UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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

(Mark One)

|[X] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------
|   

For the quarterly period endedMarch 31, 2007

|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|---- |  | ----------------------------------------------------------------------------------------
|    
|     |  | For the transition period from:  to                                                     

Commission file number:000-51294METAMORPHIX, INC.(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 52-1923417                        | 
|-------------------------------------------------------------- |  | --------------------------------- | 
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.) | 
|                                                              
|                                                              
|8000 Virginia Manor Road, Suite 140, Beltsville, Maryland      |  | 20705                             | 
|(Address of principal executive offices)                       |  | (Zip Code)                        | 
|                                                              
|Registrant's telephone number, including area code:            |  | 301-617-9080                      | 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes:No

Check whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). YesNo:

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

|Class                         |  | Outstanding as of May 1, 2007
|----------------------------- |  | -----------------------------
|Common Stock, $.001 par value |  | 21,081,891 Shares            

Transitional Small Business Disclosure Format (Check one): YesoNo x

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|                               |                                                                                                                              |                                                             |    |    |  | Page No.
|------------------------------ | ---------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | -- | -- |  | --------
|                               |                                                                                                                              |                                                            
|RESTATEMENT  EXPLANATORY NOTE |                                                                                                                              | 3                                                          
|                               |                                                                                                                              |                                                            
|PART I. FINANCIAL INFORMATION  |                                                                                                                              |                                                            
|                               |                                                                                                                              |                                                             |    |    |  |         
|ITEM 1.                        |                                                                                                                              | Consolidated Condensed Financial Statements (Unaudited)     |    |   
|                               |                                                                                                                              |                                                             |    |    |  |         
|                               | Consolidated Condensed
    Balance Sheets as of March 31, 2007 (restated) and December 31, 2006                              |                                                             | 7 
|                               |                                                                                                                              |                                                             |    |    |  |         
|                               | Consolidated Condensed
    Statements of Operations for the Three Months Ended March 31, 2007 (restated) and 2006 (restated) |                                                             | 8 
|                               |                                                                                                                              |                                                             |    |    |  |         
|                               | Consolidated Condensed
    Statements of Cash Flows for the Three Months Ended March 31, 2007 (restated) and 2006 (restated) |                                                             | 9 
|                               |                                                                                                                              |                                                             |    |    |  |         
|                               | Notes to Consolidated
    Condensed Financial Statements                                                                     |                                                             | 10
|                               |                                                                                                                              |                                                             |    |    |  |         
|ITEM 2.                        |                                                                                                                              | Management's Discussion and Analysis or Plan of Operation   |    | 21
|                               |                                                                                                                              |                                                             |    |    |  |         
|ITEM 3                         |                                                                                                                              | Controls and Procedures                                     |    | 25
|                               |                                                                                                                              |                                                            
|PART II. OTHER INFORMATION     |                                                                                                                              |                                                            
|                               |                                                                                                                              |                                                             |    |    |  |         
|ITEM 1.                        |                                                                                                                              | Legal Proceedings                                           |    | 25
|                               |                                                                                                                              |                                                             |    |    |  |         
|ITEM 2.                        |                                                                                                                              | Unregistered Sales of Equity Securities and Use of Proceeds |    | 26
|                               |                                                                                                                              |                                                             |    |    |  |         
|ITEM 3.                        |                                                                                                                              | Defaults Upon Senior Securities                             |    | 26
|                              
|ITEM 6.                        |                                                                                                                              | Exhibits                                                    |    | 26
|                               |                                                                                                                              |                                                            
|SIGNATURES                     |                                                                                                                              | 27                                                         

2

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RESTATEMENT  EXPLANATORY NOTE

MetaMorphix, Inc. (the Company) is filing this Amendment No. 1 to its Quarterly Report on Form 10-QSB/A (Amendment No. 1), which was originally filed on May 18, 2007, in order to restate the
consolidated condensed financial statements to correct errors found during the period from January 1, 1999 through March 31, 2007.

As discussed in Note 11 to the Consolidated Condensed Financial Statements, MetaMorphix and its audit committee concluded that MetaMorphix should restate its consolidated balance sheet at March
31, 2007, and its consolidated statements of operations and cash flows for the three months ended March 31, 2007 and 2006 to correct the following errors:

1.
      We used the Black-Scholes option valuation model for the valuation of warrants issued to non-employees from January 1, 1999 through March 31, 2007. The expected life assigned to these transferable warrants,
          which is an input to the Black-Scholes option valuation model, was less than the contractual life of the warrant. We based the expected life of the warrants on the assumption that the warrants would be exercised prior to it expiration. Upon further
      reflection and review of accepted valuation techniques and practices and the relevant accounting guidance, it was determined that the contractual life should have been used as an input.2.
      In 2004, holders of our 8% Secured Convertible Promissory Notes and our 10.9% Secured Convertible Promissory Notes converted principal and interest into shares of our Series F Convertible Preferred Stock and
          warrants to purchase shares of our common stock. This transaction was originally accounted for as an induced conversion. After further review of the appropriate guidance, it was determined that this conversion should have been accounted for as an
      extinguishment of the notes. This transaction generated a loss on extinguishment.3.
      In 2004, holders of our various Series C, D, & E Bridge Notes converted their notes into our 12.5% Convertible Secured Promissory Notes. It was determined that this conversion should have been accounted
      for as an extinguishment of the old notes and the establishment of new notes. This transaction generated a loss on extinguishment.4.
      In 2005, we made a material modification to the terms of our 12.5% Convertible Secured Promissory Notes, in connection with a warrant exchange to eliminate a penalty warrant clause. This modification should
      have been accounted for as an extinguishment of the old notes and the establishment of new notes. This transaction generated a loss on extinguishment.5.
      In 2005, holders of our 8% Secured Convertible Promissory Notes and our 10.9% Secured Convertible Promissory Notes converted principal and interest into shares of our Series G Convertible Preferred Stock and
          warrants to purchase our common stock. This transaction was originally accounted for as an induced conversion, but it was determined that it should have been accounted for as a debt extinguishment. This transaction generated a gain on
      extinguishment.


3

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The following Items have been amended as a result of this restatement and are included in this Amendment No. 1 on Form 10-QSB/A:

PART I. FINANCIAL INFORMATION ITEM 1. Consolidated Condensed Financial Statements (Unaudited) ITEM 2. Management's Discussion and Analysis or Plan of Operation ITEM 3. Controls and ProceduresPART II. OTHER INFORMATION ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds


We have not changed any information included in our March 31, 2007 Form 10-QSB filed on May 18, 2007 that is not affected by this amendment. Accordingly, the information included in our March
31, 2007 Form 10-QSB and included in this amendment that is not affected by these items describes conditions as they existed and were presented in our March 31, 2007 Form 10-QSB at the time we filed that report with the Securities and Exchange
Commission on May 18, 2007. We have not taken into account any other events occurring after the May 18, 2007 filing of our March 31, 2007 Form 10-QSB that might have affected those disclosures, nor have we modified or updated those disclosures,
including the exhibits to our March 31, 2007 Form 10-QSB, to reflect any other subsequent events. Accordingly, you should, in conjunction with reading this amendment to our March 31, 2007 Form 10-QSB, also read our other filings we have made with
the Securities and Exchange Commission since May 18, 2007.

INTRODUCTION

We are a life science company. We use our two fundamental proprietary technologiesanimal genomics and growth and differentiation factors, or GDFs, to discover, develop and commercialize products that we believe will
increase livestock quality and production efficiency, improve companion animal health and potentially treat human muscle degenerative diseases and metabolic disorders.

Genomics refers to the sequencing and analysis of the genetic makeup of an organism. Our proprietary animal genomics technologies are intended to provide trait identification and predictive diagnostic tools for producers
and breeders of beef and dairy cattle, swine, and poultry.  We believe that these tools will enable livestock producers and breeders and feedlot operators to improve substantially their production efficiency and help them meet consumer demand for
high quality meat products. We believe that animal genomics also has potential for diagnostic use in companion animals, including dogs, cats and horses, to detect disease predisposition, and behavioral and/or performance traits.  Commercialization
of these diagnostic products for livestock production and animal health does not require FDA approval. Our near-term products are tools that do not involve any animal pharmaceutical drugs or genetic altering of the animal.

We have established several
relationships through which we commercialize our beef and swine animal genomics
technology, and expect to commercialize our chicken genomic technology. We have
exclusive agreements with 1)  Cargill Incorporated, or Cargill, the worlds
second largest beef processor and feedlot operator, 2) the Monsanto Company,
or Monsanto, a world leader in swine breeding and 3) Hubbard S.A.S., or Hubbard,
a world leading chicken breeder. We also  have agreements to provide DNA testing
services for the American Kennel Club, the worlds largest canine registry,
United Kennel Club, American Angus Association, the worlds largest beef
cattle registry, Red Angus Association, American  Limousin Association, and American
Bucking Bull Association. These non-exclusive DNA testing service contracts are
made in the ordinary course of business and contain standard fee-per-test terms
with contracts being renewable every three years by  mutual consent of the parties.
Additionally, these agreements detail DNA sample submission format, specifications
for data analysis and delivery, and proper archiving of samples after analysis.

4

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In 2007, we launched our Canine Heritage Breed Test. This product uses DNA technology to genetically identify canine breed characteristics and can certify certain breeds. This test is being commercially sold to the public.

Our second technology platform is based on GDFs which are proteins that bind to receptors on the cell surface, with the primary result of activating cellular proliferation and/or
differentiation. Our GDF development activities are focused on GDF-8, also known as Myostatin, a naturally occurring protein that acts to limit skeletal muscle development. Myostatin is one of eight GDFs to which we have exclusive rights for use in
animals. We believe the inhibition of Myostatin has use in the livestock industry to facilitate the production of beef cattle, swine and poultry with more meat and less waste. We also believe that Myostatin can potentially be used in humans to treat
muscle degenerative diseases, including muscular dystrophy, muscle wasting (Cachexia), age-related muscle loss (Sarcopenia), Lou Gehrigs disease (ALS), and metabolic disorders, such as Type II Diabetes and obesity.

We have entered into relationships to commercialize both agricultural and human therapeutic applications of our GDF technology.  We have entered into collaborative agreements with the top two
chicken producer-processors in the United States, Tyson Poultry, Inc., or Tyson, and Pilgrims Pride Corporation, or Pilgrims Pride, and have formed a joint venture with Willmar Poultry Company, Inc., or Willmar, the worlds largest
supplier of day old poults, for the development of Myostatin applications in turkeys.  We have granted an exclusive license to Wyeth for the human therapeutic application of our GDF technology including Myostatin, under which Wyeth has completed
Phase II clinical trials to evaluate a Myostatin-based product as a therapeutic for Becker, Facioscapulohumeral, and Limb-Girdle forms of muscular dystrophy.

We have faced the numerous challenges and risks that many emerging growth, research-oriented companies face since our inception. We have had a consistent history of net losses. Our decision to
finance the Company through a combination of convertible notes and preferred stock has left us with a large debt obligation, the majority of which is long-term. The challenge is to generate sufficient revenue to repay this long term debt obligation
or to have a liquidity event whereby this long term debt will be converted to equity. Now that we are beginning to commercialize our various products, we face risks and challenges relating to liquidity.  We are dependent on future fund raising to
become solvent until our operations reach profitability.

We were incorporated as a Delaware corporation in September 1994. Between incorporation and 1997, our activities consisted of research performed by Dr. Se-Jin Lee at his laboratory at The Johns Hopkins University School of
Medicine to focus on the discovery, characterization, development and commercialization of GDFs. After Dr. Lee published a paper on Myostatin in 1997, we began to explore business opportunities to use the Myostatin technology for human and
agricultural applications. In 1999, we licensed to Wyeth human therapeutic applications of our GDF technology in exchange for which Wyeth assigned 2.7 million shares of our Series A Preferred Stock and 900,000 shares of our Series B Preferred Stock
(95% of their total holdings) to us, as well as our receiving the right to future milestone and royalty payments. We accounted for the stock assignment as a repurchase and subsequently cancelled those shares. Between 2000 and 2002, we granted
options to license our Myostatin technology to the top two U.S. chicken producers, Tyson and Pilgrims Pride, and entered into a joint venture with a leading supplier of turkey poults, Willmar, to commercialize Myostatin in the North American
chicken and turkey markets.

Our business activities in the area of animal genomics commenced in February 2002, when we acquired some of the animal-related assets of the Celera Genomics Group of Applera Corporation, or Celera, and licensed
Celeras chicken, swine and cattle genome databases for agricultural use within specified fields. In May 2002, we entered into our Joint Development and Marketing Agreement with Cargill; in June 2004, we entered into our Swine Improvement
Agreement with Monsanto; and in January 2007, we entered into a Joint Research and Marker Development Agreement with Hubbard to develop improved breeds of chicken as described under Licenses, Acquisitions, and Collaborative
Agreements.

5

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Our principal executive office is located at 8000 Virginia Manor Road, Suite 140, Beltsville, Maryland 20705, and our telephone number at that address is (301) 617-9080. We operate our GDF business from our Beltsville,
Maryland office. Our animal genomics business operates in Davis, California. We have a corporate internet website at http://www.metamorphixinc.com.  The reference to this website address does not constitute incorporation by reference of the
information contained therein.

FORWARD LOOKING STATEMENTS

Statements in this Form 10-QSB/A (Amendment No. 1) that are not descriptions of historical facts are forward-looking statements within the meaning of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward looking terminology such
as may, expects, believes, anticipates, intends, estimates, projects, or similar terms, variations of such terms or the negative of such terms.  Forward-looking
statements are based on managements current expectations. Actual results could differ materially from those currently anticipated due to a number of factors. The safe harbors for forward looking statements provided by Section 21E of the
Exchange Act do not apply to statements made in this Form 10-QSB/A (Amendment No. 1). Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise. You should not place undue reliance on our forward-looking statements. You should also be aware that any of the events described under Risk factors in our Form 10-KSB filed April 3, 2007 and elsewhere in that
registration statement could harm our business, prospects, operating results and financial condition. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.

6

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PART I. FINANCIAL INFORMATION

ITEM 1.   Consolidated Condensed Financial Statements (Unaudited)

METAMORPHIX, INC. AND SUBSIDIARIES 
CONSOLIDATED CONDENSED BALANCE SHEETS(Unaudited)

|                                                                                                                                                                            |                                                                                                                                                                                                                                      |                                      |            |              |             | March 31,  |            |              |             | December 31, | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------ | ---------- | ------------ | ----------- | ---------- | ---------- | ------------ | ----------- | ------------ | 
|                                                                                                                                                                            |                                                                                                                                                                                                                                      |                                      |            |              |             | 2007       |            |              |             | 2006         | 
|ASSETS                                                                                                                                                                      |                                                                                                                                                                                                                                      | (As Restated)                        |            |              |             |            |           
|CURRENT
     ASSETS:                                                                                                                                                        |                                                                                                                                                                                                                                      |                                      |            |              |             |            |            |             
|                                                                                                                                                                            | Cash and cash equivalents                                                                                                                                                                                                            |                                      | $          | 201,259      |             |            | $          | 277,680      |            
|                                                                                                                                                                            | Accounts receivable                                                                                                                                                                                                                  |                                      |            | 219,401      |             |            |            | 276,852      |            
|                                                                                                                                                                            | Prepaid expenses and other current assets                                                                                                                                                                                            |                                      |            | 154,706      |             |            |            | 101,661      |            
|                                                                                                                                                                            |                                                                                                                                                                                                                                      | Total current assets                 |            |              | 575,366     |            |            |              | 656,193     |             
|                                                                                                                                                                           
|PROPERTY
     AND EQUIPMENTNet                                                                                                                                             |                                                                                                                                                                                                                                      |                                      | 1,613,179  |              |             |            | 1,724,826  |             
|GOODWILL                                                                                                                                                                    |                                                                                                                                                                                                                                      |                                      | 3,739,870  |              |             |            | 3,739,870  |             
|LEASE
     SECURITY DEPOSITS                                                                                                                                                |                                                                                                                                                                                                                                      |                                      | 204,494    |              |             |            | 204,494    |             
|DEFERRED
     DEBT ISSUE COSTS                                                                                                                                              |                                                                                                                                                                                                                                      |                                      | 5,172,218  |              |             |            | 5,814,349  |             
|                                                                                                                                                                            |                                                                                                                                                                                                                                      |                                      |            |              |             | 10,729,761 |            |              |             | 11,483,539   | 
|TOTAL
     ASSETS                                                                                                                                                           |                                                                                                                                                                                                                                      | $                                    | 11,305,127 |              |             | $          | 12,139,732 |             
|                                                                                                                                                                            |                                                                                                                                                                                                                                      |                                      |            |              |             |            |            |              |             |              | 
|LIABILITIES
     AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                         |                                                                                                                                                                                                                                      |                                      |            |              |             |            |            |             
|CURRENT
     LIABILITIES:                                                                                                                                                   |                                                                                                                                                                                                                                      |                                      |            |              |             |            |            |             
|                                                                                                                                                                            | Accounts payable and accrued expenses                                                                                                                                                                                                |                                      | $          | 7,591,809    |             |            | $          | 7,542,232    |            
|                                                                                                                                                                            | Accrued compensation                                                                                                                                                                                                                 |                                      |            | 4,490,265    |             |            |            | 4,697,961    |            
|                                                                                                                                                                            | Accrued dividends                                                                                                                                                                                                                    |                                      |            | 3,616,075    |             |            |            | 3,272,114    |            
|                                                                                                                                                                            | Short-term notes payable                                                                                                                                                                                                             |                                      |            | 4,448,128    |             |            |            | 2,254,891    |            
|                                                                                                                                                                            | Notes payable to officers and directors                                                                                                                                                                                              |                                      |            | 2,184,498    |             |            |            | 2,184,498    |            
|                                                                                                                                                                            | Deferred revenue                                                                                                                                                                                                                     |                                      |            | 1,032,081    |             |            |            | 1,071,635    |            
|                                                                                                                                                                            | Celera purchase obligation                                                                                                                                                                                                           |                                      |            | 3,037,414    |             |            |            | 2,525,712    |            
|                                                                                                                                                                            | Derivative liability                                                                                                                                                                                                                 |                                      |            |             |             |            |            | 100,475      |            
|                                                                                                                                                                            | Accrued interest                                                                                                                                                                                                                     |                                      |            | 3,802,346    |             |            |            | 2,903,556    |            
|                                                                                                                                                                            |                                                                                                                                                                                                                                      | Total current liabilities            |            |              | 30,202,616  |            |            |              | 26,553,074  |             
|                                                                                                                                                                            |                                                                                                                                                                                                                                      |                                      |            |              |             |            |            |              |             |              | 
|LONG-TERM
       NOTES PAYABLE, net of discount of $1,058,683, 
       as
       restated and $1,134,299 at March 31, 2007 and December 31, 2006,
       
     respectively |                                                                                                                                                                                                                                      |                                      | 36,593,909 |              |             |            | 35,401,265 |             
|CELERA
     PURCHASE OBLIGATION                                                                                                                                             |                                                                                                                                                                                                                                      |                                      | 3,216,417  |              |             |            | 3,670,936  |             
|ACCRUED
     INTEREST                                                                                                                                                       |                                                                                                                                                                                                                                      |                                      | 1,239,525  |              |             |            | 2,472,743  |             
|OTHER
     LONG-TERM LIABILITIES                                                                                                                                            |                                                                                                                                                                                                                                      |                                      | 134,965    |              |             |            | 144,772    |             
|                                                                                                                                                                            |                                                                                                                                                                                                                                      | Total liabilities                    |            |              | 71,387,432  |            |            |              | 68,242,790  |             
|                                                                                                                                                                            |                                                                                                                                                                                                                                      |                                      |            |              |             |            |            |              |             |              | 
|COMMITMENTS
     AND CONTINGENCIES (Note 7)                                                                                                                                 |                                                                                                                                                                                                                                      |                                      |            |              |             |            |            |             
|                                                                                                                                                                            |                                                                                                                                                                                                                                      |                                      |            |              |             |            |            |              |             |              | 
|STOCKHOLDERS EQUITY
     (DEFICIT):                                                                                                                                        |                                                                                                                                                                                                                                      |                                      |            |              |             |            |            |             
|                                                                                                                                                                            | Convertible Preferred stock, $0.001 par value22,000,000 shares 
authorized and 7,333,819 and 7,326,715 shares issued and outstanding
as of March 31, 2007 and December 31, 2006, respectively                                       |                                      |            | 58,146,983   |             |            |            | 58,146,975   |            
|                                                                                                                                                                            | Common stock, $0.001 par value75,000,000 shares authorized as of
       March 31, 2007 and December 31, 2006, 21,079,641 and 21,075,141
     shares issued and outstanding as of March 31, 2007 and December 31, 2006, respectively |                                      |            | 21,080       |             |            |            | 21,075       |            
|                                                                                                                                                                            | Additional paid-in capital                                                                                                                                                                                                           |                                      |            | 117,186,775  |             |            |            | 116,981,763  |            
|                                                                                                                                                                            | Accumulated other comprehensive loss                                                                                                                                                                                                 |                                      |            | (89,359      | )           |            |            | (78,611      | )          
|                                                                                                                                                                            | Accumulated deficit                                                                                                                                                                                                                  |                                      |            | (235,347,784 | )           |            |            | (231,174,260 | )          
|                                                                                                                                                                            |                                                                                                                                                                                                                                      | Total stockholders equity (deficit) |            |              | (60,082,305 | )          |            |              | (56,103,058 | )           
|TOTAL
     LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                   |                                                                                                                                                                                                                                      | $                                    | 11,305,127 |              |             | $          | 12,139,732 |             

See notes to consolidated condensed financial statements.

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METAMORPHIX, INC. AND SUBSIDIARIES CONSOLIDATED 
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

|                                                                          |  |   | Three Months Ended |  
|------------------------------------------------------------------------- |  | - | ------------------ | -
|                                                                         
|                                                                          |  |   | March 31, 2007     |  
|                                                                          |  |   | (As Restated)      |  
|                                                                         
|REVENUE                                                                   |  | $ | 794,321            |  
|OPERATING COSTS AND EXPENSES:                                             |  |   |                    |  
|Cost of revenue                                                           |  |   | 450,590            |  
|Research and development                                                  |  |   | 548,842            |  
|General and administrative                                                |  |   | 1,924,655          |  
|Depreciation and amortization                                             |  |   | 83,811             |  
|Total operating costs and expenses                                        |  |   | 3,007,898          |  
|OTHER INCOME (EXPENSE):                                                   |  |   |                    |  
|Interest expense and accretion of debt discount                           |  |   | (1,281,389         | )
|Debt issue costs                                                          |  |   | (779,033           | )
|Other income (expense)                                                    |  |   |                   |  
|NET LOSS                                                                  |  |   | (4,273,999         | )
|Preferred stock dividends and accretion of beneficial conversion features |  |   | (343,961           | )
|NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS                              |  | $ | (4,617,960         | )
|Net loss per common share:                                                |  |   |                    |  
|Basic and diluted                                                         |  | $ | (0.22              | )
|Weighted average number of shares outstanding:                            |  |   |                    |  
|Basic and diluted                                                         |  |   | 21,076,642         |  

See notes to consolidated condensed financial statements.

8

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METAMORPHIX, INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

|                                                   |                                                                                   |                                                 |                                           |                                             |           |           | Three Months Ended |              
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | ------------------------------------------- | --------- | --------- | ------------------ | -------------
|                                                  
|                                                   |                                                                                   |                                                 |                                           |                                             |           |           |                    | March 31,    
|                                                   |                                                                                   |                                                 |                                           |                                             |           |           |                    | 2007         
|                                                   |                                                                                   |                                                 |                                           |                                             |           |           |                    | (As Restated)
|CASH FLOWS FROM OPERATING ACTIVITIES:              |                                                                                   |                                                 |                                           |                                             |           |           |                    |              
|                                                   | Net loss                                                                          |                                                 | $                                         | (4,273,999                                  | )         |           | $                  | (3,919,330   
|                                                   | Adjustments to reconcile net loss to net cash flows used in operating activities: |                                                 |                                           |                                             |           |           |                    |              
|                                                   |                                                                                   | Depreciation and amortization                   |                                           |                                             | 112,959   |           |                    |              
|                                                   |                                                                                   | Accretion of debt discount                      |                                           |                                             | 137,953   |           |                    |              
|                                                   |                                                                                   | Amortization of deferred debt issue costs       |                                           |                                             | 779,033   |           |                    |              
|                                                   |                                                                                   | Share-based payment expense                     |                                           |                                             | 486,648   |           |                    |              
|                                                   |                                                                                   | Fair value change in embedded derivative        |                                           |                                             |          |           |                    |              
|                                                   |                                                                                   | Loss on disposal of fixed assets                |                                           |                                             |          |           |                    |              
|                                                   |                                                                                   | Changes in assets and liabilities:              |                                           |                                             |           |           |                    |              
|                                                   |                                                                                   |                                                 | Accounts receivable                       |                                             |           | 57,451    |                    |              
|                                                   |                                                                                   |                                                 | Prepaid expenses and other current assets |                                             |           | (69,347   | )                  |              
|                                                   |                                                                                   |                                                 | Accounts payable and accrued expenses     |                                             |           | 81,680    |                    |              
|                                                   |                                                                                   |                                                 | Accrued compensation                      |                                             |           | (207,696  | )                  |              
|                                                   |                                                                                   |                                                 | Deferred purchase obligation              |                                             |           | 57,183    |                    |              
|                                                   |                                                                                   |                                                 | Deferred revenue                          |                                             |           | (39,554   | )                  |              
|                                                   |                                                                                   |                                                 | Accrued interest                          |                                             |           | 1,062,601 |                    |              
|                                                   |                                                                                   |                                                 |                                           | Net cash flows used in operating activities |           |           | (1,815,088         | )            
|CASH FLOWS FROM INVESTING ACTIVITIES:              |                                                                                   |                                                 |                                           |                                             |           |           |                    |              
|                                                   | Purchases of property and equipment                                               |                                                 |                                           | (44,163                                     | )         |           |                    | (1,132       
|                                                   |                                                                                   | Net cash flows used in investing activities     |                                           |                                             | (44,163   | )         |                    |              
|CASH FLOWS FROM FINANCING ACTIVITIES:              |                                                                                   |                                                 |                                           |                                             |           |           |                    |              
|                                                   | Proceeds from debt issuances                                                      |                                                 |                                           | 1,920,000                                   |           |           |                    | 4,095,000    
|                                                   | Payments of debt costs                                                            |                                                 |                                           | (120,600                                    | )         |           |                    |             
|                                                   | Principal payments on notes                                                       |                                                 |                                           | (10,000                                     | )         |           |                    | (470,850     
|                                                   | Principle payments on capital lease obligation                                    |                                                 |                                           | (6,570                                      | )         |           |                    |             
|                                                   |                                                                                   | Net cash flows provided by financing activities |                                           |                                             | 1,782,830 |           |                    |              
|NET DECREASE IN CASH AND CASH EQUIVALENTS          |                                                                                   |                                                 | (76,421                                   | )                                           |           |           | (1,128,900         | )            
|CASH AND CASH EQUIVALENTSBeginning of period      |                                                                                   |                                                 | 277,680                                   |                                             |           |           | 1,382,225          |              
|CASH AND CASH EQUIVALENTSEnd of period            |                                                                                   | $                                               | 201,259                                   |                                             |           | $         | 253,325            |              
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |                                                                                   |                                                 |                                           |                                             |           |           |                    |              
|                                                   | Cash paid during the period for interest                                          |                                                 | $                                         | 21,427                                      |           |           | $                  | 39,331       
|NON-CASH INVESTING AND FINANCING ACTIVITIES:       |                                                                                   |                                                 |                                           |                                             |           |           |                    |              
|                                                   | Conversion of notes and accrued interest into new notes                           |                                                 | $                                         | 1,397,028                                   |           |           | $                  | 1,241,803    

See notes to consolidated condensed financial statements.

9

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METAMORPHIX, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

|1. | NATURE OF THE BUSINESS AND
    GOING CONCERN-MANAGEMENTS PLANS
|-- | ---------------------------------------------------------------

MetaMorphix, Inc. (the Company) is a biopharmaceutical company focused on discovering, acquiring, developing, and commercializing products and technologies to improve animal health, livestock production, and
human health. The Company was incorporated on September 1, 1994. The Company has two key technology platforms: a) livestock genomics and b) growth and differentiation factors.  These technologies are commercially employed to both increase livestock meat quality and production efficiency
and to potentially treat muscle-wasting diseases in humans, such as Muscular Dystrophy and Sarcopenia. These consolidated condensed financial statements include the accounts of MetaMorphix, Inc. and its wholly-owned subsidiaries: MMI Genomics, Inc., MMI Canada Inc., MetaMorphix International, Inc., and MetaMorphix Holdings,
Inc. All intercompany transactions and balances have been eliminated in consolidation. In the course of its operations, the Company has sustained operating losses and negative cash flows from operations and expects such losses to continue in the foreseeable future.  As of March 31, 2007, the Company had a
working capital deficiency of $29,627,250 and an accumulated deficit of $235,347,784. The Company intends and is currently working to finance its operations primarily through future debt and equity financings and future revenues. The Company is working with two U.K.-based financial advisors to assist the Companys Board in evaluating a public listing of the Companys shares on AIM, a market operated by the London Stock Exchange plc
(AIM). As part of this public listing, we intend to raise between U.S. $25 million and $40 million through an offering of common stock (the Offering). The Offering would not be registered with the SEC because we will
be relying on one or more exemptions from registration. Although there can be no assurance at this time that we will be able to successfully complete the Offering, we believe we have assembled a highly respected group of financial institutions to
assist us in this process. We are in the process of finalizing the engagement of two investment firms in the U.K. to act as the nominated advisor (NOMAD), joint financial advisers and lead and co-broker for a U.K. fundraising and AIM
listing. All companies whose shares are listed on AIM are required to appoint a NOMAD, who acts as both a financial advisor to a company and provides the regulatory oversight required by the London Stock Exchange plc. The two firms are well-regarded
and highly selective investment firms that have played the role of financial advisor for a number of AIM-listed companies. In connection with the Offering, we are seeking the requisite consents so that all shares of our preferred stock (Series A through Series G), all of our 12.5% Convertible Notes, and a minimum of 85% of our 10% Convertible
Notes convert into common stock upon completion of the Offering and AIM listing. In addition, we are seeking consent to waive the ratchet provisions contained in our Series E preferred stock and 12.5% Convertible Notes since they are so dilutive
that they seriously jeopardize our ability to complete the Offering and AIM listing. In order to secure the automatic conversion and/or amendment of all of our outstanding preferred stock and convertible notes upon the closing of the Offering, we will need holders owning an aggregate of the following
percentage of shares of preferred stock or principal amount of convertible notes to agree to conversion and/or amendment (i.e., so long as we obtain consent in the percentages listed below (other than for the 10% Convertible Notes) 100% of the
applicable series of preferred stock or convertible notes will be automatically converted into common stock upon the closing of the Offering):


10

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Series A - 85%Series B - 85%Series C - 85%Series D - 85%Series E - 75%Series F - 50%Series G - 50% 12.5 % Convertible Notes  66.66%10% Convertible Notes  66.66%* *Since there is no existing percentage requirement for conversion of the 10% Convertible Notes, we have been advised that in order to successfully complete the Offering, we will need to obtain consent from holders of at
least 66.66% of the outstanding principal amount of all 10% Notes to convert at the time of the Offering. The conversion and/or amendment of our preferred stock and convertible notes shall not occur unless we obtain the requisite consents (in the specified percentages) for each class of preferred stock or the convertible notes
set forth above. Our current financial condition makes it imperative
that we are able to complete the Offering as soon as possible. At present, we
are insolvent, as our liabilities exceed our assets. In addition, the Report
of Independent  Registered Public Accounting Firm  on our 2006 consolidated financial
statements, as in earlier years (2004-2005), included an emphasis paragraph relating
to the Companys
ability to continue as a going concern. If we cannot complete the above described Offering, we will be forced to continue to attempt to raise capital on what we believe may be increasingly unfavorable terms, and we may not be able to raise additional funds at
all. This will slow commercialization of some of our technology.  If we cannot complete the Offering, we may be forced to seek bankruptcy protection. The securities to be offered in the Offering have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and unless so registered may not be offered or sold in the United States,
except pursuant to an exemption from, or in a transaction subject to, the registration requirements of the Securities Act of 1933 and applicable state securities laws. This disclosure is being made pursuant to Rule 135c under the Securities Act and
does not constitute an offer to sell, or the solicitation of an offer to buy, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under
the securities laws of such jurisdiction. Although the Company recognizes the need to raise funds in the near future, there can be no assurance that it will be successful in consummating any such transaction, or, if it did consummate such a transaction, that the
terms and conditions of such financing will be favorable to the Company.  The Company believes that its current assets will not be sufficient to fund operations in 2007.  This uncertainty raises substantial doubt about the Companys ability to
continue as a going concern.  The accompanying consolidated condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.


11

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|2. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

Unaudited Interim Financial StatementsThe interim financial statements of the Company for the three months ended March 31, 2007 and March 31, 2006 included herein have
been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with
accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. In the opinion of management, the accompanying unaudited interim financial
statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 2007 and the results of its operations and its cash flows for the three months
ended March 31, 2007 and March 31, 2006. The interim results of operations for the three months ended March 31, 2007 and March 31, 2006, respectively, are not necessarily indicative of the results that may be achieved for the full year. Comprehensive IncomeThe Companys total comprehensive loss for the quarters ended March 31, 2007 and 2006 is equal to $4,284,747 and $3,920,584,
respectively. These amounts represent the sum of the Companys net loss for the quarters ended March 31, 2007 and 2006 of $4,273,999 and $3,919,330, respectively, and the foreign currency translation adjustments for the quarters ended
March 31, 2007 and 2006 of $10,748 and $1,254, respectively. Earnings Per Share As of March 31, 2007 and 2006, there were 29,634,563 and 27,213,432 shares of common stock potentially issuable upon the exercise of stock options and
warrants and the conversion of convertible securities, respectively. However, diluted per share amounts have not been presented in the accompanying consolidated statement of operations because the Company had a net loss in the quarters ending March
31, 2007 and 2006 and the assumed effects of the exercise of all of the Companys outstanding stock options and warrants and the conversion of all of its convertible securities would have been anti-dilutive. Recent Accounting Pronouncements In February 2007, the Financial Accounting Standards Board, or FASB, issued SFAS No. 159,The Fair
Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115.  SFAS No. 159 permits entities to choose to measure many financial instruments and certain other
items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is effective for the Company on January 1, 2008. The Company is
evaluating the impact that the adoption of SFAS No. 159 will have on its future results of operations and financial position. In September 2006, the FASB issued a Statement of Financial Accounting Standards (SFAS) No. 157,Fair Value Measurement. The Statement defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting SFAS No. 157 on its financial statements. Contained in the registration rights section of the subscription agreement for the Companys 10% Secured Convertible Promissory Notes was a liquidated damages clause which the Company had accounted for as an embedded
derivative in accordance with FASB Statement No. 133,Accounting for Derivative Instruments and Hedging Activities.The liquidated damages clause stated that no later than 90
days following SEC clearance of the Companys current Form 10-SB, a Registration Statement on Form S-1 (or an equivalent form) relating to an offering of the Companys securities must be filed.  If the registration statement has not been
filed as set forth above, the Company shall pay liquidated damages to the noteholders in cash or Common Stock in an amount equal to 1.5% of the Purchase Price per 30 day period (or part thereof) until such filing is made.


12

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In December 2006, the FASB issued FASB Staff Position ("FSP") EITF 00-19-2,Accounting for Registration Payment Arrangements. EITF 00-19-2 addresses an issuer's accounting for registration payment arrangements. This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5,Accounting for Contingencies. The guidance in EITF 00-19-2 amends FASB Statements No. 133,Accounting for Derivative Instruments and Hedging Activities, and No. 150,Accounting for Certain Financia



l Instruments with Characteristics of both Liabilities and Equity, and FASB Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to include scope exceptions for registration payment arrangements. EITF 00-19-2 further clarifies that a financial instrument subject to a registration payment arrangement should be accounted for in accordance with other applicable generally accepted accounting principles (GAAP) without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement. The Company adopted EITF 00-19-2 as of January 1, 2007. The Company determined that the obligation relating to the registration rights agreement is not considered probable and therefore is not recognized in the financial statements. As a result, the Company recorded a cumulative-effect adjustmen



t of $100,475 as a decrease to the January 1, 2007 accumulated deficit balance.


|3. | SHARE-BASED PAYMENT EXPENSE
|-- | ---------------------------

The consolidated condensed statements of operations include the following share-based payment expense as calculated pursuant to the provisions of SFAS No. 123(R) for the three months ended March 31, 2007 and 2006:


| |  |                            |       |   |         | Three months ended
| |  | -------------------------- | ----- | - | ------- | ------------------
| |  |                            |       |   |         | March 31,         
| |  |                            |       |   |         | 2007              
|
| |  | Research and development   |       | $ | 75,505  |                   
| |  | General and administrative |       |   | 411,143 |                   
| |  |                            | Total |   | $       | 486,648           

Share-based payments in the expense categories above include expense associated with stock options granted to employees and directors as compensation and to outsiders for services performed.


|4. | PREPAID EXPENSES AND OTHER CURRENT ASSETS
|-- | -----------------------------------------

Prepaid expenses and other current assets consist of the following:


| |  |                    |       |  |        | March 31, |  |        | December 31,
| |  | ------------------ | ----- |  | ------ | --------- |  | ------ | ------------
| |  |                    |       |  |        | 2007      |  |        | 2006        
|
|
| |  | Prepaid expenses   |       |  | 80,659 |           |  | 41,452
| |  | Supplies inventory |       |  | 74,047 |           |  | 60,209
|
| |  |                    | Total |  | $      | 154,706   |  | $      | 101,661     

13

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|5. | PROPERTY AND EQUIPMENTNET                       
|-- | -------------------------------------------------
|   |                                                  
|   | Property and equipment consists of the following:

|                                     |  |   | March 31,  |   |   | December 31, |  
|------------------------------------ |  | - | ---------- | - | - | ------------ | -
|                                     |  |   | 2007       |   |   | 2006         |  
|                                    
|Office equipment                     |  | $ | 1,199,596  |   | $ | 1,199,596    |  
|Production equipment                 |  |   | 1,933,222  |   |   | 1,931,910    |  
|Office equipment under capital lease |  |   | 213,224    |   |   | 213,224      |  
|Leasehold improvements               |  |   | 129,062    |   |   | 129,062      |  
|                                    
|                                     |  |   | 3,475,104  |   |   | 3,473,792    |  
|Less: Accumulated depreciation       |  |   | (1,861,925 | ) |   | (1,748,966   | )
|                                    
|Total                                |  | $ | 1,613,179  |   | $ | 1,724,826    |  

The Company recorded depreciation expense of $112,959 and $117,250 for the three months ended March 31, 2007 and 2006, respectively. Accumulated depreciation for equipment under capital leases was $77,713 and $71,646 as of March 31, 2007 and December 31, 2006, respectively.


|6. | LONG-TERM DEFERRED DEBT ISSUE
    COSTS
|-- | ---------------------------------------

The long-term deferred debt issue cost activity during the three months ended March 31, 2007 is as follows:


| | Balance at January 1, 2007           |  | $ | 5,814,349 |  
| | ------------------------------------ |  | - | --------- | -
| | Calculated value of warrants granted |  |   | -         |  
| | Additional debt issue costs          |  |   | 136,902   |  
| | Amortization to debt issue costs     |  |   | (779,033  | )
|
| | Balance at March 31, 2007            |  | $ | 5,172,218 |  

14

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|7. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

Leases and Royalty AgreementsThe Company has office facilities and equipment under capital and operating leases. In addition, the Company has certain agreements that provide for minimum future royalty payments. Future minimum payments for capital leases, noncancelable operating leases, and royalty agreements with terms in excess of one year at March 31, 2007, are as follows:


| |                                              |  |   | Capital |   |   | Operating |  |   | Royalty   
| | -------------------------------------------- |  | - | ------- | - | - | --------- |  | - | ----------
| |                                              |  |   | Leases  |   |   | Leases    |  |   | Agreements
|
| | April 1, 2007 through December
     31, 2007 |  | $ | 31,793  |   | $ | 790,203   |  | $ | 129,825   
| | 2008                                         |  |   | 42,390  |   |   | 1,052,282 |  |   | 173,100   
| | 2009                                         |  |   | 29,155  |   |   | 1,131,950 |  |   | 173,100   
| | 2010                                         |  |   | 17,480  |   |   | 1,176,630 |  |   | 173,100   
| | 2011                                         |  |   | 17,480  |   |   | 1,222,862 |  |   |          
| | 2012                                         |  |   | 7,283   |   |   | 345,424   |  |   |          
| | Thereafter                                   |  |   |        |   |   |          |  |   |          
|
| | Total payments/(receipts)                    |  |   | 145,581 |   |   | 5,719,351 |  |   | 649,125   
|
| | Less: Amounts representing interest          |  |   | (8,472  | ) |   |          |  |   |          
|
| | Net payments/(receipts)                      |  | $ | 137,109 |   | $ | 5,719,351 |  | $ | 649,125   

The commitments for capital leases and operating leases set forth in the above table have not been reduced for anticipated amounts to be paid by the sublessee. Rent expense under operating leases was $218,293 and $199,838 for the three months ended March 31, 2007 and 2006, respectively. The Company is currently leasing space in Savage, Maryland which it no longer occupies. This lease commenced on January 1, 2002 and will terminate on December 31, 2011. The Company currently subleases this space. This sublease commenced on December 1, 2004 and will terminate on December 31, 2011. The sublease covers the primary lease obligation. In 2006, the sublessee no longer pays rent to the Company but instead pays directly to the lessor. These payments of $23,675 per month in 2007 by the sublessee fully offset amounts owed by the Company under the original lease agreement. LitigationFrom time to time, the Company and its subsidiaries face lawsuits and claims related to commercial, employment and patent-related matters. Although the possible loss or range of loss for these matters cannot be estimated, management of the Company, after reviewing developments to date with legal counsel, is of the opinion that the outcome of such matters will not have a material adverse effect on the Companys consolidated financial position or results of operations. Director and Officer IndemnificationThe Companys certificate of incorporation provides that it will indemnify and hold harmless its officers, directors and others serving the corporation in various capacities to the fullest extent permitted by the Delaware General Corporation Law (DGCL). Section 145 of the DGCL provides that a Delaware corporation has the power to indemnify officers and directors in specified circumstances. On June 20, 2005, the Company became aware of a lawsuit and claim against us from Regions Bank for $731,000. Mr. Samuel R. Dunlap, a former Company director, who recently exited bankruptcy, pledged a $731,000 Promissory Note made by us to Mr. Dunlap as security for a $5.0 million loan from Regions Bank. Regions Bank has sued us for payment of this Note. The amount that is owed is in dispute (due to offsets made at Mr. Dunlaps direction prior to the bankruptcy). We also contend that the conditions precedent to the maturity of the loan have not occurred. We note that our March 31, 2007 consolidated


15

---



financial statements reflect principal of $625,498 being owed as of such date (reflecting the offsets). Regions Bank asserts that we (in the operation of our securities transfer function) and our legal counsel enabled
Mr. Dunlap to pledge one of his several Warrants to another creditor in breach of an already existing Commercial Pledge Agreement between the Bank and Mr. Dunlap. This litigation remains in the discovery phase at this time. We will indemnify and
hold harmless our legal counsel, who is also the Secretary of the Company, in this matter. On March 15, 2007, we became aware of a claim against us from holders of two 10% convertible promissory notes, for breaches of contract for non-repayment of principal and interest due on July 31, 2006. The original amount
of the notes was $150,000 and $50,000, and principal currently past due is $120,000 and $50,000. The amount of the claim, which includes principal and accrued interest through the date of the claim, is $200,074. We have the
amounts recorded as liabilities on the financial statements at March 31, 2007. In addition, during 2006, we settled and dismissed eight collection lawsuits for a total cost of $257,503. At present, there are no such cases pending. Although the possible loss or range of loss for these matters cannot be estimated, management of the Company, after reviewing developments to date with legal counsel, is of the opinion that the outcome of such matters will
not have a material adverse effect on the Companys consolidated financial position, results of operations, or cash flows. Management CompensationThe Company has entered into agreements with four employees, including three executives and one scientist, which require payments by the Company
totaling approximately $1,009,000 annually based on their current salaries.


|8. | DEBT
|-- | ----

The Company issued additional 10% Secured Convertible Promissory Notes which totaled $1,920,000 during the three months ended March 31, 2007. These notes have a three year maturity. The Company incurred financings costs
of $136,902 in connection with obtaining these investments. In connection with the issuance of the 10% Secured Convertible Promissory Notes in 2007, the Company granted warrants to purchase 48,000 shares of common stock. These warrants had an exercise price of $4.00 per share,
expire in 2012, and had an allocated value of $62,336 in 2007.  The value of these warrants was recorded as a debt discount to be amortized over the life of the debt. Amortization expense relating to the 10% Secured Convertible Promissory Note and 12.5% Convertible Secured Promissory Note debt discount was $137,953 and $82,317 for the three months ended March 31, 2007 and 2006,
respectively. The Company issued new 12.5% Convertible Secured Promissory Notes in the amounts of $1,397,028 and $1,241,803 during the quarters ended March 31, 2007 and 2006, respectively, to existing holders of our 12.5%
Convertible Secured Promissory Notes to satisfy accrued interest payable.


16

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|9.  | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | The Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes, or FIN 48, on January 1, 2007. FIN 48 prescribes a more- likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides
guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim
periods and income tax disclosures. The total amount of unrecognized tax benefits as of the date of adoption was $0. As a result of the implementation of FIN 48, we recognized no adjustment to our unrecognized tax benefits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | The Companys practice is to recognize interest and/or penalties related to income tax matters in income tax expense. We currently have no liabilities recorded for accrued interest or penalties related
to uncertain tax positions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    | The tax years 1994-2006 remain open to examination by the major taxing jurisdictions to which we are subject, namely U.S. and Canadian federal taxes, and Maryland and California state taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    | A valuation allowance covering our net deferred tax assets has been provided due to the uncertainty of whether the future income tax benefits will be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|10. | REPORTABLE SEGMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    | The Company operates in two reportable segments: Growth and Differentiation Factors and Animal Genomics. All segments are dedicated to discovering and commercializing multiple technology platforms to improve
the food supply and human health. The Growth and Differentiation Factors segment operates in Maryland with revenue generated in Maryland through the development and commercialization of companion animal health and livestock production for Growth and
Differentiation Factor discoveries. The corporate headquarters is also located at the Maryland facility, and since no discrete financial information exists to separate the corporate activities from that of the Growth and Differentiation Factors
segment, they are presented together in the table below. The Animal Genomics segment operates in California with revenue generated in California through the pioneering of the use of genome information companion animal health and livestock
production. The Company previously had a segment called Immunopharmaceuticals, which was operated in Canada. In September 2005, the Company made the decision to consolidate the research efforts of the Immunopharmaceutical business unit into the
Growth and Differentiation Factors business unit in order to maximize efficiency, and our facility in Canada was closed. In connection with this closure, we accrued approximately $267,000 at September 30, 2005 in severance benefits for the 11
employees who were involuntarily terminated. Of the original severance accrual, $199,769 remains accrued and unpaid at March 31, 2007. Because liabilities still exist in the Canadian company, the limited activity is still disclosed.
|   

17

---



MetaMorphix, Inc.s President is the chief operating decision maker. The segment structure corresponds to the Companys subsidiary structure. The three segments relate to the Companys technology platforms and its three distinct business opportunities: livestock genomics in the Genomics segment, and human biopharmaceuticals and livestock biopharmaceuticals in the Growth and Differentiation Factors segment. The Immunopharmaceuticals segment is primarily a research and development segment.


| |                                                 |  | Segment Information
| | ----------------------------------------------- |  | -------------------
|
| |                                                 |  | 2007               
| |                                                 |  |                    
| |                                                 |  |                    
| |                                                 |  |                    
|
| | Revenues from external customers for the        |  |                    
| | three months ended March 31, 2007               |  | $                  
| | Total (loss) profit for reportable segments for |  |                    
| | the three months ended March 31, 2007           |  |                    
|
| | Segment assets at March 31, 2007                |  | $                  
|
|
|
| |                                                 |  | 2006               
|
| | Revenues from external customers for the        |  |                    
| | three months ended March 31, 2006               |  | $                  
| | Total (loss) profit for reportable segments for |  |                    
| | the three months ended March 31, 2006           |  |                    
| | Segment assets at December 31, 2006             |  |                    
| |                                                 |  | $                  

(1) The Immunopharmaceuticals segment was operated in Canada and, in September 2005, the Company made the decision to consolidate the research efforts of the Immunopharmaceutical segment into the Growth and Differentiation Factors segment in order to maximize efficiency, and our facility in Canada was closed. The segment has remaining unpaid liabilities, which generate interest and fees, thus creating a current period segment loss.


|11. | RESTATEMENT                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Subsequent to the issuance of the Companys Form 10-QSB for the 3 months ended March 31, 2007 and 2006, the Company and its Audit Committee concluded to restate its condensed consolidated financial statements to correct the following errors:
|   
|    | 1.                                                                                                                                                                                                                                               
|   
|    | 2.                                                                                                                                                                                                                                               
|   

18

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| |    | was determined that this conversion should have been accounted for as an extinguishment of the notes. This transaction generated a loss on extinguishment.                                                                                                                                                                                                                                                                                                                  
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. | In 2004, holders of the Companys various Series C, D, & E Bridge Notes converted their notes into 12.5% Convertible Secured Promissory Notes. It was determined that this conversion should have been accounted for as an extinguishment of the old notes and the establishment of new notes. This transaction generated a loss on extinguishment.                                                                                                                         
|
| | 4. | In 2005, the Company made a material modification to the terms of its 12.5% Convertible Secured Promissory Notes, in connection with a warrant exchange to eliminate a penalty warrant clause. This modification should have been accounted for as an extinguishment of the old notes and the establishment of new notes. This transaction generated a loss on extinguishment.                                                                                              
|
| | 5. | In 2005, holders of the Companys 8% Secured Convertible Promissory Notes and 10.9% Secured Convertible Promissory Notes converted principal and interest into shares of Series G Convertible Preferred Stock and warrants to purchase our common stock. This transaction was originally accounted for as an induced conversion, but it was determined that it should have been accounted for as a debt extinguishment. This transaction generated a gain on extinguishment.
|

The following tables summarize the effect of the restatement by major financial statement line item:


CONSOLIDATED BALANCE SHEETS

|                                     |  | March 31, 2007 |             
|------------------------------------ |  | -------------- | ------------
|                                     |  | As Previously  |             
|                                     |  | Reported       |             
|DEFERRED DEBT ISSUE COSTS            |  | $              | 3,549,514   
|TOTAL ASSETS                         |  |                | 9,682,423   
|LONG-TERM NOTES PAYABLE, net         |  |                |             
|of discount                          |  |                | 33,995,721  
|DEBT DISCOUNT (parenthetically)      |  |                | 3,656,871   
|TOTAL LIABILITIES                    |  |                | 68,789,245  
|Convertible Preferred Stock          |  |                | 59,918,780  
|Additional paid-in capital           |  |                | 80,155,954  
|Accumulated deficit                  |  |                | (199,113,277
|Total Stockholders equity (deficit) |  |                | (59,106,822 
|TOTAL LIABILITIES AND                |  |                |             
|STOCKHOLDERS EQUITY                 |  |                |             
|(DEFICIT)                            |  | $              | 9,682,423   

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CONSOLIDATED STATEMENTS OF OPERATIONS

|                           |  | Three months ended March 31, |            | Three months ended March 31,
|-------------------------- |  | ---------------------------- | ---------- | ----------------------------
|                           |  | 2007                         |            | 2006                        
|                          
|                           |  | As Previously                |            |                             
|                           |  | Reported                     |            | As Restated                 
|                          
|Interest expense and       |  |                              |            |                             
|accretion of debt discount |  | $                            | (1,685,616 | )                           
|                          
|Debt issue costs           |  |                              | (510,958   | )                           
|                          
|NET LOSS                   |  |                              | (4,410,151 | )                           
|                          
|NET LOSS                   |  |                              |            |                             
|ATTRIBUTABLE TO            |  |                              |            |                             
|COMMON                     |  |                              |            |                             
|STOCKHOLDERS               |  | $                            | (4,754,112 | )                           
|                          
|Net loss per common        |  |                              |            |                             
|share: Basic and diluted   |  | $                            | (0.23      | )                           

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                           |  | Three months ended March 31, |            | Three months ended March 31,
|-------------------------- |  | ---------------------------- | ---------- | ----------------------------
|                           |  | 2007                         |            | 2006                        
|                           |  | As Previously                |            |                             
|                           |  | Reported                     |            | As Restated                 
|                          
|Net loss                   |  | $                            | (4,410,151 | )                           
|Accretion of debt discount |  |                              | (542,180   | )                           
|Amortization of deferred   |  |                              |            |                             
|debt issue costs           |  |                              | (510,958   | )                           

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ITEM 2.    Management's Discussion and Analysis or Plan of Operation

As discussed in Note 11, the Companys condensed consolidated financial statements for March 31, 2007 have been restated. The accompanying managements discussion and analysis gives effect to that restatement.

Material Changes in Results of Operations - Comparison of the Three Months Ended March 31, 2007 and 2006

The following table quantifies the amount of revenue earned during the periods presented for each of our principal sources of revenues:

|                                                |  | Three months ended
|----------------------------------------------- |  | ------------------
|                                                |  | March 31,         
|                                                |  | 2007              
|Revenue                                         |  |                   
|Cattle parentage and identification genotyping  |  |                   
|service revenue                                 |  | $                 
|Canine parentage and identification genotyping  |  |                   
|service revenue                                 |  |                   
|Cattle feedlot genotyping revenue               |  |                   
|Cattle Tru-Polled® genotyping revenue           |  |                   
|License fee revenue                             |  |                   
|Other genomic service revenue                   |  |                   
|Total Revenue                                   |  | $                 
|Cost of revenue                                 |  |                   
|Research and development expense                |  |                   
|General and administrative expense              |  |                   
|Depreciation and amortization expense           |  |                   
|Interest expense and accretion of debt discount |  |                   
|Debt issue costs                                |  |                   
|Other income (loss)                             |  |                   
|Net loss                                        |  | $                 

Revenue.Our revenue for the three months ended March 31, 2007 was $794,321, which was a decrease of $51,697, or 6.1%, from the $846,017 during the first quarter of 2006, primarily due to the introduction of canine archiving in the first quarter of 2006. The Company began archiving the canine database in the first quarter of 2006, at which time we archived every canine sample tested to date, generating revenue of approximately $80,000. Since that time, we have been archiving samples as tested, averaging approximately $12,000 per quarter.

Cost of Revenue.Cost of revenue for the first quarter of 2007 was $450,590, a $149,887, or a 25.0% decrease from the $600,477 for the first quarter of 2006. This decrease was primarily related to the launch of the feedlot product line in the first quarter of 2006, which incurred initial costs at a higher level than the stabilized testing costs.

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Research and Development.Research and development costs were $548,842 for the first quarter of 2007 compared to $579,699 for the same quarter in 2006. This
$30,857, or 5.3%, decrease reflected a stable research effort during the first quarters of 2006 and 2007.

General and Administrative.General and administrative costs were $1,924,655 for the first quarter of 2007 compared to $1,636,780 for the same quarter of 2006. This
$287,875, or 17.6% increase was primarily due to the timing of professional fees associated with our SEC filings, including audit, legal and valuation fees. In 2006, most of these costs were incurred in the second quarter, while in 2007, they
were incurred in the first quarter. This timing difference amounted to approximately $316,000.

Depreciation and Amortization.Depreciation and amortization remained stable at $83,811 for the quarter ended March 31, 2007 compared to $77,121 for the quarter ended
March 31, 2006.

Interest Expense.Interest expense and accretion of debt discount increased $180,786, or 16.4%, to $1,281,389 for the first quarter of 2007 from $1,100,603 for the
same quarter in 2006. This increase was primarily due to the increase in the average debt balance for the quarter.

Debt Issue Costs.Debt issue costs increased $38,869, or 5.3%, to $779,033 for the first quarter of 2007 from $740,164 for the first quarter of 2006. This is due to
the commissions paid for the 10% Secured Convertible Promissory Notes over the last year, which were deferred and are being amortized over the three-year life of the notes.

Other Expense.Other expense of $30,503 for the quarter ended March 31, 2006 primarily related to the change in fair value of the
embedded derivative associated with the liquidated damages clause in the registration rights section of the subscription agreement for our 10% Secured Convertible Promissory Notes.  The Company has changed its method for accounting for this
instrument and no longer records a change in fair value. See Note 2 Significant Accounting Policies.

Net Loss.Net loss increased $354,670, or 9.0%, to $4,273,999 for the three months ended March 31, 2007 from $3,919,330 for the three months ended March 31, 2006,
due to a combination of the factors described above.

Material Changes in Financial Position - Liquidity and Capital Resources

The Companys primary sources of liquidity are its revenues and the sale of debt and equity securities. At March 31, 2007 the Company had cash and cash equivalents of $201,259 and a working capital deficiency of
$29,627,250.

In the first three months of 2007 cash used in operating activities was $1.8 million compared to $4.8 million for the three months ended March 31, 2006. This decrease was primarily due to a $2.8 million increase
in the change in accounts payable and accrued expenses, an increase in the change in accrued compensation of $0.6 million, partially offset by an increase in net loss of $0.4 million.  Cash used in investing activities was $44,163 and
$1,132 for the three months ended March 31, 2007 and 2006, respectively.  Net cash provided by financing activities totaled $1.8 million for the three months ended March 31, 2007 compared to $3.6 million for the same period in 2006. This
decrease was primarily due to lower net proceeds from debt and stock issuances of $2.2 million, partially offset by lower principal payments of $0.5 million.

The Company does not have any other significant commitments or guarantees, except for rental commitments and employee related obligations.

The Company is working with two U.K.-based financial advisors to assist the Companys Board in evaluating a public listing of the Companys shares on AIM, a market operated by the London Stock Exchange plc
(AIM). As part of this public listing, we intend to raise between U.S. $25 million and $40 million through an offering of common stock (the Offering). The Offering would not be registered with the SEC because we will
be relying on one or more exemptions from registration. Although there can be no assurance at this time that we will be able to successfully complete the Offering, we believe we have assembled a highly respected group of financial institutions to
assist us in this process. We are in the process of finalizing the engagement of two investment firms in the U.K. to act as the nominated advisor (NOMAD), joint financial advisers and lead and co-broker for

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a U.K. fundraising and AIM listing. All companies whose shares are listed
    on AIM are required to appoint a NOMAD, who acts as both a financial advisor
    to a company and provides the regulatory oversight required by the London
    Stock Exchange plc. The two firms are well-regarded and highly selective
    investment firms that have played the role of financial advisor for a number
    of AIM-listed companies.

In connection with the Offering, we are seeking the requisite consents so that all shares of our preferred stock (Series A through Series G), all of our 12.5% Convertible Notes, and a minimum of 85% of our 10% Convertible
Notes convert into common stock upon completion of the Offering and AIM listing. In addition, we are seeking consent to waive the ratchet provisions contained in our Series E preferred stock and 12.5% Convertible Notes since they are so dilutive
that they seriously jeopardize our ability to complete the Offering and AIM listing.

In order to secure the automatic conversion and/or amendment of all of our outstanding preferred stock and convertible notes upon the closing of the Offering, we will need holders owning an aggregate of the following
percentage of shares of preferred stock or principal amount of convertible notes to agree to conversion and/or amendment (i.e., so long as we obtain consent in the percentages listed below (other than for the 10% Convertible Notes) 100% of the
applicable series of preferred stock or convertible notes will be automatically converted into common stock upon the closing of the Offering):

Series A - 85%Series B - 85%Series C - 85%Series D - 85%Series E - 75%Series F - 50%Series G - 50%

12.5 % Convertible Notes  66.66%10% Convertible Notes  66.66%*

*Since there is no existing percentage requirement for conversion of the 10% Convertible Notes, we have been advised that in order to successfully complete the Offering, we will need to obtain consent from holders of at
least 66.66% of the outstanding principal amount of all 10% Notes to convert at the time of the Offering.

The conversion and/or amendment of our preferred stock and convertible notes shall not occur unless we obtain the requisite consents (in the specified percentages) for each class of preferred stock or the convertible notes
set forth above.

Our current financial condition makes it imperative
that we are able to complete the Offering as soon as possible. At present, we
are insolvent, as our liabilities exceed our assets. In addition, the Report
of Independent Registered Public Accounting Firm on our 2006 consolidated financial
statements, as in earlier years (2004-2005), included an emphasis paragraph relating
to the Companys ability to continue as a going concern.

If we cannot complete the above described Offering, we will be forced to continue to attempt to raise capital on what we believe may be increasingly unfavorable terms, and we may not be able to raise additional funds at
all. This will slow commercialization of some of our technology. If we cannot complete the Offering, we may be forced to seek bankruptcy protection.

The securities to be offered in the Offering have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and unless so registered may not be offered or sold in the United States,
except pursuant to an exemption from, or in a transaction subject to, the registration requirements of the Securities Act of 1933 and applicable state securities laws.  This disclosure is being made pursuant to Rule 135c under the Securities Act and
does not constitute an offer to sell, or the solicitation of an offer to buy, nor shall there be any

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sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

We have faced the numerous challenges and risks that many emerging growth, research-oriented companies face since our inception. We have had a consistent history of net losses. Our decision to
finance the Company through a combination of convertible notes and preferred stock has left us with a large debt obligation, the majority of which is long-term. The challenge is to generate sufficient revenue to repay this long term debt obligation
or to have a liquidity event whereby this long term debt will be converted to equity. Now that we are beginning to commercialize our various products, we face risks and challenges relating to liquidity.  We are dependent on future fund raising to
become solvent until our operations reach profitability.

We are currently past-due on certain debt obligations. Our efforts have been to negotiate repayment plans in these matters with the best terms possible for both parties. To date, we do not have any outstanding lawsuits
related to this indebtedness. While the debt instruments have no material covenants other than the repayment of principal and accrued interest, we are making efforts to maintain shareholder and note holder satisfaction.

Although the Company recognizes the need to raise funds in the near future, there can be no assurance that it will be successful in consummating any such transaction, or, if it did consummate such a transaction, that the
terms and conditions of such financing will be favorable to the Company. The Company believes that its current assets will not be sufficient to fund operations in 2007. This uncertainty raises substantial doubt about the Companys ability to
continue as a going concern. The accompanying consolidated condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Continuing Operations

Our priorities for the next twelve months of operations are to continue to develop and subsequently market our products and services to establish our business in the genomics and growth factors technology industry. We are
focused on our organizational activities, raising capital and establishing a business presence with vendors, business owners and referral sources.

We may be unable to compete successfully, and the competitive pressures we face might have an adverse effect on our business, results of operations and financial condition. We require additional capital, which we intend to
raise through one or more public or private offerings of equity and/or debt.  There are no preliminary loan agreements or understandings between us, our officers, director affiliates or lending institutions.  We cannot guarantee any such financing
can be obtained or, if obtained, that it will be on adequate or reasonable terms.

RISK FACTORS

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CONSIDER THE RISK FACTORS DESCRIBED IN OUR FORM 10-KSB/A (Amendment No. 2) AS WELL AS THE OTHER INFORMATION AND RISK FACTOR IN THIS FORM 10-QSB/A
(Amendment No.1) BEFORE DECIDING TO INVEST IN OUR SHARES OF COMMON STOCK. IF ANY OF THESE RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WOULD SUFFER. IF THIS HAPPENS, YOU MIGHT LOSE ALL OR PART OF YOUR INVESTMENT.

Risks Related to Our Business

If we dont complete the AIM listing and Offering, we may be forced to seek bankruptcy protection.

If we cannot complete the above described Offering, we will be forced to continue to attempt to raise capital on what we believe may be increasingly unfavorable terms, and we may not be able to raise additional funds at
all. This will slow commercialization of some of our technology. If we cannot complete the Offering, we may be forced to seek bankruptcy protection.

The existence of a significant number of securities exercisable for, or convertible into, shares of our common stock may reduce your percentage ownership in us.

As of March 31, 2007, we had outstanding convertible debt, preferred stock, options and warrants which are exercisable for, or convertible into, an aggregate of approximately 45,537,501 shares
of common stock. In

24

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addition, certain of these securities contain provisions which would increase the number of shares of common stock issuable upon exercise or conversion thereof if we were to issue shares of common stock or other securities with an effective purchase price of less than $4.00 per share. Furthermore, certain of these securities contain conversion or exercise prices that are measured as a discount to our initial offering price, if one were to occur. We are currently undertaking a consent effort from our note holders and our preferred stock holders which would eliminate the ratchet provisions of the conversion price of certain securities. If the consent effort is successful, our 10% Notes ($15,727,763 outstanding at March 31, 2007) will be the only security which will convert at a discount to an offering price. Their conversion price would be the lesser of $4.00 or 70% of an initial offering price. If the consent is not successful, our 12.5% Notes ($21,924,829 outstanding



at March 31, 2007) and our Series E Preferred Shares (2,000,000 shares outstanding at March 31, 2007) would also convert at 70% of an initial offering price. The issuance of additional shares of common stock upon the exercise or conversion of these securities will reduce your percentage ownership in us.

ITEM 3.    Controls and Procedures

In the Company’s
original filing of Form 10-QSB for the period ended March 31, 2007 filed on May
18, 2007 we reported that as of the end of the period covered by this report,
the Company carried out an evaluation, under the supervision and with the participation
of the management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934,
as amended (the Exchange
  Act).  Based
  upon the evaluation performed at that time, the Chief Executive Officer and
  Chief Financial Officer originally concluded that the Company's disclosure
controls and procedures were effective.

Subsequent  to such evaluation,
in connection with preparation of the Companys Quarterly Report on Form
10-QSB for the quarter and six-month period ended June 30, 2007, we identified
certain accounting errors that led us to conclude that our previously issued
financial statements should be restated due to errors in our methodology for
calculating and accounting for transferrable warrants and errors in our accounting
for certain debt and equity exchange transactions as described further in Note
11 to the consolidated condensed financial statements of the Company.   These
errors resulted in the filing of Amendment No. 2 to our 2006 Annual Report on
Form 10-KSB/A and this Amendment No. 1 to our March 31, 2007 Quarterly Report
on From 10-QSB.  In connection with the filing of the restated Quarterly
Report, our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, re-evaluated our disclosure controls and procedures.  Based
upon that evaluation, the CEO and CFO concluded that our disclosure controls
and procedures were not effective as of March 31, 2007, as a result of a material
weakness in our internal control over financial reporting.  A material weakness
is defined by Audit Standard No. 5 of the Public Company Accounting Oversight
Board as, A deficiency, or combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable possibility that a
material misstatement of the company’s annual or interim financial statements
will not be prevented or detected on a timely basis.

Specifically, the material weakness identified relates
to the Company lacking enough qualified  financial personnel to account for the
Company's complex debt and equity transactions in  accordance with accounting
principles accepted in the United States of America (GAAP). Notwithstanding
this material  weakness, management concluded that the consolidated condensed
financial statements included in this report present fairly, in all material
respects, the Company's financial position and results of operations and cash
flows for the periods presented in conformity with GAAP.

The Company has plans to correct its material weakness through
additional, qualified financial personnel and enhancements to the accounting system in 2008.

PART II - OTHER INFORMATION

ITEM 1.Legal Proceedings

On March 15, 2007, we became aware of a claim against us from holders of two 10% convertible promissory notes, for breaches of contract for non-repayment of principal and interest due on July 31, 2006. The original amount of the notes was $150,000 and $50,000, and principal currently past due is $120,000 and $50,000. The amount of the claim, which includes principal and accrued interest through the date of the claim, is recorded as a liability on the financial statements at March 31, 2007. In April, 2007, we reached a settlement agreement in this matter whereby we have paid all accrued interest through April 13, 2007, or $34,157 ($17,078 was paid on April

25

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13 and April 20, 2007). We have agreed to pay $10,000 of principal on June 30, 2007, and the remaining $160,000 of principal on July 31, 2007.

Although the possible loss or range of loss for these matters cannot be estimated, management of the Company, after reviewing developments to date with legal counsel, is of the opinion that the outcome of such matters will not have a material adverse effect on the Companys consolidated financial position, results of operations, or cash flows.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company issued additional 10% Secured Convertible Promissory Notes which totaled $1,920,000 during the three months ended March 31, 2007. These notes have a three year maturity. The Company incurred financings costs of $136,902 in connection with obtaining these investments.

In connection with the issuance of the 10% Secured Convertible Promissory Notes in 2007, the Company granted warrants to purchase 48,000 shares of common stock. These warrants had an exercise price of $4.00 per share, expire in 2012, and had an allocated value of $36,984 in 2007. The value of these warrants was recorded as a debt discount to be amortized over the life of the debt.

Amortization expense relating to the 10% Secured Convertible Promissory Note and 12.5% Convertible Secured Promissory Note debt discount was $137,953 and $82,317 for the three months ended March 31, 2007 and 2006, respectively.

ITEM 3. Defaults Upon Senior Securities

At March 31, 2007, $142,166 of outstanding principal amount under our 8% Secured Convertible Promissory Notes and $884,343 of outstanding principal amount under our 10.9% Secured Convertible Promissory Notes were past due. The original due dates for these notes range from September 2001 to July 2006. There are no amended terms to these past due notes as a result of the default.

ITEM 6.Exhibits

|31.1 | Section 302 Certifications of Principal Executive Officer
|---- | ---------------------------------------------------------
|31.2 | Section 302 Certifications of Principal Financial Officer
|32.1 | Section 906 Certification of Chief Executive Officer     
|32.2 | Section 906 Certification of Chief Financial Officer     

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



| |                   | METAMORPHIX, INC.                      |                         
| | ----------------- | -------------------------------------- | ------------------------
| |                   |                                        | Registrant              
| |                   |                                        |                         
| | February 29, 2008 | By:                                    | /S/ EDWIN C. QUATTLEBAUM
| | Date              | Edwin C. Quattlebaum                   |                         
| |                   | President, Chief Executive Officer and |                         
| |                   | Co-Chairman of the Board of Directors  |                         
| |                   | (Principal Executive Officer)          |                         
|
|
| | February 29, 2008 | By:                                    | /S/ THOMAS P. RUSSO     
| | Date              | Thomas P. Russo                        |                         
| |                   | Executive Vice President, Treasurer    |                         
| |                   | and Chief Financial Officer            |                         
| |                   | (Principal Financial and               |                         
| |                   | Accounting Officer)                    |                         

27

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