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                                 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, 2003          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 [X]

Registrant's revenues for its most recent year were $1,572,753.

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 March 8, 2004 was
$949,114 based on the price of the last reported sale on the OTC Bulletin Board.

As of March 8, 2004 there were 29,544,621 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 2004 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.

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                               TABLE OF CONTENTS


                                                                        Page

INTRODUCTION                                                              3

ITEM 1.        BUSINESS                                                   3

ITEM 2.        PROPERTIES                                                17

ITEM 3.        LEGAL PROCEEDINGS                                         17

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS       17

ITEM 5.        MARKET FOR REGISTRANT'S COMMON EQUITY AND
                     RELATED STOCKHOLDER MATTERS                         17

ITEM 6.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS                  18

ITEM 7.        FINANCIAL STATEMENTS                                      23

ITEM 8.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                    ACCOUNTING AND FINANCIAL DISCLOSURE                  48

ITEM 8a.       CONTROLS AND PROCEDURES                                   49

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

ITEM 13.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
                    FORM 8-K                                             50

ITEM 14.       PRINCIPAL ACCOUNTING FEES AND SERVICES                    53


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                                  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., "the
Company", 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 that the efficacy of new therapies for the treatment of
osteoporosis and other bone disorders be demonstrated and that regulatory
approval of such therapies be granted, particularly in the United States; (iv)
the acceptance and adoption by primary care providers of new osteoporosis
therapies 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 research, diagnostic and monitoring
markets for bone and muscle disorders; (vii) the high level of competition in
the rehabilitation and physical therapy markets; (viii) the high level of
competition in the pain management market; (ix) changes in technology; (x) the
Company's ability to continue to maintain and expand acceptable relationships
with third party dealers and distributors; (xi) 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; (xii) changes that may result
from health care reform in the United States may adversely affect the Company;
(xiii) the Company's cash flow and the results of its ongoing financing efforts;
(xiv) the effect of regulation by the United States Food and Drug Administration
("FDA") and other government agencies; (xv) the Company's ability to secure FDA
approval to market its products; (xvi) the effect of the Company's accounting
policies; (xvii) the outcome of pending litigation; and (xviii) 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. ("Orthometrix" or the "Company" or "OMRX") markets,
sells and services several musculoskeletal product lines used in pharmaceutical
research, diagnostis 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.

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         During the past two years, the Company has experienced aggregate losses
from continuing operations of $2,966,415 and has incurred a total negative cash
flow from continuing operations of $3,600,911 for the same two-year period. The
Company does not currently have an operating line of credit. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's continued existence is dependent upon several factors including
increased sales volume, collecting additional sums for the contingent purchase
price portion of the sale of the Company's bone densitometry business and the
ability to achieve profitability on the sale of some of the Company's remaining
product lines. The Company is pursuing initiatives to increase liquidity,
including external investments and obtaining a line of credit. The Company does
not have a commitment for such financing, and there can be no guarantee that the
Company will be able to attain such financing. 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 is 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. $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 a potential $1,000,000 in connection with
the Asset Sale to Cooper. In addition, the Company received $47,095 from the
arbitrator as a refund of arbitration fees advanced to the arbitrator. The
settlement from Cooper was received in July 2003. The refund from the arbitrator
was received in August 2003. The full amount of the remaining $500,000 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 may be eligible to receive up to an additional
$7.0 million in earn-out payments based on the net sales of certain products
over a three-year period from May 1, 2002 to April 30, 2005. No amounts have
been earned through March 1, 2004 and there is no assurance that the Company
will receive any sales proceeds from the earn-out.

         The Company markets, sells and services a wide range of proprietary
non-invasive musculoskeletal and other devices through two divisions, a
healthcare division and a sports & fitness division. The healthcare division
markets, sells and services (1) pQCT(R) (peripheral Quantitative Computed
Tomography) bone and muscle measurement systems used for musculoskeletal
research and clinical applications (including for bone disorders and human
performance)- the XCT(TM) product line; (2) ESWT (Extracorporal Shock Wave
Therapy) systems used for urology (lithotripsy) - the Genestone(TM); and (3)
patented exercise systems used for physical therapy, sports medicine and
rehabilitative medicine - the Galileo(TM) and Leonardo(TM) product lines. The
healthcare division has initiated a clinical study of the Orbasone(TM) pain
management system (ESWT), which will be added to its product line, upon
successful completion of the study and approval of the system by the United
States Food and Drug Administration (the "FDA"). The sports & fitness division
markets, sells and services patented exercise systems to

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fitness centers, gyms, sports clubs and associations and to the general public -
the VibraFlex(R) product line. The sports & fitness division's product line
includes Mini VibraFlex(R) and the VibraFlex(R) 500. The VibraFlex products are
based on the same patented technology as the Galileo products and offer a novel
approach to muscle strength development given that such products are based on
short and intense stimulations of the muscles.

         In December 2002, the Company assembled a sales organization consisting
initially of 8 regional distributors managed by a senior sales executive hired
in November 2002 to market the Galileo(TM) 2000 to the rehabilitation and
physical therapy markets in the U.S. and Canada.

         On January 1, 2003, the Company signed an agreement with BonAlyse Oy, a
Finnish medical software developer, to exclusively distribute BonAlyse's
software to the Company's pQCT(R) customers in the U.S. and Canada. BonAlyse's
software is used to analyze cross-sectional images acquired on pQCT(R) and QCT
systems, including assessment of bone density and bone geometry, muscle and fat
(intramuscular and subcutaneous) cross-sectional area, and line analysis of
distance and tissue thickness measurements.

         On October 1, 2003, the Company signed an agreement with Canton
Orthopaedics and Sports Medicine P.C., a Georgia professional company, to
acquire the exclusive worldwide license to develop, market, sell and service the
DigiFix(TM), a patent pending system that facilitates surgery on a damaged hand.

RECENT DEVELOPMENTS

         In February 2004, the Company introduced the VibraFlex(R) 500 and the
Mini VibraFlex(R). Made in the U.S., the VibraFlex products are based on the
same patented technology as the Galileo products and offer a novel approach to
muscle strength development given that such products are based on short and
intense stimulations of the muscles. They have been designed for the fitness
clubs and the home exercise market.

MARKETS AND PRODUCTS

         The Company currently offers 6 product types comprised of a total of 16
models: 6 models of pQCT systems for bone & muscle research application (XCT
Research SA, XCT Research SA+, XCT Research M. XCT Research M+, XCT Microscope,
and XCT 3000 Research), 2 models of pOCT systems for clinical application
related to bone & muscle disorders (XCT 2000 and XCT 3000), 1 model of
lithotripter (Genestone 190), 4 models of patented powered exercise systems for
rehabilitation and physical therapy (Galileo 100, Galileo XS, Galileo Home Plus,
Galileo "Kipptisch" and Galileo 2000), 1 model of human performance measurement
system (Leonardo) and 2 models of VibraFlex for sports and fitness (Mini
VibraFlex and VibraFlex 500). In addition, the Company has several products
under development.

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

1. BONE & MUSCLE DISORDERS / PHARMACEUTICAL RESEARCH

         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 allows true volumetric
measurement of both bones and muscles, allowing not only faster assessment of
new therapeutic agents but also their impact on the entire musculoskeletal
system.

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         The Company directly markets, sells and services in the US and Canada
the following pQCT 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 Microscope - (bone measurement for in vitro research);

XCT 3000 Research - (bone/muscle measurement for large laboratory animals such
as primates).

         Stratec Medizintechnik GmbH ("Stratec"), the worldwide leader in pQCT
technology, manufactures these systems in Germany and markets them in the rest
of the world. North America accounts for about 80% of the worldwide research
market.

2. BONE & MUSCLE DISORDERS / DIAGNOSTIC AND MONITORING

         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, sales and services in the US and Canada
the following pQCT systems for clinical assessment and monitoring of bone
density and architecture:

XCT2000 (bone/muscle measurement at the forearm and foot);

XCT 3000 (bone/muscle measurement at the tibia and femur).

All systems are principally marketed to the pediatrics and orthopedics
specialties. Stratec Medizintechnik GmbH, the worldwide leader in pQCT
technology, manufactures these systems in Germany and markets them in the rest
of the world.

         Sales, rental and service of all pQCT systems for in vivo and in vitro
research, clinical assessment and monitoring of bone density and architecture
represented more than 82% of the Company sales from continuing operations during
fiscal year 2004.

3. UROLOGY

         The Genestone 190(TM) lithotripter is well accepted in Europe and Asia
for the non-invasive treatment of kidney stones. It initially received PMA
market clearance from the FDA as a Class III device, and the technology has
since been reclassified as Class II. The Genestone 190 is made by Genemed GmbH,
a Swiss Corporation.

         Although our device is priced well below our competition, the US market
proved to be difficult to penetrate as it is dominated by "partnerships" which
allow practitioners with a financial interest in a lithotripter to prescribe
that such lithotripter be used for their patients. Therefore, we have targeted
some niche markets that are not affected by these restrictions, such as the
Defense market (VA hospitals, Navy, etc...). The Company did not sell any
Genestone systems during fiscal year 2003.

4. PATIENTS WITH INCONTINENCE THAT BENEFIT FROM EXERCISE

         Our target is the large incontinence market. It is well recognized that
exercise of the perineal muscles can improve their strength and reduce
incontinence. The Galileo 2000(TM) 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
Galileo systems are made by Novotec Medical GmbH ("Novotec").

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5. PATIENTS WITH DIABETES THAT BENEFIT FROM EXERCISE

         It is well known that individuals with Diabetes benefit from exercise.
In particular, it can improve blood circulation in their legs. Unfortunately,
they usually are not capable of long exercise sessions, and their exercise
efforts must be predictable so proper insulin levels can be maintained. The
Galileo(tm) rapid (25/30 Hz) stimulation rate, and the fact that it does not tax
the cardiopulmonary system, makes it well suited to the needs of these
individuals. The Galileo allows people with diabetes to enjoy the benefits of
exercise. Galileo sales accounted for less than 7% of total sales from
continuing operations during fiscal year 2003.

6. REHABILITATION / PHYSICAL THERAPY

         The patented Galileo powered exercise system has already penetrated the
European rehabilitation and physical therapy market. The Galileo 2000 model
targets the leg and lower back. The Galileo 100 model targets the arm and
shoulder muscles. The system now is marketed in the US for the rehabilitation of
muscle, tendons and ligaments, and to improve muscle strength and coordination.
The Galileo system is specifically used to:

    o    Exercise postural muscles, joints and reflexes;

    o    Improve muscle strength, reflexes and joint motions;

    o    Redevelop postural muscles, joints and reflexes after injury/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.

         The Leonardo(TM) measures various key parameters of human performance,
such as force, power, etc... It has been designed to help the rehabilitation
specialist and the physical therapist measure the progress made by his/her
patients. The Leonardo system is made by Novotec. The Company did not sell any
Leonardo systems during fiscal year 2003.

7. SPORTS AND FITNESS

         The VibraFlex is a revolutionary exercise system based on the same new
and patented concept as the Galileo systems. Many European athletes and
professional teams already use the Galileo as an inherent part of their training
to increase muscle power (ski, soccer, volley ball, basket ball, tennis,
etc...). One of the first U.S. athletes to use the Galileo system was Lance
Armstrong, several times winner of the Tour de France. The Chicago White Sox
baseball team was the first U.S. professional sports team to use the Galileo.
The patented Galileo technology was developed for Rehabilitative Medicine and
Physical Therapy to improve various conditions affecting muscle, tendons and
ligaments, improve muscle strength/coordination, and blood circulation. The
VibraFlex system has been developed by the Company to make the powerful Galileo
technology affordable to the sports & fitness industry and to the home exercise
market.

8. PRODUCTS AND APPLICATIONS UNDER DEVELOPMENT

    o    PAIN MANAGEMENT: Manufactured for MIP GmbH, a Swiss Corporation ("MIP")
         under a contractual arrangement by Nippon Infrared Industries Co., Ltd.
         (Japan), 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. The
         Company distributed the Orbasone and began generating modest sales in
         fiscal year 2000. The Orbasone delivers energy waves (Extracorporeal
         Shock Wave Treatment or ESWT) that provide relief to patients from
         minor pain in soft tissues at the treatment site, which is typically,
         the foot, ankle, elbow or shoulder. The 30 to 40 minute treatment
         sessions are delivered

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         to patients under the supervision and care of a physician such as an
         orthopedic surgeon or podiatrist. On June 21, 2000, the FDA informed
         MIP that the FDA erred in its 1998 decision and rescinded its
         determination that the Orbasone was an exempt product. As a result, the
         Company suspended sales of the Orbasone pending FDA review of the
         product in June 2000. The FDA determined that the Orbasone is a Class
         III device requiring pre-market approval ("PMA"). During 2002, the
         Company acquired the rights to manufacture the Orbasone under license
         from MIP and initiated a clinical study as part of the PMA application
         process. The Orbasone is marketed by MIP in Europe and Asia, but not
         yet available for sale in the U.S.

    o    INCONTINENCE: The Company intends to replicate in the U.S. the leading
         German incontinence study in order to quantify the benefits of
         exercising with the Galileo system.

    o    DIABETES: The Company intends to conduct clinical studies to quantify
         the benefits of exercising with the Galileo for patients at various
         stages of the disease.

    o    SPINAL CORD INJURIES: The first major U.S. rehabilitation center to use
         the Galileo was the Rusk Institute for Rehabilitative Medicine of New
         York University Medical Center. In addition to routine motor and
         cardiac rehabilitation situations, our Galileo system is being studied
         in various patient populations, including those with Parkinson's
         disease and spinal cord injuries.

    o    HAND SURGERY: On October 1, 2003, the Company signed an agreement with
         Canton Orthopaedics and Sports Medicine P.C., a Georgia professional
         company, to acquire the exclusive worldwide license to develop, market,
         sell and service the DigiFix(TM), a patent pending system that
         facilitates surgery on a damaged hand. In December 2003, the Company
         filed a 510(k) application with the FDA to market the DigiFix in the
         US.

SALES, MARKETING AND CUSTOMER SERVICE

         The Company currently employs one Sales Manager for Rehabilitation /
Fitness, one Sales Administration Manager, one full-time pQCT Sales Applications
Consultant, one Marketing Manager and two Service Engineers.

         The Company's customers are end-users. The Company sells pQCT Research
systems and pQCT Clinical systems directly to customers. The Company also sells
Genestone 190 directly to customers. For Galileo and Leonardo sales, the Company
typically uses an exclusive independent sales representative to cover one or
more states. The Company also sells directly to end-users 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 intends to expand its network of independent
sales representatives to make use of the country's large market of
rehabilitation centers and physical therapists, and to expand its sales in
children hospitals, pediatric and orthopedic practices.

         Marketing efforts are focused primarily on supporting the Sales Manager
for Rehabilitation / Fitness and the pQCT Sales Applications Consultant in their
direct sales and management of sales representatives, 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.

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         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. The Company provides warranty services to its customers. 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,
including a telephone hotline for customer inquiries, product installation,
product enhancements and maintenance releases. 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.

BONE & MUSCLE DISORDERS PRODUCTS

         The pQCT products marketed by the Company were developed and are
manufactured by Stratec at its facilities located in Pforzheim, Germany.
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 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 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.

         Some components are manufactured in accordance with custom
specifications and require substantial lead times. While efforts are made to
purchase components from more than one source and to use generally available
parts, certain components are available from only one or a limited number of
sources. In the past, there have been delays in the receipt of certain
components, although to date no such delays have had a material adverse effect
on the Company. The Company believes that Stratec has sufficient manufacturing
capacity to supply the Company's product needs for at least the next twelve
months.

         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.

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MUSCULOSKELETAL DEVELOPMENT PRODUCTS

         The Galileo and the Mini VibraFlex 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 plastic covers, final assembly and quality assurance
testing. The Company is dependent on Novotec to manufacture the Galileo and Mini
VibraFlex 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.

        Some components are manufactured in accordance with specifications that
are specific to the Galileo and Mini VibraFlex products 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.
To date there have been no delays in production which have had a material
adverse effect on the Company. The Company believes that Novotec has sufficient
capacity to supply the Company's need for Galileo and Mini VibraFlex products
for at least the next 12 months.

         The VibraFlex 500 product marketed by the Company was developed by the
Company and is manufactured by Kimchuk, Inc. at its facilities located in
Connecticut. Manufacturing consists primarily of testing components, forming and
painting of plastic covers, final assembly and quality assurance testing. The
Company is dependent on Kimchuk, Inc. to manufacture the VibraFlex 500 product
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, Inc.

        Some components are manufactured in accordance with specifications that
are specific to the VibraFlex 500 product 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. To date there
have been no delays in production which have had a material adverse effect on
the Company. The Company believes that Kimchuk, Inc. has sufficient capacity to
supply the Company's need for the VibraFlex 500 product for at least the next 12
months.

PAIN MANAGEMENT SYSTEMS

        The Orbasone system was developed by MIP and is manufactured for MIP
under a contractual arrangement by Nippon Infrared Industries Co., Ltd. (Japan),
which has its manufacturing facilities in Tokyo, Japan. Manufacturing consists
primarily of testing components, final assembly and quality assurance testing.
If and when the Orbasone receives market clearance, the Company will be
dependent on MIP to provide manufactured Orbasone systems in amounts and at
levels of quality necessary to meet demand and be competitive, until such time
as the Company has made arrangements to have the system manufactured
domestically. The Company has no ownership interest in MIP or Nippon Infrared
Industries Co., Ltd.

         Some components are manufactured in accordance with specifications that
are specific to the Orbasone 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. The Orbasone has not yet been
approved by the FDA for sale in the U.S. market. Following market approval, the
Company intends to subcontract the manufacturing of its Orbasone to Kimchuk,
Inc.'s facility in Connecticut. The Company has no ownership interest in
Kimchuk, Inc.

                                       10
<PAGE>

LITHOTRIPSY SYSTEMS

         The Genestone 190 System was developed by Genemed and manufactured for
Genemed under a contractual agreement by Kimchuk, Inc., which has its
manufacturing facilities in Connecticut. Manufacturing consists of primarily
testing of components, final assembly and quality assurance testing. The Company
depends upon Genemed to provide manufactured Genestone 190 systems in amounts
and at levels of quality necessary to meet demand and be competitive. The
Company has no ownership interest in Genemed or Kimchuk, Inc.

         Some components are manufactured in accordance with specifications that
are specific to the Genestone 190 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. The Company
believes that Genemed has sufficient manufacturing capacity to supply the
Company's product needs for at least the next twelve months.

DISTRIBUTION AGREEMENTS

         Following the sale of its bone measurement business, the Company
focused exclusively on its musculoskeletal products. It has the rights to
market, sell and service the following products:

STRATEC

         The Company and Stratec are parties to an exclusive agreement dated
October 1, 1999 with respect to the marketing, sales and service of pQCT systems
in North America. Under the terms of the four-year distribution agreement (which
may be renewed for an indefinite number of successive one-year terms), the
Company may purchase products from Stratec at a fixed price to be adjusted from
time to time by mutual consent.

NOVOTEC

         The Company and Novotec are parties to an exclusive agreement dated
October 1, 1999 with respect to the marketing, sales and service of Galileo and
Leonardo systems in North America. Under the terms of the four-year distribution
agreement (which may be renewed for an indefinite number of successive one-year
terms), the Company may purchase products from Novotec at a fixed price to be
adjusted from time to time by mutual consent.

GENEMED

         The Company and Genemed are parties to an exclusive agreement dated
February 16, 2001 amended as of April 1, 2001 and August 20, 2002 with respect
to the marketing, sales and service of the Genestone 190 system to U.S. military
bases worldwide. Under the terms of the three-year distribution agreement (which
may be renewed for an indefinite number of successive one-year terms), the
Company may purchase products from Genemed at a fixed price to be adjusted from
time to time by mutual consent.

                                       11
<PAGE>


MIP

         The Company and MIP are parties to a product approval and licensing
agreement dated February 12, 2002 with respect to the Orbasone system. Under the
terms of the agreement, MIP granted the Company the exclusive and perpetual
authority, right and license in North America to seek PMA approval for the
Orbasone, and to manufacture, market, sell and service the Orbasone. The
Orbasone has not yet been approved by the FDA for sale in the U.S. market.

BONALYSE OY

         The Company and BonAlyse Oy are parties to an exclusive agreement dated
January 1, 2003 with respect to the distribution of BonAlyse's software to the
Company's pQCT customers in the U.S. and Canada. Under the terms of the two-year
distribution agreement (which may be renewed for an indefinite number of
successive one-year terms), the Company may purchase products from BonAlyse at a
fixed price to be adjusted from time to time by mutual consent.


CANTON ORTHOPAEDICS AND SPORTS MEDICINE

         The Company and Canton Orthopeadics and Sports Medicine are parties to
a product approval and licensing agreement dated October 1, 2003 with respect to
the DigiFix system. Under the terms of the agreement, Canton Orthopeadics and
Sports Medicine granted the Company the exclusive and perpetual authority, right
and license to seek FDA 510(k) approval for the DigiFix, and to manufacture,
market, sell and service the DigiFix worldwide. The DigiFix has not yet been
approved by the FDA for sale in the U.S. market.

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 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 products. Such competitors may be more successful in marketing such
products. 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 and can receive earn-out payments
based on the net sales of certain products over a three-year period from May 1,
2002 to April 30, 2005. No amounts have been earned through March 1, 2004 and
there is no assurance that the Company will receive any sales proceeds from the
earn-out.

                                       12
<PAGE>

MUSCULOSKELETAL DEVELOPMENT PRODUCTS

         The Galileo and VibraFlex products offer a novel approach to muscle
strength development. The owner of Novotec has applied for patents regarding the
Galileo 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 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. The Company
believes that the present design of the Galileo and VibraFlex products should be
enhanced to better suit the requirements of the U.S. market. There can be no
assurance that Novotec or the Company can or will improve the product designs,
nor that the Company's competitors will fail to develop and market products that
make use of the Galileo's and VibraFlex's novel approach or that are lower
priced or better performing as compared to the Galileo or VibraFlex products. In
addition, there is a risk that the additional patents that have been applied for
by the owner of Novotec regarding the technology used by the Galileo and
VibraFlex products will not be issued.

         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 and VibraFlex 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. Many of the Company's competitors existing 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 Orbasone. 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 sales of pain management
systems are HealthTronics, Inc., Domier MedTech and Siemens AG, which have
products that have already obtained premarket approval, as well as Storz
Medical, MTS Medical Technologies & Services GmbH, 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 Orbasone was
classified in August 1998 as a Class I therapeutic vibrator (21CFR
(section)890.5975) exempt from the 510 (k) requirements of the Federal Food,
Drug and Cosmetic Act. However, on June 21, 2000, the FDA informed MIP that it
erred in its 1998 decision and rescinded its determination that the Orbasone was
an exempt product. As a result the Company suspended sales of the Orbasone
pending FDA review of the product. The FDA recently determined that the Orbasone
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 approval for the Orbasone, and to manufacture,
market, sell and service the Orbasone. The Orbasone has not yet been approved by
the FDA for sale in the U.S. market.

                                       13
<PAGE>

THIRD PARTY REIMBURSEMENT

Bone densitometry products and pain management systems

         Outside of the research market, the pQCT bone densitometry products
marketed by the Company are purchased principally by hospitals, managed care
organizations, including independent practice associations and physician
practice organizations or independent physicians or physician groups, who are
regulated in the United States by federal and state authorities and who
typically bill and are dependent upon various third party payors, such as
federal and state governmental programs (e.g., Medicare and Medicaid), private
insurance plans and managed care plans, for reimbursement for use of the
Company's products. The Health Care Financing Administration ("HCFA")
establishes new reimbursement codes and recommended reimbursement rates
effective January 1 of each calendar year. On several occasions, HCFA 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 HCFA will not
continue to make changes from time to time. The Company could be materially and
adversely affected by such changes.

         In August 1997, President Clinton signed into law the Medicare Bone
Mass Measurement Coverage Standardization Act as a provision in the Balanced
Budget Act. The provision sets forth a national mandate that requires Medicare,
under certain specified conditions, to cover bone density diagnostic tests
utilizing radiologic, radioisotopic, or other procedures approved by the FDA for
the purpose of identifying bone mass or detecting bone loss deterioration. This
mandate became effective July 1, 1998.

         Postoperative pain management is reimbursed under limited
circumstances. There can be no assurance that HCFA or other third party payors
will reimburse patients for pain management systems and pain treatment sessions
involving the Orbasone system.

Musculoskeletal development products

         As with general exercise equipment which requires no professional
supervision, the Galileo and VibraFlex series of musculoskeletal development
products are not covered under federal or state health care insurance programs
or by third party health insurance payors. However, as with other exercise
equipment used during an exercise session provided by a licensed physical
therapy provider, sessions using the Galileo and VibraFlex series may be
reimbursed under various reimbursement codes for which HCFA establishes
recommended reimbursement rates effective January 1 of each calendar year. On
several occasions, HCFA 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 HCFA 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 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.

                                       14
<PAGE>

         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) 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 determined that it erred in
its classification of the Orbasone and the Company suspended marketing of the
Orbasone. The FDA recently determined that the Orbasone 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 approval for the Orbasone, and to manufacture, market, sell
and service the Orbasone. The Company is currently seeking PMA approval for the
Orbasone. The Galileo and VibraFlex 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 for uses in connection with certain medical
conditions as a Class I device exempt from Section 510(k) premarket notification
requirements. The manufacturer of the Genestone 190 lithotripter, Genemed, has
received FDA pre-market approval for the Genestone 190.

         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


                                       15
<PAGE>

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 and has not sought patent protection for such
products. 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 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. The Company has no current backlog orders as of December 31,
2003. 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 $4.0
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 March 8, 2004, the Company had 6 employees and 5 consultants, of
whom 4 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.

                                       16
<PAGE>



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:

              2004                           28,185
              2005                           29,500
              2006                           30,816
              2007                           31,584
              Thereafter                     18,424
                                           --------
                                           $138,509
                                           ========

Prior to the Asset Sale, the Company also leased approximately 28,500 square
feet of space in Fort Atkinson, Wisconsin pursuant to two separate leases. These
leases were transferred to Cooper on the date of the Asset Sale.

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.

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, 2003.

                                     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.

PERIOD FROM JANUARY 1, 2002 THROUGH DECEMBER 31, 2002:


                                        High              Low
                                        ----              ---
          First Quarter                $0.17             $0.01
          Second Quarter                0.06              0.03
          Third Quarter                 0.04              0.02
          Fourth Quarter                0.07              0.02


                                       17
<PAGE>

PERIOD FROM JANUARY 1, 2003 THROUGH DECEMBER 31, 2003:

                                       High               Low
                                       ----               ---
          First Quarter               $ 0.06           $  0.04
          Second Quarter                0.05              0.04
          Third Quarter                 0.06              0.03
          Fourth Quarter                0.05              0.03

         As of March 8, 2004, the sales price per share of Common Stock, as
reported by the Over-The-Counter Bulletin Board, was $0.08.

         As of March 8, 2004 there were approximately 73 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.

Critical Accounting Policies And Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities.

         The Company believes the following critical accounting policies involve
additional management judgment due to the sensitivity of the methods,
assumptions and estimates necessary in determining the related asset and
liability amounts. The Company recognizes revenues in accordance with invoice
terms, typically when products are shipped. Products are covered by warranties
provided by the Company's vendors. Therefore, no warranty reserve is required on
products sold by the Company. The Company provides estimated inventory
allowances for slow-moving and obsolete inventory based on current assessments
about future demands, market conditions and related management initiatives. If
market conditions are less favorable than those projected by management,
additional inventory allowances may be required. The Company provides allowances
for uncollectible receivable amounts based on current assessment of
collectability. If collectability is less favorable than those projected by
management, additional allowances for uncollectability may be required. The
Company has recorded a valuation allowance to reduce its deferred tax assets.
The Company limited the amount of tax benefits recognizable from these assets
based on an evaluation of the amount of the assets that are expected to be
ultimately realized. An adjustment to income could be required if the Company
were to determine it could realize deferred tax assets in excess of the net
recorded amount or it would not be able to realize all or part of its net
deferred tax assets.

                                       18
<PAGE>

Liquidity and Capital Resources

         During the past two years, the Company has experienced aggregate losses
from continuing operations of $2,966,415 and has incurred total negative cash
flow from continuing operations of $3,600,911 for the same two-year period. The
Company does not currently have an operating line of credit. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's continued existence is dependent upon several factors including
increased sales volume, collecting additional sums for the contingent purchase
price portion of the sale of the Company's bone densitometry measurement
business from Cooper and the ability to achieve profitability on the sale of
some of the Company's remaining product lines. The Company is pursuing
initiatives to increase liquidity, including external investments and obtaining
a line of credit. The Company does not have a commitment for such financing, and
there can be no guarantee that the Company will be able to attain such
financing. In order to increase its cash flow, the Company is continuing its
efforts to stimulate sales. The Company has implemented high credit standards
for its customers and is emphasizing the receipt of down payments from customers
at the time their purchase orders are received and attempting to more closely
coordinate the timing of purchases.

         The level of liquidity based on cash experienced an $18,077 increase at
December 31, 2003, as compared to December 31, 2002. The Company's $1,060,606 of
net cash used in operating activities and $16,317 of cash used in investing
activities was more than offset by $1,095,000 of cash provided by financing
activities. Investing activities consisted of $16,317 of purchases of property
and equipment. Financing activities consisted of $1,095,000 of proceeds of
borrowings from directors and officers of the Company.

         Interest on the borrowings is payable at prime plus one (5.00% at
December 31, 2003.) The notes are due one year after the date of issuance. In
February 2004, $325,000 of borrowings were repaid from the $500,000 of sale
proceeds received from Cooper. The portion of the borrowings not satisfied was
extended for one year.

         The Company markets, sells and services a wide range of proprietary
non-invasive musculoskeletal and other devices through two divisions, a
healthcare division and a sports & fitness division. The healthcare division
markets, sells and services (1) pQCT(R) (peripheral Quantitative Computed
Tomography) bone and muscle measurement systems used for musculoskeletal
research and clinical applications (including for bone disorders and human
performance)- the XCT(TM) product line; (2) ESWT (Extracorporal Shock Wave
Therapy) systems used for urology (lithotripsy) - the Genestone(TM); and (3)
patented exercise systems used for physical therapy, sports medicine and
rehabilitative medicine - the Galileo(TM) and Leonardo(TM) product lines. The
healthcare division has initiated a clinical study of the Orbasone(TM) pain
management system (ESWT), which will be added to its product line, upon
successful completion of the study and approval of the system by the United
States Food and Drug Administration (the "FDA"). The sports & fitness division
markets, sells and services patented exercise systems to fitness centers, gyms,
sports clubs and associations and to the general public - the VibraFlex(R)
product line. The sports & fitness division's product line includes Mini
VibraFlex(R) and the VibraFlex(R) 500. The VibraFlex products are based on the
same patented technology as the Galileo products and offer a novel approach to
muscle strength development given that such products are based on short and
intense stimulations of the muscles. There can be no assurance that these
efforts will be successful.

         The Company has no current backlog of orders as of December 31, 2003.
There are no material commitments for capital expenditures as of December 31,
2003.

                                       19
<PAGE>

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

Results of Operations

         The Company had a net loss of $1,349,156 ($0.05 per share based on
29,544,621 weighted average shares) for the year ended December 31, 2003
compared to net income of $3,262,186 ($0.11 per share based on 29,649,339
weighted average shares) for the year ended December 31, 2002.

         Loss from continuing operations decreased from $1,617,259 for the year
ended December 31, 2002 to $1,349,156 for the year ended December 31, 2003.
Revenue for the year ended December 31, 2003 increased $670,528 (or 74.3%) to
$1,572,753 from $902,225 from the comparable period of fiscal 2002. The increase
in revenue was primarily due to an increase in XCT sales during 2003.

         Cost of revenue as a percentage of revenue was 32.4% and 39.3% for the
year ended December 31, 2003 and 2002, respectively, resulting in a gross margin
of 67.6% for the year ended December 31, 2003 compared to 60.7% for the
comparable period of 2002. The increase in gross margin was due to reduced
manufacturing expenses attributable to the products sold in 2003.

         Sales and marketing expense for the year ended December 31, 2003
increased $114,317 (or 18.9%) to $719,300 from $604,983 for the year ended
December 31, 2002. The increase is due to the Company's efforts to market its
product lines in 2003, as compared to 2002. In addition, the Company hired a
national sales manager in the fourth quarter of 2002.

         General and administrative expense for the year ended December 31, 2003
increased $119,902 (or 9.5%) to $1,382,670 from $1,262,768 for the year ended
December 31, 2002. The increase was primarily due to increased consulting and
legal fees.

         Research and development expense for the year ended December 31, 2003
increased $9,595 (or 3.8%) to $263,127 from $253,532 for the year ended December
31, 2002. The increase was primarily due to increased expenses incurred as a
result of the Orbasone PMA process.

         Interest expense increased $1,960 (or 4.0 %) to $51,230 for the year
ended December 31, 2003 from $49,270 for the year ended December 31, 2002.
Interest expense increased due to an increase in the outstanding principal
balances of the loans payable the Company maintained during the twelve months
ended December 31, 2003 as compared to the twelve months ended December 31,
2002.

New Accounting Pronouncements


         In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and
Technical Corrections," which updates, clarifies and simplifies existing
accounting pronouncements. In part, this statement rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt." FASB No. 145 is
effective for fiscal years beginning after May 15, 2002. Upon adoption,
enterprises must reclassify prior period items that do not meet the
extraordinary item classification criteria in Accounting Principles Board
("APB") Opinion No. 30. The adoption of this statement would have resulted in
the reclassification of the gain

                                       20
<PAGE>

on extinguishment of debt included in the Company's statement of operations for
the year ended December 31, 2002 from an extraordinary item to other income.

         In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing or other exit or disposal activity. SFAS
No. 146 is effective prospectively for exit and disposal activities initiated
after December 31, 2002. This statement had no effect on the Company's financial
statements.

         In November 2002, the FASB issued Interpretation No. 45, "Guarantors'
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. This interpretation does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the term of the
related guarantee. The disclosure provisions of this interpretation were
effective for the Company's December 31, 2002 financial statements. The initial
recognition and initial measurement provisions of this interpretation are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. This interpretation had no effect on the Company's financial
statements.

         In January of 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities." This interpretation clarifies the
application of existing accounting pronouncements to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
In December 2003, the FASB issued a revision to Interpretation No. 46 ("46R") to
clarify some of the provisions of Interpretation No. 46, and to exempt certain
entities from its requirements. The provisions of the interpretation need to be
applied no later than December 31, 2004, except for entities that are considered
to be special-purpose entities which need to be applied as of December 31, 2003.
The Company does not anticipate that this will have an impact on the financial
statements.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." This statement amends
SFAS No. 123, "Accounting for Stock-Based Compensation." In particular, this
statement (1) provides alternative methods of transition for entities that
voluntarily change to the fair value based method of accounting for stock-based
employee compensation, (2) amends the disclosure provision of SFAS No. 123 to
require prominent disclosure about the effects on reported net income of an
entity's accounting decisions with respect to stock-based employee compensation
and (3) amends APB Opinion No. 28, "Interim Financial Reporting," to require
disclosure about those effects on interim financial information. The transition
provisions of this statement are effective for financial statements for fiscal
years ending after December 15, 2002. The disclosure provisions of this
statement are effective for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002. The transition
provisions of this statement had no effect on the Company's financial
statements. The Company adopted the disclosure provisions of this statement at
the beginning of fiscal 2003. The adoption of the disclosure provisions resulted
in the presentation of the Company's interim financial statements to include pro
forma stock-based employee compensation costs.

                                       21
<PAGE>

         In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133
on Derivative Instruments and Hedging Activities." This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." The
changes in this statement improve financial reporting by requiring that
contracts with comparable characteristics be accounted for similarly. In
particular, this statement (1) clarifies under what circumstances a contract
with an initial net investment meets the characteristic of a derivative
discussed in SFAS No. 133, (2) clarifies when a derivative contains a financing
component, (3) amends the definition of an underlying to conform it to language
used in FASB Interpretation No. 45, and (4) amends certain other existing
pronouncements. Those changes will result in more consistent reporting of
contracts as either derivatives or hybrid instruments. This statement is
effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. The guidance should be
applied prospectively. The provisions of this statement that relate to SFAS No.
133 implementation issues that have been effective for fiscal quarters that
began prior to June 15, 2003, should continue to be applied in accordance with
their respective effective dates. In addition, certain provisions relating to
forward purchases or sales of when-issued securities or other securities that do
not yet exist, should be applied to existing contracts as well as new contracts
entered into after June 30, 2003. This statement had no effect on the Company's
financial statements.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." The
statement improves the accounting for certain financial instruments that under
pervious guidance, issuers could account for as equity. The new statement
requires that those instruments be classified as liabilities in statements of
financial position. SFAS No. 150 affects the issuer's accounting for three types
of freestanding financial instruments. One type is mandatorily redeemable
shares, which the issuing company is obligated to buy back in exchange for cash
and other assets. A second type, which includes put options and forward purchase
contracts, involves instruments that do or may require the issuer to buy back
some of its shares in exchange for cash or other assets. The third type of
instruments that are liabilities under this statement is obligations that can be
settled with shares, the monetary value of which is fixed, tied solely or
predominantly to a variable such as a market index, or varies inversely with the
value of the issuers' shares. SFAS No. 150 does not apply to features embedded
in a financial instrument that is not a derivative in its entirety. In addition
to its requirements for the classification and measurement of financial
instruments in its scope, SFAS No. 150 also requires disclosures about
alternative ways of settling the instruments and the capital structure of
entities, all of whose shares are mandatory redeemable. Most of the guidance in
SFAS No. 150 is effective for all financial instruments entered into or modified
after May 31, 2003 and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. This statement had no effect on
the Company's 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 notes payable outstanding at December 31, 2003
have variable interest rates and therefore are subject to interest rate risk. A
one percent change in the variable interest rate would result in a $10,950
change in annual interest expense.

                                       22
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS


                              FINANCIAL STATEMENTS

                                      INDEX
                                                                        Page
                                                                        ----

Independent Auditors' Reports                                            24

Financial Statements:

Balance Sheet as of December 31, 2003                                    25

Statements of Operations for the years ended
December 31, 2003 and 2002                                               26

Statements of Changes in Stockholders' Deficit
for the years ended December 31, 2003 and 2002                           27

Statements of Cash Flows for the years ended
December 31, 2003 and 2002                                               28

Notes to Financial Statements                                            30



                                       23
<PAGE>



                          Independent Auditors' Report

Stockholders and Board of Directors of
Orthometrix, Inc.:


We have audited the accompanying balance sheet of Orthometrix, Inc. (the
"Company") as of December 31, 2003 and 2002 and the related statements of
operations, changes in stockholders' deficit, and cash flows for the years then
ended. 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 generally accepted
in the United States of America. 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, 2003 and 2002, and the results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements for the year ended December 31, 2003 and
2002 have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the financial statements, the Company's
recurring losses from operations raise substantial doubt about its ability to
continue as a going concern. 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
March 8, 2004


                                       24
<PAGE>
                                ORTHOMETRIX, INC.
                                  BALANCE SHEET
                             AS OF DECEMBER 31, 2003


Assets

Current assets:

      Cash                                                         $     44,121
      Current portion of receivable due from purchaser                  500,000
      Inventories                                                       127,298
      Prepaid expenses and other current assets                          51,095
                                                                   ------------
         Total current assets                                           722,514

Property and equipment, net                                              20,163
Other                                                                    11,658
                                                                   ------------
         Total Assets                                              $    754,335
                                                                   ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

      Accounts payable - trade                                     $    362,332
      Accrued expenses                                                   86,370
      Unearned service revenue                                           12,203
      Related party loans                                             1,072,903
      Other liabilities                                                   5,645
                                                                   ------------
         Total current liabilities                                    1,539,453
                                                                   ------------

Stockholders' deficit:

      Common stock - 29,544,621
         shares issued and outstanding and
         45,000,000 shares authorized                                    14,771
      Additional paid-in capital                                     38,730,176
      Accumulated deficit                                           (39,530,065)
                                                                   ------------
         Total stockholders' deficit                                   (785,118)
                                                                   ------------
         Total Liabilities and Stockholders' Deficit               $    754,335
                                                                   ============


                     See notes to the financial statements.

                                       25
<PAGE>
                                ORTHOMETRIX, INC.
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                        2002
                                                                 2003              (CONSOLIDATED)
                                                             ------------          --------------
<S>                                                          <C>                   <C>
Revenue                                                      $  1,572,753           $    902,225
Cost of revenue                                                   508,969                354,100
                                                             ------------           ------------
         Gross profit                                           1,063,784                548,125

Sales and marketing expense                                       719,300                604,983
General and administrative expense                              1,382,670              1,262,768
Research and development expense                                  263,127                253,532
                                                             ------------           ------------
         Operating loss                                        (1,301,313)            (1,573,158)

Interest expense                                                  (51,230)               (49,270)
Interest income                                                       528                  5,169
Other income                                                        2,859                   --
                                                             ------------           ------------
Loss from continuing operations                                (1,349,156)            (1,617,259)
                                                             ------------           ------------

Discontinued operations:
      Net loss from discontinued operations                          --                 (250,731)
      Gain on disposal of discontinued operations                    --                4,319,089
                                                             ------------           ------------
Income from discontinued operations                                  --                4,068,358
                                                             ------------           ------------

(Loss) income before extraordinary item                        (1,349,156)             2,451,099

Extraordinary item - Gain on extinguishment of debt                  --                  811,087
                                                             ------------           ------------


Net (loss) income                                            $ (1,349,156)          $  3,262,186
                                                             ============           ============
Basic and diluted weighted average shares                      29,544,621             29,649,339
                                                             ============           ============

Basic and diluted (loss) income per share:
      Loss from continuing operations                        $      (0.05)          $      (0.06)
      Income from discontinued operations                            --                     0.14
      Extraordinary gain on extinguishment of debt                   --                     0.03
                                                             ------------           ------------
      Net (loss) income                                      $      (0.05)          $       0.11
                                                             ============           ============

</TABLE>




                     See notes to the financial statements.

                                       26
<PAGE>
                                ORTHOMETRIX, INC.
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                                Additional
                                                                                 Common          Paid-In         Accumulated
                                             Shares            Total             Stock           Capital            Deficit
                                         ------------      ------------      ------------      ------------      ------------
<S>                                        <C>             <C>               <C>               <C>               <C>
Balance as of December 31, 2001            30,433,509      $ (2,744,075)     $     15,215      $ 38,683,805      $(41,443,095)

Redemption of shares
      for inventory                          (888,888)          (35,556)             (444)          (35,112)             --

Stock options issued as compensation
      to non-employees                           --              24,135              --              24,135              --

Net Income                                       --           3,262,186              --                --           3,262,186
                                         ------------      ------------      ------------      ------------      ------------

Balance as of December 31, 2002            29,544,621           506,690            14,771        38,672,828       (38,180,909)

Warrants issued as compensation
      to non-employees in connection
      with notes payable                         --              57,348              --              57,348              --

Net Loss                                         --          (1,349,156)             --                --          (1,349,156)
                                         ------------      ------------      ------------      ------------      ------------

Balance as of December 31, 2003            29,544,621      $   (785,118)     $     14,771      $ 38,730,176      $(39,530,065)
                                         ============      ============      ============      ============      ============
</TABLE>





                     See notes to the financial statements.

                                       27
<PAGE>
                                ORTHOMETRIX, INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                                              2002
                                                                                        2003             (Consolidated)
                                                                                    -----------          --------------
<S>                                                                                 <C>                   <C>
Cash Flows From Operating Activities:

Net (loss) income                                                                   $(1,349,156)          $ 3,262,186
Adjustments to reconcile net (loss) income to net cash used in
      operating activities:
          Net loss from discontinued operations                                            --                 250,731
          Gain on disposal of discontinued operations                                      --              (4,319,089)
          Extraordinary gain on extinguishment of debt                                     --                (811,087)
          Accounts receivable reserve                                                      --                (282,500)
          Stock options issued as compensation to non-employees                            --                  24,135
          Amortization expense                                                           23,096                13,281
          Depreciation expense                                                            9,871                27,389
Changes in assets and liabilities:
          Decrease in accounts receivable                                               840,102               103,003
          Increase in inventories                                                       (69,150)               (5,442)
          Increase in non current assets                                                   --                  (3,850)
          (Increase) decrease in prepaid expenses and other current assets              (22,440)               35,565
          Decrease in accounts payable                                                 (171,034)             (475,464)
          Decrease in accrued expenses                                                  (58,371)             (628,832)
          (Decrease) increase in unearned service revenue                                  (782)                1,282
          (Decrease) increase in other liabilities                                     (262,742)              268,387
                                                                                    -----------           -----------

      Net cash used in continuing operations                                         (1,060,606)           (2,540,305)

      Net cash used in discontinued operations                                             --                (596,718)
                                                                                    -----------           -----------

      Net cash used in operating activities                                          (1,060,606)           (3,137,023)
                                                                                    -----------           -----------

Cash Flows From Investing Activities:

      Proceeds from disposal of discontinued operations                                    --               3,741,020
      Purchase of property and equipment                                                (16,317)                 --
                                                                                    -----------           -----------
      Cash (used in) provided by investing activities                                   (16,317)            3,741,020
                                                                                    -----------           -----------

Cash Flows From Financing Activities:

      Proceeds of borrowings from related parties                                     1,095,000               200,000
      Repayment of borrowings from related parties                                         --                (330,267)
      Repayment of notes payable                                                           --                (463,888)
                                                                                    -----------           -----------
      Net cash provided by (used in) financing activities                             1,095,000              (594,155)
                                                                                    -----------           -----------

Net increase in cash                                                                     18,077                 9,842

Cash at beginning of year                                                                26,044                16,202
                                                                                    -----------           -----------

Cash at end of year                                                                 $    44,121           $    26,044
                                                                                    ===========           ===========
</TABLE>



                     See notes to the financial statements.

                                       28
<PAGE>



                                ORTHOMETRIX INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


Noncash investing and financing activities:

During February 2002, the Company exchanged inventory with a net book value of
$40,000 with an unaffiliated entity for 888,888 shares of the Company's common
stock, with a market value of $35,556 on the date of exchange. The difference
between the net book value of the inventory exchanged and the market value of
the stock received was recorded in cost of revenue during the year ended
December 31, 2002.


       Cash paid for:                2003         2002
                                    -------     -------
              Income taxes          $ 9,175     $13,898
              Interest expense       15,479       7,615

Sale of a line of business in 2002 (see Note 3).








                     See notes to the financial statements.



                                       29
<PAGE>


                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


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 and urology. 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 continuing operations of $2,966,415 and has incurred total
         negative cash flow from continuing operations of $3,600,911 for the
         same two-year period. The Company does not currently have an operating
         line of credit. These matters raise substantial doubt about the
         Company's ability to continue as a going concern. The financial
         statements do not include any adjustments that might result from the
         outcome of this uncertainty.

         The Company's continued existence is dependent upon several factors
         including increased sales volume, collecting additional sums for the
         contingent purchase price portion of the sale of the Company's bone
         densitometry business and the ability to achieve profitability on the
         sale of some of the Company's remaining product lines. The Company is
         pursuing initiatives to increase liquidity, including external
         investments and obtaining a line of credit. The Company does not have a
         commitment for such financing, and there can be no guarantee that the
         Company will be able to attain such financing. 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:

         Basis of Presentation

         The financial statements presented for December 31, 2002 include the
         accounts of the Company and its wholly owned subsidiaries, which were
         dissolved subsequent to the "Asset Sale" on April 11, 2002.

         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



                                       30
<PAGE>

                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

         Fair Value of Financial Statements (Continued)

         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.

         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.

         The Company had purchased certain products from Stratec and Novotec
         through a company owned by Reynald Bonmati, CEO of the Company.
         Management believes the gross profit recognized by OMRX on products
         purchased from the manufacturers materially approximates that which
         would have been realized had the Company used unaffiliated suppliers.
         This agreement was terminated in April 2002.

         The Company offers one-year warranties on both hardware and software
         components of its bone densitometry systems. The provision for product
         warranties represents an estimate for future claims arising under the
         terms of the Company's 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 it 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.

         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 "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.


                                       31
<PAGE>
                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

         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 a prominent
         scientist or research institution. 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.

         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.

         Research and Development

         Research and development costs are charged to operations as incurred.

                                       32
<PAGE>

                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


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 3,150,000 and 2,958,500, shares of common stock
         were outstanding at December 31, 2003, and 2002, 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 2003, there were no significant customers. During 2002,
         approximately 56% 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.


                                       33
<PAGE>
                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


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 April 2002, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards ("SFAS") No. 145,
         "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
         Statement No. 13 and Technical Corrections," which updates, clarifies
         and simplifies existing accounting pronouncements. In part, this
         statement rescinds SFAS No. 4, "Reporting Gains and Losses from
         Extinguishment of Debt." FASB No. 145 is effective for fiscal years
         beginning after May 15, 2002. Upon adoption, enterprises must
         reclassify prior period items that do not meet the extraordinary item
         classification criteria in Accounting Principles Board ("APB") Opinion
         No. 30. The adoption of this statement would have resulted in the
         reclassification of the gain on extinguishment of debt included in the
         Company's statement of operations for the year ended December 31, 2002
         from an extraordinary item to other income.

         In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities." SFAS No. 146 requires
         companies to recognize costs associated with exit or disposal
         activities when they are incurred rather than at the date of a
         commitment to an exit or disposal plan. Examples of costs covered by
         the standard include lease termination costs and certain employee
         severance costs that are associated with a restructuring, discontinued
         operation, plant closing or other exit or disposal activity. SFAS No.
         146 is effective prospectively for exit and disposal activities
         initiated after December 31, 2002. This statement had no effect on the
         Company's financial statements.

         In November 2002, the FASB issued Interpretation No. 45, "Guarantors'
         Accounting and Disclosure Requirements for Guarantees, Including
         Indirect Guarantees of Indebtedness of Others." The interpretation
         elaborates on the disclosures to be made by a guarantor in its
         financial statements about its obligations under certain guarantees
         that it has issued. It also clarifies that a guarantor is required to
         recognize, at the inception of a guarantee, a liability for the fair
         value of the obligation undertaken in issuing the guarantee. This
         interpretation does not prescribe a specific approach for subsequently
         measuring the guarantor's recognized liability over the term of the
         related guarantee. The disclosure provisions of this interpretation
         were effective for the Company's December 31, 2002 financial
         statements. The initial recognition and initial measurement provisions
         of this interpretation are applicable on a prospective basis to
         guarantees issued or modified after December 31, 2002. This
         interpretation had no effect on the Company's financial statements.


                                       34
<PAGE>
                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

         Accounting Pronouncements (Continued)

         In January of 2003, the FASB issued Interpretation No. 46,
         "Consolidation of Variable Interest Entities." This interpretation
         clarifies the application of existing accounting pronouncements to
         certain entities in which equity investors do not have the
         characteristics of a controlling financial interest or do not have
         sufficient equity at risk for the entity to finance its activities
         without additional subordinated financial support from other parties.
         In December 2003, the FASB issued a revision to Interpretation No. 46
         ("46R") to clarify some of the provisions of Interpretation No. 46, and
         to exempt certain entities from its requirements. The provisions of the
         interpretation need to be applied no later than December 31, 2004,
         except for entities that are considered to be special-purpose entities
         which need to be applied as of December 31, 2003. The Company does not
         anticipate that this will have an impact on the financial statements.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
         Stock-Based Compensation - Transition and Disclosure." This statement
         amends SFAS No. 123, "Accounting for Stock-Based Compensation." In
         particular, this statement (1) provides alternative methods of
         transition for entities that voluntarily change to the fair value based
         method of accounting for stock-based employee compensation, (2) amends
         the disclosure provision of SFAS No. 123 to require prominent
         disclosure about the effects on reported net income of an entity's
         accounting decisions with respect to stock-based employee compensation
         and (3) amends APB Opinion No. 28, "Interim Financial Reporting," to
         require disclosure about those effects in interim financial
         information. The transition provisions of this statement are effective
         for financial statements for fiscal years ending after December 15,
         2002. The disclosure provisions of this statement are effective for
         financial reports containing condensed financial statements for interim
         periods beginning after December 15, 2002. The transition provisions of
         this statement had no effect on the Company's financial statements. The
         Company adopted the disclosure provisions of this statement at the
         beginning of fiscal 2003. The adoption of the disclosure provisions
         resulted in the presentation of the Company's interim financial
         statements to include pro forma stock-based employee compensation
         costs.

         In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133
         on Derivative Instruments and Hedging Activities." This statement
         amends and clarifies financial accounting and reporting for derivative
         instruments, including certain derivative instruments embedded in other
         contracts (collectively referred to as derivatives) and for hedging
         activities under SFAS No. 133, "Accounting for Derivative Instruments
         and Hedging Activities." The changes in this statement improve
         financial reporting by requiring that contracts with comparable
         characteristics be accounted for similarly. In particular, this
         statement (1) clarifies under what circumstances a contract with an
         initial net investment meets the characteristic of a derivative
         discussed in SFAS No. 133, (2) clarifies when a derivative contains a
         financing component, (3) amends the definition of an underlying to
         conform it to language used in FASB Interpretation No. 45, and (4)
         amends certain other existing pronouncements. Those changes will result
         in more consistent reporting of contracts as either derivatives or
         hybrid instruments. This statement is effective for contracts entered
         into or modified after June 30, 2003, and for hedging relationships
         designated after June 30, 2003. The guidance should be applied
         prospectively. The provisions of this statement that relate to SFAS No.
         133 implementation issues that have been effective for fiscal quarters
         that began prior to June 15, 2003, should continue to be applied in
         accordance with their respective effective dates. In addition,

                                       35
<PAGE>

                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

         Accounting Pronouncements (Continued)

         certain provisions relating to forward purchases or sales of
         when-issued securities or other securities that do not yet exist,
         should be applied to existing contracts as well as new contracts
         entered into after June 30, 2003. This statement had no effect on the
         Company's financial statements.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
         Financial Instruments with Characteristics of both Liabilities and
         Equity." The statement improves the accounting for certain financial
         instruments that under pervious guidance, issuers could account for as
         equity. The new statement requires that those instruments be classified
         as liabilities in statements of financial position. SFAS No. 150
         affects the issuer's accounting for three types of freestanding
         financial instruments. One type is mandatorily redeemable shares, which
         the issuing company is obligated to buy back in exchange for cash and
         other assets. A second type, which includes put options and forward
         purchase contracts, involves instruments that do or may require the
         issuer to buy back some of its shares in exchange for cash or other
         assets. The third type of instruments that are liabilities under this
         statement is obligations that can be settled with shares, the monetary
         value of which is fixed, tied solely or predominantly to a variable
         such as a market index, or varies inversely with the value of the
         issuers' shares. SFAS No. 150 does not apply to features embedded in a
         financial instrument that is not a derivative in its entirety. In
         addition to its requirements for the classification and measurement of
         financial instruments in its scope, SFAS No. 150 also requires
         disclosures about alternative ways of settling the instruments and the
         capital structure of entities, all of whose shares are mandatory
         redeemable. Most of the guidance in SFAS No. 150 is effective for all
         financial instruments entered into or modified after May 31, 2003 and
         otherwise is effective at the beginning of the first interim period
         beginning after June 15, 2003. This statement had no effect on the
         Company's financial statements.


                                       36
<PAGE>

                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


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 is 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. $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 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
         a potential $1,000,000 in connection with the Asset Sale to Cooper. In
         addition, the Company received $47,095 from the arbitrator as a refund
         of arbitration fees advanced to the arbitrator. The settlement from
         Cooper was received in July 2003. The refund from the arbitrator was
         received in August 2003. The remaining $500,000 of the purchase price
         was received on January 30, 2004.

         In addition, the Company is eligible to receive earn-out payments (up
         to a maximum purchase price of $12.0 million for the Asset Sale) based
         on Cooper's net sales over three twelve-month periods of (i) the
         products sold by the Company to Cooper in the Asset Sale, (ii) the
         McCue C.U.B.A. product and (iii) each bone measurement product (other
         than the Sahara Clinical Bone Sonometer of Hologic, Inc.) that may be
         acquired or introduced by Cooper during the earn-out periods. No
         amounts have been earned through December 31, 2003 and there is no
         assurance that the Company will receive any sales proceeds from the
         earn-out.

         After paying transaction-related expenses, the Company recorded a gain
         of approximately $4.3 million during the year ending December 31, 2002.
         Any income tax liability incurred on the gain was fully offset by the
         Company's net operating loss carryforwards.

         The results of operations for all periods presented have been restated
         for the discontinued operations.

                                                          For the Year Ended
                                                          December 31, 2002
                                                          -----------------

          Summary of Operating Results
          of Discontinued Operations:
          Revenue                                            $ 1,658,042
          Cost of revenue                                      1,030,183
          Sales and marketing                                    650,074
          General and administrative                             301,623
          Research and development expense                        72,050
          Accounts receivable reserve adjustment               (145,157)
                                                             -----------
          Net loss from discontinued operations              $ (250,731)
                                                             ===========


                                       37
<PAGE>
                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


4.       DISTRIBUTION AGREEMENTS:

         The Company and McCue PLC ("McCue") entered into a distribution
         agreement dated June 17, 1999 granting the Company the right to
         exclusively distribute the C.U.B.A.Clinical ultrasound system in North
         America and certain countries in Europe, the Pacific Rim and the Middle
         East. Under terms of the five-year agreement, there are non-binding
         sales targets. In addition, in the event that the Company did not
         purchase a specified minimum number of C.U.B.A. Clinical devices in any
         twelve-month period starting in January 2001, McCue had the right to
         make the Company's distribution rights in North America non-exclusive.
         McCue exercised such right on January 7, 2002. This agreement was
         assigned to Cooper on April 11, 2002 as part of the Asset Sale.

         The Company and Stratec Medizintechnik GmbH ("Stratec"), a German
         Corporation, are parties to an exclusive agreement dated October 1,
         1999 with respect to the marketing, sales and service of pQCT systems
         in North America. Under the terms of the four-year distribution
         agreement (which may be renewed for an indefinite number of successive
         one-year terms), the Company may purchase products from Stratec at a
         fixed price to be adjusted from time to time by mutual consent.

         The Company and Novotec Medizintechnik GmbH ("Novotec"), a German
         Corporation, are parties to an exclusive agreement dated October 1,
         1999 with respect to the marketing, sales and service of Galileo and
         Leonardo systems in North America. Under the terms of the four-year
         distribution agreement (which may be renewed for an indefinite number
         of successive one-year terms), the Company may purchase products from
         Novotec at a fixed price to be adjusted from time to time by mutual
         consent.

         The Company and Genemed GmbH, a Swiss Corporation ("Genemed"), are
         parties to an exclusive agreement dated February 16, 2001 amended as of
         April 1, 2001 and August 20, 2002 with respect to the marketing, sales
         and service of the Genestone 190 system to U.S. military bases
         worldwide. Under the terms of the three-year distribution agreement
         (which may be renewed for an indefinite number of successive one-year
         terms), the Company may purchase products from Genemed at a fixed price
         to be adjusted from time to time by mutual consent.

         The Company and MIP GmbH, a Swiss Corporation ("MIP"), are parties to a
         product approval and licensing agreement dated February 12, 2002 with
         respect to the Orbasone system. Under the terms of the agreement, MIP
         granted the Company the exclusive and perpetual authority, right and
         license in North America to seek PMA approval for the Orbasone, and to
         manufacture, market, sell and service the Orbasone. The Orbasone has
         not yet been approved by the FDA for sale in the U.S. market.

         On January 1, 2003, the Company signed an agreement with BonAlyse Oy, a
         Finnish medical software developer, to exclusively distribute
         BonAlyse's software to the Company's pQCT customers in the U.S. and
         Canada. BonAlyse's software is used to analyze cross-sectional images
         acquired on pQCT and QCT systems, including assessment of bone density
         and bone geometry, muscle and fat (intramuscular and subcutaneous)
         cross-sectional area, and line analysis of distance and tissue
         thickness measurements. Under the terms of the two-year distribution
         agreement (which may be renewed for an indefinite number of successive
         one-year terms), the Company may purchase products from BonAlyse at a
         fixed price to be adjusted from time to time by mutual consent.


                                       38
<PAGE>
                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


5.       INVENTORIES:

         Inventories consist of the following as of December 31, 2003:

         Products kits, spare parts
           and sub-assemblies                               $ 127,298
                                                            ---------
                                                            $ 127,298
                                                            =========

6.       PROPERTY AND EQUIPMENT:

         Property and equipment consisted of the following as of December 31,
         2003:




         Furniture and fixtures                             $ 136,005
         Accumulated depreciation                           (115,842)
                                                            ---------
                                                            $  20,163
                                                            =========

7.       EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT:

         During January 2002, the Company entered into an option agreement to
         purchase a note payable by the Company to a third party distributor,
         under certain conditions, at a discounted amount of $463,888 including
         accrued and unpaid interest. On April 12, the Company exercised the
         option agreement and purchased the note payable along with accrued and
         unpaid interest of $139,165. The Company recorded a gain on the
         purchase of the note and the forgiveness of the accrued and unpaid
         interest of $811,087.

8.       STOCKHOLDERS' EQUITY (DEFICIT):

         Effective with stockholder approval received on June 2, 1999, the
         Company amended its Certificate of Incorporation increasing the number
         of authorized shares of Common Stock from 20,000,000 to 45,000,000. 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,
         2003 and 2002, there was no preferred stock outstanding.


                                       39
<PAGE>

                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


9.       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.

         The amended and restated 1994 Stock Option Plan includes 3,000,000
         shares of Common Stock reserved for issuance. Options are issued to
         employees and non-employees at the discretion of the Board of
         Directors. During 2003, 269,500 options were issued as compensation to
         employees. In accordance with SFAS No. 123 "Accounting for Stock-Based
         Compensation", $0 of compensation expense was included in the Company's
         net loss for 2003.

         Under the 2000 Non-Employee Directors' Stock Option Plan (the "Board
         Plan"), which has 1,000,000 shares of common stock reserved for
         issuance to non-employee directors and consultants, 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.

         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 2003
         or 2002.

                                       40
<PAGE>
                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


9.       COMPENSATION PROGRAMS (CONTINUED):

         Stock Option Plan (Continued)

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

<TABLE>
<CAPTION>
                                                                 Range of                          Range of
                                                                  Option                            Option
                                                                  Prices                            Prices
                                                  2003          Per Share          2002            Per Share
                                              ------------     ------------     ------------     ------------
<S>                                              <C>           <C>                 <C>           <C>
         Options outstanding
         at beginning of year                    2,958,500     $0.02 - 0.05        2,319,500     $0.03 - .067
                                              ------------     ------------     ------------     ------------

         Cancellations                            (198,000)     0.02 - .531         (501,250)    $0.06 - 0.67

         Granted                                   389,500      0.02 - 0.05        1,140,250     $0.02 - 0.18

         Exercised                                  --               --                --             --
                                              ------------     ------------     ------------     ------------

         Options outstanding at
         end of year                             3,150,000                         2,958,500
                                              ============                      ============

         Options exercisable at
         end of year                             1,591,688                         1,065,000
                                              ============                      ============

         Options available for
         grant at end of year                      850,000                         1,041,500
                                              ============                      ============
</TABLE>

         The following table summarizes information about significant groups of
stock options outstanding at December 31, 2003:

<TABLE>
<CAPTION>
                                           Options Outstanding                                  Options Exercisable
                              -------------------------------------------------   ------------------------------------------------
                                                                   Weighted                                          Weighted
                                Weighted                           Average         Weighted                          Average
                                 Average                          Remaining         Average                          Remaining
              Exercisable        Options          Exercise       Contractual        Options          Exercise       Contractual
                Prices         Outstanding          Price        Life in Years    Exercisable         Price         Life in Years
             --------------    -----------      ------------    ---------------   -----------      ------------    ---------------
<S>                             <C>                <C>                <C>            <C>              <C>                <C>
              $.02 - .05        1,160,250          $.048              9              192,688          $.048              9
               .06 - .13          643,000           .074              8              262,750           .075              8
               .15              1,281,750           .150              6            1,100,000           .150              5
               .531                15,000           .531              6               11,250           .531              6
               .67                 50,000           .670              8               25,000           .670              8
</TABLE>

                                       41
<PAGE>

                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002




9.       COMPENSATION PROGRAMS (CONTINUED):

         Stock Option Plan (Continued)

         Had compensation expense for the Company's 2003 and 2002 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 2003 and 2002 would approximate the pro forma
         amounts below:

                                                           2003          2002
                                                       -----------    ----------

                Net income (loss):
                    As reported                        $(1,349,156)   $3,262,186
                    Pro forma                           (1,390,552)    3,211,031
                Income (loss) per share:
                    As reported - Basic and diluted          (0.05)         0.11
                    Pro forma - Basic and diluted            (0.05)         0.11


         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,
         2003 and 2002: dividend yield of 0%, risk-free weighted average
         interest rate of 5.0%, expected volatility factor of 132% and 173%,
         respectively and an expected option term of 10 years. The weighted
         average fair value at date of grant for options granted during 2003 and
         2002 was $0.05 and $0.05 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 $5,428 and
         $20,496 for the years ended December 31, 2003 and 2002, respectively.


                                       42
<PAGE>

                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



10.      INCOME TAXES:

         The Company did not record a provision for income tax expense for the
         years ended December 31, 2003 and 2002 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:


                                                   2003            2002
                                                  ------          ------

              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 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:

                                                                   2003
                                                               -----------
              Deferred tax assets and liabilities:
                     Accrued liabilities                       $    29,099
              Valuation allowance                                  (29,099)
                                                               -----------
                     Net current deferred tax assets                  --
                                                               -----------
                     Net operating loss carryforwards            6,302,751
              Valuation allowance                               (6,302,751)
                                                               -----------
              Net noncurrent deferred tax assets                      --
                                                               -----------
                     Total deferred tax assets                 $      --
                                                               -----------

                                       43
<PAGE>


                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


10.      INCOME TAXES (CONTINUED):

         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 2003 and 2002, 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 $15,000,000 at December 31, 2003 for
         income tax purposes, which expire in 2008 through 2023.

11.      COMMITMENTS AND CONTINGENCIES:

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


                          2004                       28,185
                          2005                       29,500
                          2006                       30,816
                          2007                       31,584
                          2008                       18,424
                                                   --------
                                                   $138,509
                                                   ========



                                       44
<PAGE>

                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


12.      RELATED PARTY TRANSACTIONS:

         TRANSACTIONS WITH CERTAIN DIRECTORS AND OFFICERS

         During 2003, the Company borrowed $1,095,000 from several directors and
         officers of the Company and issued notes bearing interest at prime plus
         one (5.00% as of December 31, 2003) which mature one year from date of
         issuance.

         For all of the notes, the Company is obligated to prepay the principal
         amount within 10 days upon the occurrence of either of two events; if
         it (i) receives at least $1,000,000 from an equity financing or (ii)
         sells substantially all of its assets. In addition, for the $500,000 of
         notes issued from August 2003 through November 2003, the Company was
         obligated to prepay the principal amount within 10 days upon the
         Company receiving the remaining $500,000 from the Asset Sale, which was
         released by Cooper to the Company on January 30, 2004. In February
         2004, $325,000 of the borrowings were repaid from the $500,000 of sale
         proceeds received from Cooper. The unpaid portion of the borrowings has
         been consolidated and extended for one year. As additional
         compensation, the Company granted the note holders five-year warrants
         to purchase up to 1,095,000 shares of common stock at $0.05 per share.
         $45,683 of the proceeds received as of December 31, 2003 were allocated
         to the warrants based on the application of the Black-Scholes option
         pricing model, with the remaining proceeds of $1,049,317 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 2003, the unamortized discount on the notes payable is $22,097.

         During 2003 and 2002, the Company recorded interest expense of $51,230
         and $49,243, respectively.

         In December 2003, the Company granted an entity affiliated with an
         officer of the Company warrants to purchase up to 240,000 shares of
         common stock at $0.05 per share as compensation for consulting services
         rendered. The value of the warrants were based on the application of
         the Black-Scholes option pricing model and valued at $11,665. The value
         of the warrants was recorded as consulting expense and as additional
         paid-in-capital.


                                       45
<PAGE>
                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002



12.      RELATED PARTY TRANSACTIONS (CONTINUED):

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

13.      SUPPLEMENTAL SALES AND CUSTOMER INFORMATION:

         During 2003, there were no significant customers. During 2002,
         approximately 56% of total sales was 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:


                                                 2003                2002
                                        -------------------   ------------------

              Pacific Rim               $      175     .01%   $    --      --  %
              Europe/Middle East              --                   --      --
              Latin America                   --                   --      --
              Canada                       238,000   15.14         --      --

              Export Sales                    --                   --      --
              Domestic Sales             1,334,578   84.85     902,225    100.0%
                                        ----------  -------   --------    ------
                                        $1,572,753  100.00%   $902,225    100.0%
                                        ==========  =======   ========    ======


                                       46
<PAGE>
                                ORTHOMETRIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002


  14.    QUARTERLY FINANCIAL DATA (UNAUDITED):

<TABLE>
<CAPTION>
                                                                             2003 Quarters
                                   ------------------------------------------------------------------------------------------------
                                         First               Second                 Third               Fourth              Total
                                   ------------------   ------------------    ------------------   -----------------    -----------
<S>                                   <C>                  <C>                  <C>                  <C>                <C>
    Revenue                           $   500,160          $   361,319          $  420,056           $  291,218         $1,572,753
    Gross Profit                          345,871              240,305             282,537              195,071          1,063,784
    Operating loss                       (306,186)            (372,103)           (309,971)            (313,053)        (1,301,313)
    Net loss                             (312,098)            (381,108)           (320,838)            (335,112)        (1,349,156)

    Weighted average shares:
    Basic and diluted                  25,544,621           29,544,621          29,544,621           29,544,621         29,544,621
    Basic and diluted per
      share                           $     (0.01)               (0.02)              (0.01)               (0.01)         $   (0.05)
</TABLE>


<TABLE>
<CAPTION>
                                                                             2002 Quarters
                                   ------------------------------------------------------------------------------------------------
                                         First               Second                 Third               Fourth             Total
                                   ------------------   ------------------    ------------------   -----------------   ------------
<S>                                   <C>                  <C>                 <C>                  <C>                <C>
    Revenue                           $    64,347          $   141,710         $   319,593          $   376,575        $   902,225
    Gross Profit                           20,516               94,567             198,722              234,320            548,125
    Operating loss                       (345,897)            (333,784)           (391,666)            (501,811)        (1,573,158)
    (Loss) income from
      discontinued operations            (323,691)           4,778,182            (350,000)             (36,133)         4,068,358
    Extraordinary gain on
      extinguishment of debt                    -              811,087                   -                    -            811,087
    Net (loss) income                    (707,890)           5,258,992            (740,598)            (548,318)         3,262,186

    Weighted average shares:
    Basic and diluted                  29,969,312           29,544,621          29,544,621           29,544,621         29,649,339
    Basic and diluted per
      share                            $    (0.02)                0.18               (0.03)               (0.02)        $     0.11
</TABLE>




                                       47
<PAGE>

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

On September 13, 2002, the Registrant's Board of Directors approved the
appointment of Neil Koenig as Chief Financial Officer of the Registrant.
Effective with the appointment, Imowitz Koenig & Co., LLP resigned as the
Registrant's independent accountant, since Mr. Koenig's appointment as Chief
Financial Officer creates a lack of independence between the Registrant and
Imowitz Koenig & Co., LLP. Imowitz Koenig & Co., LLP had been engaged as the
Registrant's independent accountants since January 29, 2002, when it replaced
Deloitte & Touche LLP as the Registrant's independent accountants. See
Registrant's Form 8-K filed with the Commission on February 5, 2002 (Commission
File No. 0-26206)

The report of Imowitz Koenig & Co., LLP on the financial statements of the
Registrant for the fiscal year ended December 31, 2001 did not contain an
adverse opinion or disclaimer of opinion and other than raising substantial
doubt about the Registrant's ability to continue as a going concern was not
otherwise qualified or modified as to uncertainty, audit scope or accounting
principles, during the period of its engagement or the interim period to the
date of resignation. Similarly, the reports of Deloitte & Touche LLP on the
financial statements of the Registrant contained no adverse opinions or
disclaimers of opinion, and, other than raising substantial doubt about the
Registrant's ability to continue as a going concern for the fiscal year ended
December 31, 2000, were not modified as to uncertainty, audit scope, or
accounting principles during the two fiscal years ended December 31, 2000 and
1999 or the interim period to January 29, 2002, the date of dismissal.

In connection with the audits of the Registrant's financial statements for the
fiscal years ended December 31, 2001 and December 31, 2000, and in the
subsequent interim period preceding the resignation, there were no disagreements
with either Imowitz Koenig & Co., LLP or Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
either Imowitz Koenig & Co., LLP or Deloitte & Touche LLP that would have caused
them to make reference to the subject matter of the disagreements in connection
with their reports.

In connection with the audits of the Registrant's financial statements for the
fiscal years ended December 31, 2001 and 2000, and through the subsequent
interim period prior to September 13, 2002,: preceding the resignation, there
were no "reportable events" as that term is described in Item 304(a) (1) (v) of
Regulation S-K.

The Registrant provided Imowitz Koenig & Co., LLP with a copy of the disclosures
which the Registrant is making in this item 4 and has requested that Imowitz
Koenig & Co., LLP furnish it with a letter addressed to the Securities and
Exchange Commission stating whether or not it agrees with such disclosures. A
copy of such letter dated September 13, 2002 was filed as Exhibit 16.1 to the
Form 8-K.

On September 13, 2002, the Registrant's Board of Directors approved the
appointment of Radin, Glass & Co., LLP as its independent accountant for the
Registrant. The Registrant has not consulted with Radin, Glass & Co., LLP during
the previous two fiscal years and the interim periods to date on any matters
which were the subject of any disagreement or with respect to any "reportable
event" as is defined in Item 304 of Regulation S-K or the type of audit opinion
which might be rendered on the Registrant's financial statements.


                                       48
<PAGE>


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.



                                       49
<PAGE>

                                    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 2004 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, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


         (a) Exhibits:

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

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

            3.2     By-laws of Orthometrix, Inc. as amended (F)

            +10.1   Assignment and Assumption Agreement dated as of April 12,
                    2002 among Bionix, LLC, Orthometrix, Inc. and M.I.P. GmbH.
                    (A)

            +10.2   Assignment and Assumption Agreement dated as of April 12,
                    2002 among Bionix, LLC, Orthometrix, Inc. and Stratec
                    Medizintechnik, GmbH. (A)

            +10.3   Assignment and Assumption Agreement dated as of April 12,
                    2002 among Bionix, LLC, Orthometrix, LLC and Novotec
                    Maschinen GmbH. (A)

            +10.4   Assignment and Assumption Agreement dated as of April 12,
                    2002 among Bionix, LLC, Orthometrix, LLC and Genemed GmbH.
                    (A)

            +10.5   Software Distribution Agreement dated as of June 1, 2002
                    between Orthometrix, Inc. and BonAlyse Oy. (A)

            10.6    $150,000 Promissory Note, dated January 6, 2003, between
                    Orthometrix, Inc. and Michael W. Huber. (A)

            10.7    $50,000 Promissory Note, dated January 22, 2003, between
                    Orthometrix, Inc. and Yukon Associates. (A)

            10.8    $100,000 Promissory Note, dated January 31, 2003 between
                    Orthometrix, Inc. and Reynald Bonmati. (A)

                                       50
<PAGE>

            10.9    $100,000 Promissory Note, dated May 27, 2003 between
                    Orthometrix, Inc. and Reynald Bonmati. (B)

            10.10   $100,000 Promissory Note, dated June 3, 2003 between
                    Orthometrix, Inc. and Michael W. Huber. (B)

            10.11   $30,000 Promissory Note, dated June 19, 2003 between
                    Orthometrix, Inc. and Reynald Bonmati. (B)

            10.12   $20,000 Promissory Note, dated June 23, 2003 between
                    Orthometrix, Inc. and Reynald Bonmati. (B)

            10.13   $25,000 Promissory Note, dated August 20, 2003 between
                    Orthometrix, Inc. and Reynald Bonmati. (C)

            10.14   $10,000 Promissory Note, dated August 26, 2003 between
                    Orthometrix, Inc. and Reynald Bonmati. (C)

            10.15   $40,000 Promissory Note, dated September 12, 2003 between
                    Orthometrix, Inc. and Reynald Bonmati. (C)

            10.16   $25,000 Promissory Note, dated September 12, 2003 between
                    Orthometrix, Inc. and Yukon Associates. (C)

            10.17   $50,000 Promissory Note, dated September 18, 2003 between
                    Orthometrix, Inc. and Michael W. Huber. (C)

            10.18   $25,000 Promissory Note, dated September 26, 2003 between
                    Orthometrix, Inc. and Reynald Bonmati. (C)

            10.19   $25,000 Promissory Note, dated October 3, 2003, between
                    Orthometrix, Inc. and James Baker.

            10.20   $25,000 Promissory Note, dated October 6, 2003, between
                    Orthometrix, Inc. and Arthur A. Rossler.

            10.21   $25,000 Promissory Note, dated October 8, 2003, between
                    Orthometrix, Inc. and Yukon Associates.

            10.22   $250,000 Promissory Note, dated November 7, 2003, between
                    Orthometrix, Inc. and Reynald Bonmati.

            10.23   $45,000 Promissory Note, dated November 24, 2003, between
                    Orthometrix, Inc. and Jacques Neusy.

                                       51
<PAGE>

            10.24   $405,000 Promissory Note, dated January 31, 2004, between
                    Orthometrix, Inc. and Reynald Bonmati. This note replaces
                    notes dated August 20, 2003; August 26, 2003; September 12,
                    2003; September 26, 2003; November 7, 2003; January 16, 2004
                    and January 23, 2004 in the amounts of $25,000 ($20,000 of
                    which has been paid off); $10,000; $40,000;
                    $25,000;$250,000; $50,000 and $25,000, respectively.

            10.25   $70,000 Promissory Note, dated January 31, 2004, between
                    Orthometrix, Inc. and Yukon Associates. This note replaces
                    notes dated January 22, 2003; September 12, 2003 and October
                    8, 2003 in the amounts of $50,000 ($30,000 of which has been
                    paid off), $25,000 and $25,000, respectively.

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

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

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

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

            +    Confidentiality requested as to certain provisions.

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

            (B)  This Exhibit was previously filed as an Exhibit to the
                 Company's Report on Form 10-QSB dated August 8, 2003 and is
                 incorporated herein by reference.

            (C)  This Exhibit was previously filed as an Exhibit to the
                 Company's Report on Form 10-QSB dated November 7, 2003, as is
                 incorporated herein by reference.

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

            (E)  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.

            (F)  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.

         (b) Reports on Form 8-K:

            No reports on Form 8-K were filed during the period ended December
            31, 2003.


                                       52


<PAGE>


Item 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

          1.   Audit Fees - The aggregate fees for the years ended December 31,
               2003 and 2002 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 $26,000 and $22,000, respectively.

          2.   Audit-Related Fees - The registrant did not pay any audit-related
               fees during the years ended December 31, 2003 and 2002 that are
               not reported under paragraph 1 above.

          3.   Tax Fees - The registrant did not pay any fees during the years
               ended December 31, 2003 and 2002 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, 2003 and 2002 other than those
               reported in paragraphs 1 through 3 above.




                                       53

<PAGE>
                                   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 31st day of March, 2004.


                                    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.


<TABLE>
<CAPTION>
                Signature                         Capacity In Which Signed                       Date
                ---------                         ------------------------                       ----
<S>                                         <C>                                      <C>

       /s/ Reynald G. Bonmati                Chairman of the Board and President                March 31, 2004
       --------------------------            (Principal Executive Officer); and
       Reynald G. Bonmati                                 Director




       /s/ Neil H. Koenig                    Chief Financial Officer (Principal                 March 31, 2004
       -----------------------------           Financial Officer and Principal
       Neil H. Koenig                                Accounting Officer)





                                       54
<PAGE>

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


       /s/ James J. Baker                                 Director                          March 31, 2004
       -------------------------------------
       James J. Baker


       /s/ Michael W. Huber                               Director                          March 31, 2004
       -------------------------------------
       Michael W. Huber


       /s/ Andre-Jacques Neusy                            Director                          March 31, 2004
       -----------------------------
       Andre-Jacques Neusy


       /s/ Albert S. Waxman                               Director                          March 31, 2004
       -------------------------------------
       Albert S. Waxman
</TABLE>




                                       55