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
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X QUARTERLY REPORT
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FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
-- or --
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TRANSITION REPORT
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FOR THE TRANSITION PERIOD FROM TO
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OSTEX INTERNATIONAL, INC.
Name of Registrant as Specified in Its Charter
0-25250
Commission File Number
STATE OF WASHINGTON
State or Other Jurisdiction of Incorporation or Organization
91-1450247
I.R.S. Employer 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
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Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING AS OF
AUGUST 1, 1998 WAS 12,696,250.
OSTEX INTERNATIONAL, INC.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Page
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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 4 - SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS.............................7
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K ..........................7
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 June 30, 1998, and audited condensed
balance sheet as of December 31, 1997, the unaudited condensed statements of
operations for the quarters ended June 30, 1998 and 1997, and for the six months
ended June 30, 1998 and 1997, and the statements of cash flow for the six months
ended June 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 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 is in the latter stages of adapting the Osteomark
assay to a serum format. 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 and to ultimately perform NTx testing on random access, automated
analyzers. The Company initiated clinical studies of its serum NTx test in an
ELISA format in June of 1998. These studies are scheduled for completion in the
third quarter of 1998.
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's 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 assemble 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 agreements with Hologic, Inc. ('Hologic'), a worldwide leader in
X-ray and ultrasound bone sonometers used to measure and/or estimate bone
density to assist in the diagnosis and monitoring of osteoporosis and other bone
diseases, and Metrika, Inc. ('Metrika'), a diagnostic device company, to develop
physician office 'point-of-care' Osteomark assay devices.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
The Company had revenues from product sales of $1,011,000 for the quarter
ended June 30, 1998, compared to $949,000 for the quarter ended June 30, 1997.
Revenue in the 1998 quarter increased 7% compared to the 1997 due to a slightly
higher number of Osteomark kits sold to domestic distributors and
laboratories and an increase in research testing services. The Company recorded
approximately $16,000 of revenue from research testing services during the
second quarter 1998 compared to zero in the same quarter of 1997.
The Company's gross margin has remained constant in the quarter ended
June 30, 1998, compared to the gross margin in the second quarter of 1997. In
the 1998 quarter, revenue increased despite a slight decrease in average pricing
levels as sales to distributors increased as a percentage of total sales over
direct customers as well as a decrease in unit production for the Osteomark
urine assay. Cost of products sold primarily include labor costs, material
management, equipment and facility costs. In addition, the Company incurred
startup costs associated with the introduction of the serum NTx 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 $686,000 for
the quarter ended June 30, 1998, compared to $1,354,000 for the quarter ended
June 30, 1997. The $668,000 decrease resulted primarily from completion of
contract development payments pursuant to NTx point-of-care co-development
programs during the first quarter of 1998. The Company incurred higher costs in
the second quarter of 1997 while initiating these programs. 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 it continues its clinical studies of its serum
NTx test in an ELISA format.
Selling, general and administrative expenses totaled $1,774,000 for the
quarter ended June 30, 1998, compared to $1,862,000 for the period ended June
30, 1997. The decrease was due to restructuring within the administrative areas
of the Company which reduced the number of personnel, the completion of
litigation in connection with the arbitration against Boehringer Mannheim
Diagnostics, and the resignation of certain executive management during the
fourth quarter of 1997 who were not replaced. The decrease was offset by an
increase in expenses associated with the promotion and advertising of the
Osteomark test and higher costs associated with patent prosecution, litigation
costs in connection with the Company's legal action against Osteometer A/S
('Osteometer'), and defense costs associated with litigation initiated by C.R.
Bard Inc. ('Bard')(see 'Legal Proceedings' in Part II, Item 1 of this Form
10-Q). Selling, general and administrative expenses are expected to increase in
future quarters as the Company implements new marketing programs to elevate
physician and consumer awareness of the Osteomark test.
Interest income totaled $202,000 for the quarter ended June 30, 1998,
compared to $230,000 for the quarter ended June 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 SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
The Company recorded revenues of $1,592,000 for the six month period
ended June 30, 1998, compared to $1,603,000 for the six month period ended June
30, 1997. The decreased revenues were due to lower volumes of Osteomark kits
sold to research and industrial laboratories during the six months ended June
30, 1998, compared to the same period of 1997.
Cost of products sold increased 2% as a percentage of sales for the
quarter ended June 30, 1998, compared to the same quarter in 1997. The increase
in cost of products sold as a percentage of sales during the first six months of
1998 compared to the same period of 1997 resulted from a lower unit production
volume and a slight decrease in the average price due to an increased level of
shipments to distributors over direct customers during the 1998 period.
Additionally, costs in the 1998 period increased within manufacturing due to
startup costs associated with the introduction of the NTx 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 $1,521,000
for the six month period ended June 30, 1998, compared to $2,432,000 for the six
months ended June 30, 1997. The decrease of $911,000 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 the first quarter of 1998 contributed approximately
$445,000 to the decrease for the six months ended June 30, 1998, compared to the
same period of 1997. The Company anticipates development to continue for a NTx
point-of-care product in future quarters.
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 six months ended June 30, 1998, compared to the same period of 1997.
Clinical study expenses decreased approximately $218,000 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 in the 1998 period because of a
consolidation of research from its laboratory located in Portland, Oregon, into
the Seattle laboratory in July 1997.
Selling, general and administrative expenses totaled $4,025,000 for the
six month period ended June 30, 1998, compared to $3,785,000 for the six months
ended June 30, 1997. The higher expense level was due to an increase in expenses
associated with the promotion and advertising of the Osteomark test and higher
costs associated with patent prosecution, litigation costs in connection with
the Company's legal action against Osteometer, and defense costs associated with
litigation initiated by Bard (see 'Legal Proceedings' in Part II, Item 1 of this
Form 10-Q) despite lower expenses from restructuring of administrative areas,
the completion of certain litigation and the resignation of certain executive
management. Selling, general and administrative expenses are expected to
increase as the Company implements new marketing programs to elevate physician
and consumer awareness of the Osteomark test.
Interest income totaled $420,000 for the six month period ended June 30,
1998, compared to $479,000 for the same period ended June 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 June 30, 1998, the Company had $14,215,000 in cash and cash
equivalents and short-term investments, working capital of $14,496,000 and total
shareholders' equity of $17,593,000. As a result of funding operating losses
during the six months ended June 30, 1998, cash, cash equivalents and short-term
investments decreased by $4,750,000, working capital decreased by $3,872,000 and
shareholders equity decreased by $4,051,000. During the six month period ended
June 30, 1998, the Company purchased $71,000 in property, plant and equipment
and reduced notes payable by $89,000.
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
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 does not currently have any information concerning the Year 2000
compliance status of its suppliers and 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, 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's 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 June 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 February 23, 1999.
Management intends to continue to vigorously assert its position in the lawsuit.
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.
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. On June 8, 1998, the Court denied Bard's motion for reconsideration.
On June 29, 1998, the parties filed a joint stipulation of dismissal without
prejudice of Ostex' counterclaim for declaratory judgment of invalidity and
unenforceability. In that filing, Bard indicated that it was presently
considering whether to appeal the Court's judgment that the `027 patent is not
infringed.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 18, 1998, the Company held its 1998 Annual Meeting of Shareholders
(the 'Annual Meeting'), at which the following members were elected to the Board
of Directors:
Affirmative Votes
Votes Withheld
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Thomas A. Bologna 11,155,024 63,631
Elisabeth L. Evans, M.D. 11,152,217 66,438
Gregory D. Phelps 11,156,074 62,581
John H. Trimmer 11,152,074 66,581
The following members continued their terms on the Board of Directors:
Thomas J. Cable
David R. Eyre, Ph.D.
Fredric J. Feldman, Ph.D.
The following proposals were also approved at the Annual Meeting:
Affirmative Votes Votes
Votes Against Withheld
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Ratification of Arthur Andersen LLP 11,134,144 38,659 45,852
as the Company's independent
auditors for the fiscal year ending
December 31, 1998
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
The following exhibit is filed herewith:
(1) 10.32 Development and Distribution Agreement dated June 8, 1998,
with Metrika, Inc.
27.1 Financial Data Schedule
(1) Confidential treatment requested. Exhibit omits information that has been
filed separately with the Commission.
(B) REPORTS ON FORM 8-K
None
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: August 12, 1998 By /S/ JOHN M. BRENNEMAN
----------------------------------
John M. Brenneman
Director of Finance and Operations
(principal financial and principal
accounting officer)
OSTEX INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
(In thousands, except share amounts)
June 30, December 31,
1998 1997
--------------- --------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,851 $ 2,201
Short-term investments 12,364 16,764
Trade receivables and other current assets, net 1,431 1,344
Inventory, at cost 183 201
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Total current assets 15,829 20,510
PROPERTY, PLANT AND EQUIPMENT, net of accumulated 2,695 2,965
depreciation
OTHER ASSETS 599 637
=============== ==============
Total assets $ 19,123 $ 24,112
=============== ==============
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,333 $ 2,142
NONCURRENT LIABILITIES:
Note payable, net of current portion 197 326
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Total liabilities 1,530 2,468
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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 (32) 3
Accumulated deficit (28,144) (24,128)
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Total shareholders' equity 17,593 21,644
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Total liabilities and shareholders' equity $ 19,123 $ 24,112
=============== ===============
The accompanying notes are an integral part of these
condensed balance sheets.
OSTEX INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Quarter Ended Year to Date
------------------------------------ ----------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
----------------- ----------------- ---------------- -----------------
REVENUE:
Product sales and research testing services $ 1,011 $ 949 $ 1,592 $ 1,603
----------------- ----------------- ---------------- -----------------
Total revenues 1,011 949 1,592 1,603
OPERATING EXPENSES:
Cost of products sold 263 261 452 412
Research and development 686 1,354 1,521 2,432
Selling, general and administrative 1,774 1,862 4,025 3,785
----------------- ----------------- ---------------- -----------------
Total operating expenses 2,723 3,477 5,998 6,629
----------------- ----------------- ---------------- -----------------
Loss from operations (1,712) (2,528) (4,406) (5,026)
OTHER INCOME (EXPENSE):
Interest income 202 230 420 479
Interest expense (15) (19) (30) (39)
----------------- ----------------- ---------------- -----------------
Net loss $ (1,525) $ (2,317) $ (4,016) $ (4,586)
================= ================= ================ =================
Basic and diluted net loss per common and
common equivalent share $ (0.12) $ (0.18) $ (0.32) $ (0.37)
Shares used in calculation 12,696 12,557 12,696 12,502
The accompanying notes are an integral part of these
condensed financial statements.
OSTEX INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Year to Date
--------------------------------------------
June 30, June 30,
1998 1997
--------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES $ (4,555) $ (5,000)
--------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (29,809) (3,592)
Proceeds from sales of short-term investments 34,174 8,791
Purchase of property, plant and equipment (71) (763)
--------------------- ---------------------
Net cash provided by investing activities 4,294 4,436
--------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options 0 118
Payments on note payable (89) (79)
--------------------- ---------------------
Net cash provided by financing activities (89) 39
--------------------- ---------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS (350) (525)
CASH AND CASH EQUIVALENTS, beginning of period 2,201 1,289
--------------------- ---------------------
CASH AND CASH EQUIVALENTS, end of period $ 1,851 $ 764
===================== =====================
The accompanying notes are an integral part of these
condensed financial statements.
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 years
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. NEW ACCOUNTING PRONOUNCEMENTS
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 six months ended June 30, 1998 and
June 30, 1997, are as follows (in thousands) :
June 30, June 30,
1998 1997
------------ ------------
Net loss $ (4,016) $ (4,586)
Unrealized gain/(loss)
on short-term investments (35) (105)
------------ ------------
Total comprehensive loss $ (4,051) $ (4,691)
============ ============