UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


                                   (Mark One)

[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 For the 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 __________


Commission File Number 0-19278


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

                     Delaware                                 13-3357370
        (State or other jurisdiction of                    (I.R.S. Employer
         incorporation or organization)                    Identification No.)

      51 James Way, Eatontown, New Jersey                         07724
    (Address of principal executive offices)                   (Zip Code)

                                  (732)542-2800
              (Registrant's telephone number, including area code)

                                 Not Applicable
(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

Indicate by check mark 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 [_]

                      Applicable Only to Corporate Issuers

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practical date.

Common Stock, $.01 par value - 14,184,684 shares as of October 31, 1999.


<PAGE>


PART I.  FINANCIAL INFORMATION
ITEM 1.  Financial Statements


                        OSTEOTECH, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                            September 30,  December 31,
                                                                 1999          1998
---------------------------------------------------------------------------------------
<S>                                                            <C>             <C>
ASSETS
---------------------------------------------------------------------------------------
Current assets:
     Cash and cash equivalents                                 $ 17,258        $ 15,119
     Short-term investments                                       3,946           2,922
     Accounts receivable, net                                    10,920          11,980
     Inventories                                                  3,547           1,568
     Deferred processing cost                                     4,724           2,620
     Prepaid expenses and other current assets                    2,748           2,913
     Litigation settlement receivable                             2,000
                                                               ------------------------
        Total current assets                                     45,143          37,122

Property, plant and equipment, net                               29,014          16,044
Excess of cost over net assets of business acquired,
     less accumulated amortization of $1,991 in 1999 and
     $1,701 in 1998                                               3,780           1,997
Other assets                                                      1,833           1,951
---------------------------------------------------------------------------------------
Total assets                                                   $ 79,770        $ 57,114
=======================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------------------------------------------------
Current liabilities:
     Accounts payable and accrued liabilities                  $ 11,804        $  9,935
     Notes payable                                                  101             609
     Current maturities of long-term debt and
         obligations under capital leases                                           205
                                                               ------------------------
        Total current liabilities                                11,905          10,749

Long-term debt                                                    3,624
Other liabilities                                                   435             435
---------------------------------------------------------------------------------------
Total liabilities                                                15,964          11,184
---------------------------------------------------------------------------------------

Commitments and contingencies

Stockholders' equity:
     Preferred stock, $.01 par value; 5,676,595 shares
         authorized; no shares issued or outstanding
     Common stock, $.01 par value; 70,000,000 shares
         authorized; issued and outstanding 14,184,609
         shares in 1999 and 13,380,291 shares in 1998               140             133
     Additional paid-in capital                                  45,544          37,332
     Accumulated other comprehensive income (loss)                  (82)             11
     Retained earnings                                           18,204           8,454
---------------------------------------------------------------------------------------
Total stockholders' equity                                       63,806          45,930
---------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                     $ 79,770        $ 57,114
=======================================================================================
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                       2
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
                  (dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                               Three Months                       Nine Months
                                                           Ended September 30,                Ended September 30,
                                                     -----------------------------       -----------------------------
                                                            1999              1998              1999              1998
----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>               <C>               <C>
Net revenues:
   Service                                           $    16,770       $    14,001       $    53,596       $    42,085
   Product                                                   699               282             2,163               803
   License fee                                                                                   118               124
                                                     -----------       -----------       -----------       -----------
                                                          17,469            14,283            55,877            43,012

Cost of services                                           5,204             3,910            16,330            12,424
Cost of products                                             439               232             1,285               584
                                                     -----------       -----------       -----------       -----------
                                                           5,643             4,142            17,615            13,008
                                                     -----------       -----------       -----------       -----------

Gross Profit                                              11,826            10,141            38,262            30,004

Marketing, general and administrative                      6,956             4,851            20,019            15,432
Research and development                                   1,310             1,079             4,248             3,285
                                                     -----------       -----------       -----------       -----------
                                                           8,266             5,930            24,267            18,717

Income from litigation settlement                          1,750                               1,750
                                                     -----------       -----------       -----------       -----------

Operating income                                           5,310             4,211            15,745            11,287

Interest and other income, net                               208               285               636               886
                                                     -----------       -----------       -----------       -----------

Income before income taxes                                 5,518             4,496            16,381            12,173

Income tax provision                                       2,270             1,878             6,631             5,020

----------------------------------------------------------------------------------------------------------------------
Net income                                           $     3,248       $     2,618       $     9,750       $     7,153
======================================================================================================================
Net income per share:
     Basic                                           $       .23       $       .20       $       .70       $       .54
     Diluted                                         $       .22       $       .19       $       .67       $       .51
----------------------------------------------------------------------------------------------------------------------
Shares used in computing net income per share:
     Basic                                            14,174,402        13,168,880        13,969,901        13,225,814
     Diluted                                          14,641,259        13,958,635        14,639,183        14,067,937
</TABLE>


See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
Nine Months Ended September 30,                                  1999            1998
---------------------------------------------------------------------------------------
<S>                                                            <C>             <C>
Cash Flow From Operating Activities
   Net income                                                  $  9,750        $  7,153
   Adjustments to reconcile net income to net cash
      Provided by (used in) operating activities:
         Depreciation and amortization                            2,201           2,042
         Changes in assets and liabilities:
               Accounts receivable                                1,403            (624)
               Inventories                                       (1,451)           (467)
               Deferred processing costs                         (2,104)           (865)
               Prepaid expenses and other current assets            396           2,083
               Litigation settlement receivable                  (2,000)
               Accounts payable and other liabilities               913              68
---------------------------------------------------------------------------------------
Net cash provided by operating activities                         9,108           9,390

Cash Flow From Investing Activities
   Capital expenditures                                         (13,537)         (4,326)
   Purchases of investments                                     (11,634)         (7,387)
   Proceeds from sale of investments                             10,610           5,941
   Acquisition of business                                       (1,526)
   Increase in other assets                                        (859)           (746)
---------------------------------------------------------------------------------------
Net cash used in investing activities                           (16,946)         (6,518)

Cash Flow From Financing Activities
   Proceeds from issuance of common stock                         4,854           2,756
   Income tax benefit related to stock options                    3,365           2,870
   Repurchase of common stock                                                    (4,958)
   Proceeds from issuance of notes payable                          116
   Principal payments on notes payable                             (693)           (582)
   Proceeds from long-term debt                                   3,000
   Principal payments on long-term debt
      And obligations under capital leases                         (758)           (482)
   Increase in other liabilities                                    171
---------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities              10,055            (396)

Effect of exchange rate changes on cash                             (78)             74
---------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                         2,139           2,550
Cash and cash equivalents at beginning of period                 15,119          13,884
---------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                     $ 17,258        $ 16,434
=======================================================================================

Supplementary cash flow data:
   Cash paid during the period for interest                    $     29        $     63
   Cash paid during the period for taxes                          2,114           1,065
   Acquisition of business:
      Fair value of assets acquired                               2,563
      Liabilities assumed                                         2,669
</TABLE>


See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)


1.   Basis of Presentation

     The accompanying  unaudited  condensed  consolidated  financial  statements
     reflect all  adjustments  (consisting  only of normal  recurring  accruals)
     considered   necessary  by  management  to  present  fairly  the  Company's
     consolidated  financial  position as of September 30, 1999 and December 31,
     1998, and the  consolidated  results of operations for the  three-month and
     nine-month  periods ended September 30, 1999 and 1998, and the consolidated
     cash flows for the nine-month periods then ended. The results of operations
     for the respective  interim periods are not  necessarily  indicative of the
     results  to be  expected  for the full  year.  The  condensed  consolidated
     financial  statements  should  be  read in  conjunction  with  the  audited
     financial  statements  for the year  ended  December  31,  1998  which were
     included as part of the Company's Report on Form 10-K.

2.   Stockholders' Equity

     In February,  1999, the Board of Directors authorized a three-for-two stock
     split in the form of a 50% stock dividend that was  distributed in March to
     stockholders  of record on March 5,  1999.  Stockholders'  equity  has been
     restated to give retroactive recognition to the stock split for all periods
     presented.  In addition,  all  references  in the  financial  statements to
     shares, per share data, and stock option data have been restated.

     In June, 1999, the Stockholders of the Company approved an amendment to the
     Company's certificate of incorporation to increase the number of authorized
     shares of common stock to 70,000,000 shares.

3.   Acquisition of OST Developpement SA

     Effective  January 1, 1999, the Company  completed the acquisition of a 90%
     interest in OST Developpement SA ("OST"), a processor of bovine bone grafts
     for orthopaedic and dental use. The aggregate purchase price paid consisted
     solely  of  cash  consideration  of  9,000,000  French  Francs  ("FRF")  or
     approximately  $1,594,700.  In addition, the Company incurred approximately
     $372,600 of  transaction  costs.  The  acquisition  was  accounted for as a
     purchase and the consolidated  financial statements include the accounts of
     OST from  January 1, 1999.  The  acquisition  resulted in an excess of cost
     over the fair value of net assets  acquired  of  $2,073,000  which is being
     amortized  over 15 years.  The Company  also has the option to purchase the
     remaining 10% of OST at a price to be determined at the time of purchase.

4.   Acquisition of Spinal Fixation System

     In June,  1999,  the Company  acquired the  Versalok(R)  Low Back  Fixation
     System (the  "Versalok(R)  System"),  including  all  patents,  from Wright
     Medical  Technology,  Inc.  for  $600,000.  Pursuant  to the  terms  of the
     purchase  agreement,  the Company  also  agreed to  purchase  approximately
     $1,120,000 of



                                       5
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)


4.   Acquisition of Spinal Fixation System - continued

     inventory,  consisting primarily of finished goods. The $600,000 payment to
     acquire  the  product  rights  and  patents  will be  amortized  using  the
     straight-line basis over five years.

5.   Comprehensive Income

     Comprehensive  income for the  three-month  and  nine-month  periods  ended
     September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                   Three months ended            Nine months ended
                                                      September 30,                September 30,
                                                 ----------------------------------------------------

        (dollars in thousands)                    1999          1998         1999          1998
        ---------------------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>           <C>
        Net income                                $3,248       $2,618       $9,750        $7,153

        Currency translation adjustments             189           83           (93)          84
        ---------------------------------------------------------------------------------------------

        Comprehensive Income                      $3,437       $2,701       $9,657        $7,237
        =============================================================================================
</TABLE>


6.   Financing Arrangements

     In June, 1999, the Company replaced its domestic lines of credit with a new
     credit  facility  which includes a $5,000,000  unsecured  revolving line of
     credit,  a $4,500,000  building  mortgage loan and a $17,000,000  equipment
     line of credit.  The revolving line of credit is committed  through May 31,
     2001. In the absence of default,  the Company has the option to convert the
     revolving line of credit to a term-loan and the outstanding  unpaid balance
     as of  May  31,  2001  will  be  repayable  in  forty-eight  equal  monthly
     installments  of  principal  together  with  accrued  interest.  An  unused
     facility  fee of .25% is  payable on the  unused  portion of the  revolving
     loan. The mortgage loan will be drawn down upon completion of the Company's
     new allograft tissue processing  facility  currently under construction and
     will be  secured  by the  building  which  will  house  the new  processing
     facility and the land on which the building is located.  The mortgage  loan
     will be  repayable  in 120 equal  monthly  installments  of  principal  and
     interest based on a twenty-year mortgage  amortization  schedule.  Upon the
     120th  payment,  the full  amount of the unpaid  principal  will be due and
     payable.  The  equipment  line of credit is secured by equipment  and other
     capital  expenditures  purchased  using the  proceeds  of such  line,  with
     advances of up to 80% of the cost  thereof.  Upon  expiration of an initial
     drawdown period, which expires December, 2000, the equipment line of credit
     will be repayable in equal monthly  installments  of principal and interest
     based on a seven-year  amortization  schedule.  During the drawdown  period
     interest only will be payable under the equipment line of credit.


                                       6
<PAGE>


                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)


6.   Financing Arrangements - continued

     Pursuant to the terms of the loan and security agreement (the "Agreement"),
     the Company is  required  to meet  certain  financial  covenants  regarding
     minimum  working  capital,  tangible  net worth and interest  coverage.  In
     addition,  the Agreement contains limitations on sales of assets other than
     in  the  ordinary  course  of  business  and  additional  indebtedness.  At
     September 30, 1999,  there was $3,000,000  outstanding  under the revolving
     line of credit.

7.   Commitments and Contingencies

     Product Liability Litigation

     The Company is a defendant in two state court product  liability actions in
     which patients claim that they have suffered  damages from the implantation
     of orthopaedic bone screws allegedly distributed by the Company. One of the
     actions is stayed.  In  September,  1999,  plaintiffs in one of the actions
     voluntarily  dismissed the Company without prejudice.  Management  believes
     that the  remaining  lawsuit and claims are without merit and will continue
     to defend such action vigorously.  It is the Company's position that either
     a device  distributed  by the Company was not implanted in the patient,  or
     that if the  allegations in the complaints  regarding the use of the device
     are assumed to be true,  the device was used in a manner which was contrary
     to  the  use  approved  by the  FDA  and  the  Company's  written  warnings
     concerning use.  Pursuant to its  distribution  agreement with the Company,
     the  manufacturer of the spinal fixation  devices,  Heinrich C. Ulrich,  KG
     ("Ulrich")  has agreed to indemnify the Company for all costs,  and damages
     incurred by the Company in  connection  with its  distribution  of products
     manufactured  by Ulrich,  except such costs and damages which are caused by
     the Company's gross negligence,  willful  misconduct or unauthorized  claim
     made by the Company in marketing the products.

     In July,  1998,  a  complaint  was filed  against the Company in the Second
     Judicial  District  Court,  Bernallilo  County,  New Mexico,  which alleges
     negligence,    strict    liability,    breach   of   warranty,    negligent
     misrepresentation,  fraud,  and  violation  of the New Mexico  Unfair Trade
     Practices Act arising from allegedly  defective  dental implant coating and
     coating services provided to plaintiffs by a subsidiary of the Company, Cam
     Implants BV.  Plaintiffs have demanded  unspecified  monetary  damages.  In
     August, 1998, the Company removed this action to the United States District
     Court for the  District  of New Mexico  and filed and  served  its  answer,
     denying any and all liability in this action,  and moved to dismiss five of
     the seven claims alleged  against it. In November,  1998, the Company moved
     for  summary  judgment  in its favor on all of the  claims  alleged in this
     action,  on the ground that all of  plaintiffs'  claims are barred by their
     applicable  statutes of  limitations.  In March,  1999, the court dismissed
     with prejudice the plaintiff's  negligence and strict liability claims, and
     to date the Court has limited  discovery in this action to matters  related
     to the statute of limitations  issue.  The Company believes that the claims
     against it are without merit and will continue to vigorously defend against
     such claims.



                                       7
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)


7.   Commitments and Contingencies - continued

     Patent Litigation

     In January,  1998, the Company filed a patent  infringement  action against
     GenSci   Regeneration   Laboratories,   Inc.  ("GenSci  Labs")  and  GenSci
     Regeneration  Sciences,  Inc. ("GenSci  Sciences") alleging that the GenSci
     parties  violated  claims of one of the  patents  involving  the  Company's
     Grafton(R) Demineralized Bone Matrix (DBM) process. Approximately two weeks
     after  Osteotech's  filing,  GenSci  Labs filed a suit  against the Company
     alleging infringement of two patents assigned to GenSci Labs in addition to
     tortious  interference with a business expectancy,  negligent  interference
     with a prospective  economic  advantage and inducing breach of contract and
     seeking a  declaratory  judgment of the  invalidity of two of the Company's
     patents covering Grafton(R) DBM. In February, 1998, GenSci Labs amended its
     complaint alleging essentially the same causes of action but adding a third
     patent to the  allegation  of patent  infringement.  The actions  have been
     consolidated  into one lawsuit.  In September,  1998, GenSci Labs served an
     amended complaint,  which asserted,  in addition to the previously asserted
     claims, claims of false advertising under Federal law. In September,  1998,
     the  Company  served  its  answer  to  this  amended  complaint,   asserted
     counterclaims  against  GenSci  Labs  and  served a  third-party  complaint
     against GenSci Sciences,  and DePuy AcroMed,  Inc.("DePuy").  The Company's
     counterclaims  and third  party  complaint  accused  the GenSci  parties of
     infringing a second Company  patent,  in addition to the patent referred to
     above,  and  accused  the DePuy and GenSci  parties of acting  jointly  and
     severally  in  infringing  on the  claims of both  patents.  Discovery  has
     commenced and is ongoing.  In May, 1999,  GenSci Labs amended its complaint
     to allege that in addition to the  Company's  Grafton(R)  DBM Flex product,
     the  Company's  Grafton(R)  DBM Gel and Putty  products  infringe on GenSci
     Lab's  patents at issue.  GenSci Labs also amended its  complaint to modify
     its false  advertising  claim,  alleging  that in addition to the  Company,
     individuals  acting on the Company's  behalf engaged in false  advertising.
     The Company  filed and served its answer and  counterclaims  to the amended
     complaint in May, 1999. In November,  1999, the Company  settled all claims
     which it had filed  against  DePuy.  As part of the  settlement,  DePuy has
     agreed to stop  selling  the  GenSci  products  accused of  infringing  the
     Company's  patents,  no later than  February 4, 2001 and to pay the Company
     $3,000,000  as  follows:  $2,000,000  in the  fourth  quarter  of 1999  and
     $250,000 at the end of each quarter in 2000. Payments in the year 2000 will
     be made unless DePuy  discontinues  selling the GenSci  products during the
     year,  at which time DePuy would not be obligated  for payments  beyond the
     quarter in which it stopped  selling the GenSci products (See Note 11). The
     Company  believes that the claims made against it by the GenSci parties are
     without merit and will continue to  vigorously  defend  against such claims
     and prosecute the claims it has asserted against the GenSci parties.


                                       8
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)


7.   Commitments and Contingencies - continued

     In February,  1999, a complaint was filed against the Company in the United
     States  District Court for the Northern  District of Florida.  This action,
     which has been brought by  plaintiffs,  University of Florida  Tissue Bank,
     Inc.,  Regeneration  Technologies,  Inc.,  Sofamor Danek Group,  Inc.,  and
     Sofamor Danek L.P. alleges that Company's  bio-d(TM) threaded cortical bone
     dowel and Endodowel  infringe on the claims of U.S.  Patent No.  5,814,084,
     entitled  "Diaphysical Cortical Dowel." In April, 1999, plaintiffs filed an
     amended  complaint  adding a claim  for  patent  infringement  against  the
     Company with respect to US Patent No.  5,814,084,  entitled  "Bone Grafting
     Units", which is owned by plaintiff University of Florida Tissue Bank, Inc.
     In May,  1999,  the  Company  filed its  answer  and  counterclaim  seeking
     declaratory  judgment  that the  patents  in  question  in this  action are
     invalid and otherwise not infringed by the Company. Although the plaintiffs
     seek monetary  damages,  an amount has not been  specified.  In May,  1999,
     plaintiffs  filed their reply to the Company's  counterclaims.  The Company
     believes the claims asserted in this action to be without merit and intends
     to vigorously defend against such claims.

     In July, 1999, Medtronic Sofamor Danek Inc., Sofamor Danek L.P. and Sofamor
     Danek Holdings, Inc. ("Danek") sued Osteotech in the United States District
     Court for the Western  District of  Tennessee  alleging  that  instruments,
     instrument sets and cortical bone dowel products, including but not limited
     to the bio-d(TM) threaded cortical bone dowel and Endodowel,  manufactured,
     sold and/or otherwise distributed by the Company infringe on certain claims
     of U.S.  Patent  Nos.  5,741,253,  entitled  "Method for  Inserting  Spinal
     Implants",  and  5,484,437,  entitled  "Apparatus  and Method of  Inserting
     Spinal Implants", which are owned by Danek. In September, 1999, the Company
     filed its answer and counter  claims  seeking a declaratory  judgement that
     the  patents in question  in this  action are  invalid  and  otherwise  not
     infringed by the Company. Plaintiffs filed their reply to the counterclaims
     in October,  1999.  The Company  believes that the claims  asserted in this
     action are without  merit and intends to  vigorously  defend  against  such
     claims.

     In September,  1999,  Medtronic  Sofamor Danek,  Inc.  ("Medtronic"),  sued
     Arthur A. Alfaro,  a former  Division  President of Medtronic and currently
     the Company's  President and Chief Operating Officer, in the Chancery Court
     of Tennessee for the  Thirtieth  Judicial  District at Memphis,  seeking to
     enjoin Mr. Alfaro from divulging alleged confidential  information or trade
     secrets of  Medtronic to third  parties,  including  the Company,  and from
     working for the Company for a period of twelve months. In September,  1999,
     the Court issued a temporary  restraining order prohibiting Mr. Alfaro from
     issuing or  divulging  any  confidential  information  or trade  secrets of
     Medtronic to any third party. In October, 1999, Mr. Alfaro filed and served
     his  answer,  denying  any and all  liability.  Pursuant  to an  employment
     agreement  between Mr.  Alfaro and the  Company,  the Company is paying Mr.
     Alfaro's legal fees and costs for defending this action.


                                       9
<PAGE>


                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)


7.   Commitments and Contingencies - continued

     Litigation  is subject to many  uncertainties  and  management is unable to
     predict the outcome of the pending  suits and claims.  It is possible  that
     the results of operations or liquidity and capital resources of the Company
     could  be  adversely  affected  by the  ultimate  outcome  of  the  pending
     litigation or as a result of the costs of  contesting  such  lawsuits.  The
     Company is unable to estimate the  potential  liability,  if any,  that may
     result from the pending litigation and,  accordingly,  no provision for any
     liability   (except  for  accrued   legal  costs)  has  been  made  in  the
     consolidated financial statements.

8.   Earnings Per Share

     The  following  table  sets  forth the  computation  of basic  and  diluted
     earnings  per  share  for the  three-month  and  nine-month  periods  ended
     September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                   Three Months Ended                    Nine Months Ended
                                                                      September 30,                        September 30,
                                                         -----------------------------------------------------------------------
         (dollars in thousands
          except per share data)                               1999              1998              1999             1998
         -----------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>              <C>               <C>
         Net income available to Common                            $3,248            $2,618           $9,750            $7,153
             Shareholders
         -----------------------------------------------------------------------------------------------------------------------

         Weighted average common shares                        14,174,402        13,168,880       13,969,901        13,225,814
                                                         -----------------------------------------------------------------------
         Denominator for basic earnings per share              14,174,402        13,168,880       13,969,901        13,225,814
         Effect of dilutive securities:
             Stock options                                        466,479           789,405          669,156           842,006
             Warrants                                                 378               350              126               117
                                                         -----------------------------------------------------------------------
         Denominator for diluted earnings per
         share                                                 14,641,259        13,958,635       14,639,183        14,067,937
         -----------------------------------------------------------------------------------------------------------------------

             Basic earnings per share                                $.23              $.20             $.70              $.54
         -----------------------------------------------------------------------------------------------------------------------

             Diluted earnings per share                              $.22              $.19             $.67              $.51
         -----------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       10
<PAGE>

                        OSTEOTECH, INC. AND SUBSIDIARIES
              Notes To Condensed Consolidated Financial Statements
                                   (unaudited)


9.   Operating Segments

     Summarized  in the table below is financial  information  for the Company's
     reportable  segments  for the  three-month  and  nine-month  periods  ended
     September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                            Three Months Ended                        Nine Months Ended
                                                               September 30,                            September 30,
                                                 ----------------------------------------- -----------------------------------------
         (dollars in thousands)                         1999                 1998                 1999                 1998
         --------------------------------------- -------------------- -------------------- -------------------- --------------------
<S>                                                    <C>                   <C>                 <C>                  <C>
         Revenues:
           Grafton(R)DBM Segment                       $  9,905              $  9,802            $ 32,346             $ 28,349
           Base Tissue Segment                            6,525                 3,816              20,043               12,523
           Other                                          1,039                   665               3,488                2,140
           Consolidated                                  17,469                14,283              55,877               43,012
         --------------------------------------- -------------------- -------------------- -------------------- --------------------
         Operating income (loss):
           Grafton(R)DBM Segment                       $  4,429              $  3,712            $ 12,509             $  9,206
           Base Tissue Segment                            1,884                   829               5,969                2,901
           Other                                         (1,003)                 (330)             (2,733)               (820)
           Consolidated                                   5,310                 4,211              15,745               11,287
         --------------------------------------- -------------------- -------------------- -------------------- --------------------
</TABLE>


10.  Inventories

     Inventories consist of the following:


     (dollars in thousands)        September 30, 1999        December 31, 1998
     ---------------------------------------------------------------------------

     Raw Materials                       $   872                     $   646
     Finished Goods                        2,675                         922
     ---------------------------------------------------------------------------
                                         $ 3,547                     $ 1,568
     ---------------------------------------------------------------------------

11.  Litigation Settlement

     In November 1999, the Company settled all claims which it had filed against
     DePuy in the  patent  infringement  suit  against  GenSci  Labs and  GenSci
     Sciences  and  DePuy  (See Note 7).  As part of the  settlement,  DePuy has
     agreed to stop  selling  the  GenSci  products  accused of  infringing  the
     Company's  patents,  no later than  February 4, 2001 and to pay the Company
     $3,000,000  as  follows:  $2,000,000  in the  fourth  quarter  of 1999  and
     $250,000 at the end of each quarter in 2000. Payments in the year 2000 will
     be made unless DePuy  discontinues  selling the GenSci  products during the
     year,  at which time DePuy would not be obligated  for payments  beyond the
     quarter  in which it  stopped  selling  the GenSci  products.  The  Company
     included  $1,750,000  of the  $2,000,000  payment  in  income  in the third
     quarter of 1999 and will  recognize  the  remaining  $250,000 in the fourth
     quarter of 1999.  The  quarterly  payments  in 2000 will be  recognized  in
     income as earned.

12.  Reclassifications

     Certain  prior year amounts have been  reclassified  to conform to the 1999
     presentation.


                                       11
<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS

Information contained herein contains "forward-looking  statements" which can be
identified  by the  use  of  forward-looking  terminology  such  as  "believes",
"expects",  "may", "will", "should", or "anticipates" or the negative thereof or
variations thereon or comparable terminology,  or by discussions of strategy. No
assurance can be given that the future  results  covered by the  forward-looking
statements will be achieved. Some of the matters set forth in the "Risk Factors"
section of the Company's  Annual Report on Form 10-K for the year ended December
31, 1998, constitute  cautionary statements  identifying factors with respect to
such forward-looking statements, including certain risks and uncertainties, that
could cause actual results to vary materially from the future results  indicated
in such  forward-looking  statements.  Other  factors  could also  cause  actual
results  to  vary  materially   from  the  future  results   indicated  in  such
forward-looking statements.

FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998

Results of Operations

Litigation Settlement

In November  1999, we settled all claims which we had filed against DePuy in the
patent  infringement  suit against GenSci Labs and GenSci  Sciences (See Notes 7
and  11 of  "Notes  to  Consolidated  Financial  Statements").  As  part  of the
settlement,  DePuy has agreed to stop  selling  the GenSci  products  accused of
infringing  our patents,  no later than  February 4, 2001 and to pay the company
$3,000,000 as follows:  $2,000,000 in the fourth quarter of 1999 and $250,000 at
the end of each  quarter in 2000.  Payments in the year 2000 will be made unless
DePuy  discontinues  selling the GenSci  products during the year, at which time
DePuy would not be obligated for payments beyond the quarter in which it stopped
selling the GenSci products.  The Company included  $1,750,000 of the $2,000,000
payment in operating  income in the third quarter of 1999 and will recognize the
remaining $250,000 in the fourth quarter of 1999. The quarterly payments in 2000
will be recognized in income as earned.

Net Income

Consolidated  net income in the third quarter of 1999 increased to $3,248,000 or
$.22  diluted net income per share as compared  to net income of  $2,618,000  or
$.19 diluted net income per share in the third quarter of 1998. Consolidated net
income in the first nine months of 1999  increased to $9,750,000 or $.67 diluted
net income per share as compared to net income of $7,153,000 or $.51 diluted net
income per share in the first nine months of 1998. Net income in the quarter and
the nine  months  ended  September  30,  1999 were  positively  impacted  by the
settlement  of  the  patent   infringement  claim  against  DePuy,  which  added
$1,043,000,  after income taxes,  or $.07 diluted net income per share.  All per
share data have been adjusted for the three-for-two stock split in the form of a
50% stock dividend effected in March, 1999.

The following is a discussion of factors affecting results of operations for the
three-month and nine-month periods ended September 30, 1999 and 1998.



                                       12
<PAGE>

Net Revenues

Consolidated net revenues increased 22% to $17,469,000 from $14,283,000 in third
quarter of 1998 and increased 30% to $55,877,000  from  $43,012,000 in the first
nine months of 1998. The increase was principally due to higher revenues in both
the  Grafton(R)  Demineralized  Bone Matrix (DBM) segment ("the  Grafton(R)  DBM
segment")  and  the  Base  Allograft  Bone  Tissue  segment  (the  "Base  Tissue
segment").  Domestic  revenues,  which consist  principally of revenues from the
Grafton(R)  DBM and Base Tissue  segments,  increased  21% to  $16,672,000  from
$13,738,000  in third  quarter of 1998 and  increased  28% to  $52,810,000  from
$41,177,000 in the first nine months of 1998.  Foreign revenues increased 46% to
$797,000  from $545,000 in third quarter of 1998 and increased 67% to $3,067,000
from  $1,835,000  in the first  nine  months of 1998.  The  increase  in foreign
revenues  resulted  primarily  from the  contribution  to  revenues  made by OST
Developpement  SA  ("OST").   In  January,   1999,  the  Company  completed  the
acquisition  of  90% of OST  which  principally  processes  bovine  bone  tissue
products for orthopaedic and dental use.

Grafton(R) DBM segment  revenues  increased 1% to $9,905,000  from $9,802,000 in
third quarter of 1998 and increased 14% to $32,346,000  from  $28,349,000 in the
first nine months of 1998.  The  increase  resulted  from  increased  demand for
Grafton(R) DBM and a price increase  effective  January 1, 1999.  Grafton(R) DBM
segment revenues growth slowed in the third quarter of 1999 as compared with the
prior year same quarter  primarily  due to effects of  competition  and a summer
slowdown  in surgical  procedures.  We believe the slow down in growth will be a
short-term  issue as surgeons  try the  competitive  product and  determine  for
themselves the superiority of Grafton(R) DBM.

Base Tissue  segment  revenues  increased 71% to $6,525,000  from  $3,816,000 in
third quarter of 1998 and increased 60% to $20,043,000  from  $12,523,000 in the
first nine months of 1998. The increases are associated  with an increase in the
number of donors  processed  for our clients,  55% in the quarter and 43% in the
nine months,  and  revenues  from the  bio-d(TM)  threaded  cortical  bone dowel
launched at the end of 1998.

In the third quarter and first nine months of 1999, two of our Grafton(R)DBM and
Base Tissue segment clients accounted for 57% and 36% of consolidated  revenues,
respectively.

Gross Profit

Gross profit as a percentage of revenues was 68% in the third quarter and 69% in
the first nine months of 1999.  Gross profit as a percentage  of revenues in the
prior year was 71% in the third  quarter and 70% in the first nine  months.  The
decrease  results from; (i) the absorption of costs  associated  with additional
allograft  tissue  processing  capacity  which was added to meet the  continuing
growth in our allograft tissue business, and (ii) a decline in the percentage of
consolidated revenues coming from the Grafton(R) DBM Segment, which has a higher
gross profit margin than other services and products.

Marketing, General and Administrative

Marketing,  general and administrative  expenses increased  $2,105,000 or 43% in
the  third  quarter  and  $4,587,000  or 30% in the  first  nine  months of 1999
compared to the same periods in 1998.  The increase was  primarily  attributable
to: (i) incremental  agent  commissions  resulting from increased  volume in the
Grafton(R) DBM segment and (ii) expanded  marketing and  promotional  activities
associated with the roll out of two new products,  the bio-d(TM) system which is
included  in the  Base  Tissue  segment


                                       13
<PAGE>

and the Segmental Spinal Correction System(TM) ("SSCS"). Additionally, corporate
administrative  costs  increased  compared  to 1998  principally  as a result of
higher costs associated with patent  infringement  lawsuits and the inclusion of
OST's operating expenses.

Research and Development

Research and development expenses increased $231,000 or 21% in the third quarter
and  $963,000  or 29% in the  first  nine  months of 1999  compared  to the same
periods in 1998. The increase was primarily  attributable to increased  spending
in the Base Tissue segment associated with the continued  development of a viral
inactivation process and ongoing development of new allograft tissue products.

Operating Income

Operating income increased  $1,099,000 or 26% in the third quarter and increased
$4,458,000  or 39% in the first nine months of 1999 compared to the same periods
in 1998.  Grafton(R) DBM segment  operating income increased  $717,000 or 19% in
the third  quarter and  increased  $3,303,000 or 36% in the first nine months of
1999  compared to the same  periods in 1998.  Grafton(R)  DBM segment  operating
income in the quarter and nine months  includes  $1,750,000 of income  resulting
from the patent  litigation  settlement  (See Note 11 of "Notes to  Consolidated
Financial Statements").  In the quarter, the impact of the settlement was partly
offset by the absorption of costs  associated with additional  allograft  tissue
processing  capacity,  higher  costs  associated  with the  patent  lawsuit  and
relatively  flat revenue growth as compared with 1998.  The segment's  operating
income in the nine  months  was also  positively  impacted  by the  increase  in
revenues.  Base Tissue segment operating income increased  $1,055,000 or 127% in
the  third  quarter  and  $3,068,000  or 106% in the first  nine  months of 1999
compared to the same periods in 1998.  The  increases  result  principally  from
increases in revenue.  Other segment operating income decreased $673,000 or 204%
in the third  quarter  and  $1,913,000  or 233% in the first nine months of 1999
compared to the same periods in 1998.  The  decreases  result  principally  from
increased marketing expenses associated with the launch of the SSCS(TM) system.

Income Tax Provision

The effective income tax rate declined to approximately 41% in the third quarter
and 40% in the first  nine  months of 1999 from 42% and 41% in the same  periods
last year.

Liquidity and Capital Resources

At September 30, 1999, we had cash and  short-term  investments  of  $21,204,000
compared to  $18,041,000  at December  31, 1998.  We invest  excess cash in U.S.
Government-backed securities and investment grade commercial paper of major U.S.
corporations.  Working capital increased  $6,865,000 to $33,238,000 at September
30, 1999 compared to  $26,373,000  at December 31, 1998. The increase in working
capital  results   principally   from  an  increase  in  cash  and  investments,
inventories, deferred processing costs and the litigation settlement receivable,
net of a decrease in accounts receivable and an increase in accounts payable and
accrued  liabilities.  The increase in  inventories  of $1,979,000 is associated
with the  acquisition of the  Versalok(R)  System and the launch of the SSCS(TM)
system. The increase in deferred  processing costs is associated with the growth
in our Grafton(R) DBM and Base Tissue segments.

Net cash  provided by  operating  activities  was  $9,108,000  in the first nine
months of 1999, compared to cash provided by operating  activities of $9,390,000
in the first nine months of 1998. The decrease resulted primarily from increases
in inventories


                                       14
<PAGE>

and deferred  processing costs. Cash used in investing  activities  increased to
$16,946,000  in the first nine months of 1999 from  $6,518,000 in the first nine
months of 1998.  The  increase  results  principally  from;  (i) an  increase in
capital expenditures to $13,537,000 from $4,326,000 resulting from our continued
investment in facilities  and equipment  needed for current and future  business
requirements,  (ii) the purchase of an additional 85% interest in OST, and (iii)
the  acquisition of the  Versalok(R)  System.  In the fourth quarter of 1998, we
commenced  construction  of  a  new  allograft  tissue  processing  facility  in
Eatontown,  New Jersey. The estimated aggregate cost for the construction of the
building,   including   furniture,   fixtures  and  equipment  is  approximately
$32,000,000;  $21,500,000 of which will be funded through the building  mortgage
loan and equipment line of credit included in the credit facility concluded with
our bank in June,  1999.  The remaining  balance of  $10,500,000  will be funded
through  available cash reserves or anticipated cash flow from  operations.  Net
cash provided by financing  activities  increased to  $10,055,000  from net cash
used of  $396,000  in the first  nine  months  of 1998.  The  increase  resulted
principally  from  cash  proceeds  received  and  related  income  tax  benefits
associated with stock option  exercises and borrowings  under the revolving line
of credit.

In June,  1999, we replaced our domestic lines of credit with a credit  facility
that includes a $5,000,000  revolving line of credit, a $4,500,000 mortgage loan
and $17,000,000  equipment line of credit. At September 30, 1999, $3,000,000 was
outstanding  under the revolving  line of credit.  We also have a line of credit
with a Dutch bank,  which  provides  for  borrowings  of up to  5,000,000  Dutch
Guilders ("dfl"), or approximately $2,426,000 at the September 30, 1999 exchange
rate.  Analysis of our cash position and anticipated cash flow indicated that it
most likely would not be necessary to utilize a significant portion of this line
of credit and, therefore,  we agreed with the bank to limit borrowings,  if any,
to no more than dfl 3,000,000 or  approximately  $1,455,000 at the September 30,
1999 exchange rate.  Additionally,  we have a line of credit with a French bank,
which provides for borrowing of up to FRF 2,000,000,  or approximately  $360,000
at the  September  30, 1999  exchange  rate.  We believe  that our cash and cash
equivalents, short-term investments and available lines of credit, together with
anticipated  future cash flow from  operations,  will be  sufficient to meet our
near-term  requirements.  From time to time we may seek additional funds through
equity  or  debt  financing.  However,  there  can be no  assurances  that  such
additional  funds will be available,  or if  available,  that such funds will be
available on favorable terms.

Impact of Inflation and Foreign Currency Exchange Fluctuations

The results of our Company's operations for the periods discussed above have not
been significantly affected by inflation or foreign currency fluctuations.

Litigation

Osteotech,  Inc. is  involved in various  legal  proceedings  involving  product
liability and patent infringement  claims. For a discussion of these matters see
Notes 7 and 11 of "Notes to Condensed Consolidated  Financial Statements",  PART
II., ITEM 1. LEGAL  PROCEEDINGS  and our Annual Report on Form 10-K for the year
ended  December  31,  1998.  It is possible  that our results of  operations  or
liquidity  and capital  resources  could be  adversely  affected by the ultimate
outcome of the pending litigation or as a result of the costs of contesting such
lawsuits.


                                       15
<PAGE>

Year 2000

We recognize the need to ensure that Year 2000 issues will not adversely  impact
our  operations  and have  identified  our  potential  Year  2000  risk in three
categories:  internal  business  software and hardware;  internal  non-financial
systems; and noncompliance by suppliers and customers.

Internal Business Software and Hardware

Several years ago we determined that our existing business  information  systems
were not adequate to support the anticipated  growth in our business  operations
and purchased a fully integrated  management  information system,  which is Year
2000  compliant.  Most of the new  system  is  operational  at this time and the
remainder  of the system is scheduled to be  operational  in the fourth  quarter
1999.  The portion of the existing  system being  replaced has been modified and
tested for Year 2000 compliance and accordingly,  if the new system is not fully
operational by January 1, 2000, we do not expect disruption to our business. The
completion cost for  implementation of the remaining software is not expected to
be material.  All related hardware  supporting our internal business software is
currently Year 2000 compliant.

Internal Non-financial Systems

We have  completed  our  assessment  and testing of our  internal  non-financial
systems such as office equipment,  security systems and other business equipment
and determined that all critical systems are Year 2000 compliant.

Noncompliance by Suppliers and Customers

We  have  completed  our  assessment  of all of our  significant  suppliers  and
customers  to  determine  the extent to which we are  vulnerable  to those third
parties' failure to achieve Year 2000  compliance.  The majority of our critical
vendors have communicated  that they are Year 2000 compliant.  We are monitoring
the progress of those  vendors who are not  currently  Year 2000  compliant  but
expect to be compliant  before December 31, 1999 and have developed  contingency
plans  with  respect  to such  vendors to  prevent  disruption  to our  business
operations.  At this time we do not anticipate  incurring  additional  cost as a
result of such contingency plans.

Risk of Non-Compliance

Based on the progress we have made in  addressing  Year 2000  issues,  we do not
foresee  significant  risks associated with our year 2000 compliance  program at
this time.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable


PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Abercrombie v. AcroMed et al.

In  September,  1999,  plaintiffs  voluntarily  dismissed  the Company from this
action without prejudice.


                                       16
<PAGE>


GenSci Regeneration Laboratories, Inc. v. Osteotech, Inc.

In November,  1999,  the Company  settled all claims which it had filed  against
DePuy.  As part of the  settlement,  DePuy has agreed to stop selling the GenSci
products accused of infringing the Company's patents,  no later than February 4,
2001 and to pay the  Company  $3,000,000  as follows:  $2,000,000  in the fourth
quarter of 1999 and $250,000 at the end of each quarter in 2000. Payments in the
year 2000 will be made unless  DePuy  discontinues  selling the GenSci  products
during the year, at which time DePuy would not be obligated for payments  beyond
the quarter in which it stopped selling the GenSci products.

Medtronic  Sofamor Danek,  Inc.,  Sofamor Danek L.P. and Sofamor Danek Holdings,
Inc. v. Osteotech

In  September,  1999 the Company filed its answer and counter  claims  seeking a
declaratory  judgement  that the  patents in question in this action are invalid
and otherwise not infringed by the Company.  Plaintiffs filed their reply to the
counterclaims in October, 1999. The Company believes that the claims asserted in
this action are without  merit and intends to  vigorously  defend  against  such
claims.

Medtronic Sofamor Danek, Inc. v. Arthur Alfaro

In September, 1999, Medtronic Sofamor Danek, Inc. ("Medtronic"),  sued Arthur A.
Alfaro,  a former  Division  President of Medtronic  and currently the Company's
President and Chief  Operating  Officer,  in the Chancery Court of Tennessee for
the Thirtieth  Judicial  District at Memphis,  seeking to enjoin Mr. Alfaro from
divulging  alleged  confidential  information  or trade  secrets of Medtronic to
third  parties,  including  the Company,  and from working for the Company for a
period of twelve  months.  In  September,  1999,  the Court  issued a  temporary
restraining   order  prohibiting  Mr.  Alfaro  from  issuing  or  divulging  any
confidential  information  or trade secrets of Medtronic to any third party.  In
October,  1999,  Mr.  Alfaro  filed and served his  answer,  denying any and all
liability.  Pursuant  to an  employment  agreement  between  Mr.  Alfaro and the
Company,  the Company is paying Mr.  Alfaro's legal fees and costs for defending
this action.

ITEM 5. OTHER INFORMATION

On November 8, 1999, we announced  that Roger C.  Stikeleather,  Executive  Vice
President,  Sales &  Marketing,  left the  Company  effective  November 4, 1999.
Personnel who had been reporting to Mr.  Stikeleather now report directly to Mr.
Arthur A. Alfaro, Osteotech's President and Chief Operating Officer.

On November  10, 1999,  we  announced  that we settled all claims which had been
filed  against  DePuy in the patent  infringement  suit against  GenSci Labs and
GenSci Sciences and DePuy.  As part of the settlement,  DePuy has agreed to stop
selling  DynaGraft(TM)  Gel and Putty, the GenSci products accused of infringing
the  Company's  patents,  no later than  February 4, 2001 and to pay the Company
$3,000,000 as follows:  $2,000,000 in the fourth quarter of 1999 and $250,000 at
the end of each  quarter in 2000.  Payments in the year 2000 will be made unless
DePuy  discontinues  selling the GenSci  products during the year, at which time
DePuy would not be obligated for payments beyond the quarter in which it stopped
selling the GenSci products.



                                       17
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits (numbered in accordance with Item 601 of Regulation S-K)

         Exhibit                                                          Page
         Number       Description                                        Number
         ------       -----------                                        ------

         10.34        Employment Agreement with Arthur A. Alfaro
                      Dated September 13, 1999                             E-1

         10.35        Change in Control Agreement by and between
                      Osteotech and Arthur A. Alfaro                       E-12

         10.36        Settlement Agreement and General Release
                      Between DePuy AcroMed, Inc. and DePuy, Inc.
                      and Osteotech, Inc.                                  E-22

          27.0        Financial Data Schedule                              E-32

(b)  Reports on Form 8-K

     On September  13, 1999,  we filed with the  Commission a current  report on
     Form 8-K to  announce  that  Arthur A.  Alfaro  had  joined us in the newly
     created new position of President and Chief Operating  Officer.  Mr. Alfaro
     was also  elected to the  Company's  Board of  Directors.  He was  formerly
     President of the Thoracolumbar Division for Medtronic Sofamor Danek, Inc.

     On September  24, 1999,  we filed with the  Commission a current  report on
     Form 8-K to announce  that we did not expect third quarter 1999 revenue and
     earnings results to meet analysts' consensus estimates for the quarter.


                                       18
<PAGE>

                                   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.




                                                         Osteotech, Inc
                                                  ------------------------------
                                                           (Registrant)





Date:    November 12, 1999                By:     /s/ Richard W. Bauer
                                                  ------------------------------
                                                  Richard W  Bauer
                                                  Chief Executive Officer




Date:    November 12, 1999                By:     /s/ Michael J. Jeffries
                                                  ------------------------------
                                                  Michael J  Jeffries
                                                  Executive Vice President
                                                  Chief Financial Officer



                                       19