----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

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**FORM      10-QSB**

**x**
**QUARTERLY      REPORT UNDER SECTION 13 OR 15(d) OF**

**THE      SECURITIES EXCHANGE ACT OF 1934**

** ̈**
**TRANSITION      REPORT UNDER SECTION 13 OR 15(d) OF**

**THE      SECURITIES EXCHANGE ACT OF 1934**

**Commission      File Number:**

**OSTEOLOGIX,      INC.**

| **Delaware**(State                or Other Jurisdiction of Incorporation or Organization)                                                                                                                                                                                                                                                                                         | **32-0104570**(I.R.S.                Employer Identification No.) |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|
|  **425                Market Street****Suite                2230****San                Francisco, CA 94105**(Address                of Principal Executive Offices) **(415)                955-2700**(Issuer’s                Telephone Number) (Former                Name and Address and Former Fiscal Year, if Changed Since Last                Report) |

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**TABLE      OF CONTENTS**

|                                                |                                                                             | **Page** |
|-----------------------------------------------------|----------------------------------------------------------------------------------|----------|
| **PART                  I - FINANCIAL INFORMATION** |                                                                             | 3        |
| ITEM                  1.                            | FINANCIAL                  STATEMENTS                                            |     | 3 |
| ITEM                  2.                            | MANAGEMENT’S                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION |     | 10  |
| ITEM                  3.                            | CONTROLS                  AND PROCEDURES                                         |     | 14  |
|                                                |                                                                             |     |
| **PART                  II - OTHER INFORMATION**    |                                                                             | 14  |
| ITEM                  1.                            | LEGAL                  PROCEEDINGS.                                              |     | 14  |
| ITEM                  2.                            | UNREGISTERED                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.    |     | 14  |
| ITEM                  3.                            | DEFAULTS                  UPON SENIOR SECURITIES.                                |     | 14  |
| ITEM                  4.                            | SUBMISSION                  OF MATTERS TO A VOTE OF SECURITY HOLDERS.            |     | 14  |
| ITEM                  5.                            | OTHER                  INFORMATION.                                              |     | 14  |
| ITEM                  6.                            | EXHIBITS.                                                                        |     | 15  |

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**PART      I - FINANCIAL INFORMATION**

**ITEM      1.**       **FINANCIAL      STATEMENTS**

| **Osteologix,                Inc.**                                        |
|----------------------------------------------------------------------------|
| **(a                development stage company)**                           |
| **Condensed                Consolidated Balance Sheets**                   |
| **(in                thousands, except per share                amounts)** |

|                                                                                                                                                                                                                          |   |                         |    |                            |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|---------|---------------------------------|--------|
|                                                                                                                                                                                                                          |   | **March                31,** |    | **December                31,** |   |
|                                                                                                                                                                                                                          |   | **2007**                     |    | **2006**                        |   |
|                                                                                                                                                                                                                          |   | **(Unaudited)**              |    |                            |   |
| Assets                                                                                                                                                                                                                        |   |                         |         |                            |   |  |   |
| Current                assets:                                                                                                                                                                                                |   |                         |         |                            |   |  |   |
| Cash                and cash equivalents                                                                                                                                                                                      |   | $                            | 898     |                            | $      | 481 |   |
| Short-term                investments                                                                                                                                                                                         |   |                         | 4,114   |                            |   | 5,719 |   |
| Prepaid                expenses and other assets                                                                                                                                                                              |   |                         | 197     |                            |   | 333 |   |
| Total                current assets                                                                                                                                                                                           |   |                         | 5,209   |                            |   | 6,533 |   |
|                                                                                                                                                                                                                          |   |                         |         |                            |   |  |   |
| Equipment,                net                                                                                                                                                                                                 |   |                         | 8       |                            |   | 9 |   |
|                                                                                                                                                                                                                          |   |                         |         |                            |   |  |   |
| Total                assets                                                                                                                                                                                                   |   | $                            | 5,217   |                            | $      | 6,542 |   |
|                                                                                                                                                                                                                          |   |                         |         |                            |   |  |   |
| Liabilities                and Stockholders' Equity                                                                                                                                                                           |   |                         |         |                            |   |  |   |
| Current                liabilities:                                                                                                                                                                                           |   |                         |         |                            |   |  |   |
| Accounts                payable                                                                                                                                                                                               |   | $                            | 1,073   |                            | $      | 600 |   |
| Accrued                liabilities                                                                                                                                                                                            |   |                         | 219     |                            |   | 145 |   |
| Total                current liabilities                                                                                                                                                                                      |   |                         | 1,292   |                            |   | 745 |   |
|  Commitments                and Contingencies                                                                                                                                                                            |   |                         |         |                            |   |  |   |
| Stockholders'                Equity                                                                                                                                                                                           |   |                         |         |                            |   |  |   |
| Preferred                stock, $0.0001 par value, 1,000 shares authorized, none issued or                outstanding                                                                                                         |   |                         | -       |                            |   | - |   |
| Common                stock, $0.0001 par value, 100,000 shares authorized, 21,051 and 21,021                shares issued and outstanding at March 31, 2007 and December 31,                2006,                respectively |   |                         | 2       |                            |   | 2 |   |
| Additional                paid-in-capital                                                                                                                                                                                     |   |                         | 15,730  |                            |   | 15,622 |   |
| Accumulated                other comprehensive loss                                                                                                                                                                           |   |                         | (67     | )                               |   | (56 | ) |
| Deficit                accumulated during development stage                                                                                                                                                                   |   |                         | (11,740 | )                               |   | (9,771 | ) |
| Total                stockholders' equity                                                                                                                                                                                     |   |                         | 3,925   |                            |   | 5,797 |   |
|                                                                                                                                                                                                                          |   |                         |         |                            |   |  |   |
| Total                liabilities and stockholders' equity                                                                                                                                                                     |   | $                            | 5,217   |                            | $      | 6,542 |   |

*See      accompanying notes to the condensed consolidated financial      statements.*

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| **Osteologix,                Inc.**                                |
|--------------------------------------------------------------------|
| **(a                development stage company)**                   |
| **Condensed                Consolidated Statements of Operations** |
| **(in                thousands, except per share amounts)**        |
| **(Unaudited)**                                                    |

|                                                                           |   | **For                the Three Months Ended****March                31,** |    | **For                the Period From June 16, 2003 (Inception) to****March                31,** |   |
|--------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|---------|-------------------------------------------------------------------------------------------------|--------|
|                                                                           |   | **2007**                                                                  |    | **2006**                                                                                        |   | ** 2007** |   |
| Revenues                                                                       |   | $                                                                         | — |                                                                                            | $      | — |   | $ | 750 |   |
|                                                                           |   |                                                                      |         |                                                                                            |   |  |   |   |  |   |
| Operating                expenses:                                             |   |                                                                      |         |                                                                                            |   |  |   |   |  |   |
| Research                and development                                        |   |                                                                      | 1,194   |                                                                                            |   | 217 |   |   | 6,278 |   |
| General                and administrative                                      |   |                                                                      | 849     |                                                                                            |   | 404 |   |   | 6,546 |   |
| Total                operating expenses                                        |   |                                                                      | 2,043   |                                                                                            |   | 621 |   |   | 12,824 |   |
| Loss                from operations                                            |   |                                                                      | (2,043  | )                                                                                               |   | (621 | ) |   | (12,074 | ) |
|                                                                           |   |                                                                      |         |                                                                                            |   |  |   |   |  |   |
| Interest                income, net                                            |   |                                                                      | 74      |                                                                                            |   | - |   |   | 334 |   |
|                                                                           |   |                                                                      |         |                                                                                            |   |  |   |   |  |   |
| Net                loss                                                        |   | $                                                                         | (1,969  | )                                                                                               | $      | (621 | ) | $ | (11,740 | ) |
|                                                                           |   |                                                                      |         |                                                                                            |   |  |   |   |  |   |
| Net                loss per share, basic and diluted                           |   | $                                                                         | (0.09   | )                                                                                               | $      | (0.06 | ) |   |  |   |
|                                                                           |   |                                                                      |         |                                                                                            |   |  |   |   |  |   |
| Weighted                average number of shares outstanding basic and diluted |   |                                                                      | 21,051  |                                                                                            |   | 10,505 |   |   |  |   |

*See      accompanying notes to the condensed consolidated financial      statements.*

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| **Osteologix,                Inc.**                                                                               |
|-------------------------------------------------------------------------------------------------------------------|
| **(a                development stage company)**                                                                  |
| **Condensed                Consolidated Statement of Stockholders' Equity and Comprehensive                Loss** |
| **For                the Period From June 16, 2003 (Inception) to March 31,                2007**                 |
| **(in                thousands, except per share                amounts)**                                        |

|                                                                                                                                                      |   | **Common                Stock**  |         | **Additional****Paid-In** |   |  **Accumulated                Other****Comprehensive****Income** |   | **Deficit                Accumulated During the Development** |         | **Total                Stockholders'** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------------|---------------------------|--------|-----------------------------------------------------------------------|--------|---------------------------------------------------------------|--------------|----------------------------------------|--------|
|                                                                                                                                                      |   | **Shares**                            |         | **Amount**                |   | **Capital**                                                           |   | ** (Loss)**                                              |         | **Stage**                              |   | **Equity** |   |
| Issuance                of common stock for cash of $0.02 per share in June 2003                                                                          |   |                                  | 4,897        |                      | $      | 1                                                                     |   | $                                                             | 84           |                                   | $      | - |   | $ | - |   | $ | 85 |   |
| Issuance                of common stock for cash of $0.95 per share in October                2003                                                        |   |                                  | 979          |                      |   | -                                                                     |   |                                                          | 930          |                                   |   | - |   |   | - |   |   | 930 |   |
| Comprehensive                loss:                                                                                                                        |   |                                  |              |                      |   |                                                                       |   |                                                          |              |                                   |   |  |   |   |  |   |   |  |   |
| Net                loss for the period                                                                                                                    |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | - |   |   | (246 | ) |   | (246 | ) |
| Foreign                currency translations                                                                                                              |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | (21 | ) |   | - |   |   | (21 | ) |
| Total                comprehensive loss                                                                                                                   |   |                                  |         |                      |   |                                                                  |   |                                                          |         |                                   |   |   |   |   |   |   |   | (267 | ) |
| **Balance                at December 31, 2003**                                                                                                           |   |                                  | **5,876**    |                      |   | **1**                                                                 |   |                                                          | **1,014**    |                                   |   | **(21** | **)** | ** ** | **(246** | **)** | ** ** | **748** |   |
| Issuance                of common stock for cash of $1.01 per share in May 2004                                                                           |   |                                  | 979          |                      |   | -                                                                     |   |                                                          | 988          |                                   |   | - |   |   | - |   |   | 988 |   |
| Comprehensive                loss:                                                                                                                        |   |                                  |              |                      |   |                                                                       |   |                                                          |              |                                   |   |  |   |   |  |   |   |  |   |
| Net                loss for the period                                                                                                                    |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | - |   |   | (1,471 | ) |   | (1,471 | ) |
| Foreign                currency translations                                                                                                              |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | (148 | ) |   | - |   |   | (148 | ) |
| Total                comprehensive loss                                                                                                                   |   |                                  |         |                      |   |                                                                  |   |                                                          |         |                                   |   |   |   |   |   |   |   | (1,619 | ) |
| **Balance                at December 31, 2004**                                                                                                           |   |                                  | **6,855**    |                      |   | **1**                                                                 |   |                                                          | **2,002**    |                                   |   | **(169** | **)** | ** ** | **(1,717** | **)** | ** ** | **117** |   |
| Issuance                of common stock for cash of $0.83 per share in January 2005, net                of                issuance costs                  |   |                                  | 1,430        |                      |   | -                                                                     |   |                                                          | 1,158        |                                   |   | - |   |   | - |   |   | 1,158 |   |
| Issuance                of common stock for cash of $1.24 per share in June 2005, net of                issuance                costs                     |   |                                  | 2,220        |                      |   | -                                                                     |   |                                                          | 2,699        |                                   |   | - |   |   | - |   |   | 2,699 |   |
| Comprehensive                loss:                                                                                                                        |   |                                  |              |                      |   |                                                                       |   |                                                          |              |                                   |   |  |   |   |  |   |   |  |   |
| Net                loss for the period                                                                                                                    |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | - |   |   | (3,196 | ) |   | (3,196 | ) |
| Foreign                currency translations                                                                                                              |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | 165 |   |   | - |   |   | 165 |   |
| Total                comprehensive loss                                                                                                                   |   |                                  |         |                      |   |                                                                  |   |                                                          |         |                                   |   |   |   |   |   |   |   | (3,031 | ) |
| **Balance                at December 31, 2005**                                                                                                           |   |                                  | **10,505**   |                      |   | **1**                                                                 |   |                                                          | **5,859**    |                                   |   | **(4** | **)** | ** ** | **(4,913** | **)** | ** ** | **943** |   |
| Common                stock transferred in merger with Castle & Morgan Holdings,                Inc.                                                  |   |                                  | 2,860        |                      |   | -                                                                     |   |                                                          | -            |                                   |   | - |   |   | - |   |   | - |   |
| Issuance                of common stock for cash of $1.31 per share in private placement                in May                2006, net of issuance costs |   |                                  | 7,656        |                      |   | 1                                                                     |   |                                                          | 9,255        |                                   |   | - |   |   | - |   |   | 9,256 |   |
| Stock                based compensation expense                                                                                                           |   |                                  | -            |                      |   | -                                                                     |   |                                                          | 508          |                                   |   | - |   |   | - |   |   | 508 |   |
| Comprehensive                loss:                                                                                                                        |   |                                  |              |                      |   |                                                                       |   |                                                          |              |                                   |   |  |   |   |  |   |   |  |   |
| Net                loss for the period                                                                                                                    |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | - |   |   | (4,858 | ) |   | (4,858 | ) |
| Unrealized                gain on short-term investments                                                                                                  |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | 2 |   |   | - |   |   | 2 |   |
| Foreign                currency translations                                                                                                              |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | (54 | ) |   | - |   |   | (54 | ) |
| Total                comprehensive loss                                                                                                                   |   |                                  |    |                      |   |                                                             |   |                                                          |    |                                   |   |    |   |   |    |   |   | (4,910 | ) |
| **Balance                at December 31, 2006**                                                                                                           |   |                                  | **21,021**   |                      |   | **2**                                                                 |   |                                                          | **15,622**   |                                   |   | **(56** | **)** | ** ** | **(9,771** | **)** | ** ** | **5,797** |   |
| Stock                issued in lieu of cash for services                                                                                                  |   |                                  | 30           |                      |   | -                                                                     |   |                                                          | 38           |                                   |   | - |   |   | - |   |   | 38 |   |
| Stock                based compensation expense                                                                                                           |   |                                  | -            |                      |   | -                                                                     |   |                                                          | 70           |                                   |   | - |   |   | - |   |   | 70 |   |
| Comprehensive                loss:                                                                                                                        |   |                                  |         |                      |   |                                                                  |   |                                                          |         |                                   |   |   |   |   |   |   |   |   |   |
| Net                loss for the period                                                                                                                    |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | - |   |   | (1,969 | ) |   | (1,969 | ) |
| Unrealized                loss on short-term investments                                                                                                  |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | (2 | ) |   | - |   |   | (2 | ) |
| Foreign                currency translations                                                                                                              |   |                                  | -            |                      |   | -                                                                     |   |                                                          | -            |                                   |   | (9 | ) |   | - |   |   | (9 | ) |
| Total                comprehensive loss                                                                                                                   |   |                                  |         |                      |   |                                                                  |   |                                                          |         |                                   |   |   |   |   |   |   |   | (1,980 | ) |
| **Balance                at March 31, 2007 (Unaudited)**                                                                                                  |   |                                  | **21,051**   |                      | **$**  | **2**                                                                 |   | **$**                                                         | **15,730**   |                                   | $      | **(67** | **)** | **$** | **(11,740** | **)** | **$** | **3,925** |   |

*See      accompanying notes to the condensed consolidated financial      statements.*

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| **Osteologix,                Inc.**                               |
|-------------------------------------------------------------------|
| **(a                development stage company)**                  |
| **Condensed                Consolidated Statements of Cash Flow** |
| **(in                thousands, except per share amounts)**       |
| **(Unaudited)**                                                   |

|                                                                               |   | **For                the Three Months Ended****March                31,** |   | **For                the Period From June 16, 2003 (Inception) to**** March                31,** |   |
|------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|
|                                                                               |   | **2007**                                                                  |   | **2006**                                                                                              |   | ** 2007** |   |
| **Operating                activities**                                            |   |                                                                      |        |                                                                                                  |   |  |   |   |  |   |
| Net                loss                                                            |   | $                                                                         | (1,969 | )                                                                                                     | $      | (621 | ) | $ | (11,740 | ) |
| Adjustments                to reconcile net loss to net cash                       |   |                                                                      |        |                                                                                                  |   |  |   |   |  |   |
| used                in operating activities:                                       |   |                                                                      |        |                                                                                                  |   |  |   |   |  |   |
| Depreciation                                                                       |   |                                                                      | 1      |                                                                                                  |   | - |   |   | 12 |   |
| Stock                based compensation                                            |   |                                                                      | 70     |                                                                                                  |   | 29 |   |   | 578 |   |
| Changes                in operating assets and liabilities:                        |   |                                                                      |        |                                                                                                  |   |  |   |   | - |   |
| Accounts                receivable                                                 |   |                                                                      | -      |                                                                                                  |   | 750 |   |   | - |   |
| Prepaid                expenses and other current assets                           |   |                                                                      | 136    |                                                                                                  |   | 25 |   |   | (197 | ) |
| Accounts                payable                                                    |   |                                                                      | 473    |                                                                                                  |   | (163 | ) |   | 1,073 |   |
| Accrued                liabilities                                                 |   |                                                                      | 112    |                                                                                                  |   | (48 | ) |   | 257 |   |
| Net                cash used in operating activities                               |   |                                                                      | (1,177 | )                                                                                                     |   | (28 | ) |   | (10,017 | ) |
|                                                                               |   |                                                                      |        |                                                                                                  |   |  |   |   |  |   |
| **Investing                activities**                                            |   |                                                                      |        |                                                                                                  |   |  |   |   |  |   |
| Purchase                of short-term investments                                  |   |                                                                      | (775   | )                                                                                                     |   | - |   |   | (7,322 | ) |
| Sales                and maturities of short-term investments                      |   |                                                                      | 2,378  |                                                                                                  |   | - |   |   | 3,208 |   |
| Purchase                of equipment                                               |   |                                                                      | -      |                                                                                                  |   | - |   |   | (20 | ) |
|                  Net cash provided by (used in) investing activities          |   |                                                                      | 1,603  |                                                                                                  |   | - |   |   | (4,134 | ) |
|                                                                               |   |                                                                      |   |                                                                                                  |   |   |   |   |   |   |
| **Financing                activities -**                                          |   |                                                                      |        |                                                                                                  |   |  |   |   |  |   |
| Net                proceeds from issuance of common stock                          |   |                                                                      | -      |                                                                                                  |   | - |   |   | 15,116 |   |
|                                                                               |   |                                                                      |        |                                                                                                  |   |  |   |   |  |   |
| Effect                of exchange rates on cash and cash equivalents               |   |                                                                      | (9     | )                                                                                                     |   | (31 | ) |   | (67 | ) |
|                                                                               |   |                                                                      |        |                                                                                                  |   |  |   |   |  |   |
| Net                increase (decrease) in cash and cash equivalents                |   |                                                                      | 417    |                                                                                                  |   | (59 | ) |   | 898 |   |
|                                                                               |   |                                                                      |   |                                                                                                  |   |   |   |   |   |   |
| Cash                and cash equivalents at beginning of period                    |   |                                                                      | 481    |                                                                                                  |   | 571 |   |   | - |   |
| Cash                and cash equivalents at end of period                          |   | $                                                                         | 898    |                                                                                                  | $      | 512 |   | $ | 898 |   |
| Supplemental              disclosure of noncash investing and financing activities |   |                                                                      |   |                                                                                                  |   |   |   |   |   |   |
| Issuance              of common stock in lieu of cash for services                 |   | $                                                                         | 38     |                                                                                                  | $      | - |   | $ | 38 |   |

*See      accompanying notes to the condensed consolidated financial      statements.*

----

**Osteologix,      Inc.**

**(a      development stage company)**

**Notes      to Condensed Consolidated Financial Statements**

**March      31, 2007 (Unaudited)**

**(Tabular      amounts in thousands, except per share amounts)**

| **1.** | **Basis                of Presentation and Summary of Significant Accounting                Policies** |
|--------|--------------------------------------------------------------------------------------------------------|

*Business      Description*

*Basis      of Presentation*

*Fair      Value of Financial Instruments*

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| **2.** | **Cash                Equivalents and Short-Term                Investments** |
|--------|-------------------------------------------------------------------------------|

| **3.** | **Stock-Based                Compensation** |
|--------|---------------------------------------------|

| **4.** | **Net                Loss Per Share** |
|--------|---------------------------------------|

| **5.** | **Recently                Adopted Accounting                Pronouncement** |
|--------|-----------------------------------------------------------------------------|

*Accounting      for Uncertainty in Income Taxes--an interpretation of FASB Statement No.      109*

----

| **6.** | **Recent                Accounting Pronouncement** |
|--------|----------------------------------------------------|

*Fair      Value Measurements*
*Share-based      Payment*

| **7.** | **Subsequent                Events** |
|--------|--------------------------------------|

----

**ITEM      2.**       **MANAGEMENT’S      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

| 1.   | THE                INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS OF THE COMPANY                APPEARING                ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-QSB;                AND |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| 2.   | RISK                FACTORS AND MANAGEMENT’S DISCUSSION AND ANALYSIS CONTAINED IN THE                COMPANY’S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31,                2006. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**PRELIMINARY      NOTE REGARDING FORWARD-LOOKING STATEMENTS**

----

**Critical      Accounting Policies and Use of Estimates**

**Recently      Adopted or Issued Accounting Pronouncements**

*Accounting      for Uncertainty in Income Taxes--an interpretation of FASB Statement No.      109,*

*Fair      Value Measurements,*
*Share-based      Payment*

**Recent      Developments**

**Three      Months Ended March 31, 2007 Compared to Three Months Ended March 31,      2006**

**Revenues**

----

**Research      and Development Expenses**

| **Three                Months Ended March 31,** |      | **Increase                from Period in Prior Year** |   |
|-------------------------------------------------|-----------|-------------------------------------------------------|--------|
| **2007**                                        |      | **2006**                                              |   | **Dollars** |   | **Percent** |   |
| $                                               | 1,194,000 |                                                  | $      | 217,000 |   | $ | 977,000 |   |   | 450 | % |

Research      and development expenses increased $977,000 for the first three months of 2007      compared to the first three months of 2006 primarily because of costs incurred      for our on-going human phase II clinical trial which we started in late 2006.      The phase II clinical trial costs include expenditures incurred by the      physicians treating the patients being evaluated for and enrolled into the      trial, expenditures by a contract research organization that is assisting us      with the oversight of the trial, and costs to acquire, manufacture and package      the drug products that are being used in the study.

**General      and Administrative Expenses**

| **Three                Months Ended March 31,** |    | **Increase                from Period in Prior Year** |   |
|-------------------------------------------------|---------|-------------------------------------------------------|--------|
| **2007**                                        |    | **2006**                                              |   | **Dollars** |   | **Percent** |   |
| $                                               | 849,000 |                                                  | $      | 404,000 |   | $ | 445,000 |   |   | 110 | % |

General      and administrative expenses increased by $445,000 for the three months ended      March 31, 2007 compared to the three months ended March 31, 2006 primarily      because of the increased costs, including legal and accounting costs, of      operating as a public company in the 2007 period; for the three months ended      March 31, 2006, Osteologix was not publicly listed. We expect general and      administrative expenses to for the balance of 2007 to continue to be higher      than      for the comparable periods in 2006 because our incremental costs for operating      as a public company were incurred for only a portion of 2006. In addition,      on      April 3, 2007, we announced the resignation of our previous Chief Executive      Officer and President, and will record costs related to the termination of      his      employment in the second quarter of 2007. Also, as required by Section 404      of      Sarbanes-Oxley, we will be required to provide a management attestation      regarding our internal controls, further increasing general and administrative      costs.

**Interest      Income**

**LIQUIDITY      AND CAPITAL RESOURCES**

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|                                                             |   | **March                31,****2007** |      | **December                31,****2006** |   |
|------------------------------------------------------------------|--------|--------------------------------------|-----------|-----------------------------------------|--------|
| Cash,                cash equivalents and short-term investments |   | $                                    | 5,012,000 |                                    | $      | 6,200,000 |   |
| Working                capital                                   |   |                                 | 3,917,000 |                                    |   | 5,788,000 |   |

**PLAN      OF OPERATION**

|   | · | the                progress we make in our clinical development                programs; |
|--------|--------|------------------------------------------------------------------------------------------|

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|   | · | our                ability to establish collaborative relationships and the terms of                these                relationships; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                cost of filing, prosecuting, defending, and enforcing patent claims                and                other intellectual property rights; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                acquisition or licensing of new drug                candidates; |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | competing                technological and market                developments; |
|--------|--------|--------------------------------------------------------------------------------|

|   | · | the                requirements of regulatory                agencies; |
|--------|--------|------------------------------------------------------------------------|

|   | · | the                time and cost involved in obtaining regulatory approvals;                and |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | the                development of commercialization activities and                arrangements. |
|--------|--------|-------------------------------------------------------------------------------------------------|

**Off-Balance      Sheet Arrangements**

**ITEM      3.**       **CONTROLS      AND PROCEDURES** ** **

Additionally,      there were no changes in the Company’s internal controls or in other factors      that could significantly affect these controls subsequent to the Evaluation      Date. We have not identified any significant deficiencies or material weaknesses      in our internal controls, and therefore there were no corrective actions      taken.

**PART      II -** **OTHER      INFORMATION**

**ITEM      1.**       **LEGAL      PROCEEDINGS.** ** **

**ITEM      2.**       **UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**

**ITEM      3.**       **DEFAULTS      UPON SENIOR SECURITIES.**

**ITEM      4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. **

**ITEM      5.**       **OTHER      INFORMATION.**

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**ITEM      6.**       **EXHIBITS.** ** **

| **(a)** | **EXHIBITS** |
|---------|--------------|

| **Exhibit                Number** |   | **Description**                                                                                                                                                                                                                                                             |
|-----------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                              |   | Certification                of Chief Executive Officer pursuant to Rules 13A-14(A) and 15D-14(A)                of                the Securities Exchange Act of 1934, as adopted pursuant to Section                302 of                the Sarbanes-Oxley Act of 2002. |
|                              |   |                                                                                                                                                                                                                                                                        |
| 31.2                              |   | Certification                of Chief Financial Officer pursuant to Rules 13A-14(A) and 15D-14(A)                of                the Securities Exchange Act of 1934, as adopted pursuant to Section                302 of                the Sarbanes-Oxley Act of 2002. |
|                              |   |                                                                                                                                                                                                                                                                        |
| 32.1                         |   | Certifications              of Chief Executive Officer and Chief Financial Officer Pursuant to              18              U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of              2002).                                                                       |

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**SIGNATURES**

|                                              |                                                                                                           |                                               |
|---------------------------------------------------|----------------------------------------------------------------------------------------------------------------|----------------------------------------------------|
|                                              | **OSTEOLOGIX, INC.**                                                                                           |
|                                         |                                                                                                      |                                          |
| Date: May              10,              2007 | By:                                                                                                  | /s/ PHILIP              J.              YOUNG |
|                                              | Name:                Philip J. YoungTitle:                President and Chief Executive                Officer |

|                                              |                                                                              |                                  |
|---------------------------------------------------|-----------------------------------------------------------------------------------|---------------------------------------|
|                                              |                                                                                   |
| Date: May              10,              2007 | By:                                                                     | /s/ MATTHEW              M. LOAR |
|                                              | Name:                Matthew M. LoarTitle:                Chief Financial Officer |

----

**EXHIBIT      INDEX**

| **Exhibit                Number** |   | **Description**                                                                                                                                                                                                                                                             |
|-----------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                              |   | Certification                of Chief Executive Officer pursuant to Rules 13A-14(A) and 15D-14(A)                of                the Securities Exchange Act of 1934, as adopted pursuant to Section                302 of                the Sarbanes-Oxley Act of 2002. |
|                              |   |                                                                                                                                                                                                                                                                        |
| 31.2                              |   | Certification                of Chief Financial Officer pursuant to Rules 13A-14(A) and 15D-14(A)                of                the Securities Exchange Act of 1934, as adopted pursuant to Section                302 of                the Sarbanes-Oxley Act of 2002. |
|                              |   |                                                                                                                                                                                                                                                                        |
| 32.1                         |   | Certifications                of Chief Executive Officer and Chief Financial Officer Pursuant to                18                U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of                2002).                                                               |

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