<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- ------ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
X EXCHANGE ACT OF 1934
- ------
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
-- or --
- ------ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
X EXCHANGE ACT OF 1934
- ------
FOR THE TRANSITION PERIOD FROM TO
----- -----
--------------------
0-25250
COMMISSION FILE NUMBER
OSTEX INTERNATIONAL, INC.
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
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
--------------------
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
----- -----
THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING AS OF MAY
7, 1998 WAS 12,696,250.
--------------------
<PAGE>
OSTEX INTERNATIONAL, INC.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
PAGE
----
ITEM 1 - FINANCIAL STATEMENTS 2
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 5
PART II -- OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 5
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 6
<PAGE>
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 March 31, 1998, and audited condensed
balance sheet as of December 31, 1997, the unaudited condensed statements of
operations for the three months ended March 31, 1998 and 1997, and the unaudited
condensed statements of cash flow for the three months ended March 31, 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 $10 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 osteoporosis therapeutic market
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 provides the
opportunity to predict skeletal response (bone mineral density) to hormonal
antiresorptive therapy in postmenopausal women which are intended to prevent 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.
<PAGE>
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 plans to initiate clinical studies of its serum NTx test
in an ELISA format during the second 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.
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND MARCH 31, 1997
Total revenues were $581,000 for the quarter ended March 31, 1998,
compared to $654,000 for the quarter ended March 31, 1997. Product sales were
$556,000 and research testing services were $25,000 during the three month
period ended March 31, 1998, compared to product sales of $654,000 for the same
period in 1997. The decrease in product sales was due to lower orders for
Osteomark kits from domestic reference laboratories.
The Company's gross margin decreased to 67% in the quarter ended March
31, 1998, compared to a gross margin of 77% in the first quarter of 1997. While
overall pricing levels have increased slightly in the first quarter of 1998
compared to the 1997 quarter, lower production volume negatively impacted the
1998 quarter. Cost of products sold primarily include labor costs, materials
management, equipment and facility costs. The increase of cost of products sold
in the first quarter of 1998 compared to the same quarter in 1997 resulted from
a slight increase in labor costs and royalty payments on product sales, and a
lower production volume compared to the 1997 first quarter. The lower production
volume adversely impacted gross margin as unabsorbed overhead was allocated to
cost of products sold in the quarter ended March 31, 1998. 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 $835,000 for
the quarter ended March 31, 1998, compared to $1,078,000 for the quarter ended
March 31, 1997. The $243,000 decrease was primarily attributable to a higher
level of clinical trial activity in the 1997 quarter. Included in the Company's
clinical studies in the 1997 quarter was a study for variability of NTx in
postmenopausal women, a study for the determination of variability and the NTx
reference range in males, and a study 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 with the commencement of
further clinical trials. The decrease in research and development expenses was
also attributable to a restructuring of the University of Washington (the "UW")
research agreements during 1997. The restructuring reduced the expenses paid to
the UW for research during the quarter ended March 31, 1998, compared to the
same quarter 1997.
Selling, general and administrative expenses totaled $2,251,000 for the
quarter ended March 31, 1998, compared to $1,923,000 for the quarter ended March
31, 1997. The $328,000 increase in the 1998 quarter was primarily due to higher
costs associated with patent prosecution, litigation costs in connection with
the Company's legal action against Osteometer Biotech A/S ("Osteometer"), and
defense costs associated with litigation initiated by C.R. Bard ("Bard") (see
"Legal Proceedings" in Part II, Item 1 of this 10-Q). Selling, general and
administrative expenses in the first quarter of 1998 also increased due to
promotion and advertising of the Osteomark test.
Interest income totaled $218,000 for the quarter ended March 31, 1998,
compared to $249,000 for the quarter ended March 31, 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 March 31, 1998, the Company had $16,404,000 in cash and cash
equivalents and short-term investments, working capital of $15,947,000 and total
shareholders' equity of $19,123,000. As a result of funding operating losses
during the three months ended March 31, 1998, cash, cash equivalents and
short-term investments decreased by $2,561,000, working capital decreased by
$2,421,000 and shareholders equity decreased by $2,521,000. During the three
month period ended March 31, 1998 the Company purchased $17,000 in property and
equipment and reduced notes payable by $44,000.
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
<PAGE>
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.
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'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
("Bard"). The complaint alleged that Ostex' Osteomark product infringes 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.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
The following exhibits are filed herewith:
10.2A Amendment to the Amended and Restated
Directors' Nonqualified Stock Option Plan
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
None
SIGNATURES
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.
DATED: May 14, 1998 By /S/ ROBERT M. LITTAUER
--------------------------------
Robert M. Littauer
Senior Vice President,
Finance and Administration
(principal financial and principal
accounting officer)
<PAGE>
<TABLE>
<CAPTION>
OSTEX INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
March 31, December 31,
1998 1997
----------------- ------------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 267 $ 2,201
Short-term investments 16,137 16,764
Trade receivables and other current assets, net 1,087 1,344
Inventory, at cost 246 201
----------------- ------------------
Total current assets 17,737 20,510
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation 2,813 2,965
OTHER ASSETS 637 637
================= ==================
Total assets $ 21,187 $ 24,112
================= ==================
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,790 $ 2,142
NONCURRENT LIABILITIES:
Note payable, net of current portion 274 326
----------------- ------------------
Total liabilities 2,064 2,468
----------------- ------------------
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value, 50,000,000
authorized; 12,696,250 issued
and outstanding 127 127
Additional paid-in capital 45,642 45,642
Accumulated other comprehensive
income - unrealized gain/(loss) on
short-term investments (27) 3
Accumulated deficit (26,619) (24,128)
----------------- ------------------
Total shareholders' equity 19,123 21,644
----------------- ------------------
Total liabilities and shareholders' equity $ 21,187 $ 24,112
================= ==================
</TABLE>
The accompanying notes are an integral part of these condensed
balance sheets.
<PAGE>
<TABLE>
<CAPTION>
OSTEX INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Quarter Ended
--------------------------------------
March 31, March 31,
1998 1997
------------------ -----------------
<S> <C> <C>
REVENUE:
Product sales and research testing services $ 581 $ 654
------------------ -----------------
OPERATING EXPENSES:
Cost of products sold 189 151
Research and development 835 1,078
Selling, general and administrative 2,251 1,923
------------------ -----------------
Total operating expenses 3,275 3,152
------------------ -----------------
Loss from operations (2,694) (2,498)
OTHER INCOME (EXPENSE):
Interest income 218 249
Interest expense (15) (20)
------------------ -----------------
Net loss $ (2,491) $ (2,269)
------------------ -----------------
Basic and diluted net loss per common and
common equivalent share $ (0.20) $ (0.18)
================== =================
Shares used in calculation of net loss per share 12,696 12,448
================== =================
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
<PAGE>
<TABLE>
<CAPTION>
OSTEX INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
(UNAUDITED)
Quarter Ended
--------------------------------------
March 31, March 31,
1998 1997
------------------ -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ (2,470) $ (2,632)
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (18,538) (3,033)
Proceeds from sales of short-term investments 19,135 5,276
Purchase of property, plant and equipment (17) (174)
------------------ -----------------
Net cash provided by investing activities 580 2,069
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options - 26
Payments on note payable (44) (39)
------------------ -----------------
Net cash used in financing activities (44) (13)
------------------ -----------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (1,934) (576)
CASH AND CASH EQUIVALENTS, beginning of period 2,201 1,289
------------------ -----------------
CASH AND CASH EQUIVALENTS, end of period $ 267 $ 713
================== =================
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
<PAGE>
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 three months ended March 31, 1998 and
March 31, 1997, are as follows (in thousands) :
March 31, March 31,
1998 1997
--------- ---------
Net loss $ (2,491) $ (2,269)
Unrealized gain/(loss)
on short-term investments (30) (171)
--------- ---------
Total comprehensive loss $ (2,521) $ (2,440)
========= =========
EXHIBIT 10.2A
OSTEX INTERNATIONAL, INC.
AMENDMENT TO DIRECTORS' NONQUALIFIED STOCK OPTION PLAN
An amendment to the Amended and Restated Directors' Nonqualified Stock
Option Plan was made by inserting the following sentence after the third
sentence of Section 3:
"In addition, each Director who was in office immediately following the
annual meeting of the Company's shareholders on June 2, 1997 and whose initial
grant was for less than a total of 25,000 shares shall be granted, as of March
4, 1998 (the date of amendment), an amount of shares, which when added to such
initial grant equals 25,000 shares, such grant to vest from the date of the
initial grant over the following three years as provided in Section 4.4."
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 267
<SECURITIES> 16,137
<RECEIVABLES> 576
<ALLOWANCES> 25
<INVENTORY> 246
<CURRENT-ASSETS> 17,737
<PP&E> 4,695
<DEPRECIATION> 1,882
<TOTAL-ASSETS> 21,187
<CURRENT-LIABILITIES> 1,790
<BONDS> 274
0
0
<COMMON> 127
<OTHER-SE> 18,996
<TOTAL-LIABILITY-AND-EQUITY> 21,187
<SALES> 581
<TOTAL-REVENUES> 581
<CGS> 189
<TOTAL-COSTS> 189
<OTHER-EXPENSES> 3,086
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203
<INCOME-PRETAX> (2,491)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,491)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,491)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
