<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
-- or --
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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 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
shorter period that the registrant was required to file such reports) No [ ]
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
31, 1999 WAS 12,467,800.
---------------------
<PAGE>
OSTEX INTERNATIONAL, INC.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C>
ITEM 1 - FINANCIAL STATEMENTS
Condensed Balance Sheets F-1
Condensed Statements of Operations F-2
Condensed Statements of Cash Flows 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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 6
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 6
</TABLE>
1
<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 September 30, 1999, and
audited condensed balance sheet as of December 31, 1998, the unaudited condensed
statements of operations for the three and nine months ended September 30, 1999
and 1998, and the unaudited condensed statements of cash flows for the nine
months ended September 30, 1999 and 1998. 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, 1998, 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, now available in
multiple test formats, incorporates breakthrough and patented technology for
the management and prevention of osteoporosis. As of September 30, 1999, the
Company had 35 employees.
Osteoporosis is a significant health problem. One hundred million people
worldwide are currently at risk of osteoporotic fracture. Twenty-five percent of
all postmenopausal women are affected by osteoporosis. Thirty-five million
people suffer from bone loss from other diseases. According to the National
Osteoporosis Foundation (the "NOF"), annual osteoporosis-related costs in the
U.S. exceed $14 billion. 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 continue to increase as the elderly population grows.
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 test, which is available in urine and serum formats that
can aid in healthcare decision-making at early menopause and beyond. The
Osteomark test 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
2
<PAGE>
postmenopausal women which are intended to prevent the onset of osteoporosis.
The Company also believes that the Osteomark test 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.
In May 1995, the Company's Osteomark test became commercially
available in the United States as a urinary test 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. In July 1996, the Company
received expanded claims for the urine test. 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 to measure the effect of
antiresorptive therapies in postmenopausal women, as well as individuals
diagnosed with osteoporosis and Paget's disease, and for the effect 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 test in an Enzyme-linked Immunosorbent Assay
("ELISA") format for testing urine or serum samples.
In February 1999, Osteomark NTx Serum became the first and only
commercially available test in the United States that measures specific bone
breakdown by osteoclasts using a blood sample. 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.
Worldwide promotion of the Osteomark urine test kits is also 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, Johnson & Johnson distributes in the
United States and certain foreign countries the Osteomark test in the
existing microtiter plate format. Ortho-Clinical Diagnostics, a Johnson &
Johnson company, announced in March 1999 the commercial availability of the
NTx test on its Vitros-Registered Trademark- automated analyzer. Ostex will
receive material transfer payments and royalties on Johnson & Johnson's sales
of products incorporating the Ostex technology. Under the Johnson & Johnson
license agreement, the Company has the right to license its technology for
use on automated instruments to one other company in addition to Johnson &
Johnson.
In 1992, Ostex 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
test in Japan. Under the research and development agreement, Mochida has an
option to license the NTx serum test and has paid Ostex $3,350,000 in
development fees to date. Future payments of $750,000 under the agreement are
contingent upon Mochida's decision to exercise its option. Under the license
agreement, Ostex granted Mochida exclusive marketing and distribution rights
to certain Ostex products in Japan. Since 1992, Mochida has paid Ostex
$2,500,000 in licensing fees for the Osteomark test. In January 1998, Mochida
launched the Osteomark test in Japan for the management of patients with
hyperparathyroidism and for patients with metastatic bone tumors. Ostex sells
Mochida the critical reagents to be assembled into finished products in Japan
by Mochida.
The Company also plans to develop the Osteomark test in other formats,
including formats suitable for use in the physician's office. The Company has
an agreement with Metrika, Inc. ("Metrika"), a diagnostic device company, to
manufacture a physician's office "point-of-care" Osteomark test device. The
Company expects to commence sales of this commercially available
point-of-care NTx test in late 1999.
3
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND
SEPTEMBER 30, 1998
Total revenues were $1,335,000 for the quarter ended September 30,
1999, compared to $623,000 for the quarter ended September 30, 1998. The
increase in product sales was due to higher sales of Osteomark urine kits to
distributors and research laboratories and growth in the sales of the
Osteomark serum kits.
The Company's gross margin increased to 79% in the quarter ended
September 30, 1999, compared to 65% in the third quarter of 1998. Cost of
products sold primarily includes labor costs, materials, equipment and
facility costs. The increase in cost of products sold in the third quarter of
1999 compared to the same quarter in 1998 resulted from the 114% increase in
total revenues. However, cost of products sold as a percentage of sales
decreased in the third quarter of 1999 compared to the same quarter in 1998
due to an increase in the average sales price per kit and the effect of
higher production volume compared to the 1998 third quarter. Since the
majority of the product cost is fixed, the higher the volume of production,
the lower the allocated cost per unit. The gross margin percentage can
fluctuate depending on the average sales price per kit and sales mix for both
urine and serum as well as production volumes.
The Company's research and development expenditures totaled $386,000
for the quarter ended September 30, 1999, compared to $661,000 for the
quarter ended September 30, 1998. The $275,000 decrease was attributable to
lower labor and overhead costs resulting from fewer personnel in third
quarter 1999 versus the same period in 1998, which was driven by the
restructuring plan implemented by the Company in December 1998. In addition,
Ostex decided to reduce the level of funding to outside companies for the NTx
point-of-care development programs.
Selling, general and administrative expenses totaled $961,000 for the
quarter ended September 30, 1999, compared to $1,759,000 for the quarter
ended September 30, 1998. The $798,000 decrease in the quarter to quarter was
due to lower labor and overhead costs resulting from fewer personnel in third
quarter 1999 versus the same period in 1998, which was driven by the
restructuring plan implemented by the Company in December 1998. In addition,
third quarter 1999 expenditures were lower in the areas of litigation costs
and marketing compared to third quarter 1998.
Net other income consists primarily of interest income and totaled
$78,000 for the quarter ended September 30, 1999, compared to $171,000 for
the quarter ended September 30, 1998. The decrease is due to a lower rate of
return on the Company's investment portfolio due to lower interest rates and
lower invested balances resulting from using cash to fund the Company's
operating losses.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
SEPTEMBER 30, 1998
Total revenues were $3,363,000 for the nine-month period ended
September 30, 1999, compared to $2,215,000 for the nine months ended
September 30, 1998. The increase in product sales was due to higher orders
for Osteomark urine kits from both distributors and research laboratories and
growth in sales of the Osteomark serum kits.
The Company's gross margin increased to 76% in the nine-month period
ended September 30, 1999, compared to 70% during the same nine-month period
of 1998. Cost of products sold primarily includes labor costs, materials,
equipment and facility costs. The increase in cost of products sold in the
first three quarters of 1999 compared to the same three quarters in 1998
resulted from the 52% increase in total revenues. Cost of products sold as a
percentage of sales decreased in the first three quarters of 1999 compared to
the same three quarters in 1998 due to an increase in the average sales price
per kit and higher production volume. Since the majority of the product cost
is fixed, the higher the volume of production, the lower the cost per unit.
The gross margin percentage can fluctuate depending on the average sales
price per kit and sales mix for both urine and serum as well as production
volumes.
The Company's research and development expenditures totaled $1,335,000
for the nine-month period ended September 30, 1999, compared to $2,182,000
for the nine-month period ended September 30, 1998. The $847,000
4
<PAGE>
decrease was attributable to lower labor and overhead costs from fewer
personnel in the first three quarters of 1999 versus the same period in 1998,
which was driven by the restructuring plan implemented by the Company in
December 1998. In addition, Ostex decided to reduce the level of funding to
outside companies for the NTx point-of-care development programs.
Selling, general and administrative expenses totaled $2,904,000 for
the nine-month period ended September 30, 1999, compared to $5,784,000 for
the nine-month period ended September 30, 1998. The $2,880,000 decrease was
due to lower labor and overhead costs resulting from fewer personnel in the
first three quarters of 1999 versus the same period in 1998, which was driven
by the restructuring plan implemented by the Company in December 1998. In
addition, 1999 expenditures were lower in the areas of litigation costs and
marketing compared to the same period in 1998.
Net other income consists primarily of interest income and totaled
$325,000 for the nine-month period ended September 30, 1999, compared to
$561,000 for the nine-month period ended September 30, 1998. The decrease is
due to a lower rate of return on the Company's investment portfolio due to
lower interest rates and lower invested balances resulting from using cash to
fund the Company's operating losses.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had cash and cash equivalents
and short-term investments of $8,933,000, working capital of $ 9,287,000 and
total shareholders' equity of $11,847,000. As a result of funding operating
losses during the nine months ended September 30, 1999, cash, cash
equivalents and short-term investments decreased by $2,046,000, working
capital decreased by $1,337,000 and shareholders equity decreased by
$1,641,000. During the nine-month period ended September 30, 1999, the
Company repurchased $239,000 of it's common stock, purchased $38,000 in
property, plant and equipment and reduced notes payable by $155,000.
The Company's future capital requirements depend upon many factors,
including the effectiveness of Osteomark NTx Serum and Urine tests and the
new point-of-care device's commercialization activities and arrangements;
continued scientific progress in its research and development programs; the
costs involved in filing, prosecuting and enforcing patent claims; and the
time and costs involved in obtaining regulatory approvals. Depending on the
expenses associated with these activities and their effectiveness on sales
growth realization, additional funds from equity or debt financing may be
required in the future. There can be no assurance that such additional funds
will be available on favorable terms, if at all. If additional funds become
necessary, the Company may seek to raise additional capital if conditions in
the public equity markets are favorable or through private placements, even
if the Company does not have an immediate need for additional cash at that
time. If additional financing is not available, the Company believes that its
existing available cash, its future license and research revenues from
existing collaboration agreements, its current level of product sales and
interest income from short-term investments, and the impact of current cost
reduction activities, will be adequate to fund operations into the
foreseeable future.
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,
pricing, market acceptance of the Company's products, changing economic
conditions in the healthcare industry, activities of competitors, delays and
increased costs of product and technology development, delays in production
of the new point-of-care device, the Company's ability to develop and
maintain collaborative arrangements, the outcome of litigation, and the
effect of the Company's accounting policies and other risk factors detailed
in the Company's 1998 Form 10-K and other SEC 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 has upgraded its financial and manufacturing information
system software to a Year 2000 compliant version as represented by the
software manufacturer. The Company has assessed the Year 2000 compliance of
its other computer system software and manufacturing equipment and expects to
complete all
5
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necessary upgrades to be Year 2000 compliant no later than December 31, 1999.
In addition, the Company has contacted all key vendors and suppliers
regarding Year 2000 compliance and has received no responses indicating that
any vendor or supplier will not be Year 2000 compliant. The Company has also
created a Year 2000 project team that periodically reviews relevant issues
regarding compliance. The costs of Year 2000 initiatives have primarily been
incurred and are not expected to be material to the Company's results of
operations or financial position in future periods. Failure to timely
complete the Company's Year 2000 initiatives could result in the Company's
software being rendered inoperative. Although the Company has no formal
contingency plans in place, in such event, the Company would attempt to
perform its MIS functions, and other functions currently performed by
software, manually through the dedication of additional personnel to
performing such functions. While the Company believes its planning efforts
are adequate to address its Year 2000 concerns, there can be no assurance
that the systems and products of other companies on which the Company's
operations rely will be converted on a timely basis and will not have a
material adverse effect on the Company's results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the board for approval this quarter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed herewith:
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: November 15, 1999 By /s/ Thomas A. Bologna
--------------------------------------
Thomas A. Bologna
Chairman, President and Chief
Executive Officer
(principal financial and principal
accounting officer)
6
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OSTEX INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents 1,534,000 $ 2,744,000
Short-term investments 7,399,000 8,235,000
Trade receivables and other current assets, net 772,000 858,000
Inventory, at cost 240,000 247,000
----------------- -----------------
Total current assets 9,945,000 12,084,000
----------------- -----------------
Property, Plant and Equipment, net 1,961,000 2,382,000
Other Assets 599,000 599,000
----------------- -----------------
Total assets $ 12,505,000 $ 15,065,000
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 74,000 $ 557,000
Accrued expenses 415,000 696,000
Current portion of note payable 169,000 207,000
----------------- -----------------
Total current liabilities 658,000 1,460,000
----------------- -----------------
Noncurrent Liabilities
Note payable, net of current portion - 117,000
----------------- -----------------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.01 par value, 50,000,000 authorized;
12,483,100 and 12,696,250 issued and outstanding at
September 30, 1999 and December 31, 1998 respectively 125,000 127,000
Additional paid-in capital 45,405,000 45,642,000
Accumulated items of comprehensive loss (102,000) (58,000)
Accumulated deficit (33,581,000) (32,223,000)
----------------- -----------------
Total shareholders' equity 11,847,000 13,488,000
----------------- -----------------
Total liabilities and shareholders' equity $ 12,505,000 $ 15,065,000
================= =================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements
F-1
<PAGE>
OSTEX INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended Year to Date
--------------------------------- ---------------------------------
September, 30 September, 30 September, 30 September, 30
1999 1998 1999 1998
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Product sales and research testing services $ 1,335,000 $ 623,000 $ 3,363,000 $ 2,215,000
Operating Expenses:
Cost of products sold 287,000 217,000 807,000 669,000
Research and development 386,000 661,000 1,335,000 2,182,000
Selling, general and administrative 961,000 1,759,000 2,904,000 5,784,000
--------------- ---------------- --------------- ----------------
Total operating expenses 1,634,000 2,637,000 5,046,000 8,635,000
--------------- ---------------- --------------- ----------------
Loss from operations (299,000) (2,014,000) (1,683,000) (6,420,000)
Other Income, net 78,000 171,000 325,000 561,000
--------------- ---------------- --------------- ----------------
Net loss $ (221,000) $ (1,843,000) $ (1,358,000) $ (5,859,000)
=============== ================ =============== ================
Basic and diluted net loss per common share $ (0.02) $ (0.15) $ (0.11) $ (0.46)
Shares used in calculation of net loss per share 12,503,000 12,696,000 12,589,000 12,696,000
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements
F-2
<PAGE>
OSTEX INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Year to Date
-----------------------------------------
September 30, September 30,
1999 1998
------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (1,570,000) (5,732,000)
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (6,379,000) (31,606,000)
Proceeds from sales and maturities of short-term investments 7,171,000 38,512,000
Purchases of property, plant and equipment (38,000) (92,000)
------------------- -------------------
Net cash provided by investing activities 754,000 6,814,000
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock (239,000) -
Payments on note payable (155,000) (136,000)
------------------- -------------------
Net cash provided used in financing activities (394,000) (136,000)
------------------- -------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,210,000) 946,000
CASH AND CASH EQUIVALENTS, beginning of period 2,744,000 2,201,000
------------------- -------------------
CASH AND CASH EQUIVALENTS, end of period $ 1,534,000 $ 3,147,000
=================== ===================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements
F-3
<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, 1998.
2. COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income", which was effective for the
Company beginning January 1, 1998, establishes standards for reporting and
disclosure of comprehensive income. The components of comprehensive income for
the nine months ended September 30, 1999 and September 30, 1998, are as follows:
<TABLE>
<CAPTION>
September, 30 September, 30
1999 1998
----------------- -----------------
<S> <C> <C>
Net Loss from operations $ (1,358,000) $ (5,859,000)
Unrealized gain/(loss) on short-term investments (44,000) (51,000)
----------------- -----------------
Total comprehensive loss $ (1,402,000) $ (5,910,000)
================= =================
</TABLE>
F-4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,534,000
<SECURITIES> 7,399,000
<RECEIVABLES> 662,000
<ALLOWANCES> 35,000
<INVENTORY> 240,000
<CURRENT-ASSETS> 9,945,000
<PP&E> 4,819,000
<DEPRECIATION> 2,857,000
<TOTAL-ASSETS> 12,505,000
<CURRENT-LIABILITIES> 658,000
<BONDS> 0
0
0
<COMMON> 125,000
<OTHER-SE> 11,722,000
<TOTAL-LIABILITY-AND-EQUITY> 12,505,000
<SALES> 3,363,000
<TOTAL-REVENUES> 3,363,000
<CGS> 807,000
<TOTAL-COSTS> 807,000
<OTHER-EXPENSES> 4,239,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,000
<INCOME-PRETAX> (1,358,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,358,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,358,000)
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
