of our products in the United States is regulated by the FDA. We must meet significant FDA requirements before we receive clearance to market our products. Included in these FDA requirements is the conduct of lengthy and expensive clinical trials to prove the safety and efficacy of the products. Until we complete such clinical trials, our products may be used only for research purposes or to provide supplemental diagnostic information in the United States. We have FDA approval for one of our products, the e² Collector. We have commenced a follow- up clinical trial for the e² Collector and commenced clinical trials for the EndoScan product. We cannot be certain these trials can be completed according to plan or that the results of these trials, or any future trials, when submitted to the FDA along with other information, will result in FDA clearance to market our products in the United States.

Sales of medical devices and diagnostic tests outside the United States are subject to foreign regulatory requirements that vary from country to country. The time required to obtain regulatory clearance in a foreign country may be longer or shorter than that required for FDA marketing clearance. Export sales of certain devices that have not received FDA marketing clearance may be subject to regulations and permits, which may restrict our ability to export the products to foreign markets. If we are unable to obtain FDA clearance for our products, we may need to seek foreign manufacturing agreements to be able to produce and deliver our products to foreign markets. We cannot be certain that we will be able to secure such foreign manufacturing agreements on acceptable terms, if at all.

We may not be able to compete with companies that are larger and have more resources.

We compete in the medical device and diagnostics marketplace with companies that are much larger and have greater financial resources. We may not succeed in developing technologies and products that are more effective than those being developed by our competitors. Our technologies and products may be rendered obsolete or noncompetitive as a result of products introduced by our competitors. Most of our competitors have substantially greater financial and technical resources, production and marketing capabilities, and related experience, which may enable them to develop, manufacture and market their products more successfully and at a lower cost. In addition, many of our competitors have significantly greater experience in conducting preclinical testing and clinical trials of products and obtaining regulatory approvals to market such products. Accordingly, our competitors may succeed in obtaining FDA approval for products more rapidly, which may give them an advantage in achieving market acceptance of their products.

We may not be able to market our products.

We do not intend to maintain a direct sales force to market and sell our products. Therefore, in order to successfully market and sell our products, we must be able to negotiate profitable marketing and sales agreements with organizations that have direct sales forces calling on domestic and foreign market participants that may use our

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products. If we are not able to successfully negotiate such agreements, we may be forced to market our products through our own sales force. We cannot be certain that we will be successful in developing and training such a sales force, should one be required, or that we will have the financial resources to carry out such development and training.

We may not be able to adequately protect our intellectual property.

We hold a variety of patents and trademarks and have applied for a significant number of additional patents and trademarks with the U.S. Patent and Trademark Office and foreign patent authorities. We intend to file additional patent and trademark applications as dictated by our research and development projects and business interests. We cannot be certain that any of the currently pending patent or trademark applications, or any of those which may be filed in the future, will be granted or that they will provide any meaningful protection for our products or technologies.

We protect much of our core technology as trade secrets because our management believes that patent protection would not be possible or would be less effective than maintaining secrecy. We cannot be certain that we will be able to maintain secrecy or that a third-party will not be able to develop technology independently.

The cost of litigation to uphold the validity of a patent or patent application, prevent infringement or protect trade secrets can be substantial, even if we are successful. Furthermore, we cannot be certain that others will not develop similar technology independently or design around the patent aspects of our products.

Management turnover could cause our business to suffer.

CCI has experienced significant turnover in its senior management in the past and there can be no assurance that we will be able to attract and retain key personnel.

Item 2.   Description of Property

We occupy approximately 2,540 square feet of leased space at 414 N. Orleans St., Suites 502 and 503, Chicago, Illinois 60610, under a five-year lease that expires in October 2008. This space houses our executive offices, research laboratory, and engineering development facilities. We also lease an executive office of approximately 300 square feet at 212 Carnegie Center, Suite 206, Princeton, New Jersey 08540 for our chief executive officer. We consider our facilities to be well utilized, well maintained, and in good operating condition. Further, we consider the facilities to be suitable for their intended purposes and to have capacities adequate to meet current and projected needs for our operations. CCI does not have any policies regarding investing in real estate, and has not had in the past and does not expect in the future to invest in real estate.

Item 3.   Legal Proceedings

Settled in 2006

Ungaretti & Harris LLP.  In May 2004, the law firm Ungaretti & Harris LLP filed an amended complaint against CCI in the Circuit Court of Cook County, Illinois (04 L 1101), to collect fees for services rendered prior to December 31, 2003. In January 2005, the court entered summary judgment in favor of Ungaretti & Harris and against CCI in the amount of $195,500, plus costs of suit. The parties subsequently entered into a settlement agreement to satisfy the judgment. CCI made the final payment in June 2006. Ungaretti & Harris filed its Satisfaction of Judgment with the Circuit Court of Cook County on June 21, 2006. CCI’s payments to Ungaretti & Harris are now concluded and CCI believes it has no further obligation to the firm.

Hill & Barlow LLP.  In February 2003, Hill & Barlow LLP, a now defunct law firm, filed a complaint against CCI in the Trial Court of the Commonwealth of Massachusetts (000740), seeking the collection of unpaid legal fees. Judgment was entered against CCI in the amount of $16,842, plus costs and interest. In April 2004, the parties completed a settlement agreement, which was never executed due to a dispute over return of certain client files. In July 2006, the parties executed an amended settlement agreement to satisfy the judgment. CCI made the sole payment required under the agreement and Hill & Barlow LLP tendered its Satisfaction of Judgment for filing to the

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Trial Court of the Commonwealth of Massachusetts in July 2006. CCI believes it has no further obligation to Hill & Barlow LLP.

Medical College of Georgia Research Institute, Inc.  In November 2003, the Medical College of Georgia Research Institute, Inc. filed suit against CCI in the Superior Court of Richmond County, Georgia (Case No. 2003-RCCV-1211) to collect amounts allegedly due pursuant to an agreement to provide a clinical study for CCI. The Medical College of Georgia, R.I. claimed that the principal amount of the obligation due from CCI was approximately $86,700, but sought to collect approximately $315,300 pursuant to an interest provision of 10% per month. In October 2004, the court entered summary judgment in favor of the Medical College of Georgia, R.I. and against CCI in the amount of $68,404. In July 2006, the parties reached a settlement agreement to satisfy the judgment. CCI made the sole payment of $58,000 required under the agreement to the Medical College of Georgia, R.I. in July 2006. CCI believes it has no further obligation to the Medical College of Georgia Research Institute, Inc.

Account Resource.  In 2002, Account Resource filed a complaint against CCI in the Circuit Court of Cook County, Illinois (Case No. 02 m1 0165588) for breach of contract for supply of temporary employees. The Circuit Court of Cook County entered judgment against CCI for $30,000. Account Resource recorded that judgment during February 2003. In July 2006, the parties reached a settlement agreement to satisfy the judgment. On July 14, 2006, CCI paid the sole payment of $18,000. CCI believes it has no further obligation to Account Resource.

Arthur Lipper III.  In July 2004, Arthur Lipper III filed a lawsuit against CCI in the Circuit Court of Cook County, Illinois (04 L 7671). Mr. Lipper claimed that CCI breached a consulting services agreement and sought $60,000, plus interest and court costs. CCI entered into a settlement agreement with Mr. Lipper in February 2006 pursuant to which CCI has agreed to pay Mr. Lipper $60,000 in full satisfaction of his claims. CCI’s payments to Mr. Lipper were made as agreed in 2006. The lawsuit has been dismissed. CCI believes it has no further obligation to Mr. Lipper.

The Lumber Company (formerly Garrett Realty, Inc.).  Prior to CCI’s acquisition of AccuMed, Garrett Realty, Inc. filed suit against AccuMed for unpaid rent and related expenses under a lease for office space located in Chicago, Illinois (Circuit Court of Cook County, Illinois (Case No. 01 M1 725821)). In July 2002, judgment was entered in favor of Garrett in the amount of approximately $157,000. In December 2002, pursuant to a court order, Garrett seized approximately $12,500 from a CCI bank account as a partial payment against the judgment amount. CCI recorded a $290,000 lease obligation in accounting for the AccuMed merger based on the present value of the future payments, but contested the right of Garrett to pursue collection of the judgment against the assets of CCI. During the first quarter of 2004, CCI reached a preliminary settlement on the outstanding judgment amounting to approximately $157,000 (plus interest) at that time, which required six monthly payments. In 2004, CCI made the first four required monthly payments. CCI also agreed to issue shares of its common stock as part of the final settlement. In March 2005, Garrett assigned its right, title and interest in the judgment to The Lumber Company. In March 2006, CCI and Lumber Co. entered into a formal settlement agreement under the same general terms reflected above. In connection with that March 2006 agreement, CCI paid to Lumber Co. two payments of $13,724 and also issued to Lumber Co. 823,466 restricted shares of CCI common stock. Final payment was made in April 2006. CCI believes it has no further obligation under this settlement.

The Lash Group, Inc.  In June 2004, The Lash Group, Inc., a healthcare consulting firm, filed a lawsuit against the Company in the General Court of Justice, Superior Court Division, in Mecklenburg County, North Carolina (04 CVS 10367). The Lash Group sought approximately $94,000, plus interest, attorney fees, and court costs, for the alleged breach of an agreement, with respect to which Peter Gombrich, the former Chairman and Chief Executive Officer, and CCI were sought to be held primarily liable. In October 2005, CCI entered into a settlement agreement with The Lash Group, which required The Lash Group to file a voluntary dismissal with prejudice of the lawsuit. In March 2006, CCI made its final payment in full satisfaction of the settlement agreement. CCI believes it has no further obligations under this settlement.

Reid Jilek.  In October 2004, Reid Jilek filed a lawsuit against CCI in the Circuit Court of Cook County, Illinois (04 CH 17375). Mr. Jilek claimed that CCI had breached a 2003 services agreement and that CCI subsequently breached a 2004 settlement agreement. Mr. Jilek sought $180,000 pursuant to the services agreement or, alternatively, $114,000 pursuant to the settlement agreement. Mr. Jilek also sought a court order that CCI issue him 1,500,000 warrants to purchase CCI stock at $0.17 per share pursuant to the services agreement. CCI previously

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issued to Mr. Jilek warrants to purchase 1,000,000 shares of its common stock at $0.17 per share. CCI entered into a settlement agreement with Mr. Jilek in December 2005 pursuant to which CCI paid Mr. Jilek $15,000 for attorney fees, issued him warrants to purchase 1,000,000 shares at $.04 per share (in exchange for the cancellation of the previously issued warrants to purchase 1,000,000 shares) and has agreed to pay Mr. Jilek $5,000 each month for the next 30 months. The payments have been made to date as scheduled. As of December 31, 2006, the Company had a remaining balance of $90,000 accrued.

Pending as of December 31, 2006; Subsequent Events

Peter Gombrich.  In April 2005, former CCI officer and director Peter Gombrich filed suit against CCI and CCI’s former Chief Executive Officer Denis M. O’Donnell, M.D. in the Circuit Court of Cook County, Illinois (05 L 4543). Mr. Gombrich claims that CCI breached a written employment contract and that it owed him in excess of $849,500. Mr. Gombrich also alleged a claim against CCI for contribution and indemnification regarding agreements he allegedly signed as a personal guarantor for certain alleged CCI obligations. CCI filed a motion to compel the case to arbitration, pursuant to the terms of the employment contract, and CCI’s motion was granted in August 2005. In late 2005, CCI filed its answer and affirmative defenses, and has asserted numerous counterclaims against Mr. Gombrich. The arbitration hearing on the parties’ cross-claims concluded in October 2006. The arbitrator issued a decision in January 2007, awarding Mr. Gombrich $538,413 for compensation plus sixty percent of his attorney fees as they relate to the award. The plaintiff’s attorney has filed a motion to reconsider the judgment against Mr. Gombrich relating to his indemnification claim. The attorney fees have yet to be determined. The claim against CCI for contribution and indemnification was denied. The Company believes that it recorded a sufficient liability reserve for this award.

The Regents of the University of California.  In May 2004, The Regents of the University of California filed suit against CCI in the Superior Court of California, County of San Francisco (CGC-04-431944). The University of California claims that CCI breached an agreement to sponsor a research project for a period of one year. The complaint seeks compensatory damages in the amount of $57,530 and additional lost opportunity damages in the amount of $75,220. In January 2005, the University of California requested that the court enter a default judgment against CCI in the amount of $132,827, which includes court costs. In February 2007, CCI and the University of California agreed to a financial settlement of the default judgment. CCI tendered final payment in March 2007 and believes it has no further obligation.

In the third quarter of 2006, The Attorney General of the State of Illinois has brought an action in the Circuit Court of Cook County, Illinois (Case No. 2006-L-003353) against the Company with regard to the Company’s alleged failure to pay back wages in the amount of $282,833 to certain of its former employees. The Company believes that it has settled the former employees’ claims and is supplying the State with substantiation that all such back wages have been paid.

In August of 2006, Diamics, Inc. brought an action against Dr. Reid Jilek and CCI in the Superior Court of Marin County, California (Case No. CV063475) to declare that Diamics had fully performed its payment obligations under a promissory note (“Note”) which Diamics had previously issued to Dr. Jilek. The Note entitled Dr. Jilek to a non-dilutable 10% ownership interest in Diamics if payment of the loan installments were not executed in accordance with the terms of the note. Dr. Jilek has asserted that Diamics defaulted under the Note and that he is entitled to the non-dilutable 10% equity ownership in Diamics. Dr. Jilek has assigned his rights under the Note to the Company. The case has been transferred to the Superior Court of San Diego. However, the Company has not recorded any value for this ownership as of December 31, 2006, pending the outcome of this litigation. CCI and Diamics in February 2006 settled litigation between the two companies for a suit CCI filed against Diamics in October 2005 and a suit Diamics filed against CCI in June 2005. CCI had no monetary obligations under the settlement.

Other claims

Other Creditors.  CCI was a party to a number of other proceedings, informal demands, or debt for services brought by former unsecured creditors, employees and consultants to collect past due amounts for services. CCI is attempting to settle these suits and unfilled claims. CCI does not consider any of these claims to be material.

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During the year ended December 31, 2006, CCI continued its’ restructuring settlement of its outstanding debt and accounts payable. During the period, the Company settled claims of creditors totaling of approximately $2.5 million through cash payments of approximately $800,000 and 2,928,271 shares of restricted common stock issued at a value of approximately $320,500. In addition, the Company issued 450,000 warrants valued at $44,000.

Item 4.   Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of stockholders during the fourth quarter of 2006.

PART II

Item 5.   Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchase of Equity Securities

Market Information

Our common stock is quoted on the Over-the-Counter Bulletin Board under the symbol “CYCR.OB.” The following table lists the high and low bid information for our common stock for the periods indicated, as reported on the Over-the-Counter Bulletin Board. These quotations reflect inter-dealer prices, and may not include retail mark-ups, mark-downs, or commissions, and may not reflect actual transactions.

	Range of Common Stock
	High		Low
Year Ended December 31, 2006
1st Quarter	$	0.15	$	0.05
2nd Quarter	$	0.25	$	0.11
3rd Quarter	$	0.23	$	0.15
4th Quarter	$	0.44	$	0.17
Year Ended December 31, 2005
1st Quarter	$	0.12	$	0.07
2nd Quarter	$	0.07	$	0.05
3rd Quarter	$	0.16	$	0.02
4th Quarter	$	0.10	$	0.04

Holders

As of March 30, 2007, we had approximately 1,429 record holders of our shares of common stock. This number does not include other persons who may hold only a beneficial interest, and not an interest of record, in our common stock.

Dividends

We have not paid a cash dividend on shares of our common stock, and the Board of Directors is not contemplating paying dividends at any time in the foreseeable future. The terms of certain of the Company’s securities, including its Series B, C, D and E preferred stock, provide that so long as such security is outstanding the Company shall not declare any dividends on its common stock (or any other stock junior to such security) except for dividends payable in shares of stock of the Company of any class junior to such security, or redeem or purchase or permit any subsidiary to purchase any shares of common stock or such junior stock, or make any distributions of cash or property among the holders of the common stock or any junior stock by the reduction of capital stock or otherwise, if any dividends on the security are then in arrears.

We paid non-cash dividends, in the form of newly issued shares of our common stock, amounting to $693,000 and $20,000 during 2006 and 2005, respectively, to holders of shares of our preferred stock who elected to convert their preferred stock and cumulative dividends thereon into shares of our common stock. We have a contingent

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obligation to pay cumulative dividends on various series of our convertible preferred stock in the aggregate amount of approximately $2,085,000, which we intend to pay through the issuance of shares of our common stock, if and when the holders of the preferred shares elect to convert their shares into common stock.

Stock Transfer Agent

Our stock transfer agent is LaSalle Bank NA, 135 South LaSalle Street, Chicago, IL 60603, and its telephone number is (312) 904-2000.

Securities Authorized for Issuance under Equity Compensation Plans

The following table presents information about the equity compensation plans of the Company as of fiscal-year end December 31, 2006. See also Note 8 — Stockholders’ Equity and Note 11 — Equity Incentive Plan and Employee Stock Purchase Plan in the Notes to our Consolidated Financial Statements for further information.

Equity Compensation Plan Information

					Number of Securities
					Remaining Available
					for Future Issuance
	Number of Securities		Weighted-Average		Under Equity
	to be Issued Upon Exercise of		Exercise Price of		Compensation Plans
	Outstanding Options,		Outstanding Options,		(Excluding Securities
Plan Category	Warrants and Rights		Warrants, and Rights		Reflected in Column (a))
	(a)		(b)		(c)
Equity Compensation Plans Approved by Security Holders
1999 Equity Incentive Plan (as amended) — 20,000,000 shares		2,257,991	$	0.2767		16,869,342
1999 Employee Stock Purchase Plan — 200,000 shares		—		—		160,415
Equity Compensation Plans Not Approved by Security Holders
Warrants issued with debt and equity(1)		35,828,718	$	0.1614		—
Warrants issued for financial and IR services(2)		5,270,125	$	0.1566		—
Warrants issued for officer and director compensation(3)		10,250,000	$	0.1683		—
Warrants issued in forgiveness of debt and other services(4)		3,697,660	$	0.1232		—
Warrants from AccuMed acquisition(5)		39,834	$	15.0600		—
Total		57,344,328	$	0.3309		17,029,757

(1)	CCI has issued warrants in conjunction with the issuance of debt and equity. The issuance of warrants significantly reduced the cash costs that would otherwise be associated with raising capital.
(2)	CCI has generally included warrants in compensation agreements for providers of investor relations and/or public relations services. Warrants were also issued to financial advisors as remuneration for the procurement of equity, debt and preferred stock convertible into equity. This practice significantly reduces the cash costs to CCI to obtain these services.
(3)	In lieu of cash payment for employment services during fiscal year 2006, 4,000,000 warrants each were issued to the former CEO David Weissberg M.D., and our current CFO Robert McCullough Jr. In addition, Augusto Ocana M.D., our current CEO, was issued 500,000 warrants. Directors John Abeles M.D. and Alexander Milley

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were issued 625,000 warrants each for services rendered. Former Vice President of Legal and Regulatory Affairs, Edward Renner was issued 500,000 warrants for services.

(4)	CCI has issued warrants to settle debt and pay for services rendered.
(5)	In September 2001, CCI completed the acquisition of AccuMed by merging it into a wholly-owned subsidiary of CCI. As a result, CCI assumed stock options and warrants outstanding on the records of AccuMed at the time of the acquisition. The remainder of the options that were assumed in the acquisition are included in total options outstanding under the Company’s 1999 Equity Incentive Plan.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

Issuance of Securities

Common Stock.  During fiscal 2006 and 2005, CCI offered common stock to foreign and accredited investors in exchange for cash.

During 2006, the Company received net aggregate proceeds of $7,283,000 and issued an aggregate 80,064,292 shares of restricted common stock at a weighted average of $0.095 per share. During 2005, the Company received net aggregate proceeds of $1,483,000 and issued an aggregate 11,858,334 shares of restricted common stock at a weighted average of $0.05 per share and 42,510,496 unregistered subscribed shares at $0.025 per share.

Also during 2006, the Company received proceeds of $246,988 from the exercise of warrants for 2,023,079 shares of restricted common stock.

Warrants.  During 2006, as part of the offering of common stock, CCI granted investors at total of 20,689,446 warrants to purchase common stock at prices ranging from $0.10 to $0.32 per share. Beginning in December 2004 and ending in June 2005, CCI offered common stock to accredited investors in exchange for cash. As part of the offering, CCI granted each investor a warrant to purchase common stock at an exercise price of $0.10 per share, with the first $250,000 of investment to receive 50% warrant coverage and subsequent investments in excess of $250,000 to receive 25% coverage.

In March 2006, CCI issued warrants to purchase 1,000,000 shares of common stock with an exercise price of $0.04 per share to a non-employee consultant as a settlement for past consulting services. CCI valued the warrants at $128,700 using the Black-Scholes valuation model and recorded the amount as an administrative expense for the year ended December 31, 2006.

In March 2006, CCI also issued warrants to purchase 300,000 shares of common stock with an exercise price of $0.10 per share to a former employee as a settlement for past employment services. CCI valued the warrants at $37,170 using the Black-Scholes valuation model and recorded the amount as a payroll expense for the year December 31, 2006.

In addition, during 2006, the Company issued warrants to purchase 1,943,167 shares of common stock at exercise prices ranging from $0.15 to $0.20 per share to non employee vendors for services performed. The warrants are for a term ranging from three to five years and are exercisable immediately. CCI valued the warrants at $312,675 using the Black-Scholes valuation model and recorded the amount as an administrative expense for the year ended December 31, 2006.

During December 2006, the Company issued a warrant to a vendor in connection with settlement of trade debt. The warrant entitles the vendor to purchase 450,000 shares of common stock at an exercise price of $0.15, exercisable immediately, over a term of five years. CCI valued the warrant $43,535 using the Black-Scholes model and recorded the amount against the trade debt owed.

Also in 2006, the Company issued to its executive officers warrants to purchase a total of 8,000,000 shares of restricted common stock at an exercise price of $0.1275 to $0.20 per share. These warrants vest at January 1, 2007. The Company also issued each independent director warrants to purchase 625,000 shares of common stock at $0.20 per share for a total of 1,250,000 shares of common stock. These warrants are immediately exercisable. CCI recorded total non-cash compensation expense in connection with these warrants of $1,094,600, based upon the fair

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value as determined using the Black-Scholes valuation model. The Company issued warrants to an executive officer to purchase a total of 500,000 shares of restricted common stock at an exercise price of $0.13 per share, exercisable immediately and for a term of three years. The Company also issued 500,000 warrants to a former executive officer for compensation owed him during his employment term, to purchase a total of 500,000 shares of common stock at an exercise price of $0.20 per share, exercisable immediately and for a term of five years

The Company was obligated under the terms of subscription agreement for the Bridge I convertible promissory notes to issue additional warrants to the note holders based on certain events. If and when the holder of a Bridge I note elects to convert the principal of the note into shares of CCI common stock, the holder is entitled to receive a warrant to purchase one share of CCI common stock for each four shares of CCI common stock into which the note is converted at an exercise price equal to $0.20, based on the written offer dated October 10, 2003. The Company issued 1,572,726 warrants in the fourth quarter of 2006 to all the holders that have converted their notes and accrued interest.

In February 2005, CCI issued warrants to purchase 200,000 shares of common stock with an exercise price of $0.06 per share to a non-employee financial consultant for past financial services. CCI valued the warrants at $16,260 using the Black-Scholes valuation model and recorded this as an administrative expense for the first quarter of fiscal 2005.

In February 2005, CCI issued warrants to purchase an aggregate 6,500,000 shares of common stock of the Company with an exercise price of $0.30 per share to Azimuth Corporation and Cadmus Corporation in exchange for such warrant holders’ agreement to cancel certain other warrants containing anti-dilution provisions unfavorable to the Company. CCI valued the warrants at $420,551 using the Black-Scholes valuation model and recorded the amount as an administrative expense in the first quarter ended March 31, 2005. In 2006, the warrants issued to Azimuth and Cadmus in February 2005, as noted above, were modified. The total of the warrants were reduced to 3,500,000 or 1,548,077 and 1,951,923 shares to Azimuth and Cadmus, respectively, at an exercise price of $0.10 per share.

In May 2005, CCI issued warrants to purchase 556,500 shares of common stock with an exercise price of $0.06 per share to a non-employee financial consultant for past financial services. CCI valued the warrants at $25,265 using the Black-Scholes valuation model and recorded the amount to additional paid-in-capital — warrants for the second quarter of fiscal 2005.

In general, each of the above warrants expires three or five years from the date of issuance and is exercisable immediately upon issuance. None of the warrants are subject to any vesting schedules or conditions other than those imposed by applicable securities laws, except for the 8,000,000 warrants issued to the officers. These warrants are exercisable on January 1, 2007. The exercise price and number of shares issuable upon exercise of the warrants are subject to anti-dilution protection in the event the Company effects a subdivision or combination of its common stock or declares or pays a dividend or distribution in common stock; the warrants also provide for adjustments in the event the Company declares or pays a dividend or other distribution in other securities or property of the Company or is a party to a reorganization, reclassification, merger or similar event.

Conversions

During 2006, holders of an aggregate $952,500 principal amount of Bridge I, II and III Convertible Promissory Notes elected to convert their notes and related accrued interest totaling approximately $278,000 into 9,337,698 shares of unregistered common stock

Also in 2006, Northlea Partners, a company affiliated with one of our directors, elected to convert Convertible promissory notes totaling approximately $120,000 in principal and accrued interest into 900,188 shares of unregistered common stock.

Bridge I.  During the fiscal year ended December 31, 2005, holders of an aggregate $250,000 principal amount of Bridge I Convertible Promissory Notes elected to convert their notes and related accrued interest of approximately $51,000 into 2,008,962 shares of unregistered common stock of the Company.

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Bridge III.  During the fiscal year ended December 31, 2005, holders of an aggregate $1,360,000 principal amount of Bridge III Convertible Promissory Notes elected to convert their notes and related accrued interest of approximately $208,000 into 15,282,236 shares of unregistered common stock of the Company.

Bridge IV.  During the fiscal year ended December 31, 2005, holders of an aggregate $2,574,000 principal amount of Bridge IV Convertible Promissory Notes elected to convert their notes, consented to waive accrued interest of $332,000, and elected to convert related remaining accrued interest of approximately $47,000 into 25,605,000 shares of unregistered common stock of the Company.

In May 2006, Monsun converted its convertible promissory notes in the principal amount of $500,000 and $519,000, including accrued interest, into 7,624,327 unregistered shares of the Company’s common stock. Since the actual conversion rate was less than the rate specified in the note, the Company recorded an additional non-cash charge to interest expense of $1,321,000 on the beneficial conversion of the Monsun note for the year ended December 31, 2006.

Preferred Stock.  During 2006, holders of 139,370 shares of Series B convertible preferred stock converted their shares, including cumulative dividends due thereon, into 851,040 shares of unregistered common stock. Holders of 207,500 shares of Series C preferred stock converted their shares, including cumulative dividends due thereon into 1,517,593 shares of unregistered common stock. Also in 2006, holders of 180,680 shares (119,380 of these shares were held by affiliates of one of our directors) of Series E convertible preferred stock converted their shares, including cumulative dividends due thereon, into 7,209,963 shares of unregistered common stock. During the fiscal year ended December 31, 2005, a shareholder converted an aggregate 17,000 shares of Series C convertible preferred stock, including cumulative dividends due thereon, into 118,260 shares of unregistered common stock.

Please refer to Note 6 — Notes Payable -Related Parties, Note 7 — Notes Payable and Note 8 — Stockholders’ Equity in the Notes to our Consolidated Financial Statements for more information on the promissory notes and the Company’s preferred stock.

CCI issued such securities in reliance on the safe harbor and exemptions from registration provided under Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales or issuances were made to a limited number of persons, all of whom were accredited investors, and transfer was restricted by the Company in accordance with the requirements of applicable law. In addition to representations by the above-referenced persons, the Company has made independent determinations such that it reasonably believes that all of the investors were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, these investors were provided with access to CCI’s filings with the Securities and Exchange Commission.

Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers

During 2006, an affiliate of our Chief Financial Officer purchased 1,875,000 shares of unregistered common stock at a price of $0.04 per share.

Item 6.   Management’s Discussion and Analysis or Plan of Operation

Forward-Looking Statements

Certain statements contained in this discussion and analysis that are not related to historical results are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are predictive, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “hopes,” or similar expressions constitute forward-looking statements. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, or possible future actions by us are also forward-looking statements.

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These forward-looking statements are based on beliefs of our management as well as current expectations, projections and assumptions currently available to the Company and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated or implied by such forward-looking statements. These risks are described more fully under the caption “Risk Factors” herein and include our ability to raise capital; our ability to settle litigation; our ability to retain key employees; economic conditions; technological advances in the medical field; demand and market acceptance risks for new and existing products, technologies, and healthcare services; the impact of competitive products and pricing; manufacturing capacity; new plant start-ups; U.S. and international regulatory, trade, and tax policies; product development risks, including technological difficulties; ability to enforce patents; and foreseeable and unforeseeable foreign regulatory and commercialization factors.

Should one or more of such risks or uncertainties materialize or should underlying expectations, projections or assumptions prove incorrect, actual results may vary materially from those described. Those events and uncertainties are difficult to predict accurately and many are beyond our control. We believe that our expectations with regard to forward-looking statements are based upon reasonable assumptions within the bounds of our current business and operational knowledge, but we cannot be sure that our actual results or performance will conform to any future results or performance expressed or implied by any forward-looking statements. We assume no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of these statements except as specifically required by law. Accordingly, past results and trends should not be used to anticipate future results or trends.

Overview

CytoCore, Inc. is a life sciences company engaged in the design, development, and commercialization of cost-effective screening systems to assist in the early detection of cancer. CCI is currently focused on the production and anticipated 2007 sales launch of its e² cervical cell collection device and the design, development and marketing of its InPath^tm System and related image analysis systems for uterine, endometrial, cervical and bladder cancers. The InPath System and related products are intended to detect cancer and cancer-related diseases, and may be used in a laboratory, clinic or doctor’s office.

The science of medical diagnostics has advanced significantly during the past decade. Much of this advance has come as a result of new knowledge of the human genome and related proteins, which form the foundation of cell biology and the human body. Our goal is to utilize this research as a base to develop screening and diagnostic testing products for cancer and cancer-related diseases. We believe that the success of these products will improve patient care through more accurate test performance, wider product availability and more cost-effective service delivery. We have developed an FDA approved product, the e² Collector cervical collection device, and are developing a series of products which are intended to screen for, at the earliest possible stage, cancer, and cancer related diseases and may be used in laboratory, clinic and doctors’ offices. The screening systems consist primarily of the Automated Image Proteomic Systems or AIPS, combined with the new P2x7 genetic biologic marker that is the lead marker for the Cocktail CVX and GCI assays. We call our suite of products the “Inpath” system.

Our strategy is to develop products through internal development processes, strategic partnerships, licenses and acquisitions of companies. This strategy has required and will continue to require additional capital. As a result, we will incur operating losses until we are able to successfully market some of our products.

We are anticipating 2007 sales of the e² Collector and hope launch sales in the third quarter. We believe the profits from this device along with additional capital will allow us to complete the development of our other products which include the Inpath System utilizing CCI’s proprietary AIPS system and the new P2X7 genetic biological marker used for the development of the various protein antibodies that allow for the detection of abnormal cervical, uterine, endometrial and bladder cancer cells.

CCI has initiated clinical trials for the EndoScan and a follow up trial for the e² cervical cell collection device, and is preparing for the 2007 sales launch of the e² Collector. The EndoScan product incorporates the AIPS system along with the genetic biological lead marker, P2x7. The first trial will test for patient efficacy. We hope the follow up trial for the e² Collector will provide statistically significant data regarding efficacy that can be used for marketing purposes. The Company has reduced debt from $13.4 million at June 30, 2005 to $4.1 million at

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December 31, 2006, a reduction of close to 70%. Approximately 18% and 14% or a total of 32% of liabilities at December 31, 2006 involve a reserve for the arbitration settlement with the Company’s former CEO and a reserve for state franchise taxes, respectively. CCI believes it has adequately reserved for both liabilities. CCI believes the December 31, 2006 debt balance can be significantly reduced in the future to reflect primarily only trade liabilities needed for operating purposes. Along with the restart of operations and reduction of debt, management has settled numerous legal proceedings involving approximately $2.5 million in claims against the company. All litigation has been settled except for the finalization of the arbitrator’s decision with regard to the litigation with the former CEO, the suit by Diamics and the Attorney General of the State of Illinois (see Item 3 — Legal Proceedings, above, for a more detailed description). The legal claim with the University of California was settled in March 2007 and the company believes it has paid all claims with regard to past wages and is in the process of substantiating this fact with the Illinois Attorney General.

The Company has incurred significant operating losses since its inception. Management expects that significant on-going operating expenditures will be necessary to successfully implement its business plan and to develop, manufacture and market its products. Implementation of the Company’s plans will be contingent upon it securing substantial additional financing. In the first quarter of 2007, CCI has raised approximately $4 million through the issuance of common stock and exercise of stock warrants. During 2006 and 2005, CCI raised approximately $7,610,000 and $1,483,000 respectively, through the issuance of common stock and the exercise of warrants. For CCI to successfully implement its business plan, CCI will have to obtain additional capital. If the Company is unable to obtain additional capital or generate profitable sales revenues, it may be required to curtail product development and other activities and may have to cease operations. No assurances can be given about the Company’s ability to obtain capital if needed. The consolidated financial statements presented herein do not include any adjustments that might result from the outcome of this uncertainty.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

We believe that the following critical accounting policies affect our more significant estimates and judgments used in the preparation of our consolidated financial statements:

Revenue Recognition.  The Company recognizes revenue upon shipment of product. Revenue from licensing fees is recognized when the service is completed.

Share-Based Payment.  The “Share-Based Payment” Statement of Financial Accounting Standards No. 123(R) establishes accounting standards for transactions in which a company exchanges its equity instruments for goods or services. The Company adopted this statement on January 1, 2006. In particular, this Statement requires that all share-based payments, such as employee stock options or warrants, be reflected as an expense based upon grant-date fair value of those awards. The expense is recognized over the remaining vesting period of the awards. The Company estimates the fair value of these awards using the Black-Scholes model. This model requires management to make certain estimates in the assumptions used in this model, including the expected term the award will be held, volatility of the underlying common stock, discount rate and forfeiture rate. We develop our assumptions based on our past historical trends as well as consider changes for future expectations.

Results of Operations

Fiscal Year Ended December 31, 2006 as compared to Fiscal Year Ended December 31, 2005

Revenue

Revenues of $94,000 for 2006 represented a decrease of $23,000, or 20% from revenues of $117,000 in 2005. The decrease was a result of a reduction in licensing fees.

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Costs and Expenses

Cost of Revenues

Cost of revenues for 2006 represented a net charge of $19,000. No cost of revenues was incurred with regard to the generation of licensing — related revenues from the slide — based installed systems. Forgiveness of trade debt of $176,000 was credited against a property impairment charge of $169,000 related to design and tooling equipment and an increase in the reserve for inventory of $26,000.

Research and Development

In 2006, Research and development expenses were $854,000, net of trade debt settlements of approximately $342,000 and primarily consist of costs related to specific development programs with scientists and researchers and expenses incurred by engineers and researchers at CCI’s Chicago Office. Expenses include industrial design and engineering covering the disposable and instrument components of the InPath System; payments to medical and engineering consultants for advice related to the design and development of our products and their potential uses in the medical technology marketplace; and payroll-related costs for in-house engineering, scientific, laboratory, software development, and research management staff. A consulting contract with GSG Enterprises LLC became effective on March 1, 2006 for a duration of 10 years. It may be terminated by either party with 30 days notice. The contract calls for an annual increase of 4%. Costs associated with University Hospital Case Medical Center (UHCMC) consist primarily of charges for the use of facilities and reimbursement of expenses paid directly by UHCMC on behalf of CCI and an overhead charge. The duration of UHCMC’s contract with CCI is for the duration of the studies defined under the contract. Research and Development expenses in 2006 increased substantially after the resumption of operations in CCI’s Chicago office and after services commenced at UHCMC. Research and development increased 220% or $822,000 over 2005 expenses of $374,000 before a favorable legal settlement of approximately $342,000 in 2006 and $274,000 in 2005. The majority of the increase was associated with services provided under the UHCMC and GSG contracts and the restart of certain design and engineering operation by CCI’s Chicago Office.

Selling, General and Administrative

Significant components of selling, general and administrative expenses are compensation costs for executive and administrative personnel; professional fees primarily related to legal, audit/accounting, consulting services and financing and investor relations costs. Selling, general and administrative expenses totaled $3,967,000 or 195% increase of $2,621,000 over 2005. The increase in legal expenses of $517,004, an increase of $320,985 or 163% over 2005 expenses, was primarily due to the arbitration proceedings with the former CEO (see Item 3 — Legal Proceedings). 2006 administrative payroll expenses increased approximately $1,534,000 from $0 in 2005 due to the company having the funding to begin operations in 2006. Of the $1,534,000 increase, $1,269,926 or 83% of administrative payroll expenses resulted from non-cash compensation expense in connection with the issuance of warrants to officers and directors. Consulting services for financing expenses, investor relations and other services was $1,437,532 in 2006 vs. $472,545 in 2005, an increase of $964,987 or 204%. Common stock and warrants valued at $1,067,625 or 74% of the total consulting expenses were issued as non — cash remuneration. These expenses were offset by gains on settlements of approximately $994,000 and $225,000 for 2006 and 2005, respectively.

Other Income and Expense

Interest Income

Interest income earned on unrestricted cash was $12,000 in 2006. No interest income was earned in 2005.

Interest Expense

Interest expense, including interest expense to related parties, decreased $1,344,000 for the fiscal year ended December 31, 2006 to $1,832,000 from $3,176,000, a decrease of 42% over the same period of 2005. 82% of interest expense for fiscal year ended December 31, 2006 or $1,494,000 represents a non-cash charge for the

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Bridge II Convertible Promissory Note and the Monsun notes’ beneficial conversion feature recognition. During fiscal year ended December 31, 2006, CCI paid principal and accrued interest of $1,060,000 and $318,913, respectively to NeoMed Medical Innovations and principal of $125,000 to other note holders. CCI has significantly reduced the December 31, 2006 note payable balance of $425,000 during 2007. This balance primarily consists of a $305,000 note to MonoGen Inc and a $50,000 Bridge II Convertible Promissory Note, which along with accrued interest, both were paid in 2007.

Restructuring Settlements

For the fiscal years ended December 31, 2006 and 2005, CCI recorded approximately a $1,581,000 and $530,000 gain from the settlement of various litigation and vendor negotiations. CCI recorded and netted these gains concurrently in the respective original expense categories they were originally recorded to.

Net Loss

The net loss for the fiscal year ended December 31, 2006 before preferred dividends totaled $6,566,000 compared with $4,326,000 for the same period in 2005, an increase of $2,240,000 or 52%. The increase resulted primarily from the start up of operations which included Research and Development expenses, administrative compensation and financing and investor relations in 2006 which was either minimal or non existent in 2005. In addition, cumulative dividends issued as common shares on the outstanding Series B, Series C, Series D and Series E convertible preferred stock totaled $693,000 for the fiscal year ended December 31, 2006, compared with $20,000 for the same period in 2005. The combined net loss applicable to common stockholders for the fiscal year ended December 31, 2006 was $7,259,000, or $0.03 loss per share, on 241,431,458 weighted average common shares outstanding, compared with the net loss and net loss available to common stockholders for the fiscal year ended December 31, 2005 of $4,346,000, or $0.04 loss per share, on 110,037,893 weighted average common shares outstanding.

Liquidity and Capital Resources

The Company’s capital resources and liquidity are generated primarily from external individual investors and institutional investors. The Company generates nominal liquidity resources from internal operations.

Research and development, clinical trials and other studies of the components of our InPath System, conversions from designs and prototypes into product manufacturing, initial sales and marketing efforts, medical consultants and advisors, and research, administrative, and executive personnel are and will continue to be the principal basis for our cash requirements. We have provided operating funds for the business since its inception through private offerings of debt and equity securities to limited numbers of U.S. and foreign accredited investors. We will be required to make additional offerings in the future to support the operations of the business until some or all of our products are introduced into the market. We used $5,252,000 and $1,363,000 during 2006 and 2005, respectively, to fund our operating activities.

At December 31, 2006, we had $874,000 cash on hand as compared to zero at the beginning of the period. We were able to raise $7,530,000 of cash, net of expenses of $79,000 through the issuance of equity for fiscal year ended December 31, 2006. This cash was used to restart operations which include the resumption of research and development activities and clinical trials, purchase of tooling equipment and the settlement of debt. We believe we will be able to raise sufficient funds through the conversion of shareholder warrants and issuance of common stock in the immediate future until we can be self sufficient through profitable operations. In the first quarter of 2007, we have raised $4.2 million through the issuance of equity as common stock and the exercise of warrants.

Our operations have been, and will continue to be, dependent upon management’s ability to raise operating capital in the form of debt or equity. We have incurred significant operating losses since inception of the business. We expect that significant on-going operating expenditures will be necessary to successfully implement our business plan and develop, manufacture and market our products. If we are unable to raise sufficient adequate additional capital or generate profitable sales revenues, we may be forced to substantially curtail product research and development and other activities and may be forced to cease operations.

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As of December 31, 2006, we are authorized to issue 375,000,000 shares of common stock. If the holders of our preferred stock outstanding and the holders of the convertible promissory notes outstanding elect to convert their holdings into common stock, and the holders of the stock options and warrants outstanding elect to exercise their rights to purchase common stock, the Company is obligated to have issued approximately 377,000,000 shares of commons stock, which is in excess of what we currently have authorized. We plan to ask the Company’s shareholders to authorize the issuance of additional shares or reverse split our common stock at our annual meeting. However there is no guarantee that we will be able to obtain the votes needed to obtain the additional authorized shares.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Item 7.   Financial Statements

Our consolidated financial statements for the years ended December 31, 2006 and 2005, together with the report of Amper, Politziner and Mattia, P.C. dated April 16, 2007 for the year ended December 31, 2006, and the report of Altschuler, Melvoin and Glasser LLP dated April 13, 2006 for the year ended December 31, 2005 and the notes thereto are filed as part of this Annual Report on Form 10-KSB commencing on page F-1 and are incorporated herein by reference.

Item 8.   Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

Resignation of Auditors

On May 10, 2006, the Company was informed by Altschuler, Melvoin and Glasser LLP that such firm was resigning as the Company’s independent registered public accounting firm. On May 15, 2006 the Company engaged Amper, Politziner & Mattia, P.C. to replace Altschuler, Melvoin and Glasser LLP.

Altschuler, Melvoin and Glasser LLP’s reported on the consolidated financial statements of the Company as of December 31, 2005 which report contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that the opinion contained a going concern explanatory paragraph. Their report on the consolidated financial statements of the Company as of December 31, 2004 contained no adverse opinion or disclaimer in opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that the opinion contained a going concern explanatory paragraph.

During the Company’s two most recent fiscal years ended December 31, 2005 and 2004 and the subsequent interim period through May 10, 2006, there were no disagreements between the Company and Altschuler, Melvoin and Glasser LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Altschuler, Melvoin and Glasser LLP’s satisfaction, would have cause them to make reference to the subject matter of the disagreement in connection with their reports on the Company’s consolidated financial statements for such years; and there were no reportable events as described in Item 304(iv)(B) of Regulation S-B. The Company provided Altschuler, Melvoin and Glasser LLP with a copy of the forgoing disclosures and has authorized them to respond fully to the inquiries of the successor accountant concerning the subject matter thereof.

During the Company’s two most recent fiscal years ended December 31, 2005 and 2004 and the subsequent interim period through May 15, 2006, neither the Company nor anyone on behalf of the Company consulted with Amper, Politziner & Mattia, P.C. with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, or written or oral advice that would have been an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue. Additionally, there was no consultation with respect to the subject of either a disagreement or event specified in Item 304(a)(1)(iv) of Regulation S-B.

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Item 8A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Limitation On Effectiveness of Controls

The Company believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2006. Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures, as designed and implemented, are not sufficiently effective for gathering, analyzing and disclosing the information that the Company is required to disclose in the reports filed under the Exchange Act, in that certain material weaknesses have been indentified. The Company has adopted a remediation plan to0 address such weaknesses, as discussed in detail below.

In connection with its audit of, and in the issuance of its report on the Company’s financial statements for the year ended December 31, 2006, Amper, Politziner & Mattia, P.C. delivered a letter to the Audit Committee of our Board of Directors and the Company’s management that identifies certain items that it considers to be material weakness in the effectiveness of the Company’s internal controls pursuant to standards established by the Public Company Accounting Oversight Board. A “material weakness” is a significant deficiency (as defined in the Public Company Accounting Oversight Board’s Auditing Standard No. 2), or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statement will not be prevented or detected on a timely basis.

The material weaknesses identified are as follows:

1. The Company currently has insufficient resources and an insufficient level of monitoring and oversight, which may restrict the Company’s ability to gather, analyze and report information relative to the financial statements in a timely manner, including insufficient documentation and review of the selection and application of generally accepted accounting principles to significant non-routine transactions. In addition, the limited size of the accounting department makes it impractical to achieve an optimum segregation of duties.

2. The Company currently has an insufficient level of monitoring and oversight controls for contract and agreements. This may restrict the Company’s ability to gather, analyze and report information relative to the financial statements in a timely manner, including insufficient documentation and review of the selection and application of generally accepted accounting principles to significant non-routine transactions.

3. The Company currently has insufficient resources, tools and expertise to properly value equity instruments in accordance with generally accepted accounting principles.

4. The Company does not have the needed expertise in house to appropriately handle all tax related matters and related accounting treatment.

5. The Company’s current accounting package has very limited controls built into the software and allows data to be easily modified, added or deleted without a detailed audit trail.

Remediation Plans

Management is in the process of remediating the above-mentioned weaknesses in our internal control over financial reporting and has designated the following steps to be implemented.

1. Review the operation of the accounting department and expand the department based upon the results of this review. Provide additional training and resource materials for the accounting department.

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2. Using outside consultants to assist the company to review and document the procedures and strengthen its internal control over significant financial transactions and financial reporting and formalize the reporting process.

3. Establish procedures for formally notifying the accounting department of all contracts and significant transactions.

4. Employ an outside tax consultant to assist in these matters.

5. Evaluate our current accounting software and using consultants if necessary identify a software package that incorporates sufficient controls for the preparation of our consolidated financial statement and SEC reporting.

Item 8B.  Other Information

None.

PART III

Item 9.   Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act

The Board of Directors and Executive Officers

			Positions and Offices, if any, Held
Name	Age		with the Company	Director Since
Dr. Augusto Ocana		63	Chief Executive Officer and Director		2006
Robert F. McCullough, Jr.		52	Chief Financial Officer and Director		2005
Clinton H. Severson		59	Director		2006
John H. Abeles, M.D.		62	Director		1999
Alexander M. Milley		54	Director		1989

Dr. Augusto Ocana was elected Chief Executive Officer and director of the Company in November 2006. Prior to joining the Company, Dr. Ocana worked as a Senior Vice President and General Manager and was a member of the Board of Directors of Ch-Werfen, S.A., an international manufacturer and distributor of laboratory equipment, including in-vitro diagnostics, hospital medical devices, and scientific instruments for industry and research, from 1997 to 2006. From 1993 to 1997, Dr. Ocana was a member of the Board of Directors and Executive Vice President and General Manager of Group Taper, S.A., a pharmaceutical company. He also served as President and CEO of both Rempack International, Inc. and Diapulse Corporation, S.A. Earlier in his career, Dr. Ocana spent over 14 years working with Abbott Laboratories, Inc., where he held several positions, including Managing Director/Regional Director and Business Development Director for Worldwide Pharmaceuticals.

Robert F. McCullough, Jr. was elected Chief Financial Officer and director of the Company in September 2005. He currently serves as President and as a Portfolio Manager of Summitcrest Capital, Inc., a money management firm and registered investment adviser, a position he has held since October 2003. From April 1999 to July 2003, Mr. McCullough served as a Portfolio Manager at Presidio Management, a money management firm. Prior thereto, Mr. McCullough served as a manager with the accounting firm of Ernst & Whinney (now Ernst & Young) and also served as a financial analyst, a portfolio manager and a Chief Financial Officer of several private companies. Mr. McCullough has an MBA in finance and is a Certified Public Accountant.

Clinton H. Severson was elected to the Board of Directors in November 2006. Mr. Severson has served as President, Chief Executive Officer and Chairman of the Board of Directors of Abaxis, Inc., a northern California-based provider of portable technology, tools and services used for medical diagnostics sold to customers and distributors worldwide, since 1996. Prior to his assuming the CEO position of Abaxis, where he was appointed Chairman of the Board in 1998, Mr. Severson served as President and CEO for over seven years at MAST Immunosystems, Inc., a privately-held medical diagnostic company.

John H. Abeles, M.D. has been a director of the Company since May 1999. Dr. Abeles is President of MedVest, Inc., a venture capital and consulting firm he founded in 1980. He is also General Partner of Northlea Partners, Ltd.,

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a family investment partnership. Dr. Abeles was a senior medical executive at Sterling Drug Company, Pfizer, Inc. and Revlon Healthcare, Inc. and subsequently was a medical analyst at Kidder, Peabody & Co. Dr. Abeles is a director of a number of companies operating in the medical device and healthcare fields, including public companies I-Flow Corporation, Oryx Technology Corp., DUSA Pharmaceuticals, Inc. and Combinatorx Inc.

Alexander M. Milley has been a director of the Company (including its predecessors) since 1989. Mr. Milley is currently President, Chief Executive Officer and Chairman of the Board of ELXSI Corp., a publicy-held holding company with subsidiaries operating in the restaurant and environmental inspection equipment industries. He is also President and Chairman of the Board of Azimuth Corporation, a holding company with subsidiaries operating in the trade show exhibit, retail environment design, and electrical components and fastener distribution industries. Mr. Milley was Chairman of the Board and Chief Executive Officer of Bell National Corporation, a predecessor of the Company, until December 1998 and was President of Bell National from August 1990 until December 1998. Mr. Milley is the founder, President, sole director and majority stockholder of Milley Management, Inc., a private investment and management-consulting firm. Mr. Milley is also the President and a director of Cadmus Corporation, a private investment and management consulting firm, and a director and executive officer of Winchester National, Inc.

Relationships and Interests in Proposals; Involvement in Certain Legal Proceedings

There are no family relationships among any of the directors or executive officers (or any nominee therefor) of CytoCore, and no arrangements or understandings exist between any director or nominee and any other person pursuant to which such director or nominee was or is to be selected at the Company’s next annual meeting of stockholders. Contempo Design, Inc., of which Mr. Milley was both a director and a Vice President, filed a petition under Chapter 11 of the federal Bankruptcy Code in 2004.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and holders of more than 10% of the outstanding shares of the Company’s common stock, to file initial reports of ownership and reports of changes in ownership with the SEC.

Based solely on the Company’s review of copies of such reports (and any amendments thereto) it has been furnished and any written representations that no other reports were required, the Company believes that with respect to fiscal 2006, all reports were timely filed except that each of Dr. Ocana and Mr. Severson has not yet filed his Form 3; Dr. Ocana has not yet filed Forms 4 regarding warrants he received and certain of such warrants he exercised under the terms of his employment agreement with the Company; Mr. McCullough filed Forms 4 late regarding warrants he received in connection with his participation in the Company’s Bridge II convertible note offering and warrants he received under his employment agreement; Mr. Milley has not yet filed Forms 4 with respect to director warrants he received in September 2006 and with respect to shares issued upon conversion of Series E preferred stock; and Dr. Abeles has not yet filed Forms 4 with respect to shares issued upon conversion of Series E preferred stock and upon conversion of certain bridge notes.

Code of Ethics

The Company has adopted its Code of Ethics and Business Conduct for Officers, Directors and Employees that applies to all of the officers, directors and employees of the Company, including the Company’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Company filed its code as an exhibit to its Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003 as filed with the Securities and Exchange Commission on April 14, 2004.

Board of Directors and Committee Information

The Board of Directors of CytoCore currently has a single standing committee, the Audit Committee. As described below, the entire Board acts with respect to compensation, nomination and corporate governance matters.

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Audit Committee

The Audit Committee consists of Mr. Milley (Chairman) and Dr. Abeles, each of whom is independent as set forth in Rule 4200(a)(15) of the listing standards of the National Association of Securities Dealers (including those for Audit Committee members) and as promulgated pursuant to the Exchange Act. The Board of Directors has determined that Mr. Milley also satisfies the definition of “audit committee financial expert” as promulgated by the Securities and Exchange Commission.

The Audit Committee acts pursuant to a written charter, which charter authorizes the committee’s overview of the financial operations and management of the Company, including a required review process for all quarterly, annual, and special filings with the SEC, and meetings with the Company’s independent registered public accounting firm.

Compensation Matters

The Company does not have a compensation committee or a committee performing similar functions due to the very limited number of persons employed by the Company in recent years and the Company’s inability at various times to provide competitive compensation. Rather, the full Board of Directors, which includes two directors employed by the Company and therefore not “independent” under applicable standards, participates in deliberations concerning executive compensation and establishes the compensation and benefit plans and programs of CytoCore. All members of the Board make decisions regarding such compensation programs and plans, but only the independent directors make decisions regarding the compensation packages for the chief executive and chief financial officers of the Company. For more information on the compensation of directors and officers of the Company, see the “Compensation” section below.

Nomination Matters

The Board of Directors does not currently have a nominating committee or a committee performing similar functions. Given the size of the Company and the historic lack of director nominations by stockholders, the Board has determined that no such committee is necessary. Similarly, although the Company’s By-laws contain procedures for stockholder nominations, the Board has determined that adoption of a formal policy regarding the consideration of director candidates recommended by stockholders is not required. The Company intends to review periodically both whether a more formal policy regarding stockholder nominations should be adopted and whether a nominating committee should be established. Until such time as a nominating committee is established, the full Board, which includes two directors employed by the Company and therefore not “independent” under applicable standards, will participate in the consideration of candidates. The Board does not utilize a nominating committee charter when performing the functions of such committee. The procedures for stockholder nominations and the desired qualifications of candidates, among other nominations matters, did not change during the 2006 fiscal year.

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Item 10.   Executive Compensation

Named Executive Officers

The following tables set forth all plan and non-plan compensation awarded to, earned by or paid to (i) each of the individuals who served as the Company’s principal executive officer during the last completed fiscal year, (ii) the other individual who was serving as an executive officer of the Company at the end of the last completed fiscal year, and (iii) one additional officer who was no longer serving as an executive officer as of the end of fiscal 2006 (together, the “Named Executive Officers”), for all services rendered in all capacities to the Company.

Summary Compensation Table

														Non-		Non-
														Equity		Qualified
														Incentive		Deferred		All
									Stock		Option			Plan		Compensation		Other
			Salary			Bonus			Awards		Awards			Compensation		Earnings		Compensation			Total
Name and Principal Position	Year		($)			($)			($)(1)		($)(1)			($)(1)		($)(1)		($)			($)
Dr. Augusto Ocana		2006	$	15,000	(2)	$	2,500	(3)			$	68,200	(4)		—		—		—		$	85,700
CEO and Chairman		2005		—			—			—		—			—		—		—		$	0
David J. Weissberg, M.D.		2006	$	87,500	(5)		—			—	$	483,200	(6)		—		—	$	1,412	(7)	$	572,112
Former CEO		2005		—			—			—		—			—		—		—		$	0
Robert F. McCullough, Jr.		2006	$	90,000	(8)		—			—	$	460,400	(9)		—		—		—		$	550,400
CFO		2005		—			—			—		—			—		—		—		$	0
Edward G. Renner		2006	$	31,750	(10)		—			—		—			—		—	$	129,600	(11)	$	161,350
Former VP of Legal		2005		—			—			—		—			—		—		—		$	0
and Regulatory Affairs

(1)	CytoCore does not have a formal compensation program (equity or non-equity) that includes long-term incentive payouts or other forms of long-term or deferred compensation. Any amounts included in these columns represent the number of shares that may be acquired pursuant to warrants or options granted in the particular year.
(2)	Dr. Ocana was elected Chief Executive Officer in November 2006. His initial base salary was set at $180,000 per year effective November 15, 2006.
(3)	Represents Dr. Ocana’s monthly bonus payment of $2,500. Per the terms of his employment agreement, Dr. Ocana is entitled to receive a $45,000 bonus, payable in 18 equal monthly installments of $2,500.
(4)	Represents warrants to purchase 500,000 shares of common stock at $.13 per share granted on December 1, 2006, exercisable immediately with a term of three years. The dollar amount presented represents the aggregate fair value of such award on the date of grant. The fair value of the warrant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2006: dividend yield of zero, expected volatility of 103%, risk-free interest rate of 4.25%, and expected life of three years. Such warrants were exercised in full in April 2007.
(5)	Dr. Weissberg was elected Chief Executive Officer in August 2005. He did not receive any salary or bonus with respect to 2005. His salary for 2006 was $120,000, of which $87,500 was paid and $30,000 was forgiven. Dr. Weissberg resigned as CEO and director in October 2006.
(6)	Represents warrants to purchase 4,000,000 shares at $0.20 per share that were issued on September 28, 2006 and expire five years from the date of issuance. The dollar amount presented represents the aggregate fair value of such award on the date of grant. The fair value of the warrant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2006: dividend yield of zero, expected volatility of 83.7%, risk-free interest rate of 4.50%, and expected life of five years. Such warrants were amended in November 2006 to permit a cashless exercise. These warrants originally fully vested on, and were exercisable as of, January 1, 2007. In March 2007, Dr. Weissberg agreed to further amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by the stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

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(7)	Represents the value of a laptop computer that Dr. Weissberg was permitted to keep upon his resignation.
(8)	Mr. McCullough was elected Chief Financial Officer in September 2005. He did not receive any salary or bonus with respect to 2005. His salary for 2006 was $120,000, of which $90,000 was paid and $30,000 forgiven.
(9)	Represents warrants to purchase 4,000,000 shares at $0.1275 per share that were issued on September 28, 2006 and expire three years from the date of issuance. The dollar amount presented represents the aggregate fair value of such award on the date of grant. The fair value of the warrant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2006: dividend yield of zero, expected volatility of 83.7%, risk-free interest rate of 4.50%, and expected life of three years. Such warrants were amended in November 2006 to permit a cashless exercise. These warrants originally fully vested on, and were exercisable as of, January 1, 2007. In March 2007, Mr. McCullough agreed to further amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by the stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.
(10)	Mr. Renner was elected Vice President of Legal and Regulatory Affairs in April 2006 and became an executive officer of the Company in August 2006; Mr. Renner resigned in October 2006. Mr. Renner’s base salary was $54,000. During 2006, he was paid $27,250 in cash and was issued 38,514 shares (valued at $4,500) in lieu of cash for salary.
(11)	Includes the following compensation received as severance: (i) $27,000 cash payment; (ii) warrants to purchase 500,000 shares at $0.20 per share that were issued on October 6, 2006, were originally fully vested and exercisable beginning January 1, 2007, and expire five years from the date of issuance; and (iii) an award of 250,000 shares of unregistered, restricted common stock in October 2006. The fair value of the warrant grant ($68,850) was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2006: dividend yield of zero, expected volatility of 103%, risk-free interest rate of 4.25%, and expected life of five years. Such warrants were amended in November 2006 to permit a cashless exercise. In April 2007, Mr. Renner agreed to further amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by the stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007. The fair value of the 250,000 share award ($33,750) was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2006: dividend yield of zero, expected volatility of 103%, risk-free interest rate of 4.25%, and expected life of five years. Amounts presented exclude payments made by the Company to Muriel Renner, LLC, of which Mr. Renner was a member prior to being employed by the Company, for legal services performed on behalf of the Company by such firm.

Compensation Philosophy

The philosophy underlying the Company’s compensation program is to provide compensation that rewards performance — both Company and individual — and align such compensation with shareholder interests. The Company aims to make executive compensation sensitive to Company performance, which is defined in terms of long-term profitability and shareholder value, and provide compensation that enables the Company to attract, retain and motivate highly-qualified individuals who contribute to the Company’s success.

Compensation Components

In recent years, Company executives have been asked to forego compensation due to the financial condition of the Company and have been granted, in limited cases, options or warrants to purchase shares of the common stock of the Company in lieu of any regular salary. In 2006, however, the Company was able to compensate its executives with a mix of base salary and equity awards, albeit on a limited basis only. The long-term compensation goals of the Company are to provide (i) base salary, (ii) annual discretionary bonuses, and (iii) stock option or similar equity

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compensation grants (both for new hires and annual discretionary grants based upon Company and individual performance) to all employees.

Base Salary

Base salary levels for the Company’s officers are based on an informal review of compensation for competitive positions in the market and reflect employees’ job skills, experience and performance, judgments as to past and future contributions to the Company, and the Company’s compensation budget. The companies whose compensation practices are reviewed span the full range of companies with which the Company believes it competes for executive talent. The Board does not give specific weight to any particular factor, although most weight is typically given for individual performance. Base salaries are reviewed annually or more frequently if circumstances dictate.

In 2005, our executive officers received no or only limited amounts for salary due to the Company’s cash position. In light of the Company’s financial condition and performance in 2005, the Board did not authorize any salary increases for any officer for 2006. Our executive officers, who as noted had foregone salary for all or a portion of 2005, received only limited salary during 2006. Specifically, the base salary of Dr. David J. Weissberg, former Chief Executive Officer, was set at $120,000 for 2006, of which $87,500 was paid. The base salary of Robert F. McCullough, the Company’s Chief Financial Officer, was set at $120,000 for 2006, of which $90,000 was paid. These salaries were established primarily because of the Company’s financial condition.

In the fall of 2006 following the resignation of Dr. Weissberg and the hiring of Dr. Ocana as Chief Executive Officer of the Company, the Company reviewed and set base salaries for the CEO and CFO. Specifically, in November 2006 Dr. Ocana’s base salary was set at $180,000 per year, subject to change as discussed below under “Chief Executive Officer Compensation”; Mr. McCullough’s base salary was set at $10,000 per month, effective December 1, 2006, subject to change as discussed below under “Chief Financial Officer Compensation.”

The base salary of Edward Renner, our former Vice President of Legal and Regulatory Affairs, was set at $54,000 when he began work in April 2006, of which $27,250 was paid in cash and $4,500 was paid through the issuance of 38,514 shares of the Company’s common stock. Mr. Renner resigned from the Company in October 2006.

Annual Bonuses

Although the Company has no formal bonus plan, the Board’s goal is to pay bonuses in each year that the Company’s financial condition permits. In light of the Company’s financial condition and performance in 2005, no bonuses were awarded to any officer of the Company for that year. Similarly, the Company did not award any cash bonuses to its executive officers for 2006, although pursuant to his employment agreement with the Company, Dr. Ocana is entitled to a $45,000 bonus payable in 18 equal monthly installments of $2,500 commencing December 2006.

Bonuses are to be designed to tie annual awards to individual performance and motivate and reward employees for their contributions to the Company. The Board considers a number of factors in determining whether annual awards should be paid, most importantly the achievement by the Company of specified strategic objectives and the achievement by employees of individual objectives.

Recognition of individual performance and accomplishment is based on a subjective analysis of each individual’s performance; recognition of Company performance is based on an evaluation of established measures of corporate performance. For 2006, the most critical priorities for the Company against which performance was measured were:

•  raising capital to support the Company’s initiatives;

•  reducing liabilities and expenses; and

•  renewing the Company’s focus on product development and commercialization.

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The Board also considers the financial growth of the Company as reflected in its revenues, and strategic achievements such as filings with and approvals of the Food and Drug Administration with respect to existing and new product candidates.

Equity Incentives

As with base salary and bonus determinations, the Board evaluates equity compensation awards at comparable companies both generally and for individual job positions. The primary goal of the equity compensation component is to align management and stockholder interests for the long-term enhancement of stockholder value, with the hope that each employee is motivated to remain with the Company and improve his or her performance in support of improved Company performance.

In selecting employees eligible to receive equity compensation grants (whether at the initial hire date or through periodic grants) and determining the size of such grants, the Board reviews a variety of factors, including:

•  the job and responsibility level of the employee,

•  grants awarded by competitors to employees at comparable job levels, and

•  past, current and prospective services rendered, or to be rendered, to the Company by the employee.

Determination of the employees eligible to receive awards and the size of such awards is based on a subjective analysis of each individual’s position within the Company, his or her performance and his or her growth potential and that of the Company.

The Board also considers it important to encourage long-term interest and investment in the Company by its officers, and all employees. While the Company does not have any formal stock ownership guidelines, the Board believes that stock ownership by management has been demonstrated to be beneficial to shareholders; this belief underlies the grant of equity awards to officers in recent years.

The Company administers one plan under which equity incentives are or have been granted to eligible participants. The CytoCore Inc. 1999 Equity Incentive Plan, as amended (the “Plan”) provides for the grant of stock options (both incentive and non-qualified), stock appreciation rights, restricted stock and performance shares/units to officers, key employees, directors and consultants and advisors of the Company and any present or future subsidiaries and affiliates to purchase a maximum of 20,000,000 shares of common stock. During 2006, the Board did not award any options to employees under the Plan. However, certain officers did receive warrants to purchase the common stock of the Company. Specifically, the Company granted to Dr. Weissberg, the Company’s former CEO and director, in consideration of his work and services performed on behalf of the Company, and in recognition of his reduced base salary, warrants to purchase 4 million shares of the Company’s common stock at an exercise price of $0.20 per share. The warrants originally were exercisable as of January 1, 2007 and expire on the fifth anniversary of the date of grant, or September 28, 2011. The closing price of the Company’s common stock on the OTC Bulletin Board on the date of grant was $0.18 per share. In March 2007, Dr. Weissberg agreed to amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by the stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

The Company also granted to Mr. McCullough, the Company’s CFO, in consideration of his work and services performed on behalf of the Company, and in recognition of his reduced base salary, warrants to purchase 4 million shares of the Company’s common stock at an exercise price of $0.1275 per share. The warrants originally were exercisable as of January 1, 2007 and expire on the third anniversary of the date of grant, or September 28, 2009. The closing price of the Company’s common stock on the OTC Bulletin Board on the date of grant was $0.18 per share. In March 2007, Mr. McCullough agreed to amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by the stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

35

Finally, the Company granted Dr. Ocana warrants to purchase 500,000 shares of common stock at $.13 per share on December 1, 2006, his first day of employment, in accordance with the terms of his employment agreement. The warrants were immediately exercisable and expire three years from the date of grant. The closing price of the Company’s common stock on the OTC Bulletin Board on the date of grant was $0.19 per share. Dr. Ocana exercised such warrants in full in April 2007.

Retirement, Severance, Change in Control and Similar Compensation

The Company does not offer or have in place any retirement, severance or similar compensation programs. Rather, the Company individually negotiates with those employees for whom retirement, severance or similar compensation is deemed necessary.

As part of his employment agreement, Dr. Ocana is entitled to severance in an amount equal to the sum of (a) 12 months’ base salary, payable in 12 equal monthly installments, and (b) the full amount of any performance bonus that he was eligible to receive for the year during which his employment was terminated, as well as 12 months’ standard benefits, in the event the Company terminates Dr. Ocana’s employment without “cause” (as defined in the agreement), or in the event Dr. Ocana voluntarily terminates his employment for “good reason” (as defined in the agreement). In addition, Dr. Ocana is entitled to any warrants that would have been granted to him had the conditions to grant set been satisfied within 6 months following his termination. If Dr. Ocana’s employment is terminated because he is “disabled” (as defined in the agreement), he is entitled to severance equal to three months of his then-current base salary, payable over six months.

Mr. McCullough’s employment agreement provides that in the event Mr. McCullough’s employment is terminated without cause, he will be entitled to his salary for the remainder of the term of his employment agreement with the Company and health insurance for himself and his children. See “Chief Financial Officer Compensation” below.

Edward Renner, the Company’s former Vice President of Legal and Regulatory Affairs, was awarded 250,000 shares of unregistered common stock and paid $27,000 as severance upon his resignation from the Company in October 2006. The Company also granted Mr. Renner warrants to purchase 500,000 shares of common stock at $.20 per share on October 6, 2006, which expire on the fifth anniversary of the date of grant. The closing price of the Company’s common stock on the OTC Bulletin Board on the date of grant was $0.18 per share. These warrants originally fully vested on, and were exercisable as of, January 1, 2007. In March 2007, Mr. Renner agreed to amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

No other employees receive or are entitled to receive any retirement, severance or similar compensation.

Perquisites and Other Benefits

The Company generally does not provide its officers with these types of benefits, although the Company does provide Dr. Ocana with a $500 monthly automobile allowance. Dr. Ocana and Mr. McCullough, like other employees, also are entitled to participate in the Company’s employee benefit plans offering health insurance, life insurance, long-term disability insurance and a 401(k) savings plan.

Chief Executive Officer Compensation

Dr. Augusto Ocana

Dr. Ocana became Chief Executive Officer and a director of the Company in November 2006. The criteria used to establish Dr. Ocana’s initial compensation included, among other things, the compensation packages of executive officers of comparable companies of similar size in the life sciences industry and the factors described above for all employees.

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According to Dr. Ocana’s employment agreement, Dr. Ocana’s initial annual salary is $180,000, subject to annual review by the Board and subject to an increase to $204,000 at the earlier of the date on which the Company raises an additional $2.5 million at an average price of not less than $0.18 per share or six months after the effective date of the agreement. Dr. Ocana is also entitled to a $45,000 bonus payable in 18 equal monthly installments of $2,500, standard benefits from the Company, and reimbursement of reasonable, ordinary and necessary business expenses. He is also entitled to a $500 per month automobile allowance.

The agreement provides for the grant to Dr. Ocana of warrants to purchase (a) 500,000 shares of common stock on the first day of his employment, at an exercise price equal to the closing price of the common stock on such date, less a 331/3% discount, (b) 300,000 shares of common stock upon completion of Food and Drug Administration trials for the Company’s “Products” (as defined in the agreement) and receipt of all necessary FDA approvals, at an exercise price equal to the closing price of the common stock on the date all such approvals have been obtained, less a 331/3% discount, (c) 500,000 shares of common stock on the date that the Company has raised $5 million in equity at an average price per share of not less than $0.22, less a 331/3% discount from such average price (and provided such financing is completed within 12 months of his first day of employment), (d) a minimum of 200,000 shares of common stock when the Company has executed distribution agreements with third parties meeting certain specified conditions, at an exercise price equal to the average closing price of the common stock, less a 331/3% discount, during the 60 day period prior to the date of execution of such agreements, (e) 200,000 shares of common stock if a distribution company that has achieved at least $25 million of annual sales of the Products during the first 12 months of sales makes an equity investment in the Company of at least $2 million, (f) 500,000 shares of common stock at such time as the closing price of the common stock is $0.30 or more during 30 days out of any consecutive 45 day period during which the common stock is traded, (g) 500,000 shares of common stock at such time as the closing price of the common stock is $0.50 or more during 45 days out of any consecutive 60 day period during which the common stock is traded, (h) 500,000 shares of common stock at such time as the closing price of the common stock is $0.75 or more during 45 days out of any consecutive 60 day period during which the common stock is traded, and (i) 1,000,000 shares at such time as the closing price of the common stock is $1.00 or more during 45 days out of any consecutive 60 day period. The exercise price for all shares purchased pursuant to (e) — (i) herein shall be equal to the average closing price of the common stock of the Company, less a 331/3% discount, during the 45 trading days prior to the date such milestone is reached, provided that the exercise price for the warrants issued pursuant to (i) shall be $1.00 per share for the first 500,000 shares and $1.50 per share for the balance. All warrants shall have a three-year exercise period from the date of grant.

Dr. Ocana received a warrant on December 1, 2006, his first day of employment, to purchase 500,000 shares of common stock at $.13 per share in accordance with (a) above, and an additional warrant to purchase 500,000 shares of common stock at $.20 per share on January 22, 2007, the date on which the closing price of the common stock was $0.30 or more during 30 days out of any consecutive 45 day period in accordance with (f) above. As noted above, in April 2007 Dr. Ocana exercised the warrants granted to him in December 2006 and purchased 500,000 shares of common stock. His remaining 500,000 warrants were subsequently amended to provide that they could not be exercised until such time as certain conditions were met, including approval by stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

Dr. Ocana’s employment agreement also provides for revenue incentives, such that he will receive warrants to purchase 1 million shares of common stock at an exercise price equal to the average closing price of the common stock during the 60 day period prior to the date on which the Company’s gross revenues from Product sales exceed $20 million for any consecutive 12 month period and an additional 1 million shares when gross revenues exceed $50 million for any consecutive 12 month period.

Finally, Dr. Ocana is entitled to receive warrants in the event of the acquisition of the Company as follows: (1) warrants to purchase 2.5 million shares of common stock at $0.25 per share if the Company is acquired for more than $1.00 per share; (2) warrants to purchase 3.5 million shares of common stock at $0.50 per share if the Company is acquired for more than $2.00 per share; and (3) warrants to purchase 5 million shares of common stock at $0.75 per share if the Company is acquired for more than $3.00 per share. Such awards are not cumulative.

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See “Retirement, Severance, Change in Control and Similar Compensation” above for a discussion of the severance payments payable to Dr. Ocana under the terms of his employment agreement.

David J. Weissberg, M.D.

David J. Weissberg, M.D. was elected Chief Executive Officer and a director of the Company effective September 2005 and resigned as Chief Executive Officer and director of the Company in October 2006. Dr. Weissberg’s initial compensation was based largely on the Company’s limited ability to pay cash compensation, and he did not receive any compensation from the Company for his services as Chief Executive Officer during the 2005 fiscal year. His annual base salary for the 2006 fiscal year was set at $120,000, of which $87,500 was paid, as noted above. Dr. Weissberg also received warrants to purchase 4 million shares of common stock in September 2006, which warrants originally fully vested and were exercisable as of January 1, 2007 at a price of $.20 per share. The term of the warrants is five years from the date of grant. In March 2007, Dr. Weissberg agreed to amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by the stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007. Dr. Weissberg did not have an employment agreement with the Company.

Chief Financial Officer Compensation

Robert F. McCullough, Jr.

Mr. McCullough did not receive any compensation from the Company for his services as Chief Financial Officer during the 2005 fiscal year. Mr. McCullough’s base salary was set at $120,000 for 2006, of which $90,000 was paid as noted above. On November 20, 2006, the Board of Directors approved and the Company entered into an employment agreement with Mr. McCullough, Jr., pursuant to which he will continue to provide, on a non-exclusive basis, financial accounting, reporting and business services to the Company. The agreement provides for a term of 24 months from December 1, 2006, subject to earlier termination. Mr. McCullough will receive $10,000 per month for each month he provides services to the Company, such amount to increase to $15,000 per month at such time as the Company raises $5 million in funding, and will be entitled to reimbursement of out-of-pocket expenses related to the performance of his duties for the Company and certain health insurance benefits.

The agreement also provides for the issuance of warrants to Mr. McCullough to purchase shares of common stock of the Company upon the achievement of certain performance milestones, as follows: (a) 150,000 shares of common stock upon completion of FDA trials for the Company’s products and receipt of all necessary FDA approvals, (b) 250,000 shares of common stock on the date that the Company has raised $5 million in an equity financing at an average price of not less than $0.22 per share, (c) 100,000 shares of common stock when the Company has signed a distribution agreement for the e² Collector cervical cell collection device, (d) 250,000 shares of common stock at such time as the Company’s stock price trades above $0.30 for 45 out of 60 trading days, (e) 250,000 shares of common stock at such time as the Company’s stock price trades above $0.50 for 45 out of 60 trading days, and (f) 500,000 shares of common stock at such time as the Company’s stock price trades above $1.00 for 45 out of 60 trading days. The exercise price for all shares purchased pursuant to any of the above shall be equal to the average closing price of the common stock of the Company, less a 33% discount, during the 45 days prior to the date such milestone is reached.

The agreement also provides for revenue incentives, such that Mr. McCullough will receive warrants to purchase 500,000 shares of common stock at an exercise price equal to the average closing price of the common stock during the 45 day period prior to the date on which the Company’s revenues exceed $20 million and an additional 500,000 shares when revenues exceed $50 million, less a 33% discount. The agreement grants Mr. McCullough further warrants in the event of the acquisition of the Company as follows: (1) warrants to purchase 1.25 million shares of common stock at $0.25 per share if the Company is acquired for more than $1.00 per share; (2) warrants to purchase 1.75 million shares of common stock at $0.50 per share if the Company is acquired for more than $2.00 per share; and (3) warrants to purchase 2.5 million shares of common stock at $0.75 per share if the Company is acquired for more than $3.00 per share.

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For 2006, the Company granted Mr. McCullough warrants to purchase 4 million shares of the Company’s common stock at an exercise price of $0.1275 per share. The warrants originally were exercisable as of January 1, 2007 and expire on the third anniversary of the date of grant, or September 28, 2009. The closing price of the Company’s common stock on the OTC Bulletin Board on the date of grant was $0.18 per share. Mr. McCullough also received a warrant to purchase 250,000 shares of common stock at $.32 per share on March 21, 2007, the date on which the closing price of the common stock was $0.30 or more during 45 days out of any consecutive 60 day period in accordance with (d) above. In March 2007, Mr. McCullough agreed to amend all of his warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by the stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information regarding unexercised options, unvested stock and equity incentive plan awards for each Named Executive Officer outstanding as of the end of the Company’s 2006 fiscal year.

Option Awards

Stock Awards

Equity

Incentive

Equity

Plan

Incentive

Awards:

Plan

Market

Equity

Awards:

or Payout

Incentive

Number of

Value of

Plan

Market

Unearned

Unearned

Awards:

Number of

Value of

Shares,

Shares,

Number of

Number of

Number of

Shares or

Shares or

Units or

Units or

Securities

Securities

Securities

Units of

Units of

Other

Other

Underlying

Underlying

Underlying

Option

Stock

Stock That

Rights

Rights

Unexercised

Unexercised

Unexercised

Exercise

Option

That

Have Not

That

That Have

Options (#)

Options (#)

Unearned

Price

Expiration

Have Not

Vested

Have Not

Not Vested

Name

Exercisable

Unexercisable

Options (#)

($)

Date

Vested (#)

($)

Vested (#)

($)

Dr. Augusto Ocana

500,000(1

)

—

—

$

.13

12/1/09

—

—

—

—

David J. Weissberg, M.D.

—

4,000,000

(2)

—

$

.20

9/28/11

—

—

—

—

Robert F. McCullough, Jr.

—

4,000,000

(3)

—

$

.1275

9/28/09

—

—

—

—

Edward G. Renner

—

500,000

(4)

—

$

.20

10/6/11

—

—

—

—

(1)	Represents grant of warrants to purchase 500,000 shares of common stock at $.13 per share, vested immediately, with a term of three years. Dr. Ocana exercised such warrants in full in April 2007.
(2)	Represents grant of warrants to purchase 4,000,000 shares of common stock at $.20 per share with a term of five years. Such warrants were amended in November 2006 to permit a cashless exercise. These warrants originally fully vested on, and were exercisable as of, January 1, 2007. In March 2007, Dr. Weissberg agreed to further amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.
(3)	Represents grant of warrants to purchase 4,000,000 shares of common stock at $.1275 per share with a term of three years. Such warrants were amended in November 2006 to permit a cashless exercise. These warrants originally fully vested on, and were exercisable as of, January 1, 2007. In March 2007, Mr. McCullough agreed to further amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.
(4)	Represents grant of warrants to purchase 500,000 shares of common stock at $.20 per share with a term of five years. Such warrants were amended in November 2006 to permit a cashless exercise. These warrants originally fully vested on, and were exercisable as of, January 1, 2007. In March, 2007, Mr. Renner agreed to further amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by stockholders of an increase in the number of authorized shares of common stock. Stockholders are

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expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

Retirement, Severance and Similar Compensation

Edward Renner, the Company’s former Vice President of Legal and Regulatory Affairs, was awarded 250,000 shares of unregistered common stock and paid $27,000 as severance upon his resignation from the Company in October 2006. The Company also granted Mr. Renner warrants to purchase 500,000 shares of common stock at $.20 per share on October 6, 2006, originally exercisable January 1, 2007, and expiring on the fifth anniversary of the date of grant. The closing price of the Company’s common stock on the OTC Bulletin Board on the date of grant was $0.18 per share. In March 2007, Mr. Renner agreed to amend the warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

No other employees received any retirement, severance or similar compensation during the 2006 fiscal year.

For a discussion of the compensation that may be payable to the Company’s other Named Executive Officers in connection with retirement, resignation, termination or a change in control, please see “Retirement, Severance, Change in Control and Similar Compensation” above.

Compensation of Directors

The following table sets forth certain information regarding all compensation earned by directors for the Company’s 2006 fiscal year.

										Nonqualified
	Fees Earned							Non-Equity		Deferred
	or Paid		Stock		Option			Incentive Plan		Compensation		All Other
	in Cash		Awards		Awards			Compensation		Earnings		Compensation		Total
Name	($)		($)		($)			($)		($)		($)		($)
Dr. Augusto Ocana		—		—		—			—		—		—		—
David J. Weissberg, M.D.		—		—		—			—		—		—		—
John Abeles, M.D.		—		—	$	75,500	(1)		—		—		—	$	75,500
Alexander Milley		—		—	$	75,500	(1)		—		—		—	$	75,500
Clinton H. Severson		—		—		—			—		—		—		—
Robert F. McCullough, Jr.		—		—		—			—		—		—		—

(1) Amount represents an award to each independent director of the Company on September 28, 2006 of a warrant to purchase 625,000 shares of common stock at $.20 per share, immediately exercisable with a term of five years. The fair value of the warrants was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2006: dividend yield of zero, expected volatility of 83.7%, risk-free interest rate of 4.50%, and expected life of five years. Such warrants were amended in November 2006 to permit a cashless exercise. Dr. Abeles and Mr. Milley subsequently agreed to further amend their warrants to provide that they could not be exercised until such time as certain conditions were met, including approval by the stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

2007 Director Compensation

In November 2006, the Board of Directors approved Board compensation for each director at the rate of $5,000 per quarter effective January 1, 2007. All outside directors will receive warrants to purchase 250,000 shares of the Company’s common stock when the Company’s revenues reach $20 million and another 250,000 shares when revenues reach $50 million. The exercise price of such warrants will be at a 33% discount to the average trading price of the common stock during the 45 days prior to the date the Company achieves each revenue milestone.

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All directors of the Company other than Mr. McCullough will also receive, upon the acquisition of the Company, as follows: (1) warrants to purchase 625,000 shares of common stock at $0.25 per share if the Company is acquired for more than $1.00 per share; (2) warrants to purchase 875,000 shares of common stock at $0.50 per share if the Company is acquired for more than $2.00 per share; and (3) warrants to purchase 1.25 million shares of common stock at $0.75 per share if the Company is acquired for more than $3.00 per share.

The Board also approved an arrangement whereby the Company will be obligated to reimburse Mr. McCullough, Dr. Weissberg, Dr. Abeles and Mr. Milley for certain tax effects in connection with the exercise of warrants issued to such individuals. The Company will be obligated to pay to each individual 39% of the taxable value of such warrants when exercised, payable within three months of such exercise, such payment to occur only if the Company is acquired or has at least $3 million in its accounts and the closing price of the common stock is at least $0.50 for at least 45 out of 60 trading days.

Historically, the Company has compensated its directors through the periodic grant of options to purchase shares of common stock of the Company. The options were typically granted at the first meeting of the Board in the calendar year or the first meeting of the Board following the annual meeting of stockholders. The exercise price of the options was set at no less than the fair market value determined by the closing price of the common stock as reported on the Over-the-Counter Bulletin Board on the date of grant. No options were granted to directors in 2006, except that each of Dr. Abeles and Mr. Milley received warrants to purchase 625,000 shares of common stock in September 2006, exercisable at $.20 per share for five years, in recognition of their services as independent members of the Board of Directors.

The Company also reimburses directors for reasonable expenses incurred in connection with their attendance at meetings of the Board of Directors. For information relating to shares of the Company owned by each of the directors, see the “Security Ownership of Certain Beneficial Owners and Management” section below under Item 11. For information concerning the compensation of directors who are also officers of the Company, see the “Summary Compensation Table” above.

In November 2006, the Board of Directors also approved amendments to all existing warrant agreements between the Company and its then-current Board members, as well as former directors and employees, such amendment to permit all such holders to exercise all such warrants on a cashless basis. As noted herein, in 2007 certain of such warrants were also amended to provide that they could not be exercised until such time as certain conditions were met, including approval by the stockholders of an increase in the number of authorized shares of common stock. Stockholders are expected to vote on such increase at the Company’s annual meeting of stockholders currently scheduled for June 21, 2007.

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Item 11.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Common Stock — Five Percent Holders

The following table sets forth, as of April 25, 2007, certain information with respect to any person, including any group, who is known to the Company to be the beneficial owner of more than 5% of the common stock of the Company.

	Amount and Nature of		Percent
Name and Address of Beneficial Owner	Beneficial Ownership(1)		of Class
Monsun, AS		33,788,648		10.0	%
Torvveien 12, 1372 Asker
Norway
Standard General Holdings, LLC		25,343,152		7.5	%
P.O. Box 2050
Fair Oaks, CA 95628
David J. Weissberg, M.D(2)		20,303,263		5.9	%
100 Goose Hill Road
Cold Springs Harbor, NY 11724
BSI Multihelvetia		18,642,857		5.5	%
c/o Kredietbank S.A. Luxembourtgeoise
43 Boulevard Royale
L-2955 Luxembourg

(1)

Unless otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name. With respect to each person or group, percentages are calculated based on the number of shares beneficially owned, including shares that may be acquired by such person or group within 60 days of April 25, 2007 upon the exercise of stock options, warrants or other purchase rights, but not the exercise of options, warrants or other purchase rights held by any other person.

(2)

Includes: (i) an aggregate 1,600,002 shares held in trust for Dr. Weissberg’s minor children (533,334 shares held in each of three trusts), for which Dr. Weissberg acts as trustee; and (ii) warrants to purchase 4,000,000 shares. Such warrants will become exercisable upon approval by the Company’s stockholders of an increase in the number of authorized shares of common stock at the Company’s annual meeting of stockholders currently scheduled to be held on June 21, 2007; such approval is assumed for the purpose of this table. If shareholder approval is not obtained, such warrants will remain unexercisable until the conditions to vesting are satisfied.

Common Stock — Management

The following table sets forth, as of April 25, 2007, certain information concerning the ownership of the Company’s common stock (including directors’ qualifying shares) of each (i) director, (ii) nominee, (iii) executive officers and former executive officers named in the Summary Compensation Table hereof and referred to as the “Named Executive Officers,” and (iv) all current directors and executive officers of the Company as a group.

	Amount and Nature of		Percent
Name of Beneficial Owner	Beneficial Ownership(1)		of Class
John H. Abeles, M.D.(2)		3,140,323		*	%
Robert F. McCullough, Jr.(3)		11,343,728		3.3	%
Alexander M. Milley(4)		9,427,769		2.8	%
Dr. Augusto Ocana(5)		1,000,000		*
Edward G. Renner(6)		1,671,206		*
Clinton H. Severson		0		*
David J. Weissberg, M.D.(7)		20,303,263		5.9	%
All current directors and executive officers as a group (5 persons)		24,911,820		7.2	%

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*	Less than one percent of the common stock outstanding.
(1)	Unless otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name. With respect to each person or group, percentages are calculated based on the number of shares beneficially owned, including shares that may be acquired by such person or group within 60 days of April 25, 2007 upon the exercise of stock options, warrants or other purchase rights, but not the exercise of options, warrants or other purchase rights held by any other person. The address of each current director, nominee and current executive officer of the Company is c/o CytoCore, Inc., 414 N. Orleans, Suite 502, Chicago, IL 60610.
(2)	Includes: (i) 2,167,282 shares owned by Northlea Partners, Ltd. (“Northlea Partners”), of which Dr. Abeles is General Partner; (ii) 98,041 shares underlying warrants granted by the Company to Northlea Partners that are exercisable within 60 days; and (iii) 875,000 shares issuable upon exercise of options and warrants granted by the Company to Dr. Abeles. Of the 875,000 shares issuable upon exercise of options and warrants, warrants with respect to 625,000 shares will become exercisable upon shareholder approval of an increase in the number of authorized shares of common stock at the Company’s annual meeting of stockholders currently scheduled to be held on June 21, 2007; such approval is assumed for the purpose of this table. If shareholder approval is not obtained, such warrants will become exercisable on June 26, 2007. The remaining 250,000 shares may be acquired upon exercise of outstanding options within 60 days. Dr. Abeles disclaims beneficial ownership of all shares owned by, or issuable to, Northlea Partners except shares attributable to his 1% interest in Northlea Partners as General Partner.
(3)	Includes: (i) 4,032,500 shares owned by Summitcrest Capital L.P., of which Mr. McCullough is President of the General Partner; (ii) 1,037,049 shares owned by MPC Trust, of which Mr. McCullough is a trustee; and (iii) 4,250,000 shares issuable upon the exercise of warrants. Such warrants will become exercisable upon approval by the Company’s stockholders of an increase in the number of authorized shares of common stock at the Company’s annual meeting of stockholders currently scheduled to be held on June 21, 2007; such approval is assumed for the purpose of this table. If shareholder approval is not obtained, such warrants will remain unexercisable until the conditions to vesting are satisfied.
(4)	Includes: (i) 4,763,484 shares issued upon conversion of 119,460 shares of Series E Stock, including shares issued in payment of an aggregate $1,477,986 cumulative dividends, held by Mr. Milley, Cadmus Corporation, Azimuth Corporation, Milley Management, Inc. and Winchester National, Inc.; (ii) 289,285 shares issuable to Cadmus Corporation under stock appreciation rights granted by the Company; and (iii) 875,000 shares subject to options and warrants granted by the Company to Mr. Milley. Of the 875,000 shares issuable upon exercise of options and warrants, warrants with respect to 625,000 shares will become exercisable upon shareholder approval of an increase in the number of authorized shares of common stock at the Company’s annual meeting of stockholders currently scheduled to be held on June 21, 2007; such approval is assumed for the purpose of this table. If shareholder approval is not obtained, such warrants will become exercisable within 90 days. The remaining 250,000 shares may be acquired upon exercise of outstanding options within 60 days. In 2006, CytoCore agreed to amend warrants held by Azimuth Corporation and Cadmus Corporation and issue new warrants entitling the holders to purchase an aggregate 3,500,000 shares of common stock. The number of shares beneficially held by Mr. Milley includes the shares issuable under these warrants. (See Item 12 below for additional details concerning this transaction.) Of the shares shown, an aggregate 4,028,896 held by Mr. Milley, Cadmus Corporation, Winchester National, Inc. and Milley Management, Inc. have been pledged to ELXSI Corp.
(5)	Includes warrants to purchase 500,000 shares that are exercisable within 60 days.
(6)	Includes (i) 307,692 shares beneficially owned by Muriel Renner LLC, received from the Company in lieu of cash payment for legal services rendered by the firm, of which 138,462 shares are held for the benefit of Mr. Renner; (ii) 575,000 shares received by Mr. Renner directly from the Company for his proportionate share of fees owed to Muriel Renner; (iii) 250,000 shares received as severance; and (iv) 38,514 shares received in lieu of cash salary. Also includes 500,000 shares subject to warrants granted by the Company to Mr. Renner . Such warrants will become exercisable upon approval by the Company’s stockholders of an increase in the number of authorized shares of common stock at the Company’s annual meeting of stockholders currently scheduled to be held on June 21, 2007; such approval is assumed for the purpose of this table. If shareholder

43

approval is not obtained, such warrants will remain unexercisable and outstanding until the conditions to vesting are satisfied.

(7)

Includes: (i) an aggregate 1,600,002 shares held in trust for Dr. Weissberg’s minor children (533,334 shares held in each of three trusts), for which Dr. Weissberg acts as trustee; and (ii) warrants to purchase 4,000,000 shares. Such warrants will become exercisable upon approval by the Company’s stockholders of an increase in the number of authorized shares of common stock at the Company’s annual meeting of stockholders currently scheduled to be held on June 21, 2007; such approval is assumed for the purpose of this table. If shareholder approval is not obtained, such warrants will remain unexercisable until the conditions to vesting are satisfied.

Series E Stock — All Holders

The following table sets forth, as of April 25, 2007, certain information with respect to (i) any person (including any group) who is known to the Company to be the beneficial owner of more than 5% of the outstanding shares of Series E Stock, (ii) each director, nominee, or Named Executive Officer who owns Series E Stock, and (iii) executive officers and directors as a group.

Name and Address of Beneficial Owner(1)	Beneficial Ownership		Of Class
Kevin F. Flynn June 1992 Non-Exempt Trust(2)		6,667		29.9	%
120 South LaSalle Street
Chicago, IL 60602
Rolf Lagerquist(3)		2,000		9.0	%
4522 CO Road 21 NE
Elgin, MN 55932
Robert L. & Loise Cecchini TTEES(4)		2,000		9.0	%
3 Winterberry Lane
North Reading, MA 01864
All current directors and executive officers as a group (5 persons)		0		*

*	Less than one percent of the Series E Stock outstanding.
(1)	No director, nominee or Named Executive Officer of the Company owns any shares of any series of preferred stock of the Company.
(2)	Converts into 279,735 shares of common stock, including shares issuable upon payment of cumulative dividends.
(3)	Converts into 83,916 shares of common stock, including shares issuable upon payment of cumulative dividends.
(4)	Converts into 83,916 shares of common stock, including shares issuable upon payment of cumulative dividends.

For information on the securities authorized for issuance under the Company’s equity compensation plans, and for information on the plans themselves, please see the information included in Item 5 of this Form 10-KSB/A and Note 9 — Equity Incentive Plan and Employee Stock Purchase Plan in the Notes to our Consolidated Financial Statements.

Item 12.   Certain Relationships, Related Transactions and Director Independence

The following section sets forth information regarding transactions or proposed transactions since January 1, 2006 between the Company and certain related persons. For information on the compensation received by current and former directors and officers of the Company during the 2006 fiscal year, and the beneficial ownership of equity securities of the Company of such individuals, see the “Compensation” and “Security Ownership of Certain Beneficial Owners and Management” sections above under Items 10 and 11, respectively.

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David J. Weissberg, M.D., former CEO and Director, and Lantana Small Capital Growth, LLC

In September 2005, Lantana Small Capital Growth, LLC (“Lantana”), of which Dr. David J. Weissberg, the Company’s former Chief Executive Officer and director, is the managing partner, purchased 1,600,000 shares of common stock of the Company and converted a Bridge II Convertible Promissory Note into 5,690,000 shares of common stock of the Company. In February 2007, Lantana exercised warrants to purchase an aggregate 329,750 shares of common stock at prices ranging from $.10 to $.17 per share and Dr. Weissberg exercised warrants to purchase 400,000 shares of common stock at the same time.

John H. Abeles, M.D., director, and Northlea Partners, Ltd.

In May 2004, the Company issued a $25,000 Bridge III Convertible Promissory Note to Northlea Partners, of which Dr. Abeles is General Partner, in exchange for $25,000 cash. The terms of the notes were identical to other Bridge III Convertible Promissory Notes issued by the Company. At that time, the Company also issued warrants to purchase 6,250 shares of common stock to Northlea Partners with the same terms as other participants in the Bridge III offering. In 2006, Northlea Partners converted all notes issued to it by the Company, including the Bridge III and prior bridge financing notes in the aggregate principal amount of $70,000, plus unpaid interest, into 900,188 shares of common stock. Also in 2006, Northlea Partners converted 7,665 shares of Series E Stock, plus cumulative unpaid dividends of $75,995, into 305,772 shares of common stock. Dr. Abeles disclaims beneficial ownership of all shares owned by, or issuable to, Northlea Partners except shares attributable to his 1% interest in Northlea Partners as General Partner.

Alexander Milley, director, and affiliated entities

In July 2003, Azimuth Corporation (“Azimuth”), of which Mr. Milley is President and Chairman of the Board of Directors, and Cadmus Corporation (“Cadmus”), of which Mr. Milley is President and a director, agreed to cancel seven warrants held by Azimuth and one warrant held by Cadmus, which entitled the holders to purchase a total of 3,125,000 shares of common stock at various exercise prices between $0.01 and $1.25 per share. The warrants, issued between December 1999 and August 2001, contained anti-dilution clauses which required CytoCore to increase the number of shares of common stock the holders were entitled to purchase under the warrants by approximately 1,500,000 shares as of the date of the agreement, with commensurate adjustments in individual exercise prices so that gross proceeds to the Company from exercise of the warrants remained the same. These anti-dilution provisions could have required the Company to make additional adjustments in shares and exercise prices in the future based on the Company’s issuance of debt or equity instruments at prices below the adjusted exercise prices of these warrants. In consideration for the parties’ agreement to cancel these warrants, including certain anti-dilution clauses, and the forgiveness of approximately $100,000 owed to Azimuth and Cadmus, CytoCore agreed to issue new five-year warrants entitling the holders to purchase an aggregate 6,500,000 shares of common stock at an exercise price of $0.30 per share. The documents relating to this agreement were executed in the first quarter of 2005. In 2006, the parties again agreed to amend the warrants, reducing the number of shares that could be purchased upon exercise to an aggregate 3,500,000 shares and reducing the exercise price to $.10 per share. Also during 2006, Mr. Milley, Azimuth, Cadmus, Milley Management, Inc. and Winchester National, Inc. converted a total of 119,460 shares of the Company’s Series E Stock and cumulative unpaid dividends of $1,477,986 into 4,763,484 shares of common stock, of which Mr. Milley directly owns 648,346 shares.

Robert F. McCullough, Chief Financial Officer and director, and Summitcrest Capital LP

Summitcrest Capital LP (“Summitcrest”), of which Mr. McCullough is the President of its general partner (Summitcrest Capital Inc.), purchased 2,157,500 shares of common stock of the Company during 2005. In 2006, Summitcrest purchased an additional 1,875,000 shares of common stock.

Edward G. Renner, former Vice President of Legal and Regulatory Affairs, and Muriel Renner LLC

Prior to joining the Company, Mr. Renner was employed by the law firm of Muriel Renner LLC (“Muriel Renner”). The Company engaged Muriel Renner to act as litigation counsel in several matters and in 2006 paid the firm for work performed on its behalf approximately $237,000 and issued 307,692 shares of common stock in lieu of cash payment.

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Mr. Renner, as a partner and owner of Muriel Renner, was entitled to his proportionate share of the fees paid to Muriel Renner in cash and shares of common stock issued in lieu of cash payment. The Company also issued 575,000 shares of common stock directly to Mr. Renner in lieu of cash for his portion of the remaining balance of fees owed to the firm for work performed on behalf of the Company. In April 2006, the Company hired Mr. Renner as in-house counsel. Mr. Renner resigned from the Company in October 2006 and Muriel Renner no longer represents the Company.

Director Independence

As noted above, our Board of Directors consists of Dr. Augusto Ocana, Robert F. McCullough, Jr., Clinton H. Severson, John H. Abeles, M.D. and Alexander M. Milley. Each member of the Board, which includes all nominees, is “independent” as set forth in Rule 4200(a)(15) of the listing standards of the NASD, except for Dr. Ocana and Mr. McCullough, both of whom are executive officers of the Company; Dr. Weissberg, a former director and executive officer, also was not independent given his employment by the Company. The Company does not utilize any other definition or criteria for determining the independence of a director, and no other transactions, relationships, or other arrangements exist to the Board’s knowledge or were considered by the Board, other than as may be discussed herein, in determining any director’s independence. For information on Board committees, please see “Board of Directors and Committee Information” under Item 9 above.

Item 13.   Exhibits

(*) Denotes an exhibit filed herewith.

(+) Denotes a management contract or compensatory plan, contract or arrangement.

Exhibit No.			Description
	2	.1	Stock and Membership Interest Exchange Agreement dated as of December 4, 1998 among Bell National Corporation, InPath, LLC and the InPath Members (as such term is defined therein). (Incorporated herein by reference to Appendix A to the Bell National Corporation Definitive Proxy Statement on Schedule 14A, filed on April 30, 1999 (the “1999 Proxy Statement”).)
	2	.2	Agreement and Plan of Merger of Bell National Corporation and Ampersand Medical Corporation. (Incorporated herein by reference to Appendix C to 1999 Proxy Statement.)
	2	.3	Agreement and Plan of Merger by and among AccuMed International, Inc., AccuMed Acquisition Corp. and Ampersand Medical Corporation, dated as of February 7, 2001, and Amendment No. 1 thereto. (Incorporated herein by reference to Appendix I to Registration Statement (as amended) on Form S-4, No. 333-61666, as filed on May 25, 2001 (the “May 2001 S-2”).)
	3	.1	Certificate of Incorporation of Ampersand Medical Corporation, as amended. (Incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 26, 2001.)
	3	.2	By-laws of Ampersand Medical Corporation. (Incorporated herein by reference to Appendix E to the 1999 Proxy Statement.)
	3	.3	Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of Ampersand Medical Corporation. (Incorporated herein by reference to Exhibit 3.5 to the Ampersand Medical Corporation Annual Report on Form 10-K (as amended) for the fiscal year ended December 31, 2000, as filed on March 29, 2001 (the “2000 10-K”).)
	3	.4	Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock of Ampersand Medical Corporation. (Incorporated herein by reference to Exhibit 3.6 to the 2000 10-K.)
	3	.5	Section 6 of Article VII of the By-laws of Ampersand Medical Corporation, as amended. (Incorporated herein by reference to Exhibit 3.3 to the May 2001 S-2.)
	3	.6	Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock (Incorporated herein by reference to Exhibit 3.4 to the Company’s Registration Statement on Form S-2 (as amended), File No. 333-83578, as filed on February 28, 2002 (the “February 2002 S-2”).)
	3	.7	Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock. (Incorporated herein by reference to Exhibit 3.5 to the February 2002 S-2.)

46

Exhibit No.			Description
	3	.8	Certificate of Amendment of Amended Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock. (Incorporated herein by reference to Exhibit 3.6 to the February 2002 S-2.)
	3	.9	Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock. (Incorporated herein by reference to Exhibit 3.7 to the February 2002 S-2.)
	3	.10	Certificate of Designation, Preferences and Rights of Series E Convertible Preferred Stock. (Incorporated herein by reference to Exhibit 3.8 to the February 2002 S-2.)
	3	.11	Certificate of Amendment to Certificate of Incorporation of the Company, dated August 5, 2004. (Incorporated herein by reference to Exhibit 3.1 to the Company’s Form 10-QSB for the quarter ended June 30, 2004, as filed on August 16, 2004 (the “2004 2Q 10-QSB”).)
	3	.12	Certificate of Amendment to Certificate of Incorporation, as filed on June 22, 2006. (Incorporated herein by reference to Exhibit 3.1 to the Company’s Form 10-QSB for the Quarter end June 30,2006, as filed on August 21, 2006)
	4	.2	Common Stock Purchase Warrant issued to Holleb & Coff on July 4, 1999 representing the right to purchase 250,000 shares of Common Stock of Ampersand Medical Corporation. (Incorporated herein by reference to Exhibit 4.3 to the Ampersand Medical Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as filed on March 31, 2000 (the “1999 10-K”).)
	4	.10	Common Stock Purchase Warrant issued to Monsun AS on April 1, 2002 representing the right to purchase 200,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.31 to the June 2002 S-2.)
	4	.12	Form of Common Stock Purchase Warrant issued in connection with certain Bridge I financing in June 2002. (Incorporated herein by reference to Exhibit 4.33 to the June 2002 S-2.)
	4	.13	Common Stock Purchase Warrant issued to Richard A. Domanik, M.D, with an issue date of May 31, 2002, representing the right to purchase 51,493 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.34 to the Registration Statement on Form S-2, File No. 333-100150, as filed on September 27, 2002 (the “September 2002 S-2”).)
	4	.14	Amendment No. 1, dated August 19, 2002, to the Common Stock Purchase Warrant issued in connection with certain Bridge I financing. (Incorporated herein by reference to Exhibit 4.36 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, as filed on July 21, 2003 (the “2002 10-K”).)
	4	.15	Form of Common Stock Purchase Warrant to be issued in connection with certain Bridge II Financing beginning in October 2002. (Incorporated herein by reference to Exhibit 4.37 to the 2002 10-K.)
	4	.16	Common Stock Purchase Warrant issued to Qwestar Resources on November 1, 2002 representing the right to purchase 200,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.38 to the 2002 10-K.)
	4	.17	Common Stock Purchase Warrant issued to Suzanne M. Gombrich on April 2, 2003 representing the right to purchase 1,000,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.39 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2003, as filed on August 13, 2003 (the “2003 2Q 10-QSB”).)
	4	.18	Common Stock Purchase Warrant issued to Dan Burns on August 20, 2003 representing the right to purchase 1,100,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.40 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2003, as filed on November 19, 2003 (the “2003 3Q 10-QSB”).)
	4	.19	Common Stock Purchase Warrant issued to Dan Burns on September 16, 2003 representing the right to purchase 935,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.41 to the 2003 3Q 10-QSB.)
	4	.20	Common Stock Purchase Warrant issued to David Weissberg on September 16, 2003 representing the right to purchase 400,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.42 to the 2003 3Q 10-QSB.)
	4	.21	Common Stock Purchase Warrant issued to Reid Jilek on September 2, 2003 representing the right to purchase 500,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.43 to the 2003 3Q 10-QSB.)

47

Exhibit No.			Description
	4	.22	Common Stock Purchase Warrant issued to Dan Burns on March 19, 2004 representing the right to purchase 500,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004, as filed on May 18, 2004 (the “2004 1Q 10-QSB”).)
	4	.23	Common Stock Purchase Warrant issued to Dan Burns on March 4, 2004 representing the right to purchase 67,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.2 to the 2004 1Q 10-QSB.)
	4	.24	Common Stock Purchase Warrant issued to Dan Burns on May 5, 2004 representing the right to purchase 500,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.1 to the Company’s Form 10-QSB for the quarter ended June 30, 2004, as filed on August 16, 2004 (the “2004 2Q 10-QSB”).)
	4	.25	Common Stock Purchase Warrant issued to Dan Burns on June 4, 2004 representing the right to purchase 530,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.2 to the 2004 2Q 10-QSB.)
	4	.26	Common Stock Purchase Warrant issued to Don Hancock on June 4, 2004 representing the right to purchase 250,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.3 to the 2004 2Q 10-QSB.)
	4	.27	Form of common stock purchase warrant issued to private placement agents on June 15, 2004 representing the right to purchase an aggregate 681,625 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.4 to the 2004 2Q 10-QSB.)
	4	.28	Form of common stock purchase warrant issued to vendors as part of restructuring settlements during the quarter ended June 30, 2004 representing the right to purchase an aggregate 483,984 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.5 to the 2004 2Q 10-QSB.)
	4	.30	Common Stock Purchase Warrant issued to Ken Sgro on September 15, 2004 representing the right to purchase 192,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.2 to the 2004 3Q 10-QSB.)
	4	.32	Common Stock Purchase Warrant issued to Jorge Leon, Ph.D., on September 15, 2004 representing the right to purchase 25,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.4 to the 2004 3Q 10-QSB.)
	4	.33	Common Stock Purchase Warrant issued to Jan L. Dorfman on September 15, 2004 representing the right to purchase 20,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.5 to the 2004 3Q 10-QSB.)
	4	.34	Common Stock Purchase Warrant with an issue date of July 18, 2003 in favor of Azimuth Corporation representing the right to purchase 2,875,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.39 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed on April 14, 2005 (the “2004 10-K”).)
	4	.35	Common Stock Purchase Warrant with an issue date of July 18, 2003 in favor of Cadmus Corporation representing the right to purchase 3,625,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.40 to the 2004 10-K.)
	4	.36	Common Stock Purchase Warrant issued to Michael Pasini on February 15, 2005 representing the right to purchase 200,000 shares of common stock of the Company. (Incorporated herein by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2005, as filed on August 16, 2005.)
	4	.37	Common Stock Purchase Warrant issued to Dan Burns on May 2, 2005 representing the right to purchase 556,500 shares of common stock. (Incorporated herein by reference to Exhibit 4.1 to Company’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005, as filed on May 20, 2005.)
	4	.38	Form of subscription agreement to purchase common stock of the Company at $0.025 per share.
	4	.39	Form of common stock purchase warrant issued as part of 2005 financings representing the right to purchase shares of common stock of the Company at $0.10 per share

48

Exhibit No.			Description
	4	.40	Common Stock Purchase Warrant issued to Reid Jilek on March 1, 2006 representing the right to purchase 1,000,000 shares of common stock.
	4	.41	Common Stock Purchase Warrant issued to Eric Gombrich on March 1, 2006 representing the right to purchase 300,000 shares of common stock.
	4	.42	Form of common stock purchase warrant issued as part of 2006 financings representing the right to purchase shares of common stock of the Company at $0.18 per share
	4	.43	Form of subscription agreement used to purchase common stock of the Company during 2006.
	10	.2+	1999 Equity Incentive Plan established as of June 1, 1999, as amended. (Incorporated herein by reference to Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A, as filed on July 1, 2004.)
	10	.3+	1999 Employee Stock Purchase Plan. (Incorporated herein by reference to Appendix G to the 1999 Proxy Statement.)
	10	.4	$500,000 Convertible Promissory Note issued to Monsun, AS on November 1, 2000. (Incorporated herein by reference to Exhibit 10.23 to the 2000 10-K.)
	10	.5	Lease Agreement between Ampersand Medical Corporation and O.P., L.L.C, dated May 18, 2000, pertaining to premises located at 414 N. Orleans, Suite 510, Chicago, Illinois 60610. (Incorporated by reference to Exhibit 10.32 to the 2000 10-K.)
	10	.6	First Amendment to Lease Agreement between Ampersand Medical Corporation and O.P., L.L.C., dated February 13, 2001, pertaining to additional premises at 414 N. Orleans, Suite 503, Chicago, Illinois 60610 and extending the term of the original lease until February 28, 2006. (Incorporated by reference to Exhibit 10.33 to the 2000 10-K.)
	10	.7	$25,000 Promissory Note issued to Northlea Partners, Ltd. on August 6, 2001. (Incorporated herein by reference to Exhibit 10.41 to the August 2001 S-4.)
	10	.8	Form of Convertible Promissory Note issued in connection with certain Bridge I financing beginning in March 2002. (Incorporated herein by reference to Exhibit 10.42 to the 2002 10-K.)
	10	.9	Amendment No. 1 to Convertible Promissory Note issued in connection with certain Bridge I financing dated August 20, 2003. (Incorporated herein by reference to Exhibit 10.43 to the 2002 10-K.)
	10	.10	Form of Bridge II Convertible Promissory Note Indenture, including Form of Convertible Promissory Note, Form of Security Agreement, Form of Collateral Sharing Agreement, and Form of Warrant issued in connection with certain Bridge II Financing beginning in October 2002. (Incorporated herein by reference to Exhibit 10.44 to the 2002 10-K.)
	10	.12	Amendment No. 1 to the 12% Convertible Secured Promissory Note issued in connection with certain Bridge II financing in October 2002. (Incorporated herein by reference to Exhibit 10.47 to the 2003 3Q 10-QSB.)
	10	.13	Amendment No. 1 dated July 31, 2003 to the Indenture dated October 1, 2002 issued in connection with certain Bridge II financing in October 2002 (Incorporated herein by reference to Exhibit 10.48 to the 2003 3Q 10-QSB.)
	10	.15	Proposal for consulting agreement with Reid Jilek. (Incorporated herein by reference to Exhibit 10.50 to the 2003 3Q 10-QSB.)
	10	.16	Form of Subscription Agreement for Bridge III $1,500,000 minimum offering/$4,000,000 Maximum Offering placed by Bathgate Capital Partners LLC. (Incorporated herein by reference to Exhibit 10.47 to the 2003 10-KSB.)
	10	.17	Form of Note for Bridge III $1,500,000 minimum offering/$4,000,000 Maximum Offering placed by Bathgate Capital Partners LLC. (Incorporated herein by reference to Exhibit 10.48 to the 2003 10-KSB.)
	10	.18	Form Registration Rights Agreement issued in connection with Bridge III Offering. (Incorporated herein by reference to Exhibit 10.49 to the 2003 10-KSB.)
	10	.19	Form of General Security Agreement by the Company in connection with Bridge III Offering. (Incorporated herein by reference to Exhibit 10.50 to the 2003 10-KSB.)
	10	.20	Form of Warrant issued in connection with Bridge III Offering. (Incorporated herein by reference to Exhibit 10.51 to the 2003 10-KSB.)

49

Exhibit No.			Description
	10	.21	Form of Subscription Agreement for Bridge IV Offering. (Incorporated herein by reference to Exhibit 4.3 to the 2004 1Q 10-QSB.)
	10	.22	Form of Note for Bridge IV Offering. (Incorporated herein by reference to Exhibit 4.4 to the 2004 1Q 10-QSB.)
	10	.23	Form of General Security Agreement for Bridge IV Offering. (Incorporated herein by reference to Exhibit 4.5 to the 2004 1Q 10-QSB.)
	10	.24	Form of Registration Rights Agreement for Bridge IV Offering. (Incorporated herein by reference to Exhibit 4.6 to the 2004 1Q 10-QSB.)
	10	.25	Form of Subscription Agreement for the Company’s August 2004 common stock offering. (Incorporated herein by reference to Exhibit 4.6 to the 2004 3Q 10-QSB.)
	10	.26	Settlement Agreement, effective as of October 14, 2004, by and among the Company, AccuMed and MonoGen, Inc. and accompanying License Agreement, made as of October 14, 2004, by and between MonoGen, Inc., the Company and AccuMed. (Incorporated herein by reference to Exhibit 4.8 to the Company’s Form 10-QSB/A for the quarter ended September 30, 2004, as filed on November 17, 2004.)
	10	.27	Form of Subscription Agreement for the Company’s common stock offering beginning in December 2004. (Incorporated herein by reference to Exhibit 10.28 to the 2004 10-K.)
	10	.28	General Release and Settlement Agreement, effective as of July 18, 2003, by and among the Company, Azimuth Corporation and Cadmus Corporation. (Incorporated herein by reference to Exhibit 10.29 to the 2004 10-K.)
	10	.29	Agreement, made as of December 31, 2004, between British Columbia Cancer Agency Branch and the Company, AccuMed and Oncometrics. (Incorporated herein by reference to Exhibit 10.30 to the 2004 10-K.)
	10	.30	Settlement Agreement, entered into as of December 2004, by and between Bruce Patterson and Invirion, Inc. and the Company. (Incorporated herein by reference to Exhibit 10.31 to the 2004 10-K.)
	10	.31	Lease proposal letter agreement, dated September 22, 2004 from Spectrum Real Estate Services to the Company pertaining to the lease of premises located at 414 N. Orleans, Suite 510, Chicago, Illinois 60610 to be effective as third amendment to original lease. (Incorporated herein by reference to Exhibit 10.32 to the 2004 10-K.)
	10	.32	Strategic alliance agreement entered into by the Company in November 2004. (Incorporated herein by reference to Exhibit 10.33 to the 2004 10-K.)
	10	.33	Settlement Agreement and Mutual Release effective June 7, 2005, by and between the Cleveland Clinic Foundation and the Company. (Incorporated herein by reference to Exhibit 10.1 to the 2005 3Q 10-QSB.)
	10	.34	General Release and Confidentiality Agreement, entered into October 2005, by and between Eric Gombrich and the Company. (Incorporated herein by reference to Exhibit 10.2 to the 2005 3Q 10-QSB.)
	10	.35	Settlement Agreement and Mutual Release, entered into October 2005, by and among the Lash Group Inc., Peter Gombrich and the Company. (Incorporated herein by reference to Exhibit 10.3 to the 2005 3Q 10-QSB.)
	10	.36	Clinical Study Agreement, entered into January 2006, between University Hospitals of Cleveland and the Company.
	10	.37	Separation Agreement, entered into December 31, 2005, between Denis M. O’Donnell, M.D. and the Company.
	10	.38	Consulting Agreement, dated January 27, 2006 and effective March 1, 2006, by and between the Company and GSG Enterprises LLC (Incorporated herein by reference to Exhibit 10.1 to the 2006 3Q 10-QSB/A.)
	10	.39+*	Employment agreement dated November 15, 2006 between Augusto Ocana and the Company.
	10	.40+*	Employment agreement dated November 20, 2006 between Robert McCullough and the Company.
	10	.41*	Consulting agreement dated November 20, 2006 between Future Wave Management and the Company.

50

Exhibit No.			Description
	10	.42*	Consulting agreement dated November 20, 2006 between EBM, Inc. and the Company.
	10	.43+*	Common Stock Purchase Warrant dated December 1, 2006 issued to Augusto Ocana representing the right to purchase 500,000 shares of common stock
	10	.44+	Common Stock Purchase Warrant dated September 28, 2006 issued to David Weissburg representing the right to purchase 4,000,000 shares of common stock
	10	.45+*	Common Stock Purchase Warrant dated September 28, 2006 issued to Robert Mccullough Jr. representing the right to purchase 4,000,000 shares of common stock
	10	.46+*	Common Stock Purchase Warrant dated September 28, 2006 issued to Alexander Milley. representing the right to purchase 625,000 shares of common stock
	10	.47+*	Common Stock Purchase Warrant dated September 28, 2006 issued to John Ables. representing the right to purchase 625,000 shares of common stock
	14		Code of Ethics and Business Conduct of Officers, Directors and Employees of CytoCore, Inc. (Incorporated herein by reference to Exhibit 99.1 to the 2003 10-KSB.)
	21*		Subsidiaries of the Company
	23	.1*	Consent of Amper, Politziner & Mattia P.C.
	23	.2*	Consent of Altschuler, Melvoin and Glasser LLP
	31	.1*	Certification of the Chief Executive Officer of CytoCore, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2*	Certification of the Chief Financial Officer of CytoCore, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1*	Certification of the Chief Executive Officer of CytoCore, Inc. Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2*	Certification of the Chief Financial Officer of CytoCore, Inc., Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Item 14.   Principal Accountant Fees and Services

Independent Registered Public Accounting Firm

Amper, Politziner & Mattia PC (“Amper”) has served as the Company’s independent registered public accounting firm since May 2006. Altschuler, Melvoin and Glasser LLP (“AMG”) served as the Company’s independent registered public accounting firm from April 2003 until its resignation on May 10, 2006. AMG had a relationship with American Express Tax and Business Services, Inc. (“TBS”) from which it leased auditing staff who were full-time, permanent employees of TBS and through which its partners provided non-audit services. As a result of this arrangement, AMG had no full time employees and therefore, none of the audit services performed were provided by permanent full-time employees of AMG. Effective October 1, 2005, TBS was acquired by RSM McGladrey, Inc. (“RSM”) and AMG’s relationship with TBS was replaced with a similar relationship with RSM. AMG managed and supervised the audit and audit staff, and was exclusively responsible for the opinion rendered in connection with its examination.

Fees

Audit Fees.  The aggregate fees billed for fiscal years 2006 and 2005 for professional services rendered by Amper for the audit of the Company’s annual financial statements and review of the financial statements included in the Company’s Forms 10-QSB or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were approximately $235,000 and $0, respectively.

The aggregate fees billed for fiscal years 2006 and 2005 for professional services rendered by AMG for the audit of the Company’s annual financial statements and review of the financial statements included in the Company’s Forms 10-QSB or for services that are normally provided by the accountant in connection with

51

statutory and regulatory filings or engagements for those fiscal years were approximately $6,000 and $164,000, respectively.

Audit-Related Fees.  Neither Amper nor AMG performed any assurance and related services that were reasonably related to the performance of the independent registered public accounting firm’s audit or review of the Company’s financial statements for fiscal years 2006 and 2005.

Tax Fees.  The Company did not incur or pay any fees for professional services rendered for tax compliance, tax advice and tax planning in either of its two most recent fiscal years.

All Other Fees.  Neither Amper nor AMG performed any services other than those described above for the Company for fiscal years 2006 and 2005.

Pre-Approval Policies

As required by applicable law, the Audit Committee is responsible for the appointment, compensation, retention and oversight of the work of the Company’s independent registered public accounting firm. In connection with such responsibilities, the Audit Committee is required, and it is the Audit Committee’s policy, to pre-approve the audit and permissible non-audit services (both the type and amount) performed by the Company’s independent registered public accounting firm in order to ensure that the provision of such services does not impair the firm’s independence, in appearance or fact.

The Audit Committee pre-approved all audit and permissible non-audit services provided to the Company by the independent registered public accounting firm during fiscal 2006.

52

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CYTOCORE, INC.

By:  /s/  Augusto Ocana

Augusto Ocana

Chief Executive Officer

By:  /s/  Robert McCullough, Jr.

Robert McCullough, Jr.

Chief Financial Officer

Date: April 27, 2007

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Augusto Ocana Augusto Ocana	Chief Executive Officer (Principal Executive Officer and Director)	April 27, 2007
/s/  Robert McCullough, Jr. Robert McCullough, Jr.	Chief Financial Officer (Principal Accounting Officer and Director)	April 27, 2007
/s/  Alexander M. Milley Alexander M. Milley	Director	April 27, 2007
/s/  John Abeles John Abeles	Director	April 27, 2007
/s/  Clint Severson Clint Severson	Director	April 27, 2007

53

Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheet of CytoCore, Inc. and Subsidiaries as of December 31, 2006, and the related consolidated statement of operations, stockholders’ deficit, and cash flow for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of CytoCore, Inc. and Subsidiaries as of December 31, 2006, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s recurring losses from operations and resulting dependence upon access to additional external financing, raise substantial doubt concerning its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 9 to the consolidated financial statements, effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” applying the modified-prospective method.

/s/  Amper, Politziner & Mattia, P.C.

April 16, 2007

Edison, New Jersey

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

CytoCore, Inc.,

We have audited the accompanying consolidated balance sheet of CytoCore, Inc. (formerly Molecular Diagnostics, Inc.) and Subsidiaries as of December 31, 2005, and the related consolidated statements of operations, cash flows and changes in stockholders’ equity (deficit) for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CytoCore, Inc. and Subsidiaries as of December 31, 2005 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring substantial net losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/  ALTSCHULER, MELVOIN AND GLASSER LLP

Chicago, Illinois

April 13, 2006

F-2

CYTOCORE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2006			2005
	(Dollars in thousands,
	except per share amounts)
ASSETS
Current Assets:
Cash and cash equivalents	$	874		$	—
Accounts receivables		24			38
Inventories		—			26
Prepaid expenses and other current assets		122			73
Total current assets		1,020			137
Fixed Assets, net		242			233
Licenses, patents, and technology, net of amortization		20			20
Total assets	$	1,282		$	390
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Checks issued in excess of amounts on deposit	$	—		$	5
Accounts payable		1,434			3,714
Accrued payroll costs		421			643
Accrued expenses		1,825			2,292
Deferred revenue		25			25
Due to stockholder		—			37
Lease obligation		—			96
Notes payable — related parties		—			70
Notes payable		425			3,557
Total current liabilities		4,130			10,439
Long-term liabilities
Convertible securities		567			—
Stockholders’ Deficit:
Preferred stock; $0.001 par value; shares authorized 10,000,000; 574,642 and 1,102,192 shares issued and outstanding at December 31, 2006 and 2005, respectively (Liquidation value of all classes of preferred stock of $5,005 at December 31, 2006)		2,920			7,716
Common stock, $0.001 par value; 375,000,000 shares authorized; 312,429,579 and 154,665,084 shares issued and 312,237,491 and 154,472,996 shares outstanding at December 31, 2006 and 2005, respectively		312			155
Additional paid-in capital		70,925			52,386
Treasury stock at cost; 192,088 shares at December 31, 2006 and 2005		(327	)		(327	)
Accumulated deficit		(77,170	)		(69,911	)
Accumulated comprehensive loss — Cumulative translation adjustment		(75	)		(68	)
Total stockholders’ deficit		(3,415	)		(10,049	)
Total liabilities and stockholders’ deficit	$	1,282		$	390

The accompanying notes are an integral part of these consolidated financial statements.

F-3

CYTOCORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2006			2005
	(Dollars in thousands,
	except per share amounts)
Net Sales	$	94		$	117
Operating expenses:
Cost of revenues (includes impairment charge of property assets of $169, net of settlement of trade debt of $176 for the year ended December 31, 2006)		19			21
Research and development (net of settlement of trade debt of $342 and $274 for the year ended December 31, 2006 and 2005, respectively)		854			(100	)
Selling, general and administrative expenses (net of settlement of trade debt of $994 and $255 for the year ended December 31, 2006 and 2005, respectively)		3,967			1,346
Total costs and expenses		4,840			1,267
Operating loss		(4,746	)		(1,150	)
Other income (expense):
Interest expense — related party		(14	)		(9	)
Interest expense (net of interest settlement of $70 and $0 for the year ended December 31, 2006 and 2005, respectively)		(1,818	)		(3,167	)
Interest income		12			—
Total other income (expense)		(1,820	)		(3,176	)
Loss from operations before income taxes		(6,566	)		(4,326	)
Income taxes		—			—
Net loss		(6,566	)		(4,326	)
Preferred stock dividends		(693	)		(20	)
Net loss applicable to common stockholders	$	(7,259	)	$	(4,346	)
Basic and fully diluted net loss per common share	$	(.03	)	$	(.04	)
Weighted average number of common shares outstanding		241,431,458			110,037,893

The accompanying notes are an integral part of these consolidated financial statements.

F-4

CYTOCORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2006			2005
	(Dollars in thousands)
Operating Activities:
Net loss	$	(6,566	)	$	(4,326	)
Amortization of debt discount		173			2,673
Depreciation and amortization		41			117
Amortization of fees		—			80
Non-cash interest related to warrant modification		100			—
Loss on sale of fixed assets		—			3
Impairment charge of property asset		169			—
Non-cash interest on beneficial note conversion settled in stock		1,321			—
Stock and warrants issued for legal settlements		210			421
Stock and warrants issued to non-employees for services		832			58
Non-cash compensation expense		1,270			—
Gain on settlements of trade indebtedness		(1,581	)		—
Stock returned for settlement		—			(47	)
Changes in assets and liabilities:
Accounts receivable		14			(8	)
Inventories		26			21
Due from stockholder		—			(1	)
Prepaid expenses and other current assets		(50	)		(58	)
Checks issued in excess of amounts on deposit		(5	)		5
Accounts payable		(745	)		(713	)
Lease obligation		(14	)		(13	)
Accrued expenses		(447	)		425
Net cash used for operating activities		(5,252	)		(1,363	)
Cash used in investing activities:
Capital purchases		(219	)		(27	)
Net cash used for investing activities		(219	)		(27	)
Cash flows from financing activities:
Proceeds from issuance of common stock		7,362			1,483
Financing costs in connection with private placement of stock		(79	)		—
Payments of notes payable		(1,185	)		(104	)
Proceeds from exercise of warrants		247			—
Net cash provided by financing activities		6,345			1,379
Net increase/(decrease) in cash and cash equivalents		874			(11	)
Cash and cash equivalents at beginning of year		—			11
Cash and cash equivalents at end of year	$	874		$	—
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	319		$	3
Non-cash transaction during the year for:
Preferred stock and cumulative dividends converted into common stock	$	5,489		$	71
Convertible promissory notes and accrued interest converted into common stock	$	2,370		$	4,494
Settlement of trade debt with stock	$	321		$	—

The accompanying notes are an integral part of these consolidated financial statements.

F-5

CYTOCORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

																						Accumulated
	Preferred Stock						Common Stock									Additional						Other			Total
	Par Value $0.001						Par Value $0.001				Treasury Stock					Paid-In			Accumulated			Comprehensive			Stockholders’
	Shares			Amount			Shares		Amount		Shares		Amount			Capital			Deficit			Loss			Deficit
	(Dollars in thousands)
January 1, 2005		1,119,192		$	7,767			99,792,292	$	100		192,088	$	(327	)	$	45,961		$	(65,565	)	$	(59	)	$	(12,123	)
Comprehensive Loss:
Net loss					—					—				—			—			(4,326	)		—			(4,326	)
Foreign currency translation					—					—				—			—			—			(9	)		(9	)
Total net comprehensive loss					—					—				—			—			—			—			(4,335	)
Series C preferred stock and cumulative dividends converted to common stock		(17,000	)		(51	)		118,260		—				—			71			(20	)		—			—
Bridge I conversions					—			2,008,962		2				—			292			—			—			294
Bridge III conversions					—			15,282,236		15				—			1,560			—			—			1,575
Bridge IV conversions					—			25,605,000		26				—			2,599			—			—			2,625
Sale of common stock					—			11,858,334		12				—			1,471			—			—			1,483
Common stock subscribed for services					—			—		—				—			16			—			—			16
Common stock returned for settlement					—			—		—				—			(47	)		—			—			(47	)
Warrants issued for services					—					—				—			42			—			—			42
Warrants issued in settlement of debt					—			—		—				—			421			—			—			421
December 31, 2005		1,102,192		$	7,716			154,665,084	$	155		192,088	$	(327	)	$	52,386		$	(69,911	)	$	(68	)	$	(10,049	)

The accompanying notes are an integral part of these consolidated financial statements

F-6

CYTOCORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT — (Continued)

																						Accumulated
	Preferred Stock						Common Stock									Additional						Other			Total
	Par Value $0.001						Par Value $0.001				Treasury Stock					Paid-In			Accumulated			Comprehensive			Stockholders’
	Shares			Amount			Shares		Amount		Shares		Amount			Capital			Deficit			Loss			Deficit
	(Dollars in thousands)
January 1, 2006		1,102,192		$	7,716			154,665,084	$	155		192,088	$	(327	)	$	52,386		$	(69,911	)	$	(68	)	$	(10,049	)
Comprehensive Loss:
Net loss					—					—				—			—			(6,566	)		—			(6,566	)
Foreign currency translation					—					—				—			—			—			(7	)		(7	)
Total net comprehensive loss					—					—				—			—			—			—			(6,573	)
Series B preferred stock and cumulative dividends converted to common stock		(139,370	)		(557	)		851,040		1				—			607			(51	)		—			—
Series C preferred stock and cumulative dividends converted to common stock		(207,500	)		(264	)		1,517,593		2				—			363			(101	)		—			—
Series E preferred stock and cumulative dividends converted to common stock		(180,680	)		(3,975	)		7,209,963		7				—			4,509			(541	)		—			—
Bridge I conversions					—			4,281,941		4				—			638			—			—			642
Bridge II conversions					—			1,693,056		1				—			252			—			—			253
Bridge III conversions					—			3,362,701		3				—			333			—			—			336
Related party notes converted					—			900,188		1				—			119			—			—			120
Monsun note conversion					—			7,624,327		8				—			2,332			—			—			2,340
Sale of common stock, net of financing costs of $79,317					—			80,064,292		80				—			7,203			—			—			7,283
Stock issued for sale of stock in prior year					—			38,210,498		38				—			(38	)		—			—			—
Exercise of warrants					—			2,023,079		2				—			245			—			—			247
Common stock issued for services					—			6,809,032		7				—			512			—			—			519
Common stock issued in settlement of debt					—			2,928,271		3				—			318			—			—			321
Common stock issued for compensation					—			288,514		—				—			38			—			—			38
Warrant conversion exercise price modification					—					—				—			100			—			—			100
Convertible securities in excess of authorized					—					—				—			(567	)		—			—			(567	)
Stock appreciation rights liability					—					—				—			(180	)		—			—			(180	)
Warrants issued for compensation					—					—				—			1,232			—			—			1,232
Warrants issued for services					—					—				—			313			—			—			313
Warrants issued in settlement of trade debt					—					—				—			210			—			—			210
December 31, 2006		574,642		$	2,920			312,429,579	$	312		192,088	$	(327	)	$	70,925		$	(77,170	)	$	(75	)	$	(3,415	)

The accompanying notes are an integral part of these consolidated financial statements.

F-7

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2006 and 2005
(Tabular data in thousands, except per share amounts)

Note 1.   The Company and Basis of Presentation

CytoCore, Inc., formerly Molecular Diagnostics, Inc (“CCI” or the “Company”) was incorporated as Ampersand Medical Corporation in Delaware in December 1998 as the successor to Bell National Corporation (“Bell National”). Bell National was incorporated in California in 1958, and was the continuing legal entity following its acquisition of InPath, LLC, a development-stage company engaged in the design and development of medical instruments and related tests, in December 1998. Bell National then merged into the Company, which was then operating under the Ampersand name, in 1999.

In September 2001, following the Company’s acquisition of AccuMed International, Inc. (“AccuMed”) via the merger of AccuMed into a wholly-owned subsidiary of CCI, the Company changed its corporate name to Molecular Diagnostics, Inc. in order to better represent its operations and products. The name change was effected through a merger with a separate wholly-owned subsidiary. CCI retained its Certificate of Incorporation in the merger, except as amended to reflect its new name, bylaws and capitalization. On June 16, 2006, the shareholders ratified a proposal to change the Company’s name from Molecular Diagnostics, Inc. to CytoCore, Inc., which change was effected in Delaware on June 22, 2006. Except where the context otherwise requires, “CCI,” the “Company,” “we” and “our” refers to CytoCore, Inc. and our subsidiaries and predecessors.

CCI is primarily focused on quick, accurate, and inexpensive screening tests for endometrial and uterine cancers using the Company’s next generation fully- integrated workstation-s, the Automated Image Proteomic Systems or AIPS^tm. This specialized computer-guided Image Recognition Microscope System combined with the new P2X7 genetic marker will be used to identify precancerous cells.

The Company hopes to integrate the next generation AIPS^tm system into the InPath System, an image analysis instrument, which will be used for various cancer-screening tests. As a result, the Company has discontinued production and sales of the AcCell Savant^tm System

Liquidity

The Company has incurred significant operating losses since its inception. Management expects that significant on-going operating expenditures will be necessary to successfully implement CCI’s business plan and develop, manufacture and market its products. These circumstances raise substantial doubt about CCI’s ability to continue as a going concern. Implementation of the Company’s plans and its ability to continue as a going concern depend upon its securing substantial additional financing working capital. During 2006, CCI raised net proceeds of approximately $7.3 million through the private sale of unregistered, restricted common stock and $922,000 from the exercise of warrants to purchase common stock. Management’s plans include efforts to obtain additional capital, although no assurances can be given about the Company’s ability to obtain such capital. In the first quarter of 2007, the Company has raised an additional $2.1 million through the sale of unregistered, restricted common stock and $2.0 million from the exercise of warrants to purchase common stock. The Company’s management team also has nearly completed implementation of its restructuring plan which is designed to provide unsecured creditors a settlement plan regarding outstanding payables. Completion of this plan may be contingent on the Company’s ability to raise sufficient new equity to fund operations. If the Company is unable to obtain adequate additional financing or generate profitable sales revenues, or negotiate a favorable settlement plan with creditors, it may be unable to fully resume its product development and other activities and may be forced to cease operations. The consolidated financial statements presented herein do not include any adjustments that might result from the outcome of this uncertainty.

F-8

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

Note 2.   Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

CCI recognizes revenue from product sales in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition,” when the following criteria are met: shipment of a product or license to customers has occurred and there are no remaining Company obligations or contingencies; persuasive evidence of an arrangement exists; sufficient vendor-specific, objective evidence exists to support allocating the total fee to all elements of the arrangement; the fee is fixed or determinable; and collection is probable.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.

Inventory of Instruments, Component Parts and Labor

Inventory of instruments and component parts consisted of AcCell instruments and component parts necessary to manufacture AcCell instruments as of December 31, 2005. During the year ended December 31, 2006, the Company has provided a reserve for the entire inventory and therefore the inventory is carried at no value on its books.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the assets’ estimated useful lives. Principal useful lives are as follows:

Furniture and fixtures	5 years
Laboratory equipment	5 years
Computer and communications equipment	3 years
Design and tooling	5 years
Leasehold improvements	Useful life or term of lease, whichever is shorter

Normal maintenance and repairs for property and equipment are charged to expense as incurred, while significant improvements are capitalized.

Licenses, Patents, and Technology

Licenses, patents, and purchased technology are recorded at their acquisition cost. Costs to prepare patent filings are expensed when incurred. Costs related to abandoned or denied patents are written off at the time of

F-9

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

abandonment or denial. Amortization is begun as of the date of acquisition or upon the grant of the final patent. Costs are amortized over the asset’s useful life, which ranges from two to 17 years. The Company assesses licenses, patents, and technology periodically for impairment.

Impairment or Disposal of Long-Lived Assets

At each balance sheet date or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, management of the Company evaluates recoverability of such assets. An impairment loss is recognized if the amount of undiscounted cash flows is less than the carrying amount of the asset, in which case the asset is written down to fair value. The fair value of the asset is measured by either quoted market prices or the present value of estimated expected future cash flows using a discount rate commensurate with the risks involved.

Research and Development Costs

Research and development costs are charged to operations as incurred. CCI conducts a portion of its research activities under contractual arrangements with scientists, researchers, universities, and other independent third parties.

Stock Based Compensation

We adopted SFAS No. 123R “Share-Based Payments,” effective January 1, 2006, which requires that share-based payments be reflected as an expense based upon the grant-date fair value of those awards. The expense is recognized over the remaining vesting periods of the awards. Prior to January 1, 2006, we applied the intrinsic value method of accounting for all stock-based employee compensation in accordance with APB No. 25 and related interpretations.

Foreign Currency Translation

The functional currency of the Company’s foreign operations is the local currency. Accordingly, all assets and liabilities are translated into U.S. dollars using year-end exchange rates, and all revenues and expenses are translated using average exchange rates during the year.

Fair Value of Financial Instruments

The carrying value of accounts receivable, accounts payable, accrued expenses and notes payable approximate their respective fair values due to their short maturities.

Other Comprehensive Income (Loss)

Translation adjustments related to the Company’s foreign operations are included in other comprehensive loss and reported separately in stockholders’ deficit.

Net Loss Per Share

Basic loss per share is calculated based on the weighted-average number of outstanding common shares. Diluted loss per share is calculated based on the weighted-average number of outstanding common shares plus the effect of dilutive potential common shares, using the treasury stock method. CCI’s calculation of diluted net loss per share excludes potential common shares as of December 31, 2006 and 2005 as the effect would be anti-dilutive

F-10

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

Income Taxes

CCI follows the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting carrying amounts and the respective tax bases of assets and liabilities, and are measured using tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Valuation allowances are provided against deferred tax assets if it is more likely than not that the deferred tax assets will not be realized.

Risks from Concentrations

The Company had our cash held at one financial institution in excess of FDIC insured limits. However, the Company does not believe a material risk of loss exists with respect to the financial position due to concentrations of credit risk.

Revenues were derived solely from one customer during 2006 and 2005.

Recent Accounting Pronouncements

Accounting for Uncertainty in Income Taxes.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. FIN 48 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. FIN 48 is effective for fiscal years beginning after December 15, 2006. We do not expect the adoption of FIN 48 to have a material impact on our financial condition or results of operations.

Fair Value Measurements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements. Accordingly, this SFAS No. 157 does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The future implementation of this Statement is not expected to have a material impact on out financial condition or results of operations.

F-11

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

Note 3.   Fixed Assets

Fixed assets consist of the following at December 31:

	2006			2005
Furniture and fixtures	$	124		$	116
Laboratory equipment		595			595
Computer and communications equipment		331			320
Design and tooling		201			170
Leasehold improvements		28			28
		1,279			1,229
Less accumulated depreciation and amortization		(1,037	)		(996	)
Total	$	242		$	233

For the years ended December 31, 2006 and 2005, depreciation expense was $41,000 and $117,000, respectively.

Note 4.   Licenses, Patents, and Technology

Licenses, patents, and technology include the following at December 31:

	2006			2005
Licenses	$	20		$	20
Patent costs		133			133
LabCorp. Technology Agreement		260			260
Subtotal		413			413
Less accumulated amortization		(393	)		(393	)
Total	$	20		$	20

For the years ended December 31, 2006 and 2005, there was no amortization expense for licenses, patents and technology. All patents and technology have been fully amortized. The licenses are deemed to have an indefinite life and are therefore not amortized.

Note 5.   Accrued Expenses

Accrued expenses include the following at December 31:

	2006		2005
Accrued interest	$	478	$	898
Accrued interest — related party		—		34
Accrued settlement costs		438		438
Accrued taxes (see Note 11)		589		589
Accrued Compensation		180		—
Other accrued expenses		140		333
Total	$	1,825	$	2,292

F-12

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

Note 6.   Notes Payable — Related Parties

Notes payable to related parties at December 31 consist of:

	2006		2005
Northlea Partners, Ltd., $25,000 Promissory Note issued August 6, 2001; interest rate 15% per annum	$	—	$	25
Northlea Partners, Ltd., $15,000 Promissory Note issued September 20, 2001; interest rate 9% per annum		—		15
Northlea Partners, Ltd., $15,000 Bridge II convertible promissory note issued May 1, 2003; interest rate 12% per annum (see description under Bridge II notes in Note 7-Notes Payable for other terms and conditions)		—		15
Northlea Partners, $25,000 Bridge III convertible promissory note issued May 21, 2004; interest rate 10% per annum (see description under Bridge III notes in Note 7- Notes Payable for other terms and conditions)		—		15
	$	—	$	70

The related party notes payable and accrued interest in the amount of approximately $120,000 were converted into an aggregate 900,188 shares of unregistered common stock during the quarter ended June 30, 2006. Northlea Partners is an affiliate of a board member of the Company.

Peter Gombrich Amounts Due.

Peter Gombrich, the Company’s former Chairman and CEO, was owed $37,000 as of December 31, 2005, for previous unsecured non-interest bearing advances to the Company, which was classified as the liability “Due to Stockholder” in the accompanying consolidated balance sheets. During 2006, the Company reclassified this liability to Accrued expenses. See the discussion in Note 12 — Legal Proceedings.

F-13

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

Note 7.   Notes Payable

Notes payable to unrelated parties at December 31 consist of:

	2006		2005
Bridge I Convertible Promissory Notes; due December 31, 2002; interest rate 7% per annum; convertible into common stock at 75% of the market price on date of conversion; beneficial conversion feature valued at $1,042,000 at June 30, 2002; warrants at an exercise price of $0.25 per share; additional warrants at an exercise price of $0.20	$	—	$	500
Bridge II Convertible Promissory Notes; due July 31, 2004; interest rate 12% or 15% per annum; convertible into common stock at $0.10 or $0.15 per share; beneficial conversion feature valued at $1,777,000 and $330,000 at December 31, 2003 and 2002, respectively; warrants at an exercise price of $0.15 or $0.20 per share		50		1,285
Bridge III Convertible Promissory Notes; due December 31, 2008; interest rate 10% per annum; convertible into common stock at $0.10 per share; beneficial conversion feature valued at $1,604,000 at June 30, 2004; warrants at an exercise price of $0.15 per share		—		115
Monsun, AS, $500,000 Promissory Note issued November 1, 2000; due July 31, 2002; interest rate 20% per annum, compounded into principal amount; beneficial conversion feature valued at $125,000 at November 1, 2000		—		953
MonoGen, Inc., $305,000 Promissory Note issued October 14, 2004; interest at 14% per annum; first installment of $25,000 due November 1, 2004 with monthly principal and interest installments of $10,000 thereafter; due January 1, 2007		305		305
Xillix Technologies Corporation, $361,000 Promissory Note issued June 26, 1998; interest rate Canadian Prime plus 6% per annum; represents a debt of AccuMed		34		34
Ungaretti & Harris LLP, $211,368 Secured Promissory Note issued May 8, 2003; interest at 12% per annum; due September 30, 2003		—		51
Ernst & Young LLP, $30,800 Promissory Note issued July 17, 2003; interest at 12% per annum commencing January 1, 2003; due December 31, 2003		—		31
Western Economic Diversification, $221,000 Promissory Note issued June 1989; no interest; represents a debt of Oncometrics		—		247
Robert Shaw, $25,000 Promissory Note issued September 20, 2001; interest rate 9% per annum.		15		15
Ventana Medical Systems, Inc., $62,946 Promissory Note issued November 30, 2003; due December 31, 2003; interest at 8% per annum payable after December 31, 2003		21		21
	$	425	$	3,557

Bridge I.  In 2002, CCI issued an aggregate $3,185,000 in Bridge I Convertible Promissory Notes to accredited investors. The notes had an interest rate of 7% per annum and are convertible at any time into the common stock of CCI at a conversion price equal to 75% of the market price of the Company’s common stock on the date of conversion. In addition, CCI issued to each holder a warrant that entitled each such holder to purchase one share of common stock at an exercise price of $0.25 per share for each dollar of principal. CCI calculated a fair value of $99,950 for these warrants using the fair value interest rate method and recorded this amount as additional interest expense during 2002. In addition, at the time of conversion of the note, each holder is entitled to receive a

F-14

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

warrant to purchase one share of common stock for each four shares of common stock into which the note converts at an exercise price equal to 150% of the conversion price of the note. Since the conversion price of the note is at a 25% discount to the market price of the common stock of CCI, the holder is considered to have a beneficial conversion feature. CCI determined the value of the beneficial conversion feature to be $1,042,000 at June 30, 2002.

Management extended a written offer, dated October 10, 2003, to the Bridge I noteholders to convert their notes and accrued interest into common shares at a conversion rate of $0.15 per share. In addition, the original offer to receive warrants to purchase one new share for every four shares acquired by the noteholder upon exercise of such holder’s conversion rights under the notes remained, but the exercise price of the warrants was modified under the offer to $0.20.

During the twelve months ended December 31, 2005, holders of Bridge I Convertible Promissory Notes elected to convert an aggregate $301,000 note principal and accrued interest into 2,008,962 shares of unregistered common stock. During the twelve months ended December 31, 2006, the remaining holders of Bridge I Convertible Promissory Notes elected to convert an aggregate $642,000 note principal and accrued interest into 4,282,941 shares of unregistered common stock. There are no Bridge I notes outstanding at December 31, 2006.

Bridge II.  Beginning in October 2002, the Company began an issue of up to $4,000,000 in Bridge II Convertible Promissory Notes to accredited investors. CCI issued $550,000 in Bridge II notes as of December 31, 2002. From January 1, 2003 through the closing of the offering on December 5, 2003, CCI issued Bridge II notes in the principal amount of: $1,980,200 in exchange for cash, $1,060,000 as a conversion of a Bridge I Convertible Promissory Note and $305,667 in exchange for a note payable to Peter P. Gombrich, the Company’s then-Chairman, for a total issuance during fiscal year 2003 of $3,345,867. The notes bear interest at a rate of 12% per annum payable at the maturity date in kind in the form of shares of common stock of CCI. The Company granted the holders a junior security position in all of its assets. The notes are convertible at any time into the common stock of CCI. The note conversion price and the value of common shares paid in kind as interest for the first $1,000,000 in principal amount of cash subscriptions, determined on a “first come — first served basis,” is $0.10 per share. The note conversion price and the value of common shares paid in kind as interest for the remaining $3,000,000 of principal amount of notes in the series is $0.15 per share. The conversion prices of the notes issued during 2002 and 2003 were less than the market price of the common stock when the notes were issued; therefore, the holders are considered to have a beneficial conversion feature. CCI determined the value of the beneficial conversion feature to be $1,777,200 and $330,000 at December 31, 2003 and 2002, respectively. The value was recorded as a reduction of the debt and was amortized as additional interest over the original life of the notes and was fully amortized by 2004.

At the time CCI completes significant additional funding plans, as outlined in the subscription agreement for the Bridge II notes, each remaining holder of Bridge II notes is entitled to receive a warrant to purchase one share of the common stock of the Company for each four shares of common stock into which the note is convertible at an exercise price of $0.15 per share for notes in the class pertaining to the first $1,000,000 in subscriptions and $0.20 for the remaining $3,000,000 in note principal subscriptions. In September 2003, an amendment to the Bridge II convertible promissory notes was sent to holders requesting an extension of the notes to July 31, 2004. As additional consideration for the extension, holders were offered an increase in the interest rate from 12% to 15%. In addition, an amendment to the indenture also offered an increase in the warrant coverage ratio from 25% to 33%. The Bridge II offering was closed as of December 5, 2003. As of December 31, 2006, the Company has not completed the additional funding requirements, as defined in the agreement, and therefore there have not been any warrants issued to date in connection with this note agreement.

There were no Bridge II notes converted during the year ended December 31, 2005.

For the twelve months ended December 31, 2006, holders of $175,000 principal amount of Bridge II convertible promissory notes elected to convert their notes and related accrued interest of approximately $78,000 into 1,693,056 shares of unregistered common stock. In December 2006, the Company paid in cash to a note holder

F-15

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

$1,060,000 in principal and related accrued interest of approximately $319,000. One Bridge II note in the principal amount of $50,000 remained unconverted and outstanding at December 31, 2006.

Bathgate Capital Partners, LLC — Bridge III.  Beginning in January 2004, Bathgate Capital Partners, LLC began an offering of a maximum of $4,000,000 and a minimum of $1,500,000 in Bridge III Convertible Promissory Notes to accredited investors on behalf of the Company. The notes had an interest rate of 10% per annum payable, on a semi-annual basis, in kind in the form of shares of common stock for the first two years and then in cash for the remaining three years until due December 31, 2008. The note conversion price and the value of common shares paid in kind as interest is $0.10 per share. The notes were convertible at any time into the common stock of CCI, although the notes will automatically convert if the last sales price of the stock is $0.30 or higher for twenty consecutive trading days, the daily average trading volume is at least 250,000 shares, and the underlying shares are registered for sale. The holders were also granted a security interest in all of the Company’s assets. CCI granted each note holder the right to receive 25% warrant coverage on all money invested; therefore, for every $100,000 invested, an investor will receive warrants to purchase 25,000 shares of common stock at an exercise price of $0.15 per share. The warrants expire on December 31, 2008.

During 2004, the Company issued an additional $1,662,500 in Bridge III notes in exchange for cash. The conversion prices of the notes issued during 2004 were less than the market price of the common stock when the notes were issued; therefore, the holders are considered to have a beneficial conversion feature. CCI determined the value of the beneficial conversion feature to be $1,604,000 at June 30, 2004. The value was recorded as a reduction of the debt and was amortized as additional interest over the life of the notes, with acceleration upon any conversion of the notes. CCI recorded additional interest expense of $172,698 and $1,126,771 to reflect amortization of the discount during the year ended December 31, 2006 and 2005, respectively. As of December 31, 2006, the discount has been fully amortized.

For the twelve months ended December 31, 2005, holders of Bridge III Convertible Promissory Notes elected to convert an aggregate $1,568,459 note principal and accrued interest into 15,282,236 unregistered common shares. The remaining $302,500 in principal Bridge III notes remained unconverted and outstanding at December 31, 2005.

During the twelve months ended December 31, 2006, holders of Bridge III Convertible Promissory Notes elected to convert an aggregate $277,500 note principal and accrued interest of approximately $59,000 into 3,362,701 unregistered common shares. As of December 31, 2006, there are no Bridge III notes outstanding.

Bridge IV.  Beginning in February 2004, CCI began a separate offering of Bridge IV Convertible Promissory Notes to accredited investors for a total issuance of $2,573,500 under this offering. The notes bore interest at 10% per annum payable, on a semi-annual basis, in kind in the form of shares of common stock for the first two years and then in cash for the remaining three years until the December 31, 2008 maturity date. The note conversion price and the value of common shares paid in kind as interest is $0.10 per share. The conversion price of the notes issued to date was less than the market price of the common stock when the notes were issued; therefore, the holders are considered to have a beneficial conversion feature. CCI determined the value of the beneficial conversion feature to be $1,791,000. The value was recorded as a reduction of the debt in 2004 and was amortized as additional interest over the life of the notes, or upon conversion, whichever was shorter. CCI recorded interest expense of $1,488,611 to reflect amortization of the discount during the 12 months ended December 31, 2005, including accelerated amortization due to the note conversion. The discount was fully amortized in 2005.

The notes were convertible at any time into the common stock of CCI. The holders were also granted a security interest in all of the Company’s assets. CCI granted each note holder the right to receive 25% warrant coverage on all money invested; therefore, for every $100,000 invested, an investor will receive warrants to purchase 25,000 shares of common stock at an exercise price of $0.15 per share. The warrants expire on December 31, 2008.

F-16

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

As of December 31, 2005, all holders of Bridge IV Convertible Promissory Notes elected to convert an aggregate $2,624,266 note principal and accrued interest into 25,605,000 unregistered common shares. As of December 31, 2005, the Bridge IV note holders representing over 85% of the total principal note amounts also elected to waive $332,455 accrued interest resulting in a one-time interest forgiveness expense reduction for the year then ended. There are no Bridge IV Convertible Promissory Notes outstanding as of December 31, 2005.

Monsun.  On November 1, 2000, CCI issued a convertible promissory note to Monsun, AS (“Monsun”) in exchange for $500,000 in cash. The note bears interest at the rate of 20% per year and was originally due 12 months from the date of issue. The Company entered into several extensions during 2001 and 2002 and the final extension maturity date was July 31, 2002.The note is convertible into common stock, any time after the expiration of the first 180 days of the loan term, at a conversion price of $1.00 per share.

In January 2003, Monsun initiated a legal action against Peter Gombrich, CCI’s then-Chairman, as a personal guarantor on the note, in an attempt to collect the unpaid principal balance of the note. Monsun was successful in obtaining a legal judgment of approximately $675,000 related to the note balance and accrued interest against Mr. Gombrich as personal guarantor. In addition, Monsun was granted an award of approximately $438,000 for attorneys’ fees against Peter Gombrich as the personal guarantor. The award for legal fees has been recorded as an accrued expense. (See Note 5 — Accrued Expense) Those judgments remain unsatisfied. Monsun has not filed suit against the Company to recover any amounts due under the note or otherwise.

In May 2006, Monsun converted its convertible promissory notes in the principal amount of $500,000 and $519,000, including accrued interest, into 7,624,327 unregistered shares of the Company’s common stock. Since the actual conversion rate was less than the rate specified in the note, the Company recorded an additional non-cash charge to interest expense of $1,321,000 on the beneficial conversion of the Monsun note for the year ended December 31, 2006.

MonoGen, Inc.  In October 2004, CCI issued a promissory note to MonoGen in the amount of $305,000, payable in an initial installment of $25,000 on November 1, 2004 and monthly installments thereafter of $10,000 until the note is paid in full, and agreed to transfer to MonoGen certain assets. Inasmuch as the assets were not timely transferred, and because the initial $25,000 payment to be made under the note was not paid by its due date, MonoGen delivered a notice of default to the Company and AccuMed in November 2004. The note became due on January 1, 2007, and the Company subsequently entered into an agreement with MonoGen to pay $328,000 as full settlement of its obligations. The Company made this payment in 2007.

Ungaretti & Harris LLP.  In March 2005, CCI entered into a settlement agreement, related to a lawsuit filed by Ungaretti & Harris for unpaid legal fees, for $150,000 payable in installments of $25,000 commencing March 22, 2005 with subsequent payments due in ninety day increments until the balance is paid in full. The parties have since modified the settlement agreement and CCI has made the final payments in 2006.

Ernst & Young LLP.  In July 2006, the Company entered into a settlement agreement to pay Ernst & Young $15,000 in full satisfaction of $15,000 in trade debt and its $31,000 note payable. The Company recorded the settlement benefit as a reduction of selling, general and administrative expense during 2006.

Western Economic Diversification.  In August 2006, the Company entered into a settlement agreement with the Receiver General of Canada to pay $75,000 in full settlement of this note. The Company recorded the settlement benefit as a reduction of selling, general and administrative expense during 2006.

See Note 13 — Legal Proceedings for a description of the legal proceedings regarding or giving rise to some of the above notes.

Defaults.  Specific events of default have occurred on all of the outstanding notes payable issued by CCI, ranging from failure to make principal payments when due to breach of certain warranties and representations. The notes payable require the holder to notify CCI in writing of a declaration of default at which time a cure period, as

F-17

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

specified in each individual note, would commence. There is no guarantee that CCI would be able to cure any event of default if, or when, the holder provides the required written notice. Other than the MonoGen note payable, CCI has not received any written declarations of default from holders of its outstanding notes payable.

Note 8.   Stockholders’ Equity

Earnings (loss) per share

A reconciliation of the numerator and the denominator used in the calculation of earnings (loss) per share is as follows:

	For the Years Ended
	December 31,
	2006			2005
Basic and Diluted:
Net loss applicable to common stockholder	$	(7,259	)	$	(4,346	)
Weighted average common shares outstanding		241,431,458			110,037,893
Net loss per common share	$	(.03	)	$	(.04	)

Stock options and warrants in the amount of 57,344,327 and 36,562,102 shares, preferred stock convertible into 6,608,105 and 14,789,349 shares and convertible notes convertible into 509,765 and 20,344,292 shares were not included in the computation of diluted loss per share applicable to common stockholders, as they are anti-dilutive as a result of net losses for the years ended December 31, 2006 and 2005, respectively.

Preferred Stock

A summary of the Company’s preferred stock capital table as of December 31, 2006 and 2005 is as follows:

			Shares Issued &		Shares Issued &
			Outstanding		Outstanding
Offering	Shares Authorized		2006		2005
Series A convertible		590,197		82,655		82,655
Series B convertible, 10% cumulative		1,500,000		225,736		365,106
Series C convertible, 10% cumulative		1,666,666		38,333		245,833
Series D convertible, 10% cumulative		300,000		175,000		175,000
Series E convertible, 10% cumulative		800,000		52,918		233,598
Undesignated Preferred Series		5,143,137		—		—
Total Preferred Stock		10,000,000		574,642		1,102,192

Convertible Cumulative Preferred Stock Conversions:

During 2006, two holders of Series B Convertible Cumulative Preferred Stock elected to convert 139,370 shares and cumulative dividends totaling $293,561 into 851,040 unregistered shares of the Company’s common stock, and several holders converted 207,500 shares of Series C convertible preferred stock, including cumulative dividends totaling $288,056, into 1,517,593 unregistered shares of common stock. Also, in 2006, holders of Series E Convertible Preferred Stock elected to convert 180,680 shares and cumulative dividends totaling $1,792,999 into 7,209,963 unregistered shares of common stock.

During 2005, a holder of Series C Convertible Cumulative Preferred Stock elected to convert 17,000 shares and cumulative dividends into 118,260 unregistered shares of the Company’s common stock.

F-18

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

Summary of Preferred Stock Terms

Series A Convertible Preferred Stock
Liquidation Value:	$4.50 per share
Conversion Price:	$10.3034 per share
Conversion Rate:	0.4367 — Liquidation Value divided by Conversion Price ($4.50/$10.3034)
Voting Rights:	None
Dividends:	None
Conversion Period:	Any time
Series B Convertible Preferred Stock
Liquidation Value:	$4.00 per share
Conversion Price:	$1.00 per share
Conversion Rate:	4.00 — Liquidation Value divided by Conversion Price ($4.00/$1.00)
Voting Rights:	None
Dividends:	10% — Quarterly — Commencing March 31, 2001
Conversion Period:	Any time
Cumulative dividends in arrears at December 31, 2006 were $529,649
Series C Convertible Preferred Stock
Liquidation Value:	$3.00 per share
Conversion Price:	$0.60 per share
Conversion Rate:	5.00 — Liquidation Value divided by Conversion Price ($3.00/$0.60)
Voting Rights:	None
Dividends:	10% — Quarterly — Commencing March 31, 2002
Conversion Period:	Any time
Cumulative dividends in arrears at December 31, 2006 were $59,382
Series D Convertible Preferred Stock
Liquidation Value:	$10.00 per share
Conversion Price:	$1.00 per share
Conversion Rate:	10.00 — Liquidation Value divided by Conversion Price ($10.00/$1.00)
Voting Rights:	None
Dividends:	10% — Quarterly — Commencing April 30, 2002
Conversion Period:	Any time
Cumulative dividends in arrears at December 31, 2006 were $904,726

F-19

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

Series E Convertible Preferred Stock
Liquidation Value:	$22.00 per share
Conversion Price:	$0.80 per share
Conversion Rate:	27.50 — Liquidation Value divided by Conversion Price ($22.00/$0.80)
Voting Rights:	Equal in all respects to holders of common shares
Dividends:	10% — Quarterly — Commencing May 31, 2002
Conversion Period:	Any time
Cumulative dividends in arrears at December 31, 2006 were $591,067

Issuance of Common Shares for Cash

2006

During 2006, the Company continued an offering of unregistered, restricted common stock to accredited investors in exchange for cash. In 2006, the Company issued 38,210,498 shares of restricted common stock for funds received in 2005.

During 2006, the Company received gross proceeds of $7,363,250 to purchase an aggregate 77,861,167 shares of unregistered subscribed common stock at prices per share ranging from $0.025 to $0.022, with a weighted average issuance price of $0.095. In connection with this issuance, the Company paid placement agent fees of $79,317 as well as issued 2,203,125 shares of common stock to a placement agent, which was valued at $176,250. The placement agent fees were recorded as a reduction to the gross proceeds in additional paid in capital. In connection with the private placements, the Company issued aggregate warrants to purchase 17,724,862 shares of common stock with exercise prices ranging from $0.10 to $0.32 and a weighted average exercise price of $0.16 and exercise terms at either three or five year, with a weighted average term of 3.7 years, which are exercisable immediately.

During 2006, the Company received proceeds of $246,988 from the exercise of warrants for 2,023,079 shares of restricted common stock. In connection with some of these warrant exercises, the Company had reduced the exercise price from the original stated exercise price in order to induce the warrant holder to exercise in order to enable the Company to raise needed cash. Due to these modifications to the exercise prices, the Company recorded the fair value of these modifications at the time of each exercise, which resulted in an aggregate $100,000, which was recorded as additional interest expense since the modified warrants were originally issued in connection with the various convertible notes of the Company.

2005

Beginning in December 2004, CCI began an offering of common stock to accredited investors in exchange for cash. As part of the offering, CCI granted each investor a warrant to purchase common stock at an exercise price of $0.10 per share, with the first $250,000 of investment to receive 50% warrant coverage and subsequent investments in excess of $250,000 to receive 25% coverage.

During 2005, the Company had received net aggregate proceeds of $601,000 and issued an aggregate 11,858,334 shares of restricted common stock, as well as warrants to purchase 2,964,584 shares of common stock. CCI valued the warrants at $207,446 using the Black-Scholes valuation model and recorded the amount to additional paid-in-capital — warrants.

In addition during 2005, the Company received net aggregate proceeds of $881,700 and issued an aggregate 42,510,496 shares of unregistered subscribed common stock at prices ranging from $0.025 to $0.04 per share with no warrant coverage and are reflected in Additional Paid-In Capital until such time as such shares are actually issued

F-20

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

by the Company’s transfer agent and will then be reflected in our Common Stock register and account. These shares were fully issued during 2006 as noted above.

Issuance of Common Stock for Services and as a Settlement of Debt

2006

During 2006, CCI issued an aggregate 6,809,032 shares of the Company’s restricted common stock to non-employees as payment for services rendered. CCI valued the shares at $518,486 at a weighted average value of $0.08 per share.

In addition, the Company issued an aggregate 2,928,271 shares of its restricted common stock to various vendors as settlement of trade debt. CCI valued the shares in the aggregate at $320,497 at a weighted average value of $0.11 per share.

2005

In 2005, CCI issued 650,496 shares of common stock at $0.025 per share in exchange for services to a non-employee professional services firm for $16,262 services due in full satisfaction of the vendor’s accounts payable balance due as of December 31, 2005.

Issuance of Common Stock as Payment for Employee Compensation

During 2006, the Company issued 288,514 shares of restricted common stock to former executive officer for services rendered. CCI valued the shares at $38,564 with a weighted average value of $0.13 per share.

Issuance of Warrants for Services and Settlement of Debt

2006

In March 2006, CCI issued warrants to purchase 1,000,000 shares of common stock with an exercise price of $0.04 per share to a non-employee consultant as a settlement for past consulting services. CCI valued the warrants at $128,700 using the Black-Scholes valuation model and recorded the amount as an administrative expense for the year ended December 31, 2006.

In March 2006, CCI also issued warrants to purchase 300,000 shares of common stock with an exercise price of $0.10 per share to a former employee as a settlement for past employment services. CCI valued the warrants at $37,170 using the Black-Scholes valuation model and recorded the amount as a payroll expense for the year December 31, 2006.

In addition, during 2006, the Company issued warrants to purchase 1,943,167 shares of common stock at exercise prices ranging from $0.15 to $0.20 per share to non employee vendors for services performed. The warrants are for a term ranging from three to five years and are exercisable immediately. CCI valued the warrants at $312,675 using the Black-Scholes valuation model and recorded the amount as an administrative expense for the year ended December 31, 2006.

During December 2006, the Company issued a warrant to a vendor in connection with settlement of trade debt. The warrant entitles the vendor to purchase 450,000 shares of common stock at an exercise price of $0.15, exercisable immediately, over a term of five years. CCI valued the warrant $43,535 using the Black-Scholes model and recorded the amount against the trade debt owed, recorded in accounts payable.

F-21

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

2005

In February 2005, CCI issued warrants to purchase 200,000 shares of common stock with an exercise price of $0.10 per share to a non-employee financial consultant for past financial services. CCI valued the warrants at $16,260 using the Black-Scholes valuation model and recorded the amount as administrative expense.

In May 2005, CCI issued warrants to purchase 556,500 shares of common stock with an exercise price of $0.06 per share to a non-employee financial consultant for past financial services. CCI valued the warrants at $25,265 using the Black-Scholes valuation model and recorded the amount to additional paid-in capital — warrants.

Issuance of warrants for debt

On July 18, 2003, Mr. Milley, a director of CCI, Azimuth Corporation (of which Mr. Milley is President and Chairman of the Board) and Cadmus Corporation (of which Mr. Milley is President), agreed to cancel seven warrants held by Azimuth and one warrant held by Cadmus, which warrants entitled the holders to purchase a total of 3,125,000 shares of CCI common stock at various exercise prices between $0.01 and $1.25 per share. The warrants, issued between December 1999 and August 2001, contained anti-dilution clauses which required CCI to increase the number of shares of common stock the holders were entitled to purchase under the warrants by approximately 1,500,000 shares as of the date of the agreement, with commensurate adjustments in individual exercise prices so that gross proceeds to the Company from exercise of the warrants remained the same. These anti-dilution provisions could have required the Company to make additional adjustments in shares and exercise prices in the future based on the Company’s issuance of debt or equity instruments at prices below the adjusted exercise prices of these warrants. In consideration for the parties’ agreement to cancel these warrants, including their individual anti-dilution clauses, and the forgiveness of approximately $100,000 owed to Azimuth and Cadmus, in February 2005, CCI issued warrants to purchase 2,875,000 and 3,625,000 shares to Azimuth and Cadmus, respectively, at an exercise price of $0.30 per share. CCI had also agreed to issue a 120-day warrant entitling the holders to purchase 500,000 shares of common stock at an exercise price of $0.30, which warrant expired on November 19, 2003. CCI valued the warrants at $420,551 using the Black-Scholes valuation model and recorded the amount as a current quarter administrative expense.

In 2006, the warrants issued to Azimuth and Cadmus in February 2005, as noted above, were modified. The total of the warrants were reduced to 3,500,000 or 1,548,077 and 1,951,923 shares to Azimuth and Cadmus, respectively, at an exercise price of $0.10 per share. These warrants expire on July 18, 2008. This modification did not result in an increase in the fair value of the warrants; therefore no further charges were taken.

Issuance of Warrants as Payment for Employee Compensation

In September 2006, as described in Note 9, the Company issued to its executive officers warrants to purchase a total of 8,000,000 shares of restricted common stock at an exercise price of $0.1275 to $0.20 per share. These warrants vest at January 1, 2007.The Company also issued each independent director warrants to purchase 625,000 shares of common stock at $0.20 per share for a total of 1,250,000 shares of common stock. These warrants are immediately exercisable. CCI recorded total non-cash compensation expense in connection with these warrants of $1,094,600, based upon the fair value as determined using the Black-Scholes valuation model.

During the fourth quarter of 2006, The Company issued warrants to an executive officer to purchase a total of 500,000 shares of restricted common stock at an exercise price of $0.13 per share, exercisable immediately and for a term of three years. The Company also issued 500,000 warrants to a former executive officer for compensation owed him during his employment term, to purchase a total of 500,000 shares of common stock at an exercise price of $0.20 per share, exercisable immediately and for a term of five years. CCI recorded total non-cash compensation

F-22

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

expense in connection with these warrants of $137,050, based upon the fair value as determined using the Black-Scholes valuation model.

Exchange of Certain Convertible Promissory Notes for Common Shares

As described in more detail in Note 7, during the year ended December 31, 2006, holders of certain convertible promissory notes (Bridge I, II and III, including notes to a related party) elected to convert an aggregate $952,500 principal and $278,000 accrued interest into 9,337,698 unregistered shares of the Company’s common stock. The Company also settled other notes payable to related parties (see Note 6) in principal and accrued interest of approximately $120,000 for 900,188 unregistered shares of the Company’s common stock during the year ended December 31, 2006.

In May 2006, Monsun converted its convertible promissory notes in the principal amount of $500,000 and $519,000 into 7,624,327 unregistered shares of the Company’s common stock. Since the actual conversion rate was less than the rate specified in the note (see Note 7), the Company recorded an additional non-cash charge to interest expense of $1,321,000 on the beneficial conversion of the Monsun note in May 2006.

As described in more detail in Note 7, during 2005, noteholders of certain Bridge I, III and IV Convertible Promissory Notes elected to exchange an aggregate $4,494,000 principal and accrued interest for 42,896,198 unregistered shares of the Company’s common stock.

Application of Black-Scholes Valuation Model

In applying the Black-Scholes valuation model, the Company used the following assumptions for the years ended December 31, 2006 and 2005:

	2006			2005
Expected volatility		84	% — 206%		277	%
Expected term (years)		3 — 5			2.5 — 5
Risk-free interest rate		4.25	%-4.50%		4.61	%
Expected dividend yield		0	%		0	%
Forfeiture rate		0	%		0	%
Resulting weighted average grant date fair value	$	0.12			—

Expected volatility is based solely on historical volatility of our common stock over the period commensurate with the expected term of the stock options. The expected term calculation is based upon the expected term the option is to be held, which in most cases is the full term of the option. The risk-free interest rate is based upon the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield of zero is based on the fact that we have never paid cash dividends on our common stock and we have no present intention to pay cash dividends.

F-23

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

Warrants

At December 31, 2006, the Company had the following outstanding warrants to purchase shares of Common Stock:

	Total Warrant		Warrant Shares		Exercise Price		Weighted Average
	Shares Outstanding		Exercisable		(Not Weighted)		Years Until Expiration
		51,493		51,493	$	0.01		0.41
		1,000,000		1,000,000	$	0.04		4.17
		556,500		556,500	$	0.06		3.34
		9,335,751		9,335,751	$	0.10		2.57
		4,000,000		—	$	0.1275		2.75
		500,000		500,000	$	0.13		2.92
		15,070,917		15,070,917	$	0.15		3.09
		474,984		474,984	$	0.16		2.27
		4,457,000		4,457,000	$	0.17		1.98
		5,792,303		5,792,303	$	0.18		3.72
		166,667		166,667	$	0.19		2.56
		10,021,797		6,021,797	$	0.20		3.80
		2,885,000		2,885,000	$	0.25		0.31
		284,091		284,091	$	0.32		5.00
		250,000		250,000	$	0.33		2.54
		200,000		200,000	$	0.70		0.25
		13,278		13,278	$	7.51		Perpetual
		13,278		13,278	$	15.05		Perpetual
		13,278		13,278	$	22.62		Perpetual
Total		55,086,337		47,086,337

The Company was obligated under the terms of subscription agreements for the Bridge I and Bridge II convertible promissory notes to issue additional warrants to the note holders based on certain events. If and when the holder of a Bridge I note elects to convert the principal of the note into shares of CCI common stock, the holder is entitled to receive a warrant to purchase one share of CCI common stock for each four shares of CCI common stock into which the note is converted at an exercise price equal to $0.20, based on the written offer dated October 10, 2003. The Company issued 1,572,726 warrants in the fourth quarter of 2006 to all the holders that have converted their notes and accrued interest.

Convertible Securities

As of December 31, 2006, the Company had an aggregate amount of shares of common stock issued as well as instruments convertible or exercisable into common shares that exceeded the total authorized common shares the Company has by 1,891,768 shares. Therefore, based upon EITF 00-19, the Company determined the fair value of the convertible securities in excess of the authorized shares. The Company determined that the excess shares related to warrants issued at the end of 2006. Therefore, the Company determined the fair value of these securities using the Black-Scholes model. As of December 31, 2006, the Company determined the fair value of these securities to be $567,000 and the Company reclassified this amount from equity to a liability account. The Company is required to remeasure the convertible securities at each reporting period end based on fair value.

F-24

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

Note 9.   Equity Incentive Plan and Employee Stock Purchase Plan

On May 25, 1999, CCI stockholders approved the establishment of the 1999 Equity Incentive Plan effective as of June 1, 1999 (the “Plan”). The Plan provides that the Board may grant various forms of equity incentives to directors and employees, including but not limited to Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, and Restricted Stock Awards. Grants under the Plan are exercisable at fair market value determined as of the date of grant in accordance with the terms of the Plan. Grants vest to recipients immediately or ratably over periods ranging from two to five years, and expire five to ten years from the date of grant.

On May 23, 2000, stockholders approved amendment No. 1 to the Plan, which increased the number of shares of common stock allocated for use in the Plan from 2,000,000 shares to 3,000,000 shares. On June 21, 2002, stockholders approved a second amendment to the Plan, which increased the number of shares allocated for use in the Plan from 3,000,000 shares to 5,500,000 shares. On July 29, 2004 stockholders approved a third amendment to the Plan, which increased the number of shares for use in the Plan from 5,500,000 to 20,000,000 shares.

The Board of Directors has also granted options and warrants to purchase common stock of CCI that are not covered by the terms of the Plan. As of December 31, 2006, there were 16,869,342 shares of common stock available to be issued under the Plan.

Effective January 1, 2006, we adopted SFAS No. 123(R), “Share-Based Payment,” using the modified prospective transition method. Under this method, recognized compensation cost for the year ended December 31, 2006 includes 1) compensation cost for all share-based payments granted prior to, but not yet fully vested as of December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123; and 2) compensation cost for all share-based payments granted on or after January 1, 2006, based on the grant date fair value estimated in accordance with SFAS No. 123(R). Accordingly, we have not restated prior period. Prior to January 1, 2006, the Company accounted for these plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations.

For the year ended December 31, 2006, the Company did not grant any options. However, it did issue to its former chief executive officer warrants to purchase a total of 4,000,000 shares of common stock with an exercise price of $0.20 per share. The warrants have a term of five years and are not exercisable until January 1, 2007. CCI valued the warrants at $483,200 using the Black-Scholes valuation model. In addition, CCI issued its chief financial officer warrants to purchase a total of 4,000,000 shares of common stock with an exercise price of $0.1275 per share. The warrants have a term of three years and are not exercisable until January 1, 2007. CCI valued the warrants at $460,400 using the Black-Scholes valuation model. The Company also issued each independent director warrants to purchase 625,000 shares of common stock with an exercise price of $0.20 per share. In total 1,250,000 warrants were issued to the independent directors. The warrants have a term of five years and are exercisable immediately. CCI valued the director’s warrants at $151,000 using the Black-Scholes valuation model. During the fourth quarter of 2006, the Company issued its new chief executive officer warrants to purchase 500,000 shares of common stock with an exercise price of $0.13 per share. The warrants have a term of three years. CCI valued the warrants at $68,200 using the Black-Scholes valuation model. The Company also issued to a former executive officer warrants to purchase 500,000 shares of common stock with an exercise price of $0.20 per share. These warrants have a term of five years, and were valued at $68,850 using the Black-Scholes valuation model. The Company recorded a total of $1,231,650 as non-cash compensation expense for the year ended December 31, 2006.

F-25

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

The fair value of each stock option and warrant award was determined as of the date of grant using the Black-Scholes option-pricing model with the following assumptions in each of the years ended December 31:

	2006			2005
Expected volatility		84	% — 206%		277	%
Expected term (years)		3 — 5			2.5 — 5
Risk-free interest rate		4.25	%-4.50%		4.61	%
Expected dividend yield		0	%		0	%
Forfeiture rate		0	%		0	%
Resulting weighted average grant date fair value	$	0.12			—

Expected volatility is based solely on historical volatility of our common stock over the period commensurate with the expected term of the stock options. The expected term calculation is based upon the expected term the option is to be held, which in most cases is the full term of the option. The risk-free interest rate is based upon the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield of zero is based on the fact that we have never paid cash dividends on our common stock and we have no present intention to pay cash dividends.

As of December 31, 2006, there were no unrecognized compensation costs related to unvested share-based compensation arrangements since all costs related to grants in 2006 or previous were fully recognized as of December 31, 2006.

There were no options granted for the year ended December 31, 2005. SFAS No. 123R requires us to present pro forma information for the comparative period prior to the adoption as if we had accounted for all our stock-based employee compensation under the fair value method of SFAS 123. The following table illustrates the effect on our net loss and basic and diluted net loss per share if we had recorded compensation expense for the estimated fair value of our stock-based employee compensation consistent with SFAS No. 123:

	For the Year Ended
	December 31, 2005
	(In thousands except
	for per share amounts)
Net loss applicable to common shareholders as reported	$	(4,326	)
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards and forfeitures, net of related taxes		(9	)
Pro forma net loss applicable to common shareholders	$	(4,335	)
Basic loss and diluted per share applicable to common shareholders — as reported	$	(.04	)
Basic and diluted loss per share applicable to common shareholders — pro forma	$	(.04	)

F-26

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

A summary of the Company’s stock option activity and related information follows:

1999 Stock Option Plan

				Weighted				Weighted Average
				Average		Aggregate		Remaining
				Exercise		Intrinsic		Contractual Life
	Options			Price		Value		(Years)
Outstanding at December 31, 2004		4,947,727
Granted		—
Exercised		—
Forfeited		(943,736	)	$	1.9032
Outstanding at December 31, 2005		4,003,991		$	0.4412	$	0.00
Granted		—
Forfeited		(1,746,000	)	$	0.5662
Outstanding and exercisable at
December 31, 2006		2,257,991		$	0.2767	$	433,500		1.68

Warrants and options issued outside of the Plan for employee compensation

			Weighted				Weighted Average
			Average		Aggregate		Remaining
	Options and		Exercise		Intrinsic		Contractual Life
	Warrants		Price		Value		(Years)
Outstanding at December 31, 2004		—
Granted		—
Exercised		—
Forfeited		—
Outstanding at December 31, 2005		—
Granted		10,250,000	$	0.17
Forfeited		—
Outstanding at December 31, 2006		10,250,000	$	0.17	$	323,100		3.86
Exercisable at December 31, 2006		2,250,000	$	0.18	$	71,000

At the Annual Meeting of Stockholders on May 25, 1999, CCI stockholders also approved the 1999 Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan offers employees the opportunity to purchase shares of common stock of CCI through a payroll deduction plan at 85% of the fair market value of such shares at specified enrollment measurement dates. The aggregate number of shares available for purchase under the Plan is 200,000. There was no activity in 2006 or 2005.

Stock Appreciation Rights

At December 31, 2006, CCI had 450,000 stock appreciation rights (SARs) outstanding and a related liability for $180,000. These SARs, issued in 1989, had an exercise price of $0.30 and could be exercised through November 20, 2001. These SARs were deemed automatically exercised on November 20, 2001 if not done so at the option of the holder. In general, each SAR entitles the holder to receive upon exercise an amount equal to the excess, if any, of the market value per share of common stock at the date of exercise over the exercise price of the SAR, plus

F-27

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

any dividends or distributions per share made by CCI prior to the exercise date. In lieu of making cash payments, CCI may elect and intends, to issue shares of common stock. CCI recorded compensation expense related to these SARs in fiscal years prior to 2002, to reflect the difference between the closing market price of CCI’s common stock and the exercise price of the SARs. Since the SARs were deemed exercised at November 20, 2001, no additional entries were required subsequently.

Note 10.   Leases

As of December 31, 2006, the Company leased approximately 2,540 square feet of space for its Chicago, Illinois corporate headquarters and research laboratory and offices under an operating lease expiring in 2008. Total rental expense related to the Company’s headquarters location during the years ended December 31, 2006 and 2005 was $72,000 and $68,000, respectively. In addition, CCI has leased for a period of one year an executive office in Princeton, NJ at a total cost of $20,700.

CCI had another lease obligation relating to the pre-merger office space of AccuMed. During 2002, AccuMed’s landlord brought suit against AccuMed for unpaid rent and obtained a judgment in the amount of approximately $157,000. In the first quarter of 2004, a preliminary settlement was reached on the outstanding judgment and four payments totaling $54,896 were paid. As of December 31, 2005, a balance of one monthly payment totaling $13,724 remains due. CCI also agreed to issue 823,466 shares of its common stock as part of the final settlement. The final payment was made in 2006 and the obligation was fully settled.

Future minimum annual lease payments under these leases as of December 31, 2006 are:

	Operating
Year	Leases
2007	$	91
2008	$	62
Total lease payments	$	153

Note 11.   Income Taxes

Significant components of deferred income taxes consist of the following at December 31:

	2006		2005
Deferred tax assets related to:
Net operating loss carryforwards	$	26,308	$	24,271
Writedown of intangibles		14		16
Accrued liabilities		150		231
Accrued expenses		132		122
		26,604		24,640
Less valuation reserve		26,604		24,640
Net deferred tax asset	$	—	$	—

At December 31, 2006, the Company had domestic net operating loss carryforwards aggregating approximately $66,000,000 for federal and approximately $75,000,000 for state. For financial reporting purposes, the entire amount of deferred tax assets related principally to the net operating loss carryforwards has been offset by a valuation allowance due to uncertainty regarding the realization of the assets. The valuation allowance increased by approximately $1,964,000 and $2,012,000 for the years ended December 31, 2006 and 2005, respectively.

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CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

The net operating loss carryforwards may not be available to offset future taxable income of CCI due to statutory limitations based on changes of ownership and other statutory restrictions.

The net operating loss carryforwards totaling approximately $415,000 expired in 2006 related to certain losses that are limited under statutory limitations, and these continued to expire in this same amount each subsequent year. The remaining net operating loss carryforwards expire between 2018 and 2026 for federal and 2017 and 2026 for state.

CCI is also delinquent in filing certain federal and state income tax returns for 2005, 2004, 2003 and 2002 and is working to complete and file the returns. The delinquent federal and state income tax returns for 2001 were filed in March 2005.

Note 12.   Commitments and contingencies

Legal Proceedings

Settled in 2006

Ungaretti & Harris LLP.  In May 2004, the law firm Ungaretti & Harris LLP filed an amended complaint against CCI in the Circuit Court of Cook County, Illinois (04 L 1101), to collect fees for services rendered prior to December 31, 2003. In January 2005, the court entered summary judgment in favor of Ungaretti & Harris and against CCI in the amount of $195,500, plus costs of suit. The parties subsequently entered into a settlement agreement to satisfy the judgment. CCI made the final payment in June 2006. Ungaretti & Harris filed its Satisfaction of Judgment with the Circuit Court of Cook County on June 21, 2006. CCI’s payments to Ungaretti & Harris are now concluded and CCI believes it has no further obligation to the firm.

Hill & Barlow LLP.  In February 2003, Hill & Barlow LLP, a now defunct law firm, filed a complaint against CCI in the Trial Court of the Commonwealth of Massachusetts (000740), seeking the collection of unpaid legal fees. Judgment was entered against CCI in the amount of $16,842, plus costs and interest. In April 2004, the parties completed a settlement agreement, which was never executed due to a dispute over return of certain client files. In July 2006, the parties executed an amended settlement agreement to satisfy the judgment. CCI made the sole payment required under the agreement and Hill & Barlow LLP tendered its Satisfaction of Judgment for to the Trial Court of the Commonwealth of Massachusetts in July 2006. CCI believes it has no further obligation to Hill & Barlow LLP.

Medical College of Georgia Research Institute, Inc.  In November 2003, the Medical College of Georgia Research Institute, Inc. filed suit against CCI in the Superior Court of Richmond County, Georgia (Case No. 2003-RCCV-1211) to collect amounts allegedly due pursuant to an agreement to provide a clinical study for CCI. The Medical College of Georgia, R.I. claimed that the principal amount of the obligation due from CCI was approximately $86,700, but sought to collect approximately $315,300 pursuant to an interest provision of 10% per month. In October 2004, the court entered summary judgment in favor of the Medical College of Georgia, R.I. and against CCI in the amount of $68,404. In July 2006, the parties reached a settlement agreement to satisfy the judgment. CCI made the sole payment of $58,000 required under the agreement to the Medical College of Georgia, R.I. in July 2006. CCI believes it has no further obligation to the Medical College of Georgia Research Institute, Inc.

Account Resource.  In 2002, Account Resource filed a complaint in the Circuit Court of Cook County, Illinois (Case No. 02 m1 0165588) for breach of contract for supply of temporary employees against CCI. The Circuit Court of Cook County entered judgment against CCI for $30,000. Account Resource recorded that judgment during February 2003. In July 2006, the parties reached a settlement agreement to satisfy the judgment. On July 14, 2006, CCI paid the sole payment of $18,000. CCI believes it has no further obligation to Account Resource.

Arthur Lipper III.  In July 2004, Arthur Lipper III filed a lawsuit against CCI in the Circuit Court of Cook County, Illinois (04 L 7671). Mr. Lipper claims that CCI breached a consulting services agreement and sought

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CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

$60,000, plus interest and court costs. CCI entered into a settlement agreement with Mr. Lipper in February 2006 pursuant to which CCI has agreed to pay Mr. Lipper $60,000 in full satisfaction of his claims. CCI’s payments to Mr. Lipper were made as agreed. The lawsuit has been dismissed. CCI believes it has no further obligation to Mr. Lipper.

The Lumber Company (formerly Garrett Realty, Inc.).  Prior to CCI’s acquisition of AccuMed, Garrett Realty, Inc. filed suit against AccuMed for unpaid rent and related expenses under a lease for office space located in Chicago, Illinois (Circuit Court of Cook County, Illinois (Case No. 01 M1 725821)). In July 2002, judgment was entered in favor of Garrett in the amount of approximately $157,000. In December 2002, pursuant to a court order, Garrett seized approximately $12,500 from a CCI bank account as a partial payment against the judgment amount. CCI recorded a $290,000 lease obligation in accounting for the AccuMed merger based on the present value of the future payments, but contested the right of Garrett to pursue collection of the judgment against the assets of CCI. During the first quarter of 2004, CCI reached a preliminary settlement on the outstanding judgment amounting to approximately $157,000 (plus interest) at that time, which required six monthly payments. In 2004, CCI made the first four required monthly payments. CCI also agreed to issue shares of its common stock as part of the final settlement. In March 2005, Garrett assigned its right, title and interest in the judgment to The Lumber Company. In March 2006, CCI and Lumber Co. entered into a formal settlement agreement under the same general terms reflected above. In connection with that March 2006 agreement, CCI paid to Lumber Co. two payments of $13,724 and also issued to Lumber Co. 823,466 restricted shares of CCI common stock. Final payment was made in April 2006. CCI believes it has no further obligation under this settlement.

The Lash Group, Inc.  In June 2004, The Lash Group, Inc., a healthcare consulting firm, filed a lawsuit against the Company in the General Court of Justice, Superior Court Division, in Mecklenburg County, North Carolina (04 CVS 10367). The Lash Group sought approximately $94,000, plus interest, attorney fees, and court costs, for the alleged breach of an agreement, with respect to which Peter Gombrich, the former Chairman and Chief Executive Officer, and CCI were sought to be held primarily liable. In October 2005, CCI entered into a settlement agreement with The Lash Group, which required The Lash Group to file a voluntary dismissal with prejudice of the lawsuit. In March 2006, CCI made its final payment in full satisfaction of the settlement agreement. CCI believes it has no further obligations under this settlement.

Reid Jilek.  In October 2004, Reid Jilek filed a lawsuit against CCI in the Circuit Court of Cook County, Illinois (04 CH 17375). Mr. Jilek claimed that CCI had breached a 2003 services agreement and that CCI subsequently breached a 2004 settlement agreement. Mr. Jilek sought $180,000 pursuant to the services agreement or, alternatively, $114,000 pursuant to the settlement agreement. Mr. Jilek also sought a court order that CCI issue him 1,500,000 warrants to purchase CCI stock at $0.17 per share pursuant to the services agreement. CCI previously issued to Mr. Jilek warrants to purchase 1,000,000 shares of its common stock at $0.17 per share. CCI entered into a settlement agreement with Mr. Jilek in December 2005 pursuant to which CCI paid Mr. Jilek $15,000 for attorney fees, issued him warrants to purchase 1,000,000 shares at $.04 per share (in exchange for the cancellation of the previously issued warrants to purchase 1,000,000 shares) and has agreed to pay Mr. Jilek $5,000 each month for the next 30 months. The payments have been made to date as scheduled. As of December 31, 2006 the Company had a remaining balance of $90,000 recorded in accounts payable.

Pending as of December 31, 2006

Peter Gombrich.  In April 2005, former CCI officer and director Peter Gombrich filed suit against CCI and CCI’s former Chief Executive Officer Denis M. O’Donnell, M.D. in the Circuit Court of Cook County, Illinois (05 L 4543). Mr. Gombrich claims that CCI breached a written employment contract and that it owes him in excess of $849,500. Mr. Gombrich also alleged a claim against CCI for contribution and indemnification regarding agreements he allegedly signed as a personal guarantor for certain alleged CCI obligations. CCI filed a motion to compel the case to arbitration, pursuant to the terms of the employment contract, and CCI’s motion was granted in

F-30

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

August 2005. In late 2005, CCI filed its answer and affirmative defenses, and has asserted numerous counterclaims against Mr. Gombrich. The arbitration hearing on the parties’ cross-claims has concluded. The arbitrator issued a decision in January, 2007, awarding Mr. Gombrich $538,413 for compensation plus sixty percent of his attorney fees as they relate to the award. The plaintiff’s attorney has filed a motion to reconsider the judgment against Mr. Gombrich on count III. The attorney fees have yet to be determined. The claim against CCI for contribution and indemnification was denied. The Company believes that it recorded a sufficient liability for this award.

The Regents of the University of California.  In May 2004, The Regents of the University of California filed suit against CCI in the Superior Court of California, County of San Francisco (CGC-04-431944). The University of California claims that CCI breached an agreement to sponsor a research project for a period of one year. The complaint seeks compensatory damages in the amount of $57,530 and additional lost opportunity damages in the amount of $75,220. In January 2005, the University of California requested that the court enter a default judgment against CCI in the amount of $132,827, which includes court costs. In February 2007, CCI and the University of California agreed to a financial settlement of the default judgment. CCI tendered final payment in March 2007 and believes it has no further obligation.

In the third quarter of 2006, The Attorney General of the State of Illinois has brought an action in the Circuit Court of Cook County, Illinois (Case No. 2006-L-003353) against the Company with regard to the Company’s alleged failure to pay back wages in the amount of $282,833 to certain of its former employees. The Company believes that it has settled the former employees’ claims and is supplying the State with substantiation that all such back wages have been paid.

In August of 2006, Diamics, Inc. brought an action against Dr. Reid Jilek and CCI in the Superior Court of Marin County, California (Case No. CV063475) to declare that Diamics had fully performed its payment obligations under a promissory note (“Note”) which Diamics had previously issued to Dr. Jilek and for attorneys fees. The Note entitled Dr. Jilek to a non-dilutable 10% ownership interest in Diamics if its payment of the loan installments were not timely made. Dr. Jilek has asserted that Diamics defaulted under the Note and that he is entitled to the non-dilutable 10% equity ownership in Diamics. Dr. Jilek has assigned his rights under the Note to the Company. Case has been transferred to the Superior Court of San Diego. CCI believes the assigned ownership rights to 10% of Diamics are valid and enforceable. As such, the Company has not recorded any value for this ownership as of December 31, 2006, pending the outcome of this litigation.

Other claims

Other Creditors.  CCI was a party to a number of other proceedings, informal demands, or debt for services brought by former unsecured creditors, employees and consultants to collect past due amounts for services. CCI is attempting to settle these suits and unfilled claims. CCI does not consider any of these claims to be material.

During the year ended December 31, 2006, CCI continued its’ restructuring settlement of its outstanding debt and accounts payable. Overall during 2006, the Company settled claims of creditors totaling of approximately $2.5 million through cash payments of approximately $800,000 and 2,928,271 shares of restricted common stock issued at a value of approximately $320,500. In addition, the Company issued 450,000 warrants valued at $44,000

Commitments

The Company has entered into employment agreements with its Chief Executive Officer (“CEO”) and its Chief Financial Officer (“CFO”). The agreement with the CEO is for a term of three years and provides for an annual salary of $180,000 annually for the first six months, increasing to $204,000 annually after certain conditions are met or six months after the start of the agreement. In addition, a total of $45,000 is guaranteed to be paid in monthly installments over eighteen months. The CEO’s compensation is to be review annually by the Board of Directors. As part of this agreement, the Company issued 500,000 warrants to purchase the Company’s common stock at $0.13 per

F-31

CYTOCORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 and 2005 — (Continued)

share. The agreement also provides the issuance of up to 10,800,000 additional warrants upon the achievement of certain performance goals.

The agreement with the CFO is for a term of two years and provides for an annual salary of $120,000 annually increasing to $180,000 annually after certain conditions are met. The agreement has a term of two years. The board of Directors has also awarded the CFO 4,000,000 warrants to purchase shares of common stock at a $0.1275 per share, which vested January 1, 2007. The agreement also provides for the issuance of up to 5,000,000 additional warrants upon the achievement of certain performance goals.

The Company has also entered into agreements with two of its consultants. The agreement are identical and provide for the annual payments of $120,000 increasing to $180,000 annually after certain performance goals are met The agreement also provides for the issuance of up to 5,000,000 additional warrants upon the achievement of certain performance goals.

In addition, CCI has entered into an agreement with its principal investigator. The agreement provides for the annual payment of $200,000 with $20,000 payable in unregistered restricted common stock of the Company. These payments are subject to an annual increase of four percent. The term of the agreement is ten years.

Note 13.   Related Party Transactions

During 2006, Alexander Milley, a director of the Company, Azimuth Corporation, Cadmus Corporation and other affiliates of Milley converted 119,460 shares of Series E Convertible Cumulative Preferred Stock and cumulative dividends totaling $1,477,986 into 4,763,484 shares of common stock. Also in 2006, the 6,500,000 warrants issued to Azimuth and Cadmus in February 2005 (see Note 8 — Stockholders Equity) were modified. The total warrants were reduced to 3,500,000 or 1,548,077 and 1,951,923 shares to Azimuth and Cadmus, respectively, at an exercise price of $0.10 per share. These warrants expire on July 18, 2008. This modification did not result in an increase in the fair value of the warrants; therefore no further charges were taken.

Also, Northlea Partners LTD. an affiliate of another director converted approximately $120,000 in principal and accrued interest into 900,188 shares unregistered shares of common stock. The same affiliate also converted 7,665 shares of Series E Convertible Cumulative Preferred Stock and cumulative dividends totaling $75,995 into 305,627 shares of unregistered common stock.

An affiliate of an officer of the Company purchased 1,875,000 shares of restricted unregistered common stock at $0.04 per share.

Note 14.   Subsequent Events

During the first quarter of 2007, the Company has raised approximately $2.1 million from the sale of 8,028,848 shares of common stock to foreign and accredited investors at prices ranging from $0.18 to $0.33 per share. The Company also raised $2.1 million from holders of 20,183,357 warrants and 250,000 options whom have elected to exercise for 20,433,357 shares of common stock.

In 2007, the Company has paid MonoGen Inc. $328,000 in satisfaction of the note principal and accrued interest. CCI has also paid $78,109 to the remaining Bridge II noteholder for principal and interest.

In April, 2007, CCI received notice from the attorneys for NeoMed III, L.P. (NeoMed) contending that payments made to NeoMed did not satisfy the Company’s obligations to NeoMed. The Company believes that it has fully complied with its obligations and that there is no further obligation to NeoMed.

F-32

EX-10.39

Exhibit 10.39

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”), dated and effective as of November 15, 2006 (the “Effective Date”), is entered into by and between CYTOCORE, INC., with offices at 414 North Orleans Street, Chicago, Illilonois 60610 (“Company”), and DR. AUGESTO OCANA, with offices at 20 Foxcroft Drive, Princeton, New Jersey 08540 (the “Executive”).

     In consideration of the mutual promises set forth below and other good and valuable consideration, the receipt and sufficiency of which the parties acknowledge, the Company and Executive agree as follows:

          1. Employment. The Company agrees to employ Executive and Executive accepts employment on the terms and conditions set forth in this Agreement.

          2. Employment Term. Commencing on the Effective Date, the Company agrees to employ Executive for a term of three (3) years (“Term”), unless terminated earlier in accordance with Section 5 below. The period of time for performance hereunder shall be referred to as the “Employment Period”.

          3. Nature of Employment. During the Employment Period, Executive shall serve as Chief Executive Officer and a member of the Board of Directors of the Company. Executive shall have all of the customary powers and duties associated with these positions. Executive shall report to the Board of Directors of the Company. Executive shall devote his full time and attention and best efforts to perform successfully his duties and advance the Company’s interests; provided, however, the Company shall permit Executive to act as an independent director of other corporations and engage in other professional and business endeavors so long Executive’s duties in connection therewith do not (i) interfere with his duties and loyalties under this Agreement or (ii) cause Executive to violate his obligations under Sections 6, 7 and 8 of this Agreement. Executive shall only engage in such activities or endeavors if they are performed for a charitable organization or with respect to other organizations redound to the benefit of the Company. Executive shall advise the Board of Directors of the identity of the organizations he is associated with from time to time. Executive shall abide by Company policies, procedures and practices as they may exist and be in force from time to time. Employee shall perform such services from whatever location he elects, but he will be present at such meetings and functions at the Company’s headquarters and elsewhere reasonably deemed important to the Company.

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          4. Compensation.

     (a) Base Salary. During the Employment Period, the Company shall pay Executive an annual base salary of one hundred eighty thousand dollars ($180,000.00), payable by the Company in monthly installments of $15,000.00 dollars starting November 15, 2006. Executive’s Base Salary shall be subject to all appropriate federal and state withholding taxes and shall be payable in accordance with the normal payroll procedures of the Company. Executive’s salary shall be reviewed annually by the Company’s Board of Directors (“Board”) and may be increased in the Board’s discretion; provided, however, that Executive’s annual Base Salary shall not be reduced below one hundred eighty thousand dollars ($180,000.00) without Executive’s written consent.

     Executive’s annual base salary shall be increased to two hundred four thousand dollars ($204,000.00), payable in monthly increments of seventeen thousand ($17,000.00), at the earlier of the date on which the Company has raised additional equity of two million five hundred thousand dollars ($2,500,000.00) at an average price of not less than eighteen cents ($.18) per share, or six (6) months after the Effective Date.

     In addition, Executive shall receive the sum of forty five thousand dollars ($45,000.00) in eighteen (18) monthly installments of two thousand five hundred dollars ($2,500.00) commencing in the month following the Effective Date. In the event of the termination of Executive’s employment for any reason, any remaining monthly payments shall continue to be made until the sum of forty five thousand dollars ($45,000) has been paid in full.

     (b) Warrants. During the Employment Period, Executive shall be entitled to grants of warrants exercisable into common stock of the Company upon the occurrence of the following events:

     (i) Five hundred thousand (500,000) warrants to purchase five hundred thousand (500,000) shares of common stock of the Company at a price equal to the closing price of the Company’s common stock on the first day of Executive’s Employment Period less a discount of thirty-three and one third per cent (33 1/3%).

     (ii) Three hundred thousand (300,000) warrants to purchase (300,000) shares of common stock of the Company upon completion of the FDA trials for the Company’s Products (as defined below) and receipt of all necessary FDA approvals thereof for the sale of the Company’s Products to the general public in the United States at the closing price of the Company’s common stock on the OTC Bulletin Board of the Company on the date all such approvals have been received less a discount of thirty-three and one third per cent (33 1/3%).

     (iii) Five hundred thousand (500,000) warrants to purchase five hundred thousand (500,000) shares of common stock of the Company on the date that the Company

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has raised five million dollars ($5,000,000) in equity at an average price of not less than twenty two cents ($.22) per share less a discount to Executive of thirty-three and one third per cent (33 1/3%) from such average price. Executive shall have earned the incentive only if such capital raise is completed with twelve (12) months from the date of the commencement of the Employment Period.

     (iv) The Company intends to sell its Products through existing channels of distribution. Executive shall receive two hundred thousand (200,000) warrants to purchase two hundred thousand (200,000) shares of the common stock of the Company at an exercise price equal to the average closing price of the common stock of the Company (less a thirty three and one third per cent (33 1/3%) discount to the Executive) during the sixty (60) day period prior to the date on which the Company has executed distribution agreements with third parties which have confirmed orders of (a) ten million dollars ($10,000,000) for the Company’s E2 Collector or similar product and (b) fifteen million dollars ($15,000,000) for its Endometrial scan or similar product (collectively the “Products”) within twelve (12) months from the date on which the Products have received all governmental approvals for their sale and the Company has publicly announced that the Products are available for sale (“Announcement Date”). The foregoing shall be increased to three hundred thousand (300,000) warrants to purchase three hundred thousand (300,000) shares of common stock of the Company if any of the distribution companies achieves sales of twenty five million dollars ($25,000,000) of the Company’s Products during the first twelve (12) months after the Announcement Date and has world-wide sales of all of its products of not less than twenty billion dollars ($20,000,000,000).

     (v) Two hundred thousand (200,000) warrants to purchase two hundred thousand (200,000) shares of common stock of the Company if a distribution company which has achieved annual sales of at least twenty five million dollars ($25,000,000) of the Company’s Products during the first twelve (12) months of sales makes an equity investment of at least two million dollars ($2,000,000) in the Company.

     (vi) Five hundred thousand (500,000) warrants to purchase five hundred thousand (500,000) shares of common stock of the Company at such time as the closing price of the Company’s common stock listed on the OTC Bulletin Board is thirty cents ($.30) or more per share during thirty (30) days out of any consecutive forty five (45) day period during which the Company’s stock is traded.

     (vii) Five hundred thousand (500,000) warrants to purchase five hundred thousand (500,000) shares of common stock of the Company at such time as the closing price of the Company’s common stock listed on the OTC Bulletin Board is fifty ($.50) or more per share during forty five (45) days out of any consecutive sixty (60) day period during which the Company’s stock is traded

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     (viii) Five hundred thousand (500,000) warrants to purchase five hundred thousand (500,000) shares of common stock of the Company at such time as the closing price of the Company’s common stock listed on the OTC Bulletin Board is seventy five cents ($.75) or more per share during forty five (45) days out of any consecutive sixty (60) day period during which the Company’s stock is traded.

     (ix) One million (1,000,000) warrants to purchase one million (1,000,000) of common stock of the Company at such time as the closing price of the Company’s common stock listed on the OTC Bulletin Board is one dollar ($1.00) per share during forty five (45) days out of any consecutive sixty (60) day period during which the Company’s stock is traded;

     (x) Except as otherwise provided herein, the exercise price for all of the above warrants is the average closing price of the Company’s stock during the prior forty five (45) trading days less a thirty three and one third per cent discount (33 1/3%) to Executive. However, the exercise price for the warrants to be issued pursuant to Section 5 (a) (ix) above shall be one dollar ($1.00) per share for the first five hundred thousand (500,000) shares and one dollar and fifty cents ($1.50) per share for the balance.

     (xi) The period for Executive to exercise any warrants granted to him shall be three (3) years from the date of grant. A copy of the form of warrant to be granted by the Company to Executive is attached hereto as Exhibit A.

     (c) Standard Benefits. Executive may participate in any medical, dental disability, life insurance and other Executive benefit plans and programs which may be available from time to time to other Company executives at Executive’s level; provided however, that any such benefits for the Company executives as a group may be changed, modified, or revoked at the sole discretion of the Company with at least ninety (90) days’ written notice.

     (d) Reimbursement of Expenses. During the Employment Period, Executive is authorized to incur reasonable, ordinary, and necessary business expenses in the performance of his duties under this Agreement and the Company shall reimburse Executive or pay the expenses in accordance with the policies established by the Company within thirty (30) days of submission of the required documentation.

     (e) Auto Allowance. The Company will pay Executive a monthly non-accountable automobile allowance in the amount of five hundred dollars ($500.00) per month, which amount will be increased to eight hundred dollars ($800.00) per month at such time as the Company has received equity contributions of not less than five million dollars ($5,000,000).

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     (f) Revenue Incentives. Executive will receive one million warrants (1,000,000) to purchase one million (1,000,000) shares of common stock of the Company at an exercise price of the average closing price of the common stock of the Company during the sixty (60) day period prior to the date on which the Company’s gross revenue from the sale of its Products exceeds twenty million dollars ($20,000,000) during any consecutive twelve (12) month period; and a warrant for the purchase of an additional one million (1,000,000) shares of common stock of the Company at an exercise price of the average closing price of the common stock of the Company during the sixty (60) day period prior to the date on which the Company’s gross revenue from the sale of its Products exceeds fifty million dollars ($50,000,000) during any consecutive twelve (12) month period.

     (g) Acquisition of the Company

     (i) Executive shall receive two and one half million (2,500,000) warrants to purchase two and one half million (2,500,000) shares of common stock of the Company at an exercise price of twenty five cents ($.25) per share if the Company is acquired for more than one dollar ($1.00) per share;

     (ii) Executive will receive three and one half million (3,500,000) warrants to purchase three and one half million (3,500,000) shares of common stock of the Company at an exercise price of fifty cents ($.50) if the Company is acquired for more than two dollars ($2.00) per share,

     (iii) Executive will receive five million (5,000,000) warrants to purchase five million (5,000,000) shares of common stock of the Company at an exercise price of seventy five ($.75) per share if the Company is acquired for more than three dollars ($3.00) per share; and

     (iv) The awards earned if the Company is acquired are not cumulative.

     5. Termination of Employment Executive’s employment with the Company will continue throughout the Employment Period, unless earlier terminated pursuant to Section 2 of this Agreement or any of the following provisions:

     (a) Death. In the event that Executive shall die during his employment by the Company hereunder, the Company shall pay to Executive’s estate any compensation due that would otherwise have been payable through the date of his death.

     (b) Disability. In the event that Executive shall become disabled during his employment by the Company, Executive’s employment hereunder shall terminate and the Company shall provide Executive with severance payments equal to three (3) months Base

5

Salary (based on Executive’s monthly salary on the date of termination). Such severance payments shall be paid over a period of six (6) months in accordance with the Company’s normal payroll practices and schedule. For purposes of this Agreement, Executive shall become “disabled” if he shall become, because of illness or incapacity, unable to perform the essential functions of his job under this Agreement with reasonable accommodation for a continuous period of 120 days during his employment by the Company.

     (c) Termination by the Company for Cause. The Company shall have the right to immediately terminate Executive’s employment at any time for any of the following reasons (each of which is referred to herein as “Cause”) by giving Executive written notice of the effective date of termination (which effective date may be the date of such notice):

     (i) the continued and intentional failure by Executive to substantially perform his duties with the Company, other than any such failure resulting from Executive’s disability (as defined in subsection (b) above), which is materially detrimental to the Company’s business; provided, however, that no termination of Executive’s employment shall be for Cause as set forth in this clause until (A) there shall have been delivered to Executive written notice setting forth that Executive has committed the conduct set forth in this subsection (i) and specifying the particulars thereof in reasonable detail, (B) Executive shall have been provided an opportunity to present his position to the Board, either in writing or in person and (C) Executive shall be given a thirty (30) day period to cure the conduct specified in the written notice referenced in subsection (i)(A) above;

     (ii) a breach by Executive of his fiduciary duties as an officer of the Company, which is materially detrimental to the Company’s business;

     (iii) Executive’s conviction of or plea of nolo contendere to a felony or final non-appealable conviction of any other crime that incarcerates Executive for a period of one (1) year or longer; or

     (iv) Executive engages in fraud, embezzlement, or theft involving the Company.

     Notwithstanding the foregoing, no failure to perform by Executive after Executive gives notice of termination shall constitute Cause for purposes of this Agreement.

     If the Company terminates Executive’s employment for Cause as defined above, Executive shall only be entitled to any compensation due that would otherwise have been payable through the date of his termination, and the Company shall have no further obligations hereunder from and after the effective date of termination.

     (d) Termination by the Company Without Cause. The Company shall have the right to terminate Executive without Cause for any reason at any time upon at least ninety (90) days’ prior written notice to Executive. If the Company terminates Executive’s employment without Cause, Executive shall be entitled to severance payments as set forth in subsection (g) below.

     (e) Voluntary Termination by Executive for “Good Reason”. Executive may at any time terminate this Agreement for “Good Reason” upon at least ninety (90) days’

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prior written notice to the Company. For purposes of this Agreement, “Good Reason” shall mean any one or more of the following: a reduction by the Company without Executive’s consent of Executive’s position, duties, responsibilities, or status with the Company that represents an adverse change in his position, duties, responsibilities, or status, or the removal of Executive from or any failure to reelect Executive to any of the positions referred to in Section 3 above, but specifically excluding any action in connection with the termination of Executive’s employment for death, disability, or Cause (as defined herein);

     (i) a reduction by the Company of the compensation Executive has become entitled to without Executive’s consent.

     (ii) any material breach by the Company of any provision of this Agreement or any other agreement between the Company or any of its subsidiaries and Executive that, in any case, is not cured within fourteen (14) days of the Company’s receipt of written notice from Executive of such breach; or

     (iii) the insolvency of or the filing by the Company of a petition for bankruptcy of the Company, which petition is not dismissed within sixty (60) days; or

     If Executive terminates this Agreement for Good Reason, Executive shall be entitled to severance payments as set forth in subsection (g) below.

     (f) Voluntary Termination by Executive. Executive may terminate this Agreement at any time upon delivering at least ninety (90) days’ prior written notice of resignation to the Company. In the event of such termination by Executive (other than for Good Reason), Executive shall only be entitled to compensation that would otherwise have been payable through the date of the termination of his employment.

     (g) Compensation Upon Termination Without Cause or For Good Reason. In the event of a termination of this Agreement by the Company without Cause or by Executive for Good Reason, the Company shall pay to Executive as severance pay and in lieu of any further compensation for periods subsequent to the termination, an amount in cash equal to the sum of (i) twelve (12) months’ Base Salary divided into twelve (12) equal monthly installments payable in accordance with the Company’s customary practice (which payments shall be calculated using Executive’s Base Salary at the time of termination), with the first installment to be paid within thirty (30) days following termination and (ii) the full amount of any performance bonus that Executive was eligible to receive for the year during which the termination of this Agreement occurs. In addition, Executive shall be entitled, for a period of twelve (12) months, to continue to receive the standard benefits under the plans and programs described in Section 4 (c) above. Executive shall be entitled to receive any Warrants which would have been granted to Executive within six (6) months following such termination as if the Employment Period had not terminated shall be granted to Executive.

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     (h) No Mitigation or Set-Off. Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment. The Company shall have no right of set-off or counterclaim in respect of any claim, debt of obligation against any payment to or for the benefit of Executive provided for in this Agreement, except as expressly provided herein.

     6. Non-Disclosure. The Company agrees to provide Executive with its Confidential Information (as defined below) during the Employment Period. During the Employment Period and at all times thereafter, Executive shall keep secret and retain in strictest confidence, and shall not, without the prior written consent of a majority of the members of the Board of Directors of the Company, furnish, make available or disclose to any third party or use for the benefit of himself or any third party, except in the furtherance of his job duties with the Company, any Confidential Information. Executive shall not, at any time after his employment with the Company has ended (for whatever reason), use or divulge to any person or entity, directly or indirectly, any Confidential Information, or use any Confidential Information in subsequent employment, work or business of any nature. As used in this Agreement, “Confidential Information” shall mean any information relating to the business or affairs of the Company and its affiliates and predecessors, including, but not limited to, trade secrets, information relating to financial statements, operations manuals, systems manuals, customer identities, customer profiles, customer preferences, partner or investor identities, Executives, suppliers, project designs, project methods, advertising programs, advertising techniques, target markets, servicing methods, equipment, programs, strategies and information, computer programs and models, technology, market analyses, profit margins, pricing information, cost structure, past, current or future marketing strategies, or any other proprietary information used by the Company or its affiliates; provided however, that Confidential Information shall not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of Executive. Executive acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company and that he is under a contractual and common law duty to not disclose the Confidential Information to any third party at any time.

     7. Non-Competition. In consideration of the numerous mutual promises contained in this Agreement between Executive and the Company, including, without limitation, those involving Confidential Information, and in order to protect the Company’s Confidential Information (including trade secrets), the value and goodwill of the Company’s business, and the Company’s legitimate business interests and to reduce the likelihood of irreparable damage which would occur in the event such information is provided to or used by a competitor of the Company, Executive agrees that during the Employment Period and for a period of one (1) year immediately following the termination of this Agreement (for whatever reason, except as provided in Sections 5(d), and 5(e) (the “Non-Competition Term”), he will not, directly or indirectly, either through any form of ownership or as a director, officer, principal, agent, Executive, employer, adviser, consultant, shareholder, partner, member, manager, or in any other individual or representative capacity whatsoever, either for his own benefit or for the benefit of any other person, firm, business, corporation, partnership, governmental or private entity, or any other entity of whatever kind, without the prior written consent of the Company

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(which consent may be withheld in the Company’s sole discretion), (i) compete for or solicit business related to cancer diagnostic products or services for or on behalf of any person or business entity with a place of business in the United States; (ii) own, operate, participate in, undertake employment with or have any interest in any entity with a place of business in the United States which competes with the business of the Company, except owning publicly traded stock for investment purposes only in which Executive owns less than five per cent (5%); (iii) compete or solicit business competitive with the business of the Company from any customer of the Company; or (iv) use in any competition, solicitation, or marketing effort any Confidential Information, any proprietary list, or any information concerning customers of the Company.

     Executive hereby acknowledges that the geographic boundaries, scope of prohibited activities and the time duration of the provisions of this Section 7 are reasonable and are no broader than are necessary to protect the legitimate business interests of the Company, including protecting the value and goodwill of the Company, including its Confidential Information. It is the intent of the parties that the provisions of this Section 8 shall be enforced to the fullest extent permissible under the applicable law. The parties agree that if at the time enforcement is sought, a court of competent jurisdiction adjudges any terms of any provision of this Section 8 to be void, invalid or unenforceable, such court shall modify or reform such provision so that it is enforceable to the fullest extent permitted by applicable law or if such modification or reformation is not possible, shall sever the provision, and enforce the remaining provisions of this Section, which shall remain in full force and effect.

     This Non-Competition provision can only be revoked or modified by a writing signed by the parties which specifically states an intent to revoke or modify this provision.

     8. Non-interference or Solicitation

     (a) Executive agrees that, during the Employment Period and for an additional period of one (1) year after the termination of Executive’s employment (for whatever reason, except as provided in Sections 5(d)and 5(e)), neither he nor any individual, partner(s), limited partnership, corporation or other entity or business with which he is in any way affiliated, including without limitation, any partner, limited partner, director, officer, member, shareholder or Executive of any such entity or business, will solicit or accept business from, or perform services on behalf of, any client or customer of the Company with which Executive had contact during the Employment Period, or in any way encourage them to terminate or otherwise negatively alter their relationship with the Company. This Section 9 shall not apply if Executive’s employment is terminated pursuant to Sections 5(d) or 5(e)- However, nothing herein shall prevent Executive from soliciting or providing goods and services that are competitive with the business of the Company to any client or customer of the Company.

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     (b) Executive also agrees that during the Employment Period and for an additional period of one (1) year after the termination of Executive’s employment (for whatever reason, except as provided in Sections 5(d)and 5(e)) that neither he nor any individual, partner(s), limited partnership, corporation or other entity or business with which he is in any way affiliated, including without limitation, any partner, limited partner, director, officer, member, shareholder or Executive of any such entity or business, will request, solicit, induce or attempt to influence, directly or indirectly, any employee of the Company to terminate their employment with the Company. This Section 9 shall not apply if Executive’s employment is terminated pursuant to Sections 5(d), and 5(e) herein. This Section 8(b) shall not prohibit Executive from soliciting or hiring any employees whose employment was involuntarily terminated by the Company.

     9. Work Product For purposes of this Section 9, “Work Product” shall mean all intellectual property rights, including all trade secrets, U.S. and international copyrights, trademarks, trade names, patentable inventions, discoveries and other intellectual property rights in any work product that is created in connection with Executive’s work or using the Company’s materials. For purposes of this Agreement, “Work” shall mean (1) any direct assignments and required performance by or for the Company, and (2) any other productive output that relates to the business of the Company and is produced during Executive’s employment by the Company. For this purpose, Work may be considered present even after normal working hours, away from the Company’s premises, on an unsupervised basis, alone or with others. Unless otherwise approved in writing by the Chief Executive Officer or the Board, this Agreement shall apply to all Work Product created in connection with ail Work conducted before or after the date of this Agreement.

     The Company shall own all rights in the Work Product. To this end, all Work Product shall be considered work made for hire for the Company. If any of the Work Product may not, by operation of law or agreement, be considered Work made by Executive for hire for the Company (or if ownership of all rights therein do not otherwise vest exclusively in the Company immediately), Executive agrees to assign, and upon creation thereof does hereby automatically assign, without further consideration, the ownership thereof to the Company. Executive hereby irrevocably relinquishes for the benefit of the Company and its assigns any moral rights in the Work Product recognized by applicable law. The Company shall have the right to obtain and hold, in whatever name or capacity it selects, copyrights, registrations, and any other protection available in the Work Product.

     10. Remedies for the Company. The termination of this Agreement by the Company for Cause shall not be deemed to be a waiver by the Company of any breach by Executive of this Agreement or any other obligation owed the Company, and, notwithstanding such a termination, Executive shall be liable for all damages attributable to such a breach. Because of the special relationship between Executive and the Company, the confidential nature of the Company’s developments and the fact that damages may not

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be adequate to enforce the rights of the Company in the event of a breach of this Agreement by Executive, it is agreed that the Company may seek to enforce all or some of its rights by seeking an injunction from a court of appropriate jurisdiction.

     11. Remedies for Executive

          (a) The termination of this Agreement by Executive for Good Reason shall not be deemed to be a waiver by Executive of any breach by the Company of this Agreement or any other obligation owed Executive, and, notwithstanding such a termination, the Company shall be liable for all damages attributable to such a breach.

          (b) In the event that Executive is terminated for Cause and it is ultimately determined that the Company lacked Cause, (i) the termination shall be treated as a termination other than for Cause; (ii) Executive shall have the right to seek remedy for a breach of this Agreement by the Company, including, but not limited to, any other such damages as may be suffered and/or incurred by Executive, Executive’s costs incurred during the dispute and reasonable attorneys’ fees in connection with such dispute; and (iii) Executive shall receive all severance benefits to which he would have been entitled in the event of a termination by the Company without Cause, as provided in Section 5(g).

     12. No Waiver. No waiver or non-action by either party with respect to any breach by the other party of any provision of this Agreement, nor the waiver or non-action with respect to the provisions of any similar agreement with other employees or the breach thereof, shall be deemed or construed to be a waiver of any succeeding breach of such provision, or as a waiver of the provision itself.

     13. Invalid Provisions. Should any portion of this Agreement be adjusted or held invalid, unenforceable or void, such holding shall not have the effect of invalidating or voiding the remainder of this Agreement and the parties hereby agree that the portion so held invalid, unenforceable, or void shall, if possible, be deemed amended or reduced in scope, or otherwise be stricken from this Agreement, to the extent required for the purposes of validity and enforcement thereof.

     14. Successors and Assigns. Neither Executive nor the Company may assign its rights, duties, or obligations hereunder without consent of the other.

     15. Survival. Unless otherwise provided herein, the provisions of Sections 6, 7, 8 and 9 of this Agreement shall survive Executive’s termination of employment. Other provisions of this Agreement shall survive any termination of Executive’s employment to the extent necessary to ensure the preservation of each party’s respective rights and obligations.

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     16.  Prior Agreements. This Agreement incorporates the entire agreement between both parties with respect to the subject matter hereof and supersedes all other prior agreements (oral or written), documents or other instruments with respect to the matters covered herein.

     17. Governing Law. This Agreement shall be governed by, and interpreted in accordance with the internal substantive laws of the State of Illinois, without giving effect to the principles of conflicts of law. Each party hereto hereby irrevocably submits itself to the exclusive personal jurisdiction of the Federal and State courts sitting in the city of Chicago, and hereby waives any claims it may have as to inconvenient forum.

     18.  No Oral Modifications. This Agreement may not be changed or terminated orally, and no change, termination or waiver of this Agreement or of any of the provisions herein contained shall be binding unless made in writing and signed by both parties, and, in the case of the Company, by a person designated by the Board or any committee thereof.

     19. Notices. All notices and other communications required or permitted hereunder shall be made in writing, and shall be deemed properly given if delivered personally, mailed by certified mail, postage prepaid and return receipt requested, sent by facsimile, or sent by Express Mail or Federal Express or other nationally recognized express delivery service, as follows:

If to the Company:	CytoCore, Inc., 414 North Orleans Street, Chicago, Illinois
Attention:	Robert McCullough, Chief Financial Officer
With a copy to:	Edmund Schaffzin,
	888 Seventh Avenue- Suite 4500,
	New York, New York 10106
If to Executive:	Dr. Augusto Ocana, 20 Foxcroft Drive Princeton, New Jersey 08540
With a copy to:	Kevin M. Briody, Esq., Gallagher, Briody & Butler 155 Village 155 Boulevard, Princeton, New Jersey 08540

     Notice given by hand, Express Mail, Federal Express, or other such express delivery service shall be effective upon actual receipt. Notice given by facsimile transmission shall be effective upon actual receipt during the recipient’s customary business hours, or at the beginning of the recipient’s next business day after receipt if not received during the

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recipient’s customary business hours. All notices sent by facsimile transmission shall be confirmed promptly after transmission in writing by certified mail or personal delivery.

     Any party may change any address to which notice shall be given to it by giving notice as provided above of such change in address.

     20. Entire Agreement. The parties expressly agree that this Agreement is contractual in nature and not a mere recital, and that it contains all the terms and conditions of the agreement between the parties with respect to the matters set forth herein. All prior negotiations, agreements, arrangements, understandings and statements between the parties relating to the matters set forth herein that have occurred at any time or contemporaneously with the execution of this Agreement are superseded and merged into this completely integrated Agreement. The Recitals set forth above shall be deemed to be part of this Agreement.

     21. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

THE COMPANY: CytoCorc,Inc.
By:	/s/ Robert McCullough
EXECUTIVE:
By:	/s/ Augusto Ocana
	Dr. Augusto Ocana

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EX-10.40

Exhibit 10.40

Employment Agreement

     This employment agreement (“Agreement”), made and entered into this 20^st day of November 2006, by and between CytoCore, Inc., with its principal place of business at 414 North Orleans Court, Suite 502 in Chicago, Illinois 60610 (the “Company”) and Robert McCullough Jr., 227 South Ridgewood, Kentfield, CA 94904 ( “McCullough”).

Background

     McCullough provides a variety of financial and business services as part of his duties as Chief Financial Officer for CytoCore, and is ready, willing, and able to provide such assistance to the Company on the terms and conditions set forth herein.

     The Company is in the process of developing a series of medical devices, drug delivery Systems, and other cervical and uterine cancer related medical Systems. In pursuit of its business strategy the Company desires to retain the services of McCullough under the terms and conditions set forth herein.

     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and McCullough agree as follows:

1.	Engagement and Scope of Services.
1.1	Company hereby retains McCullough and McCullough agrees to provide to the Company the employment services which are more fully described below:
	Employment duties will involve but are not limited to interaction with the Company’s Chief Executive Officer, Medical Advisory Board, other Officers, or consultants related to or regarding the Company’s business plans, operations, commercialization of medical devices, and other business matters that fall within McCullough’s area of expertise. McCullough will report directly to the Board of Directors and the Audit Committee comprised of members of the Board of Directors
	McCullough will be responsible for the financial accounting and reporting of the state of the Company’s financial operations and condition in accordance with rules and regulations promulgated by regulatory authorities. McCullough has the authority to hire necessary personnel and consultants to achieve this objective. and discharge same. McCullough will be responsible for generating financial projections and will have direct access to all personnel and consultants employed by the Company in order to obtain necessary information for such projections. Company will provide direct access to all computers and computer generated information required for financial statement preparation. Company will reimburse McCullough. for attending seminars that McCullough feels are essential to perform the duties listed above

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EX-10.41

Exhibit 10.41

Consulting Services Agreement

     This consulting services agreement (“Agreement”), made and entered into on November 20, 2006, and effective as of the l^st day of December 2006, by and between CytoCore, Inc. with its principal place of business at 414 North Orleans Court, Suite 502 in Chicago, Illinois 60610 (the “Company”) and Future Wave Management, with its mailing address of P.O. Box 1086, Del Mar, California 92914-1086 (the “Consultant”).

Background

     The Consultant provides a variety of financial and business consulting services as part of his regular business with Future Wave Management, and is ready, willing, and able to provide such consulting assistance to the Company on the terms and conditions set forth herein.

     The Company is in the process of developing a series of medical devices, drug delivery systems, and other cervical and uterine cancer related medical systems. In pursuit of its business strategy the Company desires to retain the services of the Consultant under the terms and conditions set forth herein.

     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Consultant agree as follows:

1.	Engagement and Scope of Services.
1.1	Company hereby retains consultant and Consultant agrees to provide to the Company the consulting services which are more fully described below:
	Consulting with the Company’s Chief Executive Officer, Chief Financial Officer, Medical Advisory Board, other Officers, or other consultants related to or regarding certain business plans, operations, commercialization of medical devices or theories, and other business matters that fall within the Consultant’s area of expertise.
	Consultant will have no authority or responsibility with regard to execution of any contract on behalf of the Company. Consultant is not an employee or officer of the Company.
	Consultant will provide progress reports from time to time to the Company’s Chief Executive Officer. Consultant agrees to provide any such report in writing if so requested by the Company’s Chief Executive Officer.
1.2	This Agreement is a non-exclusive agreement. The Consultant is free to provide similar or different services to any other company or organization desiring his services, provided that the Consultant is able to provide the Company the services

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	here agreed upon from month to month. The Company is also free to acquire simitar services from any other party should it desire to do so.
2.	Term of Agreement.
2.1	This Agreement shall supersede the Agreement that is in place between CytoCore and Future Wave Management, Inc. beginning on April 1, 2006 that has a twelve (12) month term. The term of this Agreement shall be for a period of twenty four (24) months from the date of execution, and shall terminate twenty four (24) months from signing date following written notice by one r party to the other at least thirty (30) days prior to the expiration date.
2.2	This Agreement is subject to termination in the event of a material breach of any term hereof and the breaching party’s failure to cure such material breach to the non-breaching party’s reasonable satisfaction within ten (10) business days of written notice.
2.3	Within ten (10) business days of termination of this Agreement, Consultant shall submit to the Company an itemized invoice for any remaining unpaid fees or reimbursable expenses then due and owing under this Agreement. Company, upon receipt and payment of such final invoice shall thereafter have no further obligation for payment under this Agreement. Upon the termination of this Agreement other than the surviving obligation, if any, under Section 6.1 below and payment in full of all monies due and owed from Company to Consultant pursuant to this Agreement, Consultant shall promptly return to Company all copies of any Company data, information, documents, or other materials of any sort stored in any form whatsoever, including all materials incorporating any of the Company’s proprietary information.
3.	Fees. Expenses, and Payments.
3.1	The Company shall pay Consultant a fee of Ten Thousand Dollars ($10,000.00) for each month it provides services to the Company. At such time as the Company has raised additional funding of Five Million Dollars ($5,000,000), the payment to Consultant shall be increased to Fifteen Thousand Dollars ($15,000.00) per month for the balance of the term of this Agreement.
3.2	EMB will also receive various grants of warrants to purchase CytoCore stock. The warrant grants and their associated performance triggers are listed in Addendum A attached hereto and made a part of. this Agreement.
3.3	The Company shall reimburse the Consultant for its out-of-pocket expenses related to this Agreement pursuant to the Company’s usual expense reimbursement procedures. The Consultant acknowledges that he will comply with said procedures. Further, the Consultant agrees to comply with the Company’s Code of Ethics and Business Conduct for Officers, Directors and

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	Employees of CytoCore, Inc. Finally, Consultant agrees that he is an independent contractor solely responsible for the determination and payment, if any, of all applicable federal, state, and local taxes related to this Agreement.
4.	Proprietary Information.
4.1	The Consultant acknowledges that in order to perform the services called for in this Agreement, it may be necessary for the Company to disclose to Consultant certain confidential technical, medical, or commercial information (“Confidential Information”). The Consultant agrees that without the Company’s express written approval Consultant and its senior employees shall, not, disclose, transfer, use, copy or allow access to any such Confidential Information to any third parties, except those who have a need to know such Information and are obligated to maintain the confidentiality of such Information. The foregoing shall not apply to that Information which was already known to the Consultant before disclosure, is publicly disseminated through no fault of either the Consultant, is rightfully received from a third party or is required to be disclosed pursuant to court order. This provision shall survive the termination of this Agreement and continue in effect for a period of three (3) years.
5.	Warranty and Exclusion of Warranty.
5.1	The Consultant warrants that (i) its services will be of professional quality and performed in accordance with the terms hereof and (ii) Consultant is under no obligation, the enforcement of which would prevent it from performing the services required hereunder.
5.2	The foregoing warranties are in lieu of all other warranties, conditions, or representations, express or otherwise, including without limitation any implied warranties of merchantability or fitness of use for a particular purpose.
6.	Termination.
6.1	This Agreement may be terminated by either party to this Agreement upon thirty (30) days prior written notice to the other party. This termination may be without cause. If this Agreement is terminated without cause by the Company, the Company will be obligated to pay the Consultant the balance of the fees’ and expenses due for the remainder of the Agreement.
7.	No Interference.
7.1	For the period commencing on the date hereof and ending on the date twenty four (24) months after the date this Agreement is terminated, the Contractor agrees he shall not:

(a) take any action which would:

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(i)	interfere with the contractual relationships of the Company or any affiliate of the Company, customers, suppliers, other consultants, employees, or others which relate to the business of the Company or any affiliate of the Company; or
(ii)	induce any employee, consultant, or representative of the Company or any affiliate of the Company not to become or not to continue as an employee, consultant, or representative of the Company or affiliate of the Company.

(b) make remarks or take any other action which would tend to disparage or diminish the reputation of the Company or any entity affiliated with the Company.

8.	General.
8.1	This Agreement is made and entered into, and is to be at least partially performed, in Cook County, Illinois. It shall be interpreted, construed and enforced by, and its construction and performance shall be governed by, the laws of the State of Illinois applicable to written agreements made and to be performed entirely within Illinois without regard to principles of conflicts of laws, except to the extent that Federal law may apply.
8.2	All notices required to be given hereunder shall be in writing and addressed to the respective parties set forth herein, unless another address shall have been previously designated in writing to the other party. Notice shall be deemed sent and effective when delivered by hand delivery, via U.S. Mail, Certified, with return receipt requested, or via regular U.S. Mail and confirmed facsimile delivery.
8.3	This Agreement constitutes the complete and entire Agreement between the Consultant and the Company with respect to the subject matter hereof. This Agreement supersedes all prior agreements, contracts, representations, proposals, discussions, and communications, whether oral or in writing, relating hereto. This Agreement may be modified only in writing signed by both the Consultant and a duly authorized representative of the Company.
8.4	This Agreement may be executed in counterparts or with facsimile signatures, all of which shall constitute an original.

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8.5	In the event any portion of this Agreement is deemed to be invalid or unenforceable, that portion will be deemed to be omitted and the remainder of this Release will remain in full force and effect.
9.	Signatures

The Company	The Consultant
CytoCore, Inc.	FUTURE WAVE MANAGEMENT
/s/ Robert McCullough
By: Robert McCullough	By:
Title: Chief Financial Officer	Title:
Date: November 20, 2006	Date:

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Addendum A.

1. Performance Milestones:

Future Wave Management, Inc. will be granted warrants based on the following performance milestones.

     A ) 150,000 warrants upon product completion of FDA product trials and receipt of all necessary FDA approvals.

     B.) 250,000 warrants when the company raises 5 million in equity at a price above $.22/share.

     C.) 100,000 warrants when the company signs a distribution agreement for the E2 collector.

     D.) 250,000 warrants when the company’s stock price trades above $.30 for 45 out of 60 trading days.

     E.) 250,000 warrants when the company’s stock price trades above $.50 for 45 out of 60 trading days

     F.) 500,000 warrants when the company’s stock price trades above $1.00 for 45 out of 60 trading days.

All the warrants listed in categories 1. (A) through (F) will have an exercise price at a 33% discount to the average closing price of the company’s stock price during the prior forty five days before the target as described above is reached.

2. Revenue Milestones:

     A.) Future Wave Management, Inc. will be granted 500,000 warrants when the company’s revenue reaches $20 million and 500,000 warrants when the company’s revenue reaches $50 million. Exercise price will be at a 33% discount to the average trading price of the company’s stock for a period of 45 days prior to the attainment of the revenue milestones.

3. Acquisition of Company:

     A.) Future Wave Management, Inc. will receive 1.25 million warrants to purchase the company’s stock at $.25 if the company is acquired for more than $1.00.

     B.) Future Wave Management, Inc. will receive 1.75 million warrants to purchase the company’s stock at $.50 if the company is acquired for more than $2.00

     C.) Future Wave Management, Inc. will receive 2.5 million warrants each to purchase the company’s stock at $.75 if the company is acquired for more than $3,00.

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EX-10.42

Exhibit-10.42

Consulting Services Agreement

     This consulting services agreement (“Agreement”), made and entered into on November 20, 2006 and effective as of the 1^st day of December 2006, by and between CytoCore, Inc. with its principal place of business at 414 North Orleans Court, Suite 502 in Chicago, Illinois 60610 (the “Company”) and EBM, Inc., with his mailing address of 171 E. 90^th Street, Unit 4C, New York, New York 10128, telephone (212) 348-1880) (the “Consultant”).

Background

     The Consultant provides a variety of financial and business consulting services as part of his regular business with EBM, Inc., and is ready, willing, and able to provide such consulting assistance to the Company on the terms and conditions set forth herein.

     The Company is in the process of developing a series of medical devices, drug delivery systems, and other cervical and uterine cancer related medical systems. In pursuit of its business strategy the Company desires to retain the services of the Consultant under the terms and conditions set forth herein.

     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Consultant agree as follows:

1.	Engagement and Scope of Services.
1.1	Company hereby retains consultant and Consultant agrees to provide to the Company the consulting services which are more fully described below:
	Consulting with the Company’s Chief Executive Officer, Chief Financial Officer, Medical Advisory Board, other Officers, or other consultants related to or regarding certain business plans, operations, commercialization of medical devices or theories, and other business matters that fall within the Consultant’s area of expertise.
	Consultant will have no authority or responsibility with regard to execution of any contract on behalf of the Company. Consultant is not an employee or officer of the Company.
	Consultant will provide progress reports from time to time to the Company’s Chief Executive Officer. Consultant agrees to provide any such report in writing if so requested by the Company’s Chief Executive Officer.
1.2	This Agreement is a non-exclusive agreement. The Consultant is free to provide similar or different services to any other company or organization desiring his services, provided that the Consultant is able to provide the Company the services

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	here agreed upon from month to month. The Company is also free to acquire similar services from any other party should it desire to do so.
2.	Term of Agreement.
2.1	This Agreement shall supersede the Agreement that is in place between CytoCore and EBM, Inc. beginning on April 1, 2006 that has a twelve (12) month term. The term of this Agreement shall be for a period of twenty four (24) months from the date of execution, and shall terminate twenty four (24) months from signing date following written notice by one party to the other at least thirty (30) days prior to the expiration date.
2.2	This Agreement is subject to termination in the event of a material breach of any term hereof and the breaching party’s failure to cure such material breach to the non-breaching party’s reasonable satisfaction within ten (10) business days of written notice.
2.3	Within ten (10) business days of termination of this Agreement, Consultant shall submit to the Company an itemized invoice for any remaining unpaid fees or reimbursable expenses then due and owing under this Agreement. Company, upon receipt and payment of such final invoice shall thereafter have no further obligation for payment under this Agreement. Upon the termination of this Agreement other than the surviving obligation, if any, under Section 6.1 below and payment in full of all monies due and owed from Company to Consultant pursuant to this Agreement, Consultant shall promptly return to Company all copies of any Company data, information, documents, or other materials of any sort stored in any form whatsoever, including all materials incorporating any of the Company’s proprietary information.
3.	Fees, Expenses, and Payments.
3.1	The Company shall pay Consultant a fee of Ten Thousand Dollars ($10,000.00) for each month it provides services to the Company. At such time as the Company has raised additional funding of Five Million Dollars ($5,000,000), the payment to Consultant shall be increased to Fifteen Thousand Dollars ($15,000.00) per month for the balance of the term of this Agreement.
3.2	EBM will also receive various grants of warrants to purchase CytoCore stock. The warrant grants and their associated performance triggers are listed in Addendum A attached hereto and made a part of. this Agreement.
3.3	The Company shall reimburse the Consultant for its out-of-pocket expenses related to this Agreement pursuant to the Company’s usual expense reimbursement procedures. The Consultant acknowledges that he will comply with said procedures. Further, the Consultant agrees to comply with the Company’s Code of Ethics and Business Conduct for Officers, Directors and

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	Employees of CytoCore, Inc. Finally, Consultant agrees that he is an independent contractor solely responsible for the determination and payment, if any, of all applicable federal, state, and local taxes related to this Agreement.
4.	Proprietary Information.
4.1	The Consultant acknowledges that in order to perform the services called for in this Agreement, it may be necessary for the Company to disclose to Consultant certain confidential technical, medical, or commercial information (“Confidential Information”). The Consultant agrees that without the Company’s express written approval Consultant and its senior employees shall, not, disclose, transfer, use, copy or allow access to any such Confidential Information to any third parties, except those who have a need to know such Information and are obligated to maintain the confidentiality of such Information. The foregoing shall not apply to that Information which was already known to the Consultant before disclosure, is publicly disseminated through no fault of either the Consultant, is rightfully received from a third party or is required to be disclosed pursuant to court order. This provision shall survive the termination of this Agreement and continue in effect for a period of three (3) years.
5.	Warranty and Exclusion of Warranty.
5.1	The Consultant warrants that (i) its services will be of professional quality and performed in accordance with the terms hereof and (ii) Consultant is under no obligation, the enforcement of which would prevent it from performing the services required hereunder.
5.2	The foregoing warranties are in lieu of all other warranties, conditions, or representations, express or otherwise, including without limitation any implied warranties of merchantability or fitness of use for a particular purpose.
6.	Termination.
6.1	This Agreement may be terminated by either party to this Agreement upon thirty (30) days prior written notice to the other party. This termination may be without cause. If this Agreement is terminated without cause by the Company, the Company will be obligated to pay the Consultant the balance of the fees and expenses due for the remainder of the Agreement.
7.	No Interference.
7.1	For the period commencing on the date hereof and ending on the date twenty four (24) months after the date this Agreement is terminated, the Contractor agrees he shall not:

(a) take any action which would:

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(i)	interfere with the contractual relationships of the Company or any affiliate of the Company, customers, suppliers, other consultants, employees, or others which relate to the business of the Company or any affiliate of the Company; or
(ii)	induce any employee, consultant, or representative of the Company or any affiliate of the Company not to become or not to continue as an employee, consultant, or representative of the Company or affiliate of the Company.

(b) make remarks or take any other action which would tend to disparage or diminish the reputation of the Company or any entity affiliated with the Company.

8.	General.
8.1	This Agreement is made and entered into, and is to be at least partially performed, in Cook County, Illinois. It shall be interpreted, construed and enforced by, and its construction and performance shall be governed by, the laws of the State of Illinois applicable to written agreements made and to be performed entirely within Illinois without regard to principles of conflicts of laws, except to the extent that Federal law may apply.
8.2	All notices required to be given hereunder shall be in writing and addressed to the respective parties set forth herein, unless another address shall have been previously designated in writing to the other party. Notice shall be deemed sent and effective when delivered by hand delivery, via U.S. Mail, Certified, with return receipt requested, or via regular U.S. Mail and confirmed facsimile delivery.
8.3	This Agreement constitutes the complete and entire Agreement between the Consultant and the Company with respect to the subject matter hereof. This Agreement supersedes all prior agreements, contracts, representations, proposals, discussions, and communications, whether oral or in writing, relating hereto. This Agreement may be modified only in writing signed by both the Consultant and a duly authorized representative of the Company.
8.4	This Agreement may be executed in counterparts or with facsimile signatures, all of which shall constitute an original.

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8.5	In the event any portion of this Agreement is deemed to be invalid or unenforceable, that portion will be deemed to be omitted and the remainder of this Release will remain in full force and effect.
9.	Signatures

The Company	The Consultant
Cytocore, Inc.	Ebm, Inc.
/s/ Robert McCullough
By: Robert McCullough	By:   Eugene Martineau
Title: Chief Financial Officer	Title:
Date: November 20, 2006	Date:

EX-10.43

Exhibit–10.43

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS, AND ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Warrant No. 120106-B

WARRANT TO PURCHASE SHARES OF COMMON STOCK

ISSUE DATE:           December 1, 2006

     This certifies that Dr. Augusto Ocana, an individual resident of the State of New Jersey (the “Holder”), for value received, is entitled to purchase from CytoCore, Inc., a Delaware corporation with its principal business office located at 414 North Orleans Street, Suite 502, Chicago, Illinois 60610 (together with its successors and assigns, the “Company”), subject to the terms and conditions set forth below, at any time or from time to time on and after the Issue Date as set forth above and before 3:00 p.m. (Eastern Time) on December 1, 2009 (the “Expiration Date”), Five Hundred Thousand (500,000) shares of common stock, $.001 par value per share, of the Company (“Common Stock”), at a price per share of $0.13. The shares purchasable upon exercise of this Warrant, and the applicable purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and the “Purchase Price,” respectively.

     1. Exercise of the Warrant.

          (a) Exercise. The Holder may, at the Holder’s option, elect to exercise this Warrant, in whole or in part, at any time or from time to time on or after the Issue Date but prior to 3:00 p.m. (Eastern Time) on the Expiration Date, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by or on behalf of the Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, in lawful money of the United States, of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise. In no event shall any such exercise be for fewer than 10,000 Warrant Shares unless fewer than an aggregate of 10,000 Warrant Shares are then purchasable under all outstanding Warrants held by the Holder. Payment of the aggregate Purchase Price may be made in cash, certified or bank check, or wire transfer of immediately available funds.

          (b) Exercise Date and Status as Holder of Shares. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the

day on which this Warrant shall have been surrendered to the Company as provided in Subsection 1(a) above (the “Exercise Date”). At such time, the Holder shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.

          (c) Issuance of Certificates. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within 10 business days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Holder:

               (i) a certificate or certificates for the number of full Warrant Shares to which the Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and

               (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of Warrant Shares for which this Warrant was so exercised.

          (d) Warrant Shares. The Warrant Shares issued upon any such exercise of this Warrant shall be validly issued, fully paid and non-assessable.

     2. Adjustments.

          (a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Issue Date (or, if this Warrant was issued upon partial exercise of, or in replacement of, another warrant of like tenor, then the date on which such original warrant was first issued) (either such date being referred to as the “Original Issue Date”) effect a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this Subsection 2(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.

          (b) Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in shares of Common Stock, then and in each such event the Purchase Price then in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction:

                    (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

                    (2) the denominator of which shall be the total number of

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shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution;

provided, however, that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this Subsection 2(b) as of the time of actual payment of such dividends or distributions.

          (c) Adjustment in Number of Warrant Shares. When any adjustment is required to be made to the Purchase Price pursuant to Subsections 2(a) or 2(b), the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment.

          (d) Adjustment for Reorganization. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 2(a) or 2(b)) (collectively, a “Reorganization”), then, following such Reorganization, the Holder shall receive upon exercise hereof the kind and amount of securities, cash or other property which the Holder would have been entitled to receive pursuant to such Reorganization if such exercise had taken place immediately prior to such Reorganization. In any such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Holder, to the end that the provisions set forth in this Section 2 (including provisions with respect to changes in and other adjustments of the Purchase Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter deliverable upon the exercise of this Warrant.

          (e) No Adjustments in Certain Cases. No adjustment in the number of Warrant Shares purchasable pursuant to this Warrant shall be required unless the adjustment would require an increase or decrease of at least one percent (1.0%) in the number of Warrant Shares then purchasable upon the exercise of this Warrant. Except as provided in this Section 2, no other adjustments in the number, kind or price of shares constituting Warrant Shares shall be made during the term, or upon the exercise, of this Warrant. Further, no adjustments shall be made pursuant to this Section 2 hereof in connection with the grant or exercise of presently authorized or outstanding options to purchase, or the issuance of shares of Common Stock under, the Company’s director or employee benefit, option and incentive plans.

          (f) Treasury Stock. For purposes of this Section 2, shares of Common Stock owned or held at any relevant time by, or for the account of, the Company, in its treasury or otherwise, shall not be deemed to be outstanding for purposes of the calculations and adjustments herein described.

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     3. Fractional Shares. The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall pay in cash to the Holder an amount equal to such fraction multiplied by the fair market value per share of Common Stock, as determined by the Board of Directors in good faith.

     4. Investment Representations. The Holder represents and warrants to the Company as follows:

          (a) Investment. The Holder is acquiring this Warrant, and (if and when such Holder exercises this Warrant) will acquire the Warrant Shares, for such Holder’s own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and the Holder has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof.

          (b) Accredited Investor. The Holder is an “accredited investor” as defined in Rule 501(a) under the Act.

          (c) Experience. The Holder has made such inquiry concerning the Company and its business and personnel as the Holder has deemed appropriate; and the Holder has sufficient knowledge and experience in finance and business that the Holder is capable of evaluating the risks and merits of an investment in the Company.

     5. Restrictions on Transfer.

          (a) The Warrant Shares shall not be offered, sold or transferred unless either (i) they first shall have been registered under the Act and any applicable state securities laws, or (ii) the Company first shall have been furnished with an opinion of legal counsel, satisfactory to the Company, to the effect that such offer, sale or transfer is exempt from the registration requirements of the Act and any applicable state securities laws.

          (b) Each Warrant and certificate representing Warrant Shares shall bear a legend substantially in the following form:

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such securities are registered under such act and applicable state securities laws or an opinion of counsel reasonably satisfactory to the Company is obtained to the effect that such registration is not required.”

     The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144 under the Act.

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          (c) The Company will maintain a register containing the name and address of the Holder of this Warrant. The Holder may change the Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

          (d) Except as provided herein, this Warrant and all rights hereunder are personal to the Holder, is exercisable only by the Holder, and no rights granted hereunder may be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise). Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Warrant or of such rights contrary to the provisions hereto, or upon the levy of any attachment or similar process upon this Warrant or such rights, this Warrant and such rights shall, at the election of the Company, become null and void. Notwithstanding the foregoing, in the event of the death of the Holder, this Warrant may be exercised by the estate of the Holder, or by any person or persons who acquired the right to exercise such Warrant by bequest or inheritance or by reason of the death of the Holder and, in such case, such person or persons shall be deemed the “Holder” or “Holders” hereunder.

     6. No Impairment; Adjustment of Par Value.

          (a) The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment.

          (b) Before taking any action that would cause an adjustment reducing the Purchase Price per share below the then par value of the shares of Warrant Shares issuable upon exercise of the Warrant, the Company will take any corporate action that may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Warrant Shares at such adjusted price.

     7. Record Date, etc. In the event:

          (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or

          (b) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity and its Common Stock is not converted into or exchanged for any other securities or property), or any transfer of all or substantially all of the assets of the Company; or

          (c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company,

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then, and in each such case, the Company will send or cause to be sent to the Holder a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

     8. Reservation of Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares and other securities, cash and/or property as from time to time shall be issuable upon the exercise of this Warrant.

     9. Exchange or Replacement of Warrants.

          (a) Upon the surrender by the Holder of this Warrant, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 5 hereof, issue and deliver to or upon the order of the Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of the Holder, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock (or other securities, cash and/or property) then issuable upon exercise of this Warrant.

          (b) Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

     10. Notices. All notices and other communications from the Company to the Holder in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the address last furnished to the Company in writing by the Holder. All notices and other communications from the Holder to the Company in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the Company at its principal office set forth above. If the Company should at any time change the location of its principal office to a place other than as set forth above, it shall give prompt written notice to the Holder and thereafter all references in this Warrant to the location of its principal office at the particular time shall be as so specified in such notice. All such notices and communications shall be deemed delivered (a) three business days after being sent by certified or registered mail, return receipt requested, postage prepaid, or (b) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery.

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     11. No Rights as Stockholder; No Liability. No provision of this Warrant shall be construed as conferring upon the Holder hereof the right to vote, consent, receive dividends or receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matter whatsoever as a stockholder of the Company. In the absence of affirmative action by the Holder hereof to purchase shares of Common Stock, no provision hereof shall give rise to any liability of such Holder for the purchase price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

     12. Payment of Taxes. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of this Warrant or the shares of Common Stock comprising the Warrant Shares; provided, however, the Company shall not be required to pay any tax that may be payable in respect of any permitted transfer of this Warrant or Warrant Shares.

     13. Amendment or Waiver. Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. No waivers of any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision or any other term, condition or provision hereof.

     14. Section Headings. The section headings in this Warrant are for the convenience of the parties only and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties.

     15. Severability. If any provision of this Warrant shall be held invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision of this Warrant and, to this end, the provisions hereof are severable.

     16. Assignment. This Warrant shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors and personal representatives.

     17. Governing Law. This Warrant will be governed by and construed in accordance with the internal laws of the State of Delaware (without reference to the conflicts of law provisions thereof).

     18. Signatures. This Warrant may be executed in one or more counterparts by facsimile signature.

(Signature appears on next page).

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     EFFECTIVE as of the Issue Date indicated above.

CYTOCORE, INC.

By:

Title:

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EXHIBIT I

PURCHASE FORM

To:                     Dated:                     

     The undersigned, pursuant to the provisions set forth in the attached Warrant (No.                    ), hereby elects to purchase                      shares of the Common Stock of CytoCore, Inc. by such Warrant.

     The undersigned herewith makes payment of the full Purchase Price for such shares at the price per share provided for in such Warrant. Such payment shall be in the aggregate amount of $ _____________ in cash, certified or bank check, or wire transfer of immediately available funds.

Signature:

Address:

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EX-10.45

EXHIBIT 10.45
PF-8014

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS, AND ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Warrant No. 092806-B

WARRANT TO PURCHASE SHARES OF COMMON STOCK

ISSUE DATE: September 28, 2006

     This certifies that Robert F. McCullough, Jr., an individual resident of the State of California (or any valid transferee thereof, the “Holder”), for value received, is entitled to purchase from CytoCore, Inc., a Delaware corporation with its principal business office located at 414 North Orleans Street, Suite 502, Chicago, Illinois 60610 (together with its successors and assigns, the “Company”), subject to the terms and conditions set forth below, at any time or from time to time on and after the Issue Date as set forth above and before 3:00 p.m. (Eastern Daylight Time) on September 28, 2009 (the “Expiration Date”), Four Million (4,000,000) Shares of common Stock, $0.001 par value per share, of the Company (“Common Stock”), at aprice of Twelve and Three Quarter Cents ($0.1275) per share. The shares purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and the ‘“Purchase Price,” respectively.

     1.     Exercise of the Warrant.

          (a) Exercise. The Holder may, at the Holder’s option, elect to exercise this Warrant, in whole or in part, at any time or from time to time on or after the Issue Date and Vesting Date but prior to 3:00 p.m. (Eastern Daylight Time) on the Expiration Date, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by or on behalf of the Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, in lawful money of the United States, of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise. In no event shall any such exercise be for fewer than 10,000 Warrant Shares unless fewer than an aggregate of 10,000 Warrant Shares are then purchasable under all outstanding Warrants held by the Holder. Payment of the aggregate Purchase Price may be made in cash, certified or bank check, or wire transfer of immediately available funds.

          (b) Exercise Date and Status as Holder of Shares. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Subsection 1(a) above (the “Exercise Date”). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in Subsection l(c) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.

          (c) Issuance of Certificates. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within 10 business days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Holder, or as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct:

               (i) a certificate or certificates for the number of full Warrant Shares to which the Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and

               (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of Warrant Shares for which this Warrant was so exercised.

          (d) Warrant Shares. The Warrant Shares issued upon any such exercise of this Warrant shall be validly issued, fully paid and non-assessable.

          (e) Vesting Date. The Warrants Shares shall fully and irrevocably vest on January 1, 2007. The Warrant Shares are not exerciseable before the Vesting Date.

     2.     Adjustments.

          (a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Issue Date (or, if this Warrant was issued upon partial exercise of, or in replacement of, another warrant of like tenor, then the date on which such original warrant was first issued) (either such date being referred to as the “Original Issue Date”) effect a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this Subsection 2(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.

          (b) Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in shares of Common Stock, then and in each such event the Purchase Price then in effect immediately before such event shall be decreased as of the time

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of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction:

               (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

               (2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution;

provided, however, that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this Subsection 2(b) as of the time of actual payment of such dividends or distributions.

          (c) Adjustment in Number of Warrant Shares. When any adjustment is required to be made to the Purchase Price pursuant to Subsections 2(a) or 2(b), the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment.

          (d) Adjustment for Reorganization. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 2(a) or 2(b)) (collectively, a “Reorganization”), then, following such Reorganization, the Holder shall receive upon exercise hereof the kind and amount of securities, cash or other property which the Holder would have been entitled to receive pursuant to such Reorganization if such exercise had taken place immediately prior to such Reorganization. In any such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Holder, to the end that the provisions set forth in this Section 2 (including provisions with respect to changes in and other adjustments of the Purchase Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter deliverable upon the exercise of this Warrant.

          (e) No Adjustments in Certain Cases. No adjustment in the number of Warrant Shares purchasable pursuant to this Warrant shall be required unless the adjustment would require an increase or decrease of at least one percent (1.0%) in the number of Warrant Shares then purchasable upon the exercise of this Warrant. Except as provided in this Section 2, no other adjustments in the number, kind or price of shares constituting Warrant Shares shall be made during the term, or upon the exercise, of this Warrant, Further, no adjustments shall be made pursuant to this Section 2 hereof in connection with the grant or exercise of presently

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authorized or outstanding options to purchase, or the issuance of shares of Common Stock under, the Company’s director or employee benefit, option and incentive plans.

          (f) Treasury Stock. For purposes of this Section 2, shares of Common Stock owned or held at any relevant time by, or for the account of, the Company, in its treasury or otherwise, shall not be deemed to be outstanding for purposes of the calculations and adjustments herein described.

     3.     Fractional Shares. The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall pay in cash to the Holder an amount equal to such fraction multiplied by the fair market value per share of Common Stock, as determined by the Board of Directors in good faith.

     4.     Investment Representations. The initial Holder represents and warrants to the Company as follows:

          (a) Investment. The Holder is acquiring this Warrant, and (if and when such Holder exercises this Warrant) will acquire the Warrant Shares, for such Holder’s own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and the Holder has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof.

          (b) Accredited Investor. The Holder is an “accredited investor” as defined in Rule 501(a) under the Act.

          (c) Experience. The Holder has made such inquiry concerning the Company and its business and personnel as the Holder has deemed appropriate; and the Holder has sufficient knowledge and experience in finance and business that the Holder is capable of evaluating the risks and merits of an investment in the Company.

     5.     Transfers, etc.

          (a) This Warrant and the Warrant Shares shall not be offered, sold or transferred unless either (i) they first shall have been registered under the Act and any applicable state securities laws, or (ii) the Company first shall have been furnished with an opinion of legal counsel, satisfactory to the Company, to the effect that such offer, sale or transfer is exempt from the registration requirements of the Act and any applicable state securities laws.

          (b) Each Warrant and certificate representing Warrant Shares shall bear a legend substantially in the following form:

“The securities represented by this certificate have not been registered under the Securities Act of 1933. as amended, or any state securities laws, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such securities are registered under such act and applicable state securities laws or an opinion of counsel reasonably

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satisfactory to the Company is obtained to the effect that such registration is not required.”

     The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144 under the Act.

          (c) The Company will maintain a register containing the name and address of the Holder of this Warrant, The Holder may change the Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

          (d) Subject to the provisions of clauses (a) and (b) of this Section 5, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed assignment (in the form of Exhibit II hereto) at the principal office of the Company (or, if another office or agency has been designated by the Company for such purpose, then at such other office or agency). Upon the presentation and surrender of such items to the Company, the Company shall execute and deliver to the transferee or transferees of this Warrant a new Warrant or Warrants, in the name of the transferee or transferees named in the assignment, and this Warrant shall at that time be canceled to the extent transferred.

     6.     No Impairment; Adjustment of Par Value.

          (a) The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment.

          (b) Before taking any action that would cause an adjustment reducing the Purchase Price per share below the then par value of the shares of Warrant Shares issuable upon exercise of the Warrant, the Company will take any corporate action that may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Warrant Shares at such adjusted price.

     7.     Record Date, etc. In the event:

          (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or

          (b) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity and its Common Stock is not converted into or exchanged for any other securities or property), or any transfer of all or substantially all of the assets of the Company; or

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          (c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company,

then, and in each such case, the Company will send or cause to be sent to the Holder a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

     8.     Reservation of Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares and other securities, cash and/or property as from time to time shall be issuable upon the exercise of this Warrant.

     9.     Exchange or Replacement of Warrants.

          (a) Upon the surrender by the Holder of this Warrant, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 5 hereof, issue and deliver to or upon the order of the Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of the Holder or as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock (or other securities, cash and/or property) then issuable upon exercise of this Warrant.

          (b) Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

     10.     Notices. All notices and other communications from the Company to the Holder in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the address last furnished to the Company in writing by the Holder. All notices and other communications from the Holder to the Company in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the Company at its principal office set forth above. If the Company should at any time change the location of its principal office to a place other than as set forth above, it shall give prompt written notice to the Holder and thereafter all references in this Warrant to the location of its principal office at the particular time shall be as so specified in such notice. All such notices and communications shall be deemed delivered (a) three business days after being sent by certified or registered mail, return receipt requested,

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postage prepaid, or (b) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery.

     11.     No Rights as Stockholder; No Liability. No provision of this Warrant shall be construed as conferring upon the Holder hereof the right to vote, consent, receive dividends or receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matter whatsoever as a stockholder of the Company. In the absence of affirmative action by the Holder hereof to purchase shares of Common Stock, no provision hereof shall give rise to any liability of such Holder for the purchase price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

     12.     Payment of Taxes. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of this Warrant or the shares of Common Stock comprising the Warrant Shares; provided, however, the Company shall not be required to pay any tax that may be payable in respect of any transfer of this Warrant or Warrant Shares.

     13.     Amendment or Waiver. Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. No waivers of any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision or any other term, condition or provision hereof.

     14.     Section Headings. The section headings in this Warrant are for the convenience of the parties only and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties.

     15.     Severability. If any provision of this Warrant shall be held invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision of this Warrant and, to this end, the provisions hereof are severable.

     16.     Assignment. This Warrant shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.

     17.     Governing Law. This Warrant will be governed by and construed in accordance with the internal laws of the State of Delaware (without reference to the conflicts of law provisions thereof).

     18.     Signatures. This Warrant may be executed in one or more counterparts by facsimile signature.

(Signature appears on next page).

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                         EFFECTIVE as of the Issue Date indicated above.

CYTOCORE, INC.
By:	/s/ David Weissberg
	David Weissberg, M.D.
	Title:	Chief Executive Officer

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EXHIBIT I

PURCHASE FORM

To:                                         Dated:                                        

     The undersigned, pursuant to the provisions set forth in the attached Warrant (No.                    ), hereby elects to purchase                      shares of the Common Stock of CytoCore, Inc. by such Warrant.

     The undersigned herewith makes payment of the full Purchase Price for such shares at the price per share provided for in such Warrant. Such payment shall be in the aggregate amount of $                     in cash, certified or bank check, or wire transfer of immediately available funds.

Signature:

Address:

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\

EXHIBIT II

ASSIGNMENT FORM

     FOR VALUE RECEIVED,                                                              hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (No.                    ) with respect to the number of shares of Common Stock of CytoCore, Inc. covered thereby set forth below, unto:

Name of Assignee Address No. of Shares

Dated:	Signature:
Signature Guaranteed:
By:

The signature should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Rule 17A under the Securities Exchange Act of 1934, as amended.

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EX-10.46

Exhibit 10.46

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS, AND ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Warrant No. 092806-C

WARRANT TO PURCHASE SHARES OF COMMON STOCK

ISSUE DATE: September 28, 2006

     This certifies that Alexander M. Milley, an individual resident of Massachusetts (or any valid transferee thereof, the “Holder”), for value received, is entitled to purchase from CytoCore, Inc., a Delaware corporation with its principal business office located at 414 North Orleans Street, Suite 502, Chicago, Illinois 60610 (together with its successors and assigns, the “Company”), subject to the terms and conditions set forth below, at any time or from time to time on and after the Issue Date as set forth above and before 3:00 p.m. (Eastern Daylight Time) on September 28, 2011 (the “Expiration Date”), Six Hundred and Twenty Five Thousand (625,000) shares of common Stock, $0.001 par value per share, of the Company (“Common Stock”), at a price of Twenty Cents ($0.20) per share. The shares purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and the “Purchase Price,” respectively.

     1. Exercise of the Warrant.

          (a) Exercise. The Holder may, at the Holder’s option, elect to exercise this Warrant, in whole or in part, at any time or from time to time on or after the Issue Date but prior to 3:00 p.m. (Eastern Daylight Time) on the Expiration Date, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by or on behalf of the Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, in lawful money of the United States, of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise. In no event shall any such exercise be for fewer than 10,000 Warrant Shares unless fewer than an aggregate of 10,000 Warrant Shares are then purchasable under all outstanding Warrants held by the Holder. Payment of the aggregate Purchase Price may be made in cash, certified or bank check, or wire transfer of immediately available funds.

          (b) Exercise Date, and Status as Holder of Shares. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Subsection 1 (a) above (the “Exercise Date”). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in Subsection l (c) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.

          (c) Issuance of Certificates. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within 10 business days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Holder, or as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct:

               (i) a certificate or certificates for the number of full Warrant Shares to which the Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and

               (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of Warrant Shares for which this Warrant was so exercised.

          (d) Warrant Shares. The Warrant Shares issued upon any such exercise of this Warrant shall be validly issued, fully paid and non-assessable.

     2. Adjustments.

          (a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Issue Date (or, if this Warrant was issued upon partial exercise of, or in replacement of, another warrant of like tenor, then the date on which such original warrant was first issued) (either such date being referred to as the “Original Issue Date”) effect a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall at any time or from time to lime after the Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this Subsection 2(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.

          (b) Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in shares of Common Stock, then and in each such event the Purchase Price then in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction:

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                    (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

                    (2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution;

provided, however, that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the dale fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this Subsection 2(b) as of the time of actual payment of such dividends or distributions.

          (c) Adjustment in Number of Warrant Shares. When any adjustment is required to be made to the Purchase Price pursuant to Subsections 2(a) or 2(b), the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment.

          (d) Adjustment for Reorganization. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 2(a) or 2(b)) (collectively, a “Reorganization”), then, following such Reorganization, the Holder shall receive upon exercise hereof the kind and amount of securities, cash or other property which the Holder would have been entitled to receive pursuant to such Reorganization if such exercise had taken place immediately prior to such Reorganization. In any such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Holder, to the end that the provisions set forth in this Section 2 (including provisions with respect to changes in and other adjustments of the Purchase Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter deliverable upon the exercise of this Warrant.

          (e) No Adjustments in Certain Cases. No adjustment in the number of Warrant Shares purchasable pursuant to this Warrant shall be required unless the adjustment would require an increase or decrease of at least one percent (1.0%) in the number of Warrant Shares then purchasable upon the exercise of this Warrant. Except as provided in this Section 2, no other adjustments in the number, kind or price of shares constituting Warrant Shares shall be made during the term, or upon the exercise, of this Warrant. Further, no adjustments shall be made pursuant to this Section 2 hereof in connection with the grant or exercise of presently authorized or outstanding options to purchase, or the issuance of shares of Common Stock under, the Company’s director or employee benefit, option and incentive plans.

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          (f) Treasury Stock. For purposes of this Section 2, shares of Common Stock owned or held at any relevant time by, or for the account of, the Company, in its treasury or otherwise, shall not be deemed to be outstanding for purposes of the calculations and adjustments herein described.

     3. Fractional Shares. The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall pay in cash to the Holder an amount equal to such fraction multiplied by the fair market value per share of Common Stock, as determined by the Board of Directors in good faith.

     4. Investment Representations. The initial Holder represents and warrants to the Company as follows:

          (a) Investment. The Holder is acquiring this Warrant, and (if and when such Holder exercises this Warrant) will acquire the Warrant Shares, for such Holder’s own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and the Holder has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof.

          (b) Accredited Investor. The Holder is an “accredited investor” as defined in Rule 501(a) under the Act.

          (c) Experience. The Holder has made such inquiry concerning the Company and its business and personnel as the Holder has deemed appropriate; and the Holder has sufficient knowledge and experience in finance and business that the Holder is capable of evaluating the risks and merits of an investment in the Company.

     5. Transfers, etc.

          (a) This Warrant and the Warrant Shares shall not be offered, sold or transferred unless either (i) they first shall have been registered under the Act and any applicable state securities laws, or (ii) the Company first shall have been furnished with an opinion of legal counsel, satisfactory to the Company, to the effect that such offer, sale or transfer is exempt from the registration requirements of the Act and any applicable state securities laws.

          (b) Each Warrant and certificate representing Warrant Shares shall bear a legend substantially in the following form:

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such securities are registered under such act and applicable state securities laws or an opinion of counsel reasonably satisfactory to the Company is obtained to the effect that such registration is not required.”

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     The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144 under the Act.

          (c) The Company will maintain a register containing the name and address of the Holder of this Warrant. The Holder may change the Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

          (d) Subject to the provisions of clauses (a) and (b) of this Section 5, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed assignment (in the form of Exhibit II hereto) at the principal office of the Company (or, if another office or agency has been designated by the Company for such purpose, then at such other office or agency). Upon the presentation and surrender of such items to the Company, the Company shall execute and deliver to the transferee or transferees of this Warrant a new Warrant or Warrants, in the name of the transferee or transferees named in the assignment, and this Warrant shall at that time be canceled to the extent transferred.

     6. No Impairment; Adjustment of Par Value.

          (a) The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment.

          (b) Before taking any action that would cause an adjustment reducing the Purchase Price per share below the then par value of the shares of Warrant Shares issuable upon exercise of the Warrant, the Company will take any corporate action that may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Warrant Shares at such adjusted price.

     7. Record Date, etc. In the event:

          (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or

          (b) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity and its Common Stock is not converted into or exchanged for any other securities or property), or any transfer of all or substantially all of the assets of the Company; or

          (c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company,

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then, and in each such case, the Company will send or cause to be sent to the Holder a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock for such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

     8. Reservation of Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares and other securities, cash and/or property as from time to time shall be issuable upon the exercise of this Warrant.

     9. Exchange or Replacement of Warrants.

          (a) Upon the surrender by the Holder of this Warrant, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 5 hereof, issue and deliver to or upon the order of the Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of the Holder or as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock (or other securities, cash and/or property) then issuable upon exercise of this Warrant.

          (b) Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

     10. Notice. All notices and other communications from the Company to the Holder in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the address last furnished to the Company in writing by the Holder. All notices and other communications from the Holder to the Company in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the Company at its principal office set forth above. If the Company should at any time change the location of its principal office to a place other than as set forth above, it shall give prompt written notice to the Holder and thereafter all references in this Warrant to the location of its principal office at the particular time shall be as so specified in such notice. All such notices and communications shall be deemed delivered (a) three business days after being sent by certified or registered mail, return receipt requested, postage prepaid, or (b) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery.

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     11. No Rights as Stockholder: No Liability. No provision of this Warrant shall be construed as conferring upon the Holder hereof the right to vote, consent, receive dividends or receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matter whatsoever as a stockholder of the Company. In the absence of affirmative action by the Holder hereof to purchase shares of Common Stock, no provision hereof shall give rise to any liability of such Holder for the purchase price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

     12. Payment of Taxes. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of this Warrant or the shares of Common Stock comprising the Warrant Shares; provided, however, the Company shall not be required to pay any tax that may be payable in respect of any transfer of this Warrant or Warrant Shares.

     13. Amendment or Waiver. Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. No waivers of any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision or any other term, condition or provision hereof.

     14. Section Headings. The section headings in this Warrant are for the convenience of the parties only and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties.

     15. Severability. If any provision of this Warrant shall be held invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision of this Warrant and, to this end, the provisions hereof are severable,

     16. Assignment. This Warrant shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.

     17. Governing Law. This Warrant will be governed by and construed in accordance with the internal laws of the State of Delaware (without reference to the conflicts of law provisions thereof).

     18. Signatures. This Warrant may be executed in one or more counterparts by facsimile signature.

(Signature appears on next page).

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     EFFECTIVE as of the Issue Date Indicated above.

CYTOCORE, INC,
By:	/s/ Robert F. McCullough, Jr.
	Robert F. McCullough, Jr.
	Title:	Chief Financial Officer

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EXHIBIT I

PURCHASE FORM

To:                                         Dated:                                        

     The undersigned, pursuant to the provisions set forth in the attached Warrant (No.                     ), hereby elects to purchase                                          shares of the Common Stock of CytoCore, Inc. by such Warrant.

     The undersigned herewith makes payment of the full Purchase Price for such shares at the price per share provided for in such Warrant. Such payment shall be in the aggregate amount of $                                         in cash, certified or bank check, or wire transfer of immediately available funds.

Signature:

Address:

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EXHIBIT II

ASSIGNMENT FORM

     FOR VALUE RECEIVED,                                                                                  hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (No.                    ) with respect to the number of shares of Common Stock of CytoCore, Inc. covered thereby set forth below, unto:

Name of Assignee	Address		No, of Shares
Dated:		Signature:
Signature Guaranteed:
By:

The signature should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Rule 17A under the Securities Exchange Act of 1934, as amended.

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EX-10.47

EXHIBIT 10.47

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS, AND ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Warrant No. 092806-D

WARRANT TO PURCHASE SHARES OF COMMON STOCK
ISSUE DATE: September 28, 2006

     This certifies that John Abeles, M.D, an individual resident of the State of Florida (or any valid Transferee thereof, the “Holder”), for value received, is entitled to purchase from CytoCore, Inc., a Delaware corporation with its principal business office located at 414 North Orleans Street, Suite 502, Chicago, Illinois 60610 (together with its successors and assigns, the “Company”), subject to the terms and conditions set forth below, at any time or from time to time on and after the Issue Date as set forth above and before 3:00 p.m. (Eastern Daylight Time) on September 28, 2011(the “Expiration Date”), Six Hundred and Twenty Five Thousand (625,000) Shares of common stock, $0.001 par value per share, of the Company (“Common Stock”), at a price of Twenty Cents ($0.20) per share. The shares purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and the “Purchase Price,” respectively.

     1. Exercise of the Warrant.

          (a) Exercise. The Holder may, at the Holder’s option, elect to exercise this Warrant, in whole or in part, at any time or from time to time on or after the Issue Date but prior to 3:00 p.m. (Eastern Daylight Time) on the Expiration Date, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by or on behalf of the Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, in lawful money of the United States, of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise. In no event shall any such exercise be for fewer than 10,000 Warrant Shares unless fewer than an aggregate of 10,000 Warrant Shares are then purchasable under all outstanding Warrants held by the Holder. Payment of the aggregate Purchase Price may be made in cash, certified or bank check, or wire transfer of immediately available funds.

          (b) Exercise Date and Status as Holder of Shares. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Subsection 1(a) above (the “Exercise Date”). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in Subsection l(c) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.

          (c) Issuance of Certificates. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within 10 business days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Holder, or as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct:

               (i) a certificate or certificates for the number of full Warrant Shares to which the Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and

               (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of Warrant Shares for which this Warrant was so exercised.

          (d) Warrant Shares. The Warrant Shares issued upon any such exercise of this Warrant shall be validly issued, fully paid and non-assessable.

     2. Adjustments.

          (a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Issue Date (or, if this Warrant was issued upon partial exercise of, or in replacement of, another warrant of like tenor, then the date on which such original warrant was first issued) (either such date being referred to as the “Original Issue Date”) effect a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this Subsection 2(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.

          (b) Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in shares of Common Stock, then and in each such event the Purchase Price then in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction:

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               (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

               (2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution;

provided, however, that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this Subsection 2(b) as of the time of actual payment of such dividends or distributions.

          (c) Adjustment in Number of Warrant Shares. When any adjustment is required to be made to the Purchase Price pursuant to Subsections 2(a) or 2(b), the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment.

          (d) Adjustment for Reorganization. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 2(a) or 2(b)) (collectively, a “Reorganization”), then, following such Reorganization, the Holder shall receive upon exercise hereof the kind and amount of securities, cash or other property which the Holder would have been entitled to receive pursuant to such Reorganization if such exercise had taken place immediately prior to such Reorganization. In any such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Holder, to the end that the provisions set forth in this Section 2 (including provisions with respect to changes in and other adjustments of the Purchase Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter deliverable upon the exercise of this Warrant.

          (e) No Adjustments in Certain Cases. No adjustment in the number of Warrant Shares purchasable pursuant to this Warrant shall be required unless the adjustment would require an increase or decrease of at least one percent (1.0%) in the number of Warrant Shares then purchasable upon the exercise of this Warrant. Except as provided in this Section 2, no other adjustments in the number, kind or price of shares constituting Warrant Shares shall be made during the term, or upon the exercise, of this Warrant. Further, no adjustments shall be made pursuant to this Section 2 hereof in connection with the grant or exercise of presently authorized or outstanding options to purchase, or the issuance of shares of Common Stock under, the Company’s director or employee benefit, option and incentive plans.

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          (f) Treasury Stock. For purposes of this Section 2, shares of Common Stock owned or held at any relevant time by, or for the account of, the Company, in its treasury or otherwise, shall not be deemed to be outstanding for purposes of the calculations and adjustments herein described.

     3. Fractional Shares. The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall pay in cash to the Holder an amount equal to such fraction multiplied by the fair market value per share of Common Stock, as determined by the Board of Directors in good faith.

     4. Investment Representations. The initial Holder represents and warrants to the Company as follows:

          (a) Investment. The Holder is acquiring this Warrant, and (if and when such Holder exercises this Warrant) will acquire the Warrant Shares, for such Holder’s own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and the Holder has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof.

          (b) Accredited Investor. The Holder is an “accredited investor” as defined in Rule 501(a) under the Act.

          (c) Experience. The Holder has made such inquiry concerning the Company and its business and personnel as the Holder has deemed appropriate; and the Holder has sufficient knowledge and experience in finance and business that the Holder is capable of evaluating the risks and merits of an investment in the Company.

     5. Transfers, etc.

          (a) This Warrant and the Warrant Shares shall not be offered, sold or transferred unless either (i) they first shall have been registered under the Act and any applicable state securities laws, or (ii) the Company first shall have been furnished with an opinion of legal counsel, satisfactory to the Company, to the effect that such offer, sale or transfer is exempt from the registration requirements of the Act and any applicable slate securities laws.

          (b) Each Warrant and certificate representing Warrant Shares shall bear a legend substantially in the following form:

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such securities are registered under such act and applicable state securities laws or an opinion of counsel reasonably satisfactory to the Company is obtained to the effect that such registration is not required”,

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     The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144 under the Act.

          (c) The Company will maintain a register containing the name and address of the Holder of this Warrant. The Holder may change the Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

          (d) Subject to the provisions of clauses (a) and (b) of this Section 5, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed assignment (in the form of Exhibit II hereto) at the principal office of the Company (or, if another office or agency has been designated by the Company for such purpose, then at such other office or agency). Upon the presentation and surrender of such items to the Company, the Company shall execute and deliver to the transferee or transferees of this Warrant a new Warrant or Warrants, in the name of the transferee or transferees named in the assignment, and this Warrant shall at that time be canceled to the extent transferred.

     6. No Impairment; Adjustment of Par Value.

          (a) The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment.

          (b) Before taking any action that would cause an adjustment reducing the Purchase Price per share below the then par value of the shares of Warrant Shares issuable upon exercise of the Warrant, the Company will take any corporate action that may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Warrant Shares at such adjusted price.

     7. Record Date, etc. in the event:

          (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or

          (b) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity and its Common Stock is not converted into or exchanged for any other securities or property), or any transfer of all or substantially all of the assets of the Company; or

          (c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company,

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then, and in each such case, the Company will send or cause to be sent to the Holder a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

     8. Reservation of Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares and other securities, cash and/or property as from time to time shall be issuable upon the exercise of this Warrant.

     9. Exchange or Replacement of Warrants.

          (a) Upon the surrender by the Holder of this Warrant, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 5 hereof, issue and deliver to or upon the order of the Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of the Holder or as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock (or other securities, cash and/or property) then issuable upon exercise of this Warrant.

          (b) Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

     10. Notices. All notices and other communications from the Company to the Holder in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the address last furnished to the Company in writing by the Holder. All notices and other communications from the Holder to the Company in connection herewith shall be mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide overnight courier service guaranteeing next business day delivery, to the Company at its principal office set forth above. If the Company should at any time change the location of its principal office to a place other than as set forth above, it shall give prompt written notice to the Holder and thereafter all references in this Warrant to the location of its principal office at the particular time shall be as so specified in such notice. All such notices and communications shall be deemed delivered (a) three business days after being sent by certified or registered mail, return receipt requested, postage prepaid, or (b) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery.

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     11. No Rights as Stockholder; No Liability. No provision of this Warrant shall be construed as conferring upon the Holder hereof the right to vote, consent, receive dividends or receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matter whatsoever as a stockholder of the Company. In the absence of affirmative action by the Holder hereof to purchase shares of Common Stock, no provision hereof shall give rise to any liability of such Holder for the purchase price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

     12. Payment of Taxes. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of this Warrant or the shares of Common Stock comprising the Warrant Shares; provided, however, the Company shall not be required to pay any tax that may be payable in respect of any transfer of this Warrant or Warrant Shares.

     13. Amendment or Waiver. Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. No waivers of any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision or any other term, condition or provision hereof.

     14. Section Headings. The section headings in this Warrant are for the convenience of the parties only and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties.

     15. Severability. If any provision of this Warrant shall be held invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other provision of this Warrant and, to this end, the provisions hereof are severable.

     16. Assignment. This Warrant shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.

     17. Governing Law. This Warrant will be governed by and construed in accordance with the internal laws of the State of Delaware (without reference to the conflicts of law provisions thereof).

     18. Signatures. This Warrant may be executed in one or more counterparts by facsimile signature.

(Signature appears on next page).

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EFFECTIVE as of the Issue Date indicated above.

CYTOCORE, INC.
By:	/s/ Robert F. MeCullough,
Robert F. MeCullough, Jr.
Title:  Chief Financial Officer

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EXHIBIT I

PURCHASE FORM

To:                                         Dated:                                        

     The undersigned, pursuant to the provisions set forth in the attached Warrant (No.        ), hereby elects to purchase                                    shares of the Common Stock of CytoCore, Inc. by such Warrant,

     The undersigned herewith makes payment of the full Purchase Price for such shares at the price per share provided for in such Warrant. Such payment shall be in the aggregate amount of $                                           in cash, certified or bank check, or wire transfer of immediately available funds.

Signature:

Address:

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EXHIBIT II

ASSIGNMENT FORM

     FOR VALUE RECEIVED,                                                              hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (No.                                         ) with respect to the number of shares of Common Stock of CytoCore, Inc. covered thereby set forth below, unto:

Name of Assignee	Address	No. of Shares
Dated:		Signature:
Signature Guaranteed:
By:

The signature should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Rule 17 A under the Securities Exchange Act of 1934, as amended.

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EX-21

EXHIBIT 21
Subsidiaries of the Company

AccuMed International, Inc.
Oncometrics Imaging Corp.
Bell National Corporation
PF1 National Corporation
Inpath, LLC

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

CytoCore, Inc.

We consent to the incorporation by reference in the following Registration Statements on Form S-8 (333-97863) and Form S-4 as amended (333-61666) of CytoCore, Inc. of our report dated April 16, 2007, with respect to the consolidated balance sheet of CytoCore, Inc. as of December 31, 2006, and the related consolidated statement of operations, stockholders’ deficit and cash flow for the year ended December 31, 2006, which report appears in the Annual Report on Form 10-KSB/A of CytoCore, Inc for the year ended December 31, 2006.

Our report dated April 16, 2007, contains an explanatory paragraph that states that the Company has suffered recurring losses from operations and is dependent upon access to additional external financing, which raises substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty.

/s/  Amper, Politziner & Mattia, P.C.

Edison, New Jersey

April 27, 2007

EX-23.2

Exhibit 23.2

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

We consent to the incorporation by reference of our report dated April 13, 2006, with respect to the consolidated financial statements of CytoCore Inc. (formerly Molecular Diagnostics, Inc.) included in the Annual Report on Form 10-KSB/A for the year ended December 31, 2006, in the following registration statements:

(1)	Registration Statement Number 333-97863 on Form S-8
(2)	Registration Statement Number 333-61666 on Form S-4 (as amended)

/s/  Altschuler, Melvoin and Glasser LLP

Chicago, Illinois

April 27, 2007

EX-31.1

Exhibit 31.1

Cytocore, Inc.

CERTIFICATION

I, Augusto Ocana M.D., certify that:

1.	I have reviewed this report on Form 10-KSB/A of Cytocore, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.	The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.   The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

/s/  Augusto Ocana

Augusto Ocana

Chief Executive Officer

Date: April 26, 2007

EX-31.2

Exhibit 31.2

Cytocore, Inc.

CERTIFICATION

I, Robert F. McCullough, Jr., certify that:

1.	I have reviewed this report on Form 10-KSB/A of Cytocore, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.	The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.   The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

/s/  ROBERT F. McCULLOUGH, JR.

Robert F. McCullough, Jr.

Chief Financial Officer

Date: April 26, 2007

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Augusto Ocana, the Chief Executive Officer of Cytocore, Inc. (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

(1)	the Annual Report on Form 10-KSB/A of the Company for the fiscal year ended December 31, 2006 (the “Report”) fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Augusto Ocana

Augusto Ocana

Chief Executive Officer

Date: April 26, 2007

EX-32.3

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert F. McCullough, Jr., the Chief Financial Officer of Molecular Diagnostics, Inc. (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

(1)	the Annual Report on Form 10-KSB/A of the Company for the fiscal year ended December 31, 2006 (the “Report”) fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  ROBERT F. MCCULLOUGH, JR.

Robert F. McCullough, Jr.

Chief Financial Officer

Date: April 26, 2007