**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, 2006[
                 ]
            **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 ofincorporation
                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 a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer” and large accelerated filer in Rule 12b-2 of Securities Exchange Act of
      1934. (Check one):





Large
                accelerated filer [  ]
            Accelerated
                filer [  ]
            Non-Accelerated
                filer [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, 2006, there were 36,503,678 shares of the registrant’s $0.001 par
      value common stock outstanding.












**TABLE
      OF CONTENTS**








**Item**
            
            **Page****Part
                I - Financial Information**1.
            Financial
                Statements
            3Report
                of Independent Registered Public Accounting
                Firm
            3Condensed
                Consolidated Balance Sheet at September 30, 2006
                and December 31, 2005
            4Condensed
                Consolidated Statements of Operations for the three
                months and nine months ended September 30, 2006 and 2005
            5Condensed
                Consolidated Statements of Cash Flows for the nine
                months ended September 30, 2006 and 2005
            6Notes
                to Condensed Consolidated Financial Statements
            82.
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            183.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            264.
            Controls
                and Procedures
            26**Part
                II - Other Information**1.
            Legal
                Proceedings
            261A.
            Risk
                Factors
            262.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            263.
            Defaults
                Upon Senior Securities
            274.
            Submission
                of Matters to a Vote of Security
                Holders
            275.
            Other
                Information
            276.
            Exhibits
            27





2




**PARTI.**  **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, 2006, and the
      related condensed consolidated statements of operations for the three and nine
      month periods ended September 30, 2006 and 2005 and the condensed consolidated
      statements of cash flows for the nine-month periods ended September 30, 2006
      and
      2005. 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 standards
      of the Public Company Accounting Oversight Board, the objective of which is
      the
      expression of an opinion regarding the 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 standards of the Public Company
      Accounting Oversight Board (United States), the balance sheet as of December
      31,
      2005, 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 3, 2006, 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, 2005,
      is fairly stated, in all material respects, in relation to the consolidated
      balance sheet from which it has been derived.





As
      disclosed in Note 4, the Company changed its method of accounting for
      stock-based compensation, effective January 1, 2006.





**GOLDSTEIN
      GOLUB KESSLER LLP**


New
      York,
      New York





October
      19, 2006


3


**I-TRAX,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEET**


***(in
      thousands, except share data)***





**ASSETS****September
                30, 2006 (Unaudited)**
            
            December
                31, 2005Current
                assetsCash
                and cash equivalents
            
            **$**
            **8,909**
            
            $
            5,386Accounts
                receivable, net
            
            
            **16,956**
            
            
            15,490Other
                current assets
            
            
            **2,126**
            
            
            1,899Total
                current assets
            
            
            **27,991**
            
            
            22,775Property
                and equipment, net
            
            
            **3,595**
            
            
            4,042Goodwill
            
            
            **51,620**
            
            
            51,620Customer
                list, net
            
            
            **18,529**
            
            
            19,641Other
                intangible assets, net
            
            
            **503**
            
            
            864Other
                long-term assets
            
            
            **41**
            
            
            41Total
                assets
            
            **$**
            **102,279**
            
            $
            98,983**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilitiesAccounts
                payable
            
            **$**
            **7,584**
            
            $
            8,069Accrued
                payroll and benefits
            
            
            **3,909**
            
            
            3,961Net
                liabilities of discontinued operations
            
            
            **1,299**
            
            
            1,299Accrued
                loss contracts
            
            
            **--**
            
            
            419Current
                portion of accrued restructuring charges
            
            
            **129**
            
            
            312Other
                current liabilities
            
            
            **12,211**
            
            
            11,782Total
                current liabilities
            
            
            **25,132**
            
            
            25,842Senior
                secured credit facility
            
            
            **10,425**
            
            
            8,649Note
                payable
            
            
            **143**
            
            
            --Accrued
                restructuring charges, net of current portion
            
            
            **--**
            
            
            14Other
                long-term liabilities
            
            
            **2,308**
            
            
            2,315Total
                liabilities
            
            
            **38,008**
            
            
            36,820Stockholders’
                equityPreferred
                stock - $.001 par value, 2,000,000 shares authorized, 559,160 and
                853,039
                issued and outstanding, respectively; Liquidation preference: $13,979,000
                and $21,326,000 at September 30, 2006 and December 31, 2005,
                respectively
            
            
            **1**
            
            
            1Common
                stock - $.001 par value, 100,000,000 shares authorized 36,502,979
                and
                32,818,955 shares issued and outstanding, respectively
            
            
            **36**
            
            
            32Additional
                paid in capital
            
            
            **136,553**
            
            
            134,864Accumulated
                deficit
            
            
            **(72,319**
            **)**
            
            (72,734
            )Total
                stockholders’ equity
            
            
            **64,271**
            
            
            62,163Total
                liabilities and stockholders’ equity
            
            **$**
            **102,279**
            
            $
            98,983





The
      accompanying notes are an integral part of these financial
      statements.


4


**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****2006**
            
            2005
            
            **2006**
            
            2005Net
                revenue
            
            **$**
            **30,495**
            
            $
            28,824
            
            **$**
            **91,061**
            
            $
            84,528Costs
                and expensesOperating
                expenses
            
            
            **22,622**
            
            
            21,736
            
            
            **68,849**
            
            
            64,742Impairment
                of long-lived assets
            
            
            **--**
            
            
            --
            
            
            **--**
            
            
            12,470Provision
                for loss contracts
            
            
            **--**
            
            
            (1,453
            )
            
            **--**
            
            
            663Restructuring
                expenses
            
            
            **--**
            
            
            (56
            )
            
            **--**
            
            
            783General
                and administrative expenses
            
            
            **6,437**
            
            
            5,519
            
            
            **18,356**
            
            
            17,363Depreciation
                and amortization
            
            
            **826**
            
            
            772
            
            
            **2,513**
            
            
            2,740Total
                costs and expenses
            
            
            **29,885**
            
            
            26,518
            
            
            **89,718**
            
            
            98,761Operating
                income (loss)
            
            
            **610**
            
            
            2,306
            
            
            **1,343**
            
            
            (14,233
            )Other
                expensesInterest
                expense
            
            
            **113**
            
            
            95
            
            
            **342**
            
            
            400Amortization
                of financing costs
            
            
            **59**
            
            
            57
            
            
            **172**
            
            
            182Total
                other expenses
            
            
            **172**
            
            
            152
            
            
            **514**
            
            
            582Income
                (loss) before provision for income taxes
            
            
            **438**
            
            
            2,154
            
            
            **829**
            
            
            (14,815
            )Provision
                for (benefit from) income taxes
            
            
            **234**
            
            
            (253
            )
            
            **414**
            
            
            6Net
                income (loss)
            
            
            **204**
            
            
            2,407
            
            
            **415**
            
            
            (14,821
            )Less
                preferred stock dividend
            
            
            **(282**
            **)**
            
            (518
            )
            
            **(902**
            **)**
            
            (1,561
            )Net
                income (loss) applicable to common stockholders
            
            $
            **(78**
            **)**
            $
            1,889
            
            $
            **(487**
            )
            $
            (16,382
            )Income
                (loss) per common shareBasic
            
            $
            **(0.00**
            **)**
            $
            0.06
            
            $
            **(0.01**
            **)**
            $
            (0.56
            )Diluted
            
            $
            **(0.00**
            **)**
            $
            0.05
            
            $
            **(0.01**
            **)**
            $
            (0.56
            )Weighted
                average number of shares outstandingBasic
            
            
            **36,462,797**
            
            
            30,716,890
            
            
            **35,875,461**
            
            
            29,138,509Diluted
            
            
            **36,462,797**
            
            
            41,244,259
            
            
            **35,875,461**
            
            
            29,138,509





The
      accompanying notes are an integral part of these financial
      statements.


5


**I-TRAX,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**For
      the nine months ended September 30**


**(Unaudited)**


***(in
      thousands)***





**2006**
            
            2005Operating
                activities:Net
                income (loss)
            
            **$**
            **415**
            
            $
            (14,821
            )Adjustments
                to reconcile net income (loss) to net cash provided by operating
                activities:Impairment
            
            
            --
            
            
            12,470Accrued
                loss on contracts
            
            
            **(419**
            **)**
            
            610Employee
                stock purchase
            
            
            **--**
            
            
            34Options
                issued below market value
            
            
            **--**
            
            
            25Depreciation
                and amortization
            
            
            **2,513**
            
            
            2,740Loss
                on disposal of assets
            
            
            **390**
            
            
            --Modification
                of warrants
            
            
            **57**
            
            
            --Stock
                based compensation
            
            
            **961**
            
            
            --Issuance
                of stock below market value
            
            
            **130**
            
            
            --Issuance
                of warrants for services
            
            
            **72**
            
            
            11Amortization
                of financing costs
            
            
            **172**
            
            
            182Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            **(1,466**
            **)**
            
            (5,059
            )Deferred
                tax asset
            
            
            **--**
            
            
            278Other
                current assets
            
            
            **(227**
            **)**
            
            (518
            )Other
                long term assets
            
            
            **--**
            
            
            20Accounts
                payable
            
            
            **(485**
            **)**
            
            1,616Accrued
                payroll and benefits
            
            
            **(52**
            **)**
            
            52Accrued
                restructuring charges
            
            
            **(197**
            **)**
            
            432Other
                current liabilities
            
            
            **642**
            
            
            2,079Other
                long term liabilities
            
            
            **(7**
            **)**
            
            (17
            )Net
                cash provided by operating activities
            
            
            **2,499**
            
            
            134Investing
                activities:Acquisition
                of intangible assets
            
            
            **(4**
            **)**
            
            (113
            )Purchases
                of property and equipment
            
            
            **(1,152**
            **)**
            
            (1,805
            )Net
                cash used in investing activities
            
            
            **(1,156**
            **)**
            
            (1,918
            )Financing
                activities:Principal
                payments on capital leases
            
            
            **--**
            
            
            (9
            )Proceeds
                from stock option exercises
            
            
            **132**
            
            
            --Proceeds
                from stock issuance
            
            
            **107**
            
            
            150Proceeds
                from note payable
            
            
            **184**
            
            
            --Principal
                payments on notes payable
            
            
            **(41**
            **)**
            
            --Proceeds
                from exercise of warrants
            
            
            **22**
            
            
            --Proceeds
                from bank credit facility
            
            
            **1,776**
            
            
            1,940Net
                cash provided by financing activities
            
            
            **2,180**
            
            
            2,081Net
                increase in cash and cash equivalents
            
            
            **3,523**
            
            
            297Cash
                and cash equivalents at beginning of period
            
            
            **5,386**
            
            
            3,805Cash
                and cash equivalents at end of period
            
            **$**
            **8,909**
            
            $
            4,102





(Continued
      on following page.)


The
      accompanying notes are an integral part of these financial
      statements.


6


**I-TRAX,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**For
      the nine months ended September 30**


**(Unaudited)**


***(in
      thousands)***





(Continued
      from previous page.)





Supplemental
                disclosure of cash flow information:Cash
                paid during the period for:Interest
            
            **$**
            **504**
            
            $
            495Income
                taxes
            
            **$**
            **486**
            
            $
            307Schedule
                of non-cash investing and financing activities:Modification
                of warrants
            
            **$**
            **57**
            
            
            --Stock
                issuance below market value
            
            **$**
            **130**
            
            
            --Issuance
                of warrants for services
            
            **$**
            **72**
            
            $
            11Reduction
                in accrued purchase price
            
            
            **--**
            
            $
            1,346Preferred
                stock dividend
            
            **$**
            **902**
            
            $
            1,561Conversion
                of accrued dividends to common stock
            
            **$**
            **1,115**
            
            $
            93








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”** ).





The
      Company offers health-related services through on-site health centers that
      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 services
      through CHD Meridian Healthcare, LLC, a Delaware limited liability company
      ( **“CHD
      Meridian LLC”** ),
      and
      its subsidiary companies, Continuum I-trax Health Management Solutions, LLC,
      a
      Delaware limited liability company (f/k/a I-trax I-trax Health Management
      Solutions, LLC), 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
      other 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.





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-K for the year ended December 31, 2005, filed with the Securities and
      Exchange Commission on March 22, 2006 ( **“2005
      Annual Report”** ).
      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)**








The
      accompanying condensed consolidated financial statements include the
      accounts of the Company and its direct and indirect subsidiaries, which
      include CHD Meridian LLC, Green Hills Insurance Company (see Note 9), and the
      Physician Groups. All
      material intercompany accounts and transactions have been eliminated. 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.





Consolidation
      of the Physician Groups with CHD Meridian LLC, and consequently, the Company,
      is
      necessary to present fairly the financial position and results of operations
      of
      the Company. 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, 2006 or December 31, 2005.





In
      June 2006, the Financial Accounting Standards Board ( **“FASB”** )
      issued
      FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes -
      An Interpretation of FASB Statement No. 109” ( **“FIN
      48”** ),
      which
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. FIN 48 is effective for fiscal years beginning after
      December 15, 2006. The Company is currently evaluating the impact of this new
      standard.





The
      Company records pass-through pharmaceutical purchases 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 purchased by
      the Company for the three months ended September 30, 2006 and 2005 were
      $37,888,000 and $32,936,000, respectively, and for the nine months ended
      September 30, 2006 and 2005 were $113,113,000 and $93,700,000, respectively.





**3.** ****** **Earnings/Loss
      Per Share**





The
      Company presents both basic and diluted earnings/loss per share on the face
      of
      the condensed consolidated statement of operations. As provided by Statement
      of
      Financial Accounting Standards ( **“SFAS”** )
      No.
      128, “Earnings per Share,” basic earnings/loss per share is calculated as income
      available to common stockholders divided by the weighted average number of
      shares outstanding during the period. Diluted
      earnings/loss per share reflects the potential dilution that could occur from
      common shares issuable through stock options, warrants and convertible preferred
      stock. Diluted earnings/loss per share reflects the potential dilution that
      could occur from common shares issuable through stock options, warrants,
      restricted stock and convertible preferred stock. For the three and nine months
      ended September 30, 2006, the Company had 12,714,303 shares (a) issuable upon
      exercise or conversion of options, warrants, and convertible preferred stock and
      (b) subject to restricted stock grants, which were considered anti-dilutive
      and
      thus excluded from the fully-diluted share calculation. Additionally, as of
      September 30, 2005, the Company had 17,921,000 shares issuable upon exercise
      or
      conversion of options, warrants and convertible preferred stock, which were
      considered anti-dilutive and thus not considered in the fully-diluted share
      calculation.


9
 **I-TRAX,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**




**3.** ****** **Earnings/Loss
      Per Share (continued)**





For
      the
      quarter ended September 30, 2005, 7,185,000 shares issuable upon exercise or
      conversion of options, warrants, and convertible preferred stock were excluded
      from the diluted earnings per share computation because their effect was
      anti-dilutive.








**4.
      Share-** **Based** **Compensation**





The
      Company has two equity compensation plans for employees, non-employee directors
      and certain consultants. The plans authorize the granting of stock-based awards
      consistent with the purpose of the plans (see Note 13 to the Company’s
      consolidated financial statements included in the 2005 Annual Report). The
      number of shares authorized for issuance under the Company’s plans as of September 30, 2006
      totaled 4,800,000, of which 459,231 shares were available for issuance. Stock
      option awards granted under these plans are typically issued with an exercise
      price equal to the market price of the Company’s stock at the date of grant. The
      awards generally vest over a period of three years with respect to grants made
      to employees and consultants and over a period of two years with respect to
      grants made to directors. The awards typically expire ten years from the date
      of
      grant.





In
      the
      past, the Company had also granted stock options outside of the equity
      compensation plans. As of September 30, 2006, 163,000 non-plan options were
      outstanding. Non-plan options have terms similar to options granted pursuant
      to
      the equity compensation plans, including exercise price, vesting and exercise
      terms.





On
      August
      9, 2006, in conjunction with its long-term incentive plan the Company granted
      options to acquire 947,300 shares of common stock to certain employees with
      an
      exercise price of $3.09 per share, which approximated the market value at the
      date of grant, and vests over a three year period.





On
      August
      9, 2006, in conjunction with its long-term incentive plan the Company granted
      104,630 shares of restricted stock to certain employees. The restricted shares
      were valued at $3.09 per share, which approximated the market value at the
      date
      of grant, and vest over a three year period.





Prior
      to
      January 1, 2006, the Company accounted for stock based compensation under the
      recognition and measurement principles of Accounting Principles Board
      ( **“APB”** )
      Opinion
      No. 25, “Accounting for Stock Issued to Employees,” and related interpretations,
      the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based
      Compensation” and the disclosures required by SFAS No. 148, “Accounting for
      Stock-Based Compensation-Transition and Disclosure.” In accordance with APB
      Opinion No. 25, no stock-based compensation cost was reflected in the Company’s
      prior year net income for grants of stock options to employees because the
      Company granted stock options with an exercise price equal to the market value
      of the stock at the date of grant.





Had
      the
      Company used the fair value based accounting method for stock compensation
      expense prescribed by SFAS Nos. 123 and 148, the Company’s consolidated net loss
      and net loss per share would have been reduced to the pro-forma amounts
      illustrated as follows:


10
 **I-TRAX,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**




**4.
      Share-** **Based** **Compensation (continued)**





For
                the three
              months
                ended
              September
                30, 2005
            
            For
                the nine
              months
                ended
              September
                30, 2005Net
                income/(loss) as reported
            
            $
            2,407,000
            
            $
            (14,821,000
            )Deduct
                total stock-based employee compensation
              expense determined under fair value based
              methods
                for all awards
            
            
            (323,000
            )
            
            (976,000
            )Pro
                forma net income/(loss)
            
            $
            2,084,000
            
            $
            (15,797,000
            )Net
                income/(loss) per common share as reportedBasic
            
            $
            0.06
            
            $
            (0.56
            )Diluted
            
            $
            0.05
            
            $
            (0.56
            )Pro
                forma net income/(loss) per common shareBasic
            
            $
            0.05
            
            $
            (0.60
            )Diluted
            
            $
            0.04
            
            $
            (0.60
            )





Before
      adoption of SFAS No. 123R, pro forma disclosures reflected the fair value of
      each option grant estimated on the date of grant using the Black-Scholes
      option-pricing model with the following weighted-average assumptions:





Dividend
                yield
            0.00%Expected
                volatility
            94.44%Risk-free
                interest rate
            3.99%Expected
                life
            5
                years





Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
      SFAS No. 123 (revised 2004), “Share-Based Payment” ( **“SFAS
      123R”** ),
      using
      the modified prospective method. Under this method, compensation cost in 2006
      includes the portion vesting in the period for (1) all share-based payments
      granted prior to, but not vested as of, January 1, 2006 based on the grant
      date
      fair value estimated in accordance with the original provisions of SFAS No.
      123
      and (2) all share-based payments granted subsequent to January 1, 2006, based
      on
      the grant date fair value estimated in accordance with the provisions of SFAS
      123R.


11
 **I-TRAX,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**




**4.
      Share-** **Based** **Compensation (continued)**





Under
      SFAS No. 123R, however, the Company estimates expected volatility using
      historical volatility of the Company’s common stock as well as historical
      volatility of the common stock of comparable companies over the expected life
      of
      the options. The expected life of the options has been determined using the
      simplified method as prescribed in SEC Staff Accounting Bulletin No. 107
      ( **“SAB
      107”** ).
      Results of prior periods do not reflect any restated amounts and the Company
      had
      no cumulative effect adjustment upon adoption of SFAS No. 123R under the
      modified prospective method. The Company’s policy is to recognize compensation
      cost for awards with only service conditions and a graded vesting schedule
      on a
      straight-line basis over the requisite service period for the entire award.
      The
      risk-free interest rate is based on the U.S. Treasury yield curve in effect
      at
      the time of grant for periods within the contractual life of the option. The
      expected dividend yield is based on the Company’s current dividend yield as the
      best estimate of projected dividend yield for periods within the contractual
      life of the option. Additionally, the Company’s policy is to issue new shares of
      common stock to satisfy stock option exercises.





During
      the three months ended September 30, 2006, the fair value of each option grant
      was estimated on the date of grant using the Black-Scholes option-pricing model
      with the following weighted-average assumptions:





Dividend
                yield
            0.00%Expected
                volatility
            75.41%Risk-free
                interest rate
            4.45%Expected
                life
            6
                years





For
      the
      three and nine months ended September 30, 2006, the adoption of SFAS No. 123R
      decreased the Company’s reported operating income and net income by $ 405,000
      and $961,000, respectively. The expense is classified as general and
      administrative expense on the condensed consolidated statement of operations.





A
      summary
      of the Company’s stock option activity as of September 30,
      2006, and changes during the nine-month period ended September 30, 2006
      is presented in the following table:





Number
                of Shares
            
            Weighted
                Average
              Exercise
                Price
            
            Options
                Exercisable
            
            Weighted
                Average
              Exercise
                PriceDecember
                31, 2005
            
            
            3,673,065
            
            $
            1.72
            
            
            1,237,203
            
            $
            2.21Exercised
            
            
            (146,102
            )
            $
            0.90Granted
            
            
            1,087,300
            
            $
            3.03Forfeited
            
            
            (287,163
            )
            $
            2.23Expired
            
            
            (18,000
            )
            $
            7.67September
                30, 2006
            
            
            4,309,100
            
            $
            2.02
            
            
            2,078,268
            
            $
            1.80





12
 **I-TRAX,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**








**4.
      Share-** **Based** **Compensation (continued)**





The
      weighted average remaining contractual term of options outstanding and
      exercisable at September 30, 2006, was 8.34 years and 7.52 years, respectively.
      The aggregate intrinsic value of options outstanding and exercisable at
      September 30, 2006, was $3,928,000 and $2,358,000, respectively, based on a
      closing stock price of $2.81 per share on September 29, 2006. The total
      intrinsic value of options exercised for the three and nine months ended
      September 30, 2006, was $13,000 and $356,000, respectively. The weighted-average
      grant date fair value of options granted during the nine months ended September
      30, 2006, was $1.86 per share.





As
      of
      September 30, 2006, there was $3,126,000 of total unrecognized compensation
      cost
      related to unvested share-based compensation arrangements that is expected
      to be
      recognized over a weighted-average period of 2.55 years. The total fair value
      of
      shares vested during the three and nine month periods ended September 30, 2006
      was $290,000 and $1,117,000, respectively.





Information
      regarding options outstanding at September 30, 2006 was 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$0.00-$2.00
            
            2,802,627
            
            8.24
            
            $1.42
            
            1,665,156
            
            $1.40$2.01-$4.00
            
            1,435,163
            
            8.70
            
            $3.01
            
            344,528
            
            $2.92$4.01-$6.00
            
            44,610
            
            5.40
            
            $4.72
            
            41,884
            
            $4.74$6.01-$8.00
            
            16,100
            
            5.29
            
            $6.19
            
            16,100
            
            $6.19$8.01-$10.00
            
            10,600
            
            4.35
            
            $10.00
            
            10,600
            
            $10.004,309,100
            
            8.34
            
            $2.02
            
            2,078,268
            
            $1.80





A
      summary
      of the Company’s non-vested shares as of September 30, 2006, and changes during
      the nine month period ended September 30, 2006 is presented below:





Number
                of Shares
            
            Weighted
                Average Grant Date Fair ValueNon-vested
                at January 1, 2006
            
            
            2,435,862
            
            $
            1.00Granted
            
            
            1,087,300
            
            $
            1.86Vested
            
            
            (1,103,826
            )
            $
            1.01Forfeited
            
            
            (188,504
            )
            $
            0.98Non-vested
                at September 30, 2006
            
            
            2,230,832
            
            $
            1.41








13
 **I-TRAX,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**




**5. 
      Restructuring and Related Activities**





During
      2005, the Company completed an analysis of its structure and product development
      efforts. This analysis led to the conclusion that certain products and services
      offered by the Company 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.
      A
      summary of the activity and balances of the restructuring and provision for
      loss
      contract reserve accounts was as follows:





Balance
                at
              December
                31, 2005
            
            Cash
                Payments
            
            Balance
                at
              September
                30, 2006RestructuringOne-time
                termination benefits
            
            $
            185,000
            
            
            (181,000
            )
            $
            4,000Contract
                termination costs
            
            
            141,000
            
            
            (16,000
            )
            
            125,000Restructuring
                total
            
            $
            326,000
            
            
            (197,000
            )
            $
            129,000Provision
                for loss contracts
            
            $
            419,000
            
            
            (419,000
            )
            $
            --




**6. 
      Long Term Debt**





The
      Company’s senior credit facility with Bank of America, N.A., which is secured by
      substantially all of the Company’s tangible assets, provides financing up to
      $15,000,000 through a revolving credit line.





The
      Company amended the facility on May 4, 2006 (effective June 30, 2006). Under
      the
      amendment, the maturity of the facility was extended from April 1, 2007 to
      October 1, 2007. The amendment also reset the “Fixed Charge Coverage Ratio” and
      redefined “EBITDA” to exclude non-cash stock-based compensation expense. Minimum
      EBITDA targets for periods ending September 30, 2006
      through December 31, 2006 remain:





Period
            
            Minimum
                EBITDALast
                four fiscal quarters ending September 30, 2006
            
            $
            3,960,000Last
                four fiscal quarters ending December 31, 2006
            
            $
            4,450,000





At
      September 30, 2006, the Company had $10,425,000 of debt outstanding under the
      senior credit facility and was in compliance with all covenants included in
      the
      facility. In addition, based on the borrowing base calculation, the Company
      had
      available an additional $2,918,000 under the revolving line of
      credit.





14
 **I-TRAX,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**




**7. 
      Stockholders’ Equity**





***Common
      Stock***





During
      the three months ended September 30,
      2006, the Company issued 32,500 shares of stock at $1.51 to former employees
      in
      satisfaction of a binding commitment. This issuance resulted in a charge of
      $59,000 which has been included in the statement of operations for the quarter
      ended September 30, 2006.





***Warrants***





The
      following table summarizes the Company’s activity as it relates to
      warrants:





Shares
              Underlying
              WarrantsBalance
                outstanding at December 31, 2005
            
            
            3,069,514Granted
            
            
            100,000Exercised
            
            
            (197,911
            )Expired
            
            
            (158,000
            )Balance
                outstanding at September 30, 2006
            
            
            2,813,603





At September 30,
      2006, all outstanding warrants were exercisable at a weighted average exercise
      price of $2.81 per share.





***Series
      A Convertible Preferred Stock***





During
      the three months ended September 30,
      2006, 800 shares of Series A Convertible Preferred Stock, and $3,726 in
      dividends accrued on such stock, were converted into an aggregate of 9,160
      shares of common stock.





As
      of September 30,
      2006, 559,160 shares of Series A Convertible Preferred Stock were issued and
      outstanding. 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 per share, the original
      sale price. The Company accrued dividends of $282,000 for the three months
      ended September 30,
      2006, which are included in other current liabilities.





As
      of September 30,
      2006, the Company had accrued aggregate dividends of $2,834,000, which at the
      Company’s option are payable in cash (subject to the consent of the Company’s
      senior secured creditor) or common stock valued at market price. If such
      dividends were paid in common stock at $2.81, the closing price of the common
      stock on September 29,
      2006, the Company would be required to issue approximately 1,009,000 additional
      shares of common stock.





15
 **I-TRAX,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**




**8.
      Commitments and Contingencies**





***Litigation***





The
      Company is involved in ordinary routine litigation and disputes on a variety
      of
      matters incidental to the Company’s business. After reasonable diligence, the
      Company’s management believes that the estimated losses of the Company from such
      legal disputes have been adequately provided for in other current and other
      long-term liabilities to the extent probable and reasonably estimable and
      management expects these disputes will be resolved without a material adverse
      effect on the Company’s consolidated financial position or results of
      operations. Nonetheless, it is possible that the Company’s future results of
      operations for any particular quarterly or annual period may be materially
      affected by changes in the status of such legal disputes.





***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.
      Government activity has stayed high with respect to investigations and
      allegations concerning possible violations of fraud and abuse laws and
      regulations by healthcare providers. Violations of these laws and regulations
      could result in, among other things, expulsion from government healthcare
      programs, fines, penalties, and restitution for billed services.





The
      Company’s management believes that the Company is in compliance with laws and
      regulations applicable to the Company’s business. Further, compliance with such
      laws and regulations is subject to future government review and interpretation
      as well as regulatory actions unknown or unasserted at this time.





***Significant
      Customers***





As
      of September 30, 2006
      and September 30, 2005, one customer represented 27% and 16%, respectively,
      of
      the Company’s accounts receivable as reflected on the consolidated balance
      sheet.





For
      the
      three and nine months ended September 30,
      2006, one customer accounted for 12% and 11%, respectively, of the Company’s
      revenue. For the three and nine months ended September 30,
      2005, one customer accounted for 12% of the Company’s revenue.


16
 **I-TRAX,
          INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**








**9.
      Professional Liability and Related Reserves**





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. 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-basis
      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.





At September 30,
      2006, the Company’s estimated loss reserve for cost and settlement of reported
      claims predating GHIC was $779,000, which is included in other current
      liabilities on the condensed consolidated balance sheet. The Company also
      maintains a reserve for incurred but not reported losses and loss adjustment
      expense predating or otherwise not assumed by GHIC. At September 30,
      2006, this reserve was $2,000,000 ,
      representing the Company’s self-insured retention amounts with respect to such
      claims, which is included in other long-term liabilities on the condensed
      consolidated balance sheet.





During
      the three months ended September 30,
      2006, GHIC increased its reserves for reported claims and incurred but not
      reported losses and loss adjustment expense by $467,000 to $2,932,000, 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-K for
      the
      year ended December 31, 2005 ( **“2005
      Annual Report”** ).





***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 2005 Annual
      Report 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;





·
            exposure
                to professional liability claims and a failure to manage effectively
                our
                professional liability risks;






18





·
            economic
                uncertainty; and





·
            each
                of the factors discussed under “Item 1A. - Risk Factors” in our 2005
                Annual Report.





***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, 2006 and the results of the operations and cash flows for the three and
      nine
      months ended September 30, 2006. 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 healthcare on an
      outsourced basis.





We
      believe our services improve the health of our customers’ employees and mitigate
      the upward cost trend experienced by employers, employees, and government
      agencies with respect to health and wellness costs. By proactively managing
      the
      healthcare needs of our clients’ employees and their families, we believe our
      programs improve health, increase productivity, reduce absenteeism, reduce
      the
      need for future critical care, and manage overall costs. We
      also
      believe the breadth of our services allows our clients the flexibility to meet
      each of the following needs in a cost-effective and professional manner:
      pharmacy; primary care; occupational health; corporate health; wellness;
      lifestyle management; and disease management.





We
      deliver our services at or near the client’s work site by opening, staffing and
      managing a health center or pharmacy dedicated to the client and its eligible
      population. We also provide support services to enhance our on-site health
      centers by using the Internet and our call center services. In all, we provide
      care “face to face,” telephonically, and via the Internet. We believe that our
      integrated care delivery model enhances the trusted relationship established
      by
      our clinical providers on-site with their patients, using the support services
      of our call center and our Internet programs.




As
      of
      September 30, 2006, we were providing services to clients that include large
      financial institutions, consumer products manufacturers, health plans,
      integrated delivery networks, automotive and automotive parts manufacturers,
      and
      diversified industrial companies. For 97 of these clients, we






19




operated
      211 on-site facilities in 34 states, providing a variety of health management
      programs. Our client retention rate is high due to strong relationships with
      our
      clients 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.





***Critical
      Accounting Policies***





A
      summary
      of significant accounting policies is disclosed in Note 2 to the consolidated
      financial statements included in our 2005 Annual Report. 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 2005 Annual Report.





Effective
      January 1, 2006, we adopted Statement of Financial Accounting Standards
      ( **“SFAS”** )
      No. 123
      (revised 2004), “Share-Based Payment” ( **“SFAS
      123R”** ),
      using
      the modified prospective method. Under this method, compensation cost during
      2006 included the portion vesting in the period for (1) all share-based payments
      granted prior to, but not vested as, of January 1, 2006, based on the grant
      date
      fair value estimated in accordance with the original provisions of SFAS No.
      123,
“Accounting for Stock-Based Compensation” and (2) all share-based payments
      granted subsequent to January 1, 2006, based on the grant date fair value
      estimated in accordance with the revised provisions of SFAS 123R. Prior to
      adopting SFAS 123R, we accounted for stock based compensation under the
      recognition and measurement principles of Accounting Principles Board
      ( **“APB”** )
      Opinion
      No. 25, “Accounting for Stock Issued to Employees” and related interpretations,
      the disclosure-only provisions of SFAS No. 123, and the disclosures required
      by
      SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and
      Disclosure.” In accordance with APB Opinion No. 25, no stock-based compensation
      cost was reflected in prior year net loss for grants of stock options to
      employees because we granted stock options with an exercise price equal to
      the
      market value of the stock on the date of grant.





As
      of
      September 30, 2006, there was $3,126,000 of total unrecognized compensation
      cost
      related to unvested share-based compensation arrangements that is expected
      to be
      recognized over a weighted-average period of 2.55 years.





Other
      than the adoption of SFAS 123R, there have been no changes in the nature of
      our
      critical accounting policies or the application of those policies since December
      31, 2005.





***Key
      Financial Trends and Analytical Points***





***Milestones.*** During
      the quarter ended September 30, 2006, we:





·
            Implemented
                ten new sites bringing total sites under management to 211. Site
                openings
                were weighted towards the end of the quarter, which reduced the impact
                of
                such openings on third quarter net revenue;





·
            Reported
                net revenue of $30,495,000, an increase of 5.8%, from $28,824,000
                for the
                quarter ended September 30, 2005;


·
            Reported
                a net income notwithstanding the impact of $405,000 of share based
                compensation, $390,000 of loss on the disposal of certain fixed assets,
                and approximately $198,000 spent oncompliance
                efforts under Section 404 of the Sarbanes-Oxley Act of 2002; and





20




·
            Showed
                continued improvement in operating expenses as a percentage of
                revenue.





***Earnings
      before interest, taxes, depreciation and amortization.*** In
      managing our business, we make ** use
      of
      EBITDA, which is a non-GAAP financial measure. We believe that EBITDA is a
      reliable and useful performance indicator for measuring the growth of our core
      operations. It also allows us to monitor the trend in our core operations.
      O ur
      results of operations for the three and nine months ended September 30, 2006
      and
      2005 and reconciliation of net income to EBITDA for those periods follows
      (dollars in thousands):





Three
                Months
              Ended
              September
                30, 2006
            
            Three
                Months
              Ended
              September
                30,2005
            
            Nine
                Months
              Ended
              September
                30,2006
            
            Nine
                Months
              Ended
              September
                30,2005Revenue
            
            $
            30,495
            
            $
            28,824
            
            $
            91,061
            
            $
            84,528Total
                costs and expenses
            
            
            29,885
            
            
            26,518
            
            
            89,718
            
            
            98,761Operating
                income (loss)
            
            
            610
            
            
            2,306
            
            
            1,343
            
            
            (14,233
            )Other
                expenses
            
            
            172
            
            
            152
            
            
            514
            
            
            582Income
                before taxes
            
            
            438
            
            
            2,154
            
            
            829
            
            
            (14,815
            )Provision
                for taxes
            
            
            234
            
            
            (253
            )
            
            414
            
            
            6Net
                income (loss)
            
            $
            204
            
            $
            2,407
            
            $
            415
            
            $
            (14,821
            )Reconciliation
                of net income to EBITDANet
                income (loss)
            
            $
            204
            
            $
            2,407
            
            $
            415
            
            $
            (14,821
            )Add:
                Depreciation and amortization
            
            
            885
            
            
            829
            
            
            2,685
            
            
            2,922Add:
                Provision for income taxes
            
            
            234
            
            
            (253
            )
            
            414
            
            
            6Add:
                Interest
            
            
            113
            
            
            95
            
            
            342
            
            
            400EBITDA
            
            $
            1,436
            
            $
            3,078
            
            $
            3,856
            
            $
            (11,493
            )





***Working
      Capital.*** We rely
      on our senior credit facility to meet our working capital needs. At September
      30, 2006, we had $2,918,000 available under our credit facility and a working
      capital surplus of $2,859,000. Our working capital deficit at December 31,
      2005
      was $3,067,000. During the nine months ended September 30, 2006, we increased
      the outstanding balance under our credit facility by $1,776,000, from $8,649,000
      at December 31, 2005 to $10,425,000 at September 30, 2006.





***Results
      of Operations***





***Three
      Months ended September 30, 2006 Compared to Three Months ended September 30,
      2005***





Revenue
      for the three months ended September 30, 2006 was $30,495,000,
      an increase of $ 1,671,000,
      or 5.8%, from $28,824,000 for the three months ended September 30, 2005. Our
      sites under management have increased from 185 as of September 30, 2005 to
      211
      as of September 30, 2006 as a result of our continuing sales and marketing
      efforts.





Operating
      expenses, which represent our direct costs of servicing our clients, amounted
      to $22,622,000
      for the three months ended September 30, 2006, an increase of $ 886,000,
      or 4.1%, from $21,736,000 for the three months ended September 30, 2005. This
      increase is primarily attributable to expenses associated with the revenue
      growth described above. Operating expenses as a percentage of revenue declined
      to 74.2% for the third quarter of 2006 from 75.4% for the third quarter of
      2005.






21





General
      and administrative expenses, which represent our corporate costs, increased
      by
      $ 918,000 to
      $ 6,437,000 for
      the
      three months ended September 30, 2006 from $ 5,519,000 for
      the
      three months ended September 30, 2005. Our general and administrative expenses
      as a percentage of revenue increased from 19.1% to 21.1% for the three months
      ended September 30, 2005 and 2006, respectively. Contributing factors to the
      increase were the implementation of SFAS 123R, which resulted in additional
      general and administrative expenses of $405,000 or 1.3% of revenue for the
      three
      months ended September 30, 2006, expenses associated with Sarbanes-Oxley Act
      compliance of $198,000, and $390,000 of loss on the disposition of certain
      fixed
      assets.





During
      the second quarter of 2005, we completed an analysis of our business structure
      and product development efforts and determined that certain products and
      services we offered were no longer essential to our core business. Consequently,
      we impaired goodwill and long-lived assets primarily related to goodwill and
      capitalized software development costs; recorded a provision for loss contracts
      related to customer contracts that we determined would continue to be
      unprofitable; and recorded restructuring charges. During the three months ending
      September 30, 2005, we reversed $1,453,000 of the provision for loss contracts
      and $56,000 of restructuring charges when it was determined that costs of
      terminating certain contracts and certain incidental restructuring charges
      would
      be less than originally anticipated. There were no charges of this nature
      recorded in the third quarter of 2006.





Depreciation
      and amortization expenses were $ 826,000 for the
      three months ended September 30, 2006, an increase of $ 54,000 as
      compared to $ 772,000 for the
      three months ended September 30, 2005. Amortization of financing costs for the three months ended September 30, 2006
      was $59,000, representing an increase of $2,000 from $57,000 for the three
      months ended September 30, 2005.





Interest
      expense for the three months ended September 30, 2006 was $113,000, representing
      an increase of $18,000, from $95,000 for the three months ended September 30,
      2005. Interest expense primarily includes interest payable under our senior
      secured credit facility. Our weighted average balance outstanding under the
      facility during the three months ended September 30, 2006, was $6,935,000 as
      compared to $8,580,000 for the comparable period in 2005.





The
      provision for income taxes was $234,000 for the three months ended September
      30,
      2006, a $487,000 increase from an income tax benefit of $253,000 for the three
      months ended September 30, 2005.  The increase is primarily attributable to
      approximately $150,000 of expense in the current year related to additional
      tax
      assessments and the reduction of tax expense in the prior period associated
      with
      Green Hills Insurance Company.





For
      the
      three months ended September 30, 2006, our net income was $204,000, as compared
      to $2,407,000 for the three months ended September 30, 2005. Excluding
      the impact of the reversal of $1,509,000 of restructuring-related charges in
      the
      third quarter of 2005, our net income was $898,000.





***Nine
      Months ended September 30, 2006 Compared to Nine Months ended September 30,
      2005***





Revenue
      for the nine months ended September 30, 2006 was $91,061,000, an increase of
      $6,533,000, or 7.7%, from $84,528,000 for the nine months ended September 30,
      2005. We have added 26 net new sites under management subsequent to September
      30, 2005 as a result of our continuing sales and marketing efforts.





Operating
      expenses, which represent our direct costs of servicing our clients, amounted
      to
      $68,849,000 for the nine months ended September 30, 2006, an increase of
      $4,107,000, or 6.3%, from $64,742,000 for the nine months ended September 30,
      2005. This increase is primarily attributable to expenses associated with the
      revenue growth referred to in the preceding paragraph. Operating expenses as
      a
      percentage of revenue improved to 75.6% for the first nine months of 2006 from
      76.6% for the year-ago period.






22





General
      and administrative expenses, which represent our corporate costs, increased
      by
      $ 993,000 to
      $ 18,356,000 for the
      nine months ended September 30, 2006 from $ 17,363,000 for the
      nine months ended September 30, 2005. Our general and administrative expenses
      as
      a percentage of revenue decreased from 20.5% to 20.2% for the nine months ended
      September 30, 2005 and 2006, respectively. The increase in general and
      administrative expenses was impacted by the implementation of SFAS 123R, which
      resulted in additional expense of $961,000, or 1.0% of revenue, in
      2006.





During
      the second quarter of 2005, we completed an analysis of our business structure
      and product development efforts and determined that certain products and
      services we offered were no longer essential to our core business. Consequently,
      we impaired goodwill and long-lived assets by $12,470,000, primarily related
      to
      goodwill and capitalized software development costs. We also recorded $2,116,000
      as a provision for loss contracts related to customer contracts that we
      determined would continue to be unprofitable. In the third quarter of 2005
      we
      reversed $1,453,000 of this provision. In addition, we also recorded $839,000
      of
      restructuring charges and subsequently reversed $56,000 during the third quarter
      of 2005. There were no charges of this nature recorded in 2006.





Depreciation
      and amortization expenses were $ 2,513,000 for the
      nine months ended September 30, 2006, a decrease of $ 227,000 as
      compared to $ 2,740,000 for the
      nine months ended September 30, 2005. During
      the first six months of 2005, we amortized software development costs, which
      were subsequently impaired in our restructuring activities during the second
      quarter of 2005. The remaining difference is due to fully depreciated or
      amortized assets as well as new capital expenditures. Amortization of financing
      costs for the nine months ended September 30, 2006 was $172,000, representing
      a
      decrease of $10,000 from $182,000 for the nine months ended September 30, 2005.





Interest
      expense for the nine months ended September 30, 2006 was $342,000, representing
      a decrease of $58,000, from $400,000 for the nine months ended September 30,
      2005. Interest expense primarily includes interest payable under our senior
      secured credit facility. Our weighted average balance outstanding during the
      nine months ended September 30, 2006, was $7,377,000 as compared to $8,495,000
      for the comparable period in 2005.





The
      provision for income taxes was $414,000 for the nine months ended September
      30,
      2006, a $408,000 decrease from $6,000 for the nine months ended September 30,
      2005. The increase is primarily attributable to approximately $150,000 of
      expense in the current year related to additional tax assessments and the
      reduction of tax expense in the prior period associated with Green Hills
      Insurance Company.





For
      the
      nine months ended September 30, 2006, our net income was $415,000, as compared
      to a net loss of $14,821,000 for the nine months ended September 30, 2005.
      Excluding the impact of $13,916,000 of restructuring-related charges during
      2005, our net loss was $905,000. Our improvement is primarily attributable
      to
      additional site locations.





***Liquidity
      and Capital Resources***





***Operating
      Activities***





Cash
      provided by operating activities during the nine months ended September 30,
      2006
      was $2,499,000 as a result of the following factors:





(1)  Our
      net
      income was $415,000, which included non-cash charges of $961,000 for stock-based
      compensation, $2,685,000 of non-cash depreciation and amortization, $390,000
      of
      loss on disposal of assets, and $259,000 for other non-cash charges.






23





(2)  Our
      accounts receivable and other current assets balances increased by $1,693,000
      reflecting continued growth in pharmaceutical purchases, revenue, and prepaid
      insurance related to Green Hills Insurance Company, our Risk Retention Group.





(3)  Our
      liabilities (which include accounts payable, accrued payroll and benefits,
      accrued restructuring charges, accrued loss on contracts and other current
      and
      long term liabilities) decreased by $518,000.





***Investing
      Activities***





Net
      cash
      used in investing activities was $ 1,156,000 for the
      nine months ended September 30, 2006, which consists primarily of capital
      expenditures on technology upgrades.





***Financing
      Activities***





Net
      cash
      provided by financing activities was $ 2,180,000 for
      the
      nine months ended September 30, 2006, driven primarily by additional draws
      of
      $ 1,960,000 under
      our senior secured credit facility and cash received upon stock option exercises
      and stock issuances of $ 239,000 .
      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 new facilities during the
      quarter) and capital expenditures.





Our
      senior secured credit facility provides financing up to the lesser of
      $15,000,000 or the credit facility base calculation, in each case less
      outstanding letters of credit. We amended the facility effective June 30, 2006.
      The amendment (1) extended the maturity date of the facility from April 1,
      2007
      to October 1, 2007, (2) re-set the “Fixed Charge Coverage Ratio” covenant, and
      (3) redefined “EBITDA” to exclude non-cash stock-based compensation expense.
      Minimum EBITDA requirements for periods ending September 30, 2006 through
      December 31, 2006 are as follows:





Period
            
            Minimum
                EBITDALast
                four fiscal quarters ending September 30, 2006
            
            $
            3,960,000Last
                four fiscal quarters ending December 31, 2006
            
            $
            4,450,000





As
      of
      September 30, 2006, we were in compliance with our credit facility covenants.
      As
      of September 30, 2006, $10,425 ,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 $ 2,918,000 available
      under the credit facility at September 30, 2006.





Our
      ratio
      of current assets to current liabilities (excluding dividends payable on Series
      A Convertible Preferred Stock in shares of common stock) was 1.26 at September
      30, 2006, as compared to 1.00 at December 31, 2005. We believe that this ratio
      demonstrates adequate financial liquidity and we believe that availability
      under
      our credit facility and our cash and cash equivalents of $ 8,909,000 at
      September 30, 2006 (which includes approximately $ 6,789,000 held at
      Green Hills) will be sufficient to meet our anticipated cash needs for the
      next
      12 months.





***Future
      Capital Requirements***





Our
      primary future cash needs will be to fund working capital and pay for
      anticipated capital expenditures. We had
      capital expenditures totaling $1,156,000 during the nine months ended September
      30, 2006 and anticipate this spending trend to continue throughout the remainder
      of 2006.






24





We
      cannot, however, provide assurances that our actual cash requirements will
      not
      be greater than we currently anticipate. We will, from time to time, consider
      the acquisition of, or investment in, complementary businesses, products,
      services and technologies which would most likely affect 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 (including the sale of common stock), 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, 2006, and the effect such obligations are expected to have on our liquidity
      and cash in future periods:





Payments
                  due by periodContractual
                  obligations:
              
              Total
              
              Less
                  than
                1
                  year
              
              1-3
                  years
              
              3-5
                  years
              
              More
                  than
                5
                  yearsOperating
                  leases
              
              
              $4,768,000
              
              
              $579,000
              
              
              $2,648,000
              
              
              $1,540,000
              
              
              $1,000Less:
                  Amounts reimbursed by clients
              
              
              486,000
              
              
              206,000
              
              
              252,000
              
              
              28,000
              
              
              --$4,282,000
              
              
              $373,000
              
              
              $2,396,000
              
              
              $1,512,000
              
              
              $1,000




From
      time
      to time, we enter into operating leases for offices and equipment leases on
      behalf of our clients in order to facilitate the delivery of our services at
      client locations. In such cases, our clients agree to reimburse us for the
      expenses incurred related to these operating leases.


25




**Item
      3.****Quantitative
      and Qualitative Disclosures About Market Risk**




As
      of
      September 30, 2006, 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, 2006, 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,
      2006
      that have materially affected, or are reasonably likely to materially affect,
      our internal controls over financial reporting.








**PART
      II.**  **OTHER
      INFORMATION**





**Item
      1.**  **Legal
      Proceedings**





Certain
      of our subsidiaries are involved in various ordinary and routine claims and
      legal actions incidental to our 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
      1A.**  **Risk
      Factors**





There
      were no material changes during the quarter ended September 30, 2006 from the
      risk factors as previously disclosed in our 2005 Annual Report.








**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





**Issuance
      of Unregistered Securities**





On
      September 12, 2006, a consultant exercised warrants to purchase an aggregate
      of
      55,000 shares of our common stock at an exercise price of $1.26 per share.
      In
      lieu of paying the exercise price in cash, the consultant used the warrants’
cashless exercise feature, such that the consultant received 32,278 shares
      of
      our common stock and surrendered to us for cancellation 22,722 shares of our
      common stock. In undertaking this issuance, we relied on an exemption from
      registration under Section 4(2) of the Securities Act of 1933, as amended.






26





On
      July
      19, 2006, as part of a conversion of the Series A Convertible Preferred Stock,
      we issued 1,160 shares of our common stock to one investor in payment of accrued
      dividends on shares of our Series A Convertible Preferred Stock. The shares
      issued upon conversion, including the shares representing payment of the
      dividends, were exempt from registration under Section 3(a)(9) of the Securities
      Act of 1933, as amended.








**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, 2006.








**Item
      5.**  **Other
      Information**





None.





**Item
      6.**  **Exhibits**





**Number**
            **Exhibit
                Title**15
            Awareness
                letter of Goldstein Golub Kessler LLP regarding
                unaudited interim financial information.31.1
            Chief
                Executive Officer Certification Pursuant to Rule
                13a-14(a) and 15d-14(a) of the Securities Exchange Act of
                1934.31.2
            Chief
                Financial Officer Certification Pursuant to Rule
                13a-14(a) and 15d-14(a) of the Securities Exchange Act of
                1934.32.1
            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.











27


**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 14, 2006
            By:/s/
                R. Dixon ThayerR.
                Dixon Thayer, Chief ExecutiveOfficerDate:
                November 14, 2006
            By:/s/
                David R. BockDavid
                R. Bock, Executive VicePresident
                and Chief Financial Officer




28