-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JoudSlPfJ/B1oAp7JXzMjTDk+laXkHNq1ScaFNwmeYq3xoDNdQjr9i9DFlBjy35U WCMd323t8THy7/EYIgN3OQ== 0000950136-05-004558.txt : 20050816 0000950136-05-004558.hdr.sgml : 20050816 20050804092712 ACCESSION NUMBER: 0000950136-05-004558 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050804 DATE AS OF CHANGE: 20050816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORTHOMETRIX INC CENTRAL INDEX KEY: 0000946428 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 061387931 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-26206 FILM NUMBER: 05997806 BUSINESS ADDRESS: STREET 1: 106 CORPORATE PARK DRIVE STREET 2: SUITE 106 CITY: WHITE PLAINS STATE: NY ZIP: 10604 BUSINESS PHONE: 9146942285 MAIL ADDRESS: STREET 1: 106 CORPORATE PARK DRIVE STREET 2: SUITE 106 CITY: WHITE PLAINS STATE: NY ZIP: 10604 FORMER COMPANY: FORMER CONFORMED NAME: NORLAND MEDICAL SYSTEMS INC DATE OF NAME CHANGE: 19951115 FORMER COMPANY: FORMER CONFORMED NAME: OSTECH INC DATE OF NAME CHANGE: 19950608 10KSB/A 1 file001.htm FORM 10KSB/A

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

FORM 10-QSB/A
(Amendment No. 1)
(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, 2005
--------------

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
incorporation or organization) 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 (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 [ ]

There were 42,952,368 shares of common stock outstanding as of May 13, 2005.

Orthometrix, Inc. (formerly Norland Medical Systems, Inc.) (the "Company") is
filing an Amended Form 10-QSB/A (the "Amendment") to amend its quarterly report
for the period ended March 31, 2005, as filed with the Securities and Exchange
Commission on May 13, 2005 (the "Original Filing"). The purpose of this
Amendment is to restate the statement of operations due to a discount on shares
issued to an officer that had not been recorded on the Original Filing. The
adjustment is as follows: $72,000 discount on the 400,000 shares issued to Mr.
Bonmati is recorded as compensation expense and as additional paid-in-capital.

1 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

BALANCE SHEET (UNAUDITED)

ASSETS
- ------
March 31, 2005
--------------
Current assets:

Cash $ 739,897
Accounts receivable - trade 134,916
Inventories 147,245
Prepaid expenses and other current assets 155,044
--------------
Total current assets 1,177,102

Property and equipment, net 16,490
Other 11,658
--------------
Total Assets $ 1,205,250
==============

LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------

Current liabilities:

Accounts payable - trade $ 335,628
Accrued expenses 134,400
Unearned income 99,650
Unearned service revenue 19,760
--------------
Total current liabilities 589,438
--------------

Stockholders' equity:

Common stock - par value $.0005 per share,
45,000,000 shares authorized, and 42,902,368
shares issued and outstanding 21,450
Additional paid-in capital 42,685,477
Accumulated deficit (42,091,115)
--------------
Total stockholders' equity 615,812
--------------
Total Liabilities and Stockholders' Equity $ 1,205,250
==============

See notes to financial statements.

2 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED
MARCH 31, MARCH 31,
2005 2004
-------------- --------------

Revenue $ 470,980 $ 168,387
Cost of revenue 174,330 73,708
-------------- --------------
Gross profit 296,650 94,679

Sales and marketing expense 350,633 154,826
General and administrative expense 388,555 225,935
Research and development expense 135,242 99,231
-------------- --------------

Operating loss (577,780) (385,313)
-------------- --------------

Interest expense (40,329) (39,100)
Interest income 1,244 188
-------------- --------------

Net loss $ (616,865) $ (424,225)
============== ==============

Basic and diluted weighted average shares 37,935,677 29,544,621
============== ==============

Basic and diluted loss per share:
Net loss $ (0.02) $ (0.01)
============== ==============

See notes to financial statements.

3 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>

FOR THE THREE MONTHS ENDED
MARCH 31, MARCH 31,
2005 2004
------------- -------------

Cash Flows From Operating Activities:

Net loss $ (616,865) $ (424,225)
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock options and warrants issued to non-employees 153,050 -
Non cash compensation 72,000 -
Amortization expense 33,597 19,264
Depreciation expense 1,266 1,377
Changes in assets and liabilities:
Decrease in accounts receivable 14,859 496,315
(Increase) decrease in inventories (26,785) 26,445
Increase in prepaid expenses and other current assets (47,248) (2,450)
(Decrease) increase in accounts payable (192,198) 5,546
(Decrease) increase in accrued expenses (9,329) 27,602
Increase (decrease) in unearned service revenue 12,250 (4,853)
Increase in unearned income 99,650 -
Decrease in other liabilities - (5,645)
------------- -------------

Net cash (used in) provided by operating activities (505,753) 139,376
------------- -------------

Cash Flows From Investing Activities:

Purchases of Property and Equipment - (742)
------------- -------------

Cash Flows From Financing Activities:

Repayment of borrowings from related parties (500,000) (350,000)
Proceeds of borrowings from related parties - 225,000
Proceeds for issuance of common stock 1,740,000 -
Exercise of stock options 5,650 -
------------- -------------

Cash provided by (used in) financing activities 1,245,650 (125,000)

Net increase in cash 739,897 13,634

Cash at beginning of period - 44,121
------------- -------------

Cash at end of period $ 739,897 $ 57,755
============= =============
</TABLE>

See notes to financial statements.

4 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND GOING CONCERN

The financial statements of Orthometrix, Inc. presented herein, have been
prepared pursuant to the rules of the Securities and Exchange Commission
for quarterly reports on Form 10-QSB/A 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, 2004, and included in the Company's
Report on Form 10-KSB as filed with the Securities and Exchange Commission
on March 25, 2005. In the opinion of management, the accompanying interim
unaudited financial statements contain all adjustments (consisting of
normal, recurring accruals) necessary for a fair presentation of the
financial position, results of operations and cash flows for these interim
periods.

The Company's continued existence is dependent upon several factors
including increased sales volume and the ability to achieve profitability
on the sale of some of the Company's remaining product lines. The Company
is pursuing initiatives to increase liquidity, including external
investments and obtaining a line of credit. The Company completed a
$1,740,000 share issuance in the first quarter of 2005. This will
significantly improve the Company's liquidity for the near future. In order
to increase its cash flow, the Company is continuing its efforts to
stimulate sales. The Company has 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 and attempting to more closely
coordinate the timing of purchases.

The results of operations for the three months ended March 31, 2005 are not
necessarily indicative of the results to be expected for the entire fiscal
year ending December 31, 2005.

5 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

2. INVENTORIES

As of March 31, 2005, inventories consisted of $147,245 of product kits,
spare parts and sub-assemblies.

3. CASH FLOWS

The Company paid $37,053 and $14,013 for interest during the three months
ended March 31, 2005 and 2004, respectively.

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. DISCONTINUED OPERATIONS AND CONTINGENCY

On January 30, 2004, the Company received the remaining $500,000
installment of the purchase price of its bone measurement business sold to
CooperSurgical Acquisition Corp. ("Cooper") in 2002. In addition, the
Company was eligible to receive up to an additional $7.0 million in
earn-out payments based on the net sales of certain products over a
three-year period from May 1, 2002 to April 30, 2005. No amounts have been
earned through May 13, 2005 and the Company will not receive any sales
proceeds from the earn-out.

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:

2005 29,500
2006 30,816
2007 31,584
2008 18,424
----------
$ 110,324
==========

6 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

6. RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2005, there were no borrowings from
officers and directors of the Company, as compared to the $995,000 borrowed
from several officers and directors of the Company and $405,000 borrowed
from unaffiliated individuals in 2004. The Company issued notes in 2004
bearing interest at prime plus one (6% as of December 31, 2004) which
mature one year from the date of issuance and have all been repaid as of
March 31, 2005.

In December 2004, the Board of Directors authorized the Company to offer to
the holders of certain promissory notes issued by the Company the right to
convert such notes into shares of Common Stock. Holders of such notes
elected to convert $1,545,000 of notes (the "Total Conversion Amount") into
5,492,995 shares of Common Stock at $0.28 per share. Of the Total
Conversion Amount, $1,300,000 were notes held by Michael W. Huber
($350,000), Neil H. Koenig ($120,000), Reynald G. Bonmati ($660,000),
Andre-Jacques Neusy (120,000), and Albert S. Waxman ($50,000), officers and
directors of the Company. The notes that were converted did not have a
beneficial conversion feature.

On February 25, 2005, the Company entered into a Securities Purchase
Agreement with Rock Creek Investment Partners, L.P. Pursuant to such
agreement, the Company sold 2,321,429 shares of Common Stock at $0.28 per
share for an aggregate purchase price of $650,000 to Rock Creek Investment
Partners, L.P. The market price of the Common Stock on February 25, 2005
was $0.33.

On March 3, 2005 the Company entered into a Securities Purchase Agreement
with Psilos Group Partners II SBIC L.P ("Psilos") and Reynald Bonmati.
Pursuant to such agreement, the Company sold 4,000,000 shares of Common
Stock at $0.25 per share for a purchase price of $1,000,000 to Psilos, of
which Dr. Waxman, a director of the Company, is Senior Managing Member, and
sold 400,000 shares of Common Stock at $0.25 per share, for a purchase
price of $100,000 to Reynald G. Bonmati, an officer and director of the
Company. The $100,000 purchase price was deemed paid by Mr. Bonmati as a
result of the cancellation of the aggregate amount of $100,000 of
promissory notes issued by the Company in favor of Mr. Bonmati. On December
15, 2004, the Company's Board of Directors ("the Board") authorized the
commencement of negotiations with Psilos and other parties regarding the
private sale of shares of the Company's Common Stock. The Board determined
that a sale price equal to the average closing price over the 30 day period
preceding the closing date, less 20%, would be appropriate. When
negotiations with Psilos began on December 15, 2004, such discounted
average price was approximately $0.28 per share. When Psilos was ready to
close the transaction on March 3, 2005, such discounted average price had
decreased to approximately $0.24 per share. The parties agreed to price the
deal at $0.25 per share, with Psilos being issued 4,000,000 shares. At the
request of Psilos, Mr. Bonmati accepted to purchase 400,000 shares on the
same terms. The Board unanimously authorized and ratified the transaction,
with the related parties abstaining from the vote. The Company sold an
additional 360,000 shares of Common Stock for $90,000 in conjunction with
this offering. None of the investors of the 360,000 shares were employees
or officers of the Company. The market price of the Common Stock on March
3, 2005 was $0.43. The discount on the 4,000,000 shares issued to Psilos
did not relate, in any part, to compensation for director services for Dr.
Waxman. The $72,000 discount on the 400,000 shares issued to Mr. Bonmati
was recorded as compensation expense and as additional paid-in capital.

7 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

6. RELATED PARTY TRANSACTIONS (CONTINUED)

On March 4, 2005, the Company repaid the remaining $500,000 loan balance to
Reynald G. Bonmati ($305,000), William Orr ($50,000), David E. Baines
($50,000), Ralph G Theodore and Ellen H Theodore JTWROS ($25,000), John
Utzinger ($20,000), and Farooq Kathwari ($50,000), officers, directors, and
affiliates of the Company.

On March 11, 2005, the Company granted to a consultant a warrant to
purchase up to 500,000 shares of Common Stock at $0.33 per share in
consideration for the assistance with the financial structuring of the
Company. The value of the warrants were based on the application of the
Black-Scholes option pricing model and valued at $144,600. The value of the
warrants was recorded as consulting expense and as additional paid-in
capital.

7. STOCK-BASED COMPENSATION

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Options Issued to Employees." The Company accounts for
stock-based compensation to employees using the intrinsic value method,
whereby compensation cost is recognized when the exercise price at the date
of grant is less than the fair market value of the Company's common stock.
The Company discloses the proforma effect of compensation cost based on the
fair value method for determining compensation cost. The value of
stock-based compensation awarded to non-employees is determined using the
fair value method. Compensation cost is recognized over the service or
vesting period. Had the compensation cost for stock options granted to
employees been determined using the fair value method, consistent with SFAS
123 "Accounting for Stock-Based Compensation", the Company's net loss and
loss per common share for the three months ended March 31, 2005 and 2004
would approximate the pro forma amounts as follows:

For the Three Months Ended
-------------------------------
March 31, 2005 March 31, 2004
-------------- --------------

Net loss, as reported $ (616,865) $ (424,225)
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effect (9,475) (6,953)
------------ ------------

Proforma net loss $ (626,340) $ (431,178)
============ ============

Basic and diluted loss per share
As reported $ (0.02) $ (0.01)
============ ============
Pro forma $ (0.02) $ (0.01)
============ ============

During the three months ended March 31, 2005, the Company's board of
directors approved a grant of stock options to independent consultants to
purchase an aggregate of 30,000 shares of its common stock. The value of
these issuances was based on the application of the Black-Scholes option
pricing model and valued at $8,452. The value of options was recorded as
consulting expense and additional paid-in capital.

8 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

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

The matters discussed in this Form 10-QSB/A 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/A 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 preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities.

The Company believes the following critical 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 recognizes revenues
in accordance with invoice terms, typically when products are shipped.
Products are covered by warranties provided by the Company's vendors.
Therefore, no warranty reserve is required on products sold by the
Company. 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. The Company has recorded a
valuation allowance to reduce its deferred tax assets. The Company
limited the amount of tax benefits recognizable from these assets
based on an evaluation of the amount of the assets that are expected
to be ultimately realized.

Liquidity and Capital Resources

During the past two fiscal years ended December 31, 2004 and 2003, the
Company has experienced aggregate losses from operations of $3,293,341
and has incurred total negative cash flow from operations of
$2,180,729 for the same two-year period. During the three months ended
March 31, 2005 the Company experienced a net loss from operating
activities of $616,865 and a negative cash flow from operating
activities of $505,753. The Company does not currently have an
operating line of credit. 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
increased sales volume and the ability to achieve profitability on the
sale of some of the Company's remaining product lines. The Company is
pursuing initiatives to increase liquidity, including external
investments and obtaining a line of credit. The Company completed a
$1,740,000 share issuance in the first quarter of 2005. This will
significantly improve the Company's liquidity for the near future.

9 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

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

Liquidity and Capital Resources (Continued)

In order to increase its cash flow, the Company is continuing its
efforts to stimulate sales. The Company has 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
and attempting to more closely coordinate the timing of purchases.

The level of liquidity based on cash experienced a $739,897 increase
at March 31, 2005, as compared to December 31, 2004. The Company's
$505,753 used in operating activities was substantially offset by
$1,245,650 of cash provided by financing activities. Financing
activities consisted of $500,000 repayment of borrowings from
directors and officers of the Company, $1,740,000 proceeds for
issuance of common stock, and $5,650 exercise of stock options.

During the three months ended March 31, 2005, there were no borrowings
from officers and directors of the Company, as compared to the
$995,000 borrowed from several officers and directors of the Company
and $405,000 borrowed from unaffiliated individuals in 2004. The
Company issued notes in 2004 bearing interest at prime plus one (6% as
of December 31, 2004) which mature one year from the date of issuance
and have all been repaid as of March 31, 2005.

In December 2004, the Board of Directors authorized the Company to
offer to the holders of certain promissory notes issued by the Company
the right to convert such notes into shares of Common Stock. Holders
of such notes elected to convert $1,545,000 of notes (the "Total
Conversion Amount") into 5,492,995 shares of Common Stock at $0.28 per
share. Of the Total Conversion Amount, $1,300,000 were notes held by
Michael W. Huber ($350,000), Neil H. Koenig ($120,000), Reynald G.
Bonmati ($660,000), Andre-Jacques Neusy (120,000), and Albert S.
Waxman ($50,000), officers and directors of the Company. The notes
that were converted did not have a beneficial conversion feature.

On February 25, 2005, the Company entered into a Securities Purchase
Agreement with Rock Creek Investment Partners, L.P. Pursuant to such
agreement, the Company sold 2,321,429 shares of Common Stock at $0.28
per share for an aggregate purchase price of $650,000 to Rock Creek
Investment Partners, L.P. The market price of the Common Stock on
February 25, 2005 was $0.33.

10 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

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

Liquidity and Capital Resources (Continued)

On March 3, 2005 the Company entered into a Securities Purchase
Agreement with Psilos Group Partners II SBIC L.P ("Psilos") and
Reynald Bonmati. Pursuant to such agreement, the Company sold
4,000,000 shares of Common Stock at $0.25 per share for a purchase
price of $1,000,000 to Psilos, of which Dr. Waxman, a director of the
Company, is Senior Managing Member, and sold 400,000 shares of Common
Stock at $0.25 per share, for a purchase price of $100,000 to Reynald
G. Bonmati, an officer and director of the Company. The $100,000
purchase price was deemed paid by Mr. Bonmati as a result of the
cancellation of the aggregate amount of $100,000 of promissory notes
issued by the Company in favor of Mr. Bonmati. On December 15, 2004,
the Company's Board of Directors ("the Board") authorized the
commencement of negotiations with Psilos and other parties regarding
the private sale of shares of the Company's Common Stock. The Board
determined that a sale price equal to the average closing price over
the 30 day period preceding the closing date, less 20%, would be
appropriate. When negotiations with Psilos began on December 15, 2004,
such discounted average price was approximately $0.28 per share. When
Psilos was ready to close the transaction on March 3, 2005, such
discounted average price had decreased to approximately $0.24 per
share. The parties agreed to price the deal at $0.25 per share, with
Psilos being issued 4,000,000 shares. At the request of Psilos, Mr.
Bonmati accepted to purchase 400,000 shares on the same terms. The
Board unanimously authorized and ratified the transaction, with the
related parties abstaining from the vote. The Company sold an
additional 360,000 shares of Common Stock for $90,000 in conjunction
with this offering. None of the investors of the 360,000 shares were
employees or officers of the Company. The market price of the Common
Stock on March 3, 2005 was $0.43. The discount on the 4,000,000 shares
issued to Psilos did not relate, in any part, to compensation for
director services for Dr. Waxman. The $72,000 discount on the 400,000
shares issued to Mr. Bonmati was recorded as compensation expense and
as additional paid-in capital.

On March 4, 2005, the Company repaid the remaining $500,000 loan
balance to Reynald G. Bonmati ($305,000), William Orr ($50,000), David
E. Baines ($50,000), Ralph G Theodore and Ellen H Theodore JTWROS
($25,000), John Utzinger ($20,000), and Farooq Kathwari ($50,000),
officers, directors, and affiliates of the Company.

On March 11, 2005, the Company granted to a consultant a warrant to
purchase up to 500,000 shares of Common Stock at $0.33 per share in
consideration for the assistance with the financial structuring of the
Company. The value of the warrants were based on the application of
the Black-Scholes option pricing model and valued at $144,600. The
value of the warrants was recorded as consulting expense and as
additional paid-in capital.

During the three months ended March 31, 2005, the Company's board of
directors approved a grant of stock options to independent consultants
to purchase an aggregate of 30,000 shares of its common stock. The
value of these issuances was based on the application of the
Black-Scholes option pricing model and valued at $8,452. The value of
options was recorded as consulting expense and additional paid-in
capital.

11 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

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

Liquidity and Capital Resources (Continued)

The Company markets, sells and services a wide range of proprietary
non-invasive musculoskeletal and other devices through two divisions,
a healthcare division and a sports & fitness division. The healthcare
division markets, sells and services (1) pQCT(R) (peripheral
Quantitative Computed Tomography) bone and muscle measurement systems
used for musculoskeletal research and clinical applications (including
for bone disorders and human performance)- the XCT(TM) product line;
and (2) patented exercise systems used for physical therapy, sports
medicine and rehabilitative medicine - the Galileo(TM) and
Leonardo(TM) product lines, as well as the Mini VibraFlex(R). The
healthcare division is continuing to work towards completion of the
premarket approval ("PMA") process for its Orbasone(TM) pain
management system (ESWT or Extracorporal Shock Wave Therapy), which
will be added to its product line upon successful completion of the
study and approval of the system by the United States Food and Drug
Administration (the "FDA"). The Company has received approval in
Canada in the first quarter of 2005 to market and sell the
Orbasone(TM) for treatment of plantar fasciitis. The sports & fitness
division markets, sells and services patented exercise systems to
fitness centers, gyms, sports clubs and associations and to the
general public - the VibraFlex(R) product line. The sports & fitness
division's product line includes the Mini VibraFlex(R), the Mini
VibraFlex(R) Plus and the VibraFlex(R) 500. The Company also intends
to introduce the VibraFlex(R) Rx in the near future to replace the
Galileo 2000 in the physical therapy, sports medicine and
rehabilitation markets. The VibraFlex(R) products are based on the
same patented technology as the Galileo products and offer a novel
approach to muscle strength development given that such products are
based on short and intense stimulations of the muscles.

The Company has no current backlog of orders as of March 31, 2005.
There are no material commitments for capital expenditures as of March
31, 2005.

The nature of the Company's business is such that it is subject to
changes in technology, government approval and regulation, and changes
in third-party reimbursement in the United States and numerous foreign
markets. Significant changes in one or more of these factors in a
major market for the Company's products could significantly affect the
Company's cash needs. If the Company experiences significant demand
for any of its products, additional third party debt or equity
financing will be required.

12 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

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

Results of Operations

The Company had a net loss of $616,865 ($0.02 per share based on
37,935,677 weighted average shares) for the three months ended March
31, 2005 compared to a net loss of $424,225 ($0.01 per share based on
29,544,621 weighted average shares) for the three months ended March
31, 2004.

Revenue for the three months ended March 31, 2005 increased $302,593
(or 179.7%) to $470,980 from $168,387 for the three months ended March
31, 2004. The increase in sales was primarily due to an increase in
VibraFlex(R) and XCT(TM) sales for the three months ended March 31,
2005.

Cost of revenue as a percentage of revenue was 37.0% and 43.8% for the
three months ended March 31, 2005 and 2004, respectively, resulting in
a gross margin of 63.0% for the three months ended March 31, 2005
compared to 56.2% for the three months ended March 31, 2004. The
increase in gross margin was due to obtaining a higher sales price of
certain products during the three months ended March 31, 2005.

Sales and marketing expense for the three months ended March 31, 2005
increased $195,807 or (126.5%) to $350,633 from $154,826 for the three
months ended March 31, 2004. The increase is due to the Company's
increased commission and consulting expenses.

General and administrative expense for the three months ended March
31, 2005 increased $162,620 (or 72.0%) to $388,555 from $225,935 for
the three months ended March 31, 2004. The increase was primarily due
to an increase in legal fees and non cash compensation expense
associated with the Company's financing transactions.

Research and development expense for the three months ended March 31,
2005 increased $36,011 (or 36.3%) to $135,242 from $99,231 for the
three months ended March 31, 2004. The increase was primarily due to
increased expenses incurred for the development of the Orbasone.

Interest expense increased $1,229 (or 3.1%) to $40,329 for the three
months ended March 31, 2005 from $33,046 for the three months ended
March 31, 2004. Interest expense increased as a result of the
amortization of the remaining discount due to the repayment of all
outstanding principal balances of loans payable in March 2005.

13 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

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

Recently Issued Accounting Standards

In December 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 123 (Revised 2004), "Share-Based Payment" ("SFAS No.
123R"). The revised accounting standard eliminates the ability to
account for share-based compensation transactions using the intrinsic
value method in accordance with APB Opinion No. 25 and requires
instead that such transactions be accounted for using a
fair-value-based method. SFAS No. 123R requires public entities to
record noncash compensation expense related to payment for employee
services by an equity award, such as stock options, in their financial
statements over the requisite service period. SFAS No. 123R is
effective as of the beginning of the first interim or annual period
that begins after December 15, 2005 for small business issuers. The
Company does not plan to adopt SFAS No. 123R prior to its first
quarter of fiscal 2006. The Company expects that the adoption of SFAS
No. 123R will have a negative impact on the Company's consolidated
results of operations. The company has historically provided pro forma
disclosures pursuant to SFAS No. 123 and SFAS No. 148 as if the fair
value method of accounting for stock options had been applied,
assuming use of the Black-Scholes options-pricing model. Although not
currently anticipated, other assumptions may be utilized when SFAS No.
123R is adopted.

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.

14 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

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's 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 control over financial reporting.

15 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

ITEM 6. EXHIBITS

(a) Exhibits:

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

10.12 Securities Purchase Agreement, dated March 3, 2005, between
Orthometrix, Inc. and Psilos Group Partners II SBIC, L.P. and
Reynald G. Bonmati. (A)

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.

(A) This Exhibit was previously filed as an Exhibit to the
Company's Report on Form 10-KSB dated March 15, 2005 and is
incorporated herein by reference.

16 of 22

ORTHOMETRIX, INC.
FORM 10-QSB/A MARCH 31, 2005

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

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

Dated: August 2, 2005

17 of 22

EX-31.1 2 file002.htm CERTIFICATION PURSUANT TO SECTION 302






                                                                    EXHIBIT 31.1


                                ORTHOMETRIX, INC.
                          FORM 10-QSB/A MARCH 31, 2005


                                 CERTIFICATIONS

I, Reynald Bonmati, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB/A of Orthometrix,
     Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the small business issuer as of, and for, the periods presented in
     this report;

4.   The small business issuer's other certifying officers and I are responsible
     for establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
     over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
     15d-15(f)) for the small business issuer and have:

     a)   designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the small
          business issuer, including its consolidated subsidiary, is made known
          to us by others within those entities, particularly during the period
          in which this quarterly report is being prepared;

     b)   [Paragraph omitted in accordance with SEC transition instructions.]

     c)   evaluated the effectiveness of the small business issuer's disclosure
          controls and procedures and presented in this report our conclusions
          about the effectiveness of the disclosure controls and procedures, as
          of the end of the period covered by this report based on such
          evaluation; and

     d)   disclosed in this report any change in the small business issuer's
          internal control over financial reporting that occurred during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's fourth fiscal quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting
          and;




                                    18 of 22





                                ORTHOMETRIX, INC.
                          FORM 10-QSB/A MARCH 31, 2005


5.   The small business issuer's other certifying officers and I have disclosed,
     based on our most recent evaluation of internal control over financial
     reporting, to the small business issuer's auditors and the audit committee
     of small business issuer's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies and material weaknesses in the design or
          operation of internal controls which are reasonably likely to
          adversely affect the small business issuer's ability to record,
          process, summarize and report financial information; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the small business issuer's
          internal controls over financial reporting.


Date: August 2, 2005

                                        /s/ Reynald Bonmati
                                        ---------------------------------
                                        Reynald Bonmati
                                        President/Chief Executive Officer




                                    19 of 22

EX-31.2 3 file003.htm CERTIFICATION PURSUANT TO SECTION 302




                                                                    EXHIBIT 31.2

                                ORTHOMETRIX, INC.
                          FORM 10-QSB/A MARCH 31, 2005


                                 CERTIFICATIONS


I, Neil Koenig, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB/A of Orthometrix,
     Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the small business issuer as of, and for, the periods presented in
     this report;

4.   The small business issuer's other certifying officers and I are responsible
     for establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
     over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
     15d-15(f)) for the small business issuer and have:

     a)   designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the small
          business issuer, including its consolidated subsidiary, is made known
          to us by others within those entities, particularly during the period
          in which this quarterly report is being prepared;

     b)   [Paragraph omitted in accordance with SEC transition instructions.]

     c)   evaluated the effectiveness of the small business issuer's disclosure
          controls and procedures presented in this report our conclusions about
          the effectiveness of the disclosure controls and procedures, as of the
          end of the period covered by this report based on such evaluation; and

     d)   disclosed in this report any change in the small business issuer's
          internal control over financial reporting that occurred during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's fourth fiscal quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting
          and;




                                    20 of 22




                                ORTHOMETRIX, INC.
                          FORM 10-QSB/A MARCH 31, 2005


5.   The small business issuer's other certifying officers and I have disclosed,
     based on our most recent evaluation of internal control over financial
     reporting, to the small business issuer's auditors and the audit committee
     of small business issuer's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies and material weaknesses in the design or
          operation of internal controls which are reasonably likely to
          adversely affect the small business issuer's ability to record,
          process, summarize and report financial information; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the small business issuer's
          internal controls over financial reporting.


Date: August 2, 2005

                                          /s/ Neil Koenig
                                          ----------------------------
                                          Neil Koenig
                                          Chief Financial Officer



                                    21 of 22

EX-32 4 file004.htm CERTIFICATION PURSUANT TO SECTION 906




                                                                      EXHIBIT 32

                                ORTHOMETRIX, INC.
                          FORM 10-QSB/A MARCH 31, 2005


                            CERTIFICATION PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

              In connection with the Quarterly Report of Orthometrix, Inc., (the
"Company"), on Form 10-QSB/A for the quarterly period ended March 31, 2005, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned, in the capacities and on the date indicated below,
hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: (1) the
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities and Exchange Act of 1934; and (2) the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.



Date: August 2, 2005                             /s/ Reynald G. Bonmati
                                                 ------------------------------
                                                 Reynald G. Bonmati
                                                 Chief Executive Officer



Date: August 2, 2005                             /s/ Neil H. Koenig
                                                 ------------------------------
                                                 Neil H. Koenig
                                                 Chief Financial Officer







                                    22 of 22

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