<PAGE>
================================================================================
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 quarterly period ended June 30, 1997
-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 No. 0-24936
ERGO SCIENCE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-3271667
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
CHARLESTOWN NAVY YARD
100 FIRST AVENUE, FOURTH FLOOR
CHARLESTOWN, MASSACHUSETTS 02129
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 241-6800
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 [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At August 1, 1997 there were 13,180,916 shares of common stock, par value $.01
per share, of the registrant outstanding.
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<PAGE>
ERGO SCIENCE CORPORATION
TABLE OF CONTENTS
-----------------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996...................................3
Consolidated Statements of Operations and Deficit
Accumulated During the Development Stage
for the three months and six months ended
June 30, 1997 and June 30, 1996 and for the period
from inception (January 23, 1990) to June 30, 1997......4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and June 30, 1996 and for
the period from inception (January 23, 1990)
to June 30, 1997........................................5
Notes to Consolidated Financial Statements......................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.....................8
PART II. OTHER INFORMATION................................................12
SIGNATURES.................................................................13
2
<PAGE>
ERGO SCIENCE CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 19,944,880 $ 18,066,884
Short-term investments............................................................ 10,408,671 20,550,986
Prepaid and other current assets.................................................. 541,110 234,558
------------ ------------
Total current assets........................................................... 30,894,661 38,852,428
Equipment and leasehold improvements, net .......................................... 2,480,626 2,491,866
Other assets........................................................................ 68,884 40,986
------------ ------------
Total assets.................................................................... $ 33,444,171 $ 41,385,280
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................................. $ 1,987,076 $ 1,747,961
Current portion of capital lease obligations...................................... 258,910 186,838
------------ ------------
Total current liabilities...................................................... 2,245,986 1,934,799
Long-term portion of capital lease obligations...................................... 448,213 385,256
Commitments and contingencies....................................................... -- --
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized;
6,903 shares of Series D preferred stock issued and outstanding
at June 30, 1997 and December 31, 1996 (liquidation
preferences were $7,847,076 and $7,618,522 at June 30, 1997
and December 31, 1996, respectively)........................................... 4,972,406 4,743,852
Common stock, $.01 par value, authorized 50,000,000 at
June 30, 1997 and December 31, 1996; issued and outstanding
13,180,916 shares at June 30, 1997 and 13,048,036 shares at
December 31, 1996.............................................................. 131,809 130,480
Additional paid-in capital........................................................ 97,752,276 97,158,840
Cumulative dividends on preferred stock........................................... (2,962,839) (2,734,285)
Deferred compensation............................................................. (853,511) (1,172,374)
Deficit accumulated during the development stage.................................. (68,290,169) (59,061,288)
------------ ------------
Total stockholders' equity...................................................... 30,749,972 39,065,225
------------ ------------
Total liabilities and stockholders' equity.................................. $ 33,444,171 $ 41,385,280
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
3
<PAGE>
ERGO SCIENCE CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
<TABLE>
<CAPTION>
Period From Inception
Three Months Ended June 30, Six Months Ended June 30, (January 23, 1990)
---------------------------- ------------------------ through
1997 1996 1997 1996 June 30, 1997
------ ------- ------ ------ -------------------
Revenues:
<S> <C> <C> <C> <C> <C>
Licensing and supplier fees..... 355,671
Interest........................ $ 438,646 $ 195,914 $ 919,666 $ 466,316 $ 2,874,673
----------- ----------- ----------- ----------- ------------
438,646 195,914 919,666 466,316 3,230,344
Operating expenses:
Research and development........ 2,899,048 3,124,768 6,244,289 6,051,177 37,962,035
Purchase of in-process
research and development.... -- -- -- 168,750 7,188,814
General and administrative...... 1,778,914 1,168,160 3,904,256 2,241,288 26,183,269
----------- ----------- ----------- ----------- ------------
4,677,962 4,292,928 10,148,545 8,461,215 71,334,118
----------- ----------- ----------- ----------- ------------
Net loss.................... (4,239,316) (4,097,014) (9,228,879) (7,994,899) (68,103,774)
Accretion of dividends on
preferred stock..................... (115,409) (108,784) (228,554) (215,434) (2,676,772)
Dividends on redeemable preferred
stock............................... -- -- -- -- (7,123,536)
Dividends on preferred stock.......... -- -- -- -- (2,018,763)
----------- ----------- ----------- ----------- ------------
Net loss to common stockholders....... $(4,354,725) $(4,205,798) $(9,457,433) $(8,210,333) $(79,922,845)
=========== =========== =========== =========== ============
Net loss per common share............. $ (.33) $ (.41) $ (.72) $ (.81)
=========== =========== =========== ===========
Weighted average common shares
outstanding......................... 13,179,781 10,168,080 13,149,907 10,157,489
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
4
<PAGE>
ERGO SCIENCE CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period From
Inception
Six Months Ended June 30, (January 23, 1990)
--------------------------- through
1997 1996 June 30, 1997
----------- ----------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................................ $ (9,228,879) $(7,994,899) $(68,103,774)
Adjustments to reconcile net loss to cash used
by operating activities:
Depreciation and amortization................................... 700,433 484,727 3,499,652
Noncash compensation............................................ 766,663 476,332 3,526,811
Noncash purchase of in-process research and development......... -- 168,750 5,688,814
Loss on sale of equipment....................................... 6,917 -- 35,248
Noncash charge for renegotiated supplier agreement.............. -- -- 1,747,931
Other noncash charges........................................... -- -- 86,347
Changes in operating assets and liabilities:
Prepaid and other current assets ............................. (306,552) (212,432) (541,110)
Other assets.................................................. (27,898) (16,446) (121,026)
Accounts payable and accrued expenses......................... 239,213 (2,144,427) 1,957,174
Deferred revenue.............................................. -- -- 5,559,714
------------ ----------- ------------
Net cash used in operating activities................................. (7,850,103) (9,238,395) (46,664,219)
------------ ----------- ------------
Cash flows from investing activities:
Purchase of short-term investments.................................. (23,224,472) (3,992,884) (65,333,616)
Proceeds from sale and maturity of short-term investments........... 33,366,787 6,582,501 54,924,945
Purchase of equipment and leasehold improvements.................... (457,905) (408,943) (5,484,152)
Proceeds received on sale of equipment.............................. 6,000 -- 37,724
------------ ----------- ------------
Net cash provided by (used in) investing activities................... 9,690,410 2,180,674 (15,855,099)
------------ ----------- ------------
Cash flows from financing activities:
Proceeds from issuance of convertible debt, net..................... -- -- 3,409,552
Distribution paid to S Corp stockholder............................. -- -- (186,393)
Principal payments under capital lease obligations.................. (109,276) (23,321) (282,662)
Proceeds from issuance of promissory notes.......................... -- -- 7,000,000
Repayment of promissory notes....................................... -- -- (3,000,000)
Proceeds from issuance of common stock and Series D
redeemable stock.................................................. -- -- 1,392,686
Proceeds received from capital contributions -- -- 102,176
Proceeds from issuance of Series B and C redeemable
convertible preferred stock....................................... -- -- 18,041,528
Proceeds from issuance of common stock, net of issuance costs....... -- -- 55,248,963
Proceeds from stock options exercised............................... 146,965 18,000 188,630
Proceeds from sale-leaseback agreement.............................. -- 549,718 549,718
------------ ----------- ------------
Net cash provided by financing activities............................. 37,689 544,397 82,464,198
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents.................. 1,877,996 (6,513,324) 19,944,880
Cash and cash equivalents at beginning of period...................... 18,066,884 15,896,373 --
------------ ----------- ------------
Cash and cash equivalents at end of period............................ $ 19,944,880 $ 9,383,049 $ 19,944,880
============ =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
5
<PAGE>
ERGO SCIENCE CORPORATION
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements are unaudited and have been
prepared by the Company in accordance with generally accepted accounting
principals.
Certain information and footnote disclosure normally included in the
Company's annual financial statements have been condensed or omitted. The
interim financial statements, in the opinion of management, reflect all
adjustments (including normal recurring accruals) necessary for a fair statement
of the results for the interim periods ended June 30, 1997 and 1996.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal year.
These interim financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1996, which are
contained in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission for the year ended December 31, 1996.
2. CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with maturities of 90 days or less at the date of
purchase to be cash equivalents. Changes in cash and cash equivalents may be
affected by shifts in investment portfolio maturities as well as by actual net
cash receipts or disbursements.
At June 30, 1997 and December 31, 1996, cash equivalents were composed
primarily of investments in money market funds, United States government
obligations and high grade commercial paper that mature within 90 days of
purchase.
3. SHORT-TERM INVESTMENTS
The following is a summary of securities with maturities greater than
90 days not classified as cash and cash equivalents. All short-term investments
are classified as held-to-maturity.
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Commercial paper................. $ 4,701,058 $ 8,844,868
Federal agency notes............. 5,707,613 11,706,118
----------- -----------
Total short-term investments.. $10,408,671 $20,550,986
=========== ===========
</TABLE>
The held-to-maturity securities are short-term in nature. Changes in
market interest rates would not have a significant effect on the fair value of
these securities. These securities are carried at amortized cost, which
approximates fair value.
6
<PAGE>
4. NET LOSS PER COMMON SHARE
Net loss per common share is computed based upon the weighted average
number of common shares outstanding. Common equivalent shares are not included
in the per share calculations where the effect of their inclusion would be anti-
dilutive. In the computation of net loss per common share, accretion of
preferred stock to the redemption amount is included as an increase to net loss
to common stockholders.
Fully diluted net loss per common share is the same as primary net
loss per common share.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements made by the
Company. Forward-looking statements reflect the Company's current views with
respect to such future events. Actual results may vary materially and adversely
from those anticipated, believed, assumed, estimated or otherwise indicated.
Important factors that could cause actual results to differ materially include,
without limitation, (1) that data obtained from clinical trials are subject to
varying interpretations and there can be no assurance that the FDA (or an FDA
panel of experts) will agree with the Company's assessment of clinical trial
results, (2) there can be no assurance of FDA approval to market ERGOSET for
Type 2 diabetes or any other indication or that the FDA will not require
additional clinical trials of ERGOSET, (3) uncertainty related to the scientific
development of a new medical therapy, (4) competition in the anti-diabetic and
anti-obesity markets is intense and other products have been recently approved
by the FDA, (5) the need for additional funding, (6) the uncertainty relating to
patent protection in the pharmaceutical and biotechnology industries, (7) there
can be no assurance that the Company will be able to establish corporate
alliances to market ERGOSET and assist with the development of product
candidates and (8) there can be no assurance that results obtained in animal
studies will be replicated in human clinical studies. Further information and
additional important factors are set forth in reports and other filings of the
Company with the Securities and Exchange Commission, including a Form S-1, as
amended, filed on August 9, 1996 and the 1996 Annual Report on Form 10-K,
generally under the caption "Risk Factors." The Company does not undertake to
update any forward-looking statement that may be made from time to time by or on
behalf of the Company.
OVERVIEW
Since inception, the Company has been engaged in the discovery and
development of novel treatments for metabolic disorders, including Type 2
diabetes and obesity, and various cancers. The Company's technology, based on
the principals of chronobiology, uses the timed administration of oral drugs to
modulate the body's neuroendocrine activity. The Company has dedicated most of
its financial resources to research and development of ERGOSET, the Company's
lead drug candidate, general and administrative expenses, and the prosecution of
patents and patent applications. To date, the Company has not received any
revenues from the sale of products and does not expect to generate such revenues
for at least a year, if at all. The Company has been unprofitable since its
inception, and the Company's accumulated deficit was $68,290,169 as of June 30,
1997. Although the Company intends to enter into collaborative relationships, it
expects to incur substantial and increasing expenses for at least the next
several years, due primarily to the expansion of its research and development
programs, including preclinical studies and clinical trials. The Company expects
that losses will fluctuate from quarter to quarter and that the fluctuations may
be substantial.
RESULTS OF OPERATIONS
Three Months and Six Months Ended June 30, 1996 and 1997
Total revenues increased from $195,914 and $466,316 for the three
month and six month periods ended June 30, 1996, respectively, to $438,646 and
$919,666 for the same periods in 1997. Revenues were derived primarily from
interest income earned on cash, cash equivalents and short-term investments. The
increases in interest income are attributable to an increase in the average
amounts of
8
<PAGE>
cash, cash equivalents and short-term investments during the first and second
quarters of 1997, compared to the first and second quarters of 1996. These
amounts increased as a result of proceeds received from the Company's second
public offering in August 1996.
Research and development expenses decreased from $3,124,768 to
$2,899,048 for the three month periods ended June 30, 1996 and 1997,
respectively. For the six month periods ended June 30, 1996 and 1997 research
and development expenses were consistent at $6,219,927 and $6,244,289,
respectively. In the first six months of 1996, the Company was conducting Phase
III clinical trials ("prior year activities") which were completed later that
year. In the first six months of 1997, the Company incurred costs associated
with the preparation of the New Drug Application (NDA) for ERGOSET, various new
development activities, and additional research personnel ("current year
activities"). The prior year activities resulted in research and development
expenses being higher in the three months ended June 30, 1996 than the same
period in 1997. For the six months ended June 30, 1997, the effect of the
decrease from prior year activities was equally offset by current year
activities. As a result, total research and development expenses were similar
for the first half of 1996 and 1997.
General and administrative expenses increased from $1,168,160 and
$2,241,288 for the three month and six month periods ended June 30 1996, to
$1,778,914 and $3,904,256 for the same periods in 1997. The increase in the
three month period was principally the result of the cost of settling and
defending a lawsuit brought in the first quarter of 1997 and costs associated
with the American Diabetes Association (ADA) conference held in Boston in June
1997. In an effort to establish a presence at the ADA conference and promote
awareness of the Company's research to be presented, the Company incurred
greater costs in 1997 than in 1996. The increase in the six month period was
mainly due to a charge of $928,000 which relates to a severance agreement made
with the former Chairman of the Board of Directors, who was also an officer and
employee of the Company, and the previously stated legal and ADA conference
costs.
As a result of the foregoing items, net loss to common stockholders
increased from $4,205,798 and $8,210,333 for the three month and six month
periods ended June 30, 1996, respectively, to $4,354,725 and $9,457,433 for the
same periods in 1997. The net loss per common share decreased from $(0.41) and
$(0.81) for the three month and six month periods ended June 30, 1996,
respectively, to $(0.33) and $(0.72) for the same periods in 1997. The declines
in net loss per common share were attributable to the increase in weighted
average common shares outstanding resulting from the Company's secondary public
offering in August 1996. For the three month and six month periods ended June
30, 1996, the weighted average common shares outstanding were 10,168,080 and
10,157,489, respectively, compared to 13,179,781 and 13,149,907 for the same
periods in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company's primary source of cash has been
from financing activities, which have consisted of private placements of equity
securities and two public offerings. Private placements of equity securities
provided the Company with aggregate proceeds of $32,999,000. On December 19,
1995, the Company raised $23,030,476 from the sale of stock in an initial public
offering, net of commissions and offering costs. Subsequently, on August 14,
1996, the Company raised an additional $32,218,487, net of commissions and
offering costs, from the sale of stock in a second public offering. Cash and
cash equivalents were $18,066,884 and $19,944,880, while short-term investments
were $20,550,986 and $10,408,671, at December 31, 1996 and June 30, 1997,
respectively. The changes in cash, cash equivalents and short-term investments
at June 30, 1997, were due primarily to the use of cash in the Company's
operating activities and shifts in investment portfolio balances.
The Company's primary use of cash to date has been in operating
activities to fund research and development, including preclinical studies and
clinical trials, and general and administrative expenses. During 1996, the
Company announced statistically significant Phase III results from three
separate clinical trials for ERGOSET, the Company's lead drug candidate, as
treatment for Type 2 diabetes. The
9
<PAGE>
first two clinical trials, completed in July 1996, used ERGOSET as adjunctive
therapy with sulfonylurea agents, while the third clinical trial, completed in
December 1996, was conducted with ERGOSET as monotherapy treatment. With the
results from the three Phase III trials, the Company selected an experienced
regulatory affairs consulting firm, Oxford Research International, to assist in
the preparation of its NDA for ERGOSET and held a pre-NDA meeting with the FDA
in March 1997. The Company plans to submit its NDA for ERGOSET, as adjunctive
and monotherapy treatment for Type 2 diabetes, to the FDA sometime in the third
quarter of 1997.
In the first six months of 1997, the Company continued to conduct a
small Phase II clinical trial of ERGOSET in combination with another
neurotransmitter modulating compound for the treatment of metastatic breast
cancer. Patients who completed the six months of treatment were invited to
participate in a six month extension study. The Company also continued to
conduct preclinical screens for lead candidates for use in photodynamic therapy
to treat various cancers and dopamine agonists for Type 2 diabetes and obesity.
At the ADA conference held in June 1997, Ergo Science researchers presented
preclinical findings which support the position that combination therapy with
neurotransmitter modulating drugs called dopamine D1/D2 agonists may
significantly improve the blood levels of insulin, glucose, lipids and free
fatty acids as well as a variety of proteins, enzymes and functional measures
related to diabetes, obesity and cardiovascular health. Currently, this
combination therapy is the Company's lead preclinical approach for second-
generation therapy for Type 2 diabetes and obesity. The Company expects to incur
increasing research and development costs in connection with the preclinical
studies for this combined therapy.
In April 1997, the Company announced the initiation of a new clinical
study for ERGOSET. This study is being performed to evaluate the safety and
efficacy of ERGOSET given in combination with insulin for Type 2 diabetes
patients who can no longer be controlled with traditional oral forms of
treatment called oral hypoglycemic agents (OHAs). The study is double-blinded
and placebo-controlled, and it involves approximately 40 subjects. Its objective
is to reduce excess sugar in the blood (hyperglycemia) and/or reduce the daily
insulin requirements of Type 2 diabetes patients who have previously failed or
have been discontinued from existing OHAs. The Company is incurring and will
continue to incur additional research and development expenses associated with
this study.
As of June 30, 1997, the Company's net investment in equipment and
leasehold improvements was $2,480,626. The Company expects that additional
equipment and facilities will be needed to the extent it increases its research
and development activities.
The Company believes that its available cash, cash equivalents, short-
term investments and expected interest income, will be adequate to fund its
current and anticipated levels of operations through mid-1998. Prior to that
time, the Company will need to raise additional capital through the sale of
securities in the public or private equity markets or by entering into a
collaborative arrangement with another company. There can be no assurance,
however, that events in the Company's research and development programs or other
events affecting the Company's operations will not result in accelerated or
unexpected expenditures. The Company is pursuing additional research and
development of ERGOSET and other product candidates to treat diabetes, obesity,
cancer and other diseases. The Company will require additional financing to
expand and complete that research and development. To the extent the Company
raises additional capital by issuing equity securities, ownership dilution to
existing stockholders will result and future investors may be granted rights
superior to those of existing stockholders. There can be no assurance, however,
that additional financing will be available from any source or, if available,
will be available on acceptable terms.
10
<PAGE>
The terms of the Company's Series D Preferred Stock prohibit the
Company from paying dividends on the common stock.
RECENT DEVELOPMENTS
In July 1997, the Company began enrollment of a Phase II clinical
study to evaluate the safety and efficacy of ERGOSET tablets to treat clinical
obesity. The double-blind, placebo-controlled study will be conducted at
approximately 15 clinical sites across the United States in approximately 400
clinically obese subjects. The study is designed primarily to evaluate weight
loss in subjects treated with two different dosages of ERGOSET while maintaining
a moderate, calorie-restricted diet. Preclinical and early Phase II clinical
data suggest that treatment with ERGOSET tablets may reduce body fat. In
addition, the Company intends to evaluate changes in waist circumference, blood
pressure and levels of serum lipids and insulin. Research and devepment expenses
will increase as a result of the Company's studies relating to the treatment of
obesity.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the first quarter of 1997, the Company was named as a defendant in a
lawsuit brought in Superior Court, Suffolk County Massachusetts (No. 97-0041 E)
by three individuals, Robert M. Santaniello, Jay A. Posnik and Savino J. Basile
(the "Plaintiffs"). The other defendants were Manuel Cincotta, Jr., Stephen
Cincotta and Product Development and Marketing Corporation ("PDMC"). This
lawsuit was settled in the second quarter of 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
---------
27 - Financial Data Schedule.
Reports on Form 8-K:
--------------------
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ERGO SCIENCE CORPORATION
By: /s/ Alan T. Barber
---------------------------------
Alan T. Barber
Vice President, Finance and Administration
and Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
Date: August 13, 1997
------------------------------
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 19,944,880
<SECURITIES> 10,408,671
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,894,661
<PP&E> 5,685,898
<DEPRECIATION> 3,205,272
<TOTAL-ASSETS> 33,444,171
<CURRENT-LIABILITIES> 2,245,986
<BONDS> 0
0
4,972,406
<COMMON> 131,809
<OTHER-SE> 25,645,757
<TOTAL-LIABILITY-AND-EQUITY> 33,444,171
<SALES> 0
<TOTAL-REVENUES> 919,666
<CGS> 0
<TOTAL-COSTS> 10,148,545
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,228,879)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,228,879)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,228,879)
<EPS-PRIMARY> (0.72)
<EPS-DILUTED> (0.72)
</TABLE>
