UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB

(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:000-51294

METAMORPHIX, INC.(Exact name of registrant as specified in its charter)

|Delaware                                                      |  | 52-1923417         
|------------------------------------------------------------- |  | -------------------
|(State or other jurisdiction of                               |  | (IRS Employer      
|incorporation or organization)                                |  | 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 xNoo

Check whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2). Yes oNox

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): Yes oNox

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|                                                                                 |                                                             |    | Page No.
|-------------------------------------------------------------------------------- | ----------------------------------------------------------- | -- | --------
|PART I. FINANCIAL INFORMATION                                                    |                                                             |   
|                                                                                 |                                                             |   
|ITEM 1.                                                                          | Consolidated Condensed Financial Statements (Unaudited)     |    |         
|                                                                                 |                                                             |    |         
|Consolidated Condensed Balance Sheets as of March 31, 2007 and December 31, 2006 |                                                             | 5 
|                                                                                 |                                                             |   
|Consolidated Condensed Statements of Operations for the Three Months             |                                                             |   
|                                                                                 | Ended
 March 31, 2007 and 2006                              |    | 6       
|                                                                                 |                                                             |    |         
|Consolidated Condensed Statements of Cash Flows for the Three Months Ended       |                                                             |   
|                                                                                 | March 31, 2007
 and 2006                                    |    | 7       
|                                                                                 |                                                             |    |         
|Notes to Consolidated Condensed Financial Statements                             |                                                             | 8 
|                                                                                 |                                                             |   
|ITEM 2.                                                                          | Management's Discussion and Analysis or Plan of Operation   |    | 15      
|                                                                                 |                                                             |    |         
|ITEM 3                                                                           | Controls and Procedures                                     |    | 17      
|                                                                                 |                                                             |    |         
|PART II. OTHER INFORMATION                                                       |                                                             |   
|                                                                                 |                                                             |   
|ITEM 1.                                                                          | Legal Proceedings                                           |    | 18      
|                                                                                 |                                                             |    |         
|ITEM 2.                                                                          | Unregistered Sales of Equity Securities and Use of Proceeds |    | 18      
|                                                                                 |                                                             |    |         
|ITEM 3.                                                                          | Defaults Upon Senior Securities                             |    | 19      
|                                                                                 |                                                             |    |         
|                                                                                 |                                                             |    |         
|ITEM 6.                                                                          | Exhibits                                                    |    | 19      
|                                                                                 |                                                             |    |         
|SIGNATURES                                                                       |                                                             | 20

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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.

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.



3

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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.

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 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. 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.

4

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PART I. FINANCIAL INFORMATION

ITEM 1.           Consolidated Condensed Financial Statements (Unaudited)

METAMORPHIX, INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED BALANCE SHEETS(Unaudited)

|                                                                     |  |   | March 31,    |   |  |   | December 31, |  
|-------------------------------------------------------------------- |  | - | ------------ | - |  | - | ------------ | -
|                                                                     |  |   | 2007         |   |  |   | 2006         |  
|ASSETS                                                               |  |   |              |   |  |   |              |  
|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                                            |  |   | 3,549,514    |   |  |   | 3,923,570    |  
|                                                                     |  |   | 9,107,057    |   |  |   | 9,592,760    |  
|TOTAL ASSETS                                                         |  | $ | 9,682,423    |   |  | $ | 10,248,953   |  
|                                                                    
|LIABILITIES
	        AND STOCKHOLDERS EQUITY (DEFICIT)              |  |   |              |   |  |   |              |  
|CURRENT LIABILITIES:                                                 |  |   |              |   |  |   |              |  
|Accounts payable and accrued expenses                                |  | $ | 7,591,810    |   |  | $ | 7,542,233    |  
|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                                            |  |   | 30,202,617   |   |  |   | 26,553,075   |  
|                                                                    
|LONG-TERM NOTES PAYABLE, net of discount of $3,656,871 and           |  |   |              |   |  |   |              |  
|$4,162,067 at March 31, 2007 and December 31, 2006, respectively     |  |   | 33,995,721   |   |  |   | 32,373,497   |  
|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                                                    |  |   | 68,789,245   |   |  |   | 65,215,023   |  
|                                                                    
|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             |  |   | 59,918,780   |   |  |   | 59,918,772   |  
|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                                           |  |   | 80,155,954   |   |  |   | 79,976,295   |  
|Accumulated other comprehensive loss                                 |  |   | (89,359      | ) |  |   | (78,611      | )
|Accumulated deficit                                                  |  |   | (199,113,277 | ) |  |   | (194,803,601 | )
|Total stockholders equity (deficit)                                 |  |   | (59,106,822  | ) |  |   | (54,966,070  | )
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                 |  | $ | 9,682,423    |   |  | $ | 10,248,953   |  

See notes to consolidated condensed financial statements.

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METAMORPHIX, INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

|                                       |  | Three Months Ended           |           
|-------------------------------------- |  | ---------------------------- | ----------
|                                      
|                                       |  | March
              31, 2007 |           
|                                      
|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                               |  |                              | (1,685,616
|Debt issue costs                       |  |                              | (510,958  
|Other income (expense)                 |  |                              |          
|NET LOSS                               |  |                              | (4,410,151
|Preferred stock dividends and          |  |                              |           
|accretion of beneficial conversion     |  |                              |           
|features                               |  |                              | (343,961  
|NET LOSS ATTRIBUTABLE TO               |  |                              |           
|COMMON STOCKHOLDERS                    |  | $                            | (4,754,112
|Net loss per common share:             |  |                              |           
|Basic and diluted                      |  | $                            | (0.23     
|Weighted average number of shares      |  |                              |           
|outstanding:                           |  |                              |           
|Basic and diluted                      |  |                              | 21,076,642

See notes to consolidated condensed financial statements.

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METAMORPHIX, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

|                                                        |  |   | Three Months Ended |  
|------------------------------------------------------- |  | - | ------------------ | -
|                                                       
|                                                        |  |   | March 31,          |  
|                                                        |  |   | 2007               |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                   |  |   |                    |  
|Net loss                                                |  | $ | (4,410,151         | )
|Adjustments to reconcile net loss to net cash flows     |  |   |                    |  
|used in operating activities:                           |  |   |                    |  
|Depreciation and amortization                           |  |   | 112,959            |  
|Accretion of debt discount                              |  |   | 542,180            |  
|Amortization of deferred debt issue costs               |  |   | 510,958            |  
|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            | )
|Net cash flows used in investing activities             |  |   | (44,163            | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                   |  |   |                    |  
|Proceeds from debt issuances                            |  |   | 1,920,000          |  
|Payments of debt costs                                  |  |   | (120,600           | )
|Principal payments on notes                             |  |   | (10,000            | )
|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            | )
|CASH AND CASH EQUIVALENTSBeginning of period           |  |   | 277,680            |  
|CASH AND CASH EQUIVALENTSEnd of period                 |  | $ | 201,259            |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW                   |  |   |                    |  
|INFORMATION:                                            |  |   |                    |  
|Cash paid during the period for interest                |  | $ | 21,427             |  
|NON-CASH INVESTING AND FINANCING ACTIVITIES:            |  |   |                    |  
|Conversion of notes and accrued interest into new notes |  |   | 1,397,028          |  

See notes to consolidated condensed financial statements.

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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 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 $29,627,251
      and an accumulated deficit of $199,113,277. 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): 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  85%* *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 85% 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 our auditors, as in earlier
      years (2004-2005), have included an emphasis paragraph relating to the
    Companys ability to continue as a going concern in their audit report
    on our 2006 financial statements. 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.


8

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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 $4,420,899 and $4,086,997, respectively. These
    amounts represent the sum of the Companys net loss for the quarters
    ended March 31, 2007 and 2006 of $4,410,151 and $4,085,743, respectively,
    and the foreign currency translation adjustments for the quarters ended March
    31, 2007 and 2006 of $10,748 and $1,254, respectively. 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
      Emerging Issues Task Force, or EITF, Issue No. 05-4,The
      Effects of Liquidated Damages Clause on a Freestanding Financial Instrument
      Subject to EITF Issue No. 00-19, Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Companys Own
      Stock. 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. 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 Financial
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 related 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 adjustment of $100,475
as a decrease to the January 1, 2007 accumulated deficit balance.


9

---



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   |  | $                 
|General and administrative |  |                   
|Total                      |  | $                 

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  |             
|Supplies inventory |  |           | 74,047  |             
|                  
|Total              |  | $         | 154,706 |             

10

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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
      
      $
      3,923,570Calculated value
          of warrants granted
      
      
      -Other debt issue
          costs
      
      
      136,902Amortization
          to debt issue costs
      
      
      (510,958
      )Balance at March
          31, 2007
      
      $
      3,549,514


11

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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
      
      RoyaltyLeases
      
      Leases
      
      AgreementsApril 1, 2007
          through December31,
          2007
      
      $
      31,793
      
      
      $
      790,203
      
      
      $
      129,8252008
      
      
      42,390
      
      
      
      1,052,282
      
      
      
      173,1002009
      
      
      29,155
      
      
      
      1,131,950
      
      
      
      173,1002010
      
      
      17,480
      
      
      
      1,176,630
      
      
      
      173,1002011
      
      
      17,480
      
      
      
      1,222,862
      
      
      
      2012
      
      
      7,283
      
      
      
      345,424
      
      
      
      Thereafter
      
      
      
      
      
      
      
      
      
      
      Total payments/(receipts)
      
      
      145,582
      
      
      
      5,719,350
      
      
      
      649,125Less: Amounts
          representing interest
      
      
      (8,472
      )
      
      
      
      
      
      
      Net payments/(receipts)
      
      $
      137,110
      
      
      $
      5,719,350
      
      
      $
      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


12

---



precedent to the maturity of the
      loan have not occurred. We note that our March 31, 2007 consolidated
      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 $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 $542,180 and $515,604 for the
      three months ended March 31, 2007 and 2006, respectively.


13

---



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.BUSINESS SEGMENTS

The Company operates
in two industry 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 business unit 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 business unit 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. 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               
|                                                |   | Corporate/Growth   
|                                                |   | and Differentiation
|                                                |   | Factors  Maryland 
|                                               
|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           |   | (3,896,400)        
|                                               
|Segment assets at March 31, 2007                | $ | 7,895,376          
|                                               
|                                               
|                                               
|                                                |   |                    
|                                               
|                                                |   | 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           |   | (3,324,224)        
|                                               
|Segment assets at December 31, 2006             | $ | 8,299,983          

(1) The Immunopharmaceuticals business unit was operated in Canada and, 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.  The business unit has remaining unpaid liabilities, which generate interest and fees, thus creating a current period segment loss.

14

---



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

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                                 |  | $ | 250,263            |  
|                                                |  |   |                    |  
|Canine parentage and identification genotyping  |  |   |                    |  
|service revenue                                 |  |   | 337,381            |  
|                                                |  |   |                    |  
|Cattle feedlot genotyping revenue               |  |   | 37,053             |  
|                                                |  |   |                    |  
|Cattle Tru-Polled® genotyping revenue           |  |   | 87,649             |  
|                                                |  |   |                    |  
|License fee revenue                             |  |   | 52,501             |  
|                                                |  |   |                    |  
|Other genomic service revenue                   |  |   | 29,474             |  
|                                                |  |   |                    |  
|Total Revenue                                   |  | $ | 794,321            |  
|                                                |  |   |                    |  
|Cost of revenue                                 |  |   | (450,590           | )
|                                                |  |   |                    |  
|Research and development expense                |  |   | (548,842           | )
|                                                |  |   |                    |  
|General and administrative expense              |  |   | (1,924,655         | )
|                                                |  |   |                    |  
|Depreciation and amortization expense           |  |   | (83,811            | )
|                                                |  |   |                    |  
|Interest expense and accretion of debt discount |  |   | (1,685,616         | )
|                                                |  |   |                    |  
|Debt issue costs                                |  |   | (510,958           | )
|                                                |  |   |                    |  
|Other income (loss)                             |  |   |                   |  
|                                                |  |   |                    |  
|Net loss                                        |  | $ | (4,410,151         | )

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 Revenues.Cost
of revenues 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.

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.

15

---



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 $151,725, or 9.9%, to $1,685,616
for the first quarter of 2007 from $1,533,891 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 $37,669, or 8.0%, to $510,958 for the first quarter
of 2007 from $473,289 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 of
 accounting for this instrument and no longer records a change in fair value. See Note 2  Significant Accounting Policies.

Net Loss.Net
loss increased $324,408, or 7.9%, to $4,410,151, for the three months ended
March 31, 2007 from $4,085,743 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
$29,627,251.

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 $0.3 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 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  85%*

*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 85% 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 our auditors, as in earlier years (2004-2005),
    have included an emphasis paragraph relating to the Companys ability
    to continue as a going concern in their audit report on our 2006 financial
    statements.

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.

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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 AS WELL AS THE OTHER INFORMATION
      AND RISK FACTOR IN THIS FORM 10-QSB 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 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

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 the 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, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the end of the period, the Company's disclosure controls and procedures were effective.

During the period covered by this report, there were no changes in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the internal controls
over financial reporting.

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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 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 $542,180 and $515,604 for the three months ended March 31, 2007 and 2006,
respectively.

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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.RegistrantMay
            18, 2007
      
      By:
      /S/
          EDWIN C. QUATTLEBAUMDate
      
      
      Edwin C. QuattlebaumPresident, Chief Executive
          Officer andCo-Chairman of the Board
          of Directors(Principal Executive Officer)May
            18, 2007
      
      By:
      /S/
          THOMAS P. RUSSODate
      
      
      Thomas P. RussoExecutive Vice President,
          Treasurerand Chief Financial Officer(Principal Financial andAccounting Officer)


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