##### 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, 2008
 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
  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 INFORMATION
    
    
    3ITEM 1. FINANCIAL STATEMENTS
    
    
    3ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
    
    
    9ITEM 3. CONTROLS AND PROCEDURES
    
    
    13PART II  OTHER INFORMATION
    
    
    13ITEM 1. LEGAL PROCEEDINGS.
    
    
    13ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
    
    
    21ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
    
    
    21ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.22ITEM 5. OTHER INFORMATION.22ITEM 6. EXHIBITS.
    
    
    22Exhibit 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 31,2008
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,237
    
    
    $
    2,872Short-term investments
    
    
    
    
    
    
    1,273Prepaid expenses and other assets
    
    
    157
    
    
    
    191Total current assets
    
    
    2,394
    
    
    
    4,336Equipment, net
    
    
    9
    
    
    
    9Total assets
    
    $
    2,403
    
    
    $
    4,345Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    749
    
    
    $
    1,059Accrued liabilities
    
    
    169
    
    
    
    278Total current liabilities
    
    
    918
    
    
    
    1,337Commitments and ContingenciesStockholders EquityPreferred stock, $0.0001 par value, 1,000
shares authorized, none issued or
outstanding
    
    
    
    
    
    
    Common stock, $0.0001 par value, 100,000
shares authorized, 25,012 and 24,989 shares
issued and outstanding at March 31, 2008
and December 31, 2007, respectively
    
    
    3
    
    
    
    2Additional paid-in-capital
    
    
    21,025
    
    
    
    20,946Accumulated other comprehensive loss
    
    
    (140
    )
    
    
    (132
    )Deficit accumulated during development stage
    
    
    (19,403
    )
    
    
    (17,808
    )Total stockholders equity
    
    
    1,485
    
    
    
    3,008Total liabilities and stockholders equity
    
    $
    2,403
    
    
    $
    4,345
 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 PeriodFor the Three Months Ended
    
    
    From June 16,March 31,
    
    
    2003 (Inception) to2008
    
    
    2007
    
    
    March 31, 2008Revenues
    
    $
    
    
    
    $
    
    
    
    $
    750Operating expenses:Research and development
    
    
    672
    
    
    
    1,194
    
    
    
    10,350General and administrative
    
    
    951
    
    
    
    849
    
    
    
    10,393Total operating expenses
    
    
    1,623
    
    
    
    2,043
    
    
    
    20,743Loss from operations
    
    
    (1,623
    )
    
    
    (2,043
    )
    
    
    (19,993
    )Interest income, net
    
    
    28
    
    
    
    74
    
    
    
    590Net loss
    
    $
    (1,595
    )
    
    $
    (1,969
    )
    
    $
    (19,403
    )Net loss per share, basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.09
    )Weighted average number of shares
outstanding basic and diluted
    
    
    25,011
    
    
    
    21,051
 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, 2008
(in thousands, except per share amounts)
 DeficitAccumulatedAdditional
    
    
    Accumulated 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
    )
    
    $
    3,008Stock issued in lieu of cash for services
    
    
    23
    
    
    
    1
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    31Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    49Comprehensive loss:Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,595
    )
    
    
    (1,595
    )Foreign currency translations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,603
    )Balance at March 31, 2008
    
    
    25,012
    
    
    $
    3
    
    
    $
    21,025
    
    
    $
    (140
    )
    
    $
    (19,403
    )
    
    $
    1,485
 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) to2008
    
    
    2007
    
    
    March 31, 2008Operating activitiesNet loss
    
    $
    (1,595
    )
    
    $
    (1,969
    )
    
    $
    (19,403
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation
    
    
    
    
    
    
    1
    
    
    
    19Loss on disposal of equipment
    
    
    
    
    
    
    
    
    
    
    2Issuance of stock in lieu of cash for services
    
    
    31
    
    
    
    38
    
    
    
    201Stock based compensation
    
    
    49
    
    
    
    70
    
    
    
    741Changes in operating assets and liabilities:Prepaid expenses and other current assets
    
    
    34
    
    
    
    136
    
    
    
    (157
    )Accounts payable
    
    
    (310
    )
    
    
    473
    
    
    
    749Accrued liabilities
    
    
    (109
    )
    
    
    74
    
    
    
    169Net cash used in operating activities
    
    
    (1,900
    )
    
    
    (1,177
    )
    
    
    (17,679
    )Investing activitiesPurchase of short-term investments
    
    
    
    
    
    
    (775
    )
    
    
    (13,420
    )Sales and maturities of short-term investments
    
    
    1,273
    
    
    
    2,378
    
    
    
    13,420Purchase of equipment
    
    
    
    
    
    
    
    
    
    
    (30
    )Net cash provided by (used in) investing activities
    
    
    1,273
    
    
    
    1,603
    
    
    
    (30
    )Financing activities Net proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    20,086Effect of exchange rates on cash and cash equivalents
    
    
    (8
    )
    
    
    (9
    )
    
    
    (140
    )Net increase (decrease) in cash and cash equivalents
    
    
    (635
    )
    
    
    417
    
    
    
    2,237Cash and cash equivalents at beginning of period
    
    
    2,872
    
    
    
    481
    
    
    
    Cash and cash equivalents at end of period
    
    $
    2,237
    
    
    $
    898
    
    
    $
    2,237
 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, 2008 (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
  5. Recently Adopted Accounting Pronouncement
 Fair Value Measurements
  6. Subsequent Events
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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 9




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Critical Accounting Policies and Use of Estimates
  Recently Adopted or Issued Accounting Pronouncements
 Fair Value
Measurements,
 Recent Developments
   Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
 Revenues
  Research and Development Expenses
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Three Months Ended March 31,
    
    
    Decrease from Period in Prior Year2008
    
    
    2007
    
    
    Dollars
    
    
    Percent$
    
    

    672,000
    
    
    $
    1,194,000
    
    
    $
    (522,000
    )
    
    
    - 44
    %
   General and Administrative Expenses
   Three Months Ended March 31,
    
    
    Increase from Period in Prior Year2008
    
    
    2007
    
    
    Dollars
    
    
    Percent$
    
    

    951,000
    
    
    $
    849,000
    
    
    $
    102,000
    
    
    
    12
    %
   Interest Income
  LIQUIDITY AND CAPITAL RESOURCES
   Page 11




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March 31,
    
    
    December 31,2008
    
    
    2007Cash, cash equivalents and short-term investments
    
    $
    2,237,000
    
    
    $
    4,145,000Working capital
    
    
    1,476,000
    
    
    
    2,999,000
   PLAN OF OPERATION
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
    
    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.
  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.
 We expect to need additional financing in
the near term and may be unable..., We rely on key executive officers and scientific and
medical advisors...
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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.
   Raising additional funds may cause dilution to existing stockholders or require us to relinquish
valuable rights.
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We have incurred significant net operating losses since our inception and may not achieve
profitability in future periods.
   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.
   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.
     Page 15




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Clinical trials are time-consuming, difficult and costly to design and implement.
   The results of our clinical trials may not support our product candidate claims or may
result in the discovery of adverse side effects.
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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.
   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.
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We rely exclusively on third parties to manufacture our product candidates.
    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.
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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.
      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.
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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.
  Risk Related to Management
 We rely on key executive officers 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.
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The concentrated ownership of our common stock may have the effect of delaying or preventing
mergers, acquisitions or other significant corporate transactions.
  Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time
consuming, difficult and costly.
  We cannot assure you that the common stock will become liquid or that it will become listed on a
securities exchange.
  There may be issuances of shares of preferred stock in the future.
  Our common stock is considered a penny stock.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
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Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
 Exhibit
 Number
    
    Description10.1
    
    Securities Purchase Agreement dated as of March 27, 2008, by and among Osteologix, Inc., and the purchasers named
on the signature page thereto (incorporated herein by reference to Exhibit 10.1 to the Registrants Current Report
on Form 8-K filed on April 2, 2008 (the April 2, 2008 Form 8-K)).10.2
    
    Registration Rights Agreement entered into on March 27, 2008 by and among Osteologix, Inc., and the Holders named
therein (incorporated herein by reference to Exhibit 10.2 to the April 2, 2008 Form 8-K).10.3
    
    Form of Warrant issued in connection with the Securities Purchase Agreement listed as Exhibit 10.1 above
(incorporated herein by reference to Exhibit 10.3 to the April 2, 2008 Form 8-K).31.1
    
    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 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 Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of
2002).
 
 SIGNATURES
  OSTEOLOGIX, INC.Date: May 14, 2008
    By:
    /s/ Philip J. YoungName:
    Philip J. YoungTitle:
    President and Chief Executive OfficerDate: May 14, 2008
    By:
    /s/ Matthew M. LoarName:
    Matthew M. LoarTitle:
    Principal Financial and Accounting Officer  Page 22




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EXHIBIT INDEX
 Exhibit Number
    
    Description10.1
    
    Securities Purchase Agreement dated as of March 27, 2008,
by and among Osteologix, Inc., and the purchasers named on
the signature page thereto (incorporated herein by
reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K filed on April 2, 2008 (the April 2,
2008 Form 8-K)).10.2
    
    Registration Rights Agreement entered into on March 27,
2008 by and among Osteologix, Inc., and the Holders named
therein (incorporated herein by reference to Exhibit 10.2
to the April 2, 2008 Form 8-K).10.3
    
    Form of Warrant issued in connection with the Securities
Purchase Agreement listed as Exhibit 10.1 above
(incorporated herein by reference to Exhibit 10.3 to the
April 2, 2008 Form 8-K).31.1
    
    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 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 Officer Pursuant to 18
U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of
2002).
  Page 23