UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended March 31, 2007

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

           For the transition period from ____________ to ____________

                        Commission file number: 001-16133

                              DELCATH SYSTEMS, INC.

             (Exact name of registrant as specified in its charter)

              Delaware                                      06-1245881
   (State or other jurisdiction of                       (I.R.S. Employer
   incorporation or organization)                       Identification No.)

                1100 Summer Street, 3rd Floor, Stamford, CT 06905
                    (Address of principal executive offices)

                                 (203) 323-8668
              (Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer" and "large  accelerated  filer" in Rule 12b-2 of the Exchange Act. (Check
one):
   Large accelerated filer |_|  Accelerated filer |X|  Non-accelerated filer |_|

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

As of April 19, 2007, 21,358,007 shares of the Company's common stock, $0.01 par
value, were issued and outstanding.






                              DELCATH SYSTEMS, INC.

                                      INDEX
                                                                            PAGE
                                                                            ----
PART I:  FINANCIAL INFORMATION..............................................  1

  Item 1:    Condensed Financial Statements (Unaudited).....................  1
  Item 2.    Management's Discussion and Analysis of Financial Condition
             and Results of Operations......................................  2
  Item 3.    Quantitative and Qualitative Disclosures About Market Risk.....  5
  Item 4.    Controls and Procedures........................................  5

PART II:  OTHER INFORMATION.................................................  6

  Item 1.    Legal Proceedings..............................................  6
  Item 1A.   Risk Factors...................................................  6
  Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds....  7
  Item 3.    Defaults Upon Senior Securities................................  7
  Item 4.    Submission of Matters to a Vote of Security Holders............  7
  Item 5.    Other Information..............................................  7
  Item 6.    Exhibits.......................................................  7

SIGNATURES..................................................................  8





                                       i



                                     PART I:
                              FINANCIAL INFORMATION



ITEM 1: CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

                          INDEX TO FINANCIAL STATEMENTS




                                                                                 PAGE
                                                                                 ----
                                                                               
Condensed Balance Sheets..........................................................F-1
   MARCH 31, 2007 AND DECEMBER 31, 2006

Condensed Statements of Operations................................................F-2
   FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006 AND CUMULATIVE FROM
   INCEPTION (AUGUST 5, 1988) TO MARCH 31, 2007

Condensed Statements of Cash Flows................................................F-3
   FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006 AND CUMULATIVE FROM
   INCEPTION (AUGUST 5, 1988) TO MARCH 31, 2007

Notes to Condensed Financial Statements...........................................F-4








                                       1


                              DELCATH SYSTEMS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            CONDENSED BALANCE SHEETS



                                                                        MARCH 31,           DECEMBER 31,
                                                                          2007                  2006
                                                                      (UNAUDITED)            (AUDITED)
                                                                      ------------          ------------
                                                                                      
ASSETS
Current assets
  Cash and cash equivalents                                           $  7,574,247          $  6,289,723
  Certificates of deposit                                                  540,972             2,408,302
  Prepaid expenses                                                         311,417                61,917
                                                                      ------------          ------------
    Total current assets                                              $  8,426,636          $  8,759,942

Property and equipment, net                                                 11,490                 3,719
                                                                      ------------          ------------
    Total assets                                                      $  8,438,126          $  8,763,661
                                                                      ============          ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable and accrued expenses                                    275,942               670,367
                                                                      ------------          ------------
    Total current liabilities                                         $    275,942          $    670,367

Commitments and contingencies                                                    -                     -

Stockholders' equity
  Common stock, $.01 par value; 70,000,000 shares authorized          $    212,727          $    206,608
  Additional paid-in capital                                            46,010,343            44,673,458
  Deficit accumulated during development stage                         (38,060,886)          (36,786,772)
                                                                      ------------          ------------
    Total stockholders' equity                                        $  8,162,184          $  8,093,294
                                                                      ------------          ------------
    Total liabilities and stockholders' equity                        $  8,438,126          $  8,763,661
                                                                      ============          ============



            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.



                                      F-1



                              DELCATH SYSTEMS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)




                                                                               CUMULATIVE FROM
                                                                                   INCEPTION
                                                                               (AUGUST 5, 1988)
                                                     THREE MONTHS ENDED                TO
                                                          MARCH 31,                MARCH 31,
                                            ------------------------------       ------------
                                                2007              2006               2007
                                            ------------      ------------       ------------
                                                                        
COSTS AND EXPENSES:
General and administrative expenses         $    500,819      $    561,550       $ 17,920,448
Research and development costs                   888,951           766,640         20,666,515
                                            ------------      ------------       ------------
         Total costs and expenses           $  1,389,770      $  1,328,190       $ 38,586,963
                                            ------------      ------------       ------------

         Operating loss                     $ (1,389,770)     $ (1,328,190)      $(38,586,963)

Interest income                                  115,656           144,052          2,069,655
Other income                                           -                 -            126,500
Interest expense                                       -                 -           (171,473)
                                            ------------      ------------       ------------
         Net loss                           $ (1,274,114)     $ (1,184,138)      $(36,562,281)
                                            ============      ============       ============
COMMON SHARE DATA:
Basic and diluted loss per share            $      (0.06)     $      (0.06)
                                            ============      ============


Weighted average number of shares
  of common stock outstanding               $ 21,004,943      $ 19,205,957
                                            ============      ============




            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.

                                      F-2



                              DELCATH SYSTEMS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)




                                                                                                                    CUMULATIVE FROM
                                                                                                                       INCEPTION
                                                                                          THREE MONTHS ENDED         (AUG. 5, 1988)
                                                                                               MARCH 31,              TO MARCH 31,
                                                                                         2007            2006             2007
                                                                                     ------------    ------------    ------------
                                                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                             $ (1,274,114)   $ (1,184,138)   $(36,562,281)
Adjustments to reconcile net loss to net cash used in operating activities:
  Stock option compensation expense                                                             -         505,282       3,576,110
  Stock and warrant compensation expense issued for legal settlement,
    consulting services                                                                         -               -         645,711
  Depreciation expense                                                                        969           1,126          42,548
    Amortization of organization costs                                                          -               -          42,165
Changes in assets and liabilities:
  Increase in prepaid expenses                                                           (249,500)        (16,500)       (311,417)
  Increase in interest receivable                                                               -         (90,814)              -
  (Decrease) increase in accounts payable and accrued expenses                           (394,425)       (130,977)        275,942
                                                                                     ------------    ------------    ------------
      Net cash used in operating activities                                          $ (1,917,070)   $   (916,021)   $(32,291,222)
                                                                                     ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                                   $     (8,740)              -    $    (54,038)
Purchase of short-term investments                                                              -    $ (1,800,000)    (27,492,042)
Proceeds from maturities of short-term investments                                      1,867,330       1,047,077      26,951,070
Organization costs                                                                              -               -         (42,165)
                                                                                     ------------    ------------    ------------
      Net cash provided by (used in) investing activities                            $  1,858,590    $   (752,923)   $   (637,175)
                                                                                     ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of stock and exercise of stock options and warrants           $  1,343,004    $  1,247,047    $ 39,348,318
Repurchases of common stock                                                                     -               -         (51,103)
Dividends paid                                                                                  -               -        (499,535)
Proceeds from short-term borrowings                                                             -               -       1,704,964
                                                                                     ------------    ------------    ------------
      Net cash provided by financing activities                                      $  1,343,004    $  1,247,047    $ 40,502,644
                                                                                     ------------    ------------    ------------
      Increase (decrease) in cash and cash equivalents
                                                                                        1,284,524        (421,897)      7,574,247

Cash and cash equivalents at beginning of period                                        6,289,723       1,704,131               -
                                                                                     ------------    ------------    ------------

Cash and cash equivalents at end of period                                           $  7,574,247    $  1,282,234    $  7,574,247
                                                                                     ============    ============    ============
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for interest                                                                        -               -    $    171,473
                                                                                     ============    ============    ============
SUPPLEMENTAL NON-CASH ACTIVITIES:
Cashless exercise of stock options                                                                                   $     91,166
                                                                                                                     ============
Conversion of debt to common stock                                                              -               -    $  1,704,964
                                                                                     ============    ============    ============
Common stock issued for preferred stock dividends                                               -               -    $    999,070
                                                                                     ============    ============    ============
Conversion of preferred stock to common stock                                                   -               -    $     24,167
                                                                                     ============    ============    ============
Common stock issued as compensation for stock sale                                              -               -    $    510,000
                                                                                     ============    ============    ============




            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.



                                      F-3



                              DELCATH SYSTEMS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS


NOTE 1: DESCRIPTION OF BUSINESS

Delcath Systems,  Inc. (the "Company") is a development stage company founded in
1988 for the purpose of developing  and  marketing a  proprietary  drug delivery
system capable of introducing  and removing high dose  chemotherapy  agents to a
diseased  organ system,  while greatly  inhibiting  their entry into the general
circulation  system.  It is hoped that the procedure will result in a meaningful
treatment   for  cancer.   In  November   1989,   the  Company  was  granted  an
Investigational  Device  Exemption (IDE) and an  Investigational  New Drug (IND)
status for its product by the Food and Drug Administration (FDA). The Company is
seeking to complete  clinical  trials in order to obtain separate FDA pre-market
approvals for the use of its delivery system using Melphalan, a chemotherapeutic
agent, to treat malignant melanoma that has spread to the liver.

NOTE 2: BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying  condensed financial statements are unaudited and were prepared
by the Company in accordance with accounting  principles  generally  accepted in
the  United  States  of  America  ("GAAP").  Certain  information  and  footnote
disclosures  normally included in the Company's annual financial statements have
been condensed or omitted. The interim financial  statements,  in the opinion of
management,  reflect all adjustments  (consisting of normal recurring  accruals)
necessary  for a fair  statement  of the results for the interim  periods  ended
March 31, 2007 and 2006, and cumulative from inception (August 5, 1988) to March
31, 2007.

The results of operations for the interim periods are not necessarily indicative
of the results of operations  to be expected for the fiscal year.  These interim
financial  statements  should be read in conjunction with the audited  financial
statements  and notes  thereto for the year ended  December 31, 2006,  which are
contained  in the  Company's  Annual  Report  on Form  10-K for the  year  ended
December  31, 2006 as filed with the  Securities  and Exchange  Commission  (the
"SEC") on March 16, 2007.

NOTE 3: COSTS AND EXPENSES

RESEARCH AND DEVELOPMENT COSTS

Research  and  development  costs  include  the costs of  materials,  personnel,
outside  services and  applicable  indirect costs incurred in development of the
Company's  proprietary  drug  delivery  system.  All such  costs are  charged to
expense when incurred.

GENERAL AND ADMINISTRATIVE COSTS

General  and  administrative   costs   include   the   Company's   general   and
administrative operating expenses.

NOTE 4: STOCKHOLDERS' EQUITY

The  Company  received a net amount of  $1,343,004  upon the  exercise  of stock
options for 611,850  shares  during the three months  ended March 31,  2007.  Of
those options:  (i) 100,000 were  exercised at a price of $0.71 per share,  (ii)
120,000  were  exercised  at a price of  $1.03  per  share,  (iii)  20,000  were
exercised at a





                                      F-4


                              DELCATH SYSTEMS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

price of $1.32 per share,  (iv) 200,000  were  exercised at a price of $2.78 per
share, (v) 100,000 were exercised at a price of $3.28 per share, and (vi) 71,850
were exercised at a price of $3.31 per share.

The following table sets forth changes in stockholders' equity during the three
months ended March 31, 2007:




                                               COMMON STOCK,
                                             $0.01 PAR VALUE
                                           ISSUED AND OUTSTANDING                           DEFICIT ACCUMULATED
                                      -------------------------------     ADDITIONAL PAID   DURING DEVELOPMENT
                                      NO. OF SHARES         AMOUNT          IN CAPITAL             STAGE             TOTAL
                                      -------------      ------------      ------------         ------------      ------------
                                                                                                   
Balance at December 31, 2006             20,660,763      $    206,608      $ 44,673,458         $(36,786,772)     $  8,093,294
Exercise of stock options                   611,850             6,119         1,336,885                    -         1,343,004
Net loss for three months ended
  March 31, 2007                                                                                  (1,274,114)       (1,274,114)
                                       ------------      ------------      ------------         ------------      ------------
Balance at March 31, 2007                21,272,613      $    212,727      $ 46,010,343         $(38,060,886)     $  8,162,184
                                       ============      ============      ============         ============      ============



NOTE 5: STOCK OPTION PLAN

In December  2004,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting  Standards  No. 123R,  "Share-Based  Payment"
(SFAS  123R).  This  Statement  is a revision of SFAS No. 123,  "Accounting  for
Stock-Based Compensation" (SFAS 123), and supersedes Accounting Principles Board
Opinion No. 25,  "Accounting  for Stock Issued to  Employees"  (APB 25), and its
related  implementation  guidance.  SFAS 123R establishes  accounting for equity
instruments exchanged for employee services.  Under the provisions of SFAS 123R,
share-based  compensation  is measured  at the grant  date,  based upon the fair
value of the award,  and is  recognized  as an expense over the option  holders'
requisite  service  period  (generally  the vesting period of the equity grant).
Prior to January 1, 2006, the Company accounted for share-based  compensation to
employees  in  accordance  with  APB 25,  as  permitted  by SFAS No.  123,  and,
accordingly,  did not recognize compensation expense for the issuance of options
with an exercise  price equal to or greater than the market price at the date of
grant.  The Company also  followed the  disclosure  requirements  of SFAS 123 as
amended by SFAS 148,  "Accounting for Stock-Based  Compensation - Transition and
Disclosure."  Effective  January 1,  2006,  the  Company  adopted  the  modified
prospective  approach  and,  accordingly,  prior  period  amounts  have not been
restated.  Under this approach,  the Company is required to record  compensation
cost for all share-based  payments granted after the date of adoption based upon
the grant date fair value,  estimated in accordance  with the provisions of SFAS
123R,  and for the  unvested  portion  of all  share-based  payments  previously
granted that remain outstanding based on the grant date fair value, estimated in
accordance  with the original  provisions  of SFAS 123. The Company has expensed
its share-based  compensation for share-based  payments granted after January 1,
2006 under the ratable  method,  which treats each vesting tranche as if it were
an individual grant.

The Company  periodically  grants stock  options for a fixed number of shares of
common stock to its employees,  directors and non-employee contractors,  with an
exercise  price  greater  than or equal to the fair  market  value of our common
stock at the date of the grant.  The Company  estimates  the fair value of stock
options using a Black-Scholes  valuation  model. Key inputs used to estimate the
fair value of stock



                                      F-5


                              DELCATH SYSTEMS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

options  include the  exercise  price of the award,  the  expected  post-vesting
option life,  the expected  volatility  of our stock over the option's  expected
term,  the risk-free  interest  rate over the option's  expected  term,  and our
expected  annual  dividend  yield.  Estimates  of fair value are not intended to
predict  actual  future events or the value  ultimately  realized by persons who
receive equity awards. There were no share-based grants in 2007.

The required  adoption of SFAS No. 123R as of January 1, 2006 has  significantly
increased  compensation  expense for future grants.  The actual impact on future
years will be  dependent on a number of factors,  including  our stock price and
the level of future grants and awards. In addition,  costs related to accounting
and valuation services of stock options currently outstanding in accordance with
SFAS No. 123R would have been cost prohibitive to the Company if the Company had
not adopted certain measures. Based on these considerations and after discussion
of applicable accounting literature,  the Compensation Committee of the Board of
Directors  approved  accelerating  the  vesting of all  unvested  stock  options
effective  January  1,  2006.  The  acceleration  of  vesting  resulted  in  the
recognition  of a non-cash  compensation  expense of $505,282 on January 1, 2006
which is included in costs and  expenses in the  statements  of  operations  for
2006.

The Company  established  its Incentive Stock Option Plan,  Non-Incentive  Stock
Option  Plan,  2000 Stock  Option  Plan,  2001 Stock  Option Plan and 2004 Stock
Incentive Plan  (collectively,  the "Plans"),  under which stock options,  stock
appreciation rights,  restricted stock, and stock grants may be awarded. A stock
option  grant  allows  the  holder  of the  option  to  purchase  a share of the
Company's  Common  Stock  in  the  future  at a  stated  price.  The  Plans  are
administered  by the  Compensation  and Stock  Option  Committee of the Board of
Directors, which determines the individuals to whom the options shall be granted
as well as the terms and  conditions of each option grant,  the option price and
the duration of each option.

During 2000, 2001 and 2004,  respectively,  the 2000 and 2001 Stock Option Plans
and 2004 Stock Incentive Plan became effective.  Options granted under the Plans
vest as  determined by the Company and expire over varying  terms,  but not more
than five years from the date of grant.  All currently  outstanding  options are
fully vested.  Stock option activity for the three-month  period ended March 31,
2007 is as follows:




                                                                       THE PLANS
                                          ----------------------------------------------------------------------
                                                                                                    WEIGHTED
                                                                                WEIGHTED            AVERAGE
                                                           EXERCISE PRICE        AVERAGE         REMAINING LIFE
                                          STOCK OPTIONS     PER SHARE         EXERCISE PRICE        (YEARS)
                                          -------------    --------------    ----------------   ----------------
                                                                                           
Outstanding at December 31, 2006            1,465,650       $0.71 - $3.59         $2.87                3.57
Granted                                             -             -                   -
Expired                                       202,500           $3.59             $3.59
Exercised                                     611,850       $0.71 - $3.31         $2.19
                                          -------------
Outstanding at March 31, 2007                 651,300       $1.03 - $3.59         $3.28                3.86
                                          =============




                                      F-6


                              DELCATH SYSTEMS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE 6: INCOME TAXES

The Company adopted the provisions of FASB  Interpretation  No. 48,  "Accounting
for  Uncertainty  in Income Taxes - an  interpretation  of FASB Statement No. 9"
("FIN No. 48"),  on January 1, 2007.  FIN No. 48 requires that the impact of tax
positions be recognized in the financial statements if they are more likely than
not of being sustained upon  examination,  based on the technical  merits of the
position. As discussed in the consolidated financial statements in the 2006 Form
10-K, the Company has a valuation  allowance  against the full amount of its net
deferred  tax assets.  The  Company  currently  provides a  valuation  allowance
against  deferred tax assets when it is more likely than not that some  portion,
or all of its  deferred tax assets,  will not be  realized.  The Company has not
recognized  any  unrecognized  tax  benefits  in their  balance  sheet under the
provisions of FIN No. 48. In addition, there is no impact to accumulated deficit
at the date of adoption as a result of the implementation of FIN No. 48.

The  Company  is  subject  to U.S.  federal  income tax as well as income tax of
certain state  jurisdictions.  The Company has not been audited by the I.R.S. or
any states in connection with income taxes.  The periods from 2004 - 2006 remain
open to examination by the I.R.S. and state authorities.

We recognize  interest  accrued related to unrecognized tax benefits in interest
expense.  Penalties,  if incurred,  are  recognized as a component of income tax
expense.




                                      F-7



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

                           FORWARD LOOKING STATEMENTS

Certain  statements  in  this  Form  10-Q,   including  statements  of  our  and
management's expectations,  intentions, plans, objectives and beliefs, including
those  contained  in or implied by  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations," are "forward-looking statements"
within the meaning of Section 21E of the  Securities  Exchange  Act of 1934,  as
amended,  that is subject to certain events, risks and uncertainties that may be
outside our control.  These forward-looking  statements may be identified by the
use of words such as "expects,"  "anticipates,"  "intends,"  "plans" and similar
expressions.  They include statements of our future plans and objectives for our
future  operations and statements of future  economic  performance,  information
regarding  our  expansion  and  possible  results from  expansion,  our expected
growth, our capital budget and future capital requirements,  the availability of
funds and our ability to meet  future  capital  needs,  the  realization  of our
deferred tax assets,  and the  assumptions  described in this report  underlying
such  forward-looking  statements.  Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including without limitation, those described in the context of such
forward-looking  statements,  our  expansion  strategy,  our  ability to achieve
operating  efficiencies,   industry  pricing  and  technology  trends,  evolving
industry  standards,  domestic and  international  regulatory  matters,  general
economic and business  conditions,  the strength and financial  resources of our
competitors, our ability to find and retain skilled personnel, the political and
economic  climate in which we conduct  operations,  the risks  discussed  in our
Annual  Report on Form 10-K for the fiscal year ended  December 31, 2006,  filed
with  the  SEC on  March  16,  2007  (the  "2006  Form  10-K"),  under  Item  1,
"Description of Business," and other risk factors described from time to time in
our  other  documents  and  reports  filed  with  the  Securities  and  Exchange
Commission (the "SEC").  We do not assume any  responsibility to publicly update
any of our forward-looking  statements regardless of whether factors change as a
result of new information,  future events or for any other reason. We advise you
to review any additional  disclosures  we make in our Quarterly  Reports on Form
10-Q, Current Reports on Form 8-K and Annual Reports on Form 10-K filed with the
SEC.

OVERVIEW

Since our founding in 1988 by a team of  physicians,  we have been a development
stage company engaged primarily in developing and testing the Delcath system for
the treatment of liver cancer. A substantial  portion of our historical expenses
have been for the  development of our medical device and the clinical  trials of
our product, and the pursuit of patents worldwide, as described in our 2006 Form
10-K under Item 1, "Patents, Trade Secrets and Proprietary Rights." We expect to
continue  to incur  significant  losses  from  costs  for  product  development,
clinical studies,  securing patents,  regulatory  activities,  manufacturing and
establishment  of a sales and  marketing  organization  without any  significant
revenues. A detailed description of the cash used to fund historical  operations
is in the financial  statements and the notes thereto.  Without an  FDA-approved
product and  commercial  sales,  we will continue to be dependent  upon existing
cash and the sale of equity or debt to fund future activities.  While the amount
of future net losses and time required to reach profitability are uncertain, our
ability to generate significant revenue and become profitable will depend on our
success in commercializing our device.

During 2001,  Delcath  initiated  the clinical  trial of the system for isolated
liver perfusion using the chemotherapeutic agent  Melphalan.  Enrollment of  new
patients in the Phase I trial was completed in 2003.

In 2004,  we commenced a Phase II clinical  trial  protocol for the study of the
Delcath  drug  delivery   system  for   inoperable   primary  liver  cancer  and
adenocarcinomas  and neuroendocrine  cancers that have metastasized to the liver
using Melphalan.



                                       2


In 2006, we started  enrolling and treating patients in a Phase III protocol for
the study of the Delcath drug  delivery  system for  inoperable  melanoma in the
liver using Melphalan under the Fast Track and SPA approved protocol.

Over the next 12 months,  we expect to  continue to incur  substantial  expenses
related to the research and development of our  technology,  including Phase III
and Phase II clinical trials using Melphalan with the Delcath system. Additional
funds, when available, will be committed to pre-clinical and clinical trials for
the use of other  chemotherapy  agents with the Delcath system for the treatment
of liver cancer and other cancers,  and the  development of additional  products
and components.  We will also continue efforts to qualify  additional sources of
the key components of our device,  in an effort to further reduce  manufacturing
costs and minimize dependency on a single source of supply.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007

The Company has operated at a loss for its entire history. We had a net loss for
the three months ended March 31, 2007, of $1,274,114, which is $89,976 more than
the net loss  from  continuing  operations  for the same  period  in 2006.  This
increased loss was primarily due to additional expenses relating to a Settlement
Agreement in connection with the lawsuit brought by the Company against Jonathan
Foltz, which was previously  disclosed in our 2006 Form 10-K.

General and  administrative  expenses  decreased from $561,550  during the three
months  ended March 31,  2006,  to $500,819 for the three months ended March 31,
2007,  or  10.8%.  This  decrease  is  primarily  attributed  to the  charge  to
operations of  share-based  compensation  for options  granted in November 2006,
which  occurred  during the three  months  ended  March 31,  2006 as part of the
adoption of SFAS 123R as  explained  in "Note 5: Stock Option Plan" of the Notes
to Condensed Financial  Statements filed with this Report.  There was no similar
charge during the three months ended March 31, 2007.

During  the  first  quarter  of 2007,  we  incurred  $888,951  in  research  and
development  costs,  as compared to $766,640  during the first  quarter of 2006.
This increase is primarily due to expenses  relating to a five year extension to
the Company's  Cooperative Research and Development Agreement ("CRADA") with the
National Cancer Institute  ("NCI") that expired in December 2006. This extension
was quite  important in continuing and expanding the  collaboration  between the
Company and the NCI, but will result in greater costs to the Company.

Interest  income shown is from our money market and CD  investments.  During the
three months ended March 31, 2007, the Company had interest  income of $115,656,
as compared to interest  income of  $144,052,  or a 19.7%  change,  for the same
period in 2006.  This  decrease is primarily  due to a reduced cash  position in
2007 from that in 2006.  There was no other income during the three months ended
March 31, 2007 or the comparable period in 2006.


                                       3


LIQUIDITY AND CAPITAL RESOURCES

The Company's future results are subject to substantial risks and uncertainties.
The  Company has  operated at a loss for its entire  history and there can be no
assurance of its ever  achieving  consistent  profitability.  The Company is not
projecting any capital expenditures that will significantly affect the Company's
liquidity during the next 12 months.  However,  our future liquidity and capital
requirements  will depend on numerous  factors,  including  the  progress of our
research and product  development  programs,  including  clinical  studies;  the
timing and costs of making various United States and foreign regulatory filings,
obtaining approvals and complying with regulations; the timing and effectiveness
of  product  commercialization  activities,   including  marketing  arrangements
overseas;  the timing and costs  involved  in  preparing,  filing,  prosecuting,
defending  and  enforcing  intellectual  property  rights;  and  the  effect  of
competing  technological  and market  developments.  In  addition,  the  Company
intends to hire one additional employee.

At March 31, 2007, we had cash and cash  equivalents of $7,574,247,  as compared
to  $6,289,723 at December 31, 2006 and  $1,282,234  at March 31, 2006.  Because
money  market  rates have been equal to or greater  than what the Company  could
receive in CD  investments,  nearly all of our funds are  currently  invested in
money market  accounts  which are shown in our  financial  statements as part of
"Cash and Cash  Equivalents."  In the quarter ended March 31, 2006, the majority
of our funds had been invested in CDs that became due during 2006.

During the three months ended March 31, 2007, we used  $1,917,070 of cash in our
operating  activities.  This amount  compares to $916,021  used in our operating
activities  during the  comparable  three-month  period in 2006. The increase of
$1,001,047  was primarily  due to payments to NCI as part of our newly  extended
CRADA  agreement,  and  final  payments  to  various  parties  as  part  of  the
settlements of the lawsuits that had commenced in 2006.

We have funded our operations through a combination of private placements of our
securities  and through the  proceeds of our public  offerings in 2000 and 2003.
Please see the detailed discussion of our various sales of securities  described
in Note 2 to our 2006  financial  statements in our 2006 Form 10-K. In addition,
we received  proceeds of approximately  $5.6 million from private  placements we
completed  in 2004,  approximately  $2.2 on exercise of warrants  and options in
2004,  approximately $2.5 million from a private placement we completed in 2005,
approximately  $5.5  million on exercise of  warrants  and options in 2005;  and
approximately  $5.1 million on exercise of warrants and options in 2006.  In the
quarter ended March 31, 2007, we received approximately $1.3 million on exercise
of warrants and options.

While the Company has sufficient  capital to conduct its operations  through the
end of 2007, it requires additional capital for research and development and for
additional clinical trials. Accordingly,  simultaneously with the filing of this
Report,  the  Company  is  filing  a  Registration  Statement  on Form  S-3 (the
"Registration  Statement")  to register an offering of common  stock,  preferred
stock, debt securities,  warrants,  stock purchase  contracts and stock purchase
units,  as may from time to time be  issued,  with a maximum  offering  price of
$17,200,000,  in  order  to  raise  additional  funds.  However,  there  are  no
assurances  that the  Registration  Statement will become  effective or that the
Company will successfully  consummate any transactions under the offerings,  nor
can the Company estimate when, if such offerings are successful, these offerings
may close and capital will become available to the Company. If the offerings are
successful,  the  Company  intends  to use the funds  raised  for  research  and
development,  furthering  our  clinical  trials,  FDA  compliance,  and  general
corporate purposes, including working capital.


                                       4


APPLICATION OF CRITICAL ACCOUNTING POLICIES

The  Company's  financial  statements  have been  prepared  in  accordance  with
accounting  principles  generally  accepted  in the  United  States  of  America
("GAAP").  Certain  accounting  policies  have a  significant  impact on amounts
reported in the financial statements.  A summary of those significant accounting
policies can be found in Note 1 to the Company's financial  statements contained
in the Company's 2006 Form 10-K. The Company is still in the  development  stage
and has no revenues,  trade  receivables,  inventories,  or significant fixed or
intangible assets, and therefore has very limited  opportunities to choose among
accounting  policies  or  methods.  In  many  cases,  the  Company  must  use an
accounting  policy or method  because it is the only policy or method  permitted
under GAAP. The Company has not adopted any significant new accounting  policies
or modified the  application of existing  policies during the three months ended
March 31, 2007.

Additionally,  the Company devotes substantial  resources to clinical trials and
other research and  development  activities  relating to obtaining FDA and other
approvals for the Delcath system, the cost of which is required to be charged to
expense as incurred.  This further  limits the  Company's  choice of  accounting
policies  and methods.  Similarly,  management  believes  there are very limited
circumstances  in  which  the  Company's   financial   statement  estimates  are
significant or critical.

The Company considers the valuation  allowance for the deferred tax assets to be
a significant  accounting  estimate.  In applying SFAS No. 109,  "Accounting for
Income Taxes,"  management  estimates  future taxable income from operations and
tax planning  strategies in  determining  if it is more likely than not that the
Company will realize the benefits of its deferred tax assets.

In December 2004, the Financial  Accounting  Standards  Board (FASB) issued FASB
Statement No. 123 (revised 2004),  Share-Based  Payment,  which is a revision of
SFAS No. 123, Accounting for Stock-Based Compensation.  SFAS 123R supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees and amends SFAS No. 95,
Statement of Cash Flows. Generally,  the approach in SFAS No. 123R is similar to
the approach  described  in SFAS No. 123.  However,  SFAS No. 123R  requires all
share-based  payments to employees,  including grants of employee stock options,
to be recognized in the income  statement based on their fair values.  Pro forma
disclosure is no longer an alternative. The Company adopted SFAS 123R in 2006.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company  does  not use  derivative  financial  instruments.  The  Company's
marketable  securities  consist of short-term  and/or variable rate  instruments
and,  therefore,  a change in interest rates would not have a material impact on
the value of these securities.

ITEM 4. CONTROLS AND PROCEDURES

Based on an  evaluation  of the  Company's  disclosure  controls and  procedures
performed by the Company's Chief Executive  Officer and Chief Financial  Officer
as of the  end of the  period  covered  by  this  report,  the  Company's  Chief
Executive  Officer and Chief  Financial  Officer  concluded  that the  Company's
disclosure controls and procedures have been effective.

As used herein,  "disclosure  controls and procedures"  means controls and other
procedures of the Company that are designed to ensure that information  required
to be disclosed by the Company in the reports that it files or submits under the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act"), is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
rules and



                                       5


forms issued by the SEC.  Disclosure  controls and procedures  include,  without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange  Act is  accumulated  and  communicated  to the  Company's  management,
including  its  principal  executive  officer  or  officers  and  its  principal
financial  officer or officers,  or persons  performing  similar  functions,  as
appropriate, to allow timely decisions regarding required disclosure.

There were no changes in the Company's internal control over financial reporting
identified  in  connection  with the  evaluation  described  above that occurred
during the period  covered by this report that has  materially  affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

                                    PART II:
                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We have been involved in a legal  proceeding that was originally filed on August
12, 2005 in the United States  District Court,  District of Connecticut  against
Elizabeth L. Enney. The named plaintiffs are Delcath Systems, Inc. and M.S. Koly
(former CEO, President, Treasurer and Director of Delcath),  individually and as
a Director of Delcath  Systems,  Inc. The operative  complaint seeks damages for
libel.  In May 2006,  the  libel  claims  were  dismissed  for lack of  personal
jurisdiction, and in July 2006, Plaintiffs filed a new libel claim in the United
States District Court for the Northern District of Georgia. On November 1, 2006,
Defendant filed a Motion for Judgment  claiming that  Plaintiffs'  complaint and
the attachments thereto, on their face, were insufficient to support Plaintiffs'
libel claim as a matter of law. On December 22, 2006,  Defendant  filed a motion
under Rule 11 of the Federal Rules of Civil Procedure seeking an order directing
payment  to  the  Defendant  of  reasonable  attorneys'  fees  and  expenses  by
Plaintiff.  On April 19, 2007,  the entire action was ordered and adjudged to be
dismissed, and the Defendant was granted recovery of its costs.

ITEM 1A. RISK FACTORS

Our 2006 Form 10-K  contains a detailed  discussion of certain risk factors that
could materially  adversely affect our business,  operating results or financial
condition.  The  following  risk factor has been  amended and updated to reflect
recent  events,  and should be read in  conjunction  with the risk  factors  and
information disclosed in the 2006 Form 10-K.

OUR COMMON STOCK IS LISTED ON THE NASDAQ CAPITAL MARKET.  IF WE FAIL TO MEET THE
REQUIREMENTS  OF THE NASDAQ  CAPITAL  MARKET FOR CONTINUED  LISTING,  OUR COMMON
STOCK COULD BE DELISTED.

Our common stock is currently listed on the NASDAQ Capital Market.  To keep such
listing,  we are  required  to  maintain:  (i) a minimum  bid price of $1.00 per
share,  (ii) a  certain  public  float,  (iii) a  certain  number  of round  lot
shareholders  and  (iv)  one of the  following:  a net  income  from  continuing
operations (in the latest fiscal year or two of the three last fiscal years ) of
at least $500,000,  a market value of listed  securities of at least $35 million
or a  stockholders'  equity of at least $2.5  million.  We were  notified by the
NASDAQ  Capital  Market on one  occasion  that we failed to meet the minimum bid
price requirement and on two occasions that we did not meet the requirement that
we meet one of the  following  conditions:  that the market  value of our common
stock be at least $35  million;  that we have  stockholders'  equity of not less
than $2.5 million;  or that we meet certain income tests. We have since complied
with these requirements.



                                       6


We are also required to maintain certain corporate governance  requirements.  On
April 30, 2007, we were notified by NASDAQ that due to the  resignations  of two
of our  independent  directors  on April  16,  2007,  we no longer  comply  with
NASDAQ's  requirements to have a majority of independent  directors on our Board
of Directors,  and for our Audit  Committee to have three  members.  The Company
fully intends to regain  compliance with both of these  requirements  within the
cure period allowed by NASDAQ (i.e.,  by October 13, 2007).  If we do not regain
compliance by then,  our common stock could be delisted from the NASDAQ  Capital
Market.  In addition,  if we fail to meet any of the other applicable  criteria,
our common stock could be delisted from the NASDAQ Capital Market.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

There were no matters  required to be disclosed in a Current  Report on Form 8-K
during the fiscal quarter covered by this report that were not so disclosed.

There were no changes to the procedures by which security  holders may recommend
nominees to the Company's  Board of Directors  since the Company last  disclosed
such  procedures  in our proxy  statement  filed in  connection  with our annual
meeting of stockholders to be held on June 5, 2007.

ITEM 6. EXHIBITS

         31.1  Certification  of  Chief  Executive  Officer  Pursuant  to  Rules
13a-14(a) and 15d-14(a) of the Exchange Act.

         31.2   Certification  of  Chief  Financial  Officer  Pursuant  to Rules
13a-14(a) and 15d-14(a) of the Exchange Act.

         32.1   Certification of Chief Executive  Officer  Pursuant to 18 U.S.C.
Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley  Act of
2002.

         32.2  Certification  of Chief Financial  Officer  Pursuant to 18 U.S.C.
Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley  Act of
2002.




                                       7



                                   SIGNATURES

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

May 10, 2007                      DELCATH SYSTEMS, INC.
                                  (Registrant)



                                  /S/ PAUL M. FEINSTEIN
                                  ---------------------------------------------
                                  Paul M. Feinstein
                                  Chief Financial Officer and Treasurer (on
                                  behalf of the registrant and as the principal
                                  financial and accounting officer of the
                                  registrant)



                                       8