Orthometrix Inc (Other)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended September 30, 2007

OR

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

For the transition period from                              to                             

Commission file number 0-26206

Orthometrix, Inc.

(Exact name of small business issuer as specified in its charter)

Delaware			06-1387931
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
106 Corporate Park Drive, Suite 102, White Plains, NY			10604
(Address of principal executive office)			(Zip Code)

Registrant’s telephone number, including area code [phone]

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     No

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

Transitional Small Business Disclosure Format (check one): Yes     No

There were 45,308,618 shares of common stock outstanding as of October 31, 2007.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007

PART I — FINANCIAL INFORMATION

Item 1.    Financial Statements.
Consolidated Balance Sheet (Unaudited)

			September 30, 2007
Assets
Current assets:
Cash				$	9,569
Accounts receivable – trade					141,375
Inventories					695,780
Prepaid insurance					5,481
Total current assets					852,205
Property and equipment, net					57,659
Deferred financing costs, net					5,551
Other					11,658
Total Assets				$	927,073
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable – trade				$	1,330,952
Accrued expenses					195,122
Customer deposits					64,747
Related party loans					185,000
Notes payable, net of discount					1,760,094
Unearned service revenue					86,398
Loan payable – equipment					13,621
Total current liabilities					3,635,934
Long term loan payable – equipment					18,169
Long term note payable					20,000
Stockholders’ deficit:
Common stock – par value $.0005 per share, 75,000,000 shares authorized, and 45,308,618 shares issued and outstanding					22,653
Preferred stock – par value $.0005 per share, 1,000,000 shares authorized					—
Additional paid-in capital					44,005,868
Accumulated deficit					(46,775,551	)
Total stockholders’ deficit					(2,747,030	)
Total Liabilities and Stockholders’ Deficit				$	927,073

See notes to consolidated financial statements.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007

Consolidated Statements of Operations (Unaudited)

			For The Nine Months Ended
			September 30, 2007						September 30, 2006
Revenue				$	1,672,883					$	1,967,390
Cost of revenue					942,046						689,954
Gross profit					730,837						1,277,436
Sales and marketing expense					651,521						1,236,818
General and administrative expense					508,993						877,858
Research and development expense					5,990						104,664
Operating loss					(435,667	)					(941,904	)
Interest expense					(490,912	)					(218,093	)
Interest income					447						2,187
Other (expense) income					(6,723	)					115,231
Net loss				$	(932,855	)				$	(1,042,579	)
Basic and diluted weighted average shares					45,205,211						44,366,457
Basic and diluted loss per share:
Net loss				$	(0.02	)				$	(0.02	)

See notes to consolidated financial statements.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007

Consolidated Statements of Operations (Unaudited)

			For The Three Months Ended
			September 30, 2007						September 30, 2006
Revenue				$	726,417					$	507,368
Cost of revenue					384,831						180,907
Gross profit					341,586						326,461
Sales and marketing expense					183,738						372,205
General and administrative expense					166,977						208,681
Research and development expense					579						37,135
Operating loss					(9,708	)					(291,560	)
Interest expense					(129,587	)					(121,954	)
Interest income					19						179
Other (expense) income					(6,723	)					20,000
Net loss				$	(145,999	)				$	(393,335	)
Basic and diluted weighted average shares					45,257,531						44,455,303
Basic and diluted loss per share:
Net loss				$	(0.00	)				$	(0.01	)

See notes to consolidated financial statements.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007

Consolidated Statements of Cash Flows (Unaudited)

			For The Nine Months Ended
			September 30, 2007						September 30, 2006
Cash Flows From Operating Activities:
Net loss				$	(932,855	)				$	(1,042,579	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock options and warrants issued					90,744						122,379
Loss on sale of equipment					6,723						—
Amortization expense of note payable discounts					332,862						137,427
Amortization expense of deferred financing costs					11,102						—
Depreciation expense					15,812						15,830
Changes in assets and liabilities:
Decrease (increase) in accounts receivable					97,756						(125,240	)
Decrease (increase) in inventories					121,023						(254,652	)
Decrease (increase) in prepaid expenses and other current assets					16,041						(122,253	)
(Decrease) increase in accounts payable					(52,751	)					333,479
Decrease in accrued expenses					(51,443	)					(23,881	)
Increase in unearned service revenue					6,133						41,478
Increase in customer deposits					48,404						—
Net cash used in operating activities					(290,449	)					(918,012	)
Cash Flows From Investing Activities:
Net proceeds from sale of equipment					9,500
Purchases of property and equipment					(9,114	)					(11,831	)
Cash provided by (used in) investing activities					386						(11,831	)
Cash Flows From Financing Activities:
Repayment of borrowings from related parties					(391,054	)					(170,000	)
Proceeds of borrowings from related parties					1,059,402						1,083,000
Exercise of stock options and warrants					65						17,046
(Repayment of) proceeds from line of credit					(350,000	)					20,000
Repayment of loan payable – equipment					(22,792	)					(10,057	)
Net cash provided by financing activities					295,621						939,989
Net increase in cash					5,558						10,146
Cash at beginning of period					4,011						22,861
Cash at end of period				$	9,569					$	33,007
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.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 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 nine months ended September 30, 2007 the Company experienced a net loss of $932,855 and a negative cash flow from operating activities of $290,449. 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 nine months ended September 30, 2007 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2007.

2.     Inventories

As of September 30, 2007, inventories consisted of $695,780 of sub-assemblies, parts, spare parts and finished goods. During the nine months ended September 30, 2007, the Company wrote down the value of its slow moving Orbasone inventory systems by $180,351.

3.     Cash Flows

The Company paid $47,121 and $53,312 for interest during the nine months ended September 30, 2007 and 2006, respectively.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 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 first quarter of 2007. In addition to the refinancing, the Company borrowed $516,054 from certain officers and directors in 2007, of which, $331,054 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 matured during June of 2007. The $250,000 note has not been extended. The company continues to accrue interest at the prevailing interest rate.

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.

Of the total note proceeds received or refinanced during the nine months ended September 30, 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 $1,289,311 allocated to the notes payable. The value allocated to the warrants is being amortized to interest expense over the term of the notes. At September 30, 2007, the unamortized discount on the notes payable is $112,906. During the nine months ended September 30, 2007, amortization of discounts of $332,862 was recorded as interest expense.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 nine months ended September 30, 2007, the Company’s board of directors approved a grant of stock options to employees, directors and independent consultants to purchase an aggregate of 890,000 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 fair value of these issuances was estimated using the application of the Black-Scholes option pricing model. During the nine months ended September 30, 2007, $135,291 of non-cash compensation cost was recognized. Of that amount, $103,741 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.

8.     Major Customers

During 2007, approximately 37% of total sales were derived from the Company’s three largest customers and all receivables at September 30, 2007 were collected from these customers.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007

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 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 uncollectible 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.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007

Item 2.      Management’s Discussion and Analysis or Plan of Operations  (Continued)

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.

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 nine months ended September 30, 2007, the Company incurred a net loss of $932,855 and negative cash flow from operations of $290,449. As of September 30, 2007, the Company had $9,569 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 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.

On May 1, 2007, Lamar Health Fitness & Sports (‘‘LHFS’’), a provider of innovative products to the home fitness market, entered into a licensing agreement with the Company. LHFS acquired from the Company a non-exclusive license to design, manufacture, market and service in the retail market, whole body vibration devices using the same patented technology that the Company uses for its VibraFlex ^® whole body vibration systems sold in the commercial market. LHFS also agreed to act as a non-exclusive distributor of the Company’s VibraFlex ^®  models in the U.S. commercial market. As of September 30, 2007, the Company has not conducted any sales activity with LHFS and is evaluating certain modifications to the agreement.

The level of the Company’s cash and cash equivalents increased to $9,569 at September 30, 2007 from $4,011 at December 31, 2006. The Company expended $290,449 in cash for operations during the nine months ended September 30, 2007 which was offset by $295,621 in cash provided by financing activities during the nine month period. Through these financing activities the Company received $1,059,402 in loans from officers and directors, which were offset by the repayment of equipment loan payable of $22,792, repayment of borrowings of $391,054, and repayment of the HSBC line of credit of $350,000.

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

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007

Item 2.      Management’s Discussion and Analysis or Plan of Operations  (Continued)

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 first quarter of 2007. In addition to the refinancing, the Company borrowed $516,054 from certain officers and directors in 2007, of which, $331,054 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 matured during June of 2007. The $250,000 note has not been extended. The Company continues to accrue interest at the prevailing interest rate.

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.

Of the total note proceeds received or refinanced during the nine months ended September 30, 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 $1,289,311 allocated to the notes payable. The value allocated to the warrants is being amortized to interest expense over the term of the notes. At September 30, 2007, the unamortized discount on the notes payable is $112,906. During the nine months ended September 30, 2007, amortization of discounts of $332,862 was recorded as interest expense.

During the nine months ended September 30, 2007, the Company’s board of directors approved a grant of stock options to employees, directors and independent consultants to purchase an aggregate of 890,000 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 fair value of these issuances was estimated using the application of the Black-Scholes option pricing model. During the nine months ended September 30, 2007, $135,291 of non-cash compensation cost was recognized. Of that amount, $103,741 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.

The Company had no backlog of orders as of September 30, 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 $932,855 ($0.02 per share based on 45,205,211 weighted average shares) for the nine months ended September 30, 2007 compared to net loss of $1,042,579 ($0.02 per share based on 44,366,457 weighted average shares) for the nine months ended September 30, 2006.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007

Item 2.      Management’s Discussion and Analysis or Plan of Operations  (Continued)

Revenue for the nine months ended September 30, 2007 decreased $294,507 (or 15.0%) to $1,672,883 from $1,967,390 from the comparable period of fiscal 2006. The decrease in revenue was primarily due to a decrease in Orbasone™ system sales during 2007.

Cost of revenue as a percentage of revenue was 56.3% and 35.1% for the nine months ended September 30, 2007 and 2006, respectively, resulting in a gross margin of 43.7% for the nine months ended September 30, 2007 compared to 64.9% for the comparable period of 2006. The decrease in gross margin was due to a decrease in Orbasone™ system sales in 2007, which maintains a large gross profit percentage, and the inventory write down of the value of the slow moving Orbasone™ systems.

Sales and marketing expense for the nine months ended September 30, 2007 decreased $585,297 (or 47.3%) to $651,521 from $1,236,818 for the nine months ended September 30, 2006. The decrease is due to the Company’s decrease in sales staff to market and sell the Orbasone™ and decreased trade show and travel expenses to market the Orbasone™.

General and administrative expense for the nine months ended September 30, 2007 decreased $368,865 (or 42.02%) to $508,993 from $877,858 for the nine months ended September 30, 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 nine months ended September 30, 2007 decreased $98,674 (or 94.3%) to $5,990 from $104,664 for the nine months ended September 30, 2006. The decrease was primarily due to the suspension of all research and development activities.

Interest expense increased $272,819 (or 125.1%) to $490,912 for the nine months ended September 30, 2007 from $218,093 for the nine months ended September 30, 2006. Interest expense increased due to the increase in borrowings bearing a higher interest rate.

Other income decreased $121,954 (or 105.8%) for the nine months ended September 30, 2007. The $75,000 reduction of the legal reserve in 2006 was reclassified to general and administrative expenses.

New Accounting Pronouncements

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155 (‘‘SFAS 155’’), ‘‘Accounting for Certain Hybrid Financial Instruments’’ which amends Statement of Financial Accounting Standards No. 133 (‘‘SFAS 133’’), ‘‘Accounting for Derivative Instruments and Hedging Activities’’ and Statement of Financial Accounting Standards No. 140 (‘‘SFAS 140’’), ‘‘Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.’’ SFAS 155 simplifies the accounting for certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS 140. SFAS 155 is effective for all financial instruments acquired, issued or subject to a re-measurement event occurring in fiscal years beginning after September 15, 2006. Earlier adoption is permitted, provided the Company has not yet issued financial statements, including for interim periods, for that fiscal year. Since the Company has no derivative instruments or hedging activities, the adoption of SFAS 155 did not have an impact on our financial position, results of operations or cash flows.

In July 2006, the FASB issued FASB Interpretation No. 48 (‘‘FIN 48’’), Accounting for Uncertainty in Income Taxes, which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on the recognition, classification, interest and penalties, accounting in interim periods and disclosure requirements for uncertain tax positions. The accounting provisions of FIN 48 are effective for reporting periods beginning after December 15, 2006. The

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007

Item 2.      Management’s Discussion and Analysis or Plan of Operations  (Continued)

Company is currently assessing the impact of the adoption of FIN 48 and its impact on its financial position, results of operations, or cash flows.

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 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.

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 September 30, 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 $21,100 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 second quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

13

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 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)
	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 (I)
	10	.14				$25,000 Promissory Note, dated February 1, 2007 between Orthometrix, Inc. and Neil Koenig (I)
	10	.15				$1,078,000 Promissory Note, dated February 1, 2007 between Orthometrix, Inc. and Reynald Bonmati (I)

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 2007
    

Item 6.      Exhibits   (Continued)

	10	.16				$175,000 Promissory Note, dated February 1, 2007 between Orthometrix, Inc. and The Chrystele Bonmati Trust. (I)
	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.

(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.

(I)	This Exhibit was previously filed as an Exhibit to the Company’s Report on Form 10-QSB dated June 19, 2007 and is incorporated herein by reference.

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ORTHOMETRIX, INC.
FORM 10-QSB SEPTEMBER 30, 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: November 13, 2007

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