Edgar Filing: ORTHOMETRIX INC

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended March 31, 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 0-26206

Orthometrix, Inc.
(Exact name of small business issuer as specified in its charter)

Delaware 06-1387931
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

106 Corporate Park Drive, Suite 102, White Plains, NY 10604
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code (914) 694-2285

Indicate by check mark whether 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 shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [_] No [x]

Transitional Small Business Disclosure Format (check one): Yes [_] No [x]

There were 45,178,618 shares of common stock outstanding as of June 13, 2007.

1 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED BALANCE SHEET (UNAUDITED)

ASSETS

March 31, 2007
--------------
Current assets:
Cash $ 660
Accounts receivable - trade 444,869
Inventories 713,581
Prepaid insurance 21,288
------------
Total current assets 1,180,398
Property and equipment, net 78,943
Deferred financing costs, net 13,877
Other 11,658
------------
Total Assets $ 1,284,876
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable - trade $ 1,517,183
Accrued expenses 222,148
Customer deposits 168
Related party loans 30,653
Notes payable, net of discount 1,551,955
Unearned service revenue 99,594
Loan payable - equipment 18,969
------------
Total current liabilities 3,440,670
Long term loan payable - equipment 31,130
Long term note payable 20,000
Stockholders' deficit:
Common stock - par value $.0005 per share, 22,588
75,000,000 shares authorized, and 45,178,618
shares issued and outstanding
Preferred stock - par value $.0005 per share, --
1,000,000 shares authorized
Additional paid-in capital 43,977,387
Accumulated deficit (46,206,899)
------------
Total stockholders' deficit (2,206,924)
------------
Total Liabilities and Stockholders' Deficit $ 1,284,876
============

See notes to consolidated financial statements.

2 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED
---------------------------
MARCH 31, MARCH 31,
2007 2006
---------- -----------
Revenue $ 580,493 $ 748,066
Cost of revenue 335,298 223,798
----------- -----------
Gross profit 245,195 524,268
Sales and marketing expense 253,176 443,559
General and administrative expense 180,541 260,498
Research and development expense -- 42,031
----------- -----------
Operating loss (188,522) (221,820)
Interest expense (175,929) (31,645)
Interest income 249 67
Other income -- 231
----------- -----------
Net loss $ (364,202) $ (253,167)
=========== ===========
Basic and diluted weighted average shares 45,178,618 44,288,618
=========== ===========
Basic and diluted loss per share:
Net loss $ (0.01) $ (0.01)
=========== ===========

See notes to consolidated financial statements.

3 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED
-------------------------------
MARCH 31, 2007 MARCH 31, 2006
-------------- --------------

Cash Flows From Operating Activities:
Net loss $(364,202) $(253,167)
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock options and warrants issued 77,795 61,479
Amortization expense of note payable discounts 124,722 15,945
Amortization expense of deferred financing costs 2,776 --
Depreciation expense 5,321 5,443
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (205,738) 2,655
Decrease (increase) in inventories 103,222 (97,333)
Decrease (increase) in prepaid insurance 234 (59,263)
Increase in accounts payable 133,480 171,819
(Decrease) increase in accrued expenses (39,949) 23,695
Increase in unearned service revenue 19,329 27,609
Decrease in customer deposits (16,175) --
--------- ---------
Net cash used in operating activities (159,185) (101,118)
--------- ---------
Cash Flows From Investing Activities:
Purchases of property and equipment (3,683) (11,831)
--------- ---------
Cash used in investing activities (3,683) (11,831)
--------- ---------
Cash Flows From Financing Activities:
Repayment of borrowings from related parties (87,000) --
Proceeds of borrowings from related parties 601,000 275,000
Exercise of stock options and warrants -- 17,046
Proceeds from line of credit (350,000) 10,000
Repayment of loan payable - equipment (4,483) (1,579)
--------- ---------
Net cash provided by financing activities 159,517 300,467
--------- ---------
Net increase in cash (3,351) 187,518
Cash at beginning of period 4,011 22,861
--------- ---------
Cash at end of period $ 660 $ 210,379
========= =========
Supplemental disclosure of non-cash investing and financing activities:
Purchase of property and equipment -- 64,028
Less: Amount financed -- (52,197)
--------- ---------
-- 11,831
========= =========

See notes to consolidated financial statements.

4 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND GOING CONCERN

The consolidated financial statements of Orthometrix, Inc. and
Subsidiary (the "Company") presented herein, have been prepared pursuant
to the rules of the Securities and Exchange Commission for quarterly
reports on Form 10-QSB and do not include all of the information and
footnote disclosures required by accounting principles generally
accepted in the United States of America. These statements should be
read in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 2006, and included in the
Company's Report on Form 10-KSB as filed with the Securities and
Exchange Commission on June 6, 2007. In the opinion of management, the
accompanying interim unaudited consolidated financial statements contain
all adjustments (consisting of normal, recurring accruals) necessary for
a fair presentation of the consolidated financial position, results of
operations and cash flows for these interim periods.

During the past two fiscal years ended December 31, 2006 and 2005, the
Company has experienced aggregate losses from operations of $4,368,456
and has incurred total negative cash flow from operations of $3,068,682
for the same two-year period. During the three months ended March 31,
2007 the Company experienced a net loss of $364,202 and a negative cash
flow from operating activities of $159,185. These matters raise
substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

The Company's continued existence is dependent upon several factors
including obtaining substantial additional financing, increasing sales
volume, achieving profitability on the sale of some products and
developing new products. The Company is pursuing initiatives to increase
liquidity, including external investments and obtaining lines of credit.
In order to increase its cash flow, the Company is continuing its
efforts to stimulate sales. The Company has also implemented high credit
standards for its customers and is emphasizing the receipt of down
payments from customers at the time their purchase orders are received.
The Company is also requesting prepayment from customers and attempting
to more closely coordinate the timing of purchases with the timing of
orders for products.

The results of operations for the three months ended March 31, 2007 are
not necessarily indicative of the results to be expected for the entire
fiscal year ending December 31, 2007.

2. INVENTORIES

As of March 31, 2007, inventories consisted of $713,581 of
sub-assemblies, parts, spare parts and finished goods. During the
quarter, the Company wrote down the value of their slow moving Orbasone
inventory systems by $60,117.

3. CASH FLOWS

The Company paid $20,348 and $10,469 for interest during the three
months ended March 31, 2007 and 2006, respectively.

5 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. INCOME TAXES

The Company accounts for deferred income taxes by recognizing the tax
consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax basis of existing
assets and liabilities. The effect of a change in tax rates on deferred
taxes is recognized in income in the period that includes the enactment
date. The Company realizes an income tax benefit from the exercise of
certain stock options or the early disposition of stock acquired upon
exercise of certain options. This benefit results in an increase in
additional paid in capital. Realization of the deferred tax asset is
dependent on the Company's ability to generate sufficient taxable income
in future periods. Based on the Company's existing financial condition,
the Company determined that it was more likely than not that the
deferred tax assets would not be realized. Accordingly, the Company
recorded a valuation allowance to reduce the deferred tax assets to
zero.

5. CONTINGENCY

The Company leases its corporate office space located in White Plains,
New York. Effective August 1, 2003, the Company amended its lease for
office space expiring on July 31, 2008. Minimum future rental
commitments with regard to the original and amended lease are payable as
follows:

2007 $ 31,584
2008 18,424
--------
$ 50,008
========

6. RELATED PARTY TRANSACTIONS

On February 1, 2007, the Company refinanced $1,623,000 of borrowings
originating from 2005. The notes and advances were all replaced by a new
note that bears interest at 12% and matures one year from the date of
issuance. Of the refinanced borrowings, proceeds of $225,000 originated
from 2005, $838,000 from 2006, and $560,000 from the quarter ended
March, 31 2007. In addition to the refinancing, the Company borrowed
$57,653 from certain officers and directors in the first quarter of
2007, of which, $27,000 were repaid. During the year ended December 31,
2006, the Company borrowed $1,358,000 in principal amount from related
and unaffiliated parties, $633,000 of the borrowings were short term,
interest bearing loans, of which $210,000 were repaid in 2006. The
remaining $725,000 were notes issued in 2006 bearing interest at the
JPMorgan Chase prime rate plus one (8.25% at December 31, 2006) all of
which were refinanced on February 1, 2007 except for $250,000 which
mature one year from the date of issuance.

For all of the notes, the Company is obligated to prepay the principal
amount within 10 days upon the occurrence of either of two events; if it
(i) receives at least $5,000,000 from an equity financing or (ii) sells
substantially all of its assets.

6 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. RELATED PARTY TRANSACTIONS (CONTINUED)

payable. The value allocated to the warrants is being amortized to
interest expense over the term of the notes. At March 31, 2007, the
unamortized discount on the notes payable is $321,045. During the
quarter ending March 31, 2007, amortization of discounts of $124,722 was
recorded as interest expense.

7. STOCK-BASED COMPENSATION

Beginning in the first quarter of 2006, the Company applied SFAS No. 123
(Revised 2004), "Share-Based Payment" ("SFAS No. 123R") to determine the
compensation cost of stock options granted to employees and
non-employees based on the fair value method. Non-cash compensation cost
is recognized over the service or vesting period.

During the three months ended March 31, 2007, the Company's board of
directors approved a grant of stock options to employees, directors and
independent consultants to purchase an aggregate of 800,000 shares of
its common stock with exercise prices equal to or greater than the
market price of stock on the date of grant. The options are 10-year
options (with the exception of Mr. Bonmati, a 10% shareholder, whose
options expire in 5 years) and vest over 4 years. The value of these
issuances was based on the application of the Black-Scholes option
pricing model and valued at $109,345. Of that amount, $77,795 of options
were recorded as non-cash compensation expense and additional paid-in
capital. The remaining balance of $31,550 was recorded against Mr.
Bonmati's 2006 salary accrual and additional paid-in capital.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The matters discussed in this Form 10-QSB contain certain
forward-looking statements and involve risks and uncertainties
(including changing market conditions, competitive and regulatory
matters, etc.) detailed in the disclosure contained in this Form 10-QSB
and the other filings with the Securities and Exchange Commission made
by the Company from time to time. The discussion of the Company's
liquidity, capital resources and results of operations, including
forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Company's operations.
Accordingly, actual results could differ materially from those projected
in the forward-looking statements as a result of a number of factors,
including those identified herein. This item should be read in
conjunction with the financial statements and other items contained
elsewhere in the report.

Critical Accounting Policies And Estimates

The Company's financial statements are prepared in accordance with
accounting principles generally accepted in the United States. These
accounting principles require management to make certain estimates,
judgments and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as
of the date of the financial statements as well as the reported amount
of revenues and expenses during the periods presented. Estimates are
used when accounting for the allowance for uncollectible receivables,
potentially excess and obsolete inventory, depreciation and
amortization, warranty reserves, income tax valuation allowances and
contingencies, among others. Actual results could differ significantly
from those estimates. The Company believes that the estimates, judgments
and

7 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (CONTINUED)

Critical Accounting Policies And Estimates (Continued)

assumptions upon which the Company rely are reasonable based upon
information available at the time.

The Company believes the following accounting policies involve
additional management judgment due to the sensitivity of the methods,
assumptions and estimates necessary in determining the related asset and
liability amounts. The Company sells its products directly to customers
and through third-party dealers and distributors. Revenue is generally
recognized at the time products are shipped and title passes to the
customer. The Company estimates and records provisions for product
installation and user training in the period that the sale is recorded.

Other than the bone densitometry systems, the Company's products are
covered by warranties provided by its vendors. Therefore, no warranty
reserve is required on such products. In the United States and Canada,
the Company offers one-year warranties covering parts and labor on both
hardware and software components of its bone densitometry systems
(except for computer systems, if any, which are covered under their
respective manufacturers' warranty). Outside of the United States and
Canada, the Company only offers one-year warranties on parts; the labor
warranty is provided by the distributors. The provision for product
warranties represents an estimate for future claims arising under the
terms of the various product warranties. The estimated future claims are
accrued at the time of sale. To the extent that the Company provides
warranty services for products that the Company does not manufacture,
the Company invoices the manufacturer for the costs of performing such
warranty services.

The Company has no obligations to provide any other services to any of
its third party dealers or distributors or their customers.

The Company provides estimated inventory allowances for slow-moving and
obsolete inventory based on current assessments about future demands,
market conditions and related management initiatives. If market
conditions are less favorable than those projected by management,
additional inventory allowances may be required.

The Company provides allowances for uncollectable receivable amounts
based on current assessment of collectability. If collectability is less
favorable than those projected by management, additional allowances for
uncollectability may be required.

8 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources

The Company has financed operations for the past four years through the
sale of equity securities and the issuance of debt. For the two years
ending December 31, 2006 and 2005, the Company incurred aggregate net
losses from operations of $4,368,456 and negative cash flow from
operations of $3,068,682. During the three months ended March 31, 2007,
the Company incurred a net loss of $364,202 and negative cash flow from
operations of $159,185. As of March 31, 2007, the Company had $660 in
unrestricted cash and cash equivalents available for working capital
purposes. These matters raise substantial doubt about the Company's
ability to continue as a going concern.

The Company's continued existence is dependent upon several factors
including obtaining substantial additional financing, increasing sales
volume, achieving profitability on the sale of some products and
developing new products. In order to increase cash flow, the Company is
continuing its efforts to stimulate sales. In order to manage credit
risk, the Company has begun to implement higher credit standards for
customers and to emphasize the receipt of down payments from customers
at the time their purchase orders are received. The Company has also
begun to request more prepayments from customers and attempt to more
closely coordinate the timing of purchases with the timing of orders for
products. The Company cannot predict whether or to what extent these
risk management functions may slow its ability to grow revenues.

On July 6, 2006, the Company formed Orbasone Mobile, LLC, ("Orbasone
Mobile") a limited liability company and a wholly-owned subsidiary of
the Company. Orbasone Mobile will provide an extracorporeal shock wave
therapy ("ESWT") mobile service to healthcare providers using the
Company's Orbasone ESWTTM Pain Relief System ("Orbasone").

Beginning on August 1, 2006, Healthcare Reimbursement Solutions, Inc.
("HRSI") will provide the following services to healthcare providers
serviced by Orbasone Mobile: seek insurance carrier ESWT procedure
authorizations for their patients, submit insurance claims and any
related appeals, and issue collection payments. On February 1, 2006, the
Company had formed an alliance with HRSI to provide customers using the
Orbasone with a broad range of billing advisory services. These services
included billing and reimbursement consulting, turn-key billing, as well
as a reimbursement hotline dedicated to one on one consulting and
assistance with denial and claim review. Beginning August 1, 2006, the
reimbursement hotline provided by HRSI will be discontinued and replaced
by the reimbursement services mentioned above and provided through
Orbasone Mobile.

On February 18, 2007, Kathy Smith, a leader in the health and fitness
market, and her representatives on behalf of Kathy Smith Lifestyles
("KSL") entered into a sales agreement with the Company. KSL agreed to
promote the VibraFlex Home Edition through educational seminars, media
appearances and its website, kathysmith.com, with emphasis on the female
segment of the market. The agreement ends on December 31, 2007 and can
be renewed for successive one year terms thereafter.

9 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (Continued)

The level of the Company's cash and cash equivalents decreased to $660
at March 31, 2007 from $4,011 at December 31, 2006. The Company expended
$159,185 in cash for operations and $3,683 for investments during the
three months ended March 31, 2007 which were offset by $159,517 in cash
provided by financing activities during the three month period. Through
these financing activities the Company received $601,000 in loans from
officers and directors, which were offset by the repayment of equipment
loan payable of $4,483, $87,000 repayment of borrowings, and $350,000
repayment of the HSBC line of credit.

Of the total note proceeds received or refinanced during the quarter
ended March 31, 2007, $333,689 of the remaining proceeds received or
refinanced were allocated to the warrants based on the application of
the Black-Scholes option pricing model, with the remaining proceeds of
$1,589,311 allocated to the notes payable. The value allocated to the
warrants is being amortized to interest expense over the term of the
notes. At March 31, 2007, the unamortized discount on the notes payable
is $321,045. During the quarter ending March 31, 2007, amortization of
discounts of $124,722 were recorded as interest expense.

10 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (CONTINUED)

The Company had no backlog of orders as of March 31, 2007 and there are
no material commitments for capital expenditure as of that date. The
Company believes that they will need to raise substantial additional
capital within the next twelve months in order to support the planned
growth of the business. The Company may seek additional funding through
collaborative arrangements and public or private financings. Additional
funding may not be available on acceptable terms or at all. In addition,
the terms of any financing may adversely affect the holdings or the
rights of the Company's stockholders. For example, if the Company raises
additional funds by issuing equity securities, further dilution to
existing stockholders may result. If the Company is unable to obtain
funding on a timely basis, they may be required to significantly curtail
one or more of the Company's research or development programs. The
Company also could be required to seek funds through arrangements with
collaborators or others that may require the Company to relinquish
rights to some of their technologies, product candidates or products
which they would otherwise pursue on their own.

Results of Operations

The Company had a net loss of $364,202 ($0.01 per share based on
45,178,618 weighted average shares) for the three months ended March 31,
2007 compared to net loss of $253,167 ($0.01 per share based on
44,288,618 weighted average shares) for the three months ended March 31,
2006.

Revenue for the three months ended March 31, 2007 decreased $167,573 (or
22.4%) to $580,493 from $748,066 from the comparable period of fiscal
2006. The decrease in revenue was primarily due to a decrease in
Orbasone(TM) system sales during 2007.

Cost of revenue as a percentage of revenue was 57.8% and 29.9% for the
three months ended March 31, 2007 and 2006, respectively, resulting in a
gross margin of 42.2% for the three months ended March 31, 2007 compared
to 70.1% for the comparable period of 2006. The decrease in gross margin
was due to a decrease in Orbasone(TM) system sales in 2007, which
maintains a large gross profit percentage, and the inventory write down
of the value of the slow moving Orbasone(TM) systems.

Sales and marketing expense for the three months ended March 31, 2007
decreased $190,383 (or 42.9%) to $253,176 from $443,559 for the three
months ended March 31, 2006. The decrease is due to the Company's
decrease in sales staff to market and sell the Orbasone(TM) and
decreased trade show and travel expenses to market the Orbasone(TM).

General and administrative expense for the three months ended March 31,
2007 decreased $79,957 (or 30.7%) to $180,541 from $260,498 for the
three months ended March 31, 2006. The decrease was due to a decrease in
payroll expense associated with the exclusion of the Chief Executive
Officer's salary effective January 1, 2007.

Research and development expense for the three months ended March 31,
2007 decreased $42,031 (or 100.0%) to $0 from $42,031 for the three
months ended March 31, 2006. The decrease was primarily due to the
suspension of all research and development activities.

11 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (CONTINUED)

Results of Operations (Continued)

Interest expense increased $144,284 (or 456.0%) to $175,929 for the
three months ended March 31, 2007 from $31,645 for the three months
ended March 31, 2006. Interest expense increased due to the increase in
borrowings bearing a higher interest rate.

Other income decreased $231 (or 100.0%) for the three months ended March
31, 2007. The $75,000 reduction of the legal reserve in 2006 was
reclassified to general and administrative expenses.

New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157 "Fair Value Measures"
("SFAS 157"). SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value
measurements. This statement applies under other accounting
pronouncements that require or permit fair value measurements, however
it does not apply to SFAS 123R. This Statement shall be effective for
financial statements issued for fiscal years beginning after November
15, 2007, and interim periods within those fiscal years. The Company
does not believe that SFAS 157 will have a material impact on its
financial position, results of operations or cash flows.

In September 2006, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin 108, "Considering the Effects on Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements," ("SAB 108"). SAB 108 requires registrants to quantify
errors using both the income statement method (i.e. iron curtain method)
and the rollover method and requires adjustment if either method
indicates a material error. If a correction in the current year relating
to prior year errors is material to the current year, then the prior
year financial information needs to be corrected. A correction to the
prior year results that are not material to those years would not
require a "restatement process" where prior financials would be amended.
SAB 108 is effective for the Company's year ended December 31, 2006. The
Company does not believe that the adoption of the SAB 108 will have a
material effect on its financial position, results of operations or cash
flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159
provides companies with an option to report selected financial assets
and liabilities at fair value. SFAS 159 also establishes presentation
and disclosure requirements designed to facilitate comparisons between
companies that choose different measurement attributes for similar types
of assets and liabilities and to provide additional information that
will help investors and other financial statement users to more easily
understand the effect of the Company's choice to use fair value on its
earnings. Finally, SFAS 159 requires entities to display the fair value
of those assets and liabilities for which the Company has chosen to use
fair value on the face of the balance sheet. SFAS 159 is effective as of
the beginning of an entity's first fiscal year beginning after November
15, 2007. Early adoption is permitted. The Company does not believe that
SFAS No. 159 will have a material impact on its financial position,
results of operations or cash flows.

12 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (CONTINUED)

Quantitative and Qualitative Disclosures of Market Risk

The Company does not have any financial instruments that would expose it
to market risk associated with the risk of loss arising from adverse
changes in market rates and prices.

All of the Company's loans payable outstanding at March 31, 2007 have
variable interest rates and therefore are subject to interest rate risk.
A one percent change in the variable interest rate would result in a
$10,288 change in annual interest expense.

ITEM 3. CONTROLS AND PROCEDURES

The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) as of the end of the period
covered by this report. Based on such evaluation, the Company's Chief
Executive Officer and Chief Financial Officer have concluded that, as of
the end of such period, the Company's disclosure controls and procedures
are effective.

There has been no change in the Company internal controls over financial
reporting during the Company's first quarter that has materially
affected, or is reasonably likely to materially affect, the Company's
internal controls over financial reporting.

13 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

2.1 Asset Purchase Agreement with Cooper Surgical Acquisition
Corp. and Orthometrix, Inc. (E)

3.1 Restated Certificate of Incorporation of Orthometrix, Inc.
(C)

3.2 Certificate of Amendment of Restated Certificate of
Incorporation (F)

3.3 By-laws of Orthometrix, Inc. as amended (D)

4.1 Form of warrant to purchase shares of common stock of
Orthometrix, Inc. (G)

+10.1 Assignment and Assumption Agreement, dated as of April 12,
2002 by and between Bionix, L.L.C. and Orthometrix, Inc.
(A)

+10.2 Product Approval and Licensing Agreement, dated February
12, 2002, by and between M.I.P. GmbH and Bionix L.L.C. (A)

+10.3 Assignment and Assumption Agreement, dated as of April 12,
2002 by and between Bionix, L.L.C. and Orthometrix, Inc.
(A)

+10.4 Distribution Agreement, dated as of October 1, 1999, by and
between Stratec Medizintechnik, GmbH and Bionix, L.L.C. (A)

+10.5 Assignment and Assumption Agreement, dated as of April 12,
2002 by and between Bionix, L.L.C. and Orthometrix, Inc.
(A)

+10.6 Distribution Agreement, dated as of October 1, 1999 by and
between Novotec Maschinen GmbH and Bionix, L.L.C. (A)

10.7 $20,000 Promissory Note, dated October 11, 2005, between
Orthometrix, Inc. and John Utzinger (G)

10.8 Securities Purchase Agreement, dated February 25, 2005,
between Orthometrix, Inc. and Rock Creek Investment
Partners, L.P. (B)

10.9 Securities Purchase Agreement, dated March 3, 2005, between
Orthometrix, Inc. and Psilos Group Partners II SBIC, L.P.
(B)

10.10 Amended and Restated 1994 Stock Option and Incentive Plan
for Employees (F)

14 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007

ITEM 6. EXHIBITS (CONTINUED)

10.11 Amended and Restated 2000 Stock Option and Incentive Plan
for Non Employee Directors and Consultants (F)

10.12 $250,000 Promissory Note, dated June 23, 2006 between
Orthometrix, Inc. and Psilos Group Partners II-S, L.P. (H)

10.13 $345,000 Promissory Note, dated February 1, 2007 between
Orthometrix, Inc. and Michael Huber

10.14 $25,000 Promissory Note, dated February 1, 2007 between
Orthometrix, Inc. and Neil Koenig

10.15 $1,078,000 Promissory Note, dated February 1, 2007 between
Orthometrix, Inc. and Reynald Bonmati

10.16 $175,000 Promissory Note, dated February 1, 2007 between
Orthometrix, Inc. and The Chrystele Bonmati Trust.

23.1 Consent of Radin, Glass & Co., LLP (G)

23.2 Consent of Kirkpatrick & Lockhart Nicholson Graham LLP (G)

24 Power of Attorney (G)

Exhibits required by Item 601 of Regulation S-B are filed herewith:

31.1 Chief Executive Officer's Certification, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Chief Financial Officer's Certification, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

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

+ Confidentiality requested as to certain provisions.

(A) This Exhibit was previously filed as an Exhibit to the
Company's Report on Form 10-QSB dated May 15, 2003 and is
incorporated herein by reference.

(B) This Exhibit was previously filed as an Exhibit to the
Company's Report on Form 10-KSB dated March 24, 2005 and is
incorporated herein by reference.

15 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007

ITEM 6. EXHIBITS (CONTINUED)

(C) This Exhibit was previously filed as an Exhibit to the
Company's Report on Form 10-Q dated November 13, 1997, and
is incorporated herein by reference.

(D) This Exhibit was previously filed as an Exhibit to the
Company's Registration Statement on Form S-I (Registration
No. 33-93220), effective August 1, 1995, and is
incorporated herein by reference.

(E) This Exhibit was previously filed as an Exhibit to the
Company's Report on Form 8-K dated April 15, 2002, as
incorporated herein by reference.

(F) This Exhibit was previously filed as an Exhibit to the
Company's Report on Form 10-QSB dated August 2, 2005, as
incorporated herein by reference.

(G) This Exhibit was previously filed as an Exhibit to the
Company's Registration Statement on Form SB-2 (Registration
No. 333-130095), effective December 14, 2005, and is
incorporated herein by reference.

(H) This Exhibit was previously filed as an Exhibit to the
Company's Report on Form 10-QSB dated August 4, 2006 as
incorporated herein by reference.

16 of 17

ORTHOMETRIX, INC.
FORM 10-QSB MARCH 31, 2007
SIGNATURES

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

ORTHOMETRIX, INC.

BY: /s/ Reynald G. Bonmati
------------------------------------
Reynald G. Bonmati
President/Chief Executive Officer

BY: /s/ Neil H. Koenig
------------------------------------
Neil H. Koenig
Chief Financial Officer
(Principal Financial Officer)

Dated: June 19, 2007

17 of 17