`UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

For the fiscal year ended December 31, 2005          Commission file No. 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

Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

Securities registered pursuant to Section 12(g) of the Act:

                    COMMON STOCK, PAR VALUE $0.0005 PER SHARE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [_]

Registrant's revenues for its most recent year were $1,514,525.

The aggregate market value of the registrant's Common Stock, par value $0.0005
per share, held by non-affiliates of the registrant as of February 13, 2006 was
$2,707,506.53 based on the price of the last reported sale on the OTC Bulletin
Board.

As of February 13, 2006 there were 44,353,618 shares of the registrant's Common
Stock, par value $0.0005 per share, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Orthometrix, Inc. Proxy Statement for the 2006 Annual Meeting of
Stockholders are incorporated by reference in Items 9, 10, 11 and 12 of Part III
of this Form 10-KSB. A definitive proxy statement will be filed with the
Securities and Exchange Commission within 120 days after the close of the fiscal
year covered by this Form 10-KSB.



                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
INTRODUCTION                                                                   3

ITEM 1.        BUSINESS                                                        3

ITEM 2.        PROPERTIES                                                     17

ITEM 3.        LEGAL PROCEEDINGS                                              18

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS            18

ITEM 5.        MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS                                         19

ITEM 6.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS                         19

ITEM 7.        FINANCIAL STATEMENTS                                           25

ITEM 8.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE                         49

ITEM 8A.       CONTROLS AND PROCEDURES                                        49

ITEMS 9, 10,
11 and 12      DOCUMENTS INCORPORATED BY REFERENCE                            50

ITEM 13.       EXHIBITS                                                       50

ITEM 14.       PRINCIPAL ACCOUNTING FEES AND SERVICES                         53



                                  INTRODUCTION

     The statements included in this Report regarding future financial
performance and results and other statements that are not historical facts
constitute forward-looking statements. The words "believes," "intends,"
"expects," "anticipates," "projects," "estimates," "predicts," and similar
expressions are also intended to identify forward-looking statements. These
forward-looking statements are based on current expectations and are subject to
risks and uncertainties. In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, Orthometrix, Inc.,
("Orthometrix" or the "Company" or "OMRX"), cautions the reader that actual
results or events could differ materially from those set forth or implied by
such forward-looking statements and related assumptions due to certain important
factors, including, without limitation, the following: (i) the effect of product
diversification efforts on future financial results; (ii) the availability of
new products and product enhancements that can be marketed by the Company; (iii)
the importance to the Company's sales growth and that regulatory approval of
products be granted, particularly in the United States; (iv) the acceptance and
adoption by primary care providers of new products and the Company's ability to
expand sales of its products to these physicians; (v) adverse affect resulting
from changes in the reimbursement policies of governmental programs (e.g.,
Medicare and Medicaid) and private third party payors, including private
insurance plans and managed care plans; (vi) the high level of competition in
the rehabilitation and physical therapy markets; (vii) the high level of
competition in the pain management market; (viii) changes in technology; (ix)
the Company's ability to continue to maintain and expand acceptable
relationships with third party dealers and distributors; (x) the Company's
ability to provide attractive financing options to its customers and to provide
customers with fast and efficient service for the Company's products; (xi)
changes that may result from health care reform in the United States may
adversely affect the Company; (xii) the Company's cash flow and the results of
its ongoing financing efforts; (xiii) the effect of regulation by the United
States Food and Drug Administration ("FDA") and other government agencies; (xiv)
the Company's ability to secure FDA approval to market its products; (xv) the
effect of the Company's accounting policies; (xvi) the outcome of potential
litigation; and (xvii) other risks described elsewhere in this Report and in
other documents filed by the Company with the Securities and Exchange
Commission. The Company is also subject to general business risks, including
adverse state, federal or foreign legislation and regulation, adverse publicity
or news coverage, changes in general economic factors and the Company's ability
to retain and attract key employees. Any forward-looking statements included in
this Report are made as of the date hereof, based on information available to
the Company as of the date hereof, and, subject to applicable law, the Company
assumes no obligation to update any forward-looking statements.

                                     PART I

ITEM 1. BUSINESS.

     Orthometrix, Inc. markets, sells and services several musculoskeletal
product lines used in pharmaceutical research, diagnosis and monitoring of bone
and muscle disorders, sports medicine, rehabilitative medicine, physical therapy
and pain management. Prior to April 11, 2002, the Company also developed,
manufactured, sold and serviced a broad line of traditional bone densitometers
used to assess bone mineral content and density, one of several factors used by
physicians to aid in the diagnosis and monitoring of bone disorders,
particularly osteoporosis. This line of products, which was the Company's
primary business, was sold on April 11, 2002 to CooperSurgical Acquisition Corp.
("Cooper"), a wholly-owned subsidiary of the Cooper Companies, Inc. (NYSE:COO)
(the "Asset Sale"). As of April 11, 2002, the Company changed its name from
Norland Medical Systems, Inc. to Orthometrix, Inc. As a result of the Asset
Sale, the Company's subsidiaries became inactive and were subsequently dissolved
in 2003.


                                       -3-



     During the past two years, the Company has experienced aggregate losses
from operations of $4,332,317 and has incurred a total negative cash flow from
operations of $3,000,606 for the same two-year period. 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
additional lines of credit. In October 2005, the Company obtained $350,000 of
credit from HSBC Bank USA, N.A. The line of credit has been guaranteed by
certain officers and directors of the Company and in connection with this
guarantee they have been granted warrants to purchase up to 350,000 shares of
Common Stock at $0.25 per share. 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.

     On April 11, 2002, the Company sold its bone measurement business to
Cooper, the Company's exclusive distributor to U.S. physicians and group
practices specializing in Obstetrics and Gynecology. The Company was entitled to
receive up to a maximum of $12.0 million for the sale of substantially all its
assets and the assumption of certain liabilities. The Company received $3.5
million of the purchase price at the closing of the Asset Sale. An additional
$1.0 million of the remaining purchase price (plus or minus any required
purchase price adjustment) was to be released to the Company by Cooper during
August 2002 upon submission to the Company by Cooper of a closing statement
setting forth the value of the net assets and liabilities of the transferred
business in the Asset Sale as of the closing date of the Asset Sale. In August
2002, Cooper submitted a closing statement to the Company and notified the
Company of a downward adjustment to the purchase price based on Cooper's
purported valuation of the net assets and liabilities of the transferred
business. Based on its downward adjustment, Cooper paid approximately $405,000
to the Company on August 16, 2002. The Company did not agree with Cooper's
valuation of the applicable net assets and liabilities and, accordingly, did not
agree with Cooper's downward purchase price adjustment. The Company and Cooper
were unable to settle the disagreement and engaged an independent accounting
firm to provide a binding resolution of such disagreement. During June 2003 the
arbitrator settled the disagreement in favor of the Company for $268,569.
Accordingly, the Company received a total of $673,569 out of the potential
$1,000,000 installment payable in connection with the Asset Sale to Cooper. The
settlement from Cooper was received in July 2003. The full amount of the
remaining $500,000 installment of the purchase price was released by Cooper to
the Company on January 30, 2004, without any adjustment. The Company recorded a
gain from the Asset Sale of $4.3 million during the year ending December 31,
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 by the Company.

     The Company currently offers 7 product lines comprised of a total of 16
models. Its principal products are the pQCT(R) (or XCT(TM)) series for research
applications, the pQCT(R) (or XCT(TM)) series for clinical applications, the
pDEXA(R) SABRE, the Galileo(TM) series, the Leonardo(TM), the VibraFlex(R)
series and the Orbasone(TM). During 2004, approximately 48% of our total sales
were derived from four customers. During 2005, approximately 62.3% of our total
sales were derived from 8 customers. These customers are primarily universities
and hospitals. The Company markets, sells and services its products primarily in
the United States and Canada. A small number of sales of certain of its products
have been made in Australia, Taiwan and Mexico.

     The Company markets, sells and services its products and devices through
two divisions--the Healthcare Division and the Sports & Fitness Division:


                                       -4-



o    The Healthcare Division markets, sells and services:

          1.   pQCT(R) (peripheral Quantitative Computed Tomography) bone and
               muscle measurement systems for use in musculoskeletal research
               applications, including for bone disorders and human performance
               (also called the XCT(TM) research product line);

          2.   pQCT(R) bone and muscle measurement systems for use in
               musculoskeletal clinical applications, including for bone
               disorders and human performance (also called the XCT(TM) clinical
               product line);

          3.   the pDEXA(R) SABRE system, a DXA-based (Dual Energy X-Ray
               Absoptiometry) system used to measure bone mass and determine
               body composition of small laboratory animals;

          4.   patented exercise systems used in physical therapy, sports
               medicine and rehabilitative medicine - the VibraFlex(R) Rx and
               the Mini VibraFlex(R) (two years ago, the Company started selling
               in the physical therapy, sports medicine and rehabilitative
               markets the Galileo(TM) 2000 model that the Company imported from
               Germany while it was redesigning a United States-made version,
               which the Company named VibraFlex(R) Rx; the Company began
               marketing the VibraFlex(R) Rx in the second quarter of 2005 in
               such markets);

          5.   the Leonardo(TM), a human performance measurement device used to
               quantify the progress made by individuals using the Company's
               VibraFlex(R) exercise systems; and

          6.   the Orbasone(TM) ESWT pain management system (Extracorporal Shock
               Wave Therapy), used to treat chronic plantar fasciitis (foot
               pain), was added to the Company's product line following the
               successful completion of pre-market approval of the system by the
               FDA in the third quarter of 2005 (in the first quarter of 2005,
               the Company received approval from Health Canada to market and
               sell the Orbasone(TM) in Canada to treat chronic plantar
               fasciitis).

o    The Sports & Fitness Division markets, sells and services the following
     patented exercise systems:

          1.   the Mini VibraFlex(R);

          2.   the Mini VibraFlex(R) Plus;

          3.   the VibraFlex(R) 500 (two years ago, the Company started
               designing a more powerful version of the Galileo(TM) 2000 that we
               began marketing under the name VibraFlex(R) 500 in the fourth
               quarter of 2004 in the sports and fitness market);

          4.   the VibraFlex(R) 500S; and

          5.   The Galileo(TM) Sports Professional.

     The VibraFlex(R) products are based on the same patented technology as the
Galileo(TM) products and offer an improved approach to muscle strength
development through the short and intense stimulation of the muscles. The Sports
& Fitness Division markets, sells and services these systems to fitness centers,
gyms, sports clubs and associations and to the general public.


                                       -5-



RECENT DEVELOPMENTS

     On February 1, 2006, the Company formed an alliance with Healthcare
Reimbursement Solutions, Inc. of Orlando, Florida to provide health care
practices, such as podiatric and orthopedic practices that purchase its
Orbasone(TM) ESWT with a broad range of billing advisory services, from a
reimbursement hot line to turn-key billing operation.

MARKETS AND PRODUCTS

     The Company currently offers 7 product types comprised of a total of 16
models: 5 models of pQCT(R) systems for bone & muscle research application (XCT
Research SA, XCT Research SA+, XCT Research M, XCT Research M+, and XCT 3000
Research); 2 models of pQCT(R) systems for clinical application related to bone
& muscle disorders (XCT 2000L and XCT 3000); 1 model of a DXA-based system used
to measure bone mass and determine body composition of small laboratory animals:
pDEXA(R) SABRE; 2 models of patented powered exercise systems for rehabilitation
and physical therapy (Mini VibraFlex(R), VibraFlex(R) Rx); 1 model of human
performance measurement system (Leonardo(TM)); 5 models of VibraFlex(R) for
sports and fitness (Mini VibraFlex(R) Plus, VibraFlex(R) 500, VibraFlex(R) 500S,
Mini VibraFlex(R), and Galileo(TM) Sports Professional); and 1 model of pain
relief system (Orbasone(TM) ESWT).

The following is a description of each of the Company's product types and
primary models.

1. THE PQCT(TM) SYSTEMS FOR BONE AND MUSCLE RESEARCH APPLICATIONS

     The Company believes that over the past decade, peripheral Quantitative
Computed Tomography (pQCT(R)) has replaced Dual Energy Bone Absorptiometry (DEXA
or DXA) as the technology of choice for pharmaceutical research laboratories
specializing in bone disorders such as osteoporosis. Unlike DXA, pQCT(R) allows
true volumetric measurement of both bones and muscles. The Company believes that
it allows not only faster assessment of new therapeutic agents but it also has a
stronger impact on the entire musculoskeletal system.

     The Company directly markets, sells and services in the US and Canada the
following pQCT(R) systems for in vivo and in vitro research:

XCT Research SA/SA+ (bone/muscle measurement for small laboratory animals such
as rats);
XCT Research M/M+ (bone/muscle measurement for transgenic mice);
XCT 3000 Research - (bone/muscle measurement for large laboratory animals such
as primates).

     The Company also directly markets, sells and services, in the United States
and Canada, the pDEXA(R) SABRE, a DXA-based system used to measure bone mass and
determine body composition of small laboratory animals.

     Stratec Medizintechnik GmbH ("Stratec"), a worldwide leader in pQCT(R)
technology, manufactures these systems in Germany and markets them in the rest
of the world (other than the United States and Canada where the Company directly
markets, sells and services its products). North America accounts for about 80%
of the worldwide research market.


                                       -6-



2. THE PQCT(R) SYSTEMS FOR CLINICAL APPLICATION RELATED TO BONE AND MUSCLE
DISORDERS

     The clinical market is usually lagging several years behind the research
market. Therefore, DXA still is the "gold standard" in the diagnostic and
monitoring of bone disorders, in spite of its shortcomings. However, the
two-dimensional nature of DXA technology makes it of little value in situations
when parameters such as bone thickness or bone cross section area need to be
measured (orthopedics) or when long bones continue to grow (pediatrics).

     The Company directly markets, sells and services in the US and Canada the
following pQCT(R) systems for clinical assessment and monitoring of bone density
and architecture:

XCT2000L (bone and muscle measurement at the forearm, foot and tibia);
XCT 3000 (bone and muscle measurement at the tibia and femur).

     All systems are principally marketed to the pediatrics and orthopedics
specialties. Stratec, a worldwide leader in pQCT(R) technology, manufactures
these systems in Germany and markets them in the rest of the world (other than
the United States and Canada where the Company directly markets, sells and
services its products).

     Sales, rental, and service of all pQCT(R) systems for in vivo and in vitro
research, clinical assessment and monitoring of bone density and architecture
represented approximately 51.2% of the Company systems sales from operations
during fiscal year 2005.

3. PATIENTS WITH INCONTINENCE THAT BENEFIT FROM EXERCISE

     One target for the Galileo(TM) product line and the VibraFlex(R) product
line is the large incontinence market. It is well recognized that exercise of
the perineal muscles can improve their strength and reduce incontinence. The
VibraFlex(R) R(x) is a patented powered exercise system that allows patients
with incontinence to stimulate such muscles at a rapid (25/30 Hz) rate,
providing them with the exercise that can reduce incontinence. The VibraFlex(R)
Rx replaced the Galileo(TM) 2000 for this application in the second quarter of
2005. The VibraFlex(R) Rx is manufactured in the United States by Kimchuk.

4. PATIENTS WITH DIABETES THAT BENEFIT FROM EXERCISE

     It is well known that individuals with diabetes benefit from exercise. In
particular, exercise can improve blood circulation in the legs of diabetics.
Unfortunately, diabetics usually are not capable of long exercise sessions, and
their exercise efforts must be predictable so that proper insulin levels can be
maintained. The VibraFlex(R) R(x) rapid (25/30 Hz) stimulation rate, which does
not tax the cardiopulmonary system, is well suited to the needs of these
individuals. The VibraFlex(R) R(x) allows people with diabetes to enjoy the
benefits of exercise. The VibraFlex(R) Rx replaced the Galileo(TM) 2000 for this
application in the second quarter of 2005. The VibraFlex(R) Rx is manufactured
in the United States by Kimchuk.

5. REHABILITATION / PHYSICAL THERAPY

     The patented Galileo(TM) 2000 powered exercise system has already
penetrated the European rehabilitation and physical therapy market. It has been
redesigned by the Company and is now made in the United States by Kimchuk, and
marketed under the name of VibraFlex(R) R(x). It is used to rehabilitate muscle,
tendons and ligaments, and to improve muscle


                                       -7-



strength and coordination. The Company's VibraFlex(R) R(x) (whole body
vibration) and Mini VibraFlex(R) (upper body vibration) exercise systems are
specifically used to:

     o    exercise postural muscles and joints;

     o    improve muscle strength, reflexes and joint motions;

     o    redevelop postural muscles, joints and reflexes after injury or
          disease;

     o    reduce the pain and disability associated with osteoarthritis; and

     o    allow patients with Parkinson's disease to benefit from exercise that
          can slow the progress of the disease.

6. THE HUMAN PERFORMANCE MEASUREMENT SYSTEM

     The Leonardo(TM) measures various key parameters of human performance, such
as force and power. It has been designed to help the rehabilitation specialist
and the physical therapist measure the progress made by his/her patients. The
Leonardo(TM) system is made by Novotec. Leonardo(TM) sales were not significant
for 2005.

7. SPORTS AND FITNESS

     The VibraFlex(R) is a revolutionary exercise system based on the same new
and patented concept as the Galileo(TM) systems. Many European athletes and
professional teams (ski, soccer, basketball, volleyball, tennis, etc.) already
use the Galileo(TM) as an inherent part of their training to increase muscle
power. One of the first United States athletes to use the Galileo(TM) system was
Lance Armstrong, several times winner of the Tour de France bicycle competition.
The Chicago White Sox baseball team was the first United States professional
team to use the Galileo(TM) technology and the VibraFlex(R) 500 has since been
incorporated in their routine training and conditioning. The list of United
States professional teams using the VibraFlex(R) product line is growing and now
includes the New York Giants, the Miami Dolphins, the Orlando Magic, the Miami
Heat, the L.A. Clippers, the Boston Celtics and the Philadelphia 76'ers. The
VibraFlex(R) 500 was introduced in the fourth quarter of 2004.

     The VibraFlex(R) system was designed so that the powerful Galileo(TM)
technology will be affordable to the sports and fitness industry and to the home
exercise market. The VibraFlex(R) 500 model is manufactured by Kimchuk. The Mini
VibraFlex(R) and the Mini VibraFlex(R) Plus models are manufactured by Novotec.
The VibraFlex(R) 500 replaced the Galileo(TM) 2000 for the sports and fitness
application in the fourth quarter of 2004.

8. PAIN MANAGEMENT

     In the United States, the Company only received approval from the FDA to
market the Orbasone(TM) for the treatment of chronic plantar fasciitis (foot
pain). ESWT has typically been used to treat minor pain in soft tissues, such as
the feet, ankles, elbows, shoulders and knees. The Orbasone(TM) ESWT is designed
to deliver energy waves to patients in treatment sessions of less than 30
minutes under the supervision and care of a physician such as an orthopedic
surgeon or podiatrist.

     Until June 2000, Nippon Infrared Industries Co., Ltd. (Japan) manufactured
the Orbasone(TM) for its developer MIP. The Orbasone(TM) was classified in
August 1998 by the FDA as a Class I therapeutic vibrator (21 CFR Section
890.5975) exempt from the 510(k) requirements of the Federal Food, Drug and
Cosmetic Act. Under a license from MIP, the Company


                                       -8-



began distributing in North America the Orbasone(TM) and began generating modest
sales in fiscal year 2000. On June 21, 2000, the FDA informed MIP that the FDA
had erred in its 1998 decision and rescinded its determination that the
Orbasone(TM) was an exempt product. As a result, the Company suspended sales of
the Orbasone(TM) in June 2000 pending FDA review of the product. The FDA
determined that the Orbasone(TM) was a Class III device requiring pre-market
approval or PMA. During 2002, the Company acquired the rights to manufacture the
Orbasone(TM) under a license from MIP and initiated a clinical study as part of
the PMA process. In the third quarter of 2005, the Orbasone(TM) for the
treatment of chronic plantar fasciitis (foot pain) was added to the Company's
product line upon successful completion of the clinical study and market
approval of the system by the FDA. In the first quarter of 2005, the Company
also received approval from Health Canada to market and sell the Orbasone(TM)
for the treatment of plantar fasciitis (foot pain) in Canada.

9. PRODUCTS AND APPLICATIONS UNDER DEVELOPMENT

o    Orbasone(TM) ESWT diversification: the Company is investigating additional
     applications of its Orbasone(TM) ESWT system beyond the treatment of soft
     tissue pain. Preliminary studies have shown that ESWT may be used in areas
     of skin regeneration (healing wounds) due to its potential ability to
     improve skin regeneration following severe burns, accelerate healing of
     chronic skin lesions and enhance skin flap survival in connection with
     grafts. ESWT enhances tissue vascularisation and neoangiogenesis. There
     have already been some very promising studies conducted on animals, but
     limited clinical data have been available on humans. The skin regeneration
     market is large and the Company intends to position the Orbasone(TM) in
     that market.

o    VibraFlex(R) Home Edition: the Company have been developing a home version
     of the VibraFlex(R) Rx in order to make its powerful vibration technology
     accessible to the public. A prototype has been in operation for the past
     few months and preliminary engineering studies have shown that a system
     could be built at a relatively well-priced retail rate.

SALES, MARKETING AND CUSTOMER SERVICE

     The Company currently employs one Marketing Manager, four Regional Sales
Managers for Pain Management, one Sales Manager for Rehabilitation / Fitness,
one part-time pQCT(R) Sales Applications Consultant one Sales Administration
Manager and two Service Engineers.

     The Company sells pQCT(R) Research systems, pQCT Clinical systems and
pDEXA(R) SABRE research systems directly to its customers, whether they are
research or clinical institutions. For Galileo(TM), VibraFlex(R) and
Leonardo(TM) sales, the Company typically uses an exclusive independent sales
representative to cover one or more states. The Company also sells directly to
its customers in those markets where the Company does not have third party sales
representatives. The Company's sales staff is responsible for the support and
supervision of independent sales representatives within their geographic region.
Support includes participation in trade shows, symposiums, customer visits,
product demonstrations, ongoing distribution of literature and publications,
sales training and presentations of financing programs. The Company is in the
process of expanding its network of independent sales representatives to make
use of the country's large market of rehabilitation centers, physical therapists
and fitness facilities. The Company has also started an effort to recruit a
network of international distributors. Distributors have recently been recruited
in Australia and Taiwan.

     The Company sells the Orbasone(TM) ESWT directly to podiatrists, orthopedic
surgeons and mobile services providing ESWT services to such podiatrists and
orthopedic surgeons. The Company has assembled a team of four regional sales
managers covering 42 contiguous states.


                                       -9-



     Marketing efforts are focused primarily on supporting the Sales Manager for
Rehabilitation / Fitness in his management of independent sales representative,
the pQCT(R) Sales Applications Consultant and the sales manager who focuses on
the pain management market in their direct sales, managing sales requests
received on the Company's websites, managing sales lead generation programs,
managing product introductions and new product financing programs, designing and
maintaining media support such as brochures, manuals, and trade show material,
and developing and maintaining the Company Web sites.

     In the United States and Canada, the Company offers one-year warranties
covering parts and labor on both the hardware and software included in its
systems (except for computer systems, if any, which are covered under their
respective manufacturers' warranty), as well as extended warranty contracts.
Outside of the United States and Canada, the Company only offers one-year
warranties on parts; the labor warranty is provided by the Company's
distributors. The Company provides warranty services to its customers in the
United States and Canada. Any costs incurred by the Company in connection with a
warranty of a system not manufactured by the Company are borne by such
manufacturer pursuant to the applicable distribution agreement.

     The Company has no obligation to provide any other services to its third
party independent sales representatives or other customers. However, the Company
does offer non-warranty services and a range of other product support services
in cooperation with its third-party independent sales representatives. The
Company also offers training at customer locations and the Company's facilities
to end-user customers, independent sales representatives and service
technicians.

MANUFACTURING

     Following the sale of its bone measurement business, the Company relied
exclusively on third parties for the manufacturing of its products. Some
components are produced in accordance with specifications of the specific
product the Company makes and requires substantial lead times. Until production
quantities increase to a level that permits the Company to realize economies of
scale and dual sourcing of components, each component is generally purchased
from a limited number of sources and is subject to the risk that its
availability could become delayed.

     Manufacturing processes for the products marketed by the Company are
subject to stringent federal, state and local laws and regulations governing the
use, generation, manufacture, storage, handling and disposal of certain
materials and wastes. In the United States, such laws and regulations include
the Occupational Safety and Health Act, the Environmental Protection Act, the
Toxic Substances Control Act, and the Resource Conservation and Recovery Act.
The Company believes that it has complied in all material respects with such
laws and regulations. There can be no assurance that the Company will not be
required to incur significant costs in the future with respect to compliance
with such laws and regulations.

BONE & MUSCLE DISORDERS PRODUCTS

     The pQCT(R) products marketed by the Company were developed and are
manufactured by Stratec at its facilities located in Pforzheim, Germany. The
pDEXA(R) SABRE marketed by the Company was jointly developed by Stratec and the
Company and is manufactured by Stratec. Manufacturing consists primarily of
testing of components, final assembly and systems testing. All establishments,
whether foreign or domestic, manufacturing medical devices for sale in the
United States


                                      -10-



are subject to periodic inspections by or under the authority of the FDA to
determine whether the manufacturing establishment is operating in compliance
with FDA Quality System Regulation ("QSR") requirements. The Company is
dependent on Stratec to manufacture the pQCT(R) and pDEXA(R) SABRE products that
the Company and others market in amounts and at levels of quality necessary to
meet demand. The Company has no ownership interest in Stratec.

     The Company believes that Stratec has sufficient manufacturing capacity to
supply the Company's product needs for at least the next twelve months.

MUSCULOSKELETAL DEVELOPMENT PRODUCTS

     The Galileo(TM), Leonardo(TM) and the Mini VibraFlex(R) products marketed
by the Company were developed and are manufactured by Novotec at its facilities
located in Pforzheim, Germany. Manufacturing consists primarily of testing
components, forming and painting of covers, final assembly and quality assurance
testing. The Company is dependent on Novotec to manufacture the Galileo(TM) and
Mini VibraFlex(R) products that the Company and others market in amounts and at
levels of quality necessary to meet demand. The Company has no ownership
interest in Novotec.

     The Company believes that Novotec has sufficient capacity to supply the
Company's need for Galileo(TM), Leonardo(TM) and Mini VibraFlex(R) products for
at least the next 12 months.

     The VibraFlex(R) 500, VibraFlex(R) Rx and VibraFlex(R) 500S products
marketed by the Company were developed by the Company and are manufactured for
the Company by Kimchuk, Inc. at its facilities located in Connecticut.
Manufacturing consists primarily of testing components, forming and painting of
covers, final assembly and quality assurance testing. The Company is dependent
on Kimchuk to manufacture the VibraFlex(R) 500, VibraFlex(R) Rx and VibraFlex(R)
500S products that the Company and others market in amounts and at levels of
quality necessary to meet demand. The Company has no ownership interest in
Kimchuk.

     The Company believes that Kimchuk has sufficient capacity to supply the
Company's need for the VibraFlex(R) 500, VibraFlex(R) Rx and VibraFlex products
for at least the next 12 months.

PAIN MANAGEMENT SYSTEMS

     In 2002, the Company acquired rights to manufacture the Orbasone(TM) under
a license from MIP and has since retained Kimchuk to manufacture the
Orbasone(TM) in the U.S. for the U.S. and Canadian markets. The manufacturing of
the Orbasone(TM) consists primarily of procuring and testing components, final
assembly and quality assurance testing. The Company is dependent on several
component manufacturers to supply sufficient components for the Orbasone(TM)
systems, and on Kimchuk to assemble such components, in amounts and at levels of
quality necessary to meet demand and be competitive. The Company has no
ownership interest in MIP or Kimchuk.

     Some components are produced in accordance with specifications that are
specific to the Orbasone(TM) and require substantial lead times. Until such time
as production quantities increase to a level that provides for opportunities to
realize economies of scale and dual sourcing of components, each component is
generally purchased from a limited number of sources and is subject to the risk
that its availability could become delayed.

DISTRIBUTION AGREEMENTS

     Following the sale of its bone measurement business, the Company focused
exclusively on its musculoskeletal products. The following parties have provided
to the Company rights to market, sell and service certain products:


                                      -11-



STRATEC

     Under a Distribution Agreement, dated as of October 1, 1999, Stratec gave
Bionix L.L.C., a company of which Reynald Bonmati is president, the exclusive
right to distribute all Stratec products in the United States, Canada, Mexico,
Central and South America and the Caribbean. The Company entered into an
Assignment and Assumption Agreement, dated as of April 12, 2002, with Bionix,
L.L.C. whereby Bionix assigned to the Company all of its right, title and
interest in, to and under this Distribution Agreement.

     Under the Distribution Agreement, Stratec grants the Company a license,
with the right to sublicense, to market, sell and service the pQCT-based systems
in the United States, Canada, Mexico, Central and South America and the
Caribbean. Under the terms of the four-year Distribution Agreement, the Company
may purchase these systems from Stratec at a fixed price to be adjusted from
time to time by mutual consent. On October 1, 2005, the Distribution Agreement
with Stratec was renewed for one year, and will be renewed on every October 1st
for a one-year term provided that the Company or Stratec provide the other party
thereto with proper and timely written notice of the election to renew the term
of the Distribution Agreement.

NOVOTEC

     Under a Distribution Agreement, dated as of October 1, 1999, Novotec gave
Bionix the exclusive right to distribute the Galileo(TM) and Leonardo(TM)
product lines in the United States, Canada, Mexico, Central and South America
and the Caribbean. The Company entered into an Assignment and Assumption
Agreement, dated as of April 12, 2002, with Bionix, whereby Bionix assigned to
the Company all of its right, title and interest in, to and under this
Distribution Agreement.

     Under the Distribution Agreement, Novotec also grants the license,
including a right to sublicense, to market, sell and service the Galileo(TM) and
Leonardo(TM) systems in the United States, Canada, Mexico, Central and South
America and the Caribbean. Under the terms of the four-year Distribution
Agreement, the Company may purchase the Galileo(TM) and Leonardo(TM) systems
from Novotec at a fixed price to be adjusted from time to time by mutual
consent. On October 1, 2005, the Distribution Agreement with Novotec was renewed
for one year, and may be renewed by either party upon prior notice to the other
on every October 1st for consecutive one-year terms provided that the Company or
Novotec provide the other party thereto with proper and timely written notice of
the election to renew the term of the Distribution Agreement.

MIP

     Under a Product Approval and Licensing Agreement, dated as of February 12,
2002, MIP licensed to Bionix the Orbasone(TM) product line. The Company entered
into an Assignment and Assumption Agreement, dated as of April 12, 2002 with
Bionix, whereby Bionix assigned to the Company all of its right, title and
interest in, to and under this agreement.

     Under the Product Approval and Licensing Agreement, MIP granted the Company
an exclusive and perpetual authority, right and license to use the technology in
the Orbasone(TM), to seek PMA approval for the Orbasone(TM) and to assemble,
develop, manufacture, market, promote, sell, distribute and service the
Orbasone(TM) in North America.


                                      -12-



COMPETITION

BONE DENSITOMETRY PRODUCTS

     The Company believes that the pQCT-based products it markets provide
measurement capabilities, such as three-dimensional measurements and separate
measurement of cortical and trabecular bone, not available with traditional
DXA-based technology, at prices competitive with systems using that technology.
In the research market, the range, accuracy and precision of measurements are
the principal competitive factors. Despite the absence of directly similar
products, there are a number of competing approaches and products that compete
with the pQCT(R) products. Many of the Company's existing competitors and
potential competitors have substantially greater financial, marketing and
technological resources, as well as established reputations for success in
developing, selling and servicing products. The Company expects existing and new
competitors will continue to introduce products that are directly or indirectly
competitive with the pQCT(R) products. Such competitors may be more successful
in marketing such products. The Company's primary competitors for the sale of
pQCT(R) products are entities that market micro CT products which compete on the
basis of image resolution but are generally more expensive. Such competitors
include Scanco, Skyscan and General Electric. There can be no assurance that the
Company will be able to continue to compete successfully in this market. The
Company sold its traditional DXA-based technology to CooperSurgical on April 11,
2002.

MUSCULOSKELETAL DEVELOPMENT PRODUCTS

     The Galileo(TM) and VibraFlex(R) products offer a novel approach to muscle
strength development. The owner of Novotec has applied for patents regarding the
Galileo(TM) products and has already received certain patents, namely in Germany
and in the U.S. Despite the absence of directly similar products, there are a
number of competing approaches and products that develop muscle strength. Many
of the Company's existing competitors and potential competitors have
substantially greater financial, marketing and technological resources, as well
as established reputations for success in developing, selling and servicing
products. The Company expects existing and new competitors will continue to
introduce products that are directly or indirectly competitive with the
Galileo(TM) and VibraFlex(R) products. Such competitors may be more successful
in marketing such products. There can be no assurance that the Company will be
able to compete successfully in this market.

     The Company's primary competitors for the sale of musculoskeletal
development products are marketers of exercise equipment such as OMNI Fitness
and Stairmaster. These companies have products that compete directly with the
products marketed by the Company in certain segments of the market. Other
smaller companies, such as Power Plate are marketing products that compete
directly with VibraFlex(R) products. There can be no assurance that the
Company's competitors will fail to develop and market products that make use of
the Galileo(TM)'s and VibraFlex(R)'s novel approach or that are lower priced or
better performing as compared to the Galileo(TM) or VibraFlex(R) products.

     The Company believes that the products it markets compete primarily on the
basis of price/performance characteristics, perceived efficacy of results, ease,
convenience and safeness of use, quality of service and price. The Company is
using its initial product marketing efforts to assess the competitiveness of the
Galileo(TM) and VibraFlex(R) products, which the Company recently introduced to
the U.S. market.

PAIN MANAGEMENT SYSTEMS

     The pain management systems market is highly competitive. Several companies
have developed or are developing devices that compete or will compete with the
Orbasone(TM) ESWT. The Company's primary competitors are Donier MedTech,
SanuWave, Inc., Siemens AG and Medispec Ltd., which have products that have
already obtained premarket approval (in some cases, for the treatment of plantar
fasciitis and in some cases, for the treatment of tennis elbow), as well as
Storz Medical, MTS Medical Technologies & Services GmbH, EMS Dolorclast and
other companies that have or potentially plan to have products that are in
various stages of the FDA review process for the purpose of obtaining premarket
approval. The Company intends to seek PMA approval for additional applications
of the Orbasone(TM) ESWT,


                                      -13-



such as for the treatment of golf shoulder, tennis elbow and knee pain. The
Company competes on the basis of size (compactness), performance, price and
availability as the Orbasone(TM) ESWT is the only product of its category that
is manufactured in the United States.

THIRD PARTY REIMBURSEMENT

Bone densitometry products and pain management systems

     Outside of the research market, the Company's pQCT(R) bone densitometry
products are purchased principally by hospitals, managed care organizations,
including independent practice associations and physician practice organizations
or independent physicians or physician groups, that are regulated in the United
States by federal and state authorities and that typically bill and are
dependent upon various third party payers, such as federal and state
governmental programs (e.g., Medicare and Medicaid), private insurance plans and
managed care plans, for reimbursement for use of our products. The CMS
establishes new reimbursement codes and recommended reimbursement rates
effective January 1 of each calendar year. On several occasions, CMS has
affected increases and decreases in its recommended reimbursement rates for bone
densitometry examinations and has made changes in the types of examinations
eligible for reimbursement. There can be no assurance that CMS will not continue
to make changes from time to time. However, the current sales volume of pQCT(R)
equipment subject to reimbursement are no longer significant to the Company.

     Pain management is reimbursed only under limited circumstances. Although a
Current Procedural Terminology (CPT(R)) code for the Orbasone(TM) covering
chronic plantar fasciitis was published in October 2005 and made effective as of
January 1, 2006, there can be no assurance that CMS or other third party payers
will reimburse or continue to reimburse patients for pain management systems and
pain treatment sessions involving the Orbasone(TM) system or that the
reimbursement levels will be sufficient to make the purchase of the Orbasone(TM)
attractive to health care providers.

Musculoskeletal development products

     As with general exercise equipment which requires no professional
supervision, the Galileo(TM) and VibraFlex(R) series of musculoskeletal
development products are not covered under federal or state health care
insurance programs or by third party health insurance payers. However, as with
other exercise equipment used during an exercise session provided by a licensed
physical therapy provider, sessions using the Galileo(TM) and VibraFlex(R)
series may be reimbursed under various reimbursement codes for which CMS
establishes recommended reimbursement rates effective January 1 of each calendar
year. On several occasions, CMS has affected increases and decreases in its
recommended reimbursement rates and has made changes in the types of sessions
eligible for reimbursement. There can be no assurance that CMS will not continue
to make changes from time to time. The Company could be materially and adversely
affected by such changes.

GOVERNMENT REGULATION

     The development, testing, manufacturing and marketing of the bone
densitometry and pain management products marketed by the Company are regulated
by the FDA in the United States and by various foreign regulatory agencies. The
testing for, preparation of, and subsequent FDA review of required applications
is expensive, lengthy and uncertain. Moreover, regulatory approval or clearance,
if granted, can include significant limitations on the indicated uses for which
a product may be marketed. Failure to comply with applicable regulations can
result in warning letters, civil penalties, refusal


                                      -14-



to approve or clear new applications or notifications, withdrawal of existing
product approvals or clearances, product seizures, injunctions, recalls,
operating restrictions, and criminal prosecutions. Delays in receipt of or
failure to receive clearances or approvals for new products would adversely
affect the marketing of such products and the results of future operations.

     Medical devices are classified as either Class I, II, or III based on the
risk presented by the device. Class I devices generally do not require review
and approval or clearance by the FDA prior to marketing in the U.S. Class II
devices generally require premarket clearance through the Section 510(k)
premarket notification process, and Class III devices generally require
premarket approval through the lengthier premarket approval application ("PMA")
process. Orthometrix markets Class I, II, and III devices. Section 510(k)
submissions may be filed only for those devices that are "substantially
equivalent" to a legally marketed Class I or Class II device or to a Class III
device for which the FDA has not called for PMAs. A Section 510(k) submission
generally requires less data than a PMA. The FDA must determine whether or not
to clear a Section 510(k) submission within 90 days of its receipt. The FDA may
extend this time period, however, if additional data or information is needed to
demonstrate substantial equivalence. If a device is not "substantially
equivalent" to a legally marketed Class I or Class II device or to a Class III
device for which the FDA has not previously called for PMAs, a PMA is required.
The premarket approval procedure involves a more complex and lengthy testing and
FDA review process than the Section 510(k) premarket notification process. There
can be no assurances that clearances or approvals will be obtained on a timely
basis, if at all. Modifications or enhancements to products that are either
cleared through the Section 510(k) process or approved through the PMA process
that could effect a major change in the intended use, or affect the safety or
effectiveness, of the device may require further FDA review and clearance or
approval through new Section 510(k) or PMA submissions.

     The Company has received Section 510(k) clearance for all its bone
densitometers marketed in the U.S. for use in humans. The pain management
devices (Orbasone(TM) ) marketed by the Company in the U.S. were classified by
the FDA in August 1998 as Class I devices exempt from Section 510(k) premarket
notification requirements. On June 21, 2000, the FDA informed MIP that it erred
in its classification of the Orbasone(TM) and the Company suspended marketing of
the Orbasone(TM). The FDA determined that the Orbasone(TM) is a Class III device
requiring premarket approval. Following such determination MIP granted the
Company the exclusive and perpetual authority, right and license in North
America to seek PMA for the Orbasone(TM), and to manufacture, market, sell and
service the Orbasone(TM). The Company has received PMA approval for the
Orbasone(TM). The Galileo(TM) and VibraFlex(R) musculoskeletal development
products are not medical devices subject to FDA regulation but are consumer
products subject to regulation under the Consumer Product Safety Act. However,
the Company requested and received on July 25, 2002 a written opinion from the
FDA regarding the classification of the Galileo(TM) for uses in connection with
certain medical conditions as a Class I device exempt from Section 510(k)
premarket notification requirements.

     The FDA continues to regulate medical device products even after they have
received initial approval or clearance. Manufacturers of medical devices for
marketing in the United States are required to adhere to applicable FDA
regulations, which include testing, control and documentation requirements. In
addition, all establishments, whether foreign or domestic, manufacturing medical
devices for sale in the United States are subject to periodic inspections by or
under authority of the FDA to determine whether the manufacturing establishment
is operating in compliance with QSR requirements. Manufacturers must continue to
expend time, money and effort to ensure compliance with QSR requirements. The
FDA also requires that medical device manufacturers undertake post-market
reporting for serious injuries, deaths, or malfunctions associated with their
products. If safety or efficacy problems occur after the product reaches the
market, the FDA may take steps to prevent or limit further marketing of the
product. Additionally, the FDA actively enforces regulations concerning
marketing of devices for indications or uses that have not been cleared or
approved by the FDA.


                                      -15-



     The Company's promotional materials must be consistent with its current
market clearances and approvals and in compliance with other applicable
regulations. The determination of whether the Company is making unapproved,
"off-label," or new claims or false, misleading, or unsubstantiated claims can
be subjective and the FDA may disagree with the Company's determination. If the
FDA determines that the Company's promotional materials constitute promotion of
an unapproved use or makes false or misleading claims, or claims unsupported by
adequate scientific data, the agency could subject us to serious enforcement
sanctions and/or limit the promotional claims that the Company can make for our
devices.

     Manufacturing processes for the products marketed by the Company are also
subject to stringent federal, state and local laws and regulations governing the
use, generation, manufacture, storage, handling and disposal of certain
materials and wastes. In the United States, such laws and regulations include
the Occupational Safety and Health Act, the Environmental Protection Act, the
Toxic Substances Control Act, and the Resource Conservation and Recovery Act.
Suppliers of components of, and products used to manufacture, our products must
also comply with FDA and other foreign regulatory requirements, which often
require significant time, money and record-keeping and quality assurance efforts
and subject us and our suppliers to potential inspections and stoppages. The
Company's suppliers may not satisfy these requirements.

     All entities, whether foreign or domestic, manufacturing medical devices
for sale in the United States are subject to periodic inspections by or under
authority of the FDA to determine whether the manufacturing establishment is
operating in compliance with QSR requirements. Manufacturers must continue to
expend time, money and effort to ensure compliance with QSR requirements. The
FDA also requires that medical device manufacturers undertake post-market
reporting for serious injuries, deaths, or malfunctions associated with their
products. If safety or efficacy problems occur after the product reaches the
market, the FDA may take steps to prevent or limit further marketing of the
product. Additionally, the FDA actively enforces regulations concerning
marketing of devices for indications or uses that have not been cleared or
approved by the FDA.

     The Company's products also are subject to regulatory requirements for
electronic products under the Radiation Control for Health and Safety Act of
1968. The FDA requires that manufacturers of diagnostic x-ray systems comply
with certain performance standards, and record keeping, reporting, and labeling
requirements.

     The Company may export a medical device not approved in the United States
to any country without obtaining FDA approval, provided that the device (i)
complies with the laws of that country and (ii) has valid marketing
authorization or the equivalent from the appropriate authority in a "listed
country." The listed countries are Australia, Canada, Israel, Japan, New
Zealand, Switzerland, South Africa and countries in the European Union and the
European Economic Area. Export of unapproved devices that would be subject to
PMA requirements if marketed in the United States and that do not have marketing
authorization in a listed country generally continue to require prior FDA export
approval.

PROPRIETARY RIGHTS

     The Company believes that its sales are dependent in part on certain
proprietary features of the products it manufactures and/or markets. The Company
relies primarily on know-how, trade secrets and trademarks to protect those
intellectual property rights, other than the application by the licensor of the
Galileo(TM) products, ithas not sought patent protection for such products. The
VibraFlex(R) product is a registered trademark held by the Company. There can be
no assurance that these measures will be adequate to protect the rights of the
Company. To the extent that intellectual property rights are not adequately
protected, the Company may be vulnerable to competitors who attempt to copy the
Company's products or gain access to the trade secrets and know-how related to
such products. Further, there can be no assurance that the Company's competitors
will not independently develop substantially equivalent or superior technology.
The


                                      -16-



Company is not the subject of any litigation regarding proprietary rights, and
the Company believes that the technologies used in its products were developed
independently. In addition, the Company's business depends on proprietary
information regarding customers and marketing, and there can be no assurance
that the Company will be able to protect such information.

BACKLOG

     Backlog consists of signed purchase orders received by the Company from its
customers. As of December 31, 2005, the Company had backlogs of $374,850. The
Company's ability to ship products depends on manufacturers whose products are
distributed by the Company. Purchase orders are generally cancelable. The
Company believes that its backlog as of any date is not a meaningful indicator
of future operations or net revenues for any future period.

PRODUCT LIABILITY INSURANCE

     The Company's business involves the inherent risk of product liability
claims. If such claims arise in the future they could have a material adverse
impact on the Company. The Company maintains product liability insurance on a
"claims made" basis with respect to its products in the aggregate amount of $6.0
million, subject to certain deductibles and exclusions. The Company's agreements
with the manufacturers of other products distributed by the Company require that
such manufacturers maintain product liability insurance that covers the Company
as an additional named insured. There is no assurance that existing coverage
will be sufficient to protect the Company from risks to which it may be subject,
including product liability claims, or that product liability insurance will be
available to the Company at a reasonable cost, if at all, in the future or that
insurance maintained by the other manufacturers will cover the Company.

EMPLOYEES

     At December 31, 2005, the Company had 10 employees and 9 consultants, of
whom 8 were engaged in direct sales and marketing activities. The remaining
employees and consultants are in finance, administration, product development
and customer service. No employees of the Company are covered by any collective
bargaining agreements, and management considers its employee relations generally
to be good.

ITEM 2. PROPERTIES

     The Company leases its principal executive offices, which are located at
106 Corporate Park Drive, Suite 102, White Plains, New York 10604. 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:

2006    30,816
2007    31,584
2008    18,424
       -------
       $80,824
       =======


                                      -17-



ITEM 3. LEGAL PROCEEDINGS

     In the normal course of business, the Company is named as defendant in
lawsuits in which claims are asserted against the Company. In the opinion of
management, the liabilities if any, which may ultimately result from such
lawsuits, are not expected to have a material adverse effect on the financial
position, results of operations or cash flows of the Company. No claims are
currently outstanding.

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

     No matters were submitted to a vote to the Company's security holders
during the fourth quarter of the fiscal year ended December 31, 2005.


                                      -18-



                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock is traded on the Over-The-Counter Bulletin Board
under the symbol "OMRX.OB". Prior to September 23, 1998, the Company's Common
Stock was traded on the NASDAQ National Market. The following table sets forth,
for the periods indicated, the high and low sales prices per share of Common
Stock, as reported by the Over-The-Counter Bulletin Board for the respective
periods. The following prices reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.

PERIOD FROM JANUARY 1, 2004 THROUGH DECEMBER 31, 2004:

                  High    Low
                 -----   -----
First Quarter    $0.13   $0.05
Second Quarter    0.20    0.10
Third Quarter     0.19    0.10
Fourth Quarter    0.53    0.18

PERIOD FROM JANUARY 1, 2005 THROUGH DECEMBER 31, 2005:

                  High    Low
                 -----   -----
First Quarter    $0.50   $0.27
Second Quarter    0.41    0.21
Third Quarter     0.35    0.19
Fourth Quarter    0.21    0.10

     As of February 13, 2006, the sales price per share of Common Stock, as
reported by the Over-The-Counter Bulletin Board, was $0.17.

     As of February 13, 2006 there were approximately 92 outstanding
stockholders of record of the Company's Common Stock. This number excludes
persons whose shares were held of record by a bank, broker or clearing agency.

     The Company has not paid any cash dividends on its shares of Common Stock
and does not expect to pay any cash dividends in the foreseeable future. The
Company's policy has been to reinvest any earnings in the continued development
and operations of its business.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the Financial Statements and the
related Notes thereto included in Item 7 of this Report. The following
discussion contains forward-looking statements which involve risks and
uncertainties, some of which are described in the Introduction to this Report.
The Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those
discussed in the Introduction.


                                      -19-



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 to us at the time they are made.

     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 record
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 our distributors. The provision for
product warranties represents an estimate for future claims arising under the
terms of our 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.

     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.


                                      -20-



Liquidity and Capital Resources

     The Company has financed operations for the past three years through the
sale of equity securities and the issuance of debt. For the two years ending
December 31, 2005 and 2004, the Company incurred aggregate net losses from
operations of $4,332,317 and negative cash flow from operations of $3,000,606.
During 2005, the Company incurred a net loss of $2,388,132 and negative cash
flow from operations of $1,880,483. As of December 31, 2005, the Company had
approximately $22,861 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. However, 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.

     The Company pursued several initiatives in 2005 to increase liquidity,
including obtaining equity and debt financings and a bank line of credit. The
Company has raised $1,740,000 in the private placement of shares of its Common
Stock in the first quarter of 2005. In October 2005, the Company obtained a
$350,000 line of credit from HSBC Bank USA, N.A, or HSBC. The line of credit is
secured by all of the Company's assets and is guaranteed by Mr. Bonmati (up to
$175,000) and Mr. Koenig (up to $175,000). In connection with these guarantees,
the Company granted these officers or their affiliates warrants to purchase up
to 175,000 shares of Common Stock each at $0.25 per share. The Company recorded
total guaranty expenses of $73,430 in connection with the issuance of warrants.
On December 31, 2005, the Company had outstanding borrowings of $330,000 in
principal amount under this line of credit. Interest on borrowings under the
credit line accrues at HSBC's prime rate plus 1.50%.

     The level of the Company's cash and cash equivalents increased to $22,861
at December 31, 2005 from $0 at December 31, 2004. The Company spent $1,880,483
in cash for operations and $30,557 for investments during the year ended
December 31, 2005 which expenditures were offset by $1,933,901 in cash provided
by financing activities during the twelve month period. Through these financing
activities the Company received $285,000 in loans from affiliated and
unaffiliated parties, $1,740,000 from the issuance of shares of Common Stock and
$118,901 pursuant to the exercise of stock options and warrants, which were
offset by the repayment of $540,000 in borrowings from directors and officers.

     In 2004, the Company had issued a principal amount of $1,400,000 in new
notes which bore interest at the JPMorgan Chase prime rate plus one, each of
which was to mature, subject to certain early triggers, one year from the date
of issuance. These funds were borrowed to cover immediate cash needs. These
notes were all repaid or converted into shares of Common Stock as of March 4,
2005.

     In December 2004, the Board of Directors authorized the Company to offer to
the holders of $2,145,000 in principal amount of promissory notes issued at
various times between June 2003 and January 2005 the opportunity to convert the
principal amount of such notes into shares of the Company's Common Stock.
Holders of such notes elected to convert $1,545,000 of notes, or the Total
Conversion Amount, into 5,492,995 shares of Common Stock at $0.2813 per share (a
20% discount from the weighted average price of the Common Stock during the
period commencing November 15, 2004 and ending December 15, 2004). All of the
notes bore interest at the JPMorgan Chase prime rate plus 1% and matured at
various times through January 2006. Of the Total Conversion Amount, $1,300,000
was represented by notes held by officers, directors or affiliates - Michael W.
Huber ($350,000), Neil H. Koenig ($120,000), Reynald G. Bonmati


                                      -21-



($660,000), Andre-Jacques Neusy ($120,000), and Albert S. Waxman ($50,000). The
actual conversion took place on January 17, 2005, but took effect retroactively
on December 31, 2004. The issuance of the shares of Common Stock pursuant to the
conversion was made pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder. The converted notes did not have a beneficial conversion
feature. After giving effect to such conversion, $600,000 in principal amount of
notes remained outstanding of which $455,000 were held by officers and
directors. Out of the $600,000 in principal amount of outstanding notes,
$500,000 was repaid in March 2005 (including the notes issued 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)), and $100,000 was cancelled in conjunction with the
issuance of Common Stock to Psilos described below.

     On December 15, 2004, the Board authorized the commencement of negotiations
with Psilos Group Partners II SBIC, L.P, or Psilos, and other parties regarding
the private sale of shares of Common Stock. Dr. Waxman, a director of the
Company, is a Senior Managing Member of the general partner of Psilos. 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
closing price was approximately $0.28 per share. When Psilos was ready to close
the transaction on March 3, 2005, such discount average price had decreased to
approximately $0.24 per share. The market price of Common Stock on March 3, 2005
was $0.43. The parties, however, agreed to price the deal at $0.25 per share,
with Psilos being issued 4,000,000 shares of Common Stock for a purchase price
of $1,000,000. In connection with the Psilos purchase, Mr. Bonmati agreed to
purchase 400,000 shares of Common Stock for a purchase price of $100,000. The
$100,000 purchase price was not paid by Mr. Bonmati in cash but was deemed paid
as a result of his cancellation of an aggregate amount of $100,000 in promissory
notes issued by the Company to him in 2004. The Board unanimously authorized and
ratified the transaction, with all related parties abstaining from the vote. The
Company privately sold an additional 360,000 shares of Common Stock to
unaffiliated third parties for a purchase price of $90,000 contemporaneously
with this private offering. The discount on the 4,000,000 shares issued to
Psilos did not relate, in any part, to compensation for director services of 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 February 25, 2005, the Company entered into a securities purchase
agreement with Rock Creek Investment Partners, L.P., or Rock Creek. 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 in a private
placement. The market price of the Common Stock on February 25, 2005 was $0.33.

     On March 11, 2005, the Company granted to John C. Sites, Jr., a consultant
to the Company, a warrant to purchase up to 500,000 shares of Common Stock at
$0.33 per share. The value of the warrants on the date of grant was $144,600,
based on the application of the Black-Scholes option pricing model and this
value was recorded as consulting expense and as additional paid-in capital. Mr.
Sites transferred these warrants to Rock Creek in 2005.

     During the year ended December 31, 2005, the Company borrowed $285,000 in
principal amount from related and unaffiliated parties, as compared to
borrowings of $1,400,000 from related parties and others in 2004. $40,000 of the
borrowings in 2005 were short term, non-interest bearing loans and were repaid
in full as of December 31, 2005. $25,000 were short term loans, bearing interest
at prime which mature when the Company receives proceeds from their next sale,
and the remaining $220,000 were notes bearing interest at the JPMorgan Chase
prime rate plus one (8.25% at December 31, 2005) which mature one year from the
date of issuance.

     In December 2005, the Company granted an Officer 400,000 shares of Common
Stock at $0.19 per share for services rendered. The value of the stock was
$76,000 and recorded as consulting expense, additional paid in capital, and
Common Stock.

     During 2005, the Board approved a grant of stock options to employees and
directors to purchase an aggregate of


                                      -22-



1,355,000 shares of Common Stock with exercise prices equal to 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, who received options to purchase
680,000 shares of Common Stock) and vest over 4 years. During 2005, the Board
also approved a grant of stock options to independent consultants to purchase an
aggregate of 260,000 shares of Common Stock. The value of these options was
$59,109, based on the application of the Black-Scholes option pricing model and
this value was recorded as consulting expense and additional paid-in capital.

     At the 2005 annual meeting of stockholders on June 14, 2005, the
stockholders approved an amendment to the Amended and Restated 1994 Stock Option
and Incentive Plan for Employees, and the Amended and Restated 2000 Stock Option
and Incentive Plan for Non Employee Directors and Consultants, to increase the
authorized number of shares reserved for stock options from 3 million to 5
million and from 1 million to 1.5 million, respectively. In addition, the
stockholders approved at this meeting an amendment to the Company's Certificate
of Incorporation to authorize an increase in the number of authorized shares of
Common Stock from 45,000,000 to 75,000,000.

     The Company has backlog of orders of $374,850 as of December 31, 2005 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 $2,388,132 ($0.06 per share based on
42,035,129 weighted average shares) for the year ended December 31, 2005
compared to net loss of $1,944,185 ($0.06 per share based on 31,235,286 weighted
average shares) for the year ended December 31, 2004.

     Revenue for the year ended December 31, 2005 increased $334,648 (or 28.4 %)
to $1,514,525 from $1,179,877 from the comparable period of fiscal 2004. The
increase in revenue was primarily due to an increase in XCT, VibraFlex(R) and
Orbasone(TM) sales during 2005.

     Cost of revenue as a percentage of revenue was 40.5% and 44.8% for the year
ended December 31, 2005 and 2004, respectively, resulting in a gross margin of
59.5% for the year ended December 31, 2005 compared to 55.2% for the comparable
period of 2004. The increase in gross margin was due to an increase in
VibraFlex(R) sales in 2005, which maintains a large gross profit percentage.

     Sales and marketing expense for the year ended December 31, 2005 increased
$548,534 (or 75.4%) to $1,276,516 from $727,982 for the year ended December 31,
2004. The increase is due to the Company's increase in commissions and
additional sales staff hired to market and sell the Orbasone(TM).

     General and administrative expense for the year ended December 31, 2005
increased $452,227 (or 37.9%) to $1,645,967 from $1,193,740 for the year ended
December 31, 2004. The increase was primarily due to an increase in professional
fees associated with the Company's capital structure.


                                      -23-



     Research and development expense for the year ended December 31, 2005
decreased $70,738 (or 18.3%) to $314,959 from $385,697 for the year ended
December 31, 2004. The decrease was primarily due to decreased expenses incurred
as a result of the PMA process in 2004. The Orbasone(TM) was approved by FDA in
2005.

     Interest expense decreased $233,655 (or 80.9%) to $55,050 for the year
ended December 31, 2005 from $288,705 for the year ended December 31, 2004.
Interest expense decreased due to the satisfaction of all notes issued in 2003
and 2004 during March 2005.

New Accounting Pronouncements

     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.

     In May 2005, the FASB issued FAS No. 154, "Accounting Changes and Error
Corrections - A Replacement of APB Opinion No. 20 and FAS Statement No. 3" ("FAS
154"). FAS 154 changes the requirements for the accounting and reporting of a
change in accounting principle by requiring retrospective application to prior
periods' financial statements of the change in accounting principle, unless it
is impractical to do so. FAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005. We
do not expect the adoption of FAS 154 to have any impact on our financial
statements.

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 December 31, 2005 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 $2,368 change in
annual interest expense.


                                      -24-



ITEM 7. FINANCIAL STATEMENTS

                              FINANCIAL STATEMENTS

                                      INDEX

                                                                            Page
                                                                            ----

Report of Independent Registered Public Accounting Firm                      26
Financial Statements:
Balance Sheet as of December 31, 2005                                        27
Statements of Operations for the years ended
December 31, 2005 and 2004                                                   28
Statements of Changes in Stockholders' Deficit
for the years ended December 31, 2005 and 2004                               29
Statements of Cash Flows for the years ended
December 31, 2005 and 2004                                                   30
Notes to Financial Statements                                                31


                                      -25-



                        Report of Independent Registered
                             Public Accounting Firm

Stockholders and Board of Directors of
Orthometrix, Inc.:

We have audited the accompanying balance sheet of Orthometrix, Inc. (the
"Company") as of December 31, 2005 and the related statements of operations,
changes in stockholders' deficit, and cash flows for each of the two years ended
December 31,2005. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Orthometrix, Inc. as of
December 31, 2005, and the results of their operations and their cash flows for
each of the two years ended December 31, 2005 in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements for the year ended December 31, 2005 have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company has suffered
recurring operating losses and has a net capital deficiency that raise
substantial doubt about its ability to continue as going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


/s/ Radin, Glass & Co., LLP
-------------------------------------
New York, New York
February 13, 2006


                                      -26-



                                ORTHOMETRIX, INC.
                                  BALANCE SHEET
                             AS OF DECEMBER 31, 2005

ASSETS
Current assets:
   Cash                                             $     22,861
   Accounts receivable - trade                            35,540
   Inventories                                           262,496
   Prepaid expenses and other current assets             156,131
                                                    ------------
      Total current assets                               477,028
Property and equipment, net                               42,036
Other                                                     11,658
                                                    ------------
      Total Assets                                  $    530,722
                                                    ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Accounts payable - trade                         $    704,421
   Accrued expenses                                       57,257
   Unearned service revenue                               37,945
   Related party loans                                   183,069
   Loan payable - equipment                               16,826
                                                    ------------
      Total current liabilities                          999,518
   Line of credit                                        330,000
Stockholders' deficit:
   Common stock - $0.0005 par value
      44,207,368 shares issued and outstanding
      and 75,000,000 shares authorized                    22,103
   Preferred stock - $0.0005 par value
      1,000,000 shares authorized                             --
   Additional paid-in capital                         43,041,483
   Accumulated deficit                               (43,862,382)
                                                    ------------
      Total stockholders' deficit                       (798,796)
                                                    ------------
      Total Liabilities and Stockholders' Deficit   $    530,722
                                                    ============

                     See notes to the financial statements.


                                      -27-



                                ORTHOMETRIX, INC.
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

                                                          2005          2004
                                                      -----------   -----------
Revenue                                               $ 1,514,525   $ 1,179,877
Cost of revenue                                           613,869       528,809
                                                      -----------   -----------
   Gross profit                                           900,656       651,068

Sales and marketing expense                             1,276,516       727,982
General and administrative expense                      1,645,967     1,193,740
Research and development expense                          314,959       385,697
                                                      -----------   -----------
   Operating loss                                      (2,336,786)   (1,656,351)

Interest expense                                          (55,050)     (288,705)
Interest income                                             3,679           334
Other income                                                   25           537
                                                      -----------   -----------
Net loss                                              $(2,388,132)  $(1,944,185)
                                                      ===========   ===========
Basic and diluted weighted average shares              42,053,129    31,235,286
                                                      ===========   ===========
Basic and diluted loss per share                      $     (0.06)  $     (0.06)
                                                      ===========   ===========

                     See notes to the financial statements.


                                      -28-



                                ORTHOMETRIX, INC.
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004



                                                                            Additional
                                                                   Common     Paid-In      Accumulated
                                         Shares        Total       Stock      Capital        Deficit
                                       ----------   -----------   -------   -----------   ------------

Balance as of December 31, 2003        29,544,621      (785,118)   14,771    38,730,176    (39,530,065)
Warrants issued as compensation
   to non-employees in connection
   with notes payable                          --       332,622        --       332,622             --
Stock options and warrants issued as
   compensation to non-employees               --        31,650        --        31,650             --
Stock options and warrants exercised      356,323        29,206       178        29,028             --
Stock issued as compensation
   to non-employees                       317,000        65,937       159        65,778             --
Notes converted to stock                5,492,995     1,431,865     2,746     1,429,119             --
Net Loss                                       --    (1,944,185)       --            --     (1,944,185)
                                       ----------   -----------   -------   -----------   ------------
Balance as of December 31, 2004        35,710,939   $  (838,023)  $17,854   $40,618,373   $(41,474,250)
                                       ==========   ===========   =======   ===========   ============
Warrants issued as compensation
   to non-employees in connection
   with notes payable                          --        43,318        --        43,318             --
Stock options and warrants issued as
   compensation to non-employees               --       277,141        --       277,141             --
Stock options and warrants exercised    1,015,000       118,901       508       118,393             --
Stock issued in connection with
   equity financing                     6,681,429     1,812,000     3,341     1,808,659             --
Notes converted to stock                  400,000       100,000       200        99,800             --
Stock issued as compensation
   to non-employees                       400,000        76,000       200        75,800             --
Net Loss                                       --    (2,388,132)       --            --     (2,388,132)
                                       ----------   -----------   -------   -----------   ------------
Balance as of December 31, 2005        44,207,368   $  (798,795)  $22,103   $43,041,484   $(43,862,382)
                                       ==========   ===========   =======   ===========   ============


                       See notes to financial statements.


                                      -29-



                                ORTHOMETRIX, INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004



                                                                 2005          2004
                                                              -----------   -----------

Cash Flows From Operating Activities:

Net loss                                                      $(2,388,132)  $(1,944,185)
Adjustments to reconcile net loss to net cash used in
   operating activities:
      Stock issued as compensation to non-employees                76,000        65,937
      Stock options and warrants issued as compensation
         to non-employees                                         277,141        31,650
      Amortization expense                                         39,984       160,197
      Depreciation expense                                          6,276         5,611
      Fair value of stock at conversion                            72,000        47,789
Changes in assets and liabilities:
      Decrease in accounts receivable                             114,235       350,273
      Increase (decrease) in inventories                         (142,036)        6,838
      Increase in prepaid expenses and other current assets       (48,335)      (56,749)
      Increase in accounts payable                                151,595       165,495
      Decrease (increase) in accrued expenses                     (86,472)       57,359
      Increase (decrease) in unearned service revenue              30,435        (4,693)
      Increase (decrease) in other liabilities                     16,826        (5,645)
                                                              -----------   -----------
         Net cash used in operating activities                 (1,880,483)   (1,120,123)
                                                              -----------   -----------
Cash Flows From Investing Activities:

   Purchase of property and equipment                             (30,557)       (3,204)
                                                              -----------   -----------
         Cash used in investing activities                        (30,557)       (3,204)
                                                              -----------   -----------
Cash Flows From Financing Activities:

   Proceeds from line of credit                                   330,000            --
   Proceeds of borrowings from unrelated parties                   70,000       405,000
   Proceeds of borrowings from related parties                    215,000       995,000
   Repayment of borrowings from related parties                  (540,000)     (350,000)
   Exercise of stock options and warrants                         118,901        29,206
   Proceeds for issuance of common stock                        1,740,000            --
                                                              -----------   -----------
         Net cash provided by financing activities              1,933,901     1,079,206
                                                              -----------   -----------
Net increase (decrease) in cash                                    22,861       (44,121)

Cash at beginning of year                                              --        44,121
                                                              -----------   -----------
Cash at end of year                                           $    22,861   $        --
                                                              ===========   ===========
Supplemental disclosure of cash flow information

   Cash paid for interest                                     $    39,836   $    50,398
                                                              ===========   ===========
   Cash paid for income taxes                                 $       696   $     2,574
                                                              ===========   ===========


                     See notes to the financial statements.


                                      -30-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

1.   THE COMPANY AND GOING CONCERN CONSIDERATION:

     Orthometrix, Inc. ("OMRX" or the "Company") markets, sells, and services
     several musculoskeletal product lines used in pharmaceutical research,
     diagnostic and monitoring of bone and muscle disorders in sports medicine,
     rehabilitative medicine, physical therapy and pain management. Prior to
     April 11, 2002 the Company also developed, manufactured, sold and serviced
     a wide range of traditional bone densitometers used to assess bone mineral
     content and density, one of several factors used by physicians to aid in
     the diagnosis and monitoring of bone disorders, particularly osteoporosis.

     During the past two years, the Company has experienced aggregate losses
     from operations of $4,332,317 and has incurred a total negative cash flow
     from operations of $3,000,606 for the same two-year period. 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 additional lines of credit. In October
     2005, the Company obtained $350,000 of credit from HSBC Bank USA, N.A. The
     line of credit has been guaranteed by certain officers and directors of the
     Company and in connection with this guarantee they have been granted
     warrants to purchase up to 350,000 shares of Common Stock at $0.25 per
     share. The Company recorded total guaranty expenses of $73,430 in
     connection with the issuance of warrants. 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.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Fair Value of Financial Statements

     Statement of Financial Accounting Standards (SFAS) No. 107, as amended by
     SFAS No. 119, "Disclosures about Fair Value of Financial Instruments",
     requires that the Company disclose estimated fair values for its financial
     instruments. Fair value estimates are made at a specific point in time,
     based on relevant market information and information about the financial
     instrument. Because no market exists for a significant portion of the
     Company's financial instruments, fair values are based on judgments
     regarding future expected loss experience, current economic conditions,
     risk characteristics of various financial instruments and other factors.
     These estimates are subjective in nature and involve uncertainties and
     matters of significant judgment and therefore cannot be determined with
     precision.

     Management of the Company estimates that all financial instruments of OMRX,
     due to their short-term nature, have a fair value equal to their carrying
     value.


                                      -31-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     Revenue and Cost Recognition

     The Company primarily 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.

     In the United States and Canada, the Company offers one-year warranties on
     both the hardware and software included in its systems (except for computer
     systems, if any, which are covered under their respective manufacturers'
     warranty), as well as extended warranty contracts. Outside of the United
     States and Canada, the Company only offers one-year warranties on parts;
     the labor warranty is provided by the Company's distributors. The Company
     also offers six-month warranties on replacement parts worldwide. The
     Company provides warranty services to its customers in the United States
     and Canada. Any costs incurred by the Company in connection with a warranty
     of a system not manufactured by the Company are borne by such manufacturer
     pursuant to the applicable distribution agreement. Therefore, no warranty
     reserve is required by products sold by the Company.

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

     Stock-based Compensation

     Stock-based compensation related to employees and directors is accounted
     for in accordance with Accounting Principles Board Opinion Number 25
     "Accounting for Stock Issued to Employees". Stock-based compensation
     related to non-employees is accounted for in accordance with SFAS No. 123
     and SFAS No. 148 "Accounting for Stock-Based Compensation".

     Inventory

     Inventories are stated at the lower of cost or market; cost is determined
     principally by the first-in, first-out method.

     Property and Equipment

     Furniture and fixtures are recorded at cost and are depreciated using the
     straight-line method over three to seven years.

     The Company's demonstration systems used for marketing and customer service
     purposes are carried at the lower of cost or net realizable value until the
     time of sale. From time to time, the Company may judge it desirable for
     marketing purposes to provide a device to an appropriate entity. In such
     cases, the Company will carry the device at cost less amortization, with
     amortization calculated on a straight-line basis over thirty-six months or
     expense the device if appropriate.


                                      -32-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     Long-lived Assets

     Management evaluates on an ongoing basis whether events or changes in
     circumstances exist that would indicate that the carrying value of the
     Company's long-lived assets may not be recoverable. Should there be an
     indication of impairment in the value of its long-lived assets, management
     would estimate the future cash flows expected to result from the use of the
     assets and their eventual disposition and recognize a specific provision
     against such assets if the aggregate nominal estimated future undiscounted
     cash flows are less than the carrying value of the assets. In considering
     whether events or changes in circumstances exist, management assesses
     several factors, including a significant change in the extent or manner in
     which the assets are used, a significant adverse change in legal factors or
     in the business climate that could affect the value of the assets, an
     adverse action or assessment of a regulator, and a current period operating
     or cash flow loss combined with a history of operating or cash flow losses
     or a projection or forecast that demonstrates continuing losses associated
     with such assets.

     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.

     Advertising

     The Company expenses the cost of advertising as incurred. Advertising
     expenses of approximately $23,024 and $31,100 were incurred for the years
     2005 and 2004, respectively, and are included in sales and marketing
     expense.

     Research and Development

     Research and development costs are charged to operations as incurred.


                                      -33-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     Income (Loss) per Share

     Basic per share amounts are computed using the weighted average number of
     common shares outstanding. Diluted per share amounts are computed using the
     weighted average number of common shares outstanding, after giving effect
     to dilutive options, using the treasury stock method.

     Options to purchase 3,792,500 and 3,432,500, shares of common stock were
     outstanding at December 31, 2005, and 2004, respectively, but were not
     included in the computation of diluted income (loss) per share because
     their effect was anti-dilutive.

     Concentration of Credit Risk

     During 2005, approximately 62% of total sales was derived from the
     Company's eight largest customers. During 2004, approximately 48% of total
     sales was derived from the Company's four largest customers. The Company
     generally sells on credit terms ranging from thirty to ninety days or
     against irrevocable letters of credit. Any financing of the end user is the
     decision of, and dependent on, the distributor in each territory. The
     Company sells to customers in various geographic territories worldwide.

     Management 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 at the date of the financial statements and the reported
     amounts of revenue and expenses during the reporting period. 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.

     Foreign Exchange Exposure

     The Company's purchases and sales of products and services are made
     primarily in U.S. dollars. As a result, the Company has minimal exposure to
     foreign exchange risk in the short-term. However, a portion of the
     Company's products are supplied by Stratec and sold along with the
     Company's products into foreign markets. Any significant and lasting change
     in the exchange rates between the U.S. dollar and the currencies of those
     countries could have a material effect on both the costs and sales of those
     products and services.

     Cash and Cash Equivalents

     The Company considers all highly liquid instruments with original
     maturities of three months or less at the time of purchase to be cash and
     cash equivalents.


                                      -34-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     Segment Reporting

     The Company has one reportable segment. The Company evaluates performance
     based on operating income, which is income before interest and
     non-operating items.

     Accounting Pronouncements

     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.

     In May 2005, the FASB issued FAS No. 154, "Accounting Changes and Error
     Corrections - A Replacement of APB Opinion No. 20 and FAS Statement No. 3"
     ("FAS 154"). FAS 154 changes the requirements for the accounting and
     reporting of a change in accounting principle by requiring retrospective
     application to prior periods' financial statements of the change in
     accounting principle, unless it is impractical to do so. FAS 154 is
     effective for accounting changes and corrections of errors made in fiscal
     years beginning after December 15, 2005. We do not expect the adoption of
     FAS 154 to have any impact on our financial statements.

3.   DISCONTINUED OPERATIONS AND CONTINGENCY:

     On April 11, 2002, the Company sold its bone measurement business to
     CooperSurgical Acquisition Corp., ("Cooper") a wholly-owned subsidiary of
     the Cooper Companies, Inc. The Company was entitled to receive up to a
     maximum of $12.0 million for the sale (the "Asset Sale"). The Company
     received $3.5 million of the purchase price at the closing of the Asset
     Sale. An additional $1.0 million of the remaining purchase price (plus or
     minus any required purchase price adjustment) was to be released to the
     Company by Cooper during August 2002 upon submission to the Company by
     Cooper of a closing statement setting forth the value of the net assets and
     liabilities of the transferred business in the Asset Sale as of the closing
     date of the Asset Sale. In August 2002, Cooper submitted a closing


                                      -35-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

3.   DISCONTINUED OPERATIONS AND CONTINGENCY (CONTINUED):

     statement to the Company and notified the Company of a downward adjustment
     to the purchase price based on Cooper's purported valuation of the net
     assets and liabilities of the transferred business. Based on its downward
     adjustment, Cooper paid approximately $405,000 to the Company on August 16,
     2002. The Company did not agree with Cooper's valuation of the applicable
     net assets and liabilities and, accordingly, did not agree with Cooper's
     downward purchase price adjustment. The Company and Cooper were unable to
     settle the disagreement and have engaged an independent accounting firm to
     provide a binding resolution of such disagreement. During June 2003 the
     arbitrator settled the disagreement in favor of the Company for $268,569.
     Accordingly, the Company received a total of $673,569 out of the potential
     $1,000,000 installment payable in connection with the Asset Sale to Cooper.
     The settlement from Cooper was received in July 2003. The remaining
     $500,000 installment of the purchase price was received on January 30,
     2004.

     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 by the Company.

4.   DISTRIBUTION AGREEMENTS:

     STRATEC

     Under a Distribution Agreement, dated as of October 1, 1999, Stratec gave
     Bionix L.L.C., a company of which Reynald Bonmati is president, the
     exclusive right to distribute all Stratec products in the United States,
     Canada, Mexico, Central and South America and the Caribbean. The Company
     entered into an Assignment and Assumption Agreement, dated as of April 12,
     2002, with Bionix, L.L.C. whereby Bionix assigned to the Company all of its
     right, title and interest in, to and under this Distribution Agreement.

     Under the Distribution Agreement, Stratec grants the Company a license,
     with the right to sublicense, to market, sell and service the pQCT-based
     systems in the United States, Canada, Mexico, Central and South America and
     the Caribbean. Under the terms of the four-year Distribution Agreement, the
     Company may purchase these systems from Stratec at a fixed price to be
     adjusted from time to time by mutual consent. On October 1, 2005, the
     Distribution Agreement with Stratec was renewed for one year, and will be
     renewed on every October 1st for a one-year term provided that the Company
     or Stratec provide the other party thereto with proper and timely written
     notice of the election to renew the term of the Distribution Agreement.

     NOVOTEC

     Under a Distribution Agreement, dated as of October 1, 1999, Novotec gave
     Bionix the exclusive right to distribute the Galileo(TM) and Leonardo(TM)
     product lines in the United States, Canada, Mexico, Central and South
     America and the Caribbean. The Company entered into an Assignment and
     Assumption Agreement, dated as of April 12, 2002, with Bionix, whereby
     Bionix assigned to the Company all of its right, title and interest in, to
     and under this Distribution Agreement.


                                      -36-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004



4.   DISTRIBUTION AGREEMENTS (CONTINUED):

     NOVOTEC (continued)

     Under the Distribution Agreement, Novotec also grants the license,
     including a right to sublicense, to market, sell and service the
     Galileo(TM) and Leonardo(TM) systems in the United States, Canada, Mexico,
     Central and South America and the Caribbean. Under the terms of the
     four-year Distribution Agreement, the Company may purchase the Galileo(TM)
     and Leonardo(TM) systems from Novotec at a fixed price to be adjusted from
     time to time by mutual consent. On October 1, 2005, the Distribution
     Agreement with Novotec was renewed for one year, and may be renewed by
     either party upon prior notice to the other on every October 1st for
     consecutive one-year terms provided that the Company or Novotec provide the
     other party thereto with proper and timely written notice of the election
     to renew the term of the Distribution Agreement.

     MIP

     Under a Product Approval and Licensing Agreement, dated as of February 12,
     2002, MIP licensed to Bionix the Orbasone(TM) product line. The Company
     entered into an Assignment and Assumption Agreement, dated as of April 12,
     2002 with Bionix, whereby Bionix assigned to the Company all of its right,
     title and interest in, to and under this agreement.

     Under the Product Approval and Licensing Agreement, MIP granted the Company
     an exclusive and perpetual authority, right and license to use the
     technology in the Orbasone(TM), to seek PMA approval for the Orbasone(TM)
     and to assemble, develop, manufacture, market, promote, sell, distribute
     and service the Orbasone(TM) in North America.

5.   INVENTORIES:

     Inventories at December 31, 2005 consist of products kits, spare parts and
     sub-assemblies.

6.   PROPERTY AND EQUIPMENT:

     Property and equipment consisted of the following as of December 31, 2005:

     Furniture and fixtures     $ 168,580
     Accumulated depreciation    (126,544)
                                --------
                                $  42,036
                                =========

7.   STOCKHOLDERS' EQUITY (DEFICIT):

     Effective with stockholder approval received on June 14, 2005, the Company
     amended its Certificate of


                                      -37-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


7.   STOCKHOLDERS' EQUITY (DEFICIT): (CONTINUED)

     Incorporation increasing the number of authorized shares of Common Stock
     from 45,000,000 to 75,000,000. The Company has authorized 1,000,000 shares
     of preferred stock, par value $0.0005 per share, issuable in series with
     such rights, powers and preferences as may be fixed by the Board of
     Directors. At December 31, 2005 and 2004, there was no preferred stock
     outstanding.

     On December 2, 2005, the Company registered 10,926,429 shares of Common
     Stock with the filing of Form SB-2. 6,721,429 of the shares registered are
     currently outstanding and 4,205,000 shares are issuable upon the exercise
     of warrants held by certain officers, directors and unaffiliated
     individuals.

8.   COMPENSATION PROGRAMS:

     Stock Option Plan

     The Company has a stock-based compensation plan whereby stock options may
     be granted to officers, employees and non-employee consultants to purchase
     a specified number of shares of Common Stock. All outstanding options
     granted have an exercise price not less than 100% of the market value of
     the Company's Common Stock at the date of grant, are for a term not to
     exceed 10 years, and vest over a four year period at 25% per year.

     At the 2005 annual meeting of stockholders on June 14, 2005, the
     shareholders approved an amendment to the Company's Amended and Restated
     1994 Stock Option and Incentive Plan for Employees, and the Amended and
     Restated 2000 Stock Option and Incentive Plan for Non Employee Directors
     and Consultants, to increase the authorized number of shares reserved for
     stock options from 3 million to 5 million and from 1 million to 1.5
     million, respectively.

     The Amended and Restated 1994 Stock Option and Incentive Plan for Employees
     includes 5,000,000 shares of Common Stock reserved for issuance. Options
     are issued to employees at the discretion of the Board of Directors. During
     2005, 1,335,000 options were issued as compensation to employees. The
     Company has elected to follow APB Opinion No. 25, "Accounting for Stock
     Issued to Employees," in accounting for its employee stock options.
     Accordingly, no compensation expense is recognized in the Company's
     financial statements because the exercise price of the Company's employee
     stock options equals the market price of the Company's Common Stock on the
     date of grant.

     Under the Amended and Restated 2000 Stock Option Plan for Non-Employee
     Directors and Consultants (the "Board Plan"), which has 1,500,000 shares of
     common stock reserved for issuance, each non-employee director receives
     options to acquire shares of Common Stock, vesting in four equal annual
     installments, commencing on the first anniversary of the date of grant, at
     an exercise price per share not lower than the market value on the date of
     grant. A grant to acquire 50,000 shares is effective on the date of the
     director's first election to the Board of Directors and a grant to acquire
     5,000 shares is effective on the date of the director's reelection to the
     Board of Directors. Options are issued to consultants at the discretion of
     the Board of Directors. During 2005, 280,000 options were issued to
     non-employee directors and consultants.


                                      -38-





                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


8.   COMPENSATION PROGRAMS: (CONTINUED)

     Stock Option Plan (continued)

     On October 6, 1998 and December 14, 1998, the Board of Directors approved
     the repricing of certain employee stock options. Approximately 673,750
     shares were repriced to $0.67 per share on October 6, 1998 and December 14,
     1998, representing a price that was not less than the market value at such
     dates. On December 14, 2000 the Board of Directors approved the repricing
     of certain options and accordingly, 1,524,500 shares were repriced to $.15
     per share. Subsequent to the option repricing on December 14, 2000, the
     company measured compensation expense using variable plan accounting.
     Compensation cost continues to be adjusted for increases or decreases in
     the intrinsic value over the term of the options or until they are
     exercised or forfeited, or expire. The effect of this change was not
     material in fiscal year 2005 or 2004.

     The following is a summary of options related to the Amended and Restated
     1994 Stock Option and Incentive Plan for Employees and the Board Plan as of
     December 31:



                                                 Range of                  Range of
                                                  Option                    Option
                                                  Prices                    Prices
                                     2005       Per Share       2004       Per Share
                                  ---------   ------------   ---------   -------------

     Options outstanding
        at beginning of year      3,432,500   $0.02 - 0.67   3,150,000   $0.02 - 0.67
     Cancellations                 (560,000)  $0.06 - 0.37    (620,000)  $0.02 - 0.17
     Granted                      1,615,000   $0.19 - 0.44   1,090,000   $0.055 - 0.30
     Exercised                     (695,000)  $0.06 - 0.15    (187,500)  $0.02 - 0.531
                                  ---------   ------------   ---------   -------------
     Options outstanding at
        end of year               3,792,500                  3,432,500
                                  =========                  =========
     Options exercisable at
        end of year               1,968,563                  2,195,438
                                  =========                  =========
     Options available for
        grant at end of year      1,825,000                    380,000
                                  =========                  =========



                                      -39-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

8.   COMPENSATION PROGRAMS (CONTINUED):

     Stock Option Plan (Continued)

     The following table summarizes information about significant groups of
     stock options outstanding at December 31, 2005:



                              Options Outstanding                         Options Exercisable
                   -----------------------------------------   -----------------------------------------
                                                Weighted                                    Weighted
                     Weighted                    Average         Weighted                    Average
                     Average                   Remaining         Average                    Remaining
     Exercisable     Options     Exercise   Contractual Life     Options     Exercise   Contractual Life
       Prices      Outstanding     Price         in Years      Exercisable     Price        in Years
     -----------   -----------   --------   ----------------   -----------   --------   ----------------

     $.02 - .05     1,121,250      $.048            7              747,313     $.048             7
      .055            495,000       .055            3              495,000      .055             3
      .06 - .13       570,000       .083            5              445,000      .080             6
      .15             151,250       .150            8              151,250      .150             8
      .17             175,000       .170            8               43,750      .170             8
      .19             145,000       .190            8                    0      .190             0
      .20              60,000       .200            8               15,000      .200             8
      .22             160,000       .220            8                    0      .220             0
      .23             125,000       .230           10                    0      .230             0
      .27              20,000       .270            9                    0      .270             0
      .28              65,000       .280           10                    0      .280             0
      .30              90,000       .300            9               11,250      .300             9
      .33             510,000       .330            9                    0      .330             0
      .44              45,000       .440            9                    0      .440             0
      .531             10,000       .531            4               10,000      .531             4
      .67              50,000       .670            6               50,000      .670             6


     Had compensation expense for the Company's 2005 and 2004 grants for the
     stock-based compensation plan been determined based on the fair value of
     the options at their grant dates consistent with SFAS 123 "Accounting for
     Stock-Based Compensation", the Company's net loss and loss per common share
     for 2005 and 2004 would approximate the pro forma amounts below:

                                                          2005          2004
                                                      -----------   -----------
     Net loss:
        As reported                                   $(2,388,132)  $(1,944,185)
        Stock-based employee compensation                 (39,069)      (65,752)
                                                      -----------   -----------
        Pro forma                                     $(2,427,201)  $(2,009,937)
                                                      ===========   ===========
     Loss per share:
        As reported - Basic and diluted                     (0.06)        (0.06)
        Pro forma - Basic and diluted                       (0.06)        (0.06)


                                      -40-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

8.   COMPENSATION PROGRAMS (CONTINUED):

     Stock Option Plan (Continued)

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option pricing model with the following assumptions used
     for grants during each of the years ended December 31, 2005 and 2004:
     dividend yield of 0%, risk-free weighted average interest rate of 4.29% and
     5%, expected volatility factor of 150% and 132% and an expected option term
     of 10 years (or 5 years for 10% shareholders). The weighted average fair
     value at date of grant for options granted during 2005 and 2004 was $0.26
     and $0.17 per option, respectively.

     401(k) Plan

     Pursuant to the Orthometrix, Inc. Retirement Savings Plans, eligible
     employees may elect to contribute a portion of their salary on a pre-tax
     basis. With respect to employee contributions of up to 7% of salary, the
     Company makes a contribution at the rate of 25 cents on the dollar.
     Contributions are subject to applicable limitations contained in the
     Internal Revenue Code. Employees are at all times vested in their own
     contributions; Company matching contributions vest gradually over six years
     of service. The Company's policy is to fund plan contributions as they
     accrue. Contribution expense was $14,103 and $13,623 for the years ended
     December 31, 2005 and 2004, respectively.

9.   INCOME TAXES:

     The Company did not record a provision for income tax expense for the years
     ended December 31, 2005 and 2004 since any provision would be offset by the
     Company's NOL carryforwards.

          Income tax expense (benefit) differs from the statutory federal income
          tax rate of 34% for the years ended December 31 as follows:

                                        2005    2004
                                       -----   -----
          Statutory income tax rate    (34.0%) (34.0%)
          Valuation allowance           42.0    42.0
          State income taxes, net of
             Federal benefit            (8.0)   (8.0)
                                       -----   -----
                                         0.0%    0.0%
                                       =====   =====

     Deferred income taxes reflect the net tax effects of temporary differences
     between the carrying amounts of assets and


                                      -41-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


9.   INCOME TAXES (CONTINUED):

     liabilities for financial statement purposes and the amounts used for
     income tax purposes and net operating loss carryforwards. Significant
     components of the Company's deferred tax assets and liabilities as of
     December 31 are summarized below:

                                           2005
                                       -----------
Deferred tax assets and liabilities:
   Accrued liabilities                 $    23,368
Valuation allowance                        (23,368)
                                       -----------
   Net current deferred tax assets              --
                                       -----------
   Net operating loss carryforwards     (7,990,978)
Valuation allowance                     (7,990,978)
                                       -----------
Net noncurrent deferred tax assets              --
                                       -----------
   Total deferred tax assets           $        --
                                       -----------

     Realization of the deferred tax asset is dependent on the Company's ability
     to generate sufficient taxable income in future periods. Based on the
     historical operating losses and the Company's existing financial condition,
     in 2005 and 2004, 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.

     The Company has utilizable federal and state net operating loss
     carryforwards of approximately $19,026,137 at December 31, 2005 for income
     tax purposes, which expire in 2008 through 2023.

10.  COMMITMENTS AND CONTINGENCIES:

     Employees

     In 2005, the Company entered into various employee agreements with 4 new
     employees. In addition to their base salary, each employee was offered
     various benefits, and in some cases stock options.

     Legal Proceedings

     In the normal course of business, the Company is named as defendant in
     lawsuits in which claims are asserted against the Company. In the opinion
     of management, the liabilities if any, which may ultimately result from
     such lawsuits, are not expected to have a material adverse effect on the
     financial position, result of operations or cash flows of the Company.

     Leases

     Effective August 1, 2003, the Company amended its lease for office space
     expiring on July 31, 2008. Minimum


                                      -42-





                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


10.  COMMITMENTS AND CONTINGENCIES: (CONTINUED)

     Leases (continued)

     future rental commitments with regard to the original and amended lease are
     payable as follows:

     2006    30,816
     2007    31,584
     2008    18,424
            -------
            $80,824
            =======

11.  RELATED PARTY TRANSACTIONS:

     During 2005, the Company borrowed $215,000 from certain officers and
     directors. $40,000 were short term, non-interest bearing loans which were
     repaid in 2005, $25,000 were short term loans, bearing interest at prime
     which mature when the Company receives their next sale proceeds, and the
     remaining $150,000 were notes bearing interest at prime plus one (8.25% at
     December 31, 2005) which mature one year from the date of issuance. In
     addition, the Company issued notes of $70,000 to unaffiliated individuals
     under the same note terms and conditions.

     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.

     As of December 31, 2005, $43,318 of the remaining proceeds received were
     allocated to the warrants based on the application of the Black-Scholes
     option pricing model, with the remaining proceeds of $176,682 allocated to
     the notes payable. The value allocated to the warrants is being amortized
     to interest expense over the term of the notes. At December 31, 2005, the
     unamortized discount on the notes payable is $36,931. During 2005 and 2004,
     the Company recorded interest expense of $45,535 and $288,705,
     respectively.

     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.

     In January 2004, the Company granted a Director of the Company a warrant to
     purchase up to 50,000 shares of Common Stock at $0.05 per share in
     connection with the renewal for one year of an expired note. The value of
     the warrants were based on the application of the Black-Scholes option
     pricing model and valued at $3,415. The value of the warrants was recorded
     as interest expense and as additional paid-in capital.

     In November 2004, the Company granted a consultant warrants to purchase up
     to 75,000 shares of Common Stock at $0.36 per share for consulting services
     in lieu of his monthly retainer. The value of the warrants were based on
     the application of the Black-Scholes option pricing model valued at
     $23,670. The value of the warrants was recorded as


                                      -43-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


11.  RELATED PARTY TRANSACTIONS (CONTINUED):

     consulting expense and as additional paid-in capital.

     In December 2004, the Company granted an Officer 317,000 shares of common
     stock at $0.26 per share for services rendered. The value of the stock was
     based on a 20% discount valued at $65,937. The value of the stock was
     recorded as consulting expense, common stock, and additional paid-in
     capital.

     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 agreed 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.


                                      -44-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

11.  RELATED PARTY TRANSACTIONS (CONTINUED):

     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 September 2005 there were $65,000 borrowings from certain officers
     of the Company. These loans were borrowed to cover immediate cash needs
     prior to securing the credit facility. $40,000 were short term,
     non-interest bearing loans which were repaid in 2005 and $25,000 were short
     term loans, bearing interest at prime, which will be repaid from the
     proceeds of the Company's next sale.

     In October 2005, the Company obtained a $350,000 line of credit from HSBC
     Bank USA, N.A. This loan was guaranteed by certain officers of the Company.
     In connection with the guarantee, the Company issued them warrants to
     purchase up to 350,000 shares of Common Stock at $0.25 per share. The value
     of the warrants were based on the application of the Black-Scholes option
     pricing model and valued at $73,430. The value of the warrants was recorded
     as consulting expense and additional paid-in capital.

     During the fourth quarter of 2005, the Company issued $150,000 notes to
     certain officers and directors and $70,000 to unaffiliated individuals. The
     notes bear interest at prime plus one (8.25% at December 31, 2005) and
     mature one year from the date of issuance.

     In December 2005, the Company granted an Officer 400,000 shares of Common
     Stock at $0.19 per share for services rendered. The value of the stock was
     $76,000 and recorded as consulting expense, additional paid in capital, and
     common stock.

     TRANSACTIONS WITH BIONIX

     The Company and Bionix, a company of which Reynald G. Bonmati, the
     President and Chairman of the Board of the Company is President, were
     parties to three exclusive four-year sub-distribution agreements pursuant
     to which the Company has the right to purchase and sell certain systems and
     products from Bionix at a fixed percentage discount from
     contractually-stated selling prices. Under two separate sub-distribution
     agreements, dated October 1, 1999, the Company had the right to purchase
     and sell the pQCT(R) and Galileo(TM) systems and products. Under the third
     sub-distribution agreement, dated February 17, 2000, the Company had the
     right to purchase and sell the Genestone 190 systems and products. During
     fiscal year 2002, the Company purchased from Bionix systems and products
     equal to approximately $4,500. Following the asset sale to Cooper, the
     Company focused exclusively on its musculoskeletal products and all Bionix
     rights from MIP were assigned to the Company for one dollar. Such rights
     also include the exclusive and perpetual authority, right and license in
     North America to seek PMA approval for the


                                      -45-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

11.  RELATED PARTY TRANSACTIONS (CONTINUED):

     TRANSACTIONS WITH BIONIX (continued)

     Orbasone(TM), and to assemble, manufacture, market, sell and service the
     Orbasone(TM). The Orbasone(TM) systems and products have not yet been
     approved by the U.S. Food and Drug Administration for sale in the U.S.

12.  SUPPLEMENTAL SALES AND CUSTOMER INFORMATION:

     During 2005, approximately 62% of total sales were derived from the
     Company's eight largest customers. During 2004, approximately 48% of total
     sales were derived from the Company's four largest customers. The Company's
     largest customers are medical device distributors.

     The Company's sales consisted of domestic sales to customers and export
     sales to customers in the following geographic territories:

                                 2005                 2004
                          ------------------   ------------------
     Pacific Rim          $   56,394    3.72%  $       --      --%
     Europe/Middle East           --      --        3,000     .26
     Latin America            33,844    2.23        8,257     .70
     Canada                  224,074   14.79       13,597    1.15
     Export Sales                 --      --           --      --
     Domestic Sales        1,200,213   79.26    1,155,023   97.89
                          ----------   -----   ----------   -----
                          $1,514,525   100.0%  $1,179,877   100.0%
                          ==========   =====   ==========   =====

13.  QUARTERLY FINANCIAL DATA (UNAUDITED):



                                                         2005 Quarters
                              -------------------------------------------------------------------
                                 First         Second        Third         Fourth        Total
                              -----------   -----------   -----------   -----------   -----------

Revenue                       $   470,980   $   391,484   $   302,981   $   349,080   $ 1,514,525
Gross Profit                      296,650       221,831       167,219       214,956       900,656
Operating loss                   (577,780)     (343,925)     (564,850)     (850,231)   (2,336,786)
Net loss                         (616,865)     (341,734)     (564,649)     (864,884)   (2,388,132)

Weighted average shares:
Basic and diluted              37,935,677    42,949,624    43,470,248    43,777,205    42,035,129
Basic and diluted per share   $     (0.02)        (0.01)        (0.01)        (0.02)        (0.06)



                                      -46-



                               ORTHOMETRIX, INC.
                         NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


13.  QUARTERLY FINANCIAL DATA (UNAUDITED): (CONTINUED)




                                                         2004 Quarters
                              -------------------------------------------------------------------
                                 First         Second        Third         Fourth        Total
                              -----------   -----------   -----------   -----------   -----------

Revenue                       $   168,387   $   274,468   $   391,226   $   345,796   $ 1,179,877
Gross Profit                       94,679       185,643       227,739       143,007       651,068
Operating loss                   (385,313)     (272,248)     (297,927)     (700,863)   (1,656,351)
Net loss                         (424,225)     (309,028)     (360,817)     (802,326)   (1,944,185)

Weighted average shares:
Basic and diluted              29,544,621    29,825,944    29,825,944    31,235,286    31,235,286
Basic and diluted per share   $     (0.01)        (0.01)        (0.01)        (0.03)        (0.06)



                                      -47-



                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

NONE

ITEM 8A: CONTROLS AND PROCEDURES

The Company's principal executive officer and principal financial officer have,
within 90 days of the filing date of this annual report, evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a - 14(c)) and have determined that such disclosure
controls and procedures are adequate. There have been no significant changes in
the Company's internal controls or in other factors that could significantly
affect such internal controls since the date of evaluation. Accordingly, no
corrective actions have been taken with regard to significant deficiencies or
material weaknesses.


                                      -48-



                                    PART III

ITEMS 9, 10, 11, AND 12

The information required under these items is contained in the Company's Proxy
Statement relating to its 2005 Annual Meeting of Stockholders, which Proxy
Statement will enclose this Form 10-K and is being filed with the Securities and
Exchange Commission within 120 days after the close of the Company's fiscal year
end. This information is incorporated herein by reference.

ITEM 13. 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    $50,000 Promissory Note, dated October 4, 2005, between Orthometrix,
        Inc. and Michael Huber (G)


                                      -49-



ITEM 13. EXHIBITS (Continued)

10.8    $20,000 Promissory Note, dated October 11, 2005, between Orthometrix,
        Inc. and John Utzinger (G)

10.9    $100,000 Promissory Note, dated November 18, 2005, between Orthometrix,
        Inc. and Reynald Bonmati (G)

10.10   $50,000 Promissory Note, dated December 12, 2005, between Orthometrix,
        Inc. and The Chrystele Bonmati Trust

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

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

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

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

10.15   Small Business Grid Note, dated October 3, 2005, between HSBC Bank USA,
        N.A. and Orthometrix, Inc. (G)

10.16   General Security Agreement, dated October 3, 2005, between HSBC Bank
        USA, N.A. and Orthometrix, Inc. (G)

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

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

23.3    Power of Attorney (included on signature page)

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.


                                      -50-



ITEM 13. EXHIBITS (Continued)

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 10QSB 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.


                                      -51-



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

          1.   Audit Fees - The aggregate fees for the years ended December 31,
               2005 and 2004 for professional services rendered by Radin, Glass
               & Co., LLP for the audit of annual financial statements and
               review of financial statements included in any Form 10-QSB or
               services that are normally provided by the accountant in
               connection with statutory and regulatory filings or engagements
               are approximately $28,500 in 2004 and $32,000 in 2005.

          2.   Audit-Related Fees - The registrant did not pay any audit-related
               fees during the years ended December 31, 2005 and 2004 that are
               not reported under paragraph 1 above.

          3.   Tax Fees - The registrant did not pay any fees during the years
               ended December 31, 2005 and 2004 for professional services
               rendered by the principal accountant for tax compliance, tax
               advice, and tax planning.

          4.   All Other Fees - The registrant did not pay any other fees during
               the years ended December 31, 2005 and 2004 other than those
               reported in paragraphs 1 through 3 above.


                                      -52-



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of White
Plains, New York, on the 22nd day of February, 2006.

                                        ORTHOMETRIX, INC.


                                        By: /s/ Reynald Bonmati
                                            ------------------------------------
                                            Name: Reynald G. Bonmati
                                            Title: President

                                POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
Reynald G. Bonmati as true and lawful attorney-in-fact and agent of the
undersigned, with full power of substitution and resubstitution, for and in the
name, place and stead of the undersigned, in any and all capacities, to sign any
and all amendments to this Annual Report and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Commission, and
hereby grants to such attorneys-in-fact and agents full power and authority to
do and perform each and every act and thing requisite or desirable to be done,
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
Registrant, Orthometrix, Inc., in the capacities and on the dates indicated.

        Signature               Capacity In Which Signed              Date
        ---------               ------------------------              ----


/s/ Reynald G. Bonmati    Chairman of the Board and President  February 22, 2006
------------------------   (Principal Executive Officer); and
Reynald G. Bonmati                      Director


/s/ Neil H. Koenig        Chief Financial Officer (Principal   February 22, 2006
------------------------    Financial Officer and Principal
Neil H. Koenig                    Accounting Officer)


/s/ Michael W. Huber                    Director               February 22, 2006
------------------------
Michael W. Huber


/s/ Andre-Jacques Neusy                 Director               February 22, 2006
------------------------
Andre-Jacques Neusy


/s/ William Orr                         Director               February 22, 2006
------------------------
William Orr


/s/ Albert S. Waxman                    Director               February 22, 2006
------------------------
Albert S. Waxman


                                      -53-`