-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J67DIsHOw8aWKEwKGh08nIhAcB52g4kiLKaYPkI50Lf/gcCnK9mKZpKNdshZizrr pb/F0epJE/6Jw6Pi8/T9hg== 0001047469-98-040190.txt : 19981113 0001047469-98-040190.hdr.sgml : 19981113 ACCESSION NUMBER: 0001047469-98-040190 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSTEX INTERNATIONAL INC /WA/ CENTRAL INDEX KEY: 0000932631 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 911450247 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25250 FILM NUMBER: 98744504 BUSINESS ADDRESS: STREET 1: 2203 AIRPORT WY S STREET 2: STE 400 CITY: SEATTLE STATE: WA ZIP: 98134 BUSINESS PHONE: 2062928082 MAIL ADDRESS: STREET 1: 2203 AIRPORT WAY STREET 2: SUITE 400 CITY: SEATLE STATE: WA ZIP: 98134 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- FORM 10-Q PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 /X/ QUARTERLY REPORT FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 -- or -- / / TRANSITION REPORT FOR THE TRANSITION PERIOD FROM TO ----- ----- ------------------------- OSTEX INTERNATIONAL, INC. NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER 0-25250 COMMISSION FILE NUMBER STATE OF WASHINGTON 91-1450247 STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION IDENTIFICATION NUMBER 2203 AIRPORT WAY SOUTH, SUITE 400, SEATTLE, WASHINGTON 98134 206-292-8082 ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES [N/A] FORMER NAME, ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT ------------------------- Indicate by checkmark whether the registrant (1) has filed all Yes [X] reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such No [ ] shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING AS OF OCTOBER 22, 1998 WAS 12,696,250. ------------------------- OSTEX INTERNATIONAL, INC. INDEX TO FORM 10-Q PART I - FINANCIAL INFORMATION
PAGE ---- ITEM 1 - FINANCIAL STATEMENTS Condensed Balance Sheets.................................... F-1 Condensed Statements of Operations.......................... F-2 Condensed Statements of Cash Flow........................... F-3 Notes to Condensed Financial Statements .................... F-4 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......... 2 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................................... 6 PART II -- OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS....................................... 6 ITEM 2 - CHANGES IN SECURITIES................................... 6 ITEM 3 - EXHIBITS AND REPORTS ON FORM 8-K........................ 7
-1- PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Attached hereto are Ostex International, Inc.'s (the "Company's or Ostex' ") unaudited condensed balance sheet as of September 30, 1998, and audited condensed balance sheet as of December 31, 1997, the unaudited condensed statements of operations for the quarters ended September 30, 1998 and 1997, and for the nine months ended September 30, 1998 and 1997, and the statements of cash flow for the nine months ended September 30, 1998 and 1997. Notes follow the unaudited financial statements and are an integral part thereof. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q contains forward-looking statements which reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below, that could cause actual results or the timing of certain events to differ materially from historical results or those anticipated. Words used herein such as "believes," "anticipates," "expects," "intends," and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. In addition, the disclosures in this Item 2 under the caption "Other Factors that May Affect Operating Results", consist principally of a brief discussion of risks which may affect future results and are thus, in their entirety, forward-looking in nature. Readers are urged to carefully review and consider the various disclosures made by the Company in this report and in the Company's other reports previously filed with the Securities and Exchange Commission (the "Commission"), including the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, that attempt to advise interested parties of the risks and factors that may affect the Company's business. OVERVIEW Ostex was incorporated in the State of Washington in 1989. The Company is engaged in the discovery and commercialization of products associated with osteoporosis and other collagen-related diseases. The Company believes that its lead product, the Osteomark-Registered Trademark- test, incorporates breakthrough technology in the area of bone resorption measurement. Osteoporosis is a significant health problem. According to the National Osteoporosis Foundation (the "NOF"), osteoporosis afflicts approximately 28 million people in the U.S. alone. Additionally millions of people are at risk of skeletal degradation associated with Paget's disease of bone, cancer that metastasizes to bone, hyperparathyroidism (overactivity of the parathyroid gland, characterized by a reduction of bone mass) and renal osteodystrophy. In spite of the serious human and economic consequences of these diseases (according to the NOF, the direct healthcare and indirect lost productivity costs of osteoporosis exceed $14 billion annually in the U.S. alone), medical intervention usually commences only after pain, immobility, fractures, or other symptoms have appeared. The Company expects the therapeutic market for osteoporosis will increase significantly. The Company also believes new therapeutic products are under development for osteoporosis, some of which are in late-stage clinical trials, and that the Osteomark test can be used to effectively predict a patient's response to osteoporosis therapy and monitor existing therapies and other therapies which may be developed. The Company is the exclusive licensee of the Osteomark technology, known clinically as the NTx assay, which is a urine test that can aid in healthcare decision-making at early menopause and beyond. The Osteomark assay is a non-invasive diagnostic test which quantitatively indicates the level of bone resorption. Individuals who are losing bone collagen at accelerated rates may progress to low bone mass, a major cause of osteoporosis. The Company believes that early identification of high levels of bone resorption allows physicians the opportunity to prescribe antiresorptive therapy in cases where prescriptions may not have been made otherwise, thereby avoiding the onset of osteoporosis. The Company also believes that the Osteomark assay aids clinicians in monitoring the effects of -2- antiresorptive therapies in postmenopausal women, as well as in older patients who have already lost significant bone mass. On May 8, 1995, the Company's Osteomark assay became commercially available in the United States as a urinary assay that provides a quantitative measure of the excretion of cross-linked N-telopeptides of Type I collagen (NTx) as an indicator of human bone resorption, and in July 1996 the Company received expanded claims from the Food and Drug Administration (the "FDA") for the assay. The 1996 claims allow that an Osteomark test measurement, if taken prior to the initiation of hormonal antiresorptive therapy, can be utilized to predict a patient's response to that therapy, in terms of its effect on bone mineral density. Additionally, the claims allow that the test can be used for therapeutic monitoring of antiresorptive therapies in postmenopausal women, as well as individuals diagnosed with osteoporosis and Paget's disease, and for therapeutic monitoring of estrogen-suppressing therapies. In March 1998 the claims were further expanded by allowing that, in addition to the 1996 claims, an Osteomark test measurement can identify the probability of a decrease in bone mineral density in postmenopausal women taking calcium supplements relative to those treated with hormonal antiresorptive therapy. The Company is manufacturing and marketing the Osteomark assay initially in an Enzyme-linked Immunosorbent Assay ("ELISA") microtiter plate format for testing urine samples and has successfully completed clinical trials of a version of Osteomark to measure NTx in serum. These studies were submitted to the FDA in September 1998. The Company believes that the use of a serum NTx test provides a number of advantages to testing laboratories, including the elimination of the requirement to normalize NTx values to creatinine concentration as well as allowing testing of NTx in serum specimens that may have been collected by the physician for testing other analytes such as cholesterol levels, etc. Worldwide promotion of the Osteomark test kits is supported by Johnson & Johnson Clinical Diagnostics, Inc. ("Johnson & Johnson"). In 1995 the Company entered into research, development, license and supply agreements with Johnson & Johnson. These agreements grant Johnson & Johnson a license to manufacture, sell and distribute certain products using Ostex' bone resorption technology. Currently, Ostex sells Johnson & Johnson the Osteomark assay in the existing microtiter plate format for distribution in the United States and certain foreign countries and Johnson & Johnson is adapting the urine assay for use with its automated analyzer. Ostex will receive royalties on Johnson & Johnson's automated analyzer sales of products incorporating licensed Ostex technology. Ostex has also entered into a research and development agreement and a license agreement with Mochida Pharmaceutical Co., Ltd. ("Mochida"), a Japanese pharmaceutical company, for the commercialization of the Osteomark assay in Japan. Under the research and development agreement, Mochida has an option to license the NTx serum assay upon completion of certain milestones. Under the license agreement, Ostex granted Mochida exclusive marketing and distribution rights to certain Ostex products in Japan, and Ostex sells to Mochida the critical reagents necessary for Mochida to manufacture Osteomark kits. In January 1998 Mochida launched the Osteomark assay in Japan for the management of patients with hyperparathyroidism and for patients with metastatic bone tumors. The Company also plans to develop the Osteomark assay in other formats, including formats suitable for use in the physician's office. The Company has entered into an agreement with Metrika, Inc. ("Metrika"), a diagnostic device company, to develop physician office "point-of-care" Osteomark assay devices. In June 1998 the Company entered into a new agreement with Metrika whereby the Company has worldwide marketing and sales rights to the Metrika device for use with bone resorption testing for all fields of use. In August 1998 the Company formally concluded its "point-of-care" device co-development agreement with Hologic, Inc. and has opted to concentrate its "point-of-care" and "over-the-counter" co-development efforts on its relationship with Metrika. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997 Total revenues were $623,000 for the quarter ended September 30, 1998, compared to $1,505,000 for the quarter ended September 30, 1997. Product sales were $623,000 during the three month period ended September 30, 1998, compared to $1,055,000 for the same period in 1997. The 41% decrease in product sales was due to lower volumes of Osteomark kits being sold to Johnson & Johnson and national reference laboratories during the 1998 quarter compared to the same period of 1997. License and research and development fees were zero during the three month period ended September 30, 1998, compared to $450,000 during the same period in 1997. The $450,000 reduction in fees collected -3- under license and research and development agreements with Mochida was expected and is due to attainment of scheduled milestones. The Company does not expect to receive any further milestone payments under the license agreement with Mochida and future payments of up to $750,000 under the research and development agreement are contingent upon Mochida's decision to exercise its option to license the NTx serum assay and achievement of certain serum assay development milestones. The Company's gross margin on product sales was 65% for the quarter ended September 30, 1998, compared to 78% for the quarter ended September 30, 1997. The 13% decrease was due primarily to an increase in unit manufacturing costs resulting from decreased production volume spreading fixed manufacturing costs over a lower base of units produced during the quarter ended September 30, 1998, compared to the quarter ended September 30, 1997. The gross margin is expected to continue to fluctuate depending on the volume and timing of customer orders and the production levels needed to fill customer demand. The Company's research and development expenditures totaled $661,000 for the quarter ended September 30, 1998, compared to $1,090,000 for the quarter ended September 30, 1997. The $429,000 decrease resulted primarily from completion of contract development payments pursuant to NTx assay point-of-care co-development programs during the first quarter of 1998. The decreased research and development expenses were also attributable to the completion of clinical studies that were ongoing during the 1997 quarter. The Company's clinical study expenses during the 1997 quarter included a study for the determination of the NTx reference range in males, a study to complement physician interpretation of NTx results in postmenopausal women, and preliminary studies for the use of the Osteomark test in helping to identify bone metastases. The Company anticipates research and development expenses to increase in future quarters as a result of continued clinical studies and other costs associated with the introduction of its NTx serum test. Selling, general and administrative expenses totaled $1,759,000 for the quarter ended September 30, 1998, compared to $1,903,000 for the period ended September 30, 1997. The decrease was due to previous restructuring within the administrative areas of the Company which reduced the number of personnel, the resignation of certain executive management during the fourth quarter of 1997 who were not replaced, the completion of litigation in connection with the arbitration against Boehringer Mannheim Diagnostics, resolution of the C.R. Bard, Inc. case, and reduced activity associated with the Company's legal action against Osteometer Biotech A/S (see "Legal Proceedings" in Part II, Item 1 of this Form 10-Q). The decrease was offset by an increase in expenses associated with the promotion and advertising of the Osteomark test. Specifically, physician, clinical laboratory, and managed care advertising campaigns were initiated in September 1998. Interest income totaled $184,000 for the quarter ended September 30, 1998, compared to $196,000 for the quarter ended September 30, 1997. The decrease is due to lower invested balances resulting from using cash to fund the Company's operating losses. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997 The Company recorded revenues of $2,215,000 for the nine month period ended September 30, 1998, compared to $3,108,000 for the nine month period ended September 30, 1997. Product sales were $2,215,000 during the nine month period ended September 30, 1998, compared to $2,658,000 for the same period in 1997. The 17% decrease in product sales was due to lower volumes of Osteomark kits being sold to Johnson & Johnson, national reference laboratories, and research laboratories during the nine months ended September 30, 1998, compared to the same period of 1997. License and research and development fees were zero during the nine month period ended September 30, 1998, compared to $450,000 during the same period in 1997. The $450,000 reduction in fees collected under license and research and development agreements with Mochida was expected and is due to attainment of scheduled milestones. The Company does not expect to receive any further milestone payments under the license agreement with Mochida and future payments of up to $750,000 under the research and development agreement are contingent upon Mochida's decision to exercise its option to license the NTx serum assay and achievement of certain serum assay development milestones. -4- The Company's gross margin on product sales was 70% for the nine month period ended September 30, 1998, compared to 76% for the nine month period ended September 30, 1997. The 6% decrease was due primarily to an increase in unit manufacturing costs resulting from decreased production volume spreading fixed manufacturing costs over a lower base of units produced during the nine month period ended September 30, 1998, compared to the nine month period ended September 30, 1997. Additionally, costs in the 1998 period increased within manufacturing due to startup costs associated with the introduction of the NTx serum assay to the production process. The gross margin is expected to continue to fluctuate depending on the volume and timing of customer orders and the production levels needed to fill customer demand. The Company's research and development expenditures totaled $2,182,000 for the nine month period ended September 30, 1998, compared to $3,522,000 for the nine months ended September 30, 1997. The decrease of $1,340,000 was primarily due to lower expenses in connection with the Company's point-of-care programs. Reduced obligations for contract development payments for the NTx point-of-care development program in 1998 contributed approximately $691,000 to the decrease for the nine months ended September 30, 1998, compared to the same period in 1997. The Company anticipates increased research and development expenses as a result of continued clinical studies and other costs associated with the introduction of its NTx serum assay. The completion of clinical studies and the closing of a laboratory in Portland also contributed to the decrease in research and development expenses for the nine months ended September 30, 1998, compared to the same period in 1997. Clinical study expenses decreased approximately $314,000 in the 1998 period compared to 1997. Included in the Company's clinical study expenses during the 1997 quarter was a study for the determination of the NTx reference range in males, a study to complement physician interpretation of NTx results in postmenopausal women, and preliminary studies for the use of the Osteomark test in helping to identify bone metastases. These studies were completed in 1997. Additionally, research and development decreased approximately $152,000 in the 1998 period because of a consolidation of research from the Company's laboratory located in Portland, Oregon, into the Seattle laboratory in July 1997. Selling, general and administrative expenses totaled $5,784,000 for the nine month period ended September 30, 1998, compared to $5,688,000 for the nine months ended September 30, 1997. The approximately $96,000 increase in expenses was due to an increase in expenses associated with the promotion and advertising of the Osteomark test. This increase was offset by lower legal costs resulting from the completion of litigation in connection with the arbitration against Boehringer Mannheim Diagnostics, resolution of the C.R. Bard, Inc. case, and reduced activity associated with the Company's legal action against Osteometer Biotech A/S (see "Legal Proceedings" in Part II, Item 1 of this Form 10-Q) as well as reduced expenses resulting from a prior restructuring within the administrative areas of the Company which reduced the number of personnel and the resignation of certain executive management during the fourth quarter of 1997 who were not replaced. Interest income totaled $604,000 for the nine month period ended September 30, 1998, compared to $675,000 for the same period ended September 30, 1997. The decrease is due to lower invested balances resulting from using cash to fund the Company's operating losses. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1998, the Company had $12,943,000 in cash and cash equivalents and short-term investments, working capital of $12,780,000 and total shareholders' equity of $15,735,000. As a result of funding operating losses during the nine months ended September 30, 1998, cash, cash equivalents and short-term investments decreased by $6,022,000, working capital decreased by $5,588,000 and shareholders equity decreased by $5,909,000. During the nine month period ended September 30, 1998, the Company purchased $92,000 in property, plant and equipment and reduced notes payable by $136,000. The Company's future capital requirements depend upon many factors, including the timing and effectiveness of commercialization activities and collaborative arrangements; continued scientific progress in its research and development programs; the costs involved in filing, prosecuting and enforcing patent claims; the costs involved in legal efforts to enforce patent rights; and the time and costs involved in obtaining regulatory approvals. The Company is -5- likely to require additional funds from equity or debt financing and there can be no assurance that such additional funds will be available on favorable terms, if at all. Due to the Company's significant long-term cash requirements, it may seek to raise additional capital if conditions in the public equity markets are favorable, even if the Company does not have an immediate need for additional cash at that time. If additional financing is not available, the Company anticipates that its existing available cash, its future license and research revenues from existing collaboration agreements, product sales and interest income from short-term investments will be adequate to satisfy its capital requirements and to fund operations through 1999. No assurance can be given, however, that such funds will in fact be adequate until that time, since the Company's prediction is subject to a number of risks and uncertainties, including those discussed in the following paragraph. OTHER FACTORS THAT MAY AFFECT OPERATING RESULTS The Company's operating results may fluctuate due to a number of factors including, but not limited to, volume and timing of product sales, product pricing, market acceptance of the Company's products, changing economic conditions in the healthcare industry, delays and increased costs of product and technology development, the Company's ability to develop and maintain collaborative arrangements, the timing of payments under those arrangements, the outcome of litigation, and the effect of the Company's accounting policies, as well as other risk factors detailed in the Company's 1997 Form 10-K and other Commission filings. All of the foregoing factors are difficult for the Company to predict and can materially adversely affect the Company's business and operating results. The Company is currently in the process of evaluating its information technology infrastructure for the Year 2000 compliance. The Company does not expect that the cost to modify its information technology infrastructure to be Year 2000 compliant will be material to its financial condition or results of operations. The Company does not anticipate any material disruption in its operations as a result of any failure by the Company to be in compliance. The Company is presently in the process of certifying the Year 2000 compliance status of its suppliers. The Company does not currently have any information concerning the Year 2000 compliance status of its customers. However, the Company does fall into the Year 2000 compliance audit of many of its customers. In the event that any of the Company's significant suppliers or customers do not successfully and timely achieve Year 2000 compliance, the Company's business or operations could be adversely affected. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In June 1996, the Company filed an action in the United States District Court for the Western District of Washington against Osteometer Biotech A/S ("Osteometer"), a medical technology company based in Denmark, and Diagnostic Systems Laboratories Inc. for patent infringement of United States Patent No. 5,455,179. The Company believes Osteometer's bone resorption immunoassay incorporates technology which infringes patented Ostex technology. In September 1996, the defendants filed a response denying infringement and counterclaimed that Ostex' patent is invalid and unenforceable. By order dated July 7, 1997, the Court granted Ostex' motion to file a supplemental complaint, to add a second cause of action based upon United States Patent No. 5,641,837, which issued on September 24, 1997. On October 24, 1997, Ostex filed a second supplemental complaint to add third and fourth causes of action based upon U.S. Patent No. 5,652,112, which issued on July 29, 1997, and U.S. Patent No. 5,656,439, which issued on August 12, 1997. The lawsuit is currently scheduled for trial commencing August 24, 1999. Management intends to continue to vigorously assert its position in the lawsuit. -6- On April 9, 1997, the Company was served with a lawsuit filed in the United States District Court, Central District of California by C.R. Bard, Inc. ("Bard"). The complaint alleged that Ostex' Osteomark product infringed U.S. Patent No. 4,628,027 assigned to Bard in 1993. On April 22, 1998, the Court issued an order granting Ostex' motion for summary judgment and dismissed Bard's lawsuit with prejudice. Bard did not appeal this decision. ITEM 2. CHANGES IN SECURITIES None ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 27.1 Financial Data Schedule (b) REPORTS ON FORM 8-K None -7- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OSTEX INTERNATIONAL, INC. DATE: November 16, 1998 By /S/ JOHN M. BRENNEMAN ---------------------------------- John M. Brenneman Director of Finance and Operations (principal financial and principal accounting officer) -8- OSTEX INTERNATIONAL, INC. CONDENSED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
September 30, December 31, 1998 1997 ---------------- ---------------- (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 3,147 $ 2,201 Short-term investments 9,796 16,764 Trade receivables and other current assets, net 816 1,344 Inventory, at cost 225 201 ---------------- ---------------- Total current assets 13,984 20,510 PROPERTY, PLANT AND EQUIPMENT, net of accumulated 2,544 2,965 depreciation OTHER ASSETS 599 637 ---------------- ---------------- Total assets $ 17,127 $ 24,112 ---------------- ---------------- ---------------- ---------------- CURRENT LIABILITIES: Accounts payable and accrued expenses $ 1,204 $ 2,142 NONCURRENT LIABILITIES: Note payable, net of current portion 188 326 ---------------- ---------------- Total liabilities 1,392 2,468 ---------------- ---------------- SHAREHOLDERS' EQUITY: Common stock, $.01 par value, 50,000,000 authorized; 12,696,250 and 12,696,250 issued and outstanding, respectively 127 127 Additional paid-in capital 45,642 45,642 Accumulated other comprehensive income - unrealized (loss)/gain on short-term investments (48) 3 Accumulated deficit (29,986) (24,128) ---------------- ---------------- Total shareholders' equity 15,735 21,644 ---------------- ---------------- Total liabilities and shareholders' equity $ 17,127 $ 24,112 ---------------- ---------------- ---------------- ----------------
The accompanying notes are an integral part of these condensed balance sheets. F - 1 OSTEX INTERNATIONAL, INC. CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Quarter Ended Year to Date ----------------------------- ----------------------------- September 30, September 30, September 30, September 30, 1998 1997 1998 1997 -------------- -------------- -------------- -------------- REVENUE: Product sales $ 623 $ 1,055 $ 2,215 $ 2,658 License and research and development fees $ - $ 450 $ - $ 450 -------------- -------------- -------------- -------------- Total revenues 623 1,505 2,215 3,108 OPERATING EXPENSES: Cost of products sold 217 228 669 640 Research and development 661 1,090 2,182 3,522 Selling, general and administrative 1,759 1,903 5,784 5,688 -------------- -------------- -------------- -------------- Total operating expenses 2,637 3,221 8,635 9,850 -------------- -------------- -------------- -------------- Loss from operations (2,014) (1,716) (6,420) (6,742) OTHER INCOME (EXPENSE): Interest income 184 196 604 675 Interest expense (13) (18) (43) (57) -------------- -------------- -------------- -------------- Net loss $ (1,843) $ (1,538) $ (5,859) $ (6,124) -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Basic and diluted net loss per common and common equivalent share $ (0.15) $ (0.12) $ (0.46) $ (0.49) Shares used in calculation 12,696 12,635 12,696 12,547
The accompanying notes are an integral part of these condensed financial statements. F - 2 OSTEX INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Year to Date ------------------------------------- September 30, September 30, 1998 1997 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES $ (5,732) $ (5,872) ----------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments (31,606) (3,592) Proceeds from sales of short-term investments 38,512 11,206 Purchase of property, plant and equipment (92) (1,093) ----------------- ----------------- Net cash provided by investing activities 6,814 6,521 ----------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of common stock options 0 124 Proceeds from borrowings on note payable 0 0 Payments on note payable (136) (121) ----------------- ----------------- Net cash provided by financing activities (136) 3 ----------------- ----------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 946 652 CASH AND CASH EQUIVALENTS, beginning of period 2,201 1,289 ----------------- ----------------- CASH AND CASH EQUIVALENTS, end of period $ 3,147 $ 1,941 ----------------- ----------------- ----------------- -----------------
The accompanying notes are an integral part of these condensed financial statements. F - 3 OSTEX INTERNATIONAL, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The unaudited condensed financial statements include the accounts of Ostex International, Inc. (a Washington corporation) (the "Company"). These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission. While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim periods, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 1997. NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE The Company adopted SFAS No. 128, "Earnings per Share," effective December 15, 1997. Basic net loss per share is the net loss divided by the average number of shares outstanding during the year. Diluted net loss per share is calculated as the net loss divided by the sum of the average number of shares outstanding during the year plus the net additional shares that would have been issued had all dilutive options been exercised, less shares that would be repurchased with the proceeds from such exercise (Treasury Stock Method). During all periods presented, the effect of including outstanding options is antidilutive, therefore, no options are considered in the calculation of diluted net loss per share. There is no difference between the previously reported net loss per share and the basic and diluted net loss per share. 2. CONTINGENCIES LEGAL PROCEEDINGS Refer to Part II, Item 1 of this Form 10-Q. 3. COMPREHENSIVE INCOME The Company has adopted SFAS No. 130, "Reporting Comprehensive Income", which establishes standards for reporting and disclosure of comprehensive income. The components of comprehensive income for the nine months ended September 30, 1998 and September 30, 1997, are as follows (in thousands) :
September 30, September 30, 1998 1997 ---------- ---------- Net loss $ (5,859) $ (6,124) Unrealized gain/(loss) on short-term investments (51) (89) ---------- ---------- Total comprehensive loss $ (5,910) $ (6,213) ---------- ---------- ---------- ----------
F - 4 EX-27 2 EXHIBIT 27
5 3-MOS DEC-31-1998 SEP-30-1998 3,147 9,796 471 50 225 13,984 4,770 2,226 17,127 1,204 188 0 0 127 15,608 17,127 623 623 217 217 2,420 0 171 (1,843) 0 (1,843) 0 0 0 (1,843) (.15) (.15)
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