**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

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**FORM 10-Q**
| **Mark One** |
|--------------|
|         |   |   |   |   |
| **x**        | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** |
|         |   |   |   |   |
| ** **   | ** ** | **For The Quarterly Period Ended March 31, 2007** |
|         |   |   |   |   |
| **o**        | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **   | ** ** | ** ** |
| ** **   | ** ** | **For the Transition Period  from               to                 ** |

**CommissionFile Number****333-125575**

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

| **Delaware**                                                                      |   | **20-1983837**                        |
|-----------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization)                   |   | (IRS Employer  Identification Number) |
| ** **                                                                        |   | ** **                            |
| **101 E.  County Line Road  Hatboro, PA**(Address of principal executive offices) |   | **19040**(Zip code)                   |

**(215)604-0691**(Registrant’s telephone number, including area code)

Indicateby check mark if the registrant is not required to file reports pursuant toSection 13 or Section 15(d) of the Exchange Act. Yes  o    No  x

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  x    No  o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o          Acceleratedfiler  o          Non-acceleratedfiler  x

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes  o    No  x

Thenumber of shares outstanding of each of the issuer’s classes of common stock asof the latest practicable date,
| Class                                      | ** ** | **Outstanding at May 11, 2007** |
|--------------------------------------------|------------|---------------------------------|
| ** **                                 | ** ** | ** **                      |
| Common Stock,  $.00001 par value per share |       | 24,133,823  Shares              |

 

 

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**TABLE OF CONTENTS**

**PART I — FINANCIAL INFORMATION**
| Item 1.    |       | Financial  Statements (Unaudited)                                                                          | 3          |
|------------|------------|------------------------------------------------------------------------------------------------------------|------------|
|       |       |                                                                                                       |       |
|       |       | Consolidated Balance Sheets as of March 31, 2007  (unaudited) and December 31, 2006                   | 3          |
|       |       |                                                                                                       |       |
|       |       | Consolidated Statements of Operations (unaudited) for  the three months ended March 31, 2007 and 2006 | 4          |
|       |       |                                                                                                       |       |
|       |       | Consolidated Statements of Cash Flows (unaudited) for  the three months ended March 31, 2007 and 2006      | 5          |
|       |       |                                                                                                       |       |
|       |       | Notes to Consolidated Financial Statements                                                                 | 6          |
|       |       |                                                                                                       |       |
| Item 2.    |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                | 15         |
|       |       |                                                                                                       |       |
| Item  3.   |       |  Quantitative and Qualitative Disclosures About Market  Risk                                          | 20         |
|       |       |                                                                                                       |       |
| Item 4.    |       |  Controls and Procedures                                                                              | 20         |
|       |       |                                                                                                       |       |
| ** ** | ** ** | **PART II  — OTHER INFORMATION**                                                                      | ** ** |
| ** ** | ** ** | ** **                                                                                                 | ** ** |
| Item  1.   |       | Legal  Proceedings                                                                                         | 21         |
| ** ** | ** ** | ** **                                                                                                 | ** ** |
| Item 1a.   |       | Risk Factors                                                                                               | 21         |
|       |       |                                                                                                       |       |
| Item 2.    |       | Unregistered Sales of Equity Securities and Use of  Proceeds                                               | 21         |
| ** ** | ** ** | ** **                                                                                                 | ** ** |
| Item 6.    |       | Exhibits                                                                                                   | 22         |
|       |       |                                                                                                       |       |
|       |       | Signatures                                                                                                 | 23         |

 

2

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**PART I - FINANCIAL INFORMATION**

**Item1.**

**INFOLOGIX, INC.Consolidated Balance Sheets**
| **ASSETS**                                                                                                       | ** ** | ** **         | ** ** | ** **            | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                       | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
| ** **                                                                                                       | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                       | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| Currents assets:                                                                                                 |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                       |       | $                  | 11,525,697 |                  | $          | 12,882,044 |   |
| Accounts and  other receivables (net of allowance for doubtful accounts in the amount of  $135,600 and $120,000) |       | 10,187,211         |       | 11,797,265            |       |
| Finished goods  inventory, net                                                                                   |       | 2,272,680          |       | 2,227,201             |       |
| Prepaid expenses  and other current assets                                                                       |       | 1,052,309          |       | 906,793               |       |
| Deferred tax  assets                                                                                             |       | 106,929            |       | 311,478               |       |
| Total current  assets                                                                                            |       | 25,144,826         |       | 28,124,781            |       |
|                                                                                                             |       |               |       |                  |       |
| Property and equipment,  net                                                                                     |       | 1,766,823          |       | 1,440,338             |       |
| Intangible assets, net                                                                                           |       | 781,897            |       | 871,976               |       |
| Deferred tax assets                                                                                              |       | 2,289,135          |       | 1,375,486             |       |
| Total assets                                                                                                     |       | $                  | 29,982,681 |                  | $          | 31,812,581 |   |
|                                                                                                             |       |               |       |                  |       |
| ** **                                                                                                       | ** ** | ** **         | ** ** | ** **            | ** ** |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                   | ** ** | ** **         | ** ** | ** **            | ** ** |
| Current liabilities:                                                                                             |       |               |       |                  |       |
| Accounts payable                                                                                                 |       | $                  | 4,987,646  |                  | $          | 6,584,489 |   |
| Line of credit                                                                                                   |       | 6,524,784          |       | 5,954,672             |       |
| Current portion  of notes payable — bank                                                                    |       | 833,333            |       | 833,333               |       |
| Current portion  of capital lease obligations                                                                    |       | 95,591             |       | 116,973               |       |
| Sales tax  payable                                                                                               |       | 236,430            |       | 342,064               |       |
| Accrued expenses                                                                                                 |       | 1,120,578          |       | 767,967               |       |
| Total current  liabilities                                                                                       |       | 13,798,362         |       | 14,599,498            |       |
|                                                                                                             |       |               |       |                  |       |
| Notes payable - bank,  net of current maturities                                                                 |       | 1,055,556          |       | 1,194,445             |       |
| Capital lease  obligations, net of current maturities                                                            |       | 90,832             |       | 130,378               |       |
| Total  liabilities                                                                                               |       | 14,944,750         |       | 15,924,321            |       |
|                                                                                                             |       |               |       |                  |       |
| Commitments and  Contingencies (Note J)                                                                          |       |               |       |                  |       |
|                                                                                                             |       |               |       |                  |       |
| Stockholders’ equity:                                                                                       |       |               |       |                  |       |
| Preferred stock,  par value $.00001; authorized 10,000,000 shares; none issued or outstanding                    |       | —             |       | —                |       |
| Common stock,  par value $.00001; authorized 100,000,000 shares; issued and outstanding 23,595,663  shares       |       | 236                |       | 236                   |       |
| Additional paid  in capital                                                                                      |       | 18,052,374         |       | 17,802,373            |       |
| Accumulated  deficit                                                                                             |       | (3,014,679         | )          | (1,914,349            | )          |
| Total  stockholders’ equity                                                                                 |       | 15,037,931         |       | 15,888,260            |       |
|                                                                                                             |       |               |       |                  |       |
| Total  liabilities and stockholders’ equity                                                                 |       | $                  | 29,982,681 |                  | $          | 31,812,581 |   |

 

The accompanyingnotes are an integral part of these  unaudited consolidated financial statements.

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**INFOLOGIX, INC.**

** UNAUDITED CONSOLIDATED STATEMENTS OFOPERATIONS**

 

 
| ** **                                    | ** ** | **Three Months**         | ** ** |
|-----------------------------------------------|------------|-------------------------------|------------|
| ** **                                    | ** ** | **Ended March 31,** | ** ** |
| ** **                                    | ** ** | **2007**                      | ** ** | **2006** | ** ** |
| Revenues                                      |       | $                             | 12,877,673 |   | $ | 13,053,974 |   |
|                                          |       |                          |       |   |   |
| Cost of revenues                              |       | 9,536,985                     |       | 9,761,439 |   |
|                                          |       |                          |       |   |   |
| Gross profit                                  |       | 3,340,688                     |       | 3,292,535 |   |
|                                          |       |                          |       |   |   |
| Selling, general and  administrative expenses |       | 5,177,034                     |       | 3,061,972 |   |
|                                          |       |                          |       |   |   |
| Operating (loss)  income                      |       | (1,836,346                    | )          | 230,563 |   |
|                                          |       |                          |       |   |   |
| Interest income                               |       | 158,411                       |       | — |   |
| Interest expense                              |       | (131,495                      | )          | (138,268 | ) |
|                                          |       |                          |       |   |   |
| Income (loss)  before income tax benefit      |       | (1,809,430                    | )          | 92,295 |   |
|                                          |       |                          |       |   |   |
| Income tax benefit                            |       | 709,100                       |       | — |   |
|                                          |       |                          |       |   |   |
| Net (loss)  income                            |       | $                             | (1,100,330 | ) | $ | 92,295 |   |
|                                          |       |                          |       |   |   |
| (Loss) earnings per  share:                   |       |                          |       |   |   |
| Basic                                         |       | $                             | (0.05      | ) | $ | 0.01 |   |
| Diluted                                       |       | $                             | (0.05      | ) | $ | 0.01 |   |
|                                          |       |                          |       |   |   |
| Weighted average shares  outstanding:         |       |                          |       |   |   |
| Basic                                         |       | 23,595,663                    |       | 12,500,000 |   |
| Diluted                                       |       | 23,595,663                    |       | 12,500,000 |   |
|                                          |       |                          |       |   |   |
|                                          |       |                          |       |   |   |

 

Theaccompanying notes are an integral part of these

 unaudited consolidated financial statements.

 

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**INFOLOGIX,INC.**

**UNAUDITEDCONSOLIDATED STATEMENTS OF CASH FLOWS**
| ** **                                                          | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                          | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| Operating activities:                                               |       |                                                 |       |   |   |
| Net income  (loss)                                                  |       | $                                                    | (1,100,330 | ) | $ | 92,295 |   |
| Adjustments to  reconcile net income (loss) to operating cash flow: |       |                                                 |       |   |   |
| Depreciation and  amortization                                      |       | 287,487                                              |       | 258,877 |   |
| Allowance for  doubtful accounts receivable                         |       | 15,600                                               |       | — |   |
| Share based  compensation                                           |       | 250,001                                              |       | — |   |
| Deferred income  tax benefit                                        |       | (709,100                                             | )          | — |   |
| Changes in:                                                         |       |                                                 |       |   |   |
| Accounts  receivable                                                |       | 1,594,454                                            |       | 1,841,785 |   |
| Finished goods  inventory                                           |       | (45,479                                              | )          | 225,431 |   |
| Prepaid expenses  & other current assets                        |       | (145,516                                             | )          | (218,816 | ) |
| Accounts payable                                                    |       | (1,596,843                                           | )          | (2,173,001 | ) |
| Sales tax  payable                                                  |       | (105,634                                             | )          | 12,681 |   |
| Accrued expenses                                                    |       | 352,611                                              |       | 100,719 |   |
| Deferred revenue                                                    |       | —                                               |       | 23,940 |   |
|                                                                |       |                                                 |       |   |   |
| Net cash provided by  (used in) operating activities                |       | (1,202,749                                           | )          | 163,911 |   |
|                                                                |       |                                                 |       |   |   |
| Investing  activities:                                              |       |                                                 |       |   |   |
| Acquisition of  property and equipment                              |       | (523,893                                             | )          | (252,522 | ) |
| Net cash used in  investing activities                              |       | (523,893                                             | )          | (252,522 | ) |
|                                                                |       |                                                 |       |   |   |
| Financing activities:                                               |       |                                                 |       |   |   |
| Proceeds from  long-term debt                                       |       | -                                                    |       | 1,500,000 |   |
| Repayment of  long-term debt & capital leases                   |       | (199,817                                             | )          | (642,339 | ) |
| Net borrowings  (repayments) from line of credit                    |       | 570,112                                              |       | (794,070 | ) |
| Net cash  provided by financing activities                          |       | 370,295                                              |       | 63,591 |   |
|                                                                |       |                                                 |       |   |   |
| Net change in  cash and cash equivalents                            |       | (1,356,347                                           | )          | (25,020 | ) |
|                                                                |       |                                                 |       |   |   |
| Cash and cash  equivalents at beginning of year                     |       | 12,882,044                                           |       | 447,901 |   |
|                                                                |       |                                                 |       |   |   |
| Cash and cash  equivalents at end of quarter                        |       | $                                                    | 11,525,697 |   | $ | 422,881 |   |
|                                                                |       |                                                 |       |   |   |

 

The accompanying notes are an integral part of theseunaudited consolidated financial statements.

5

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**INFOLOGIX, INC.****NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

The accompanyingunaudited consolidated financial statements of Infologix, Inc. andsubsidiaries (collectively, the “Company”) have been prepared in accordancewith United States generally accepted accounting principles (“GAAP”) forinterim financial information and with the instructions for Form 10-Q andArticle 10 of Regulation S-X. Accordingly, they do not include all ofthe information and footnotes required by GAAP for complete consolidated financialstatements. In the opinion of management, all adjustments (consisting of normalrecurring accruals) considered necessary for a fair presentation have beenincluded. The notes to the consolidated financial statements contained in theAnnual Report on Form 10-K for the year ended December 31, 2006should be read in conjunction with these consolidated financialstatements.  Operating results for thethree months ended March 31, 2007 are not necessarily indicative of theresults that may be expected for the year ending December 31, 2007.

**NOTE A—MERGER**

OnNovember 22, 2006, New Age Translation, Inc., a Nevada corporation (“NewAge-NV”) was merged with and into New Age Translation, Inc., a Delawarecorporation (“New Age-DE”), for the sole purpose of changing the state ofincorporation from Nevada to Delaware pursuant to a Certificate of Ownershipand Merger dated November 22, 2006 and approval by the stockholders onNovember 22, 2006. Under the terms of the Certificate of Ownership, eachshare of New Age-NV was exchanged for 3.18877518427542 shares of New Age-DE, oran aggregate of 18,539,539 shares. On November 22, 2006, 15,943,876 sharesof common stock of New Age-DE were cancelled and 2,595,663 shares of commonstock of New Age-DE remained outstanding.

On November 29,2006, New Age-DE entered into an Agreement and Plan of Merger (the “MergerAgreement”) with InfoLogix, Inc., a privately held Delaware corporation (“InfoLogix”),and INFLX Acquisition Corp., a newly formed wholly-owned Delaware subsidiary ofNew Age-DE (“Merger Sub”), pursuant to which Merger Sub merged with and intoInfoLogix (the “Merger”) on November 29, 2006. As a result, InfoLogix isnow a wholly owned subsidiary of New Age-DE. In connection with the Merger, NewAge-DE changed its name to “InfoLogix, Inc.” and InfoLogix changed it nameto “InfoLogix Systems Corporation.”

Pursuantto the terms and conditions of the Merger Agreement, each share of InfoLogixcommon stock issued and outstanding immediately prior to the closing of theMerger was converted into the right to receive 25,000 shares of New Age-DEcommon stock. As a result, 12,500,000 shares of New Age common stock wereissued to the stockholders of InfoLogix. Immediately after closing of theMerger on November 29, 2006, there were 15,095,663 shares of New Age-DEcommon stock issued and outstanding, approximately 82.8% of which shares arecurrently held by the former stockholders of InfoLogix.

OnNovember 29, 2006, concurrent with the Merger, the Company closed on aprivate placement of 8,500,000 shares of its common stock to accreditedinvestors. The shares were sold for an aggregate purchase price of $17,000,000before costs associated with the private placement of $2,020,825.  Theprivate placement was exempt from registration under the Securities Act of 1933as amended.

TheMerger was accounted for under the purchase method of accounting as a reverseacquisition in accordance with GAAP. Under this method of accounting, NewAge-DE was treated as the “acquired” company for financial reporting purposes.In accordance with guidance applicable to these circumstances, the Merger wasconsidered to be a capital transaction in substance. Accordingly, foraccounting purposes, the Merger was treated as the equivalent of InfoLogixissuing stock for the net monetary assets of New Age-DE, accompanied by arecapitalization. All historical share and per share amounts have beenretroactively adjusted to give effect to the reverse acquisition of InfoLogixand related recapitalization.

6

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**NOTEB—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

***Nature of business***

InfoLogix, Inc.(the “Company”) provides mobile intelligence technology solutions by enablingreal time data communications anywhere in an enterprise. The Company provideswireless network design, hardware, software, consulting, system integration andnetwork management solutions.

***Principles of consolidation***

Theconsolidated financial statements include the accounts of the Company and itswholly-owned subsidiaries, OPT Acquisition LLC and Embedded Technologies, LLC.All significant inter-company balances and transactions have been eliminated inconsolidation.

***Cash and cash equivalents***

Forpurposes of the cash flow statements, the Company considers all highly liquidinvestments with original maturities of three months or less to be cashequivalents.

***Fair value of financial instruments***

TheCompany used the following methods and assumptions in estimating the fair valuedisclosures for financial instruments:

Cashand cash equivalents: The carrying value approximates fair value due to thecurrent maturity of these instruments.

Long-and short-term debt: The carrying value of the debt is considered toapproximate fair value because the underlying interest rates approximate marketrates at the balance sheet date.

***Concentrations of credit risk***

Financialinstruments that subject the Company to credit risk consist of cash equivalentsand accounts receivable.

TheCompany’s policy is to limit the amount of credit exposure to any one financialinstitution, and place investments with financial institutions evaluated asbeing creditworthy, or in short-term money market funds which are exposed tominimal interest rate and credit risk. The Company maintains its cash primarilyin investment accounts within large financial institutions. The Federal DepositInsurance Corporation insures these balances up to $100,000 per bank. TheCompany has not experienced any losses on its bank deposits and managementbelieves these deposits do not expose the Company to any significant credit risk.

TheCompany grants credit, generally without collateral, to its customers, whichare primarily in the healthcare and commercial markets. Consequently, theCompany is subject to potential credit risk related to changes in economicconditions within those markets. However, management believes that its billingand collection policies are adequate to minimize the potential credit risk.

TheCompany has a policy of reserving for uncollectible accounts based on its bestestimate of the amount of probable credit losses in its existing accountsreceivable. The Company periodically reviews its accounts receivable todetermine whether an allowance is necessary based on an analysis of past dueaccounts and other factors that may indicate that the realization of an accountmay be in doubt including historical experience and current economic and marketconditions. Account balances deemed to be uncollectible are charged to theallowance after all means of collection have been exhausted and the potentialfor recovery is considered remote.

***Inventory***

Inventoryis stated at the lower of cost or market. Cost is determined using the firstin, first out method.

***Property and equipment***

Propertyand equipment are recorded at cost less accumulated depreciation. Depreciationis computed over the lesser of the estimated useful lives or the lease term ofthe related assets using the straight line method. Maintenance and repairs thatneither add materially to the value of the asset nor appreciably prolong itsuseful life are charged to expense as incurred. Gains or losses on the disposalof property and equipment are included in the determination of income. Usefullives of property and equipment are as follows:
| Demonstration and evaluation  equipment |   | 3 years      |
|-----------------------------------------|--------|--------------|
| Equipment                               |   | 3 to 5 years |
| Furniture and  fixtures                 |   | 5 years      |
| Leasehold  improvements                 |   | 5 years      |

** **

** **

7

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***Impairment of long-lived assets***

TheCompany assesses the potential impairment of long-lived assets whenever eventsor changes in circumstances indicate that the carrying value may not berecoverable. An asset’s value is impaired if management’s estimate of theaggregate future cash flows, undiscounted and without interest  charges,to be  generated by the asset are less than the carrying value of theasset. Such cash flows consider factors such as expected future operatingincome and historical trends, as well as the effects of demand and competition.To the extent impairment has occurred, the loss is measured as the excess ofthe carrying amount of the asset over the estimated fair value of the asset.Such estimates require the use of judgment and numerous subjective assumptions,which, if actual experience varies, could result in material differences in therequirements for impairment charges.

***Intangible assets***

TheCompany accounts for its intangible assets in accordance with Statement ofFinancial Accounting Standards (SFAS) 142, *Goodwill andOther Intangible Assets*. The costs of successful registrations forpatents are amortized over the estimated useful lives of the assets, which isgenerally three years, using the straight-line method. The costs ofunsuccessful registrations are charged to expense. Acquired technology isrecorded at its fair value at the date of acquisition and amortized over theestimated useful lives of the assets, which is generally five years, using thestraight-line method. Developed technology is also amortized using thestraight-line method, generally over five years. License fees are amortizedover the license period using the straight-line method.

***Software capitalization***

TheCompany capitalizes certain costs related to the acquisition and development ofsoftware and amortizes these costs using the straight-line method over theestimated useful life of the software which is three to five years. Inaccordance with SFAS 86, *Accounting forthe Costs of Computer Software to be Sold, Leased or Otherwise Marketed*,the Company expenses as incurred those costs incurred prior to achievingtechnological feasibility.

***Revenue recognition***

Revenueconsists primarily of sales of wireless products. Sales revenue is recognizedwhen both the title and risk of loss transfer to the customer, generally uponshipment. The Company also realizes revenue from the sale of componentwarranties on their wireless mobile products as well as from the sale ofproprietary learning technologies. Warranty revenue is recognized uponexecution of the warranty agreement. There is no associated warranty risk asthe Company has contracted with another party to fully assume all risks andobligations. Revenue from the sale of proprietary learning technologies isrecognized upon delivery and acceptance by the customer. We present sales taxliability on a net basis in accordance with Emerging Issues Task Force (“EITF”)Issue No. 06-03. Sales are not grossed up with the attendant taxes anddeducted as a separate line item.

***Advertising costs***

Advertisingcosts are expensed when incurred and approximated $83,000 and $88,000 for thethree months ended March 31, 2007 and 2006, respectively.

Inaccordance with Emerging Issues Task Force (EITF) 02-16, *Accounting by a Customer (Including a Reseller) forCertain Consideration Received from a Vendor*, certain cooperativeadvertising reimbursements are netted against specific, identifiable costsincurred in connection with the selling of the vendor’s product. Cooperativeadvertising reimbursement of approximately $25,000 and $40,000 for the threemonths ended March 31, 2007 and 2006, respectively, were recorded as areduction of advertising expense with the net amount included in selling,general and administrative expenses in the consolidated statements ofoperations.

***Income taxes***

TheCompany accounts for income taxes in accordance with SFAS 109, *Accounting for Income Taxes*. SFAS 109requires that deferred tax assets be reduced by a valuation allowance if it ismore likely than not that some portion or all of the deferred tax asset willnot be realized.   For the three monthsended March 31, 2007, the Company recorded an income tax benefit amountingto $709,100 related primarily to the net operating loss incurred during thisperiod.

TheCompany adopted the provisions of Financial Accounting Standards Board (FASB)Interpretation No. 48, *Accounting for Uncertaintyin Income Taxes*, on January 1, 2007.  FIN 48 prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return. Asa result of the implementation of FIN 48, the Company determined thatthere were no material liabilities for tax benefits for past years and thecurrent period.

 

8

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TheCompany has determined that any future interest accrued, related tounrecognized tax benefits, will be included in interest expense. In the eventthe Company must accrue for penalties as a result of FIN 48, they will beincluded as an operating expense.

Priorto the Merger discussed in Note A, the Company filed its Federal and StateIncome Tax Returns as a Sub-Chapter S Corporation.  Therefore, any income tax liability from itsoperations was payable directly by its shareholders. The Company’s Sub-ChapterS Corporation status was terminated on November 29, 2006, the date of theMerger.  As a result, the results ofoperations for the three months ended March 31, 2006 do not include anincome tax provision. The unaudited pro-forma income tax rate for the threemonths ended March 31, 2006 was 33.3%.

***Stock based compensation***

EffectiveJanuary 1, 2006, the Company adopted the provisions of SFAS 123(R), *Share-Based Payment*, under the modifiedprospective method which requires that such transactions be accounted for usinga fair-value-based method. Under the modified prospective method, the Companyis required to recognize compensation cost for share-based payments toemployees based on their grant-date fair value from the beginning of the fiscalperiod in which the recognition provisions are first applied.

Forthe three months ended March 31, 2007, the recognized compensation costfor stock options and warrants granted to employees during 2006 was$250,001.  In addition, the Companyrecorded an income tax benefit of $98,750 related to the granting of thenonqualified options and warrants.

***Non-employee stock based compensation***

Thecost of stock based compensation awards issued to non-employees for servicesare recorded at either the fair value of the services rendered or theinstruments issued in exchange for such services, whichever is more readilydeterminable, using the measurement date guidelines enumerated in EITF 96-18,*Accounting for Equity Instruments That AreIssued to Other Than Employees for Acquiring, or in Conjunction with Selling,Goods or Services*.

***Earnings per share***

TheCompany has adopted the provisions of SFAS 128, *Earnings per Share*. Basic earnings per share is computed bydividing income or loss available to common stockholders by the weightedaverage number of common shares outstanding during the period. SFAS 128also requires a dual presentation of basic and diluted earnings per share onthe face of the statement of operations for all companies with complex capitalstructures.

As discussed above, there is no provision for incometaxes for the period ended March 31, 2006. The unaudited pro-forma results of operations for the three months endedMarch 31, 2006 and related income per share are as follows:

| (Unaudited pro-forma results of operations) | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------|------------|------------|------------|
| Income before  income taxes                                     |       | $          | 92,295     |   |
| Pro-forma income  tax expense                                   |       | 30,734     |       |
| Pro-forma net  income                                           |       | $          | 61,561     |   |
| Pro-forma  earnings per share:                                  |       |       |       |
| Basic                                                           |       | $          | .005       |   |
| Diluted                                                         |       | $          | .005       |   |

 

***Use of estimates***

Thepreparation of financial statements in conformity with GAAP requires managementto make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at the dateof the financial statements and the reported amounts of revenue and expensesduring the reporting period.  Significantestimates are required in accounting for inventory costing, asset valuationsand amortization. Actual results could differ from those estimates.

 

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***Recent accounting pronouncements***

InSeptember 2006, the SEC issued SAB 108, *Considering the Effects of Prior Year Misstatements when QuantifyingMisstatements in Current Year Financial Statements*. SAB 108provides interpretive guidance on how the effects of the carryover or reversalof prior year misstatements should be considered in quantifying a current yearmisstatement. The pronouncement prescribes an approach whereby the effect ofall unrecorded identified errors should be considered on all of the financialstatements rather than just either the effect on the balance sheet or theincome statement. The Company adopted the provisions of SAB 108 as ofDecember 31, 2006. The adoption of SAB 108 did not have a materialimpact on the Company’s consolidated financial statements.

InSeptember 2006, the FASB issued SFAS 157, *Fair Value Measurements*. SFAS 157 defines fair value,establishes a framework for measuring fair value and expands disclosures aboutfair value measurements. SFAS 157 is effective for financial statementsissued for fiscal years beginning after November 15, 2007 and interimperiods within those fiscal years. The Company is currently evaluating theimpact that SFAS 157 will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for Financial Assets and Financial Liabilitie*s.SFAS 159 allows entities to voluntarily choose to measure certainfinancial assets and liabilities at fair value (“fair value option”). The fairvalue option may be elected on an instrument-by-instrument basis and isirrevocable, unless a new election date occurs. If the fair value option is electedfor an instrument, SFAS 159 specifies that unrealized gains and losses forthat instrument shall be reported in earnings at each subsequent reportingdate. SFAS 159 is effective January 1, 2008. The Company is currentlyevaluating the impact that SFAS 159 will have on its consolidatedfinancial statements.

 

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**NOTEC—PROPERTY AND EQUIPMENT**

Property andequipment consists of the following:
| ** **                              | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Demonstration and  evaluation equipment |       | $                        | 2,634,986  |                        | $          | 2,477,581 |   |
| Equipment                               |       | 1,270,056                |       | 973,664                     |       |
| Furniture and fixtures                  |       | 365,989                  |       | 295,425                     |       |
| Leasehold improvements                  |       | 40,587                   |       | 40,587                      |       |
|                                    |       | 4,311,618                |       | 3,787,257                   |       |
| Less: accumulated  depreciation         |       | (2,544,795               | )          | (2,346,919                  | )          |
|                                    |       | $                        | 1,766,823  |                        | $          | 1,440,338 |   |

 

Depreciationexpense was $197,876 and $141,411 for the three months ended March 31, 2007 and2006, respectively.

**NOTED—INTANGIBLE ASSETS**

Intangible assetsconsist of the following:

 
| ** **                      | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|---------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Patents                         |       | $                        | 639,881    |                        | $          | 639,881 |   |
| Less: accumulated  amortization |       | (592,661                 | )          | (576,921                    | )          |
|                            |       | 47,220                   |       | 62,960                      |       |
| Computer software               |       | 411,765                  |       | 411,765                     |       |
| Less: accumulated  amortization |       | (111,834                 | )          | (79,558                     | )          |
|                            |       | 299,931                  |       | 332,207                     |       |
| Developed technology            |       | 457,057                  |       | 457,525                     |       |
| Less: accumulated  amortization |       | (410,686                 | )          | (390,716                    | )          |
|                            |       | 46,371                   |       | 66,809                      |       |
| License fees                    |       | 515,000                  |       | 515,000                     |       |
| Less: accumulated amortization  |       | (126,625                 | )          | (105,000                    |       |
|                            |       | 388,375                  |       | 410,000                     |       |
| Total net intangible assets     |       | $                        | 781,897    |                        | $          | 871,976 |   |

 

Developedtechnology relates primarily to wearable computer and cart technology which isnot patented. Amortization expense related to intangible assets was $89,611 and$117,466 for the three months ended March 31, 2007 and 2006, respectively.

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**NOTEE—DEBT**

In March 2006, theCompany executed a Loan and Security Agreement with a bank. Under the terms ofthe agreement and subsequent amendments, the bank provided the Company with an$8,500,000 line of credit and two term loans amounting to $1,500,000 and$1,000,000, respectively. The proceeds from the loans were used to pay offexisting loans and to provide working capital. The loans are collateralized byall of the tangible and intangible assets of the Company. The Loan and SecurityAgreement contains certain financial covenants with which we must complyincluding:  minimum annual and quarterlynet income tests, a fixed-charge coverage ratio, and maximum annual capitalexpenditures. On March 23, 2007 we entered into an amendment to the Loan andSecurity Agreement which waived the non-compliance with these covenants. Theamendment also lowered the quarterly net income covenant to a cumulativebalance of $0 through September 30, 2007, and adjusted the fixed chargecoverage ratio to 1.0 to 1.0 at December 31, 2007 and 1.2 to 1.0 as of the endof each fiscal quarter thereafter.

***Lines of credit***

At March 31, 2007,the outstanding balance of the line of credit was $6.5 million and bearsinterest at 1.25% above the bank’s prime rate under the credit facility (9.5%).At December 31, 2006, the outstanding balance on the line of credit was $6.0million.

***Notes payable***

Notes payableconsist of the following:

 
| ** **                                                                                                                                                                                              | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Note payable,  bank, principal payable $41,667 monthly over thirty-five months commencing  March 2006. Interest was payable monthly at the prime rate plus 1.0%  (9.25% at March 31, 2007)         |       | $                        | 1,000,000  |                        | $          | 1,083,333 |   |
| Note payable,  bank, principal payable $27,778 monthly over thirty-five months commencing  December 2006. Interest was payable monthly at the prime rate plus 1.0%  (9.25% at March 31, 2007) |       | 888,889                  |       | 944,445                     |       |
| Total                                                                                                                                                                                                   |       | 1,888,889                |       | 2,027,778                   |       |
| Less: current  maturities                                                                                                                                                                               |       | 833,333                  |       | 833,333                     |       |
|                                                                                                                                                                                                    |       | $                        | 1,055,556  |                        | $          | 1,194,445 |   |

 

***Letter of Credit***

InNovember 2006 the Company issued a letter of credit to a vendor for$243,000 to support a customer order for products. At  March 31, 2007 and December 2006 theCompany had a liability under the letter of credit of $0 and $161,458  respectively.

**NOTEF—CAPITAL LEASE OBLIGATION**

The capital leaseobligations expire in 2009 and bear interest at 10.3% imputed based on thelessor’s implicit rate of return. Future minimum capital lease payments are asfollows:

|                                              | ** ** | **Amount** | ** ** |
|----------------------------------------------|------------|------------|------------|
| 2007, remainder  of                          |       | $          | 82,764     |   |
| 2008                                         |       | 110,352    |       |
| 2009                                         |       | 12,646     |       |
| Total                                        |       | $          | 205,762    |   |
| Less: amount  representing interest          |       | 19,339     |       |
| Net present  value of minimum lease payments |       | 186,423    |       |
| Less: current  portion                       |       | 95,591     |       |
|                                         |       | $          | 90,832     |   |

 

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The Company leases furniture and fixtures and computerequipment under capital leases.  Assetsunder capital leases included in property and equipment are as follows:
| ** **                      | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|---------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Furniture and Fixtures          |       | $                        | 248,372    |                        | $          | 248,372 |   |
| Computer Equipment              |       | 112,215                  |       | 112,215                     |       |
|                            |       | 360,587                  |       | 360,587                     |       |
| Less: accumulated  depreciation |       | (173,735                 | )          | (151,965                    | )          |
|                            |       | $                        | 186,852    |                        | $          | 208,622 |   |

 

**NOTE G—LEASECOMMITMENTS**

The Company leases itsfacilities in Pennsylvania and Minnesota under agreements expiring between 2007and 2011. Total rent expense for all leases was approximately $55,780 and$42,472 for the three months ended March 31, 2007 and 2006, respectively.

Future minimum leasepayments required under the operating leases in effect subsequent to March 31,2007 are approximately as follows:

|                    | ** ** | **Amount** | ** ** |
|--------------------|------------|------------|------------|
| 2007, remainder of |       | $          | 167,325    |   |
| 2008               |       | 227,700    |       |
| 2009               |       | 232,200    |       |
| 2010               |       | 236,800    |       |
| 2011               |       | 241,500    |       |
|                    |            |            |            |  |

 

**NOTE H—RELATEDPARTY TRANSACTIONS**

***Notes payable—stockholders***

The Company wasindebted to certain stockholders for notes payable. Interest paid tostockholders approximated $36,000 at March 31, 2006.  The notes were paid in full in March 2006.

***Support services***

Beginning in 2004,the Company has an agreement with a stockholder’s company whereby the Companytransferred its warranty risks for extended warranties sold and technicalsupport services provided on behalf of certain Company’s customers. Under theagreement, the Company was charged $452,305 and $85,958 for the three monthsended March 31, 2007 and 2006, respectively, and made payments under thisagreement of $442,206 and $66,545 for the three months ended March 31, 2007 and2006, respectively.

***Due from related party***

There wasapproximately $81,551 and $116,956 due from a related party at March 31, 2007and December 31, 2006 for the sale of certain hardware products. Theseamounts are classified as accounts receivable in the accompanying financialstatements.

**NOTE I—CUSTOMERAND VENDOR CONCENTRATIONS**

For the three monthsended March 31, 2007 and 2006, the Company had sales to significant customersas follows:

|            | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------|------------|----------|------------|----------|------------|
| Customer A |       | 10       | %          | 20       | %          |
| Customer B |       | 17       | %          | 0        | %          |

 

For the three monthsended March 31, 2007 and 2006, the Company had a significant vendor providinghardware as follows:

|          | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------|------------|----------|------------|----------|------------|
| Vendor A |       | 34       | %          | 42       | %          |

 

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**NOTE J—COMMITMENTSAND CONTINGENCIES**

***Litigation***

The Company isinvolved in disputes or legal actions arising in the ordinary course ofbusiness. Management does not believe the outcome of such legal actions willhave a material adverse effect on the Company’s financial position, results ofoperations or cash flows.

**NOTE K—INCOMETAXES**

Indetermining our current income tax provision, the Company assesses temporarydifferences resulting from different treatments of items for tax and accountingpurposes.  These differences result indeferred tax assets and liabilities, which are recorded in the Company’sconsolidated balance sheets.  A valuationallowance is provided to the extent tax assets are not likely to berecovered.  The Company has recorded avaluation allowance against the Company’s gross deferred tax assets ofapproximately $25,000, which allowance has remained unchanged since December31, 2006.

Asof March 31, 2007, the Company has net operating losses (“NOL”) ofapproximately $2,040,000 which will be available to offset future taxableincome.  Included in the NOL’s are lossesof $65,000 generated by New Age Translation, Inc. which are subject to restrictionsunder Internal Revenue Code Section 382, due to change in ownership in thatentity.  Therefore, the Company hasrecorded a valuation allowance against the net operating losses generated byNew Age Translation, Inc.  If not used,the NOL’s will expire beginning after 2024. The Company’s state NOL’s will also be subject to expiration in varyingyears starting in 2013 through 2027.

**NOTE L—SUBSEQUENTEVENTS**

OnApril 9, 2007, the Company entered into a merger agreement pursuant to whichDDMS Holdings, LLC (“DDMS”) merged with and into the Company’s newly formedwholly-owned subsidiary InfoLogix-DDMS, Inc.  As a result of the merger,which closed on April 9, 2007, the Company acquired all of the assets of DDMS,which primarily consists of patents, patent applications and other intellectualproperty related to radio frequency identification technology.  Thepurchase price paid by the Company consisted of $200,000 in cash and 400,000shares of the Company’s common stock.  The shares of common stock aresubject to a one-year lock-up period.

Underthe merger agreement, the Company agreed to commit funds as it deems necessarytoward the maintenance and expansion of the patents and patent applicationsacquired as a result of the merger (the “Patents”), including a minimum of$250,000 before April 9, 2008.  If theCompany determines not to maintain or procure a Patent or invention acquired asa result of the merger in a certain jurisdiction, the two former owners of DDMS(the “Shareholders”) have the right to purchase the rights to the Patent orinvention in that jurisdiction for $1.00.

Inconnection with the merger, the Company entered into a ten-year consultingagreement with LM Consulting LLC (the “Consultant”), an entity wholly-owned bythe Shareholders.  Under the consulting agreement, the Consultant willprovide up to 20 hours of consulting services per month.  The consultingservices will be rendered by the Shareholders, who are the original inventorsof the Patents, and will consist of services related to the commercializationand development of the Patents and other intellectual property acquired in themerger.  The Consultant is entitled to receive a consulting fee during theterm of the consulting agreement equal to 36% of the revenue generated by thePatents after deducting (i) certain expenses related to the generation of thoserevenues and (ii) a portion of the funds expended by the Company in maintainingand expanding the Patents.  The consulting agreement contains customarynon-competition, non-solicitation, confidentiality and assignment of inventionsprovisions.

**On May 10, 2007, the Company,through its wholly-owned subsidiary InfoLogix Systems Corporation, acquiredcertain assets of AMTSystems, Inc. (“AMT”) pursuant to an asset purchaseagreement dated as of May 10, 2007.  Theacquired assets include the rights to existing relationships with customers,vendors and partners, and the intellectual property rights behind AMT’sclinical and financial mobility solutions for healthcare.  The purchase price paid by the Companyconsisted of $100,000 in cash and 138,160 shares of the Company’s common stockat closing, and $500,000 in cash, plus interest, payable in 72 equal monthlyinstallments of $8,766.22.  The shares ofcommon stock are unregistered and are subject to a two-year lock-up.**

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** **

***Item 2.*****  ****Management’s Discussion****andAnalysis of Financial Condition and Results of Operation**

The followingdiscussion and analysis of our financial condition and results of operations isintended to assist you in understanding our financial condition and results ofoperations.  This discussion and analysisshould be read in conjunction with our financial statements and the notesthereto included elsewhere in this report and our annual report filed with theU.S. Securities and Exchange Commission on Form 10-K.  Many of the amounts and percentages presentedin this discussion and analysis have been rounded for convenience ofpresentation.

**Overview and Outlook**

We provide mobileintelligence technology solutions principally to the healthcare, retail,distribution, and transportation markets in North America.  Our business is organized to provideconsulting, business software applications, managed services, mobileworkstations, devices and other hardware products, and wireless communicationsinfrastructure. Our professional services and products utilize proprietarysoftware and radio frequency identification (RFID) technologies that enhanceworkflow and customer care using real-time information, and proprietarylearning technologies for business-to-business applications. We deliver ourproducts and professional services to customers utilizing mobile applicationsthat run on handheld computers, cell phones, tablet computing devices andmobile workstations, and that operate with existing enterprise softwaresolutions.

We are positioned at theconvergence of the growing enterprise mobility, healthcare informationtechnology and RFID markets. The market for enterprise mobility solutions isprojected to be a $21 billion market by 2008 driven by rapid adoption withinindustries such as healthcare, manufacturing/distribution and retail for thepurposes of streamlining data sharing and communication, according to VentureDevelopment Corporation (VDC) research published in September 2005. TheHospital Information Systems (HIS) market is estimated to grow from $52 billiontoday to $61 billion by 2009 according to Health Industry Insights researchpublished in February 2006. Additionally, the RFID technology industry is also experiencing rapid adoption,with analysts projecting market growth from $2 billion today to $25 billion by2015 according to Gartner research published in November 2005.

Animportant component of our strategy is to continue to build and, whennecessary, defend our intellectual property portfolio. We file patent applicationsto protect technology, innovations and improvements that we consider importantto the development of our business and throughout our history we haveproactively invested in and acquired intellectual property assets.  We continue to partner and invest to develop,capture and deliver unique, high-quality, differentiated and cost-effectivemobile intelligence technology solutions for our customers. We have 19 issuedpatents in the U.S. related to wearable computers and surrounding RFIDtechnology that manages proper medication delivery and administration. We alsohave 15 patent applications pending with the U.S. Patent and Trademark Officerelated to medication delivery and administration and a proprietary powersolution specifically designed for mobile workstations, a system and method forlive interactive distance learning, and related mobile wireless computersystems.  The patents for which we havereceived a final issuance have remaining legal lives that vary from 5 to 17years.

**Keyindicators of our financial condition and operating performance**

As the result ofthe private placement and merger we consummated in November 2006, we aretransitioning from a private to publicly-traded company. We are making selectinvestments in operations, sales and marketing to support our anticipatedgrowth and various public company compliance requirements. Our management isalso focused on identifying and completing professional services and technologyrelated acquisitions to broaden our service offerings and establish us as aleader in enterprise mobility solutions. Management must manage the growth ofthe business and provide infrastructure to support it, particularly related toexecuting against our sales and marketing plans, and developing technologiesthat will differentiate us in the markets we serve. We have experiencedimproved gross margins, but have yet to reach optimal financial metrics relatedto cash flow and operating margins as we support the anticipated future growthof our business.

**Characteristicsof our revenue and expenses**

We generate ourrevenue through the resale of wireless and mobile hardware and systems,including computers, peripherals, and related products under which the revenueis recognized. Sales revenue onproduct is recognized when both the title and risk of loss transfer to the customer,generally upon shipment. We also generate revenue from the sale of extended warrantieson certain components. Revenue from the sale of component warranties isrecognized upon execution of the warranty agreement. There is no associatedwarranty risk as we have contracted with a third party to fully assume allrisks and obligations. We also generate revenue from professionalservices, primarily on a project basis, under which revenue from the sale of our proprietary learning technologies isrecognized upon acceptance of our deliverables by clients.

Payments receivedin advance of services performed are recorded as deferred revenue.  Certain contract payment terms may result incustomer billing occurring at a pace slower than revenue recognition. Theresulting revenue recognized in excess of amounts billed and project cost isincluded in accounts receivable and other receivables on our balance sheet.

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Cost of revenueprimarily consists of all expenses that are directly attributable to ourbusiness and include the costs associated with professional services, thepurchase, for resale, of wireless and mobile hardware and systems, includingcomputers, peripherals, and related products. Fluctuations in our gross marginmay occur due to changes in our ability to obtain discounts on product sales orour ability to negotiate higher margins on sales contracts with largecustomers.

Sales andmarketing expenses primarily consist of the salaries, benefits, travel and othercosts of our sales and marketing teams, as well as marketing initiatives andbusiness development expenses.  Generaland administrative expenses primarily consist of the costs attributable to thesupport of our operations, such as: costs related to information systems,salaries, expenses and office space costs for executive management, insidesales, warehousing, technical support, financial accounting, purchasing,administrative and human resources personnel, insurance, recruiting fees,legal, accounting and other professional services.

**Critical Accounting Estimates and Policies**

Our consolidatedfinancial statements are prepared in conformity with accounting principlesgenerally accepted in the United States of America (GAAP), which requires us tomake estimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting periods.  Critical accounting policies are those thatrequire the application of management’s most difficult, subjective, or complexjudgments, often because of the need to make estimates about the effect ofmatters that are inherently uncertain and that may change in subsequentperiods. Actual results may differ from these estimates. In addition, othercompanies may utilize different estimates, which may impact the comparabilityof our results of operations to those of companies in similar businesses.

In making thecomplex or subjective assumptions and judgments with respect to applying itscritical accounting policies, management considers, among other factors:

·                  events and changes in market and economic conditions;

·                  estimated future cash flows from operations; and

·                  the risk of loss on specific accounts or amounts.

The estimates andassumptions made by management in applying critical accounting policies havenot changed materially during 2007 and 2006, and none of these estimates orassumptions have proven to be materially incorrect or resulted in our recordingany significant adjustments related to prior periods. We will continue tomonitor the key factors underlying our estimates and judgments, but no changeis currently expected. Please refer to our Annual Report on Form 10-K for asummary of the accounting policies that management believes are critical to thepreparation of the consolidated financial statements.

**Results of Operations**

***ThreeMonths ended March 31, 2007 compared with the Three Months ended March 31, 2006***

Revenues were$12.9 million for the three months ended March 31, 2007, compared to $13.1million for the three months ended March 31, 2006, a decrease of $0.2 millionor 1.4%. The decrease in revenue was due to a decrease in the number of mobileworkstations that shipped in the comparable periods which was partially offsetby an increase in the number of third-party wireless hardware implementationsdelivered.

Our cost of saleswas $9.5 million for the three months ended March 31, 2007, compared to $9.8million for the three months ended March 31, 2006, a decrease of $0.2 millionor 2.3%. Our gross profit was $3.3 million for the three months ended March 31,2007, compared to $3.3 million for the three months ended March 31, 2006, anincrease of $0.05 million or 1.5%, resulting in a gross margin of 25.9% atMarch 31, 2007, up from 25.2% at March 31, 2006. The increase in our grossmargin is the result of increased margins earned from our mobile workstationhardware, and the increased sales volume of our higher margin third-partywarranty sales.

Our selling,general and administrative expenses were $5.2 million for the three monthsended March 31, 2007, compared with $3.1 million for the three months endedMarch 31, 2006, an increase of $2.1 million, or 69.1%.  These expenses increased as the result of anincrease in our selling expenses to $2.6 million in the three months endedMarch 31, 2007 from $1.6 million in the three months ended March 31, 2006, anincrease of $1.0 million, or 62.5%, as the result of our expanded nationalsales force. Our general and administrative expenses increased to $2.6 millionin the three months ended March 31, 2007 from $1.5 million in the three monthsended March 31, 2006, an increase of $1.1 million, or 76.2%, as the result ofan increased level of administrative support staff and

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higher professional fees associated with our internalcontrols and compliance requirements and approximately $0.3 million of FAS 123Rcompensation expenses incurred as the result of incentive stock options grantedto employees.

Our interestexpense, which is derived from our credit line, term loan and stockholders’loans was $131 thousand for the three months ended March 31, 2007, compared toapproximately $138 thousand for the three months ended March  31, 2006, a decrease of $7 thousand or 4.9%.Our interest earned on cash and cash equivalents was approximately $158thousand for the three months ended March 31, 2007, compared to $0 for thethree months ended March 31, 2006, an increase of $158 thousand.  Interest income in the three months ended March31, 2007 was the result of an increase in cash due to the financing transactioncompleted in November 2006.

Our depreciationand amortization expense increased to $287 thousand for the three months endedMarch 31, 2007 from $259 thousand for the three months ended March 31, 2006, anincrease of $28 thousand or 11.1% as the result of a greater number ofdemonstration units deployed to our expanded sales force and additionalinvestments in computer equipment.

Our net loss was$1.1 million for the three months ended March 31, 2007, compared with netincome of $0.1 million for the three months ended March 31, 2006, adecrease of $1.2 million. Net income declined primarily due to increasedselling expenses related to our expanded national sales force, increased levelsof professional services associated with public company disclosure requirementsand FAS 123R compensation expenses incurred as the result of issuing incentivestock options to employees.

As a result of themerger, InfoLogix Systems Corporation Sub-Chapter S Corporation status wasterminated on November 29, 2006.  Inaccordance with SFAS 109, when the Company changes its tax status from anontaxable corporation to a taxable corporation, deferred tax assets andliabilities are recognized for timing differences at the date that a nontaxableenterprise becomes a taxable enterprise. The Company recorded a net deferred tax asset of approximately $0.7million with the offset being recorded as an income tax benefit in thestatement of operations for the quarter ended March 31, 2007. No net income taxbenefit or offsetting net deferred tax asset was recorded in the first quarterended March 31, 2006 since our operating subsidiary InfoLogix SystemsCorporation elected to be taxed under the provisions of Sub-Chapter S of theInternal Revenue Code whereby our individual stockholders reported their shareof the corporate income on their personal federal and state income tax returns.

As of March 31,2007, the Company had net operating losses (“NOL”) of approximately $2.0million which will be available to offset future taxable income.  Included in the NOL’s are losses of $65,000generated by New Age Translation, Inc., the predecessor to InfoLogix, Inc.,which are subject to restrictions under Internal Revenue Code Section 382, dueto the change in ownership in that entity. Therefore, the Company has recordeda valuation allowance against the net operating losses generated by New AgeTranslation, Inc.  If not used, the NOL’swill expire beginning in the year 2025. The Company’s state NOL’s will also be subject to expiration ****in varying years startingin 2013 through 2027.****

***Liquidity and Capital Resources***

At March 31, 2007,we had cash and cash equivalents of $11.5 million, compared to $12.9 million atDecember 31, 2006.  We have used, andplan to use, such cash for general corporate purposes, including workingcapital as well as acquisitions. Net cash used in operating activities for thethree months ended March 31, 2007 was $1.2 million, primarily the result of netlosses from operations. Net cash used in investing activities was $0.5 millionfor the three months ended March 31, 2007, primarily used to acquiredemonstration and office equipment.  Netcash provided by financing activities was $0.4 million for the three monthsended March 31, 2007, primarily due to the net increase from borrowings underour asset-based line of credit, and the proceeds from a term loan from oursenior secured lender, and partially offset by the repayment of unsecured notesto stockholders and the principal payments under the terms of oursenior-secured note.

We believe that ouravailable funds and the availability under our asset-based line of credit willbe sufficient to meet our capital requirements over the next 12 months;however, we may seek to raise additional funds through the sale of equity ordebt securities or obtaining additional credit facilities. The sale ofadditional equity securities or issuance of equity securities in futureacquisitions would result in dilution to our stockholders and the incurrence ofdebt would result in an increase in our interest expense. However, there can beno assurance that we will be able to sell additional equity or debt securities,or be able to obtain financing on acceptable terms, if at all.

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***Line of Credit and Term Loan***

In March 2006, weexecuted a Loan and Security Agreement with a bank.  Under the terms of the agreement andsubsequent amendments, the bank provided us with an $8.5 million line of creditand two term loans amounting to $1.5 million and $1.0 million,respectively.  The proceeds from theloans were used to pay off existing loans and to provide working capital.  The loans are collateralized by all of thetangible and intangible assets of InfoLogix Systems Corporation, as well as apledge of all of the common stock of InfoLogix Systems Corporation. At March31, 2007, the outstanding balance of the line of credit is $6.5 million, and$1.9 million on the two term loans. The loan and security agreement containscertain financial covenants with which we must comply including:  minimum annual and quarterly net incometests, a fixed-charge coverage ratio, and maximum annual capital expenditures.On March 23, 2007 we entered into an amendment to the Loan and SecurityAgreement which waived the non-compliance with these covenants. The amendmentalso lowered the quarterly net income covenant to a cumulative balance of $0through September 30, 2007, and adjusted the fixed charge coverage ratio to 1.0to 1.0 at December 31, 2007 and 1.2 to 1.0 as of the end of each fiscal quarterthereafter.

***OffBalance Sheet Arrangements***

We do not currently haveany off-balance sheet arrangements.

***New Accounting Standards***

Severalnew accounting standards have been issued and adopted, except for SFAS No. 159,which the Company has not yet adopted. None of these standards had a materialimpact on our financial position, results of operations, or liquidity.

InJuly 2006, the FASB issued Interpretation No. 48, *Accounting for Uncertainty in Income Taxes*, (“FIN 48”),which clarifies the accounting for uncertainty in income taxes recognized inthe financial statements in accordance with FASB Statement No. 109,*  Accounting for Income Taxes*. FIN48 provides guidance on the financial statement recognition and measurement ofa tax position taken or expected to be taken in a tax return. FIN 48 alsoprovides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosures, and transition. FIN 48 is effectivefor fiscal years beginning after December 15, 2006.

In September 2006, theSEC issued SAB 108, *Considering the Effects ofPrior Year Misstatements when Quantifying Misstatements in Current YearFinancial Statements* (SAB 108). SAB 108 provides interpretiveguidance on how the effects of the carryover or reversal of prior yearmisstatements should be considered in quantifying a current year misstatement.The pronouncement prescribes an approach whereby the effect of all unrecordedidentified errors should be considered on all of the financial statementsrather than just either the effect on the balance sheet or the incomestatement. We adopted the provisions of SAB 108 as of December 31, 2006.The adoption of SAB 108 did not have a material impact on our consolidatedfinancial statements.

In September 2006, theFASB issued SFAS No. 157, *Fair Value Measurements*.SFAS 157 defines fair value, establishes a framework for measuring fairvalue and expands disclosures about fair value measurements. SFAS 157 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007 and interim periods within those fiscal years. We are inthe process of evaluating the impact SFAS 157 will have on our consolidatedfinancial statements.

In February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for Financial Assets and Financial Liabilitie*s.SFAS 159 allows entities to voluntarily choose to measure certain financialassets and liabilities at fair value (“fair value option”). The fair valueoption may be elected on an instrument-by-instrument basis and is irrevocable,unless a new election date occurs. If the fair value option is elected for aninstrument, SFAS 159 specifies that unrealized gains and losses for thatinstrument shall be reported in earnings at each subsequent reporting date.SFAS 159 is effective January 1, 2008. We are in the process of evaluatingthe impact that SFAS 159 will have on our consolidated financial statements.

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*Forward-Looking Statements*

This report contains “forward-looking statements” withinthe meaning of the Private Securities Litigation Reform Act of 1995 thatinvolve risks and uncertainties, many of which are beyond our control.  Our actual results could differ materiallyand adversely from those anticipated in such forward-looking statements as aresult of certain factors, including those set forth in our Annual Report onForm 10-K for the year ended December 31, 2006. Important factors that may cause actual results to differ fromprojections include, but are not limited to, for example:

·              adverse economic conditions;

·              inability to raise sufficientadditional capital to operate our business;

·              unexpected costs, lower thanexpected sales and revenues, and operating deficits;

·              adverse results of any legalproceedings;

·              inability to attract or retainqualified personnel, including sales and marketing, and scientific personnel;and

·              other specific risks that may bereferred to in this report and in our Annual Report on Form 10-K for theyear ended December 31, 2006, including those under “Risk Factors.”

All statements, other than statements of historicalfacts, included in this report regarding our strategy, future operations,financial position, estimated revenue or losses, projected costs, prospects,current expectations, forecasts, and plans and objectives of management areforward-looking statements.  When used inthis report, the words “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,”“expect,” “should,” “project,” “plan” and similar expressions are intended toidentify forward-looking statements, although not all forward-lookingstatements contain such identifying words. All forward-looking statements speak only as of the date of thisreport.  We do not undertake anyobligation to update any forward-looking statements or other informationcontained herein, except as required by federal securities laws.  You should not place undue reliance on theseforward-looking statements.  Although webelieve that our plans, intentions and expectations reflected in or suggestedby the forward-looking statements in this report are reasonable, we cannotassure you that these plans, intentions or expectations will be achieved.  We have disclosed important factors thatcould cause our actual results to differ materially from our expectations under“Risk Factors” in our Annual Report on Form 10-K for the year ended December31, 2006 and elsewhere in this report. These cautionary statements qualify all forward-looking statementsattributable to us or persons acting on our behalf.

Information regarding market and industry statisticscontained in this report is included based on information available to us thatwe believe is accurate.  It is generallybased on academic and other publications that are not produced for purposes ofsecurities offerings or economic analysis. We have not reviewed or included data from all sources, and we cannotassure you of the accuracy or completeness of the data included in thisreport.  Forecasts and otherforward-looking information obtained from these sources are subject to the samequalifications and the additional uncertainties accompanying any estimates offuture market size, revenue and market acceptance of products andservices.  We undertake no obligation toupdate forward-looking information to reflect actual results or changes inassumptions or other factors that could affect those statements.  See “Risk Factors” included in our AnnualReport on Form 10-K for the year ended December 31, 2006 for a more detaileddiscussion of uncertainties and risks that may have an impact on futureresults.

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**Item3.  Quantitative and Qualitative Disclosures About Market Risk**

The primary objective ofour investment activities is to preserve principal. Our funds are currentlyheld in checking accounts and money market funds which do not subject us torisk of a loss of principal due to changes in prevailing interest rates and ina portfolio of cash and cash equivalents that include investments ininvestment-grade securities, such as commercial paper, money market funds, governmentdebt securities and certificates of deposit with maturities of less than ninemonths. Some of these securities may be subject to market risk due to changesin prevailing interest rates, which may cause fluctuations in market value.

Twoof the main risks associated with these investments are interest rate risk andcredit risk.  Typically, when interest rates rise, there is acorresponding decline in the market value of debt securities. Fluctuations in interest rates would not have a material effect on ourfinancial statements because of the short-term nature of the securities inwhich we invest and our intention to hold the securities to maturity. Credit risk refers to the possibility that the issuer of the debt securitieswill not be able to make principal and interest payments.  We have limitedthe investments to investment grade or comparable securities and have notexperienced any losses on our investments to date due to credit risk.

The fair value of ourcash and short-term investment portfolio at March 31, 2007, approximated itscarrying value due to the short-term maturities of these investments. Thepotential decrease in fair value resulting from a hypothetical 10% increase ininterest rates at year-end for our investment portfolio is not material.

The fair value of ourlong-term debt at March 31, 2007, including current maturities, wasapproximately $1.9 million. Our long-term debt is set at the prime rate plus1.0% (9.25% at March 31, 2007).

**Item4.  Controls and Procedures**

Wemaintain disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in our reports filed under the SecuritiesExchange Act of 1934, as amended, is recorded, processed, summarized andreported within the time periods specified in the SEC’s rules and forms andthat such information is accumulated and communicated to our management,including our Chief Executive Officer and Chief Financial Officer, asappropriate, to allow for timely decisions regarding required disclosure. In designingand evaluating the disclosure controls and procedures, management recognizesthat any controls and procedures, no matter how well designed and operated, canprovide only reasonable assurance of achieving the desired control objectives,and management is required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

Asrequired by SEC Rule 13a-15(b), we carried out an evaluation, under thesupervision and with the participation of our management, including the ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures as of the end ofthe period covered by this report. Based on the foregoing, our Chief ExecutiveOfficer and Chief Financial Officer concluded that our disclosure controls andprocedures were effective to provide reasonable assurance that we would meetour disclosure obligations.

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**PART II — OTHER INFORMATION**

**Item1. Legal Proceedings**

In the normal course of business, we have become and might in the futurebecome involved in legal actions relating to its business. In management’sopinion, the resolution of any such pending legal actions are not expected tohave a material adverse effect on our consolidated financial position orresults of operations.

**Item1A.  Risk Factors**

There have been nomaterial changes in our risk factors from the information set forth in ourAnnual Report on Form 10-K for the year ended December 31, 2006.

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

UnregisteredOfferings

None.

Issuer Purchasesof Equity Securities

None.

##  

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## ** **

**Item 6.Exhibits**
| Exhibit  No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                |
|--------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1         |       | Third Amendment and Modification to Loan and Security  Agreement between InfoLogix, Inc., OPT Acquisition LLC, Embedded  Technologies, LLC and Sovereign Bank, dated as of March 23, 2007  (incorporated herein by reference to Exhibit 10.17 of our Annual Report on  Form 10-K for the fiscal year ended December 31, 2006). |
| 10.2         |       | Securities Account Pledge Agreement between InfoLogix,  Inc., OPT Acquisition LLC, Embedded Technologies, LLC and Sovereign Bank,  dated as of March 23, 2007 (incorporated herein by reference to Exhibit 10.17  of our Annual Report on Form 10-K for the fiscal year ended December 31,  2006).                             |
| 31.1         |       | Certification pursuant to Exchange Act Rules  13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.*                                                                                                                                                                                     |
| 31.2         |       | Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a),  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                      |
| 32.1         |       | Certification pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                      |
| 32.2         |       | Certification pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                      |

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(*) Filed herewith.

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**SIGNATURES**

Pursuantto the requirements of section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned; thereunto duly authorized, in Hatboro, Pennsylvania on May 15,2007.

 
|          | INFOLOGIX, INC. |                                                        |   |
|----------|-----------------|-------------------------------------------------------------|--------|
|     |            |                                                        |   |   |
|     | By:             | /s/ David T. Gulian                                         |   |   |
|     |            | David T. Gulian                                             |   |   |
| * * | * *        | *President and Chief Executive Officer*                     |   |   |
| * * | * *        | * *                                                    |   |   |
|     | By:             | /s/ John A. Roberts                                         |   |   |
|     |            | John A. Roberts                                             |   |   |
| * * | * *        | *Chief Financial Officer and Principal Accounting  Officer* |   |   |

 

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