##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 OR
 o
    
    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 333-112754
 OSTEOLOGIX, INC.
  Delaware
    
    32-0104570(State or other jurisdiction of incorporation)
    
    (IRS Employer Identification No.)
 4415 Cox Road, Glen Allen, VA 23060
 (Address of principal executive offices)
 (804) 747-6027
 (Registrants telephone number, including area code)
 þ o
 þ o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company þ
 o þ




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##### 



[TABLE OF CONTENTS]
 PagePART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
    
    
    10ITEM 3. CONTROLS AND PROCEDURES
    
    
    13PART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    14ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    22ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    22ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    22ITEM 5. OTHER INFORMATION
    
    
    22ITEM 6. EXHIBITS
    
    
    23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Osteologix, Inc.
(a development stage company)
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,695
    
    
    $
    2,996Short-term investments
    
    
    554
    
    
    
    1,388Prepaid expenses and other assets
    
    
    96
    
    
    
    111Total current assets
    
    
    3,345
    
    
    
    4,495Equipment, net
    
    
    4
    
    
    
    5Total assets
    
    $
    3,349
    
    
    $
    4,500Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    394
    
    
    $
    575Accrued liabilities
    
    
    103
    
    
    
    148Total current liabilities
    
    
    497
    
    
    
    723Commitments and Contingencies
    
    
    
    
    
    
    Stockholders EquityPreferred stock, $0.0001 par value, 1,000
shares authorized, none issued or
outstanding at March 31, 2009 or December
31, 2008
    
    
    
    
    
    
    Common stock, $0.0001 par value, 100,000
shares authorized; 29,484 and 29,142 shares
issued and outstanding at March 31, 2009
and December 31, 2008, respectively
    
    
    3
    
    
    
    3Additional paid-in-capital
    
    
    26,508
    
    
    
    26,435Accumulated other comprehensive loss
    
    
    (190
    )
    
    
    (192
    )Deficit accumulated during development stage
    
    
    (23,469
    )
    
    
    (22,469
    )Total stockholders equity
    
    
    2,852
    
    
    
    3,7773,Total liabilities and stockholders equity
    
    $
    3,349
    
    
    $
    4,500
 See accompanying notes to the condensed consolidated financial statements.
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Osteologix, Inc.
(a development stage company)
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
 For the Period FromFor the Three Months Ended
    
    
    June 16, 2003March 31,
    
    
    (Inception) to2009
    
    
    2008
    
    
    March 31, 2009Contract revenue from related party
    
    $
    
    
    
    $
    
    
    
    $
    750Operating expenses:Research and development
    
    
    398
    
    
    
    672
    
    
    
    11,833General and administrative
    
    
    612
    
    
    
    951
    
    
    
    13,103Total operating expenses
    
    
    1,010
    
    
    
    1,623
    
    
    
    24,936Loss from operations
    
    
    (1,010
    )
    
    
    (1,623
    )
    
    
    (24,186
    )Interest income, net
    
    
    10
    
    
    
    28
    
    
    
    717Net loss
    
    $
    (1,000
    )
    
    $
    (1,595
    )
    
    $
    (23,469
    )Net loss per common share, basic and
diluted
    
    $
    (0.03
    )
    
    $
    (0.06
    )Weighted average number of common
shares outstanding-basic and
diluted
    
    
    29,400
    
    
    
    25,011
 See accompanying notes to the condensed consolidated financial statements.
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Osteologix, Inc.
(a development stage company)
Condensed Consolidated Statement of Stockholders Equity and Comprehensive Loss
For the Period From June 16, 2003 (Inception) through March 31, 2009
(in thousands, except per share amounts)
 DeficitAccumulated
    
    
    AccumulatedAdditional
    
    
    Other
    
    
    During the
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Development
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Loss
    
    
    Stage
    
    
    EquityIssuance of common stock to founders for
cash of $0.02 per share in June 2003
    
    
    4,897
    
    
    $
    1
    
    
    $
    84
    
    
    $
    
    
    
    $
    
    
    
    $
    85Issuance of common stock for cash of
$0.95 per share in October 2003
    
    
    979
    
    
    
    
    
    
    
    930
    
    
    
    
    
    
    
    
    
    
    
    930Issuance of common stock for cash of
$1.01 per share in May 2004
    
    
    979
    
    
    
    
    
    
    
    988
    
    
    
    
    
    
    
    
    
    
    
    988Issuance of common stock for cash of
$0.83 per share in January 2005, net of
issuance costs
    
    
    1,430
    
    
    
    
    
    
    
    1,158
    
    
    
    
    
    
    
    
    
    
    
    1,158Issuance of common stock for cash of
$1.24 per share in June 2005, net of
issuance costs
    
    
    2,220
    
    
    
    
    
    
    
    2,699
    
    
    
    
    
    
    
    
    
    
    
    2,699Comprehensive loss:Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,913
    )
    
    
    (4,913
    )Foreign currency translations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,917
    )Balance at December 31, 2005
    
    
    10,505
    
    
    
    1
    
    
    
    5,859
    
    
    
    (4
    )
    
    
    (4,913
    )
    
    
    943Common stock transferred in merger with
Castle & Morgan Holdings, Inc.
    
    
    2,860
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock for cash of
$1.31 per share in private placement in
May 2006, net of issuance costs
    
    
    7,656
    
    
    
    1
    
    
    
    9,255
    
    
    
    
    
    
    
    
    
    
    
    9,256Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    508
    
    
    
    
    
    
    
    
    
    
    
    508Comprehensive loss:Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,858
    )
    
    
    (4,858
    )Unrealized gain on short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Foreign currency translations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    (54
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,910
    )Balance at December 31, 2006
    
    
    21,021
    
    
    
    2
    
    
    
    15,622
    
    
    
    (56
    )
    
    
    (9,771
    )
    
    
    5,797Issuance of common stock and warrants
for cash of $1.32 per share in private
placement in June 2007, net of issuance
costs
    
    
    3,825
    
    
    
    
    
    
    
    4,970
    
    
    
    
    
    
    
    
    
    
    
    4,970Stock issued in lieu of cash for services
    
    
    143
    
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    170Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    184Comprehensive loss:Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,037
    )
    
    
    (8,037
    )Unrealized loss on short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Foreign currency translations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74
    )
    
    
    
    
    
    
    (74
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,113
    )Balance at December 31, 2007
    
    
    24,989
    
    
    
    2
    
    
    
    20,946
    
    
    
    (132
    )
    
    
    (17,808
    )
    
    
    3,008Issuance of common stock and warrants
for cash of $1.32 per share in private
placement in April 2008, net of issuance
costs
    
    
    4,030
    
    
    
    1
    
    
    
    5,149
    
    
    
    
    
    
    
    
    
    
    
    5,150Stock issued in lieu of cash for services
    
    
    123
    
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    
    
    
    
    123Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    217
    
    
    
    
    
    
    
    
    
    
    
    217Comprehensive loss:Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,661
    )
    
    
    (4,661
    )Unrealized loss on short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Foreign currency translations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    (59
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,721
    )Balance at December 31, 2008
    
    
    29,142
    
    
    $
    3
    
    
    $
    26,435
    
    
    $
    (192
    )
    
    $
    (22,469
    )
    
    $
    3,777
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Osteologix, Inc.
(a development stage company)
Condensed Consolidated Statement of Stockholders Equity and Comprehensive Loss
For the Period From June 16, 2003 (Inception) through March 31, 2009
(in thousands, except per share amounts)
 DeficitAccumulated
    
    
    AccumulatedAdditional
    
    
    Other
    
    
    During the
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Development
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Loss
    
    
    Stage
    
    
    EquityBalance at December 31, 2008
    
    
    29,142
    
    
    $
    3
    
    
    $
    26,435
    
    
    $
    (192
    )
    
    $
    (22,469
    )
    
    $
    3,777Stock issued in lieu of cash for services
    
    
    342
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    30Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    43Comprehensive loss:Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000
    )
    
    
    (1,000
    )Foreign currency translations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (998
    )Balance at March 31, 2009
    
    
    29,484
    
    
    $
    3
    
    
    $
    26,508
    
    
    $
    (190
    )
    
    $
    (23,469
    )
    
    $
    2,852
 See accompanying notes to the condensed consolidated financial statements.
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Osteologix,
Inc.
(a development stage company)
Condensed Consolidated Statements of Cash Flow
(in thousands, except per share amounts)
(Unaudited)
 For the PeriodFor the Three Months Ended
    
    
    From June 16, 2003March 31,
    
    
    (Inception) to2009
    
    
    2008
    
    
    March 31, 2009Operating activitiesNet loss
    
    $
    (1,000
    )
    
    $
    (1,595
    )
    
    $
    (23,469
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation
    
    
    1
    
    
    
    
    
    
    
    40Loss on disposal of equipment
    
    
    
    
    
    
    
    
    
    
    3Issuance of stock in lieu of cash for services
    
    
    
    
    
    
    31
    
    
    
    293Stock based compensation
    
    
    43
    
    
    
    49
    
    
    
    952Changes in operating assets and liabilities:Prepaid expenses and other current assets
    
    
    15
    
    
    
    34
    
    
    
    (96
    )Accounts payable
    
    
    (181
    )
    
    
    (310
    )
    
    
    394Accrued liabilities
    
    
    (45
    )
    
    
    (109
    )
    
    
    102Net cash used in operating activities
    
    
    (1,167
    )
    
    
    (1,900
    )
    
    
    (21,781
    )Investing activitiesPurchase of short-term investments
    
    
    (1,328
    )
    
    
    
    
    
    
    (28,312
    )Sales and maturities of short-term investments
    
    
    2,162
    
    
    
    1,273
    
    
    
    27,758Purchase of equipment
    
    
    
    
    
    
    
    
    
    
    (46
    )Net cash provided by (used in) investing activities
    
    
    834
    
    
    
    1,273
    
    
    
    (600
    )Financing activitiesNet proceeds from issuance of common stock
    
    
    30
    
    
    
    
    
    
    
    25,266Net cash provided by financing activities
    
    
    30
    
    
    
    
    
    
    
    25,266Effect of exchange rates on cash and cash equivalents
    
    
    2
    
    
    
    (8
    )
    
    
    (190
    )Net (decrease) increase in cash and cash equivalents
    
    
    (301
    )
    
    
    (635
    )
    
    
    2,695Cash and cash equivalents at beginning of period
    
    
    2,996
    
    
    
    2,872
    
    
    
    Cash and cash equivalents at end of period
    
    $
    2,695
    
    
    $
    2,237
    
    
    $
    2,695
 See accompanying notes to the condensed consolidated financial statements.
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Osteologix, Inc.
(a development stage company)
Notes to Condensed Consolidated Financial Statements
March 31, 2009 (Unaudited)
(Tabular amounts in thousands, except per share amounts)
 1. Basis of Presentation and Summary of Significant Accounting Policies
 Business Description
  Basis of Presentation
     Fair Value of Financial Instruments
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2. Cash Equivalents and Short-Term Investments
   3. Stock-Based Compensation
  4. Net Loss Per Share
   Page 9




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Special Note Regarding Forward-Looking Statements
    Company Information and Background
   Page 10




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Critical Accounting Policies and Use of Estimates
  Recently Adopted or Issued Accounting Pronouncements
  Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
 Revenues
  Research and Development Expenses
   Three Months Ended March 31,
    
    
    Decrease from Period in Prior Year2009
    
    
    
    
    2008
    
    
    Dollars
    
    
    Percent$
    398,000
    
    
    
    
    $
    672,000
    
    
    $
    (274,000
    )
    
    
    -41
    %
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General and Administrative Expenses
   Three Months Ended March 31,
    
    
    Decrease from Period in Prior Year2009
    
    
    
    
    2008
    
    
    Dollars
    
    
    Percent$
    612,000
    
    
    
    
    $
    951,000
    
    
    $
    (339,000
    )
    
    
    -36
    %
   Interest Income
  LIQUIDITY AND CAPITAL RESOURCES
   March 31,
    
    
    December 31,2009
    
    
    2008Cash, cash equivalents and short-term investments
    
    $
    3,249,000
    
    
    $
    4,384,000Working capital
    
    
    2,848,000
    
    
    
    3,772,000
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PLAN OF OPERATION
    
    
    the requirements of regulatory agencies;
    
    our ability to establish collaborative relationships and the terms of these
relationships;
    
    the progress we make in our clinical development programs and the results of our
clinical trials;
    
    competing technological and market developments; and
    
    our acquisition or licensing of new drug candidates.
 Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  Item 1A. Risk Factors.
 Risks Related to Our Financial Condition
 We expect to need additional financing in the near term and may be unable to raise funding
when needed, which could force us to delay, curtail or discontinue development of our products or
operations.
  
    
    the progress and cost of our clinical trials and other research and development activities;
    
    the costs and timing of obtaining regulatory approvals;
    
    the terms and timing of any collaborative, licensing, acquisition or other arrangements that we may establish;
    
    the costs of filing, prosecuting, defending and enforcing any patent
applications, claims, patents and other intellectual property rights;
    
    the cost and timing of securing manufacturing capabilities for our clinical
product candidates and commercial products, if any;
    
    the costs of lawsuits involving us or our product candidates; and
    
    the costs of establishing sales, marketing and distribution capabilities.
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Raising additional funds may cause dilution to existing stockholders or require us to
relinquish valuable rights.
  We have incurred significant net operating losses since our inception and may not achieve
profitability in future periods.
   Our independent public accounting firm has issued an opinion on our consolidated financial
statements that states the consolidated financial statements were prepared assuming we will
continue as a going concern.
  Risks Related to Our Business
 We have only one product that is currently being evaluated for commercial development, and
even if our continued development of this product is successful, it will be several years before it
can reach market.
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Obtaining and maintaining the necessary U.S. or worldwide regulatory approvals for our product
candidates will be time consuming, difficult and costly. If we fail to do so, we will be unable to
commercialize our product candidates.
      Clinical trials are time-consuming, difficult and costly to design and implement.
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The results of our clinical trials may not support our product candidate claims or may result
in the discovery of adverse side effects.
   The strontium salt that is approved for treating osteoporosis in Europe has exhibited a new
potential side effect not seen in clinical trials.
 ®
  Delays in patient enrollment for clinical trials could increase costs and delay regulatory
approvals.
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Physicians and patients may not accept and use our drugs.
  Patients may not be able to obtain adequate reimbursement for our drugs.
  Our drug-development programs depend upon third-party researchers who are outside our control.
  We rely exclusively on third parties to manufacture our product candidates.
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Competition for qualified personnel is intense in our industry, and we may not be able to
recruit and retain qualified personnel.
  Developments by competitors may render our products or technologies obsolete or
noncompetitive.
  If we fail to protect our intellectual property rights, or to secure rights to patents of
others, our competitive position could be harmed or we could be required to incur significant
expenses to enforce our rights.
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If we infringe the rights of third parties, we could be prevented from selling products,
forced to pay damages, and compelled to defend against litigation.
   We may be exposed to liability claims associated with using hazardous materials and chemicals.
  We may incur substantial liabilities and be required to limit commercialization of our product
candidates in response to product liability lawsuits.
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Risk Related to Management
 We rely on one key executive officer and scientific and medical advisors. Their knowledge of
our business and technical expertise would be difficult to replace.
   We may not successfully manage our growth.
  The concentrated ownership of our common stock may have the effect of delaying or preventing
mergers, acquisitions or other significant corporate transactions.
  Risk Related to Common Stock
 We cannot assure you that the common stock will become liquid or that it will become listed on
a securities exchange.
  A significant number of shares of our common stock are subject to issuance upon exercise of
outstanding warrants, which upon exercise would result in dilution to our security holders
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There may be issuances of shares of preferred stock in the future.
  Our common stock is considered a penny stock.
  Anti-takeover provisions in our charter and by-laws and under Delaware law may make an
acquisition of us or a change in our management more difficult, even if an acquisition or a
management change would be beneficial to our stockholders.
  Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be
time consuming, difficult and costly.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information.
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Item 6. Exhibits.
 Exhibit Number
    
    Description31.1
    
    
    Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act
of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Principal Financial and Accounting Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).32.2
    
    
    Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the
Sarbanes-Oxley Act of 2002).
 
 SIGNATURES
  OSTEOLOGIX, INC.Date: May 14, 2009
    By:
    /s/ Philip J. YoungName:
    Philip J. YoungTitle:
    President and Chief Executive OfficerDate: May 14, 2009
    By:
    /s/ Philip J. YoungName:
    Philip J. YoungTitle:
    Principal Financial and Accounting Officer  Page 23




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description31.1
    
    
    Certification of Chief Executive Officer pursuant to
Rules 13a-14(a) and 15d-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Principal Financial and Accounting
Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer Pursuant to 18
U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of
2002).32.2
    
    
    Certification of Principal Financial and Accounting
Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the
Sarbanes-Oxley Act of 2002).
  Page 24