<PAGE>
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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 March 31, 1998
-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)
<TABLE>
<CAPTION>
<S> <C>
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)
</TABLE>
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 May 1, 1998 there were 14,220,266 shares of common stock, par value
$.01 per share, of the registrant outstanding.
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ERGO SCIENCE CORPORATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997. . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the three
months ended March 31, 1998 and March 31, 1997 . . . . 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and March 31, 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
</TABLE>
2
<PAGE>
ERGO SCIENCE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $21,129,199 $13,923,115
Short-term investments.......................... 15,889,286 9,536,995
Receivables..................................... 5,244,520 --
Inventory....................................... -- 424,320
Prepaid and other current assets................ 249,830 260,608
----------- ------------
Total current assets.......................... 42,512,835 24,145,038
Equipment and leasehold improvements, net......... 1,978,514 1,970,328
Deferred charges.................................. 2,499,000 2,499,000
Other assets...................................... 66,880 50,300
----------- ------------
Total assets.................................. $47,057,229 $28,664,666
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........... $ 3,620,663 $ 2,921,538
Current portion of capital lease obligations.... 328,367 280,305
----------- ------------
Total current liabilities..................... 3,949,030 3,201,843
Long-term portion of capital lease obligations.... 344,046 327,442
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 March 31, 1998 and December 31,
1997 (liquidation preferences were
$8,202,529 and $8,082,490 at March 31,
1998 and December 31, 1997, respectively)..... 5,327,859 5,207,820
Common stock, $.01 par value,
authorized 50,000,000 at March 31,
1998 and December 31, 1997; issued and
outstanding 14,167,266 shares at March
31, 1998 and 13,493,262 shares at
December 31, 1997............................. 141,673 134,933
Additional paid-in capital...................... 111,803,776 101,469,182
Cumulative dividends on preferred stock......... (3,318,292) (3,198,253)
Deferred compensation........................... (751,720) (874,473)
Accumulated deficit............................. (70,439,143) (77,603,828)
----------- ------------
Total stockholders' equity.................... 42,764,153 25,135,381
----------- ------------
Total liabilities and stockholders'
equity.................................... $47,057,229 $28,664,666
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
3
<PAGE>
ERGO SCIENCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
----------- ------------
<S> <C> <C>
Revenues:
Product revenue.......................... $2,488,520 --
Sponsored research revenue............... 2,756,000 --
License fees............................. 10,000,000 --
---------- -----------
15,244,520 --
Operating expenses:
Cost of product revenue.................. 2,488,520 --
Research and development................. 3,699,251 $3,345,241
General and administrative............... 2,189,916 2,125,342
---------- -----------
8,377,687 5,470,583
---------- -----------
Net operating income (loss)............ 6,866,833 (5,470,583)
Other Income:
Interest................................. 297,852 481,020
---------- -----------
Net income (loss)...................... 7,164,685 (4,989,563)
Accretion of dividends on preferred stock.. (120,039) (113,145)
---------- -----------
Net income (loss) to common stockholders... $7,044,646 $(5,102,708)
---------- -----------
---------- -----------
Earnings (loss) per common share:
Basic.................................... $0.52 $(0.39)
---------- -----------
---------- -----------
Diluted.................................. $0.49 $(0.39)
---------- -----------
---------- -----------
Weighted average common shares outstanding:
Basic.................................... 13,613,357 13,123,034
---------- -----------
---------- -----------
Diluted.................................. 14,624,246 13,123,034
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
4
<PAGE>
ERGO SCIENCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss)............................. $7,164,685 $(4,989,563)
Adjustments to reconcile net income/(loss)
to cash provided by (used in)
operating activities:
Depreciation and amortization............. 223,596 331,451
Noncash compensation...................... 114,309 646,937
Loss on sale of equipment................. -- 6,917
Changes in operating assets and
liabilities:
Receivables........................... (5,244,520) --
Inventory............................. 424,320 --
Prepaid and other current assets...... 10,778 (346,981)
Other assets.......................... (16,585) (19,643)
Accounts payable and accrued expenses. 699,124 247,363
---------- --------------
Net cash provided by (used in) operating
activities.................................... 3,375,707 (4,123,519)
---------- --------------
Cash flows from investing activities:
Purchase of short-term investments............ (15,889,286) (12,889,610)
Proceeds from maturity of short-term
investments................................. 9,537,000 20,550,986
Purchase of equipment and leasehold
improvements................................ (60,085) (294,554)
Proceeds received on sale of equipment........ -- 6,000
---------- --------------
Net cash (used in) provided by investing
activities.................................... (6,412,371) 7,372,822
---------- --------------
Cash flows from financing activities:
Principal payments under capital
lease obligations........................... (107,030) (50,975)
Proceeds from stock issuance.................. 10,000,000 --
Proceeds from stock options exercised......... 349,778 103,746
---------- --------------
Net cash provided by financing activities....... 10,242,748 52,771
---------- --------------
Net increase in cash and cash equivalents....... 7,206,084 3,302,074
Cash and cash equivalents at beginning of
period........................................ 13,923,115 18,066,884
---------- --------------
Cash and cash equivalents at end of period...... $21,129,199 $21,368,958
---------- --------------
---------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
5
<PAGE>
ERGO SCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements are unaudited and have been
prepared by Ergo Science Corporation ("Ergo" or the "Company") in
accordance with generally accepted accounting principles.
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 March 31, 1998 and
1997.
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, 1997, 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, 1997.
Prior to January 1, 1998, the Company was a development stage enterprise
as defined in Statement of Financial Accounting Standards No. 7 ("SFAS 7").
As a result of the collaboration agreement entered into with Johnson &
Johnson in the first quarter of 1998 (see Note 6) the Company is no longer
considered a development stage enterprise as defined in SFAS 7.
2. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
90 days or less at the date of purchase to be cash equivalents.
Debt securities are classified as held-to-maturity when the Company
has positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost.
At March 31, 1998 and December 31, 1997, 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>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Commercial paper.................. $8,832,125 $6,461,033
Federal agency notes.............. 7,057,161 3,075,962
---------- ----------
Total short-term investments.... $15,889,286 $9,536,995
---------- ----------
---------- ----------
</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.
4. Inventory
Pursuant to a supply agreement, the Company was responsible for the
purchase and supply of all active ingredient required for the manufacturing
of ERGOSET-Registered Trademark- tablets. In the fourth quarter of 1997, the
Company purchased $424,320 of active ingredient to be used in the
manufacturing of ERGOSET-Registered Trademark- tablets, all of which was
held as raw material at December 31, 1997.
6
<PAGE>
5. Earnings/Loss Per Common Share
Basic earnings/loss per share is computed by dividing net income/loss by
the weighted average number of common shares outstanding for the period.
Diluted earnings per share is computed by dividing net income by the sum of
the weighted average number of common shares outstanding for the period plus
the assumed exercise of all dilutive securities, such as stock options. The
following is a calculation of earnings/loss per common share for the three
months ended March 31:
<TABLE>
<CAPTION>
BASIC EARNINGS/LOSS PER COMMON SHARE COMPUTATION
1998 1997
------- -------
<S> <C> <C>
Numerator:
Net income/(loss) $ 7,044,646 $ (5,102,708)
Denominator:
Weighted Average common
shares outstanding 13,613,357 13,123,034
------------ ------------
------------ ------------
Basic Earnings/Loss
Per Common Share $ 0.52 $ (0.39)
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
DILUTED EARNINGS/LOSS PER COMMON SHARE COMPUTATION
1998 1997
------- -------
<S> <C> <C>
Numerator:
Net income/(loss) $ 7,044,646 $ (5,102,708)
Accretion of dividends 120,039 --
------------ ------------
Adjusted net income/(loss) 7,164,685 (5,102,708)
Denominator:
Weighted Average common
shares outstanding 13,613,357 13,123,034
Dilutive effect of
stock options 472,056 --
Conversion of preferred stock 538,833 --
------------ ------------
Total shares 14,624,246 13,123,034
------------ ------------
------------ ------------
Diluted Earnings/Loss
Per Common Share $ 0.49 $ (0.39)
------------ ------------
------------ ------------
</TABLE>
The diluted loss per common share calculated for 1997 excludes the
effects of 1,664,200 options outstanding at January 1, 1997, the assumed
conversion of preferred stock and accretion of dividends as the inclusion of
these items would be anti-dilutive.
6. Collaboration Agreement
On February 23, 1998, Ergo and Johnson & Johnson entered into a
worldwide Joint Collaboration and License Agreement (the "Joint Collaboration
Agreement") to develop and commercialize ERGOSET-Registered Trademark-
tablets as well as other potential collaboration products for the treatment
of Type 2 diabetes and obesity. In March 1998, Johnson & Johnson made
payments to Ergo totaling $20 million, including payment of a $10 million
license fee and the purchase of $10 million of Ergo common stock. In
addition, Johnson & Johnson has committed to provide Ergo with significant,
additional financial support in the form of milestone payments upon
achievement of specified development, regulatory and commercial objectives
subject to the terms of the Joint Collaboration Agreement.
Under the Joint Collaboration Agreement, the Company is responsible for
paying half of the development, marketing, and commercialization costs of
collaboration compounds being developed and/or commercialized under the Joint
Collaboration Agreement. In addition, the Company assigned its rights and
obligations, other than certain specified existing obligations, under a
supply agreement for ERGOSET-Registered Trademark- tablets to Johnson &
Johnson. Under the supply agreement, the supplier is to receive payments
contingent upon the occurrence of specific events. The obligation for these
contingent payments will be that of Johnson & Johnson, and the Company will
reimburse Johnson & Johnson for its half of such payments.
The Company is dependent on future payments from Johnson & Johnson to
continue the development and commercialization of ERGOSET-Registered
Trademark- tablets. Under the Joint Collaboration Agreement, Johnson &
Johnson has primary responsibility for commercializing ERGOSET-Registered
Trademark- tablets. If Johnson & Johnson desires to discontinue the
collaboration, it can terminate the Joint Collaboration Agreement with the
Company at any time subject to the possibility of paying penalties in certain
circumstances. In addition, Johnson & Johnson has the right to terminate the
Joint Collaboration Agreement at any time based on material safety or
tolerability issues.
7. Contingencies
On April 29, 1998, the Company and the Board of Supervisors of Louisiana
State University and Agriculture and Mechanical College ("LSU") entered into
dispute resolution under the provisions of the parties' Novated License and
Royalty Agreement ("License Agreement") dated May 1, 1995. The dispute
relates to the amount of payment owed to LSU on account of various payments
received by the Company from Johnson & Johnson. LSU is seeking payment of
$4,138,000. The Company believes that the payment owed to LSU is
significantly less than this amount.
8. New Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 requires that changes in comprehensive income
be shown in a financial statement that is displayed with the same prominence
as other financial statements. This statement also requires that an entity
classify items of other comprehensive earnings by their nature in an annual
financial statement. SFAS 130 is effective for fiscal years beginning after
December 15, 1997 and, accordingly, was adopted during the first quarter of
1998. Comprehensive income/loss is the same as net income/loss for all
periods presented.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements. Forward-looking
statements reflect Ergo's current views with respect to 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) there
can be no assurance that Ergo will be able to submit clinical trial results
in the future that will produce an approval by the FDA of Ergo's new,
patented oral formulation of bromocriptine mesylate for the treatment of Type
2 diabetes, (2) there can be no assurance that Ergo will have sufficient
capital to complete any additional trials undertaken, (3) 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 Ergo's
assessment of future clinical trial results, (4) uncertainty related to the
scientific development of a new medical therapy, (5) competition in the
anti-diabetic and anti-obesity markets is intense; other products have been
recently approved for these indications and other companies are developing
competing products, (6) the need for additional funding, (7) there can be no
assurance that Ergo's formulation of bromocriptine mesylate, if approved for
commercial marketing, will be successful in the marketplace, or that Ergo
will receive any profits from its sale, (8) if approved for commercial
marketing, Johnson & Johnson, and not Ergo, is responsible for manufacturing
and the timing and implementation of marketing Ergo's formulation of
bromocriptime mesylate, (9) there can be no assurance that Ergo will achieve
any of the objectives required for milestone payments by Johnson & Johnson,
(10) Johnson & Johnson has the right to terminate the collaboration at any
time subject to the possibility of paying penalties in certain circumstances
and (11) the uncertainty relating to patent protection in the pharmaceutical
and biotechnology industries. Further information and additional important
factors are set forth in reports and other filings of Ergo with the
Securities and Exchange Commission, including, without limitation, the 1997
Annual Report on Form 10-K, generally under the section entitled "Risk
Factors." Ergo does not undertake to update any forward-looking statement
that may be made from time to time by or on behalf of Ergo.
Overview
Since inception, Ergo has developed novel treatments for metabolic
disorders, including Type 2 diabetes and obesity, immune system disorders and
various forms of cancer based on its core technology, Neuroendocrine
Resetting Therapy ("NRT"). NRT is based on the role of neurotransmitters in
regulating metabolism. The Company has dedicated most of its financial
resources to research and development of ERGOSET-Registered
Trademark-tablets, the Company's lead product 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 its ability to receive any revenues from product sales
is dependent upon receiving market clearance from the FDA (see "Subsequent
Events"). From inception through 1997, the Company had been unprofitable.
On February 23, 1998, Ergo and Johnson & Johnson entered into a worldwide
Joint Collaboration and License Agreement to develop and commercialize
ERGOSET-Registered Trademark- tablets as well as other potential
collaboration products for the treatment of Type 2 diabetes and obesity (the
"Joint Collaboration Agreement"). In conjunction with the Joint
Collaboration Agreement, Ergo received a $10 million license fee and
approximately $2.8 million in sponsored research revenue. As a result, the
Company generated net income of approximately $7.2 million for the first
quarter of 1998.
8
<PAGE>
Results of Operations
Three Months Ended March 31, 1997 and 1998
Total revenues were $15,244,520 for the three month
period ended March 31, 1998 and consisted of a $10 million license fee,
approximately $2.8 million in sponsored research revenue and approximately
$2.5 million of product revenue from raw material inventory sold at cost.
These revenues were generated in connection with the Joint Collaboration
Agreement. In 1997, the Company did not generate revenues.
Research and development expenses increased from $3,345,241 to
$3,699,251 for the three month periods ended March 31, 1997 and 1998,
respectively. This increase was mainly due to expenses related to the New
Drug Application ("NDA") for ERGOSET-Registered Trademark- (bromocriptine
mesylate) tablets, Ergo's lead candidate for Type 2 diabetes, and costs
associated with the Phase II obesity study.
General and administrative expenses were generally consistent for the
three month periods ended March 31, 1997 and 1998, totaling $2,125,342 and
$2,189,916, respectively.
Other income decreased from $481,020 to $297,852 for the three month
periods ended March 31, 1997 and 1998, respectively. Other income was
derived from interest income earned on cash, cash equivalents and
short-term investments. The decrease in interest income is attributable to
a decrease in the average amounts of cash, cash equivalents and short-term
investments during the first three months of 1998, compared to the first
three months of 1997. This amount decreased as a result of cash used to
fund the Company's operations.
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.
On February 23, 1998, Ergo and Johnson & Johnson entered into the Joint
Collaboration Agreement to develop and commercialize ERGOSET-Registered
Trademark- tablets as well as other potential collaboration products for the
treatment of Type 2
9
<PAGE>
diabetes and obesity. In March 1998, Johnson & Johnson made payments to Ergo
totaling $20 million, including payment of a $10 million license fee and the
purchase of $10 million of Ergo common stock. In addition, Johnson & Johnson
has committed to provide Ergo with significant, additional financial support
in the form of milestone payments upon achievement of specified development,
regulatory and commercial objectives subject to the terms of the Joint
Collaboration Agreement.
Cash and cash equivalents were $21,129,199 and $13,923,115, while
short-term investments were $15,889,286 and $9,536,995, at March 31, 1998 and
December 31, 1997, respectively. The overall increase in cash, cash
equivalents and short-term investments at March 31, 1998, was due primarily
to the payments received in connection with the Joint Collaboration Agreement.
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.
In 1997, the Company initiated a Phase II clinical study to evaluate the
safety and efficacy of ERGOSET-Registered Trademark- tablets to treat
clinical obesity. This study is being conducted at approximately 15 clinical
sites across the United States in approximately 400 clinically obese
subjects. The Company is incurring and will continue to incur additional
research and development expenses associated with its various clinical trials.
In 1997, the Company filed with the FDA an NDA for ERGOSET-Registered
Trademark-tablets to treat Type 2 diabetes and the FDA accepted the NDA for
filing. During 1998 the Company incurred and will continue to incur costs
associated with the NDA approval process.
As of March 31, 1998, the Company's net investment in equipment and
leasehold improvements was $1,978,514. The Company expects that additional
equipment and facilities will be needed to the extent it increases its
research and development activities.
Based on the decision of the Endocrinologic and Metabolic Drugs Advisory
Committee of the FDA, discussed below in "Subsequent Events," the Company is
currently reevaluating its development programs. However, the Company
currently plans to manage any changes to such programs so that the Company's
available cash, cash equivalents, short-term investments, and expected
interest income will fund its operations through 1999. In the event that the
costs of such development programs are higher than expected, the Company will
likely need additional capital. 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
10
<PAGE>
assurance, however, that additional financing will be available from any
source or, if available, will be available on acceptable terms.
The terms of the Company's Series D Preferred Stock prohibit the
Company from paying dividends on the common stock.
Subsequent Events
On May 14, 1998, the Endocrinologic and Metabolic Drugs Advisory
Committee of the FDA found that there was not sufficient evidence to
recommend for approval the Company's NDA for ERGOSET-Registered Trademark-
tablets for Type 2 diabetes. The Company plans to meet with the FDA as soon
as possible to review the committee's recommendation and to consider
appropriate next steps.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 29, 1998, the Company and the Board of Supervisors of
Louisiana State University and Agriculture and Mechanical College ("LSU")
entered into dispute resolution under the provisions of the parties' Novated
License and Royalty Agreement ("License Agreement") dated May 1, 1995. The
dispute relates to the amount of payment owed to LSU on account of various
payments received by the Company from Johnson & Johnson. LSU is seeking
payment of $4,138,000. The Company believes that the payment owed to LSU is
significantly less than this amount. The dispute resolution provisions of
the License Agreement provide for the current sixty-day period of good faith
negotiations between the parties, followed, if necessary, by mediation and
binding arbitration.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule.
(b) During the quarter ended March 31, 1998, the Company filed the
following report on Form 8-K:
On March 10, 1998, the Company filed a report on Form 8-K to
disclose that the Company had entered into an agreement to form a worldwide
collaboration with the R.W. Johnson Pharmaceutical Research Institute and
Ortho-McNeil Pharmaceuticals Inc., both Johnson & Johnson units, to
develop and commercialize ERGOSET-Registered Trademark- (bromocriptine
mesylate) tablets, the Company's lead product, and other potential products
for the treatment of Type 2 diabetes and obesity, based on the Company's
novel Neuroendocrine Resetting Therapy. In connection with the
collaboration agreement, the Company and Johnson & Johnson entered into a
Stock Purchase Agreement whereby the Company agreed to sell, and Johnson &
Johnson agreed to purchase, an amount of the Company's common stock with a
value of $10 million based upon the closing prices of the Company's common
stock over a certain trading period.
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/ Francis M. Ferrara, Jr.
----------------------------
Francis M. Ferrara, Jr.
Controller
(principal accounting officer)
Date: May 15, 1998
---------------------------
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 21,129,199
<SECURITIES> 15,889,286
<RECEIVABLES> 5,244,520
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,512,835
<PP&E> 6,160,988
<DEPRECIATION> 4,182,474
<TOTAL-ASSETS> 47,057,229
<CURRENT-LIABILITIES> 3,949,030
<BONDS> 0
0
5,327,859
<COMMON> 141,673
<OTHER-SE> 37,294,621
<TOTAL-LIABILITY-AND-EQUITY> 47,057,229
<SALES> 0
<TOTAL-REVENUES> 15,244,520
<CGS> 2,488,520
<TOTAL-COSTS> 8,377,687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,164,685
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,164,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,164,685
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.49
</TABLE>
