**United
        States**
 **Securities
        and Exchange Commission**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-Q**
 
 
 [X]
              **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**For
                  the quarterly period ended: September 30, 2005[
                  ]
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**Commission
                  File Number: 001-31584
 
 
 **I-TRAX,
        INC.**
 (Exact
        name of registrant as specified in its charter)
 
 **Delaware**
              
              **23-3057155**(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer Identification Number)
 
 **4
        Hillman Drive, Suite 130**
 **Chadds
        Ford, Pennsylvania 19317**
 
 (Address
        of principal executive offices)
 (Zip
        Code)
 
 **(610)
        459-2405**
 (Registrant’s
        telephone number, including area code)
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.  Yes
        [X]  No
        [
        ]
 
 Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Securities Exchange Act of
        1934).  Yes
        [
        ]  No
        [X]
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Securities Exchange Act of 1934).   Yes
        [
        ]No
        [X]
 
 As
        of
        November 9, 2005, there were 30,716,890 shares of the registrant’s $0.001 par
        value common stock outstanding.
 
 
  **TABLE
        OF CONTENTS**
 
 
 **Item**
              
              **Page****Part
                  I - Financial Information**1.
              Financial
                  Statements
              2Report
                  of Independent Registered Public Accounting
                  Firm
              2Condensed
                  Consolidated Balance Sheet at September 30, 2005
                and
                  December 31, 2004
              3Condensed
                  Consolidated Statements of Operations for the
                  three
                and
                  nine months ended September 30, 2005 and
                  2004
              4Condensed
                  Consolidated Statement of Stockholders’ Equity
                  for
                the
                  nine months ended September 30, 2005
              5Condensed
                  Consolidated Statements of Cash Flows for
                the
                  nine months ended September 30, 2005 and
                  2004
              6Notes
                  to Condensed Consolidated Financial Statements
              82.
              Management’s
                  Discussion and Analysis of Financial Condition
                and
                  Results of Operations
              183.
              Quantitative
                  and Qualitative Disclosure About Market
                  Risks
              284.
              Controls
                  and Procedures
              28**Part
                  II - Other Information**1.
              Legal
                  Proceedings
              292.
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              293.
              Defaults
                  Upon Senior Securities
              294.
              Submission
                  of Matters to a Vote of Security
                  Holders
              295.
              Other
                  Information
              296.
              Exhibits
              29
 
  1
  **PART
        I.**  **FINANCIAL
        INFORMATION**
 
 **Item
        1.**  **Financial
        Statements**
 
 
 **Report
        of** **Independent** **Registered Public Accounting Firm**
 
 
 To
        the
        Board of Directors and Stockholders
 of
        I-trax, Inc.
 
 We
        have
        reviewed the accompanying condensed consolidated balance sheet of I-trax,
        Inc.
        (a Delaware corporation) and Subsidiaries as of September 30, 2005, the related
        condensed consolidated statements of operations for the three and nine month
        periods ended September 30, 2005 and 2004, the condensed consolidated statement
        of stockholders’ equity for the nine month period ended September 30, 2005, and
        the condensed consolidated statements of cash flows for the nine month periods
        ended September 30, 2005 and 2004. These interim financial statements are
        the
        responsibility of the company’s management.
 
 We
        conducted our reviews in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). A review of interim financial
        information consists principally of applying analytical procedures and making
        inquiries of persons responsible for financial and accounting matters. It
        is
        substantially less in scope than an audit conducted in accordance with the
        standards of the Public Company Accounting Oversight Board, the objective
        of
        which is the expression of an opinion regarding the condensed consolidated
        financial statements taken as a whole. Accordingly, we do not express such
        an
        opinion.
 
 Based
        on
        our reviews, we are not aware of any material modifications that should be
        made
        to the condensed consolidated financial statements referred to above for
        them to
        be in conformity with United States generally accepted accounting
        principles.
 
 We
        have
        previously audited, in accordance with the standards of the Public Company
        Accounting Oversight Board (United States), the balance sheet as of December
        31,
        2004, and the related consolidated statements of operations, stockholders’
equity and cash flows for the year then ended (not presented herein); and
        in our
        report dated February 4, 2005 (except for the last two paragraphs of Note
        13, as
        to which the date is February 15, 2005), we expressed an unqualified opinion
        on
        those consolidated financial statements. In our opinion, the information
        set
        forth in the accompanying condensed consolidated balance sheet as of December
        31, 2004 is fairly stated, in all material respects, in relation to the
        consolidated balance sheet from which it has been derived.
 
 
 **GOLDSTEIN
        GOLUB KESSLER LLP**
 New
        York,
        New York
 
 October
        19, 2005
 
 
 
 
 
  2
  **I-TRAX,
        INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEET**
 ***(in
        thousands, except share data)***
 
 **ASSETS****September
                  30,**
                **2005**
                **(Unaudited)**
              
              December
                  31,
                2004Current
                  assetsCash
                  and cash equivalents
              
              **$**
              **4,102**
              
              $
              3,805Accounts
                  receivable, net
              
              
              **19,018**
              
              
              13,959Deferred
                  tax asset
              
              
              **920**
              
              
              1,198Other
                  current assets
              
              
              **2,470**
              
              
              1,978Total
                  current assets
              
              
              **26,510**
              
              
              20,940Property
                  and equipment, net
              
              
              **3,740**
              
              
              6,719Goodwill
              
              
              **51,620**
              
              
              61,390Customer
                  list, net
              
              
              **20,011**
              
              
              21,182Other
                  intangible assets, net
              
              
              **986**
              
              
              1,860Other
                  long term assets
              
              
              **41**
              
              
              61Total
                  assets
              
              **$**
              **102,908**
              
              $
              112,152**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Current
                  liabilitiesAccounts
                  payable
              
              **$**
              **7,734**
              
              $
              6,118Accrued
                  expenses
              
              
              **3,948**
              
              
              3,896Net
                  liabilities of discontinued operations
              
              
              **1,299**
              
              
              1,299Accrued
                  loss contracts
              
              
              **610**
              
              
              --Current
                  potion of accrued restructuring charges
              
              
              **412**
              
              
              --Other
                  current liabilities
              
              
              **13,506**
              
              
              9,601Total
                  current liabilities
              
              
              **27,509**
              
              
              20,914Note
                  payable
              
              
              **10,248**
              
              
              8,308Deferred
                  tax liability
              
              
              **1,526**
              
              
              1,526Accrued
                  purchase price (Note 6. Business Combination)
              
              
              **--**
              
              
              7,294Accrued
                  restructuring charges, net of current portion
              
              
              **20**
              
              
              --Other
                  long term liabilities
              
              
              **2,315**
              
              
              2,347Total
                  liabilities
              
              
              **41,618**
              
              
              40,389Stockholders’
                  equityPreferred
                  stock - $.001 par value, 2,000,000 shares authorized,
                1,027,038
                  and 1,070,283 issued and outstanding, respectively
              
              
              **1**
              
              
              1Common
                  stock - $.001 par value, 100,000,000 shares authorized
                30,716,890
                  and 26,226,818 shares issued and outstanding,
                respectively
              
              
              **30**
              
              
              25Additional
                  paid in capital
              
              
              **134,742**
              
              
              130,399Accumulated
                  deficit
              
              
              **(73,483**
              **)**
              
              (58,662
              )Total
                  stockholders’ equity
              
              
              **61,290**
              
              
              71,763Total
                  liabilities and stockholders’ equity
              
              **$**
              **102,908**
              
              $
              112,152
 
 The
        accompanying notes are an integral part of these financial
        statements.
  3
  **I-TRAX,
        INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(Unaudited)**
 ***(in
        thousands, except share data)***
 
 **Three
                  months ended**
                **September
                  30**
              
              **Nine
                  months ended**
                **September
                  30****2005**
              
              2004
              
              **2005**
              
              2004Net
                  revenue
              
              **$**
              **28,824**
              
              $
              24,136
              
              **$**
              **84,528**
              
              $
              49,968Costs
                  and expensesOperating
                  expenses
              
              
              **21,736**
              
              
              18,816
              
              
              **64,742**
              
              
              38,631Impairment
                  of long-lived assets
              
              
              **--**
              
              
              --
              
              
              **12,470**
              
              
              --Provision
                  for loss contracts
              
              
              **(1,453**
              **)**
              
              --
              
              
              **663**
              
              
              --Restructuring
                  expenses
              
              
              **(56**
              **)**
              
              --
              
              
              **783**
              
              
              --General
                  and administrative expenses
              
              
              **5,519**
              
              
              4,670
              
              
              **17,363**
              
              
              11,342Depreciation
                  and amortization
              
              
              **772**
              
              
              1,097
              
              
              **2,740**
              
              
              2,889Total
                  costs and expenses
              
              
              **26,518**
              
              
              24,583
              
              
              **98,761**
              
              
              52,862Operating
                  income/(loss)
              
              
              **2,306**
              
              
              (447
              )
              
              **(14,233**
              **)**
              
              (2,894
              )Other
                  expensesInterest
                  expense
              
              
              **95**
              
              
              124
              
              
              **400**
              
              
              900Amortization
                  of financing costs
              
              
              **57**
              
              
              13
              
              
              **182**
              
              
              60Other
                  expenses
              
              
              **--**
              
              
              --
              
              
              **--**
              
              
              350Total
                  other expenses
              
              
              **152**
              
              
              137
              
              
              **582**
              
              
              1,310Loss
                  before provision for income taxes
              
              
              **2,154**
              
              
              (584
              )
              
              **(14,815**
              **)**
              
              (4,204
              )(Benefit
                  from)/provision for income taxes
              
              
              **(253**
              **)**
              
              251
              
              
              **6**
              
              
              251Net
                  income/(loss)
              
              
              **2,407**
              
              
              (835
              )
              
              **(14,821**
              **)**
              
              (4,455
              )Less
                  preferred stock dividend
              
              
              **(518**
              **)**
              
              (605
              )
              
              **(1,561**
              **)**
              
              (1,282
              )Less
                  deemed dividends applicable to preferred stockholders
              
              
              **--**
              
              
              --
              
              
              **--**
              
              
              (15,820
              )Net
                  income/(loss) applicable to common stockholders
              
              **$**
              **1,889**
              
              $
              (1,440
              )
              $
              **(16,382**
              **)**
              $
              (21,557
              )Earnings/(loss)
                  per common share, basic and dilutedBasic
              
              **$**
              **0.06**
              
              $
              (0.06
              )
              $
              **(0.56**
              **)**
              $
              (1.00
              )Diluted
              
              **$**
              **0.05**
              
              $
              (0.06
              )
              $
              **(0.56**
              **)**
              $
              (1.00
              )Weighted
                  average number of shares outstanding, basic and dilutedBasic
              
              
              **30,716,890**
              
              
              24,730,933
              
              
              **29,138,509**
              
              
              21,613,701Diluted
              
              
              **41,244,259**
              
              
              24,730,933
              
              
              **29,138,509**
              
              
              21,613,701
 
 
 
 
 The
        accompanying notes are an integral part of these financial
        statements.
 
 4
  **I-TRAX,
        INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENT OF STOCKHOLDERS’EQUITY**
 **(Unaudited)**
 ***(in
        thousands, except share data)***
 
 Preferred
                  Stock
              
              Common
                  Stock
              
              Additional
                Paid-in
              
              Accumulated
              
              Total
                Stockholders’Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Deficit
              
              Equity**Balances
                  at December 31, 2004**
              
              
              **1,070,283**
              
              **$**
              **1**
              
              
              **26,226,818**
              
              **$**
              **25**
              
              **$**
              **130,399**
              
              $
              **(58,662**
              **)**
              **$**
              **71,763**Warrant
                  exercises
              
              
              --
              
              
              --
              
              
              22,158
              
              
              --
              
              
              --
              
              
              --
              
              
              --Issuance
                  of warrants for services
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              11
              
              
              --
              
              
              11Issuance
                  of common stock (Note 6. Business
                Combination)
              
              
              --
              
              
              --
              
              
              3,859,200
              
              
              4
              
              
              5,592
              
              
              --
              
              
              5,596Conversion
                  of preferred stock and accrued
                dividends
                  for preferred stock
              
              
              (43,245
              )
              
              --
              
              
              488,714
              
              
              1
              
              
              92
              
              
              --
              
              
              93Preferred
                  sock dividend
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              (1,561
              )
              
              --
              
              
              (1,561
              )Employee
                  subscription stock purchase
              
              
              --
              
              
              --
              
              
              120,000
              
              
              --
              
              
              184
              
              
              --
              
              
              184Non-cash
                  compensation
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              25
              
              
              --
              
              
              25Net
                  loss for the nine months ended
                September
                  30, 2005
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              (14,821
              )
              
              (14,821
              )**Balances
                  at September 30, 2005**
              
              
              **1,027,038**
              
              **$**
              **1**
              
              
              **30,716,890**
              
              **$**
              **30**
              
              **$**
              **134,742**
              
              **$**
              **(73,483**
              **)**
              **$**
              **61,290**
 
 
 
 
 The
        accompanying notes are an integral part of these financial
        statements.
 
  5
  **I-TRAX,
        INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH
        FLOWS**
 **(Unaudited)**
 ***(in
        thousands, except share data)***
 
 **Nine
                  months ended September 30****2005**
              
              2004Operating
                  activities:Net
                  loss
              
              $
              **(14,821**
              **)**
              $
              (4,455
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Impairment
              
              
              **12,470**
              
              
              --Accrued
                  loss on contracts
              
              
              **610**
              
              
              --Depreciation
                  and amortization
              
              
              **2,740**
              
              
              2,889Employee
                  stock purchase
              
              
              **34**
              
              
              --Options
                  issued below market value
              
              
              **25**
              
              
              --Accretion
                  of discount on notes payable charged to interest expense and beneficial
                conversion
                  value of debenture
              
              
              **--**
              
              
              573Issuance
                  of warrants for services
              
              
              **11**
              
              
              --Increase
                  in fair value of common stock warrants
              
              
              **--**
              
              
              350Amortization
                  of financing costs
              
              
              **182**
              
              
              47Changes
                  in operating assets and liabilities, net of effects of
                  acquisition:(Increase)/decrease
                  in accounts receivable
              
              
              **(5,059**
              **)**
              
              996Decrease
                  in deferred tax asset
              
              
              **278**
              
              
              147Increase
                  in other current assets
              
              
              **(518**
              **)**
              
              (920
              )Decrease/(increase)
                  in other long term assets
              
              
              **20**
              
              
              (52
              )Increase/(decrease)
                  in accounts payable
              
              
              **1,616**
              
              
              (948
              )Increase
                  in accrued expenses
              
              
              **52**
              
              
              1,463Increase
                  in accrued restructuring charges
              
              
              **432**
              
              
              --Increase
                  in other current liabilities
              
              
              **2,079**
              
              
              260Decrease
                  in other long term liabilities
              
              
              **(17**
              **)**
              
              --Net
                  cash provided by operating activities
              
              
              **134**
              
              
              350Investing
                  activities:Purchases
                  of property, plant and equipment
              
              
              **(1,805**
              **)**
              
              (1,628
              )Acquisition
                  of intangible assets
              
              
              **(113**
              **)**
              
              (688
              )Acquisition
                  of CHD Meridian, net of acquired cash
              
              
              --
              
              
              (18,134
              )Net
                  cash used in investing activities
              
              
              **(1,918**
              **)**
              
              (20,450
              )Financing
                  activities:Principal
                  payments on capital leases
              
              
              **(9**
              **)**
              
              (35
              )Repayment
                  to related parties
              
              
              **--**
              
              
              (280
              )Repayment
                  of note payable
              
              
              **--**
              
              
              (618
              )Proceeds
                  from exercise of warrants
              
              
              **--**
              
              
              52Proceeds
                  from bank credit facility
              
              
              **1,940**
              
              
              7,350Proceeds
                  from sale of stock
              
              
              **150**
              
              
              --Proceeds
                  from sale of preferred stock, net of issuance costs
              
              
              **--**
              
              
              23,510Redemption
                  of preferred stock
              
              
              **--**
              
              
              (5,000
              )Net
                  cash provided by financing activities
              
              
              **2,081**
              
              
              24,979Net
                  increase in cash and cash equivalents
              
              
              **297**
              
              
              4,879Cash
                  and cash equivalents at beginning of period
              
              
              **3,805**
              
              
              574Cash
                  and cash equivalents at end of period
              
              **$**
              **4,102**
              
              $
              5,453
 
 (Continued
        on following page.)
 The
        accompanying notesare an integral part of these financial
        statements.
  6
  **I-TRAX,
        INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(Unaudited)**
 ***(in
        thousands, except share data)***
 
 (Continued
        from previous page.)
 **Nine
                    months ended September 30****2005**
                
                2004Supplemental
                    disclosure of cash flow information:Cash
                    paid during the period for:Interest
                
                **$**
                **495**
                
                $
                377Income
                    taxes
                
                **$**
                **307**
                
                $
                257Schedule
                    of non-cash investing and financing activities:Issuance
                    of warrants for services
                
                
                **11**
                
                
                --Reclassification
                    of common stock warrants to paid in capital
                
                
                **--**
                
                $
                3,110Issuance
                    of common stock in connection with conversion of
                  promissory
                    note and other settlement
                
                
                **--**
                
                $
                71Issuance
                    of common stock in connection with conversion of debenture
                  payable
                
                
                **--**
                
                $
                747Beneficial
                    conversion feature in connection with issuance of preferred
                  stock
                
                
                **--**
                
                $
                15,820Issuance
                    of common and preferred stock in connection with the
                  acquisition
                    of CHD Meridian
                
                
                **--**
                
                $
                46,300Reduction
                    in accrued purchase price (see Note 6. Business
                  Combination)
                
                **$**
                **1,346**
                
                $
                --Preferred
                    stock dividend
                
                **$**
                **1,561**
                
                $
                1,282Conversion
                    of accrued dividends to common stock
                
                **$**
                **93**
                
                $
                --Purchase
                    of all capital stock of CHD Meridian and assumption of
                  liabilities
                    in the acquisition as follows:Fair
                    value of non-cash tangible assets acquired
                
                
                **--**
                
                $
                17,257Goodwill
                
                
                **--**
                
                
                37,429Customer
                    list
                
                
                **--**
                
                
                29,184Other
                    intangibles
                
                
                **--**
                
                
                1,167Cash
                    paid, net of cash acquired (includes $85 of transaction costs
                  incurred
                    in a prior period)
                
                
                **--**
                
                
                (18,834
                )Common
                    stock issued
                
                
                **--**
                
                
                (36,300
                )Preferred
                    stock issued
                
                
                **--**
                
                
                (10,000
                )Liabilities
                    assumed
                
                
                **--**
                
                $
                19,903
 The
          accompanying notes are an integral part of these financial
          statements.
  7
   **I-TRAX,
        INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL
        STATEMENTS**
 **(Unaudited** )
  
 
 **1.
        ORGANIZATION**
 
 I-trax,
        Inc. (the **“Company”** )
        was
        incorporated in the State of Delaware on September 15, 2000. On March 19,
        2004,
        the Company consummated a merger with Meridian Occupational Healthcare
        Associates, Inc., a private company, which did business as CHD Meridian
        Healthcare ( **“CHD
        Meridian”** ).
        (See
        Note 6. Business Combination.)
 
 The
        Company offers health-related services such as on-site health centers, which
        deliver primary care, acute care, corporate health, occupational health and
        pharmacy care management services as well as integrated disease management,
        wellness and disability management programs.
 
 The
        Company conducts its on-site services through CHD Meridian Healthcare, LLC,
        a
        Delaware limited liability company ( **“CHD
        Meridian LLC”** ),
        and
        its subsidiary companies, and its integrated disease management and wellness
        programs through I-trax Health Management Solutions, LLC, a Delaware limited
        liability company, and I-trax Health Management Solutions, Inc., a Delaware
        corporation.
 
 Physician
        services at the Company’s on-site locations are provided under management
        agreements with affiliated physician associations, which are organized
        professional corporations that hire licensed physicians who provide medical
        services (the **“Physician
        Groups”** ).
        The
        Physician Groups provide all medical aspects of the Company’s on-site services,
        including the development of professional standards, policies, and procedures.
        The Company provides a wide array of business services to the Physician Groups,
        including administrative services, support personnel, facilities, marketing,
        and
        non-medical services.
 
 
 **2.
        BASIS OF PRESENTATION AND INTERIM RESULTS**
 
 The
        condensed consolidated financial statements include the accounts of the Company
        and its subsidiaries and have been prepared by the Company, without audit,
        pursuant to the rules and regulations of the Securities and Exchange Commission.
        The results of operations and cash flows for the nine months ended September
        30,
        2004 include the operations of CHD Meridian effective as of April 1, 2004,
        even
        though the merger was consummated on March 19, 2004.
 
 Certain
        information and footnote disclosures normally included in annual financial
        statements prepared in accordance with generally accepted accounting principles
        have been condensed or omitted pursuant to such rules and regulations. The
        Company believes that the disclosures are adequate to make the financial
        information presented not misleading. These condensed consolidated financial
        statements should be read in conjunction with the audited consolidated financial
        statements and the notes thereto included in the Company’s Annual Report on Form
        10-KSB for the year ended December 31, 2004, filed with the Securities and
        Exchange Commission on March 30, 2005. All adjustments were of a normal
        recurring nature unless otherwise disclosed. In the opinion of management,
        all
        adjustments necessary for a fair statement of the results of operations for
        the
        interim period have been included. The results of operations for such interim
        periods are not necessarily indicative of the results for the full year.
  8
 **I-TRAX,
              INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited** )
  
 
 **2.
        BASIS OF PRESENTATION AND INTERIM RESULTS (continued)**
 
 Certain
        other amounts presented in the condensed consolidated financial statements
        as of
        September 30, 2004 have been reclassified to conform to the current year
        presentation.
 
 These
        condensed consolidated financial statements also include the balance sheet
        of
        CHD Meridian LLC, its wholly owned subsidiaries, the Physician Groups and
        Green
        Hills Insurance, a risk retention group (see Note 10. Risk Retention Group).
        The
        financial statements of the Physician Groups are consolidated with CHD Meridian
        LLC in accordance with the nominee shareholder model of Emerging Issues Task
        Force ( **“EITF”** )
        Issue
        No. 97-2, “Application of FASB Statement No. 94 and APB Opinion No. 16 to
        Physician Practice Management Entities and Certain Other Entities with
        Contractual Management Arrangements.” CHD Meridian LLC has unilateral control
        over the assets and operations of the Physician Groups. Control of the Physician
        Groups is perpetual and other than temporary because of the nominee shareholder
        model and the management agreements between the entities. The net tangible
        assets of the Physician Groups were not material at September 30, 2005 and
        2004.
 
 The
        Company records pass-through pharmaceutical purchases and sales on a net
        basis
        in compliance with EITF Issue No. 99-19, “Reporting Gross Revenue as a Principal
        vs. Net as an Agent.” The amounts of pass-through pharmaceuticals excluded from
        the Company’s net revenue and operating expenses for the three months ended
        September 30, 2005 and 2004 were $32,936,000 and $25,357,000, respectively,
        and
        for the nine months ended September 30, 2005 and 2004 were $93,700,000 and
        $50,228,000, respectively.
 
 
 **3.
        EARNINGS/LOSS PER SHARE**
 
 Earnings
        and loss per common share are computed pursuant to Statement of Financial
        Accounting Standards ( **“SFAS”** )
        No.
        128, “Earnings Per Share.” Basic earnings and loss per share is computed as net
        loss available to common stockholders divided by the weighted average number
        of
        common shares outstanding for the period. Diluted earnings and loss per share
        reflects the potential dilution that could occur from common shares issuable
        through stock options, warrants, convertible preferred stock and convertible
        preferred stock dividends. For the quarter ended September 30, 2005, 7,185,000
        shares issuable upon exercise of options, warrants, and convertible preferred
        stock were excluded from the diluted earnings per share computation because
        their effect would be anti-dilutive.
 
 For
        the
        nine months ended September 30, 2005 and the three and nine months ended
        September 30, 2004, 17,921,000 and 17,169,000 shares, respectively, issuable
        upon exercise of options, warrants and convertible preferred stock were excluded
        from the diluted loss per share computation because their effect would be
        anti-dilutive.
 
  9
 **I-TRAX,
              INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited** )
  
 **4.
        STOCK-BASED COMPENSATION**
 
 At
        September 30, 2005, the Company had two equity incentive plans, which are
        described more fully in the Company’s Annual Report on Form 10-KSB for the year
        ended December 31, 2004. The Company accounts for its stock-based compensation
        programs according to the provisions of Accounting Principles Board Opinion
        No.
        25, “Accounting for Stock Issued to Employees.” Accordingly, compensation
        expense is recognized based on the intrinsic value of compensatory options
        or
        shares granted under the plans.
 
 If
        the
        Company had measured compensation cost for the stock options granted under
        the
        fair value based method subscribed by SFAS No. 123, “Accounting for Stock-Based
        Compensation,” net loss per share would have been increased to the following pro
        forma amounts:
 
 For
                  the three
                months
                  ended
                September
                  30, 2005
              
              For
                  the three
                months
                  ended
                September
                  30, 2004
              
              For
                  the nine
                months
                  ended
                September
                  30, 2005
              
              For
                  the nine
                months
                  ended
                September
                  30, 2004Net
                  income/(loss) as reported
              
              $
              2,407,000
              
              $
              (835,000
              )
              $
              (14,821,000
              )
              $
              (4,455,000
              )Deduct
                  total stock-based
                employee
                  compensation expense
                determined
                  under fair value
                based
                  methods for all awards
              
              
              (323,000
              )
              
              (160,000
              )
              
              (976,000
              )
              
              (578,000
              )Pro
                  forma net income/(loss)
              
              $
              2,084,000
              
              $
              (995,000
              )
              $
              (15,797,000
              )
              $
              (5,033,000
              )Net
                  income/(loss) per share asreportedBasic
              
              $
              0.06
              
              $
              (0.06
              )
              $
              (0.56
              )
              $
              (1.00
              )Diluted
              
              $
              0.05
              
              $
              (0.06
              )
              $
              (0.56
              )
              $
              (1.00
              )Pro
                  forma net income/(loss) per shareBasic
              
              $
              0.05
              
              $
              (0.06
              )
              $
              (0.60
              )
              $
              (1.02
              )Diluted
              
              $
              0.04
              
              $
              (0.06
              )
              $
              (0.60
              )
              $
              (1.02
              )
 
 The
        above
        pro forma disclosure may not be representative of the effects on reported
        net
        operations for future years as options vest over several years and the Company
        may continue to grant options to employees.
 
 The
        fair
        market value of each option grant is estimated at the date of grant using
        the
        Black-Scholes valuation model with the following weighted-average
        assumptions:
 
 Dividend
        yield     0.00%
 Expected
        volatility    78
        -
        112%
 Risk-free
        interest rate    3
        -
        4%
 Expected
        life     5
        years
  10
 **I-TRAX,
              INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited** )
  
 
 **5.
        RESTRUCTURING AND RELATED ACTIVITIES**
 
 During
        the three months ended June 30, 2005, and as subsequently revised during
        the
        three months ended September 30, 2005, the Company completed an in-depth
        analysis of its structure and product development efforts. This analysis
        led to
        the conclusion that certain of the Company’s products and services were no
        longer essential to its integrated business model. The Company then implemented
        a restructuring of its operations and related activities, which was
        substantially completed as of June 30, 2005. In the restructuring, the Company
        recorded an impairment of long-lived assets, a provision for loss contracts
        and
        restructuring expenses, each of which is discussed below.
 
 ***Impairment
        of Long-Lived Assets***
 
 In
        accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” and SFAS
        No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the
        Company recorded an impairment to goodwill and long-lived assets totaling
        $12,470,000. Of this amount, the Company wrote-off software development costs
        of
        $3,563,000 associated with products that the Company will not sell or support
        in
        the future or with proprietary systems that the Company is no longer developing.
        The Company recorded an impairment of $8,424,000 to goodwill and $483,000
        to
        miscellaneous long-lived assets, most of which was related to the acquisitions
        of iSummit Partners, LLC and WellComm Group, Inc.
 
 ***Provision
        for Loss Contracts***
 
 As
        indicated, the Company determined that certain customer contracts were likely
        to
        continue to be unprofitable, notwithstanding the reductions in operating
        expenses implemented in the restructuring. The Company recorded a provision
        for
        loss contracts totaling $2,116,000 for the three and six months ended June
        30,
        2005, and accrued this provision as accrued loss contracts in the condensed
        consolidated balance sheet as of June 30, 2005. The Company classified
        $1,345,000 of the total provision for loss contracts as a current liability
        as
        of June 30, 2005.
 
 During
        the three months ended September 30, 2005, the Company offset operating losses
        of $28,000 from loss contracts against the accrual for loss contracts and
        reached agreements with customers to terminate or phase out these contracts
        by
        July 2006. Accordingly, the Company reversed $1,453,000 of the provision
        for
        loss contracts by eliminating the long term portion and reducing the current
        portion of accrued provision for loss contracts. At September 30, 2005, the
        Company estimates continuing losses and contract termination costs from such
        contracts to be $610,000, which is included in the accompanying condensed
        consolidated balance sheet.
 
 ***Restructuring
        Expenses***
 
 In
        accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or
        Disposal Activities,” the Company recorded restructuring expenses related to
        one-time termination benefits of $542,000, contract termination costs of
        $228,000, and other associated costs of $69,000 for the three and six months
        ended June 30, 2005. The Company recorded an accrual of $795,000, of which
        $769,000 was classified as current, related to restructuring expenses to
        be
        incurred in subsequent periods.
  11
 **I-TRAX,
              INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited** )
  
 
 **5.
        RESTRUCTURING AND RELATED ACTIVITIES (continued)**
 
 During
        the three months ended September 30, 2005, the Company paid $257,000 of one-time
        termination benefits, $64,000 of contract termination costs, and $32,000
        of
        other associated costs. The Company reversed $10,000 of restructuring expenses
        related to a favorable contract termination, and reversed additional
        restructuring expenses by $46,000. As of September 30, 2005, $432,000 is
        classified as accrued restructuring expenses in the accompanying condensed
        consolidated balance sheet, of which $412,000 is classified as current.
 
 Current
                portion
                  of
                accrued
                restructuring
                charges
              
              Accrued
                restructuring
                charges,
                  net of
                current
                  portionBalance
                  at June 30, 2005
              
              $
              769,000
              
              $
              26,000Changes
                  during the quarter ended September 30, 2005One-time
                  termination benefits
              
              
              (257,000
              )
              
              --Contract
                  termination costs
              
              
              (74,000
              )
              
              --Other
                  associated costs
              
              
              (26,000
              )
              
              (6,000
              )Adjustments
              
              
              --
              
              
              --Balance
                  at September 30, 2005
              
              $
              412,000
              
              $
              20,000
 
 
 **6.
        BUSINESS COMBINATION**
 
 On
        March
        19, 2004, the Company merged with CHD Meridian, a privately held company
        and a
        major provider of outsourced, employer-sponsored healthcare services.
 
 As
        of
        December 31, 2004, the Company had recorded a liability of $7,294,000 as
        accrued
        purchase price on the condensed consolidated balance sheet for the value
        of
        3,859,200 shares of common stock issuable pursuant to the merger agreement.
        Please see the Company’s Annual Report on Form 10-KSB for the year ended
        December 31, 2004 for further information. The liability was recorded using
        the
        market value of the shares on December 31, 2004, or $1.89. On April 5, 2005,
        the
        shares held in escrow pursuant to the merger agreement were released. The
        market
        value of the Company’s common stock on April 5, 2005 was $1.45. Consequently,
        the Company reduced its liability for the issuance of these shares by
        $1,698,000, approximating the liability for the fair value of the shares
        released on April 5, 2005, which was offset against goodwill.
 
 During
        the three months ended March 31, 2005, the Company established an additional
        liability for a cash bonus plan for certain non-executive employees of CHD
        Meridian. The total liability of the cash bonus plan was estimated at $352,000,
        which was recorded as an increase to goodwill pursuant to the merger agreement.
        In March 2005, the Company paid $268,000 pursuant to the cash bonus plan.
        The
        remaining $84,000 was classified in other current liabilities at March 31,
        2004
        in the condensed consolidated balance sheet and was distributed in April
        2005.
  12
 **I-TRAX,
              INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited** )
  
 
 **6.
        BUSINESS COMBINATION (continued)**
 
 The
        following are the Company’s unaudited pro forma results of operations for the
        nine months ended September 30, 2004, giving effect to the acquisition of
        CHD
        Meridian as though the transaction had occurred on January 1, 2004. The results
        exclude transaction costs of $1,938,000 and transaction related bonuses and
        termination pay of $832,000 included in the CHD Meridian and the Company’s
        statements of operations, respectively. The pro forma results also include
        adjustments to amortization expense associated with the intangibles acquired
        and
        interest expense related to the new senior secured credit facility.
 
 Nine
                  Months
                Ended
                September
                  30, 2005
                (Actual)
              
              Nine
                  Months
                Ended
                September
                  30, 2004
                (Pro
                  Forma)Net
                  revenue
              
              $
              84,528,000
              
              $
              73,322,000Operating
                  loss
              
              
              (14,233,000
              )
              
              (1,452,000
              )`Net
                  loss
              
              $
              (14,821,000
              )
              $
              (3,164,000
              )Loss
                  per shareBasic
              
              $
              (0.56
              )
              $
              (0.20
              )Diluted
              
              $
              (0.56
              )
              $
              (0.20
              )
 
 
 **7.
        LONG TERM DEBT**
 
 The
        Company, certain of its direct and indirect subsidiaries, and Bank of America,
        N.A., are parties to a senior secured credit facility pursuant to a Credit
        Agreement dated March 19, 2004, as amended. Effective June 29, 2005, the
        Company
        executed a Sixth Amendment to the Credit Agreement in anticipation of failure
        to
        meet certain covenants, which was caused by the restructuring. (See Note
        5.
        Restructuring and Related Activities.) Under the Sixth Amendment: (1) the
        aggregate amount that can be borrowed under the facility increased to the
        lesser
        of $15,000,000 or the credit facility base calculation, in either case less
        outstanding letters of credit; (2) compliance with the covenant for the ratio
        of
        Funded Indebtedness to Earnings Before Interest, Taxes, Depreciation and
        Amortization (as defined in the Credit Agreement), or EBITDA, is waived through
        December 31, 2006; and (3) covenants setting minimum EBITDA targets for periods
        ending September 30, 2005 through December 31, 2006 were added.
 
 As
        of
        September 30, 2005, the Company was in compliance with its financial covenants.
        The Company had $10,248,000 outstanding under the credit facility, which
        was
        classified as long term, and $1,000,000 under a letter of credit. The Company
        had $3,752,000 available for borrowing under the credit facility at September
        30, 2005.
 
  13
 **I-TRAX,
              INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited** )
  
 
 **8.
        COMMITMENTS AND CONTINGENCIES**
 
 ***Litigation***
 
 CHD
        Meridian is involved in certain legal actions and claims on a variety of
        matters
        related to the normal course of business. Management believes that such legal
        actions will not have a material effect on the results of operations, financial
        position, or liquidity of the Company. (See also Note 10. Risk Retention
        Group.)
 
 ***Compliance
        with Healthcare Regulations***
 
 Because
        the Company operates in the healthcare industry, it is subject to numerous
        laws
        and regulations of Federal, state, and local governments. These laws and
        regulations include, but are not limited to, matters regarding licensure,
        accreditation, government healthcare program participation requirements,
        reimbursement for patient services, and Medicare and Medicaid fraud and abuse.
        Recently, government activity has increased with respect to investigations
        and
        allegations concerning possible violations of fraud and abuse statutes and
        regulations by healthcare providers. Violations of these laws and regulations
        could result in, among other things, expulsion from government healthcare
        programs together with the imposition of significant fines and penalties,
        as
        well as significant repayments for patient services previously billed.
 
 Management
        believes that the Company is in compliance with fraud and abuse statutes
        as well
        as other applicable government laws and regulations. Compliance with such
        laws
        and regulations can be subject to future government review and interpretation
        as
        well as regulatory actions unknown or unasserted at this time.
 
 ***Significant
        Customers***
 
 As
        of
        September 30, 2005, one customer represented 16% of the Company’s accounts
        receivable as reflected on the condensed consolidated balance sheet. As of
        September 30, 2004, one customer represented 14% each of the total accounts
        receivable.
 
 For
        the
        three and nine months ended September 30, 2005 and 2004, one customer of
        the
        Company accounted for 12% of the Company’s revenue.
  14
 **I-TRAX,
              INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited** )
  
 **8.
        COMMITMENTS AND CONTINGENCIES (continued)**
 
 ***Risk-Sharing
        Contracts***
 
 From
        time
        to time the Company enters into risk-sharing contracts. A risk-sharing contract
        generally requires the Company to manage the health and wellness of a
        predetermined set of individuals for a term of three to five years. A
        risk-sharing contract provides that the Company is required to refund to
        its
        client a percentage of the Company’s fees if its program does not save the
        client an agreed upon percentage of the client’s healthcare costs or meet
        certain contractual criteria. At September 30, 2005, the Company did not
        have
        any revenue at risk, representing a decrease of $114,000 and $256,000 from
        June
        30, 2005 and December 31, 2005, respectively. During the three months ended
        September 30, 2005, the Company deferred $34,000 of additional at risk fees
        before satisfying contractual obligations which allowed the Company to recognize
        $148,000 of at risk fees.
 
 **9.
        STOCKHOLDERS’ EQUITY**
 
 ***Warrants***
 
 On
        September 12, 2005, the Company issued a warrant to purchase 55,000 shares
        of
        the Company’s common stock at an exercise price of $1.26 per share to a
        consultant. The warrant vests over six months and expires on September 12,
        2008.
        The warrant was valued at $41,000, with $11,000 included as general and
        administrative expense in the accompanying condensed consolidated statements
        of
        operations.
 
 ***Common
        Stock***
 
 The
        Company has 100,000,000 shares of common stock authorized for issuance. As
        of
        September 30, 2005, the Company had issued and outstanding 30,716,890 shares
        of
        common stock.
 
 During
        the nine months ended September 30, 2005, 43,245 shares of Series A Convertible
        Preferred Stock, and $92,021 in dividends accrued on such shares, were converted
        into an aggregate of 488,714 shares of common stock.
 
 ***Series
        A Convertible Preferred Stock***
 
 As
        of
        September 30, 2005, the Company had issued and outstanding 1,027,038 shares
        of
        Series A Convertible Preferred Stock. Each share of Series A Convertible
        Preferred Stock converts into 10 shares of common stock. Each share of Series
        A
        Convertible Preferred Stock also accrues dividends at the rate of 8% per
        year on
        $25.00, the original sale price. The Company accrued dividends of $518,000
        for
        the three months ended September 30, 2005.
 
 As
        of
        September 30, 2005, the Company had accrued aggregate dividends of $3,151,000,
        which at the Company’s option are payable in cash (subject to the consent of the
        senior secured creditor) or common stock at market price. If such dividends
        were
        paid in common stock at $1.27, the closing price of the common stock on
        September 30, 2005, the Company would be required to issue approximately
        2,481,000 additional shares of common stock.
  15
 **I-TRAX,
              INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited** )
  
 
 **9.
        STOCKHOLDERS’ EQUITY (continued)**
 
 ***Stock
        Options***
 
 The
        table
        below summarizes the activity in the Company’s stock option plans for the nine
        months ended September 30, 2005:
 
 Incentive
                Options
              
              Non-Qualified
                Options
              
              Non-Plan
                Non-Qualified
                Options
              
              TotalOutstanding
                  as of January 1, 2005
              
              
              533,188
              
              
              725,973
              
              
              493,998
              
              
              1,753,159Granted
              
              
              1,602,381
              
              
              653,619
              
              
              --
              
              
              2,256,000Exercised
              
              
              --
              
              
              --
              
              
              --
              
              
              --Forfeited/Expired
              
              
              (57,507
              )
              
              (20,000
              )
              
              --
              
              
              (77,507
              )Outstanding
                  as of March 31, 2005
              
              
              2,078,062
              
              
              1,359,592
              
              
              493,998
              
              
              3,931,652Granted
              
              
              454,913
              
              
              340,087
              
              
              
              
              
              795,000Exercised
              
              
              --
              
              
              --
              
              
              --
              
              
              --Reclassification
              
              
              133,531
              
              
              (133,531
              )
              
              --
              
              
              --Forfeited/Expired
              
              
              (198,814
              )
              
              --
              
              
              --
              
              
              (198,814
              )Outstanding
                  as of June 30, 2005
              
              
              2,467,692
              
              
              1,566,148
              
              
              493,998
              
              
              4,527,838Granted
              
              
              180,000
              
              
              --
              
              
              --
              
              
              180,000Exercised
              
              
              --
              
              
              --
              
              
              --
              
              
              --Forfeited/Expired
              
              
              (357,840
              )
              
              (108,726
              )
              
              --
              
              
              (466,566
              )Outstanding
                  as of September 30, 2005
              
              
              2,289,852
              
              
              1,457,422
              
              
              493,998
              
              
              4,241,272
 
 As
        of
        September 30, 2005, exercisable plan and non-plan options to purchase an
        aggregate of 1,704,799 shares, with exercise prices ranging from $.01 to
        $10.00,
        were outstanding.
 
 On
        August
        10, 2005, the Company granted options to acquire 180,000 shares of common
        stock
        to certain employees with an exercise price of $1.42 per share, which
        approximated the market value at the date of the grant.
 
 Plan
        activity is summarized as follows:
 
 Options
                  Outstanding
              
              Options
                  ExercisableRange
                  of
                Exercise
                Price
              
              Number
                Outstanding
              
              Weighted
                Average
                Remaining
                Contractual
                  Life
              
              Weighted
                Average
                Exercise
                Price
              
              Number
                Exercisable
              
              Weighted
                Average
                Exercise
                Price$.01
              
              112,000
              
              6.35
              
              $.01
              
              112,000
              
              $.01$1.40-$1.77
              
              3,246,997
              
              9.23
              
              $1.45
              
              784,975
              
              $1.48$2.60-$3.00
              
              583,957
              
              6.14
              
              $2.75
              
              551,729
              
              $2.75$3.10-$5.00
              
              195,218
              
              7.31
              
              $3.86
              
              152,995
              
              $3.89$5.50-$7.50
              
              60,100
              
              6.22
              
              $6.00
              
              60,100
              
              $6.00$10.00
              
              43,000
              
              4.70
              
              $10.00
              
              43,000
              
              $10.004,241,272
              
              8.55
              
              $1.86
              
              1,704,799
              
              $2.39
 
  16
 **I-TRAX,
              INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited** )
  
 
 **10.
        RISK RETENTION GROUP**
 
 Since
        2004, the Company has secured medical malpractice and general liability
        insurance for certain of its direct and indirect subsidiaries through Green
        Hills Insurance Company, a Risk Retention Group ( **“GHIC”** ),
        incorporated as a subsidiary of CHD Meridian LLC under the laws of the State
        of
        Vermont. In years prior to 2004, the Company secured such insurance in the
        commercial market.
 
 On
        an
        annual basis, the Company uses independent actuaries to estimate its exposures
        for claims obligations (for both asserted and unasserted claims) related
        to
        deductibles and exposures in excess of coverage limits, and the Company
        maintains reserves for these obligations. Loss and loss adjustment expense
        reserves are recorded monthly and represent management’s best estimate of the
        ultimate net cost of all reported and unreported losses incurred. The reserves
        for unpaid losses and loss adjustment expenses are estimated using individual
        case valuations and statistical analyses. Those estimates are subject to
        the
        effects of trends in claim severity and frequency. Although considerable
        variability is inherent in such estimates, management believes the reserves
        for
        losses and loss adjustment expenses are adequate. The estimates are reviewed
        and
        adjusted continuously as experience develops or new information becomes known;
        such adjustments are included in current operations.
 
 As
        of
        September 30, 2005, the Company’s estimated loss reserve for incurred but not
        reported losses and loss adjustment expense predating GHIC was $2,000,000,
        which
        is included in other long term liabilities on the condensed consolidated
        balance
        sheet. The Company also maintains a reserve for cost and settlement amounts
        of
        reported claims predating GHIC, which is included in other current liabilities
        on the condensed consolidated balance sheet. During the three and nine months
        ended September 30, 2005, the Company incurred $64,000 related to reported
        claims, reducing the balance of reserve for cost and settlement amounts of
        reported claims at September 30, 2005 to $1,547,000.
 
 During
        the three and nine months ended September 30, 2005, GHIC increased its reserves
        for reported claims and incurred but not reported losses and loss adjustment
        expense by $263,000 and $874,000, respectively, to $1,603,000, which is included
        in other current liabilities on the condensed consolidated balance sheet.
 
 
 
 
  17
   **Item
                  2.**
              **Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations**
 
 The
        following Management’s Discussion and Analysis of Financial Condition and
        Results of Operations of I-trax, Inc. and its subsidiaries should be read
        in
        conjunction with our unaudited condensed consolidated financial statements
        and
        related notes appearing on the preceding pages as well as our audited financial
        statements and related notes included in our Annual Report on Form 10-KSB
        for
        the year ended December 31, 2004 filed on March 30, 2005.
 
 ***Forward
        Looking Statements***
 
 The
        following discussion also contains forward-looking statements. All statements,
        other than statements of historical facts, included in this quarterly report
        regarding our strategy, future operations, financial position, future revenues,
        projected costs, prospects, plans and objectives of management are
        forward-looking statements. The words
“anticipates,”“believes,”“estimates,”“expects,”“intends,”“may,”“plans,”“projects,”“will,”“would”
and similar expressions are intended to identify forward-looking statements,
        although not all forward-looking statements contain these identifying words.
        We
        cannot guarantee that we actually will achieve the plans, intentions or
        expectations disclosed in our forward-looking statements, and readers of
        this
        report should not place undue reliance on our forward-looking statements.
        Actual
        results or events could differ, possibly materially, from the plans, intentions
        and expectations disclosed in our forward-looking statements. We have identified
        important factors in the cautionary statements below and in our Annual Report
        on
        Form 10-KSB for the fiscal year ended December 31, 2004 that we believe could
        cause actual results or events to differ, possibly materially, from our
        forward-looking statements. Our forward-looking statements do not reflect
        the
        potential impact of any future acquisitions, mergers, dispositions, joint
        ventures or investments we may make. We undertake no duty to update these
        forward-looking statements, even though our situation may change in the future.
 
 ***Risk
        Considerations***
 
 You
        are
        cautioned not to place undue reliance on the statements and other discussion
        set
        forth in this quarterly report. These statements and other discussion speak
        only
        as of the date this quarterly report is filed with the Securities and Exchange
        Commission, and these statements are based on management’s current expectations
        and are subject to uncertainty and changes in circumstances. Factors that
        may
        cause actual results to differ materially from management expectations include,
        but are not limited to:
 
 ·
              effects
                  of increasing competition for contracts to establish and manage
                  employer-dedicated pharmacies and clinics;
 
 ·
              loss
                  of advantageous pharmaceutical pricing;
 
 ·
              inability
                  to meet covenants and financial tests related to our senior secured
                  credit
                  facility;
 
 ·
              long
                  and complex sales cycles;
 
 ·
              loss
                  of a major client;
 
 ·
              cost
                  pressures in the healthcare industry;
   18
 
 ·
              exposure
                  to professional liability claims and a failure to manage effectively
                  our
                  professional liability risks;
 
 ·
              economic
                  uncertainty; and
 
 ·
              each
                  of the factors discussed under “Item 1 - Description of Business - Risk
                  Factors” in our Annual Report on Form 10-KSB for the year ended December
                  31, 2004.
 
 ***Basis
        of Presentation***
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with accounting principles
        generally accepted in the United States of America for interim financial
        information, the instructions to Form 10-Q and Regulation S-X. In our
        opinion, the unaudited condensed consolidated financial statements have been
        prepared on the same basis as the annual financial statements and reflect
        all
        adjustments necessary to present fairly our financial position as of September
        30, 2005 and the results of the operations and cash flows for the three and
        nine
        months ended September 30, 2005. The preparation of these financial statements
        requires us to make estimates and judgments that affect the reported amounts
        of
        assets and liabilities and the reported amounts of revenues and expenses
        during
        the covered periods. We base our estimates and judgments on our historical
        experience and on various other factors that we believe are reasonable under
        the
        circumstances. We evaluate our estimates and judgments, including those related
        to revenue recognition, bad debts, and goodwill and other intangible assets
        on
        an ongoing basis. Notwithstanding these efforts, there can be no assurance
        that
        actual results will not differ from the respective amount of those estimates.
 
 ***Business
        Overview***
 
 I-trax
        is
        an integrated health and productivity management company formed by the merger
        on
        March 19, 2004 of I-trax, Inc. and Meridian Occupational Healthcare Associates,
        Inc., which did business as CHD Meridian Healthcare. We
        offer
        a range of health and productivity-related services to large, self-insured
        employers. Our services can be integrated or blended as necessary or appropriate
        based on each client’s needs. The
        services include on-site health centers, which deliver primary care, acute
        care,
        corporate health, occupational health and pharmacy care management services
        as
        well as integrated disease management, wellness and disability management
        programs. We
        believe we are the nation’s largest provider of on-site corporate health
        management services on an outsourced basis.
 
 We
        believe our service offerings improve the health status of employee populations
        and manage the upward claim trend experienced by employers and employees,
        self-insured employers and government agencies. By proactively managing our
        clients’ existing healthcare needs, we believe our programs reduce later need
        for critical care and related costs, increase productivity, reduce absenteeism,
        improve health status of both active employees and retirees, and reduce overall
        costs.
 
 Our
        services are designed to allow employers to contract directly for a wide
        range
        of employee healthcare needs. We can deliver these services at or near the
        client’s work site by opening, staffing and managing a clinic or pharmacy
        dedicated to the client and its employees, or remotely by using the Internet
        and
        our state-of-the-art Care Communication Center staffed with trained nurses
        and
        other healthcare professionals who are available 24 hours per day, 7 days
        per
        week. Our array of services provides each client with flexibility to meet
        its
        specific pharmacy, primary care, occupational health, corporate health, wellness
        management or disease management needs.
 
 We
        provide services to approximately 121 clients, including automotive and
        automotive parts manufacturers, consumer products manufacturers, large financial
        institutions, health plans, integrated delivery networks, and third party
        administrators. On September 30, 2005, we operated 185 on-site facilities
        for 92
        of such clients in 32 states and provided a variety of other health management
        programs for the remaining 29 of such clients. Our client retention rate
        has
        been high because we establish strong client relationships that are supported
        by
        the critical nature of our services, the benefits achieved by employer and
        employee constituents, and the utilization of multi-year service contracts.
   19
 
 ***Critical
        Accounting Policies***
 
 A
        summary
        of significant accounting policies is disclosed in Note 2 to the consolidated
        financial statements included in our Annual Report on Form 10-KSB for the
        year
        ended December 31, 2004. Our critical accounting policies are further described
        under the caption “Critical Accounting Policies” in Management’s Discussion and
        Analysis of Financial Condition and Results of Operations in our Annual Report
        on Form 10-KSB for the year ended December 31, 2004. There have been no changes
        in the nature of our critical accounting policies or the application of those
        policies since December 31, 2004.
 
 ***CHD
        Meridian Healthcare Merger***
 
 We
        merged
        with CHD Meridian Healthcare on March 19, 2004. The total value of the merger
        consideration was approximately $79,232,000. The results of operations for
        the
        three months ended March 31, 2004 do not include the results of operations
        for
        CHD Meridian because we agreed for accounting purposes to consolidate results
        of
        operations effective as of April 1, 2004. However, the discussion below,
        to the
        extent it concerns our results and performance for the quarter ended March
        31,
        2004, assumes that the merger took effect on January 1, 2004.
 
 ***Key
        Financial Trends and Analytical Points***
 
 ***Update
        on Restructuring and Related Activities.*** During
        the three months ended June 30, 2005, we completed an in-depth review of
        our
        business strategy, operational integration and product development efforts.
        We
        concluded that our basic strategy could be pursued more effectively and
        efficiently through a deeper integration of our key lines of service and
        that
        certain products and services were no longer essential to our integrated
        business model. We implemented a restructuring of our operations and related
        activities to reduce costs and better utilize our on-site business as the
        platform for expanded products and services. This restructuring has resulted
        in
        a major improvement in our financial performance during the quarter ended
        September 30, 2005.
 
 *Adjustments
        to Provision for Loss Contracts.* At June
        30, 2005, we determined that certain customer contracts were unprofitable
        and
        likely to remain so despite the restructuring. We thus established a provision
        of $2,116,000 for the estimated continuing losses. During the three months
        ended
        September 30, 2005, we reached agreements with certain customers to terminate
        or
        phase out these loss contracts by July 2006. These agreements reduce the
        losses
        expected to be incurred in subsequent periods and we have accordingly reversed
        $1,453,000 of the provision for loss contracts by eliminating the long term
        portion and reducing the current portion of accrued provision for loss
        contracts. Our actual loss on these contracts during the quarter ended September
        30, 2005 was $28,000, which was offset by the current portion of the accrued
        loss contracts. As of September 30, 2005, management estimates continuing
        losses
        and contract termination costs from such contracts to be $610,000.
 
 *Restructuring
        Expenses.* We
        recorded restructuring expenses related to one-time termination benefits
        of
        $542,000, contract termination costs of $228,000, and other associated costs
        of
        $69,000 for the three and six months ended June 30, 2005. The Company
        established an accrual for such expenses of $795,000. During the third quarter,
        we paid $257,000 of one-time termination benefits, $64,000 of contract
        termination costs, and $32,000 of other associated costs. We also reversed
        $10,000 of restructuring expenses related to a favorable contract negotiation
        with a terminated vendor and reduced restructuring expenses of $46,000.
        Consequently, we estimate that $432,000 of restructuring expenses will be
        paid
        in subsequent periods.
   20
 
 ***Revenue
        Trend.*** Revenue
        for the third quarter of 2005 increased 2.1% from the second quarter of 2005,
        4.9% from the first quarter of 2005, and 19.4% from the third quarter of
        2004.
        This sustained revenue growth is driven by the continued increase in demand
        for
        our services, in particular our primary care and pharmacy operations. Since
        December 31, 2004, we have increased our sites under management from 177
        to
        185.
  In
        addition, we have experienced significant growth in pharmacy sales. We record
        pass-through pharmaceutical purchases and sales on a net basis. For the three
        and nine months ended September 30, 2005, pass-through pharmaceuticals excluded
        from our net revenue and operating expenses were $32,936,000 and $93,700,000,
        respectively, compared to $25,357,000 and $72,995,000 (on a pro forma basis
        as
        if the merger had been effective as of January 1, 2004) for the three and
        nine
        months ended September 30, 2004. This growth in pass-through pharmaceuticals
        is
        due to the increased utilization of our on-site pharmacies as well as the
        launch
        of our new mail-order pharmacy program in the first quarter of
        2005.
 
 ***Profitability.*** The
        third quarter results of operations show significant improvement over the
        prior
        quarter and prior year. Our consolidated gross profit contribution, that
        is net
        revenue less direct costs of operation excluding provision for loss contracts
        and restructuring expenses, was $7,088,000 for the quarter ended September
        30,
        2005. Our percentage gross profit margin for the quarters ended September
        30,
        2005 and September 30, 2004 was 24.6% and 22.0% of net revenue, respectively,
        with a rolling four quarter weighted average of 24.1%. General and
        administrative expenses decreased by $822,000 from the second quarter of
        2005 as
        a result of our restructuring efforts.
 
 Our
        net
        income for the quarter ended September 30, 2005 was $898,000 after eliminating
        the effects of adjustments to provision for loss contracts and restructuring
        expenses during the third quarter. This compares with net loss for the quarter
        ended June 30, 2005, of $1,382,000 after eliminating the effects of impairment
        of long-lived assets, provision for loss contracts, and restructuring expenses. A
        reconciliation of net income/loss to adjusted net income/loss for the three
        and
        nine months ended September 30, 2004 and 2005 follows.
 
 Three
                  months ended
                September
                  30
              
              Nine
                  months ended
                September
                  302005
              
              2004
              
              2005
              
              2004Net
                  income/(loss)
              
              $
              2,407,000
              
              $
              (835,000
              )
              $
              (14,821,000
              )
              $
              (4,455,000
              )Impairment
                  of long-lived assets
              
              
              --
              
              
              --
              
              
              12,470,000
              
              
              --Provision
                  for loss contracts
              
              
              (1,453,000
              )
              
              --
              
              
              663,000
              
              
              --Restructuring
                  expenses
              
              
              (56,000
              )
              
              --
              
              
              783,000
              
              
              --Net
                  income/(loss), excluding restructuring related activities
              
              $
              898,000
              
              $
              (835,000
              )
              $
              (905,000
              )
              $
              (4,455,000
              )
 
  21
  ***Earnings
        before interest, taxes, depreciation, and
        amortization.*** ** We
        make ** use
        of
        EBITDA, which is a non-GAAP financial measure. We believe that EBITDA is
        a
        useful operating performance indicator. Our EBITDA and reconciliation of
        net
        income/loss to EBITDA for the three and nine months ended September 30, 2004
        and
        2005 follows.
 
 Three
                  months ended
                September
                  30
              
              Nine
                  months ended
                September
                  302005
              
              2004
              
              2005
              
              2004Net
                  income/(loss)
              
              $
              2,407,000
              
              $
              (835,000
              )
              $
              (14,821,000
              )
              $
              (4,455,000
              )Add:
                  Depreciation and amortization
              
              
              829,000
              
              
              1,110,000
              
              
              2,922,000
              
              
              2,949,000Add:
                  (Benefit from)/provision for income taxes
              
              
              (253,000
              )
              
              251,000
              
              
              6,000
              
              
              251,000Add:
                  Interest
              
              
              95,000
              
              
              124,000
              
              
              400,000
              
              
              900,000EBITDA
              
              $
              3,078,000
              
              $
              650,000
              
              $
              (11,493,000
              )
              $
              (355,000
              )
 
 ***Working
        Capital.*** At
        September 30, 2005, we had a working capital deficit of $999,000, as compared
        to
        a working capital deficit of $1,826,000 at June 30, 2005 and a working capital
        surplus of $26,000 at December 31, 2004. Our decreased deficit from the second
        quarter is primarily related to management’s revised estimate of loss contracts
        identified during our restructuring efforts of the second quarter. This revision
        reduced current liabilities during the quarter by $735,000.
 
 During
        the third quarter of 2005, we reduced the outstanding balance under our credit
        facility by $752,000, from $11,000,000 at June 30, 2005 to $10,248,000 at
        September 30, 2005. This improvement is due in part to reduced spending on
        general and administrative expenses resulting from our second quarter
        restructuring efforts.
 
 ***Results
        of Operations***
 
 We
        commenced reporting financial results that include CHD Meridian Healthcare
        operations beginning as of April 1, 2004, and consequently, our historic
        results
        for the three month period ended March 31, 2004 only reflect the separate
        operations of I-trax. Accordingly, in addition to providing comparative analysis
        on a historical basis, for the comparison of nine month periods ended September
        30, 2005 and 2004 we are providing supplemental unaudited pro forma information
        that we believe is useful to understand how our results of operations have
        performed on a comparative basis as if the acquisition of CHD Meridian
        Healthcare occurred on January 1, 2004.
 
 ***Three
        Months ended September 30, 2005 Compared to Three Months ended September
        30,
        2004***
 
 Revenue
        for the three months ended September 30, 2005 was $28,824,000,
        an increase of $ 4,688,000,
        or 19.4%, from $24,136,000 for the three months ended September 30, 2004.
        This
        increase was primarily due to growth in our on-site primary care and pharmacy
        operations as well as the addition of 17 new sites under management. Current
        period revenue was also positively affected by $450,000 of on-site contract
        termination revenue and the recognition of previously deferred revenue related
        to loss contracts.
 
 Operating
        expenses, which represent our direct costs associated with services to clients,
        amounted to $21,736,000
        for the three months ended September 30, 2005, an increase of $ 2,920,000,
        or 15.5%, from $18,816,000 for the three months ended September 30, 2004.
        Operating costs grew less than revenue during the three months ended September
        30, 2005. As a result, operating expenses as a percentage of revenue for
        the
        three months ended September 30, 2005 declined to 75.4% from 78.0% for the
        comparable period of 2004.
   22
 
 As
        part
        of our restructuring activities during the three months ended June 30, 2005,
        we
        determined that certain customer contracts were unprofitable and likely to
        remain so, notwithstanding the reductions in operating expenses that we
        implemented. During the three months ended September 30, 2005, we reached
        agreements with certain customers to terminate or phase out these loss contracts
        by July 2006. Termination of these contracts reduces the losses expected
        to be
        incurred in subsequent periods and we have accordingly reversed $1,453,000
        of
        the provision for loss contracts by eliminating the long term portion and
        reducing the current portion of accrued provision for loss contracts. Actual
        loss on these contracts incurred during the three months ended September
        30,
        2005 was $28,000 and was offset by the current portion of the loss contracts
        accrual.
  We
        recorded restructuring expenses related to one-time termination benefits
        of
        $542,000, contract termination costs of $228,000, and other associated costs
        of
        $69,000 for the three and six months ended June 30, 2005. We reversed $10,000
        of
        restructuring expenses related to a favorable contract negotiation with a
        terminated vendor and reduced restructuring expenses of $46,000 in the three
        months ended September 30, 2005.
 
 General
        and administrative expenses, which represent our corporate costs, increased
        to
        $5,519,000 for the three months ended September 30, 2005 from $4,670,000
        for the
        three months ended September 30, 2004. Our general and administrative expenses
        as a percentage of revenue declined modestly from 19.3% to 19.1% for the
        three
        months ended September 30, 2004 and 2005, respectively. General
        and administrative costs for the third quarter decreased by $822,000 compared
        to
        the three months ended June 30, 2005 primarily due to the
        restructuring.
 
 Depreciation
        and amortization expenses were $772,000 for the three months ended September
        30,
        2005, a decrease of $325,000 as compared to $1,097,000 for the three months
        ended September 30, 2004. Approximately $144,000 of this decrease is related to intangibles that were
        fully amortized as of March 31, 2005. The remaining change is due to the
        reclassification of certain intangible assets to goodwill as disclosed in
        our
        Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004.
 
 Interest
        expense for the three months ended September 30, 2005 was $95,000, representing
        a decrease of $29,000, or 23.4%, from $124,000 for the three months ended
        September 30, 2004. Interest expense primarily includes interest payable
        under
        our senior secured credit facility.
 
 Amortization
        of financing costs for the three months ended September 30, 2005 was $57,000,
        representing an increase of $44,000 from $13,000 for the three months ended
        September 30, 2004. The increase is due to additional financing costs
        capitalized in connection with senior secured credit facility
        amendments.
 
 For
        the
        three months ended September 30, 2005, our net income was $2,407,000, as
        compared to a net loss of $835,000 for the three months ended September 30,
        2004. Our
        improved financial results were positively impacted by the reversal of
        $1,509,000 of expenses related to loss contracts and restructuring expenses.
        Excluding such items, our net income for the three months was $898,000, an
        improvement of $1,733,000 from the comparable period last year.
 
 ***Nine
        Months ended September 30, 2005 Compared to Nine Months ended September 30,
        2004***
 
 Revenue
        for the nine months ended September 30, 2005 was $84,528,000, an increase
        of
        $34,560,000, or 69.2%, from $49,968,000 for the nine months ended September
        30,
        2004. The substantial increase is the result of the CHD Meridian Healthcare
        acquisition and growth in our on-site primary care and pharmacy operations.
   23
 
 Operating
        expenses, which represent our direct costs associated with services to clients,
        amounted to $64,742,000 for the nine months ended September 30, 2005, an
        increase of $26,111,000 from $38,631,000 for the nine months ended September
        30,
        2004. The substantial increase is the result of the CHD Meridian Healthcare
        acquisition.
 
 Impairment
        of long-lived assets for the nine months ended September 30, 2005 was
        $12,470,000. In the quarter ended June 30, 2005, w e
        wrote-off software development costs of $3,563,000 associated with products
        that
        we no longer sell and will not support in the future and with proprietary
        systems that we are no longer developing. We recorded an impairment of
        $8,424,000 to goodwill and $483,000 to miscellaneous long-lived assets, in
        each
        case related to the acquisitions of iSummit Partners and WellComm Group.
 
 Our
        provision for loss contracts for the nine months ended September 30, 2005
        was
        $663,000. In the quarter ended June 30, 2005, w e
        determined that certain customer contracts are likely to continue to be
        unprofitable, notwithstanding the reductions in our operating expenses that
        we
        have already implemented.
 
 Our
        restructuring expenses for the nine months ended September 30, 2005 were
        $783,000. W e
        recorded expenses related to one-time termination benefits of $542,000, contract
        termination costs of $218,000 and other associated costs of $23,000 that
        consists primarily of consulting fees.
 
 General
        and administrative expenses, which represent our corporate costs, increased
        to
        $17,363,000 for the nine months ended September 30, 2005 from $11,342,000
        for
        the nine months ended September 30, 2004. The increase of $6,021,000 is
        primarily attributable to the CHD Meridian Healthcare acquisition.
 
 Depreciation
        and amortization expenses were $2,740,000 for the nine months ended September
        30, 2005, a decrease of $149,000 as compared to $2,889,000 for the nine months
        ended September 30, 2004. Approximately $470,000 of depreciation and
        amortization expenses are excluded from our results of operations for the
        nine
        months ended September 30, 2004, as a result of the effective date of the
        CHD
        Meridian Healthcare acquisition.
 
 Interest
        expense for the nine months ended September 30, 2005 was $400,000, representing
        a decrease of $500,000, or 55.6%, from $900,000 for the nine months ended
        September 30, 2004. For the nine months ended September 30, 2005, interest
        expense includes interest payable under our senior secured credit facility.
        For
        the nine months ended September 30, 2004, interest expense includes a charge
        of
        $573,000 attributable to the unamortized portion of the discount and beneficial
        conversion value associated with a convertible debenture.
 
 Amortization
        of financing costs for the nine months ended September 30, 2005 were $182,000,
        representing an increase of $122,000 from $60,000 for the nine months ended
        September 30, 2004. This increase is attributable to costs associated with
        amending our senior credit facility.
 
 For
        the
        nine months ended September 30, 2005, our net loss was $14,821,000, as compared
        to a net loss of $4,455,000 for the nine months ended September 30, 2004.
   24
  
 ***Nine
        Months ended September 30, 2005 (Actual) Compared to Nine Months ended September
        30, 2004 (Pro Forma)***
 
 The
        following are our unaudited pro forma results of operations giving effect
        to the
        acquisition of CHD Meridian Healthcare as though the transaction had occurred
        on
        January 1, 2004. The results exclude transaction costs of $1,938,000 and
        transaction related bonuses and termination pay of $832,000 included in CHD
        Meridian Healthcare’s and our statements of operations, respectively. The pro
        forma results also include adjustments to amortization expense associated
        with
        the intangibles acquired and interest expense related to the new credit
        facility.
 
 Nine
                  Months
                Ended
                September
                  30, 2005
                (Actual)
              
              Nine
                  Months
                Ended
                September
                  30, 2004
                (Pro
                  Forma)Net
                  revenue
              
              $
              84,528,000
              
              $
              73,322,000Operating
                  loss
              
              
              (14,233,000
              )
              
              (1,452,000
              )`Net
                  loss
              
              $
              (14,821,000
              )
              $
              (3,164,000
              )Loss
                  per shareBasic
              
              $
              (0.56
              )
              $
              (0.20
              )Diluted
              
              $
              (0.56
              )
              $
              (0.20
              )
  Revenue
        on a pro forma basis for the nine months ended September 30, 2005 increased
        $11,206,000, or approximately 15.3%,
        to $ 84,528,000
        from $ 73,322,000
        for the nine months ended September 30, 2004. This growth was generated by
        increases from our corporate health, primary care and pharmacy service
        lines.
 
 Total
        costs and expenses include direct costs of our operations (including impairment
        of long-lived assets, provision for loss contracts, and restructuring expenses),
        corporate overhead (general and administrative expenses), and depreciation
        and
        amortization. Total costs and expenses for the nine months ended September
        30,
        2005 increased $23,986,000, or approximately 32.1%, to $98,761,000 from $ 74,775,000
        reported for the nine months ended September 30, 2004 on a pro forma basis.
        Of
        this increase, $13,916,000 is attributable to the restructuring of our health
        and productivity management services.
 
 Operating
        expenses for the nine months ended September 30, 2005 were $8,084,000 higher
        than the pro forma amount for the comparable period in the previous year
        as a
        result of growth in our service lines. General and administrative expenses
        increased by $2,959,000, of which $2,110,000 occurred during the six
        months ended June 30, 2005. The increase in the first half of the year was
        a key
        factor in management’s decision to restructure the organization during the
        second quarter of 2005. Pro forma general and administrative expenses as
        a
        percentage of revenue was 20.5% and 19.6% for the nine months ended September
        30, 2005 and 2004, respectively. As a result of our restructuring activities,
        general and administrative expenses as a percentage of revenue for the three
        months ended September 30, 2005, was 19.1%.
 
 Interest
        expense and financing costs for the nine months ended September 30, 2005
        decreased from the nine months ended September 30, 2004 by $879,000. During
        the
        three months ended September 30, 2004, we recorded non-recurring charges
        to
        interest expense and other expenses in the amount of $923,000.
   25
 
 ***Liquidity
        and Capital Resources***
 
 ***Operating
        Activities***
 
 Cash
        provided by operating activities during the nine months ended September 30,
        2005
        was $134,000. The following factors accounted for our operating cash surplus:
 
 (1)  Our
        operating loss was $14,821,000, which included non-cash charges of $12,470,000
        for impairment of long-lived assets and $3,602,000 of non-cash depreciation,
        amortization, accrued loss on contracts, and other non-cash charges.
 
 (2)  Our
        accounts receivable and other current assets balances increased by $5,577,000
        reflecting growth in pharmaceutical purchases and revenue. Other current
        assets
        have increased as a result of a prepayment of professional liability insurance.
 
 (3)  Our
        liabilities (which include accounts payable, accrued expenses, accrued
        restructuring charges and other current and long term liabilities) increased
        by
        $4,162,000, which includes accruals recorded in relation to our restructuring
        and related activities of $432,000. Other contributing factors to this increase
        were an increase in pharmaceutical sales driving higher pharmaceutical purchases
        and increases in reserves for Green Hills Insurance, our Risk Retention
        Group.
 
 ***Investing
        Activities***
 
 Net
        cash
        used in investing activities was $1,918,000 for the nine months ended September
        30, 2005, which consists of $822,000 of capitalized software costs and $983,000
        of capital expenditures. The remaining amount of $113,000 relates to additional
        financing costs associated with amending our senior secured credit facility.
 
 ***Financing
        Activities***
 
 Net
        cash
        provided by financing activities was $2,081,000 for the nine months ended
        September 30, 2005, substantially all of which represents additional draws
        of
        $1,940,000 under our senior secured credit facility. We used these funds
        to
        finance our working capital requirements (which increased due to additional
        revenue, expenses and accounts receivable generated from increases in same-site
        operations as well as the addition of eight new facilities during 2005),
        capital
        expenditures and development expenses. As a result of our
        restructuring, we have substantially reduced our development expenses.
 
 We
        amended our credit facility to finance working capital needs associated with
        our
        business growth and restructuring expenses. The amendment, effective June
        29,
        2005: (1) increased the aggregate amount that can be borrowed under the facility
        to the lesser of $15,000,000 or the credit facility base calculation, in
        each
        case less outstanding letters of credit; (2) waived compliance with the covenant
        for the ratio of the Funded Indebtedness to Earnings Before Interest, Taxes,
        Depreciation and Amortization (as defined in the credit facility), or EBITDA,
        through December 31, 2006; and (3) added covenants setting minimum EBITDA
        targets for periods ending September 30, 2005 through December 31, 2006.
        The
        minimum EBITDA targets for periods ending September 30, 2005 through December
        31, 2006 are:
  26
  
 Period
              Minimum
                  EBITDAJuly
                  1, 2005 - September 30, 2005
              $
                  780,000July
                  1, 2005 - December 31, 2005
              1,560,000July
                  1, 2005 - March 31, 2006
              2,560,000Last
                  four fiscal quarters ending June 30, 2006
              3,580,000Last
                  four fiscal quarters ending September 30, 2006
              3,960,000Last
                  four fiscal quarters ending December 31, 2006
              4,450,000
 
 As
        of
        September 30, 2005, we were in compliance with our credit facility covenants.
        As
        of September 30, 2005, $10,248,000 was outstanding under the credit facility,
        which was classified as long term, and $1,000,000 was outstanding under a
        letter
        of credit. We had $3,752,000 available under the credit facility at September30,
        2005.
 
 ***Future
        Capital Requirements***
 
 Our
        primary future cash needs will be to fund working capital and pay for
        anticipated capital expenditures. Through
        our restructuring efforts, we eliminated the need to continue funding software
        development at the same rate as in the first six months of 2005, which amounted
        to $822,000. Excluding software development costs, we had capital expenditures
        totaling $983,000 during the nine months ended September 30, 2005.
 
 We
        believe that our cash and cash equivalents of $4,102,000 at September 30,
        2005
        (which includes approximately $4,671,000 held at Green Hills Insurance Company)
        and availability under our credit facility will be sufficient to meet our
        anticipated cash needs for the next 12 months. We cannot, however, provide
        assurances that our actual cash requirements will not be greater than we
        currently believe. We will, from time to time, consider the acquisition of,
        or
        investment in, complementary businesses, products, services and technologies,
        which would most likely effect our liquidity requirements or cause us to
        issue
        additional equity or debt securities.
 
 If
        sources of liquidity are not available or if we cannot generate sufficient
        cash
        flow from operations during the next 12 months, we might be required to obtain
        additional sources of funds through additional operating improvements, capital
        market transactions, asset sales or financing from third parties, or a
        combination thereof. We cannot provide assurance that these additional sources
        of funds will be available or, if available, would have reasonable terms.
 
 ***Material
        Commitments***
 
 We
        have
        various contractual obligations which are recorded as liabilities in our
        condensed consolidated financial statements. Other items, such as operating
        lease contract obligations are not recognized as liabilities in our condensed
        consolidated financial statements but are required to be disclosed.
 
 The
        following table summarizes our significant contractual obligations at September
        30, 2005, and the effect such obligations are expected to have on our liquidity
        and cash in future periods:
  27
  
 Non-cancelable
                operating
                  leases
              
              Senior
                  credit facilityRemainder
                  of 2005
              
              $
              388,000
              
              $
              --2006
              
              
              1,362,000
              
              
              --2007
              
              
              1,205,000
              
              
              10,248,0002008
              
              
              1,128,000
              
              
              --2009
              
              
              1,094,000
              
              
              --Thereafter
              
              
              488,000
              
              
              --Total
                  contractual obligations
              
              $
              5,665,000
              
              $
              10,248,000
  ***Material
        Equity Transactions***
 
 As
        described in our Annual Report on Form 10-KSB for the fiscal year ended December
        31, 2004, I-trax had 3,859,200 shares of common stock in escrow for issuance
        to
        former CHD Meridian Healthcare stockholders. CHD Meridian Healthcare achieved
        the maximum EBITDA targets and consequently, on April 5, 2005, I-trax released
        3,859,200 shares held in escrow to former CHD Meridian Healthcare stockholders.
        On April 5, 2005, the market value of our stock was $1.45 per share.
 
 Effective
        June 2, 2005, our President and Chief Medical Officer purchased from us 120,000
        shares at a purchase price of $1.25 per share.
 
 **Item
        3.**  **Quantitative
        and Qualitative Disclosures About Market Risk**
  As
        of
        September 30, 2005, we did not own any derivative instruments, but we were
        exposed to market risks, primarily due to changes in U.S. interest rates.
        Our
        credit facility bears a variable interest rate, and accordingly, the fair
        market
        value of the debt is sensitive to changes in interest rates.
 
 **Item
        4.**  **Controls
        and Procedures**
 
 Our
        management, under the supervision and with the participation of the principal
        executive officer and principal financial officer, has evaluated the
        effectiveness of our controls and procedures related to our reporting and
        disclosure obligations as of September 30, 2005, which is the end of the
        period
        covered by this Quarterly Report on Form 10-Q. Based on that evaluation,
        the
        principal executive officer and principal financial officer have concluded
        that
        our disclosure controls and procedures are effective.
 
 There
        were no changes that occurred during the fiscal quarter ended September 30,
        2005
        that have materially affected, or are reasonably likely to materially affect,
        our internal controls over financial reporting.
 
  28
  
 **PART
        II.**  **OTHER
        INFORMATION**
 
 **Item
        1.**  **Legal
        Proceedings**
 
 Certain
        of our subsidiaries are involved in various claims and legal actions arising
        in
        the ordinary course of business. In the opinion of management, the ultimate
        disposition of these matters will not have a material adverse effect on our
        overall consolidated financial position, results of operations or
        liquidity.
 
 **Item
        2.**  **Unregistered
        Sales of Equity Securities and Use of Proceeds**
 
 **Issuance
        of Unregistered Securities**
 
 Effective
        as of September 12, 2005, we issued a warrant to acquire 55,000 shares of
        our
        common stock at an exercise price of $1.26 to a consultant as consideration
        for
        consulting services. We valued the warrant at $41,000. The consultant is
        an
        accredited investor. In undertaking this issuance, we relied on an exemption
        from registration under Section 4(2) of the Securities Act and Regulation
        D
        promulgated under the Securities Act.
  **Item
        3.**  **Defaults
        Upon Senior Securities**
 
 None.
 
 **Item
        4.**  **Submission
        of Matters to a Vote of Security Holders**
 
 We
        did
        not submit any matters to a vote of our security holders during the quarter
        ended September 30, 2005.
 
 **Item
        5.**  **Other
        Information**
 
 None.
 
 **Item
        6.**  **Exhibits**
  **Number**
                **Exhibit
                  Title**10.1
                Separation
                    Agreement effective as of August 19, 2005,
                    between and CHD Meridian Healthcare, LLC and E. Stuart Clark.15
                Awareness
                    letter of Goldstein, Golub Kessler LLP
                    regarding unaudited interim financial information.31.1
                Certification
                    Pursuant to 18 U.S.C. Section 1350, as
                    Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
                    2002.31.2
                Certification
                    Pursuant to 18 U.S.C. Section 1350, as
                    Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
                    2002.32.1
                Certification
                    Pursuant to 18 U.S.C. Section 1350, as
                    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                    2002.32.2
                Certification
                    Pursuant to 18 U.S.C. Section 1350, as
                    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                    2002.
 29
  **SIGNATURE**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned, thereunto
        duly authorized.
 
 
 I-TRAX,
                    INC.Date:
                    November 9, 2005
                By:/s/
                    R. Dixon ThayerR.
                    Dixon Thayer, Chief ExecutiveOfficerDate:
                    November 9, 2005
                By:/s/
                    David R. BockDavid
                    R. Bock, Executive VicePresident
                    and Chief Financial Officer