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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, 2002          Commission file No. 0-26206

                                Orthometrix, Inc.
                                -----------------
        (Exact name of small business issuer as specified in its charter)
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                            Delaware                                                        06-1387931
       ----------------------------------------------------                ----------------------------------------------
                 (State or other jurisdiction of                               (I.R.S. Employer Identification No.)
                    incorporation or organization)

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

                        Registrant's telephone number, including area code     (914) 694-2285
                                                                           -----------------------
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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 $902,225.

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 17, 2003 was
$674,745 based on the price of the last reported sale on the OTC Bulletin Board.

As of March 17, 2003 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 2003 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
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INTRODUCTION   3

ITEM 1.     BUSINESS                                                                         3

ITEM 2.     PROPERTIES..17

ITEM 3.     LEGAL PROCEEDINGS17

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                                                           24

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                 ACCOUNTING AND FINANCIAL DISCLOSURE                                        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.    CONTROLS AND PROCEDURES                                                         52
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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; (xii) 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; (xiii) changes that
may result from health care reform in the United States may adversely affect the
Company; (xi) 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. and its subsidiaries (collectively, "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.



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         During the past two years, the Company has experienced aggregate losses
from continuing operations of $3,687,445 and has incurred a total negative cash
flow from continuing operations of $4,114,307 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 from Cooper the remainder of the purchase
price for 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.

         In November 1999, the Company announced a product diversification
program into musculoskeletal development and pain management which was extended
to urology in February 2000. To penetrate these potentially large markets, the
Company is launching the sale of new lines of products used in sports medicine,
musculoskeletal development, pain management and urology. The Company has
obtained exclusive distribution rights for certain products that are used to
provide aid in musculoskeletal development, the management of pain associated
with soft tissue and the treatment of kidney stones.

         On September 11, 1997, the Company purchased all of the outstanding
stock of Norland Corporation ("Norland Corp.") from Norland Medical Systems B.V.
("NMS BV"). Norland Corp. developed and manufactured bone densitometry systems
based on dual-energy x-ray absorptiometry ("DXA") technology, which, since 1987,
has been a standard for measuring bone mass reduction, one of the primary
indicators of osteoporosis. Prior to September 11, 1997, the Company had
exclusive worldwide distribution rights to all products developed and
manufactured by Norland Corp. and Stratec Medizintechnik GmbH ("Stratec"), a
former subsidiary of NMS BV which develops and manufactures bone densitometry
systems based on peripheral quantitative computed tomography ("pQCT")
technology. This agreement was limited to the North American market on December
31, 2000 and was terminated on August 1, 2001.

         Prior to the Asset Sale on April 11, 2002, the Company's bone
diagnostic product line had five types of bone measurement devices comprised of
eight models utilizing several different technologies. The Company manufactured
and marketed a line of traditional full size DXA-based bone densitometry
products. The Excell, the Excell plus and the XR46 were highly effective and
offered essential features at competitive prices. Because of the cost, space
requirements and training required, these systems were generally found in
hospitals, large clinics and research institutions, as opposed to physician's
offices, where patients would benefit from timely and easy access to bone
density testing and monitoring.

         The Company's peripheral x-ray line of bone densitometers consisted of
the Apollo DXA, the pDEXA and the Discovery systems, which were lower priced
high performance portable systems based on DXA technology. The pDEXA, which
scans the forearm, was the first desktop DXA-based system to receive FDA
marketing clearance and the first system to receive FDA marketing clearance for
use in fracture risk assessment. Sales of the pDEXA were discontinued as of
January 1, 2001 as a result of the Company's development efforts and replaced
with the Discovery. The Discovery was the forearm-scanning successor to the
pDEXA, and was introduced as a prototype in September 1999. The Apollo DXA,
which performed scans of the heel in fifteen seconds, was introduced in May
1998.



                                       4
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         In June 1999, the Company acquired certain distribution rights for the
C.U.B.A.Clinical ultrasound based bone measurement system that was developed by
McCue Plc (the "C.U.B.A.Clinical") (Contact Ultrasound Bone Analyzer). The
C.U.B.A.Clinical uses technology to gently apply pressurized water-filled
membranes to the patient's heel through which the velocity of sound and broad
band ultrasound attenuation readings are measured and analyzed to assess the
patient's calcaneus (heel bone). In January 2000, the FDA approved the
C.U.B.A.Clinical for sale in the United States. The Company had been selling the
C.U.B.A. Clinical in North America, first on an exclusive basis, then on a
non-exclusive basis starting January 7, 2002. This agreement was assigned to
Cooper on April 11, 2002 as part of the Asset Sale.

         In 1999, the Company announced a product diversification program into
musculoskeletal development and pain management. The Company was also seeking
additional new diversified products to distribute through its existing network
of independent dealers, sales representatives and Company sales personnel.
Pursuant to an October 1, 1999 sub-distribution agreement between the Company
and Bionix L.L.C. (U.S.) ("Bionix") which runs through September 30, 2003, the
Company obtained the right to exclusively distribute the Galileo exercise
systems in U.S. hospitals, clinics, group practices and private medical offices
involved in sports medicine and physical therapy. The Galileo system features an
efficient method of muscle strength development through mechanical stimulation.
Pursuant to a separate sub-distribution agreement between the Company and
Bionix, dated October 1, 1999, which runs through September 30, 2003, the
Company obtained the right to exclusively distribute the Orbasone system within
the U.S., subject to FDA market clearance. The Orbasone system which provides
relief to patients from minor pain in soft tissue is targeted toward orthopedic
surgeons, podiatrists, and pain management specialists.

         During 2000, the Company decided to expand its diversification program
into urology. Pursuant to a sub-distribution agreement, dated February 17, 2000
between the Company and Bionix, which runs through February 28, 2004, the
Company obtained the right to exclusively distribute the Genestone 190 within
the U.S. The Genestone 190 is a novel lithotripter used to treat kidney stones,
which has received premarket approval from the FDA. In late 2001, the Genestone
190 was introduced to VA hospitals, community hospitals and mobile services by
the Health Care Products ("HCP") division of Philips Medical Systems, Inc., the
Company's exclusive distributor. The distribution agreement with HCP was
subsequently terminated following the leveraged buy out of HCP and the Company
restricted its direct marketing efforts to the Defense market (VA hospitals,
Navy, etc...). In February 2002, Bionix acquired the rights to manufacture and
distribute in the U.S. and Canada the Orbasone(TM), a novel pain management
system, upon successful completion of a clinical study and approval of the
system by the FDA. The Company's Chairman, Reynald Bonmati, controls Bionix.
Following the sale of its bone measurement business (as described below), the
Company focused exclusively on its musculoskeletal products and all Bionix
rights were assigned to the Company for one dollar.

         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 have engaged an independent accounting firm to provide a
binding resolution of such disagreement. The Company is claiming aggregate



                                       5
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adjustments in the amount of at least $584,000 in its favor. In the event the
Company does not receive substantial funds upon resolution of the dispute it
will create further demand on the Company to increase sales volume and to obtain
alternate sources of financing. The remaining $500,000 of the purchase price
(less any indemnification obligations owing by the Company to Cooper) is to be
released by Cooper to the Company on or before January 31, 2004.

         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, 2003 and there is no assurance that the Company
will receive any sales proceeds from the earn-out.

         The Company recorded a gain from the Asset Sale of $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 Company
used the net proceeds from the Asset Sale of $3,741,020, to pay current
operating expenses and to satisfy liabilities of the Company not assumed by
Cooper, including $463,888 to repurchase at a discount $1,274,975 of promissory
notes (including accrued and unpaid interest) previously issued to Nissho Iwai
Corporation and Nissho Iwai American Corporation and $330,267 to repay loans
from directors and officers of the Company. None of the proceeds from the Asset
Sale have been or will be distributed to any shareholders of the Company.

         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 (peripheral Quantitative Computed
Tomography) bone and muscle measurement systems used for musculoskeletal
research and clinical applications (including for bone disorders and human
performance), (2) ESWT (Extracorporal Shock Wave Therapy) systems used for
urology (lithotripsy) and (3) patented exercise systems used for physical
therapy, sports medicine and rehabilitative medicine. The healthcare division
has initiated a clinical study of the Orbasone 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 sports & fitness division's product line includes the
Galileo systems. Galileo products 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 to be 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.

RECENT DEVELOPMENTS

         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.

MARKETS AND PRODUCTS

         The Company currently offers 5 product types comprised of a total of 13
models: 7 models of pQCT systems for bone & muscle research application (XCT
Research SA, XCT Research SA+, XCT Research M. XCT Research



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M+, XCT Microscope, XCT 3000 Research and XCT Fan-Beam u-Scope), 2 models of
pOCT systems for clinical application related to bone & muscle disorders (XCT
2000 and XCT 3000), 1 model of lithotripter (Genestone 190), 2 models of
patented powered exercise systems (Galileo 100 and Galileo 2000) and 1 model of
human performance measurement system (Leonardo). 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(TM)) 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.
         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).
XCT Fan Beam u-Scope - (bone measurement for in vitro research).

         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 90% of the Company sales from continuing operations during
fiscal year 2002.

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



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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 2002

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").

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 5% of total sales from
continuing operations during fiscal year 2002.

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 2002.

7. 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 ss.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


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         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 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 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    SPORTS & 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, 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
         is being developed by the Company to make the powerful Galileo
         technology affordable to the sports & fitness industry.

SALES AND MARKETING

         The Company currently employs one Vice President Sales & Marketing, one
Sales Manager for Rehabilitation / Fitness, one Sales Administration Manager and
one full-time pQCT Sales Applications Consultant. The Company's customers are
end-users. The Company sells pQCT Research systems directly to customers and
uses independent sales representatives to sell pQCT Clinical systems. The
Company 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.

         In 2002, the Company reorganized its marketing department, which
presently consists of one employee. Marketing efforts are focused primarily on
supporting the Vice President Sales & Marketing, the Sales Manager for



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Rehabilitation / Fitness and the pQCT Sales Applications Consultant in their
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 site.

        Following the sale of its bone measurement business, the Company limited
its products sales to the North American market and U.S. military bases
worldwide.

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.

MUSCULOSKELETAL DEVELOPMENT PRODUCTS

         The Galileo 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 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 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



                                       10
<PAGE>


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 products 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.

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.

CUSTOMER SUPPORT SERVICES

         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.


                                       11
<PAGE>


DISTRIBUTION AGREEMENTS

         Following the sale of its bone measurement business, the Company
focused exclusively on its musculoskeletal products and all Bionix rights were
assigned to the Company for one dollar. As a result, the Company has the
following rights to market, sell and service the following products in North
America:

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 as 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.

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.

RECENT DEVELOPMENTS

         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.



                                       12
<PAGE>


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, 2003 and
there is no assurance that the Company will receive any sales proceeds from the
earn-out.

MUSCULOSKELETAL DEVELOPMENT PRODUCTS

         The Galileo 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 products should be enhanced to
better suit the requirements of the U.S. market. There can be no assurance that
Novotec can or will improve the product design, nor that the Company's
competitors will fail to develop and market products that make use of the
Galileo's novel approach or that are lower priced or better performing as
compared to the Galileo products. In addition, there is a risk that the patents
that have been applied for by the owner of Novotec regarding Galileo 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 products, which the Company recently introduced to the U.S. market.



                                       13
<PAGE>




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 (21 CFR ss.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.

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.


                                       14
<PAGE>



         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 series of musculoskeletal development products are not
covered under federal or state health care insurance programs or by third party
health insurance payors.

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.

         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. was 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 musculoskeletal



                                       15
<PAGE>


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 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. Backlog as of December 31, 2002 and 2001 totaled approximately
$- 0 - and $755,000, respectively. 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.



                                       16
<PAGE>


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 3, 2003, the Company had 7 employees, of whom 3 were engaged
in direct sales and marketing activities. The remaining employees are in
finance, administration, product development and customer service. No employees
of the Company are covered by any collective bargaining agreements, and
management considers its employee relations generally to be good.

ITEM 2. PROPERTIES

         The Company leases its principal executive offices, which are located
at 106 Corporate Park Drive, Suite 106, White Plains, New York 10604. The lease
expires on July 31, 2003. 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, 2002.


                                     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". 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.



                                       17
<PAGE>



         PERIOD FROM JANUARY 1, 2001 THROUGH DECEMBER 31, 2001:

                                      High              Low
                                      ----              ---
         First Quarter               $ 0.22           $ 0.09
         Second Quarter                0.20             0.07
         Third Quarter                 0.18             0.08
         Fourth Quarter                0.09             0.04

         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

         As of March 17, 2003, the sales price per share of Common Stock, as
reported by the Over-The-Counter Bulletin Board, was $0.05.

         As of March 3, 2003 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 Consolidated 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




                                       18
<PAGE>


management initiatives. If market conditions are less favorable than those
projected by management, additional inventory allowances may be required. The
Company provides allowances for uncollectable receivable amounts based on
current assessment of collectability. If collectability is less favorable than
those projected by management, additional allowances for uncollectability may be
required. The Company has recorded a valuation allowance to reduce its deferred
tax assets. The Company limited the amount of tax benefits recognizable from
these assets based on an evaluation of the amount of the assets that are
expected to be ultimately realized. 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.

Liquidity and Capital Resources
-------------------------------

         During the past two years, the Company has experienced aggregate losses
from continuing operations of $3,687,445 and has incurred total negative cash
flow from continuing operations of $4,114,307 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 the remainder of the purchase price for the
sale of its bone 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 a $9,842 increase at
December 31, 2002, as compared to December 31, 2001. The Company's $3,741,020 of
cash provided by the sale of its bone measurement business (investing
activities) was substantially offset by $3,137,023 of net cash used in operating
activities and by $594,155 of net cash used in financing activities. Financing
activities consisted of $200,000 of proceeds of borrowings from directors and
officers of the Company which was more than offset by $463,888 to repurchase the
promissory notes and $330,267 to repay borrowings from directors and officers.

         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. (NYSE: COO) and 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
"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. The Company is claiming aggregate adjustments in the amount of at
least $584,000 in its favor. In the event the Company does not receive
substantial funds upon resolution of the dispute it will create further demand
on the Company to increase sales volume and to obtain alternate sources of
financing. The remaining $500,000 of the purchase price (less any
indemnification obligations owing by the Company to Cooper) is to be released by
Cooper to the Company on or before January 31, 2004.


                                       19
<PAGE>


         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, 2003 and there is no assurance that the Company
will receive any sales proceeds from the earn-out.

         The Company recorded a gain from the Asset Sale of $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 which
approximate $10,000,000. The Company used the net proceeds from the Asset Sale
of $3,741,020 to pay current operating expenses and to satisfy liabilities of
the Company not assumed by Cooper, including $463,888 to repurchase at a
discount, $1,274,975 of promissory notes (including accrued and unpaid interest)
previously issued to Nissho Iwai Corporation and Nissho Iwai American
Corporation and $330,267 to repay loans from directors and officers of the
Company. None of the proceeds from the Asset Sale have been or will be
distributed to any shareholders of the Company.

         In January 2003, the Company borrowed $300,000 from certain officers
and directors of the Company. Interest on the notes is calculated at prime plus
one. The notes are due in January 2004.

         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 (peripheral Quantitative Computed
Tomography) bone and muscle measurement systems used for musculoskeletal
research and clinical applications (including for bone disorders and human
performance), (2) ESWT (Extracorporal Shock Wave Therapy) systems used for
urology (lithotripsy) and (3) patented exercise systems used for physical
therapy, sports medicine and rehabilitative medicine. The healthcare division is
currently initiating a study of the Orbasone 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 sports & fitness division's product line includes the
Galileo systems. Galileo products offer a novel approach to muscle strength
development given that such products are based on short and intense stimulations
of the muscles rather than on longer repetitive movements on conventional
exercise systems. The systems mechanically stimulate targeted muscles at a
specific frequency, typically 25 to 30 impulses per second, causing the muscles
to respond by contracting and relaxing by natural reflex 20 to 30 times per
second. The Galileo systems target the leg and lower back (Galileo 2000), the
arm and shoulder muscles (Galileo 100). There can be no assurance that these
efforts will be successful.

         The Company has no current backlog of orders as of December 31, 2002.
There are no material commitments for capital expenditures as of December 31,
2002.

         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.


                                       20
<PAGE>


Results of Operations
---------------------

         The Company had 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
compared to a net loss of $1,636,672 ($0.05 per share based on 30,383,098
weighted average shares) for the year ended December 31, 2001. The increase in
net income was due to a gain on sale of discontinued operations of $4,319,089
and an $811,087 extraordinary gain on extinguishment of debt in 2002.

         Loss from continuing operations decreased from $2,070,186 for the year
ended December 31, 2001 to $1,617,259 for the year ended December 31, 2002.
Revenue for the year ended December 31, 2002 increased $217,853 (or 31.8%) to
$902,225 from $684,372 from the comparable period of fiscal 2001. The increase
in sales was primarily due to an increase in sales during the latter half of
2002.

         Cost of revenue as a percentage of revenue was 39.3% and 74.0% for the
year ended December 31, 2002 and 2001, respectively, resulting in a gross margin
of 60.7% for the year ended December 31, 2002 compared to 26.0% for the
comparable period of 2001. The increase in gross margin was due to reduced
manufacturing overhead expenses attributable to the products sold in 2002.

         Sales and marketing expense for the year ended December 31, 2002
decreased $238,687 (or 28.3%) to $604,983 from $843,670 for the year ended
December 31, 2001. The categories that were lower included labor costs and
travel related expenses incurred by sales and service personnel. The expense
reductions are attributed to improvements in the cost-effectiveness of the
sales, marketing and service functions and are not expected to adversely affect
future sales.

         General and administrative expense for the year ended December 31, 2002
increased $91,963 (or 7.9%) to $1,262,768 from $1,170,805 for the year ended
December 31, 2001. The increase was primarily due to increased consulting and
legal fees.

         Research and development expense for the year ended December 31, 2002
increased $168,755 (or 199.0%) to $253,532 from $84,777 for the year ended
December 31, 2001. The increase was primarily due to increased expenses incurred
as a result of the Orbasone PMA process.

         Interest expense decreased $99,187 (or 66.8%) to $49,270 for the year
ended December 31, 2002 from $148,457 for the year ended December 31, 2001.
Interest expense decreased due to repayment of all principal balances on
promissory notes and related party loans during April 2002.

New Accounting Pronouncements
-----------------------------

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No.
141 prohibits pooling-of-interests method of accounting for business
combinations initiated after June 30, 2001, and applies to all business
combinations completed after June 30, 2001. There are also transition provisions
that apply to purchase combinations completed prior to June 30, 2001. SFAS 141
is effective immediately. SFAS No. 142 is effective for the Company beginning
January 1, 2002, and applies to goodwill and other intangible assets recognized
in the Company's consolidated balance sheet as of that date, regardless of when
those assets were initially recognized. SFAS No. 141 and No. 142 had no effect
on the Company's consolidated financial statements.



                                       21
<PAGE>


         In August 2001, the FASB issued SFAS No. 143, "Accounting For Asset
Retirement Obligations". This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. This standard
requires entities to record the fair value of a liability for an asset
retirement obligation in the period incurred. When the liability is initially
recorded, the entity capitalizes a cost by increasing the carrying amount of the
related long-lived asset. Over time, the liability is accreted to its present
value each period, and the capitalized cost is depreciated over the useful life
of the related asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss upon settlement.
The Company adopted the provisions of SFAS No. 143 at the beginning of 2002.
SFAS No. 143 did not have an impact on the Company's consolidated financial
statements.

         In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supersedes FASB Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions". This Statement also amends ARB No. 51, "Consolidated Financial
Statements", to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. This Statement requires that one
accounting model be used for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. This Statement also broadens
the presentation of discontinued operations to include more disposal
transactions. The provisions of this Statement are required to be adopted by the
Company at the beginning of fiscal 2002. The adoption of this statement resulted
in the presentation of the Company's consolidated financial statements to
include the assets, liabilities and results of operations of its bone
measurement business, which was sold in April 2002, as discontinued operations.

         In April 2002, the FASB issued 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 will be 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 APB 30. The effect of this statement on the Company's
consolidated financial statements would be the reclassification of extraordinary
gain on early extinguishment of debt to continuing operations, however, this
would have no effect on the Company's net income. The Company intends to adopt
FASB No. 145 as of January 1, 2003.

         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, with earlier adoption encouraged. The Company does not
expect that this statement will have a material effect on the Company's
consolidated 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



                                       22
<PAGE>


related guarantee. The disclosure provisions of this Interpretation are
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
consolidated 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.
The provisions of the Interpretation will be immediately effective for all
variable interests in variable interest entities created after January 31, 2003,
and the Company will need to apply its provisions to any existing variable
interests in variable interest entities by no later than December 31, 2004. The
Company does not anticipate that this will have an impact on the 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.


                                       23
<PAGE>


ITEM 7. FINANCIAL STATEMENTS


                        CONSOLIDATED FINANCIAL STATEMENTS

                                      INDEX
                                                                            Page
                                                                            ----
Independent Auditors' Reports                                                25

Financial Statements:

Consolidated Balance Sheet as of December 31, 2002                           27

Consolidated Statements of Operations for the years ended
December 31, 2002 and 2001                                                   28

Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for the years ended December 31, 2002 and 2001                               29

Consolidated Statements of Cash Flows for the years ended
December 31, 2002 and 2001                                                   30

Notes to Consolidated Financial Statements                                   32



                                       24
<PAGE>



                          Independent Auditors' Report
                          ----------------------------


Stockholders and Board of Directors of
Orthometrix, Inc.:


We have audited the accompanying consolidated balance sheet of Orthometrix, Inc.
and subsidiaries (the "Company") as of December 31, 2002 and the related
consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows for the year 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 2002 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Orthometrix,
Inc. and subsidiaries as of December 31, 2002, and the consolidated results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements for the year ended December
31, 2002 have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial statements, the
Company's recurring losses from operations raise substantial doubt about its
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.


/s/ Radin, Glass & Co., LLP


New York, New York
February 13, 2003



                                       25
<PAGE>



                          Independent Auditors' Report
                          ----------------------------

Stockholders and Board of Directors of
Orthometrix, Inc.:


We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity (deficit), and cash flows of Orthometrix, Inc. and
subsidiaries (the "Company") for the year ended December 31, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2001 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of Orthometrix, Inc. and subsidiaries for the year ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying consolidated financial statements for the year ended December
31, 2001 have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial statements, the
Company's recurring losses from operations raise substantial doubt about its
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.


/s/ Imowitz Koenig & Co., LLP


New York, New York
February 8, 2002



                                       26
<PAGE>


                                ORTHOMETRIX, INC.
                           CONSOLIDATED BALANCE SHEET
                             AS OF DECEMBER 31, 2002

<TABLE>
<CAPTION>
<S>                                                                                 <C>
                         ASSETS
                         ------


Current assets:

      Cash                                                                           $              26,044
      Accounts receivable-trade, less allowance for doubtful
         accounts of $0                                                                            245,110
      Current portion of receivable due from purchaser                                             594,992
      Inventories                                                                                   58,148
      Prepaid expenses and other current assets                                                     28,655
                                                                                     ----------------------
         Total current assets                                                                      952,949

Property and equipment, net                                                                         13,717
Long term receivable due from purchaser                                                            500,000
Other                                                                                               11,658
                                                                                     ----------------------
         Total Assets                                                                $           1,478,324
                                                                                     ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:

      Accounts payable - trade                                                       $             533,366
      Accrued expenses                                                                             156,896
      Unearned service revenue                                                                      12,985
      Other liabilities                                                                            268,387
                                                                                     ----------------------
         Total current liabilities                                                                 971,634
                                                                                     ----------------------
Stockholders' equity:

      Common stock - 29,544,621
         shares issued and outstanding and
         45,000,000 shares authorized                                                               14,771
      Additional paid-in capital                                                                38,672,828
      Accumulated deficit                                                                      (38,180,909)
                                                                                     ----------------------
         Total stockholders' equity                                                                506,690
                                                                                     ----------------------
         Total Liabilities and Stockholders' Equity                                  $           1,478,324
                                                                                     ======================

</TABLE>


                                       27
<PAGE>


                                ORTHOMETRIX, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  FOR THE YEAR ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>

                                                                                                              2001
                                                                                     2002                  (RESTATED)
                                                                             ---------------------    ---------------------
<S>                                                                          <C>                      <C>
Revenue                                                                      $            902,225     $            684,372
Cost of revenue                                                                           354,100                  506,849
                                                                             ---------------------    ---------------------
         Gross profit                                                                     548,125                  177,523

Sales and marketing expense                                                               604,983                  843,670
General and administrative expense                                                      1,262,768                1,170,805
Research and development expense                                                          253,532                   84,777
                                                                             ---------------------    ---------------------
         Operating loss                                                                (1,573,158)              (1,921,729)

Interest expense                                                                          (49,270)                (148,457)
Interest income                                                                             5,169                        -
                                                                             ---------------------    ---------------------
Loss from continuing operations                                                        (1,617,259)              (2,070,186)
                                                                             ---------------------    ---------------------

Discontinued operations:
      Net (loss) income from discontinued operations                                     (250,731)                 433,514
      Gain on disposal of discontinued operations                                       4,319,089                        -
                                                                             ---------------------    ---------------------
Income from discontinued operations                                                     4,068,358                  433,514
                                                                             ---------------------    ---------------------
Income (loss) before extraordinary item                                                 2,451,099               (1,636,672)

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

Net income (loss)                                                            $          3,262,186     $         (1,636,672)
                                                                             =====================    =====================

Basic and diluted weighted average shares                                              29,649,339               30,383,098
                                                                             =====================    =====================
Basic and diluted income (loss) per share:
      Loss from continuing operations                                        $              (0.06)    $              (0.07)
      Income from discontinued operations                                                    0.14                     0.02
      Extraordinary gain on extinguishment of debt                                           0.03                        -
                                                                             ---------------------    ---------------------
      Net income (loss)                                                      $               0.11     $              (0.05)
                                                                             =====================    =====================

</TABLE>



                                       28
<PAGE>


                                ORTHOMETRIX, INC.
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 2002 and 2001

<TABLE>
<CAPTION>

                                                                                                  Additional
                                                                                     Common         Paid-In        Accumulated
                                                   Shares           Total           Stock           Capital          Deficit
                                             ----------------  ---------------  -------------  ----------------  ----------------
<S>                                          <C>                <C>             <C>            <C>               <C>
Balance as of December 31, 2000                   29,233,509   $   (1,287,403)  $     14,615   $    38,504,405   $   (39,806,423)

Issuance of common stock                           1,200,000          180,000            600           179,400                 -

Net loss                                                   -       (1,636,672)             -                 -        (1,636,672)
                                             ----------------  ---------------  -------------  ----------------  ----------------

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)
                                             ================  ===============  =============  ================  ================

</TABLE>




                                       29
<PAGE>


                                ORTHOMETRIX, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 and 2001
<TABLE>
<CAPTION>

                                                                                                                    2001
                                                                                              2002                (RESTATED)
                                                                                       -------------------    --------------------
<S>                                                                                    <C>                    <C>
Cash Flows From Operating Activities:

Net income (loss)                                                                      $        3,262,186     $     (1,636,672)
Adjustments to reconcile net income (loss) to net cash used in
      operating activities:
         Net loss (income) from discontinued operations                                           250,731             (433,514)
         Gain on disposal of discontinued operations                                           (4,319,089)                   -
         Extraordinary gain on extinguishment of debt                                            (811,087)                   -
         Accounts receivable reserve                                                             (282,500)             (18,500)
         Stock options issued as compensation to non-employees                                     24,135                    -
         Amortization expense                                                                      13,281               53,124
         Depreciation expense                                                                      27,389               84,542
Changes in assets and liabilities:
         Decrease in accounts receivable                                                          103,003              184,339
         (Increase) decrease in inventories                                                        (5,442)              84,587
         (Increase) decrease in non current assets                                                 (3,850)                 700
         Decrease (increase) in prepaid expenses and other current assets                          35,565              (19,094)
         (Decrease) increase in accounts payable                                                 (475,464)             290,323
         Decrease in accrued expenses                                                            (628,832)            (118,533)
         Increase (decrease) in unearned service revenue                                            1,282              (45,304)
         Increase in other liabilities                                                            268,387                    -
                                                                                       -------------------    -----------------


      Net cash used in continuing operations                                                   (2,540,305)          (1,574,002)

      Net cash (used in) provided by discontinued operations                                     (596,718)           1,316,929
                                                                                       -------------------    -----------------

      Net cash used in operating activities                                                    (3,137,023)            (257,073)
                                                                                       -------------------    -----------------

Cash Flows From Investing Activities:

      Proceeds from disposal of discontinued operations                                         3,741,020                    -
                                                                                       -------------------    -----------------

Cash Flows From Financing Activities:

      Issuance of common stock                                                                          -              180,000
      Proceeds of borrowings from related parties                                                 200,000               50,000
      Repayment of borrowings from related parties                                               (330,267)             (10,014)
      Repayment of notes payable                                                                 (463,888)                   -
                                                                                       -------------------    -----------------

      Net cash (used in) provided by financing activities                                        (594,155)             219,986
                                                                                       -------------------    -----------------

Net increase (decrease) in cash                                                                     9,842              (37,087)

Cash at beginning of period                                                                        16,202               53,289
                                                                                       -------------------    -----------------

Cash at end of period                                                                  $           26,044     $         16,202
                                                                                       ===================    =================

</TABLE>



               See notes to the consolidated financial statements.


                                       30
<PAGE>



                                ORTHOMETRIX INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 21, 2002 AND 2001


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:                   2002                  2001
                                    -----------           -----------

              Income taxes          $    13,898           $   120,000
              Interest expense            7,615                11,826



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



















               See notes to the consolidated financial statements.


                                       31
<PAGE>



                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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 $3,687,445 and has incurred total
         negative cash flow from continuing operations of $4,114,307 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 consolidated
         financial statements do not include any adjustments that might result
         from the outcome of this uncertainty.

         The Company's continued existence is dependent upon several factors
         including increased sales volume, collecting the remainder of the
         purchase price for 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:

         Principles of Consolidation

         The consolidated financial statements include the accounts of the
         Company and its wholly owned subsidiaries. Intercompany transactions
         and balances are eliminated in consolidation.

         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


                                       32
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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, except the long term receivable, have a fair value equal to the
         carrying value. The fair value of the long term receivable is estimated
         to be approximately $450,000.

         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 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.



                                       33
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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.



                                       34
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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 2,958,500 and 2,319,500, shares of common stock
         were outstanding at December 31, 2002, and 2001, respectively, but were
         not included in the computation of diluted income (loss) per share
         because their effect was anti-dilutive.

         Concentration of Credit Risk
         ----------------------------

         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. At December 31, 2002 and 2001, and for the years then
         ended, no customer had outstanding trade receivables in excess of 10%
         of total outstanding trade receivables nor accounted for more than 10%
         of revenues. The Company sells to customers in various geographic
         territories worldwide (see Note 13).

         Management Estimates
         --------------------

         The preparation of consolidated 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 consolidated
         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 & 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.


                                       35
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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 June 2001, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
         Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets."
         SFAS No. 141 prohibits pooling-of-interests method of accounting for
         business combinations initiated after June 30, 2001, and applies to all
         business combinations completed after June 30, 2001. There are also
         transition provisions that apply to purchase combinations completed
         prior to June 30, 2001. SFAS 141 is effective immediately. SFAS No. 142
         is effective for the Company beginning January 1, 2002, and applies to
         goodwill and other intangible assets recognized in the Company's
         consolidated balance sheet as of that date, regardless of when those
         assets were initially recognized. SFAS No. 141 and No. 142 had no
         effect on the Company's consolidated financial statements.

         In August 2001, the FASB issued SFAS No. 143, "Accounting For Asset
         Retirement Obligations". This statement addresses financial accounting
         and reporting for obligations associated with the retirement of
         tangible long-lived assets and the associated asset retirement costs.
         It applies to legal obligations associated with the retirement of
         long-lived assets that result from the acquisition, construction,
         development and (or) the normal operation of a long-lived asset, except
         for certain obligations of lessees. This standard requires entities to
         record the fair value of a liability for an asset retirement obligation
         in the period incurred. When the liability is initially recorded, the
         entity capitalizes a cost by increasing the carrying amount of the
         related long-lived asset. Over time, the liability is accreted to its
         present value each period, and the capitalized cost is depreciated over
         the useful life of the related asset. Upon settlement of the liability,
         an entity either settles the obligation for its recorded amount or
         incurs a gain or loss upon settlement. The Company adopted the
         provisions of SFAS No. 143 at the beginning of 2002. SFAS No. 143 did
         not have an impact on the Company's consolidated financial statements.

         In October 2001, the FASB issued SFAS No. 144, "Accounting for the
         Impairment or Disposal of Long-Lived Assets". This statement addresses
         financial accounting and reporting for the impairment or disposal of
         long-lived assets. This statement supersedes FASB Statement No. 121,
         "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
         Assets to Be Disposed Of", and the accounting and reporting provisions
         of APB Opinion No. 30, "Reporting the Results of Operations - Reporting
         the Effects of Disposal of a Segment of a Business, and Extraordinary,
         Unusual and Infrequently Occurring Events and Transactions". This
         Statement also amends ARB No. 51, "Consolidated Financial Statements",
         to eliminate the exception to consolidation for a subsidiary for which
         control is likely to be temporary. This Statement requires that one
         accounting model be used for long-lived assets to be disposed of by
         sale, whether previously held and used or newly acquired. This
         Statement also broadens the presentation of discontinued operations to
         include more disposal transactions. The provisions of this Statement
         are required to be adopted by the Company at the beginning of fiscal
         2002. The adoption of this statement resulted in the presentation of
         the Company's consolidated financial statements to include the assets,
         liabilities and results of operation of its bone measurement business,
         which was sold in April 2002, as discontinued operations.


                                       36
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

         Accounting Pronouncements (Continued)
         -------------------------------------

         In April 2002, the FASB issued 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 will be 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 APB
         30. The effect of this statement on the Company's consolidated
         financial statements would be the reclassification of extraordinary
         gain on early extinguishment of debt to continuing operations, however,
         this will have no effect on the Company's net income. The Company
         intends to adopt FASB No. 145 as of January 1, 2003.

         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, with earlier adoption encouraged.
         The Company does not expect that this statement will have a material
         effect on the Company's consolidated 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 are
         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 consolidated 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.
         The provisions of the Interpretation will be immediately effective for
         all variable interests in variable interest entities created after
         January 31, 2003, and the Company will need to apply its provisions to
         any existing variable interests in variable interest entities by no
         later than December 31, 2004. The Company does not anticipate that this
         will have an impact on the consolidated financial statements.


                                       37
<PAGE>



                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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. The Company is claiming
         aggregate adjustments in the amount of at least $584,000 in its favor.
         In the event the Company does not receive substantial funds upon
         resolution of the dispute it will create further demand on the Company
         to increase sales volume and to obtain alternate sources of financing.
         The remaining $500,000 of the purchase price (less any indemnification
         obligations owing by the Company to Cooper) is to be released by Cooper
         to the Company on or before January 31, 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, 2002 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.

<TABLE>
<CAPTION>

                                                                                     For the Year Ended
                                                                         December 31, 2002       December 31, 2001
                                                                         -----------------       -----------------
         <S>                                                             <C>                        <C>
          Summary of Operating Results
          of Discontinued Operations:
          Revenue                                                         $     1,658,042           $    8,506,508
          Cost of revenue                                                       1,030,183                4,864,360
          Sales and marketing                                                     650,074                1,848,714
          General and administrative                                              301,623                1,108,625
          Research and development expense                                         72,050                  251,295
          Accounts receivable reserve adjustment                                 (145,157)                  -
                                                                          ----------------          --------------

          Net (loss) income from discontinued operations                  $      (250,731)          $      433,514
                                                                          ================          ==============
</TABLE>




                                       38
<PAGE>



                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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 as 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.


                                       39
<PAGE>



                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


5.       INVENTORIES:

         Inventories consist of the following as of December 31, 2002:


         Products kits, spare parts
           and sub-assemblies                                    $      3,090
         Finished goods                                                55,058
                                                                 ------------

                                                                 $     58,148
                                                                 ============
6.       PROPERTY AND EQUIPMENT:

         Property and equipment consisted of the following as of December 31,
2002:




         Furniture and fixtures                                  $    119,688


         Accumulated depreciation                                    (105,971)
                                                                 ------------

                                                                 $     13,717
                                                                 ============

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,
         2002 and 2001, there was no preferred stock outstanding.


                                       40
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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 2002, 465,000 options were issued as compensation to
         non-employees. In accordance with SFAS No. 123 "Accounting for
         Stock-Based Compensation", $24,135 of compensation expense was included
         in the Company's net loss for 2002.

         Under the 2000 Non-Employee Directors' Stock Option Plan, 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. For each of Mr. Allen, Mr. Baker, Dr. Neusy, Mr. Huber and
         Dr. Waxman, 50,000 options were granted on June 2, 1999 at an exercise
         price of $0.67 per share, 5,000 options were granted on June 1, 2000 at
         an exercise price of $0.531 per share and 5,000 options were granted on
         June 13, 2001 at an exercise price of $0.085. Each member of the Board
         of Directors received 5,000 options on April 11, 2002 at an exercise
         price of $0.05. Directors who are employees of the Company do not
         receive additional compensation for serving as directors. No member of
         the Board of Directors was paid compensation during fiscal year 2002
         for his service as a director of the Company other than pursuant to the
         standard compensation arrangement described above.

         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 2002
         or 2001.



                                       41
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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
                                                2002                Per Share                2001                 Per Share
                                          ------------------    -------------------    ------------------    --------------------
       <S>                                <C>                   <C>                     <C>                  <C>
         Options outstanding
         at beginning of year                 2,319,500          $   0.06 - 0.67            1,804,500          $   0.15 - .067

         Cancellations                         (501,250)             0.06 - 0.67              (31,250)         $   0.15 - 0.67

         Granted                              1,140,250              0.02 - 0.08              546,250          $   0.06 - 0.15

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

         Options outstanding at
         end of year                          2,958,500                                     2,319,500
                                         ================                              ==============

         Options exercisable at
         end of year                          1,065,000                                       899,938
                                         ================                              ==============

         Options available for
         grant at end of year                 1,041,500                                     1,680,500
                                         ===============                              ===============
</TABLE>


         The following table summarizes information about significant groups of
         stock options outstanding at December 31, 2002:
<TABLE>
<CAPTION>


                                           Options Outstanding                                    Options Exercisable
                                -------------------------------------------------   ------------------------------------------
                                                                     Weighted                                       Weighted
                                 Weighted                            Average         Weighted                        Average
                                 Average                            Remaining        Average                       Remaining
              Exercisable        Options          Exercise      Contractual Life      Options       Exercise    Contractual Life
                Prices         Outstanding          Price            in Years       Exercisable        Price           in
             --------------    -----------       ------------   -----------------   -----------    ------------ ----------------
         <S>                   <C>               <C>            <C>                  <C>           <C>          <C>
             $0.02-0.05           875,250        $ 0.045              9                    -      $       -             -
              0.06-0.13           673,000          0.073              9                103,250         0.077            8
              0.15              1,340,250          0.150              6                939,250         0.15             6
              0.53                 20,000          0.530              7                 10,000         0.53             7
              0.67                 50,000          0.670              9                 12,500         0.67             9

</TABLE>


                                       42
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


9.       COMPENSATION PROGRAMS (CONTINUED):

         Stock Option Plan (Continued)
         -----------------------------

         Had compensation expense for the Company's 2002 and 2001 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 2002 and 2001 would approximate the pro forma
         amounts below:

<TABLE>
<CAPTION>

                                                                2002                  2001
                                                          ------------------    ----------------
          <S>                                             <C>                   <C>
              Net income (loss):
                    As reported                           $     3,262,186     $      (1,636,672)
                    Pro forma                                   3,211,031            (1,773,346)
              Income (loss) per share:
                    As reported - Basic and diluted                  0.11                 (0.05)
                    Proforma - Basic and diluted                     0.11                 (0.06)

</TABLE>

         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,
         2002 and 2001: dividend yield of 0%, risk-free weighted average
         interest rate of 5.0% and 4.4%, expected volatility factor of 173% and
         116%, respectively and an expected option term of 10 years. The
         weighted average fair value at date of grant for options granted during
         2002 and 2001 was $0.05 and $0.22 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 $20,496 and
         $28,107 for the years ended December 31, 2002 and 2001, respectively.





                                       43
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

10.      INCOME TAXES:

         The Company did not record a provision for income tax expense for the
         years ended December 31, 2002 and 2001 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:

<TABLE>
<CAPTION>

                                                                      2002                 2001
                                                                 ---------------      -------------
                    <S>                                         <C>                   <C>

                           Statutory income tax rate                   (34.0%)               (34.0%)
                           Valuation allowance                          42.0                  39.0
                           State income taxes, net of
                             Federal benefit                            (8.0)                 (5.0)
                                                                ----------------      -------------

                                                                         0.0%                  0.0%
                                                                ================      =============
</TABLE>

         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:

                                                                  2002
                                                             ---------------
            Deferred tax assets and liabilities:
                   Accrued liabilities                       $       109,113
            Valuation allowance                                     (109,113)
                                                             ---------------
                   Net current deferred tax assets                         -
                                                             ---------------
                   Net operating loss carryforwards                4,076,807
            Other                                                     13,018
            Valuation allowance                                   (4,089,825)
                                                             ---------------
            Net noncurrent deferred tax assets                             -
                                                             ---------------
                   Total deferred tax assets                 $            --
                                                             ---------------


                                       44
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

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 2002 and 2001, 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 $10,000,000 at December 31, 2002 for
         income tax purposes, which expire in 2008 through 2021.

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

         The Company leases office space under a lease expiring in July 2003.
         Total rent expense incurred in 2002 and 2001 was $103,814 and $81,939
         respectively. The following is a schedule of future minimum lease
         payments as of December 31, 2002:


                                     2003                   39, 704

12.      RELATED PARTY TRANSACTIONS:

         TRANSACTIONS WITH CERTAIN DIRECTORS AND OFFICERS

         At December 31, 2001, notes payable--related parties consisted of the
         following:

                           Bonmati note                 $  80,267(a)
                           Huber note                      50,000(b)
                                                        ---------
                           Total                        $ 130,267
                                                        =========

         (a)  The $80,267 note payable at December 31, 2001 was payable to
              Reynald G. Bonmati, the President and Chairman of OMRX. The
              principal amount plus accrued interest (at 6.5%) of $1,444 was
              repaid with proceeds from the Asset Sale during 2002.

         (b)  The Company had borrowed $50,000 (together with interest at a rate
              of 10% per annum) from Mr. Huber, a Director of the Company,
              pursuant to a Note dated September 20, 2001, due by March 31,
              2002. The principal amount and accrued interest of $2,795 was
              repaid with proceeds from the Asset Sale.


                                       45
<PAGE>

                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001

12.      RELATED PARTY TRANSACTIONS (CONTINUED):

         TRANSACTIONS WITH CERTAIN DIRECTORS AND OFFICERS (CONTINUED)

         The Company had also borrowed $75,000 (together with interest at a rate
         of 10% per annum) from Mr. Huber pursuant to a Note dated January 8,
         2002, due by June 30, 2002. The Company granted 75,000 options at an
         exercise price of $0.06 to Mr. Huber as additional consideration. The
         fair value of the options granted of $4,478 was recorded as interest
         expense and as additional paid-in capital. The principal amount plus
         accrued interest of $1,931 was repaid with proceeds from the Asset
         Sale.

         The Company had also borrowed $25,000 (together with interest at a rate
         of 10% per annum) from Mr. Allen, a Director of the Company, pursuant
         to a Note dated January 9, 2002, due by June 30, 2002. The Company
         granted 25,000 options at an exercise price of $0.06 to Mr. Allen as
         additional consideration. The fair value of the options granted of
         $1,493 was recorded as interest expense and as additional paid-in
         capital. The principal amount plus accrued interest of $637 was repaid
         with proceeds from the Asset Sale.

         The Company had also borrowed $75,000 (together with interest at a rate
         of 10% per annum) from Mr. Huber pursuant to a note dated March 13,
         2002, due by June 30, 2002. The Company granted 75,000 options at an
         exercise price of $0.05 to Mr. Huber as additional consideration. The
         fair value of the options granted of $3,727 was recorded as interest
         expense and as additional paid-in capital. The principal amount plus
         accrued interest of $616 was repaid with proceeds from the Asset Sale.

         The Company had also borrowed $25,000 (together with interest at a rate
         of 10% per annum) from Mr. Baker, a Director of the Company, pursuant
         to a note dated March 15, 2002, due by June 30, 2002. The Company
         granted 25,000 options at an exercise price of $0.05 to Mr. Baker as
         additional consideration. The fair value of the options of $1,242 was
         recorded as interest expense and as additional paid-in capital. The
         principal amount plus accrued interest of $192 was repaid with proceeds
         from the Asset Sale.

         In January 2003, the Company borrowed $300,000 from certain officers
         and directors of the Company. Interest on the notes is calculated at
         prime plus one. The notes are all due in January 2004.

         Mr. Allen provided limited consulting services to the Company during
         fiscal year 2001. Mr. Allen was not paid cash for his services.
         Instead, certain options that he was granted in 1997 under the
         Company's 1994 Plan were repriced from $0.67 to $0.15 in consideration
         of his services (see Note 9).

         Starting in August of 2001, the Chairman of the Company elected to have
         his salary deferred. The Company has recorded this as salary expense
         and as a deferred liability. The salary deferral, which continued
         through the date of the asset sale was paid with proceeds from the
         Asset Sale.


                                       46
<PAGE>


                                ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


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 had 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 and 2001, the Company
         purchased from Bionix systems and products equal to approximately
         $4,500 and $488,000, respectively. 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:

         For the years ended December 31, 2002, and 2001, no customer accounted
         for more than 10% of revenues. 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:
<TABLE>
<CAPTION>

                                                      2002                              2001
                                          ----------------------------      ----------------------------
         <S>                              <C>                <C>            <C>                  <C>
              Pacific Rim                 $       --              --%        $      711,973         7.8%
              Europe/Middle East                  --              --              1,912,485        20.8
              Latin America                       --              --                325,489         3.5

              Export Sales                        --              --              2,949,947        32.1
              Domestic Sales              $  902,225           100.0%             6,240,933        67.9
                                          ----------           -----         --------------       -----
                                          $  902,225           100.0%        $    9,190,880       100.0%
                                          ==========           =====         ==============       =====

</TABLE>




                                       47
<PAGE>


                               ORTHOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2002 AND 2001


  14.    QUARTERLY FINANCIAL DATA (UNAUDITED):
<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)
    Income (loss) 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 income (loss)                   (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>

<TABLE>
<CAPTION>

                                                                           2001 Quarters
                                   -------------------------------------------------------------------------------------------------
                                       First                Second               Third               Fourth               Total
                                   ----------------     ----------------    ----------------     ----------------     --------------
<S>                               <C>                  <C>                  <C>                  <C>                <C>
    Revenue                        $     186,482       $      385,238       $    105,559          $     7,093        $    684,372
    Gross Profit                          44,920               97,545             31,156                3,902             177,523
    Operating loss                      (510,661)            (464,615)          (469,397)            (477,056)         (1,921,729)
    Income (loss) from
      discontinued operations            449,633             (104,826)            (6,780)              95,487             433,514
    Net loss                             (94,692)            (603,786)          (510,939)            (427,255)         (1,636,672)

    Weighted average shares:
    Basic and diluted                 30,229,065           30,433,509         30,433,509           30,433,509          30,383,098
    Basic and diluted per
      share                        $        0.00                (0.02)             (0.02)               (0.01)       $      (0.05)
</TABLE>



                                       48
<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 has 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.


                                       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 2003 Annual Meeting of Stockholders, which Proxy
Statement enclosed 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.
<TABLE>
<CAPTION>

         Exhibit
         Number             Description
        <S>                <C>
             2.1            Agreement and Plan of Merger by and among Dove Medical Systems, DMS Acquisition Corp. and Orthometrix,
                            Inc., (C)

             2.2            Purchase Agreement by and among Robert L. Piccioni and Joan Piccioni, CHC, Inc.,
                            Mirella Monte Belshe and Orthometrix, Inc. (C)

             2.3            Stock Purchase Agreement between Orthometrix, Inc. and Orthometrix Medical Systems B.V. (G)

             2.4            Amendment to Stock Purchase Agreement dated as of December 31, 1998 between Orthometrix
                            Medical Systems, B.V. and Orthometrix, Inc.(I)

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

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

           +10.1            Distribution Agreement dated as of April 1, 1995 by and among Orthometrix Corporation,  Stratec
                            Medizintechnik GmbH and Orthometrix, Inc. (A)

           +10.2            Product Development Loan Agreement dated as of June 1, 1995 by and among Stratec
                            Medizintechnik GmbH, Orthometrix Corporation and Orthometrix, Inc. (A)

            10.3            Amended and Restated 1994 Stock Option and Incentive Plan (G)

            10.4            Exclusive Distributor Agreement dated as of July 1, 1996 among Orthometrix, Inc.,
                            Nissho Iwai Corporation and Nissho Iwai American Corporation (E)

            10.5            Exclusive Distributor Agreement dated as of June 2, 1995 between Orthometrix, Inc. and
                            Meditec Co., Ltd. (A)


                                       50
<PAGE>


            10.6            Amendment No. 1 to Distribution Agreement by and among Orthometrix Corporation, Stratec
                            Medizintechnik GmbH and Orthometrix, Inc. (B)

            10.7            Amendment No. 2 to Distribution Agreement by and among Orthometrix Corporation, Stratec
                            Medizintechnik GmbH and Orthometrix, Inc. (D)

          + 10.8            Amendment No. 3 to Distribution Agreement by and among Orthometrix Corporation, Stratec
                            Medizintechnik GmbH and Orthometrix, Inc. (F)

          + 10.9            Amended Distribution Agreement dated as of September 11, 1997 among Stratec
                            Medizintechnik GmbH, Orthometrix, Inc. and Orthometrix Corporation (G)

            10.10           Amendment No. 1 to Amended Distribution Agreement dated as of December 7, 1998 by and
                            among Stratec Medizintechnik GmbH, Orthometrix, Inc. and Orthometrix Corporation. (J)

            10.11           Distribution Agreement dated as of January 1, 2001, between Marconi Medical Systems,
                            Inc. and Orthometrix, Inc.

            10.12           Amendment, dated April 1, 2000, to Distribution Agreement between Marconi Medical
                            Systems, Inc. and Orthometrix, Inc.

            10.13           Note Repurchase Agreement, dated December 28, 2001 between Orthometrix, Inc. and Nissho
                            Iwai American Corporation

              21            Subsidiaries

              99            Certification Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

                            (b)  Reports on Form 8-K.

                            None
</TABLE>

  ------------------------

+    Confidentiality requested as to certain provisions

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

(B)  This Exhibit was previously filed as an Exhibit to the Company's Report on
     Form 10-K dated March 27, 1996 and is incorporated herein by reference.

(C)  This Exhibit was previously filed as an Exhibit to the Company's Report on
     Form 8-K dated April 15, 1996 and is incorporated herein by reference.


                                       51
<PAGE>


(D)  ThisExhibit was previously filed as an Exhibit to the Company's
     Registration Statement on Form S-1 (Registration No. 333-05303) and is
     incorporated herein by reference.

(E)  This Exhibit was previously filed as an Exhibit to the Company's Report on
     Form 10-Q dated August 13, 1996 and is incorporated herein by reference.

(F)  ThisExhibit was previously filed as an Exhibit to the Company's report on
     Form 10-K dated March 28, 1997 and is incorporated herein by reference.

(G)  This Exhibit was previously filed as an Exhibit to the Company's Proxy
     Statement dated July 25, 1997 and is incorporated herein by reference.

(H)  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.

(I)  This Exhibit was previously filed as an Exhibit to the Company's report on
     Form 10-K dated March 31, 1999 and is incorporated herein by reference.

(J)  This Exhibit was previously filed as an Exhibit to the Company's report on
     Form 10-K dated April 16, 2001 and is incorporated herein by reference.


Item 14. 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.


                                       52
<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, 2003.


                            ORTHOMETRIX, INC.


                            By: /s/ Reynald G. 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, 2003
       ----------------------               (Principal Executive Officer); and
       Reynald G. Bonmati                                 Director


      /s/ Neil H. Koenig                    Chief Financial Officer (Principal              March 31, 2003
      -----------------------                Financial Officer and Principal
       Neil H. Koenig                                Accounting Officer)

</TABLE>

                                       53
<PAGE>

<TABLE>
<CAPTION>

                Signature                         Capacity In Which Signed                       Date
                ---------                         ------------------------                       ----
<S>                                              <C>                                       <C>
      /s/ James J. Baker                                 Director                          March 31, 2003
      ------------------------------
      James J. Baker


      /s/ Michael W. Huber                               Director                          March 31, 2003
      ------------------------------
      Michael W. Huber


      /s/ Andre-Jacques Neusy                            Director                          March 31, 2003
      -----------------------------
      Andre-Jacques Neusy


      /s/ Albert S. Waxman                               Director                          March 31, 2003
      ------------------------------
      Albert S. Waxman

</TABLE>














                                       54
<PAGE>



                                 CERTIFICATIONS

I, Neil H. Koenig, certify that:

1.       I have reviewed this annual report on Form 10-KSB of Orthometrix, Inc.;

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

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

4.       The registrant's other certifying officers and I am responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

              a)  designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

              b)  evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

              c)  presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

              a)  all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

              b)  any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report whether there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date:    March 31, 2003
         --------------

                               /s/ Neil H. Koenig
                               ------------------------------------
                               Neil H. Koenig
                               Chief Financial Officer
                                      \


                                       55
<PAGE>


                                 CERTIFICATIONS

I, Reynald Bonmati, certify that:

1.       I have reviewed this annual report on Form 10-KSB of Orthometrix, Inc.;

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

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

4.       The registrant's other certifying officers and I am responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
         and have:

              a)  designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

              b)  evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

              c)  presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

  5.     The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

              a)  all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

              b)  any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

  6.     The registrant's other certifying officers and I have indicated in this
         annual report whether there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date:    March 31, 2003

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







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