UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q ~~(Mark~~

(Mark One) ~~[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934~~


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~MARCH 31,~~SEPTEMBER 30, 2007

OR ~~[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934~~


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD ~~__________~~ TO ~~__________~~

COMMISSION FILE NUMBER: 000-31745

THIRD WAVE TECHNOLOGIES, INC. ~~(Exact~~

(Exact name of Registrant as specified in its charter)


DELAWARE ~~39-1791034 (State~~ (State or other jurisdiction ~~(I.R.S. Employer~~ of incorporation or organization)		39-1791034 (I.R.S. Employer Identification No.)


502 S. ROSA ROAD, MADISON, WI		53719 ~~(Address~~
(Address of principal executive offices) ~~(Zip~~		(Zip Code)

(888) 898-2357 ~~(Registrant's~~
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X]~~þ No ~~[ ]~~ o

Indicate by check whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ~~"accelerated~~“accelerated filer and large accelerated ~~filer"~~filer” in Rule 12b-2 of Exchange Act. (Check one):

~~Large Accelerated Filer ~~[ ]~~o Accelerated Filer ~~[X]~~þ Non-Accelerated Filer ~~[ ]~~ o~~

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

The number of shares outstanding of the ~~registrant's~~registrant’s Common Stock, $.001 par value, as of ~~May~~November 7, 2007, was ~~42,277,120. ================================================================================~~ 43,673,173.

THIRD WAVE TECHNOLOGIES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED ~~MARCH 31,~~September 30, 2007

~~TABLE OF CONTENTS~~



	PAGE NO. ~~--------~~
PART I FINANCIAL ~~INFORMATION.........................................~~ INFORMATION		3
Item 1. Consolidated Financial ~~Statements.........................~~ Statements		3
Consolidated Balance Sheets (Unaudited) as of ~~March 31,~~September 30, 2007 and December 31, ~~2006..........................................~~ 2006		3
Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended ~~March 31,~~September 30, 2007 and ~~2006...........................~~ 2006		4
Consolidated Statements of Cash Flows (Unaudited) for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2007 and ~~2006........................... 5~~ 2006
Notes to Consolidated Financial Statements (Unaudited)~~......... 6~~		5
Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations....................... 11~~ Operations		13
Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk...................................................... 17~~ Risk		20
Item 4. Controls and ~~Procedures................................... 17~~ Procedures		20
PART II OTHER ~~INFORMATION............................................ 17~~ INFORMATION		20
Item 1. Legal ~~Proceedings......................................... 17~~ Proceedings		20
Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.................................................. 18~~ Proceeds		21
Item 3. Defaults Upon Senior ~~Securities........................... 18~~ Securities		21
Item 4. Submission Of Matters To A Vote Of Security ~~Holders....... 18~~ Holders		21
Item 5. Other ~~Information......................................... 18~~ Information		21
Item 6. Exhibits.................................................. 18 SIGNATURES........................................................... 19 EXHIBITS............................................................. 20 Exhibits		21
SIGNATURES		22
EXHIBITS		23

PART I -— FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
THIRD WAVE TECHNOLOGIES, INC.
Consolidated Balance Sheets (Unaudited)
MARCH 31, DECEMBER 31, 2007 2006 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 45,535,913 $ 42,428,841 Short-term investments 1,575,000 1,770,000 Accounts receivables, net of allowance for doubtful accounts of $200,000 at March 31, 2007 and December 31, 2006, respectively 4,453,014 4,756,497 Inventories 3,799,023 3,513,909 Prepaid expenses and other 1,423,188 463,139 ------------- ------------- Total current assets 56,786,138 52,932,386 Equipment and leasehold improvements: Machinery and equipment 16,780,816 16,623,560 Leasehold improvements 2,362,879 2,362,676 ------------- ------------- 19,143,695 18,986,236 Less accumulated depreciation 15,154,572 14,763,932 ------------- ------------- 3,989,123 4,222,304 ------------- ------------- Intangible assets, net of accumulated amortization 1,734,511 2,135,884 Goodwill 489,873 489,873 Capitalized license fees, net of accumulated amortization 2,320,588 2,624,580 Other assets 2,304,660 1,828,949 ------------- ------------- Total assets $ 67,624,893 $ 64,233,976 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,119,356 $ 7,095,860 Accrued payroll and related liabilities 1,704,987 3,856,999 Other accrued liabilities 1,157,402 1,446,500 Deferred revenue -- 109,052 Capital lease obligations due within one year 110,991 124,220 Long-term debt due within one year 355,086 368,269 ------------- ------------- Total current liabilities 10,447,822 13,000,900 Long-term debt 15,321,134 15,182,478 Deferred revenue - long-term -- 36,330 Capital lease obligations - long-term 78,149 99,446 Other liabilities 4,385,499 4,776,272 Minority interest in subsidiary 372,574 465,134 Shareholders' equity: Participating preferred stock, Series A, $.001 par value, 10,000,000 shares authorized, no shares issued and outstanding -- -- Common stock, $.001 par value, 100,000,000 shares authorized, 42,404,431 shares issued, 42,186,431 shares outstanding at March 31, 2007 and 42,135,713 shares issued and 41,917,713 shares outstanding at December 31, 2006 42,404 42,136 Additional paid-in capital 210,912,495 209,355,204 Unearned stock-based compensation (1,791) (6,354) Treasury stock - 218,000 shares acquired at an average price of $4.02 per share (877,159) (877,159) Foreign currency translation adjustment (84,257) (102,186) Accumulated deficit (172,971,977) (177,738,225) ------------- ------------- Total shareholders' equity 37,019,715 30,673,416 ------------- ------------- Total liabilities and shareholders' equity $ 67,624,893 $ 64,233,976 ============= =============

September 30, 2007 December 31, 2006
ASSETS

Current assets:
Cash and cash equivalents $ 43,204,188 $ 42,428,841
Short-term investments 385,000 1,770,000
Accounts receivable, net of allowance for doubtful accounts of $250,000 and $200,000 at September 30, 2007 and December 31, 2006, respectively 5,153,810 4,756,497
Inventories 4,866,651 3,513,909
Prepaid expenses and other assets 953,940 463,139

Total current assets 54,563,589 52,932,386

Equipment and leasehold improvements:
Machinery and equipment 17,030,791 16,623,560
Leasehold improvements 2,922,220 2,362,676

19,953,011 18,986,236
Less accumulated depreciation 14,719,803 14,763,932

5,233,208 4,222,304

Intangible assets, net of accumulated amortization 931,765 2,135,884
Goodwill 489,873 489,873
Capitalized license fees, net of accumulated amortization 3,147,456 2,624,580
Other assets 3,152,171 1,828,949

Total assets $ 67,518,062 $ 64,233,976

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable $ 6,542,852 $ 7,095,860
Accrued payroll and related liabilities 2,413,394 3,856,999
Other accrued liabilities 1,204,645 1,446,500
Deferred revenue — 109,052
Capital lease obligations due within one year 70,759 124,220
Long-term debt due within one year — 368,269

Total current liabilities 10,231,650 13,000,900

Long-term debt 15,588,508 15,182,478
Deferred revenue — long-term — 36,330
Capital lease obligations — long-term 54,323 99,446
Other liabilities 5,421,104 4,776,272
Minority interest in subsidiary 386,143 465,134

Shareholders’ equity:
Participating preferred stock, Series A, $.001 par value, 10,000,000 shares authorized, no shares issued and outstanding — —
Common stock, $.001 par value, 100,000,000 shares authorized, 43,722,150 shares issued, 43,504,149 shares outstanding at September 30, 2007 and 42,135,713 shares issued and 41,917,713 shares outstanding at December 31, 2006 43,722 42,136
Additional paid-in capital 223,176,620 209,355,204
Unearned stock compensation — (6,354 )
Treasury stock at cost, 218,000 shares (877,159 ) (877,159 )
Foreign currency translation adjustment 143,562 (102,186 )
Accumulated deficit (186,650,411 ) (177,738,225 )

Total shareholders’ equity 35,836,334 30,673,416

Total liabilities and shareholders’ equity $ 67,518,062 $ 64,233,976

~~See accompanying notes to consolidated financial statements.~~

THIRD WAVE TECHNOLOGIES, INC.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31, ------------------------- 2007 2006 ----------- ----------- Revenues: Clinical product sales $ 5,973,160 $ 4,709,787 Research product sales 568,952 2,995,688 License and royalty revenue 170,955 27,263 Grant revenue -- 141,882 ----------- ----------- Total revenues 6,713,067 7,874,620 ----------- ----------- Operating expenses: Cost of goods sold Product cost of goods sold 1,311,571 1,469,650 Intangible and long-term asset amortization 705,365 693,391 ----------- ----------- 2,016,936 2,163,041 Research and development 5,109,089 2,302,013 Selling and marketing 2,602,781 3,028,635 General and administrative 2,885,747 4,060,595 Litigation 406,481 1,001,934 ----------- ----------- Total operating expenses 13,021,034 12,556,218 ----------- ----------- Loss from operations (6,307,967) (4,681,598) Other income (expense): Interest income 531,275 373,182 Interest expense (301,239) (55,846) Other 10,747,947 (19,185) ----------- ----------- Total other income (expense) 10,977,983 298,151 Income (loss) before minority interest 4,670,016 (4,383,447) Minority interest in subsidiary 96,232 -- ----------- ----------- Net income (loss) $ 4,766,248 $(4,383,447) =========== =========== Net income (loss) per share - basic $ 0.11 $ (0.11) Net income (loss) per share - diluted $ 0.11 $ (0.11) Weighted average shares outstanding - basic 42,025,463 41,310,561 Weighted average shares outstanding - diluted 43,884,463 41,310,561

Three Months Ended September 30, Nine Months Ended September 30,
2007 2006 2007 2006

Revenues:
Clinical product sales $ 6,734,778 $ 5,368,470 $ 18,963,811 $ 15,136,818
Research product sales 1,403,070 1,181,226 3,035,833 5,809,175
License and royalty revenue 19,897 51,827 232,080 106,353
Grant revenue — — — 182,876

Total revenues 8,157,745 6,601,523 22,231,724 21,235,222

Operating expenses:
Cost of goods sold 2,141,198 2,237,106 6,098,633 6,298,027
Research and development 5,811,401 3,451,043 16,134,831 8,785,640
Selling and marketing 2,888,135 2,713,646 8,698,757 8,634,435
General and administrative 4,821,128 3,536,620 11,010,630 11,482,926
Litigation 1,784,324 255,809 3,433,618 1,438,671
Restructuring — (180,000 ) — (180,000 )

Total operating expenses 17,446,186 12,014,224 45,376,469 36,459,699

Loss from operations (9,288,441 ) (5,412,701 ) (23,144,745 ) (15,224,477 )

Other income (expense):
Interest income 503,010 368,727 1,584,489 1,115,637
Interest expense (300,168 ) (55,251 ) (896,563 ) (161,433 )
Other 2,485,966 (118,845 ) 13,156,726 (98,949 )

Total other income (expense) 2,688,808 194,631 13,844,652 855,255

Loss before minority interest $ (6,599,633 ) $ (5,218,070 ) $ (9,300,093 ) $ (14,369,222 )

Minority interest in subsidiary 169,170 65,481 387,907 106,327

Net loss $ (6,430,463 ) $ (5,152,589 ) $ (8,912,186 ) $ (14,262,895 )

Net loss per share — basic and diluted $ (0.15 ) $ (0.12 ) $ (0.21 ) $ (0.34 )
Weighted average shares outstanding — basic and diluted 42,942,190 41,515,143 42,454,591 41,427,973

~~See accompanying notes to consolidated financial statements.~~

THIRD WAVE TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31, ------------------------- 2007 2006 ----------- ----------- OPERATING ACTIVITIES: Net income (loss) $ 4,766,248 $(4,383,447) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Minority interest in net loss of subsidiary (96,232) -- Depreciation and amortization 436,701 407,082 Amortization of intangible assets 401,373 376,188 Amortization of licensed technology 303,992 317,203 Noncash stock compensation 615,822 966,546 Interest accretion related to convertible note payable 223,228 -- Loss on disposal of equipment 11,834 9,691 Changes in operating assets and liabilities: Accounts receivable 262,523 302,888 Inventories (285,351) (1,100,935) Prepaid expenses and other assets (1,409,653) (621,138) Accounts payable 268,395 157,505 Accrued expenses and other liabilities (2,388,717) 70,205 Deferred revenue (145,382) (23,447) ----------- ----------- Net cash provided by (used in) operating activities 2,964,781 (3,521,659) INVESTING ACTIVITIES: Purchases of equipment and leasehold improvements (214,462) (182,733) Proceeds on sale of equipment 524 -- Purchases of licensed technology (244,900) (333,212) Purchases of short-term investments (575,000) -- Sales and maturities of short-term investments 770,000 -- Change in restricted cash balance -- 805,184 ----------- ----------- Net cash provided by (used in) investing activities (263,838) 289,239 FINANCING ACTIVITIES: Payments on long-term debt (97,755) (91,984) Payments on capital lease obligations (34,526) (31,123) Proceeds from issuance of common stock, net 502,225 240,173 ----------- ----------- Net cash provided by financing activities 369,944 117,066 ----------- ----------- Effect of exchange rate changes on cash 36,185 -- ----------- ----------- Net increase (decrease) in cash and cash equivalents 3,107,072 (3,115,354) ----------- ----------- Cash and cash equivalents at beginning of period 42,428,841 27,681,704 ----------- ----------- Cash and cash equivalents at end of period $45,535,913 $24,566,350 ----------- -----------

Nine Months Ended September 30,
2007 2006
OPERATING ACTIVITIES:
Net loss $ (8,912,186 ) $ (14,262,895 )
Adjustments to reconcile net loss to net cash used in operating activities:
Minority interest in net loss of subsidiary (387,907 ) (106,327 )
Depreciation and amortization 1,283,019 1,230,262
Amortization of intangible assets 1,204,119 1,128,564
Amortization of licensed technology 827,824 939,998
Noncash stock compensation 3,851,638 2,720,817
Interest accretion related to convertible note payable 677,274 —
Impairment charge and loss on disposal of equipment 161,029 28,564
Changes in operating assets and liabilities:
Accounts receivable (392,523 ) (625,604 )
Inventories (1,352,995 ) (1,171,114 )
Prepaid expenses and other assets (1,802,687 ) (333,386 )
Accounts payable (199,767 ) (1,118,105 )
Accrued expenses and other liabilities (1,412,104 ) 971,293
Deferred revenue (145,382 ) (89,235 )

Net cash used in operating activities (6,600,648 ) (10,687,168 )

INVESTING ACTIVITIES:

Purchases of equipment and leasehold improvements (2,451,933 ) (570,668 )
Proceeds on sale of equipment 1,439 —
Purchases of licensed technology (912,292 ) (702,274 )
Purchases of short-term investments (960,000 ) (1,770,000 )
Sales and maturities of short-term investments 2,345,000 11,035,000
Change in restricted cash balance — 805,184

Net cash provided by (used in) investing activities (1,977,786 ) 8,797,242

FINANCING ACTIVITIES:
Payments on long-term debt (639,513 ) (282,070 )
Payments on capital lease obligations (98,584 ) (106,702 )
Proceeds from issuance of common stock, net 4,556,614 729,286
Proceeds from minority equity investment in subsidiary 5,259,058 5,093,973
Repurchase of common stock (53,492 ) —

Net cash provided by financing activities 9,024,083 5,434,487

Effect of exchange rate changes on cash 329,698 —

Net increase in cash and cash equivalents 775,347 3,544,561

Cash and cash equivalents at beginning of period 42,428,841 27,681,704

Cash and cash equivalents at end of period $ 43,204,188 $ 31,226,265

THIRD WAVE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~March 31,~~
September 30, 2007
(Unaudited)

~~(1) Basis of Presentation~~

The accompanying unaudited consolidated financial statements of Third Wave Technologies, Inc. have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results that may be expected for the year ending December 31, 2007.

The balance sheet at December 31, 2006 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

The accompanying unaudited consolidated financial statements should be read in conjunction with the audited financial statements and footnotes thereto included in our Form 10-K for the fiscal year ended December 31, 2006 filed with the Securities and Exchange Commission (SEC).

~~(2) Settlement~~

In September 2004, the Company filed a suit against Stratagene Corporation alleging patent infringement of two patents concerning the Company’s proprietary Invader chemistry. The case was tried before a jury in August 2005, and the jury found that Stratagene willfully infringed the ~~Company's~~Company’s patents and that the patents were valid and awarded $5.29 million in damages. The Court subsequently tripled that judgment and awarded the Company interest and attorneys fees of $4.2 million. Stratagene appealed the verdict to the Court of Appeals for the Federal Circuit in Washington, D.C.

On January 29, 2007, the Company and Stratagene entered into an out-of-court settlement regarding this litigation. Under the terms of the settlement Stratagene paid the Company $10.75 million in cash to satisfy the outstanding judgment and dropped its appeal in its entirety. The parties also agreed to dismiss all litigation, including the suit filed by Stratagene against Third Wave in the District of Delaware.

~~(3) Net ~~Income (Loss)~~Loss Per Share~~

In accordance with GAAP, basic net ~~income (loss)~~loss per share has been computed using the weighted-average number of shares of common stock outstanding during the respective periods. Diluted net ~~income (loss)~~loss per share takes into account the weighted average shares from options that could potentially dilute basic net income per share in the future. Shares associated with stock options are excluded for the ~~three months ended March 31, 2006~~periods presented because they are anti-dilutive.

The following table presents the calculation of basic and diluted net ~~income (loss)~~loss per share:
THREE MONTHS ENDED MARCH 31, ------------------------- 2007 2006 ----------- ----------- Numerator: Net income (loss) $ 4,766,248 $(4,383,447) =========== =========== Denominator: Weighted average shares outstanding - basic 42,025,463 41,310,561 Dilutive securities - stock options 1,859,000 N/A ----------- ----------- Weighted average shares outstanding - diluted 43,884,463 41,310,561 Basic net income (loss) per share $ 0.11 $ (0.11) Dilutive net income (loss) per share $ 0.11 $ (0.11)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
2007 2006 2007 2006
Numerator:
Net loss $ (6,430,463 ) $ (5,152,589 ) $ (8,912,186 ) $ (14,262,895 )

Denominator:
Weighted average shares outstanding — basic 42,942,190 41,515,143 42,454,591 41,427,973
Dilutive securities — stock options N/A N/A N/A N/A

Weighted average shares outstanding — diluted 42,942,190 41,515,143 42,454,591 41,427,973
Basic net loss per share $ (0.15 ) $ (0.12 ) $ (0.21 ) $ (0.34 )
Diluted net loss per share $ (0.15 ) $ (0.12 ) $ (0.21 ) $ (0.34 )

~~(4) ~~Stock-Based Compensation~~ Shareholder’s Equity~~

The Company purchases shares of its common stock to cover employee related taxes withheld on vested restricted shares. During the nine months ended September 30, 2007, the Company repurchased approximately 10,000 shares of its common stock for an aggregate price of approximately $53,000.

The Company has Incentive Stock Option Plans for its employees and Nonqualified Stock Option Plans (collectively, the Plans) for employees and non-employees under which an aggregate of 13,213,183 stock options and stock purchase rights (including restricted stock units (RSUs)) may be granted. Options under the Plans have a maximum life of ten years. Options vest at various intervals, as determined by the compensation committee of the Board of Directors at the date of grant. At ~~March 31,~~September 30, 2007, approximately ~~2.5~~2.1 million shares were available for future grant under the Plans. 6

~~Stock Options~~

The following table summarizes the stock option activity under the Plans for the ~~three~~nine months ended ~~March 31,~~September 30, 2007:
WEIGHTED AVERAGE AGGREGATE NUMBER OF WEIGHTED AVERAGE CONTRACTUAL INTRINSIC SHARES EXERCISE PRICE LIFE VALUE --------- ---------------- ----------- ----------- Outstanding at December 31,2006 7,787,607 $4.12 Granted 19,829 5.34 Exercised (189,278) 2.65 Forfeited (18,825) 6.78 --------- ----- Outstanding at March 31, 2007 7,599,333 $4.15 6.1 $10,859,359 Options exercisable at March 31, 2007 5,599,711 $4.37 5.6 $ 7,736,770

WEIGHTED
WEIGHTED AVERAGE AGGREGATE
NUMBER OF AVERAGE CONTRACTUAL INTRINSIC
SHARES EXERCISE PRICE LIFE VALUE
Outstanding at December 31, 2006 7,787,607 $ 4.12
Granted 79,829 6.88
Exercised (1,390,563 ) 3.12
Forfeited (122,388 ) 4.95

Outstanding at September 30, 2007 6,354,485 $ 4.38 6.0 $ 27,128,525
Options exercisable at September 30, 2007 4,977,407 $ 4.60 5.4 $ 20,187,269

The weighted average fair value of stock options granted in the ~~three~~nine months ended ~~March 31,~~September 30, 2007 and 2006 was ~~$3.29~~$3.97 and ~~$1.88,~~$1.90, respectively, using the Black-Scholes option-pricing model.

The calculations were made for the ~~three~~nine months ended ~~March 31,~~September 30, 2007 and 2006 using the following assumptions:
~~2007 2006 ---- ----~~ ~~Expected term (years) 5 5 Risk-free interest rate 4.5% 4.7% Expected volatility 69% 77% Expected dividend yield 0% 0% Forfeiture rate 25% 25%~~

2007 2006
Expected term (years) 5 5
Risk-free interest rate 4.58 % 4.83 %
Expected volatility 66 % 74 %
Expected dividend yield 0 % 0 %
Forfeiture rate 25 % 25 %

The expected volatility is based on the historical volatility of the ~~Company's~~Company’s common stock. The Company uses historical option activity to estimate the forfeiture rate, expected term of the options and the option exercise and employee termination behavior. The Company considers all employees to have similar exercise behavior and therefore has not identified separate homogeneous groups for valuation. The expected term of the options represents the period of time the options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual term of the options is based on the U.S. Treasury constant maturity interest rate which has a term that is consistent with the expected life of the stock options.

As of ~~March 31,~~September 30, 2007, there was approximately ~~$3.2~~$2.4 million of total unrecognized compensation cost related to the stock options granted under the Plans. The intrinsic value of the shares acquired upon exercise of stock options in the ~~three~~nine months ended ~~March 31,~~September 30, 2007 and 2006 was ~~$0.5~~$5.4 million and ~~$0.2~~$0.4 million, respectively.

~~Restricted Stock Units~~

The ~~Company's~~Company’s stock plan also permits the granting of restricted stock units to eligible employees and non-employee directors. Restricted stock units are payable in shares of ~~Company~~common stock upon vesting. The restricted stock units vest at various intervals as

determined by the compensation committee of the Board of Directors at the date of grant. The following table presents a summary of the ~~Company's~~Company’s nonvested restricted stock units granted to employees as of ~~March 31,~~September 30, 2007.
THREE MONTHS ENDED MARCH 31, 2007 ---------------------------- NUMBER OF WEIGHTED AVERAGE SHARES FAIR VALUE --------- ---------------- Nonvested restricted stock units at December 31, 2006 109,079 $2.84 Granted 83,789 0.29 Vested (79,441) -- Forfeited (1,300) 2.84 ------- ----- Nonvested restricted stock units at March 31, 2007 112,127 $2.95 ======= =====

NINE MONTHS ENDED
SEPTEMBER 30, 2007
NUMBER WEIGHTED
OF AVERAGE
SHARES FAIR VALUE
Nonvested restricted stock units at December 31, 2006 109,079 $ 2.84
Granted 557,709 4.78
Vested (105,880 ) 3.24
Forfeited (12,627 ) 2.25

Nonvested restricted stock units at September 30, 2007 548,281 $ 4.73

As of ~~March 31,~~September 30, 2007, there was approximately ~~$0.3~~$1.9 million of total unrecognized compensation cost related to the nonvested restricted stock units granted under the plan. The expense is expected to be recognized over the vesting period. Compensation expense 7 related to restricted stock units was approximately ~~$20,000~~$252,000 in the ~~three~~nine months ended ~~March 31,~~September 30, 2007. The aggregate intrinsic value of the restricted stock units outstanding at ~~March 31,~~September 30, 2007 was ~~$0.6~~$4.7 million.

~~Employee Stock Purchase Plan~~

The Company also has an Employee Stock Purchase Plan (Purchase Plan) under which an aggregate of 1,256,800 common shares may be issued. All employees are eligible to participate in the Purchase Plan. Eligible employees may make contributions through payroll deductions of up to 10% of their compensation. The price of common stock purchased under the Purchase Plan is 85% of the lower of the fair market value of the common stock at the beginning or end of the offering period. There were no99,697 and 67,267 shares sold to employees in the ~~three~~nine months ended ~~March 31,~~September 30, 2007 and 2006, respectively. At ~~March 31,~~September 30, 2007, approximately ~~306,000~~207,000 shares were available for issuance under the Purchase Plan.

~~Minority Interest~~

In April 2006, Third Wave Japan, Inc., a formerly wholly-owned subsidiary of the Company (TWT Japan), entered into a Series A Preferred Stock and Warrant Purchase Agreement with Mitsubishi Corporation and CSK Institute for Sustainability, LTD. Under this purchase agreement, Mitsubishi and CSK invested (¥)580 million (approximately $5.1 million) in TWT Japan in exchange for Series A convertible preferred stock of TWT Japan and warrants to purchase TWT Japan common stock. Pursuant to the transaction, Mitsubishi and CSK acquired approximately 17% of TWT Japan prior to the exercise of the warrants or 20% after exercise of the warrants.

On May 31, 2007, TWT Japan entered into a Series A Preferred Stock Purchase Agreement with Mitsubishi, CSK, BML, Inc., Daiichi Pure Chemicals Co., Ltd., Toppan Printing Co., Ltd. and Shimadzu Corporation. Under this purchase agreement, these investors purchased(¥)640.1 million (approximately $5.3 million) of TWT Japan Series A convertible preferred stock, representing approximately 12.9% of TWT Japan’s outstanding shares and approximately 12.4% of its outstanding equity on a fully-diluted basis. As a result of the transaction and the prior investments made by Mitsubishi and CSK in April 2006, outside investors own approximately 27.5% of TWT Japan prior to the exercise of outstanding warrants or 31% after exercise of the warrants. The proceeds from these equity investments are required to be used in the operations of TWT Japan.

At the time of the original investment, minority interest of $704,000 was recorded on the consolidated balance sheet to reflect the share of the net assets of TWT Japan held by minority investors. After the second investment, an additional $210,000 was recorded as minority interest on the consolidated balance sheet to reflect the increased share of the net assets of TWT Japan held by investors. For the nine months ended September 30, 2007, minority interest was reduced by approximately $289,000 for the minority investors’ share of the net losses and change in foreign currency translation adjustments of TWT Japan.

~~(5) Inventories~~

~~Inventories are carried at the lower of cost or market using the first-in, first-out (FIFO) method for determining cost.~~

Inventories consist of the following:
~~MARCH 31, DECEMBER 31, 2007 2006 ---------- ------------~~ Raw materials $2,434,091 $2,283,852 Finished goods 1,269,049 1,367,177 Work in process 821,693 517,880 Reserve for excess and obsolete inventory (725,810) (655,000) ---------- ---------- Total inventories $3,799,023 $3,513,909 ========== ==========

SEPTEMBER 30, DECEMBER 31,
2007 2006
Raw materials $ 2,510,487 $ 2,283,852
Finished goods 2,117,437 1,367,177
Work in process 974,727 517,880
Reserve for excess and obsolete inventory (736,000 ) (655,000 )

Total inventories $ 4,866,651 $ 3,513,909

~~(6) Stock-based Compensation~~

Included in operating expenses are the following stock-based compensation charges, net of forfeitures related to terminated employees:
THREE MONTHS ENDED MARCH 31, ------------------- 2007 2006 -------- -------- Cost of goods sold $ 23,723 $ 40,913 Research and development 124,433 155,790 Selling and marketing 122,713 198,946 General and administrative 344,953 570,897 -------- -------- Total stock-based compensation $615,822 $966,546 -------- --------

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006
Cost of goods sold $ 26,569 $ 43,636 $ 78,926 $ 105,945
Research and development 203,218 155,982 541,393 476,892
Selling and marketing 154,674 183,728 437,100 565,234
General and administrative 2,059,138 551,821 2,794,219 1,572,746

Total stock-based compensation $ 2,443,599 $ 935,167 $ 3,851,638 $ 2,720,817

~~(7) Comprehensive ~~Income (Loss)~~ Loss~~

The components of comprehensive income (loss) are as follows:
THREE MONTHS ENDED MARCH 31, ------------------------ 2007 2006 ---------- ----------- Net income (loss) $4,766,248 $(4,383,447) Other comprehensive income (loss): Foreign currency translation adjustments 17,929 36 ---------- ----------- Comprehensive income (loss) $4,784,177 $(4,383,411) ========== ===========

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2007 2006 2007 2006
Net loss $ (6,430,463 ) $ (5,152,589 ) $ (8,912,186 ) $ (14,262,895 )
Other comprehensive loss:
Foreign currency translation adjustments 336,083 (114,167 ) 245,748 (159,474 )

Comprehensive loss $ (6,094,380 ) $ (5,266,756 ) $ (8,666,438 ) $ (14,422,369 )

~~(8) Amortizable Intangible Assets~~

Amortizable intangible assets consist of the following:
MARCH 31, 2007 DECEMBER 31, 2006 -------------------------- -------------------------- GROSS GROSS CARRYING ACCUMULATED CARRYING ACCUMULATED AMOUNT AMORTIZATION AMOUNT AMORTIZATION ----------- ------------ ----------- ------------ Costs of settling patent litigation $10,533,248 $9,772,568 $10,533,248 $9,396,380 Technology license 915,828 30,528 915,828 7,632 Trademark 91,583 3,052 91,583 763 Customer agreements 38,000 38,000 38,000 38,000 ----------- ---------- ----------- ---------- Total $11,578,659 $9,844,148 $11,578,659 $9,442,775 =========== ========== =========== ==========
8

SEPTEMBER 30, 2007 DECEMBER 31, 2006
GROSS GROSS
CARRYING ACCUMULATED CARRYING ACCUMULATED
AMOUNT AMORTIZATION AMOUNT AMORTIZATION
Costs of settling patent litigation $ 10,533,248 $ 10,524,944 $ 10,533,248 $ 9,396,380
Technology license 915,828 76,320 915,828 7,632
Trademark 91,583 7,630 91,583 763
Customer agreements 38,000 38,000 38,000 38,000
��
Total $ 11,578,659 $ 10,646,894 $ 11,578,659 $ 9,442,775

~~(9) Restructuring and Impairment of Long Lived Assets~~

During the third quarter of 2002, we announced a restructuring plan designed to simplify product development and manufacturing operations and reduce operating expenses. The restructuring charges recorded were determined based upon plans submitted by the ~~Company's~~Company’s management and approved by the Board of Directors using information available at the time. The restructuring charge included $2.5 million for the consolidation of facilities, $500,000 for prepayment penalties mainly under capital lease arrangements, an impairment charge of $7.2 million for abandoned leasehold improvements and equipment to be sold and $900,000 of other costs

~~related to the restructuring. The Company also recorded a $1.1 million charge within cost of goods sold related to inventory that was considered obsolete based upon the restructuring plan.~~

The facilities charge contained estimates based on the ~~Company's~~Company’s potential to sublease a portion of its corporate office. The Company has offered the corporate office space for sublease, but has been unable to sublease the space. Accordingly, the Company decreased its estimate of the amount of sublease income it expects to receive. The estimated lease and operating expenses were also reduced, based on a portion of the office space being utilized and revisions to the building lease.

The following table shows the changes in the restructuring accrual since December 31, 2006. The remaining restructuring balance of ~~$0.6~~$0.5 million is for rent payments on a non-cancelable lease, net of estimated sublease income, which will continue to be paid over the lease term through 2011. The current portion of the accrual is included in other accrued liabilities on the balance sheets and the remainder is included in other long-term liabilities. Accrued restructuring balance at December 31, 2006 $631,260 Payments made (31,390) -------- Accrued restructuring balance at March 31, 2007 $599,870 ========

Accrued restructuring balance at December 31, 2006 $ 631,260
Payments made (97,747 )

Accrued restructuring balance at September 30, 2007 $ 533,513

~~(10) Other Long-term Liabilities~~

Other long-term liabilities consist of the ~~long-term portion of the~~ following items:
~~MARCH 31, DECEMBER 31, 2007 2006 ---------- ------------~~ License payments $ 949,446 $1,048,260 Long-term Incentive Plan 1,693,767 1,885,989 Restructuring 474,564 505,681 Rent 1,067,722 1,103,313 Other 200,000 233,029 ---------- ---------- $4,385,499 $4,776,272 ========== ==========

SEPTEMBER 30, DECEMBER 31,
2007 2006
License payments $ 1,557,406 $ 1,048,260
Long-term Incentive Plan 2,267,601 1,885,989
Restructuring 399,558 505,681
Rent 996,539 1,103,313
Other 200,000 233,029

$ 5,421,104 $ 4,776,272

~~(11) Income Taxes~~

On July 13, 2006, the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) issued Financial Interpretation ~~("FIN"~~(“FIN”) No. 48, ~~Accounting~~“Accounting for Uncertainty in Income Taxes -— An Interpretation of FASB Statement No. ~~109.~~109”. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an ~~entity's~~entity’s financial statements in accordance with SFAS No. 109, ~~Accounting~~“Accounting for Income ~~Taxes,~~Taxes”, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under FIN No. 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN No. 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006.

The Company adopted the provisions of FIN No. 48 on January 1, 2007. The total amount of unrecognized tax benefits as of the date of adoption was not significant. As such, there are no unrecognized tax benefits included in the balance sheet that would, if recognized, affect the effective tax rate. 9

The ~~Company's~~Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accruals for interest and penalties on the ~~Company's~~Company’s Balance Sheets at December 31, 2006 and at ~~March 31,~~September 30, 2007, and has not recognized any interest or penalties in the Statement of Operations for the first ~~quarter~~nine months of 2007.

The Company is subject to taxation in the U.S. and various state jurisdictions. All of the ~~Company's~~Company’s tax years are subject to examination by the U.S. and state tax authorities due to the carryforward of unutilized net operating losses and research and development credits.

~~THIRD WAVE TECHNOLOGIES, INC.~~

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

This ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations as of ~~March 31,~~September 30, 2007 and for the three and nine months ended ~~March 31,~~September 30, 2007 and 2006 should be read in conjunction with our Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC. In this Form 10-Q, the terms ~~"we," "us," "our," "Company,"~~“we,” “us,” “our,” “Company,” and ~~"Third Wave"~~“Third Wave” each refer to Third Wave Technologies, Inc. and its subsidiaries. The following discussion of our financial condition and results of our operations should be read in conjunction with our Financial Statements, including the Notes thereto, included elsewhere in this Form 10-Q.

~~OVERVIEW~~

Third Wave Technologies, Inc. is a leading molecular diagnostics company. We believe our proprietary Invader chemistry, a novel, molecular chemistry, is easier to use and more accurate than competing technologies. These and other advantages conferred by our chemistry are enabling us to provide clinicians and researchers with superior molecular solutions.

More than ~~180~~200 clinical laboratory customers are using Third ~~Wave's~~Wave’s molecular diagnostic reagents. Other customers include pharmaceutical and biotechnology companies, academic research centers and major health care providers.

In August 2005, we received clearance from the U.S. Food and Drug Administration (the FDA) for our Invader UGT1A1 Molecular Assay. The Invader UGT1A1 Molecular Assay is cleared for use to identify patients who may be at increased risk of adverse reaction to the chemotherapy drug Camptosar(R) (irinotecan) by detecting and identifying specific mutations in the UGT1A1 gene that have been associated with that risk. Camptosar, marketed in the U.S. by Pfizer, Inc., is used to treat colorectal cancer and was relabeled in 2005 to include dosing recommendations based on a ~~patient's~~patient’s genetic profile. In December 2006, we submitted a cystic fibrosis product to the FDA. The Company is awaiting FDA clearance for this product.

We also market a growing number of products, including analyte specific reagents (ASRs). These ASRs allow certified clinical reference laboratories to create assays to perform hepatitis C virus genotyping, inherited disorders testing (e.g., Factor V Leiden), and a host of other mutations associated with genetic predispositions and other diseases. We have developed or plan to develop a menu of molecular diagnostic products for clinical applications that include genetic testing, pharmacogenetics, and ~~women's~~women’s health. We also have a number of other Invader products including those for research, agricultural and other applications.

The FDA ~~is considering new guidelines for~~has issued a guidance document regarding the ~~use~~sale of ASRs. ~~The enactment of new guidelines or potential adverse market perceptions of using ASRs when FDA cleared tests are available~~This guidance document may ~~present risks to~~negatively impact our ability to continue to successfully market and sell our ASR products.

Currently, one of our key strategic initiatives is the commercialization of our Human Papillomavirus (HPV) offering. In August 2006, we began clinical trials for two HPV premarket approval submissions to the FDA. We expect to spend between $12 million and ~~$15~~$17.5 million on these submissions over three years. If for any reason these trials are not successful or are substantially delayed or for any other reason we are unable to successfully commercialize our HPV offering, our business and prospects would likely be materially adversely impacted. Additionally, we anticipate ~~significant~~ competition in the HPV market as additional large competitors have announced plans to enter the market in the near future. This competition may have a significant impact on the success of our commercialization of our HPV offering.

In January 2007, Digene Corporation initiated legal proceedings against us over our HPV products. See Part II, Item 1 --— Legal Proceedings. Should the outcome of this action be unfavorable, the ~~Company's~~Company’s business, financial condition, results of operations and cash flows could be materially adversely affected.

Our financial results may vary significantly from quarter to quarter due to fluctuations in the demand for our products, timing of new product introductions and deliveries made during the quarter, the timing of research, development and grant revenues and increases in spending, including expenses related to our product development submissions for FDA clearances or approvals and intellectual property litigation. 11

~~CRITICAL ACCOUNTING POLICIES ~~Management's~~~~

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. We review the accounting policies we use in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, inventories, equipment and leasehold improvements and intangible assets. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. These estimates and judgments are reviewed by management on an ongoing basis, and by the Audit Committee at the end of each quarter prior to the public release of our financial results. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

~~REVENUE RECOGNITION~~

Revenue from product sales is recognized upon delivery which is generally when the title passes to the customer, provided that the Company has completed all performance obligations and the customer has accepted the products. Customers have no contractual rights of return or refunds associated with product sales. Consideration received in multiple element arrangements is allocated to the separate units based upon their relative fair values. The multiple element arrangements involve contracts with customers in which the Company is selling reagent products and leasing equipment to the customer for use during the term of the contract. Based upon the guidance in paragraph 9 of EITF No. 00-21 ~~"Revenue~~“Revenue Arrangements with Multiple ~~Deliverables"~~Deliverables”, both the reagents and equipment have value to the customer on a standalone basis, there is objective and reliable evidence of fair value for both the reagents and equipment and there are no rights of return. The Company has sold both the reagents and equipment separately, and therefore is able to determine a fair value for each. The respective fair values are used to allocate the proceeds received to each of the elements for purposes of recognizing revenue.

Grant revenues consist primarily of research grants from agencies of the federal government the revenue from which is recognized as research is performed. Payments received which are related to future performance are deferred and recorded as revenue when earned. Grant payments designated to purchase specific assets to be used in the performance of a contract are recognized as revenue over the shorter of the useful life of the asset acquired or the contract.

License and royalty revenue include amounts earned from third parties for licenses of the ~~Company's~~Company’s intellectual property and are recognized when earned under the terms of the related agreements. License revenues are generally recognized upon receipt unless the Company has continuing performance obligations, in which case the license revenue is recognized ratably over the period of expected performance.

~~RESTRUCTURING AND OTHER CHARGES~~

The restructuring and other charges resulting from the restructuring plan in the third quarter of 2002 have been recorded in accordance with EITF Issue No. 94-3, ~~"Liability~~“Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)"”, Staff Accounting Bulletin No. 100, ~~"Restructuring~~“Restructuring and Impairment Charges,"” and Statement of Financial Accounting Standards (SFAS) No. 144, ~~"Accounting~~“Accounting for the Impairment or Disposal of Long-Lived Assets."” The restructuring charge was comprised primarily of costs to consolidate facilities, impairment charges for abandoned leasehold improvements and equipment to be sold or abandoned, prepayment penalties related mainly to capital lease obligations on equipment to be sold or abandoned, and other costs related to the restructuring. The remaining accrued restructuring balance is for rent payments on a non-cancelable lease, net of estimated sublease income. In calculating the cost to consolidate the facilities, we estimated the future lease and operating costs to be paid until the leases are terminated and the amount, if any, of sublease receipts for each location. This required us to estimate the timing and costs of each lease to be terminated, the amount of operating costs, and the timing and rate at which we might be able to sublease the site. To form our estimates for these costs, we performed an assessment of the affected facilities and considered the current market conditions for each site. Our assumptions on the lease payments, operating

costs until terminated, and the offsetting sublease receipts may turn out to be incorrect and our actual cost may be materially different from our estimates. 12

~~LONG-LIVED ~~ASSETS--IMPAIRMENT~~ ASSETS—IMPAIRMENT~~

Equipment, leasehold improvements and amortizable identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For assets held and used, if the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. For assets removed from service and held for sale, we estimate the fair market value of such assets and record an adjustment if the fair value less costs to sell is lower than the carrying value.

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests under SFAS No. 142, ~~"Goodwill~~“Goodwill and Other Intangible Assets."” The annual impairment test iswas completed in the quarter ended September ~~30.~~ 30, 2007 and resulted in no impairment.

~~STOCK-BASED COMPENSATION EXPENSE~~

We have adopted SFAS No. 123(R) to account for share-based payments to employees. As a result, we recognize expense for all share-based payments to employees, including grants of employee stock options and RSUs, based on their fair values. ~~INVENTORIES--SLOW~~

~~INVENTORIES—SLOW MOVING AND OBSOLESCENCE~~

Significant management judgment is required to determine the reserve for obsolete or excess inventory. Inventory on hand may exceed future demand either because of process improvements or technology advancements, the amount on hand is more than can be used to meet future need, or estimates of shelf lives may change. We currently consider all inventory that we expect will have no activity within one year or within the period defined by the expiration date of the product, as well as any additional specifically identified inventory to be subject to a provision for excess inventory (including inventory that we determine to be obsolete based on criteria such as changing manufacturing processes and technologies). At ~~March 31,~~September 30, 2007, our inventory reserves were approximately ~~$726,000,~~$736,000, or ~~16%~~13% of our ~~$4.5~~$5.6 million total gross inventories.

~~NEW ACCOUNTING PRONOUNCEMENTS~~

On July 13, 2006, the Financial Accounting Standards Board (FASB) issued Financial Interpretation (FIN) No. 48, ~~Accounting~~“Accounting for Uncertainty in Income Taxes -— An Interpretation of FASB Statement No. ~~109.~~109”. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an ~~entity's~~entity’s financial statements in accordance with SFAS No. 109, ~~Accounting~~“Accounting for Income ~~Taxes,~~Taxes”, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under FIN No. 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN No. 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006.

The adoption of FIN No. 48 did not impact the ~~Company's~~Company’s financial condition, results of operations or cash flows. At ~~March 31,~~September 30, 2007, the Company had deferred tax assets of $63.2 million. The deferred tax assets are primarily composed of federal and state tax net operating loss carryforwards and federal and state research and development credit carryforwards. Due to uncertainties surrounding the ~~Company's~~Company’s ability to generate future taxable income to realize these assets, a full valuation allowance has been established to offset the ~~Company's~~Company’s net deferred tax asset. Additionally, the future utilization of the ~~Company's~~Company’s net operating loss and research and development credit carryforwards to offset future taxable income may be subject to a substantial annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future. Any carryforwards 13 that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact the ~~Company's~~Company’s effective tax rate.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157). This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is evaluating the impact Statement 157 will have on its financial statements.

~~RESULTS OF OPERATIONS~~

~~Three and Nine Months Ended ~~March 31,~~September 30, 2007 and 2006~~

NET ~~INCOME (LOSS).~~LOSS. Net ~~income~~loss for the three months ended ~~March 31,~~September 30, 2007 ~~improved~~was $6.4 million compared to ~~$4.8 million from~~ a net loss of ~~$4.4~~$5.2 million for the corresponding period of 2006. ~~The increase~~Net loss for the nine months ended September 30, 2007 was $8.9 million, compared to a net loss of $14.3 million for the same period in ~~net income was due to the impact of the $10.7 million of other income from the settlement of patent litigation with Stratagene Corporation partially offset by an increase in operating loss.~~ 2006.

REVENUES. Revenues for the three months ended ~~March 31,~~September 30, 2007 of ~~$6.7~~$8.2 million represented ~~a decrease~~an increase of ~~$1.2~~$1.6 million, compared to revenues of ~~$7.9~~$6.6 million for the corresponding period of 2006. Revenues for the nine months ended September 30, 2007 of $22.2 million represented an increase of $1.0 million, compared to revenues of $21.2 million for the corresponding period of 2006. Following is a discussion of changes in revenues:

Clinical molecular diagnostic product revenue increased to ~~$6.0~~$6.7 million in the quarter ended ~~March 31,~~September 30, 2007 from ~~$4.7~~$5.4 million in the quarter ended ~~March 31,~~September 30, 2006. Clinical revenue for the nine months ended September 30, 2007 increased to $19.0 million, compared to $15.1 million in 2006. The increase in revenue is due to an increase in the number of customers buying our product and growth in purchases from current customers.

Research product ~~revenues decreased~~revenue increased to ~~$0.6~~$1.4 million in the three months ended ~~March 31,~~September 30, 2007 from ~~$3.0~~$1.2 million in the three months ended ~~March 31,~~September 30, 2006. ~~The three~~Research product revenue for the nine months ended ~~March 31,~~September 30, 2007 decreased to $3.0 million from $5.8 million in 2006. During the first half of 2006, ~~was~~we received $2.7 million in Japanese research revenue, the last ~~quarter~~period in which ~~we received~~ substantial ~~Japanese research revenue. Significant Customers.~~ revenue of this type was generated.

In the ~~three~~nine months ended ~~March 31,~~September 30, 2007, we generated ~~$2.5~~$7.3 million, or ~~38%~~33% of our revenue, from sales to a small number of large clinical testing laboratories compared to ~~$2.1~~$6.7 million, or ~~26%~~31% of our revenue, in the same period of 2006.

COST OF GOODS SOLD. Cost of goods sold consists of materials used in the manufacture of product, depreciation on manufacturing capital equipment, salaries and related expenses for management and personnel associated with our manufacturing and quality control departments and amortization of licenses and other intangible assets. For the three months ended ~~March 31,~~September 30, 2007, cost of goods sold decreased slightly to ~~$2.0~~$2.1 million, compared to $2.2 million ~~for~~in the corresponding period of 2006. Cost of goods sold for the nine months ended September 30, 2007 decreased to $6.1 million from $6.3 million in 2006. The decrease in ~~the three month period~~cost of goods sold was ~~primarily~~ due to ~~the decrease in sales volume.~~ operational efficiencies.

RESEARCH AND DEVELOPMENT EXPENSES. Our research activities are focused on moving our technology into broader markets. Our development activities are focused on new products to expand our molecular diagnostics menu. Research and development expenses consist primarily of salaries and related personnel costs, material costs for assays and product development, fees paid to consultants, depreciation and facilities costs and other expenses related to the design, development, testing, (including clinical trials to validate the performance of our products) and enhancement of our products, and acquisition of technologies used in our products. Research and development costs are expensed as they are incurred. Research and development expenses for the three months ended ~~March 31,~~September 30, 2007 were ~~$5.1~~$5.8 million, compared to ~~$2.3~~$3.5 million for the three months ended ~~March 31,~~September 30, 2006. In the nine months ended September 30, 2007, research and development expenses increased to $16.1 million from $8.8 million in 2006. The increase in research and development expenses was primarily due to an increase in personnel and product development expense (including clinical trial costs incurred by us in pursuit of FDA premarket approval for our HPV offerings). We will continue to invest in research and development, and expenditures in this area will increase as we expand our product development efforts. In addition, as the Company moves towards consideration of FDA cleared or approved products, there will be increased expenses attributed to these activities.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist primarily of salaries and related personnel costs for our sales and marketing management and field sales force, commissions, office support and related costs, and travel and entertainment. Selling and marketing expenses for the three months ended ~~March 31,~~September 30, 2007 were ~~$2.6~~$2.9 million, ~~a decrease~~an increase of ~~$0.4~~$0.2 million, compared to ~~$3.0~~$2.7 million for the corresponding period of 2006. The ~~decrease~~increase in selling and marketing expenses was due to ~~a decrease~~an increase in ~~personnel related~~consulting expenses, compared to the same ~~periods~~period in 2006. Selling and marketing expense for the nine months ended September 30, 2007 increased slightly to $8.7 million compared to $8.6 million for the corresponding period of 2006.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, legal and professional fees, office support and depreciation. General and administrative expenses ~~decreased~~increased to ~~$2.9~~$4.8 million in the three months ended ~~March 31,~~September 30, 2007, from ~~$4.1~~$3.5 million for

the corresponding period in 2006. The increase in the three month period was due to stock-based compensation expense related to a former executive employment agreement. In the nine months ended September 30, 2007, general and administrative expenses decreased to $11.0 million compared to $11.5 million in 2006. The decrease in general and administrative expense was due to a decrease in personnel related expense, sales tax, consulting and legal fees, ~~related to our patents and stock based~~offset by an increase in stock-based compensation expense compared to the same period in 2006. ~~We anticipate that general and administrative expense for the year will be at the same level as prior year.~~

LITIGATION EXPENSE. Litigation expense consists of legal fees and other costs associated with patent infringement and other lawsuits. Litigation expense ~~decreased~~increased to ~~$0.4~~$1.8 million in the three months ended ~~March 31,~~September 30, 2007 from ~~$1.0~~$0.3 million in the 14 corresponding period in 2006. Litigation expense increased to $3.4 million in the nine months ended September 30, 2007 from $1.4 million in 2006. The ~~decreases were~~increase was the result of the ~~decreased~~increased litigation activity due to the ~~resolution of the lawsuits~~lawsuit with ~~Innogenetics, Chiron Corporation, Bayer Corporation, and~~ Digene Corporation. We anticipate litigation expense to increase throughout 2007 due to the lawsuit with Digene ~~Corporation~~ (see Part II, Item 1: Legal Proceedings).

INTEREST INCOME. Interest income for the three months ended ~~March 31,~~September 30, 2007 and 2006 was $0.5 million and $0.4 million, respectively. Interest income for the nine months ended September 30, 2007 and 2006 was $1.6 million and $1.1 million, respectively.

INTEREST EXPENSE. Interest expense for the three months ended ~~March 31,~~September 30, 2007 was $0.3 million compared to ~~$56,000~~$55,000 in the corresponding period in 2006. Interest expense for the nine months ended September 30, 2007 was $0.9 million compared to $0.2 million in the corresponding period in 2006. The increase in interest expense was due to the interest accretion on the convertible note payable entered into in December 2006.

OTHER INCOME (EXPENSE). Other income for the three months ended ~~March 31,~~September 30, 2007 was ~~$10.7~~$2.5 million compared to other expense of ~~$19,000~~$0.1 million for the same period in 2006. Other income for the nine months ended September 30, 2007 was $13.2 million compared to other expense of $0.1 million for the same period in 2006. Other income in the three months ended September 30, 2007 included the reversal of long-standing accruals. Other income for the nine month period included $10.75 million from the settlement of patent litigation with Stratagene Corporation.

MINORITY INTEREST. Minority interest for the three months ended ~~March 31,~~September 30, 2007 was ~~$96,000.~~$0.2 million compared to $65,000 in 2006. Minority interest for the nine months ended September 30, 2007 was $0.4 million compared to $0.1 million in 2006 . Minority interest represents Third Wave ~~Japan's~~Japan’s minority ~~investors'~~investors’ share of the equity and earnings of the subsidiary.

~~LIQUIDITY AND CAPITAL RESOURCES~~

Since our inception, we have financed our operations primarily through private placements of equity securities, research grants from federal and state government agencies, payments from strategic collaborators, equipment loans, capital leases, product sales, convertible notes and an initial public offering. As of ~~March 31,~~September 30, 2007, we had cash and cash equivalents and short-term investments of ~~$47.1~~$43.6 million.

In April 2006 we raised $5.1 million from the sale of a minority equity investment in our Japan subsidiary. In May 2007 we raised an additional $5.3 million from the sale of additional minority equity investments in our Japan subsidiary The proceeds from ~~the~~these equity ~~investment~~investments are required to be used in the operations of our Japan subsidiary.

In December 2006 we sold $20,000,000 (at maturity) of Convertible Senior Subordinated Zero-Coupon Promissory Notes (the ~~"Notes"~~“Notes”) to an investor for total proceeds of $14,881,878 (the ~~"Purchase Price"~~“Purchase Price”). The Notes will mature on December 19, 2011. The Notes do not bear cash interest but accrue original issue discount on the Purchase Price at the rate of 6.00% per year compounded semiannually (the Purchase Price plus such accrued original issue discount, the ~~"Accreted Value"~~“Accreted Value”). So long as the Notes remain outstanding, we may not incur indebtedness other than certain Permitted Indebtedness, as such term is defined in the Notes.

The Notes are convertible at the ~~holder's~~holder’s option into shares of Third Wave common stock at a rate of 124.01565 shares per $1,000 of principal at maturity ($744 of Purchase Price) or a total of 2,480,313 shares. Pursuant to the securities purchase agreement under which we sold the Notes, in January 2007 we filed a registration statement with the Securities and Exchange Commission ~~for~~covering the resale of the shares of common stock issuable upon conversion of the Notes.

After December 19, 2008, if Third Wave common stock closes above $9.00 (150% of the initial conversion price) for 20 consecutive trading days, we may force the conversion of the Notes so long as there is an effective registration statement covering the Common Stock in place. At any time after December 19, 2009, we may redeem the Notes for an amount equal to their Accreted Value. If either an event of default occurs under the Notes (which would include failure to make any payments due under the Notes and certain defaults under other indebtedness) or a change of control occurs with respect to Third Wave, the holders of the Notes may put the Notes to Third Wave for a purchase price equal to 110% of their Accreted Value. The Company has three notes payable to a bank in the original amounts of $200,000, $270,000 and $800,000. These notes have respective final maturity dates of July 1, 2007, October 1, 2009 and July 1, 2008, bear annual interest at 4.25%, 4.93% and 5.2%, respectively, and require monthly principal and interest payments. The borrowings under the notes payable are secured by short-term investments consisting of certificates of deposit in the aggregate amount of $575,000. The Company has an available and unused $1,000,000 letter of credit with the same bank that expires on September 1, 2007.

Net cash ~~provided by~~used in operations for the ~~three~~nine months ended ~~March 31,~~September 30, 2007 was ~~$3.0~~$6.6 million, compared to ~~net cash used of $3.5~~$10.7 million in the corresponding period in 2006. The change was primarily due to the proceeds received from the settlement of patent litigation with Stratagene ~~Corporation.~~ Corporation, offset by increased expenses related to our HPV clinical trial and litigation expenses.

Net cash used in investing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2007 was ~~$0.3~~$2.0 million, compared to net cash provided of 15 ~~$0.3~~$8.8 million in the corresponding period in 2006. Investing activities included capital expenditures of ~~$0.2~~$2.5 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2007 ~~and~~compared to $0.6 million in 2006. Investing activities in the ~~three~~nine months ended ~~March 31,~~September 30, 2007 and 2006 included the payment on license fee arrangements of ~~$0.2~~$0.9 and $0.7 million, ~~compared to $0.3 million in 2006.~~respectively. In addition, ~~net cash provided by~~ investing activities in the nine months ended September 30, 2007 included ~~$0.2~~net proceeds of $1.4 million from the maturity and purchase activity of ~~short term~~short-term investments compared to $9.3 million in ~~the three months ended March 31, 2007.~~2006. Investing activities in the ~~three~~nine months ended ~~March 31,~~September 30, 2006 also included a change in the restricted cash balance of $0.8 million.

Net cash provided by financing activities was ~~$0.4~~$9.0 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2007 compared to ~~$0.1~~$5.4 million in 2006. Cash provided by financing activities in the ~~three~~nine months ~~ending March 31,~~ended September 30, 2007 consisted of proceeds from the sale of common stock under the ~~Company's~~Company’s employee stock purchase plan and stock option plans of ~~$0.5~~$4.6 million compared to ~~$0.2~~$0.7 million in the corresponding period of 2006. InFinancing activities in the ~~three~~nine months ended ~~March 31,~~September 30, 2007 and 2006 ~~$0.1~~also included proceeds from a minority equity investment in our Japan subsidiary of $5.3 million and $5.1 million, respectively. In the nine months ended September 30, 2007, $0.6 million was used to repay ~~debt. Additionally,~~debt compared to $0.3 million in ~~the three months ended March 31, 2007 and 2006, $35,000 and $31,000~~2006. In addition, $100,000 was used for capital lease obligations ~~respectively.~~ in the nine months ended September 30, 2007 and 2006.

We believe that current cash reserves together with our ability to generate cash through operations, financing activities and other sources will be sufficient to support short-term and long-term liquidity requirements for current operations (including annual capital expenditures). However, we cannot assure you that our business or operations will not change in a manner that would consume available resources more rapidly than anticipated.

We also cannot assure you that we will not require substantial additional funding before we can achieve profitable operations. Our capital requirements depend on numerous factors, including the following: - our progress with our research and development programs; - the need to pursue FDA clearances or approvals of our products; - our level of success in selling our products and technologies; - our ability to establish and maintain successful collaborative relationships; - the costs we incur in securing intellectual property rights, whether through patents, licenses or otherwise; - the costs we incur in enforcing and defending our patent claims and other intellectual property rights; - the need to respond to competitive pressures; - the possible acquisition of complementary products, businesses or technologies; and - the timing of capital expenditures

	•		our progress with our research and development programs;

	•		the need to pursue FDA clearances or approvals of our products;

	•		our level of success in selling our products and technologies;

	•		our ability to establish and maintain successful collaborative relationships;

	•		the costs we incur in securing intellectual property rights, whether through patents, licenses or otherwise;

	•		the costs we incur in enforcing and defending our patent claims and other intellectual property rights;

	•		the need to respond to competitive pressures;

	•		the possible acquisition of complementary products, businesses or technologies; and

	•		the timing of capital expenditures

~~FORWARD-LOOKING STATEMENTS~~

This Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this Form 10-Q the words ~~"believe," "anticipates," "intends," "plans," "estimates,"~~“believe,” “anticipates,” “intends,” “plans,” “estimates,” and similar expressions are forward-looking statements. Such forward-looking statements contained in this Form 10-Q are based on current expectations. Forward-looking statements may address the following subjects: results of operations; customer growth and retention; development of technologies; losses or earnings; operating expenses, including, without limitation, marketing expense, litigation expense, and technology and development expense; and revenue growth. We caution investors that there can be no assurance that actual results, outcomes or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, among others, our limited operating history, unpredictability of future revenues and operating results, competitive pressures and also the potential risks and uncertainties discussed in the Risk Factors section of this Form 10-Q and under the heading ~~"Overview"~~“Overview” in the ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Form 10-Q and in the ~~"Risk Factors"~~“Risk Factors” and ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of our annual report on Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC, which factors are specifically incorporated herein by this reference. You should also carefully consider the factors set forth in other reports or documents that we file from time to time with the SEC. Except as required by law, we undertake no obligation to update any forward-looking statements. We expressly disclaim any obligation or undertaking to release publicly any updates or 16 revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions, or circumstances on which any such statements are based.

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Our exposure to market risk is currently confined to changes in foreign exchange and interest rates. Our exposure to market risk was discussed in the Quantitative and Qualitative Disclosures About Market Risk section of our annual report on Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC. There have been no material changes to such exposures during the ~~first~~second quarter of 2007.

~~ITEM 4. CONTROLS AND PROCEDURES~~

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, the ~~Company's~~Company’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the ~~Company's~~Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the ~~Company's~~Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. There have been no significant changes during the period covered by this report in the ~~Company's~~Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

~~PART II -— OTHER INFORMATION~~

~~ITEM 1. LEGAL PROCEEDINGS.~~

~~From time to time, we may be involved in litigation relating to claims arising out of our operations in the usual course of business.~~

In September 2004, we filed a suit against Stratagene Corporation in the United States District Court for the Western District of Wisconsin. The complaint alleged patent infringement of two of our patents concerning our proprietary Invader technology by Stratagene's sale of its QPCR and QRTPCR Full Velocity products. The case was tried before a jury in August 2005, and the jury found that Stratagene willfully infringed our patents and that our patents were valid. The jury awarded us $5.29 million in damages. The Court subsequently entered a permanent injunction barring Stratagene from making, selling or offering to sell its FullVelocity QPCR and QRT-PCR products and any other products that practice our patented Invader methods. In December 2005, the Court tripled the damages award to $15.9 million and ruled that Stratagene must pay attorney fees of $4.2 million. In January 2006, the Court awarded additional interest on the damages award in the amount of $485,716, increasing the total damages amount to $16.4 million. Stratagene appealed the verdict to the Court of Appeals for the Federal Circuit in Washington, D.C. Also in January 2006, Stratagene posted a $21 million civil bond to stay payment of the judgment during its appeal. The Court of Appeals heard argument in the appeal on December 7, 2006. On January 29, 2007, we entered into an out-of-court settlement with Stratagene regarding this litigation. Under the terms of the settlement Stratagene agreed to pay us $10.75 million in cash to satisfy the outstanding judgment and dropped its appeal in its entirety. Stratagene made this payment to us in the first quarter of 2007. As discussed below, the parties also agreed to dismiss all litigation, including the suit filed by Stratagene against Third Wave in the District of Delaware. In May 2005, Stratagene Corporation filed suit against us in the United States District Court for the District of Delaware. The complaint alleged patent infringement of claims of two Stratagene patents relating to our Invader Plus chemistry. The complaint was served on us in September 2005 and the Court set a trial date of April 7, 2008. As part of the out-of-court settlement we entered into with Stratagene, discussed above, Stratagene dismissed this suit without prejudice on February 13, 2007. Under the terms of the settlement Stratagene and Third Wave agreed to resolve any infringement claims that may arise between the parties in the future as well as any disputes relating to their settlement agreement through binding arbitration. The parties also agreed to grant each other covenants-not-to sue under specified conditions in exchange for the payment of royalties and other fees. In September 2005, Innogenetics filed suit against us in the United States District Court for the Western District of Wisconsin. The complaint alleged that our HCVg ASRs infringe a patent owned by Innogenetics relating to the detection of the hepatitis C virus. In February 2006, we reached an agreement with Innogenetics that resolved the litigation. In connection with the agreement, Third Wave acquired a non-exclusive license to Innogenetics' patent for the United States. The agreement includes certain opt-out rights for Third Wave, as well as an option to extend both the term and global reach of the license. In October 2005, we filed a declaratory judgment suit in the United States District Court for the Western District of Wisconsin against Chiron Corporation and Bayer Corporation seeking a ruling that our HCVg ASRs do not infringe any valid claims of Chiron's 17 hepatitis C related patents. In February 2006, we reached an agreement with Chiron and Bayer to dismiss the suit without prejudice. No licenses were granted or taken under the agreement and no payment of any monies was made to any of the companies. Also in October 2005, we filed a declaratory judgment suit in the United States District Court for the Western District of Wisconsin against Digene Corporation seeking a ruling that our HPV ASRs do not infringe any valid claims of ~~Digene's~~Digene’s human papillomavirus related patents. In January 2006, we reached an agreement with Digene to dismiss the suit without prejudice. We also agreed that neither party would file a suit against the other relating to the Digene human papillomavirus patents for one year. After this period expired, on January 11, 2007, Digene Corporation filed suit against us in the United States Court for the Western District of Wisconsin. The complaint alleges patent infringement of unidentified claims of a single patent related to HPV type 52 by the ~~Company's~~Company’s HPV ASR product. We filed our response to ~~Digene's~~Digene’s complaint on February 28, 2007, which, in addition to denying the alleged infringement, also asserted that certain Digene sales practices violate certain anti-trust laws. ~~The litigation is currently in the discovery phase with~~After conducting a ~~claim construction~~ hearing ~~scheduled for~~on June 22, 2007, the court

released its claim construction order on July 23, 2007 adopting all of Third Wave’s proposed construction. On July 31, 2007, Digene filed a motion to reconsider the court’s claim construction. On September 26, 2007, the court issued an order denying Digene’s motion for reconsideration in its entirety and ~~trial scheduled~~upheld the earlier claim construction ruling. In response, in a filing to the court, Digene stated that it “believes it will not be able to sustain its claim of infringement.” On October 19, Digene filed a motion for summary judgment on Third Wave’s antitrust counterclaims and a motion for entry of judgment of non-infringement. Trial on Third Wave’s antitrust claims remains set to begin on February 19, 2008.

While no assurance can be given regarding the outcome of the above ~~matters,~~matter, based on information currently available, the Company believes that the resolution of ~~these matters~~this matter will not have a material adverse effect on the financial position or results of future operations of the Company. However, because of the nature and inherent uncertainties of litigation, should the outcome of ~~any of~~ the ~~actions~~action be unfavorable, the ~~Company's~~Company’s business, financial condition, results of operations and cash flows could be materially adversely affected.

~~ITEM 1A. RISK FACTORS~~

~~There have been no material changes in our risk factors from those disclosed in our Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC.~~

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. -— None.~~

~~ITEM 3. DEFAULTS UPON SENIOR ~~SECURITIES -~~SECURITIES. — None.~~

~~ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY ~~HOLDERS. - None.~~ HOLDERS~~

~~At the Annual Meeting of Stockholders held on July 24, 2007, the following matters were submitted to a vote of security holders:~~

	1.		the election of Kevin T. Conroy and David A. Thompson to serve as directors with terms ending in 2010, and

	2.		the proposal to ratify the appointment of Grant Thornton LLP as independent registered public accounting firm for the fiscal year ending December 31, 2007.

~~The nominees for director were elected based upon the following votes:~~

DIRECTOR VOTES FOR VOTES WITHHELD
Kevin T. Conroy 38,555,138 533,935
David A. Thompson 38,552,137 536,936

In addition to Mr. Conroy and Mr. Thompson, the term of office of each of the following directors continued after the meeting: Gordon Brunner, James Connelly, Lawrence Murphy, Kay Napier and Lionel Sterling.

~~The appointment of Grant Thornton LLP as the Company’s independent auditors for the fiscal year ending December 31, 2007 was ratified, as follows:~~

VOTES FOR VOTES AGAINST VOTES ABSTAIN BROKER NON-VOTES
39,011,113 61,523 16,437 0

~~ITEM 5. OTHER INFORMATION.~~

On ~~April 24,~~November 7, 2007, the ~~Company's~~Company’s board of directors ~~adopted a revised Code~~approved an annual increase of ~~Business Conduct that applies~~1,000,000 shares under the 2000 Stock Plan for fiscal year 2008.

On November 7, 2007, the employment agreement of Cindy S. Ahn, Vice President and General Counsel, was amended and restated to ~~all employees, officers, directors and agents. Sections~~conform to the employment agreements of the ~~Code of Business Conduct that were revised include the sections that cover conflicts of interest, compliance with law and reporting of violations. A copy~~other executive officers of the ~~revised Code~~Company.

On November 7, 2007, the Company entered into an employment agreement with Ivan Trifunovich, Senior Vice President. The terms of ~~Business Conduct is available on our website at www.twt.com.~~ the employment agreement conform to the terms contained in the employment agreements of other executive officers of the Company.

~~ITEM 6. EXHIBITS.~~

~~The exhibits required to be filed as a part of this Report are listed in the Exhibit Index. 18~~

~~EXHIBIT INDEX~~



EXHIBIT
NO.	DESCRIPTION	INCORPORATED BY REFERENCE TO ~~- ------- -------------------------------------------------- -------------------------------------~~
10.1	Amended and Restated Employment ~~Agreement~~agreement between Cindy ~~Ahn~~S. Ann and Third Exhibit 10.24 to the Registrant's Wave Technologies, Inc. dated March 12, 2007 Quarterly Report on Form 10-K for the fiscal year ended December 31, 2006 10.2 Employment Agreement between John Bellano and Exhibit 10.25 to the Registrant's Third Wave Technologies, Inc. dated ~~March 12,~~November 7, 2007 ~~Quarterly Report on Form 10-K for the fiscal year ended December 31, 2006 10.3~~

10.2	Employment Agreement between ~~Jorge Garces~~Ivan Trifunovich and ~~Exhibit 10.26 to the Registrant's~~ Third Wave Technologies, Inc. dated ~~March 12,~~November 7, 2007

10.3	Lease Agreement between Third Wave Technologies, Inc and University Research Park, Inc. dated July 13, 2007	Exhibit 10.3 to the Registrant’s Quarterly Report on Form ~~10-K~~10-Q for the ~~fiscal year~~period ended ~~December 31, 2006 10.4 Employment Agreement between Greg Hamilton and Exhibit 10.27 to the Registrant's Third Wave Technologies, Inc. dated March 12,~~June 30, 2007 Quarterly Report on Form 10-K for the fiscal year ended December 31, 2006 10.5 Third Wave Technologies, Inc. 2007 Incentive Plan Exhibit 10.29 to the Registrant's Quarterly Report on Form 10-K for the fiscal year ended December 31, 2006 10.6 Third Wave Technologies, Inc. Long Term Incentive Exhibit 10.30 to the Registrant's Plan No. 4 Quarterly Report on Form 10-K for the fiscal year ended December 31, 2006

31.1 ~~CEO's~~	CEO’s Certification Pursuant to Section 302 of the Sarbanes Oxley Act of 2002

31.2 ~~CFO's~~	CFO’s Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002

32	CEO and CFO Certification pursuant to 18 U.S.C. Section 1350, of Chapter 63 of Title 18 of the United States Code


	THIRD WAVE TECHNOLOGIES, INC.
Date: November 1, 2007	/s/ Kevin T. Conroy
	Kevin T. Conroy,
	Chief Executive Officer


Date: November 1, 2007	/s/ Maneesh K. Arora
	Maneesh K. Arora,
	Chief Financial Officer


	September 30, 2007			December 31, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	43,204,188		$	42,428,841
Short-term investments		385,000			1,770,000
Accounts receivable, net of allowance for doubtful accounts of $250,000 and $200,000 at September 30, 2007 and December 31, 2006, respectively		5,153,810			4,756,497
Inventories		4,866,651			3,513,909
Prepaid expenses and other assets		953,940			463,139

Total current assets		54,563,589			52,932,386

Equipment and leasehold improvements:
Machinery and equipment		17,030,791			16,623,560
Leasehold improvements		2,922,220			2,362,676

		19,953,011			18,986,236
Less accumulated depreciation		14,719,803			14,763,932

		5,233,208			4,222,304


Intangible assets, net of accumulated amortization		931,765			2,135,884
Goodwill		489,873			489,873
Capitalized license fees, net of accumulated amortization		3,147,456			2,624,580
Other assets		3,152,171			1,828,949


Total assets	$	67,518,062		$	64,233,976

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,542,852		$	7,095,860
Accrued payroll and related liabilities		2,413,394			3,856,999
Other accrued liabilities		1,204,645			1,446,500
Deferred revenue		—			109,052
Capital lease obligations due within one year		70,759			124,220
Long-term debt due within one year		—			368,269

Total current liabilities		10,231,650			13,000,900

Long-term debt		15,588,508			15,182,478
Deferred revenue — long-term		—			36,330
Capital lease obligations — long-term		54,323			99,446
Other liabilities		5,421,104			4,776,272
Minority interest in subsidiary		386,143			465,134

Shareholders’ equity:
Participating preferred stock, Series A, $.001 par value, 10,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $.001 par value, 100,000,000 shares authorized, 43,722,150 shares issued, 43,504,149 shares outstanding at September 30, 2007 and 42,135,713 shares issued and 41,917,713 shares outstanding at December 31, 2006		43,722			42,136
Additional paid-in capital		223,176,620			209,355,204
Unearned stock compensation		—			(6,354	)
Treasury stock at cost, 218,000 shares		(877,159	)		(877,159	)
Foreign currency translation adjustment		143,562			(102,186	)
Accumulated deficit		(186,650,411	)		(177,738,225	)

Total shareholders’ equity		35,836,334			30,673,416

Total liabilities and shareholders’ equity	$	67,518,062		$	64,233,976


	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006

Revenues:
Clinical product sales	$	6,734,778		$	5,368,470		$	18,963,811		$	15,136,818
Research product sales		1,403,070			1,181,226			3,035,833			5,809,175
License and royalty revenue		19,897			51,827			232,080			106,353
Grant revenue		—			—			—			182,876


Total revenues		8,157,745			6,601,523			22,231,724			21,235,222


Operating expenses:
Cost of goods sold		2,141,198			2,237,106			6,098,633			6,298,027
Research and development		5,811,401			3,451,043			16,134,831			8,785,640
Selling and marketing		2,888,135			2,713,646			8,698,757			8,634,435
General and administrative		4,821,128			3,536,620			11,010,630			11,482,926
Litigation		1,784,324			255,809			3,433,618			1,438,671
Restructuring		—			(180,000	)		—			(180,000	)


Total operating expenses		17,446,186			12,014,224			45,376,469			36,459,699


Loss from operations		(9,288,441	)		(5,412,701	)		(23,144,745	)		(15,224,477	)

Other income (expense):
Interest income		503,010			368,727			1,584,489			1,115,637
Interest expense		(300,168	)		(55,251	)		(896,563	)		(161,433	)
Other		2,485,966			(118,845	)		13,156,726			(98,949	)

Total other income (expense)		2,688,808			194,631			13,844,652			855,255

Loss before minority interest	$	(6,599,633	)	$	(5,218,070	)	$	(9,300,093	)	$	(14,369,222	)

Minority interest in subsidiary		169,170			65,481			387,907			106,327


Net loss	$	(6,430,463	)	$	(5,152,589	)	$	(8,912,186	)	$	(14,262,895	)

Net loss per share — basic and diluted	$	(0.15	)	$	(0.12	)	$	(0.21	)	$	(0.34	)
Weighted average shares outstanding — basic and diluted		42,942,190			41,515,143			42,454,591			41,427,973

•		During the nine months ended September 30, 2007, the Company issued 79,441 shares of common stock as partial payment of amounts earned by employees under the 2006 Incentive Plan.

•		During the nine months ended September 30, 2006 the Company entered into capital lease obligations of $58,659.

•		During the nine months ended September 30, 2006 the Company entered into a license agreement under which the Company will pay 1,000,000 Euros over two years. The estimated present value of the license is $1,122,338.

•		During the nine months ended September 30, 2007 the Company entered into a license agreement under which the Company will pay $1,250,000 over time through 2010. The estimated present value of the license is $1,150,700.


	THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30						SEPTEMBER 30
	2007			2006			2007			2006
Numerator:
Net loss	$	(6,430,463	)	$	(5,152,589	)	$	(8,912,186	)	$	(14,262,895	)

Denominator:
Weighted average shares outstanding — basic		42,942,190			41,515,143			42,454,591			41,427,973
Dilutive securities — stock options		N/A			N/A			N/A			N/A


Weighted average shares outstanding — diluted		42,942,190			41,515,143			42,454,591			41,427,973
Basic net loss per share	$	(0.15	)	$	(0.12	)	$	(0.21	)	$	(0.34	)
Diluted net loss per share	$	(0.15	)	$	(0.12	)	$	(0.21	)	$	(0.34	)


						WEIGHTED
				WEIGHTED		AVERAGE		AGGREGATE
	NUMBER OF			AVERAGE		CONTRACTUAL		INTRINSIC
	SHARES			EXERCISE PRICE		LIFE		VALUE
Outstanding at December 31, 2006		7,787,607		$	4.12
Granted		79,829			6.88
Exercised		(1,390,563	)		3.12
Forfeited		(122,388	)		4.95

Outstanding at September 30, 2007		6,354,485		$	4.38		6.0	$	27,128,525
Options exercisable at September 30, 2007		4,977,407		$	4.60		5.4	$	20,187,269


	2007			2006
Expected term (years)		5			5
Risk-free interest rate		4.58	%		4.83	%
Expected volatility		66	%		74	%
Expected dividend yield		0	%		0	%
Forfeiture rate		25	%		25	%


	NINE MONTHS ENDED
	SEPTEMBER 30, 2007
	NUMBER			WEIGHTED
	OF			AVERAGE
	SHARES			FAIR VALUE
Nonvested restricted stock units at December 31, 2006		109,079		$	2.84
Granted		557,709			4.78
Vested		(105,880	)		3.24
Forfeited		(12,627	)		2.25

Nonvested restricted stock units at September 30, 2007		548,281		$	4.73


	SEPTEMBER 30,			DECEMBER 31,
	2007			2006
Raw materials	$	2,510,487		$	2,283,852
Finished goods		2,117,437			1,367,177
Work in process		974,727			517,880
Reserve for excess and obsolete inventory		(736,000	)		(655,000	)

Total inventories	$	4,866,651		$	3,513,909


	SEPTEMBER 30, 2007					DECEMBER 31, 2006
	GROSS					GROSS
	CARRYING			ACCUMULATED		CARRYING		ACCUMULATED
	AMOUNT			AMORTIZATION		AMOUNT		AMORTIZATION
Costs of settling patent litigation	$	10,533,248		$	10,524,944	$	10,533,248	$	9,396,380
Technology license		915,828			76,320		915,828		7,632
Trademark		91,583			7,630		91,583		763
Customer agreements		38,000			38,000		38,000		38,000
			��
Total	$	11,578,659		$	10,646,894	$	11,578,659	$	9,442,775


Accrued restructuring balance at December 31, 2006	$	631,260
Payments made		(97,747	)

Accrued restructuring balance at September 30, 2007	$	533,513


DIRECTOR	VOTES FOR		VOTES WITHHELD
Kevin T. Conroy		38,555,138		533,935
David A. Thompson		38,552,137		536,936


VOTES FOR	VOTES AGAINST	VOTES ABSTAIN	BROKER NON-VOTES
39,011,113	61,523	16,437	0