<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, 1999
-OR-
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from...to...
Commission File 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)
43 HIGH STREET
NORTH ANDOVER, MASSACHUSETTS 01845
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 974-9474
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 July 22, 1999 there were 14,254,467 shares of common stock, par value $.01
per share, of the registrant outstanding.
- --------------------------------------------------------------------------------
<PAGE>
ERGO SCIENCE CORPORATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1999 and
December 31, 1998 ...............................................3
Consolidated Statements of Operations for the three
months and six months ended June 30, 1999
and June 30, 1998 ...............................................4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and June 30, 1998 ...........................5
Notes to Consolidated Financial Statements ...........................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ..................................8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...........12
PART II. OTHER INFORMATION .............................................................13
SIGNATURES .............................................................................14
</TABLE>
2
<PAGE>
ERGO SCIENCE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................................... $ 18,150,350 $ 15,715,708
Short-term investments ......................................... 12,360,088 17,997,599
Prepaid and other current assets ............................... 125,222 593,125
------------- -------------
Total current assets ............................. 30,635,660 34,306,432
Equipment and leasehold improvements, net ..................................... 49,508 367,123
Other assets .................................................................. 6,048 51,313
------------- -------------
Total assets ..................................... $ 30,691,216 $ 34,724,868
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses .......................... $ 3,905,868 $ 4,477,254
Current portion of capital lease obligations ................... -- 266,136
------------- -------------
Total current liabilities ........................ 3,905,868 4,743,390
Long-term portion of capital lease obligations ................................ -- 155,596
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, 1999 and December 31, 1998
(liquidation preferences were $8,831,960 and $8,574,718 at
June 30, 1999
and December 31, 1998, respectively) ....................... 5,957,290 5,700,048
Common stock, $.01 par value, authorized 50,000,000 at
June 30, 1999 and December 31, 1998; issued and outstanding
14,254,467 shares at June 30, 1999 and December 31, 1998,
respectively................................................ 142,545 142,545
Additional paid-in capital ..................................... 111,773,472 111,977,063
Cumulative dividends on preferred stock ........................ (3,947,723) (3,690,481)
Deferred compensation .......................................... (39,007) (390,568)
Accumulated deficit ............................................ (87,101,229) (83,912,725)
------------- -------------
Total stockholders' equity ....................... 26,785,348 29,825,882
------------- -------------
Total liabilities and stockholders' equity $ 30,691,216 $ 34,724,868
------------- -------------
------------- -------------
</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 June 30 Six Months Ended June 30
---------------------------------------------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Product revenue ......................... -- -- -- $ 2,488,520
Sponsored research revenue .............. -- $ 1,972,465 -- 4,728,465
License fees ............................ -- -- -- 10,000,000
------------ ------------ ------------ ------------
-- 1,972,465 -- 17,216,985
Operating expenses:
Cost of product revenue ................. -- -- -- 2,488,520
Research and development ................ 768,208 3,662,634 2,082,481 7,361,885
Write-off related to renegotiated supply
agreement ......................... -- 2,499,000 -- 2,499,000
General and administrative .............. 703,439 1,622,111 1,884,895 3,812,027
------------ ------------ ------------ ------------
1,471,647 7,783,745 3,967,376 16,161,432
------------ ------------ ------------ ------------
Net operating income (loss) (1,471,647) (5,811,280) (3,967,376) 1,055,553
Other Income:
Interest ................................ 358,831 564,465 778,872 862,316
------------ ------------ ------------ ------------
Net income (loss) ......... (1,112,816) (5,246,815) (3,188,504) 1,917,869
Accretion of dividends on preferred stock .............. (129,895) (122,439) (257,242) (242,478)
------------ ------------ ------------ ------------
Net income (loss) to common stockholders ............... $ (1,242,711) $ (5,369,254) $ (3,445,746) $ 1,675,391
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings (loss) per common share:
Basic ................................... $ (0.09) $ (0.38) $ (0.24) $ 0.12
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted ................................. $ (0.09) $ (0.38) $ (0.24) $ 0.12
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average common shares outstanding:
Basic ................................... 14,254,467 14,222,585 14,254,467 13,919,654
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted ................................. 14,254,467 14,222,585 14,254,467 14,251,367
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</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>
Six Months Ended June 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income ....................................................... $ (3,188,504) $ 1,917,869
Adjustments to reconcile net income (loss) to cash provided by
(used in) operating activities:
Depreciation and amortization ....................................... 12,684 454,680
Loss on equipment disposal .......................................... 157,332 --
Noncash compensation ................................................ 147,970 224,338
Noncash charge for write-off related to renegotiated supply agreement -- 2,499,000
Changes in operating assets and liabilities:
Inventory ................................................. -- 424,320
Prepaid and other current assets .......................... 467,903 (66,440)
Other assets .............................................. 45,265 (18,465)
Accounts payable and accrued expenses ..................... (571,386) 442,613
Deferred revenue .......................................... -- 151,435
------------ ------------
Net cash (used in) provided by operating activities .................................... (2,928,736) 6,029,350
------------ ------------
Cash Flows from investing activities:
Purchase of short-term investments ...................................... (30,870,861) (32,342,900)
Proceeds from maturity of short-term investments ........................ 36,508,372 21,112,759
Proceeds on sale of equipment ........................................... 279,045 --
Purchase of equipment and leasehold improvements ........................ (131,446) (145,818)
------------ ------------
Net cash provided by (used in) investing activities .................................... 5,785,110 (11,375,959)
------------ ------------
Cash flows from financing activities:
Principal payments under capital lease obligations ...................... (421,732) (166,513)
Proceeds from issuance of common stock .................................. -- 10,000,000
Proceeds from stock options exercised ................................... -- 570,494
------------ ------------
Net cash (used in) provided by financing activities .................................... (421,732) 10,403,981
------------ ------------
Net (decrease) increase in cash and cash equivalents ................................... 2,434,642 5,057,372
Cash and cash equivalents at beginning of period ....................................... 15,715,708 13,923,115
------------ ------------
Cash and cash equivalents at end of period ............................................. $ 18,150,350 $ 18,980,487
------------ ------------
------------ ------------
</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 June 30, 1999 and 1998.
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, 1998, 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, 1998.
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 June 30, 1999 and December 31, 1998, 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, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Commercial paper .................... $ 5,509,350 $ 4,371,496
Federal agency notes ................ 6,850,738 13,626,103
----------- -----------
Total short-term investments $12,360,088 $17,997,599
----------- -----------
----------- -----------
</TABLE>
6
<PAGE>
Since 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. 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. At June 30, 1999 and 1998 the Company had 1,363,975 and 1,828,894
options outstanding, respectively. 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.
5. 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 dated May 1, 1995. The dispute relates to the amount of
payment owed to LSU arising from 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 agreement provides for a period of good faith
negotiations between the parties, followed, if necessary, by mediation and
binding arbitration. The Company and LSU are currently in arbitration.
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,
- - ERGO MAY NOT BE SUCCESSFUL IN ITS APPEAL OF THE FDA'S NOT-APPROVABLE LETTER
AND MAY NOT RECEIVE APPROVAL OF THE NDA FOR ERGOSET-Registered Trademark-;
- - ERGO MAY NOT BE ABLE TO UNDERTAKE OR SUBMIT CLINICAL TRIAL RESULTS IN THE
FUTURE THAT WILL PRODUCE AN APPROVAL FROM THE FDA OF ERGOSET-Registered
Trademark- TABLETS;
- - ERGO MAY NOT HAVE SUFFICIENT CAPITAL TO COMPLETE ANY ADDITIONAL TRIALS THAT
MAY BE UNDERTAKEN;
- - ANY CURRENT OR FUTURE CLINICAL TRIAL MAY NOT PRODUCE POSITIVE RESULTS;
- - DATA OBTAINED FROM CLINICAL TRIALS ARE SUBJECT TO VARYING INTERPRETATIONS,
AND THE FDA (OR AN FDA PANEL OF EXPERTS) MAY NOT AGREE WITH ERGO'S
ASSESSMENT OF ANY CURRENT OR FUTURE CLINICAL TRIAL RESULTS;
- - UNCERTAINTY RELATED TO THE SCIENTIFIC DEVELOPMENT OF A NEW MEDICAL THERAPY;
- - COMPETITION IN THE ANTI-DIABETIC MARKET IS INTENSE; OTHER PRODUCTS HAVE
BEEN RECENTLY APPROVED FOR THIS INDICATION AND OTHER COMPANIES ARE
DEVELOPING COMPETING PRODUCTS;
- - THE NEED FOR ADDITIONAL FUNDING;
- - ERGO MAY NOT BE ABLE TO ESTABLISH CORPORATE ALLIANCES TO MARKET
ERGOSET-Registered Trademark- TABLETS, IF APPROVED for COMMERCIAL
MARKETING;
- - ERGOSET-Registered Trademark- TABLETS, IF APPROVED FOR COMMERCIAL
MARKETING, MAY NOT BE SUCCESSFUL IN THE MARKETPLACE, or ERGO MAY NOT
RECEIVE ANY PROFITS FROM ITS SALE; AND
- - 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 THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING, WITHOUT LIMITATION, THE 1998 ANNUAL REPORT ON FORM 10-K,
GENERALLY UNDER THE SECTION ENTITLED "RISK FACTORS." ERGO SCIENCE 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, Ergo has sought to develop 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-Registered Trademark- ("NRT-Registered
Trademark-"). NRT-Registered Trademark- is based on the role of
neurotransmitters in regulating metabolism. The Company has dedicated most of
its financial resources, since inception, 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 been unprofitable and 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.
8
<PAGE>
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. On November 20, 1998, the Company received a letter from the Division
of Metabolic and Endocrine Drug Products at the FDA that its New Drug
Application for ERGOSET-Registered Trademark- tablets for the treatment of type
2 diabetes is not approvable, citing the overall benefit to risk ratio.
Subsequently in January 1999, Johnson & Johnson terminated the worldwide
Joint Collaboration Agreement, which had been signed on February 23, 1998. As a
result of these events, the Company further reduced its work-force by
approximately 50% and discontinued funding of all its pre-clinical development
programs. In February 1999 the Company decided to appeal the not-approvable
letter. The Company has begun the appeal process within the FDA of the
not-approvable letter for ERGOSET -Registered Trademark- tablets sent to the
Company by the Division of Metabolic and Endocrine Drug Products of FDA. The
Company is also considering other strategic alternatives.
On July 9, 1999, the Company announced the results of its Phase II
clinical study of ERGOSET-Registered Trademark- tablets (bromocriptine mesylate)
in the treatment of obesity. The primary objective of the study was to determine
if treatment with two different dosages of ERGOSET-Registered Trademark- tablets
(2.4 mg and 4.8 mg) given once daily in the morning in addition to a 25%
calorie-restricted diet would result in greater weight loss than treatment with
diet and placebo. Although all of the ERGOSET-Registered Trademark- and placebo
groups lost weight during the study, there was no statistically significant
difference in weight loss between patients treated with ERGOSET-Registered
Trademark- tablets and diet and patients treated with placebo and diet in the
intent to treat analysis.
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
There were no product-related revenues for the three and six month periods
ended June 30, 1999. Total revenues were $1,972,465 and $17,216,985 for the
three and six month periods ended June 30, 1998, respectively. Total revenues
for the first six months of 1998 consisted of a $10 million license fee,
approximately $4.7 million in sponsored research revenue and approximately $2.5
million of product revenue from raw material sold at cost, all derived from the
Joint Collaboration Agreement.
Research and development expenses decreased from $3,662,634 to $768,208
and from $7,361,885 to $2,082,481 for the three and six month periods ended June
30, 1998 and 1999, respectively. These decreases were mainly due to the
reduction of the Company's workforce and the discontinued funding of all its
pre-clinical development programs.
The write-off related to renegotiated supply agreement charge of
$2,499,000 in the second quarter of 1998 represents the write-off of the
capitalized fair value of stock issued in the fourth quarter of 1997 to the
Company's drug supplier.
General and administrative expenses decreased from $1,622,111 to $703,439
and from $3,812,027 to $1,884,895 for the three and six month periods ended June
30, 1998 and 1999, respectively. These decreases were mostly attributable to the
reduction of the Company's workforce.
9
<PAGE>
Interest income decreased from $564,465 to $358,831 and from $862,316 to
$778,872 for the three and six month periods ended June 30, 1998 and 1999,
respectively. These decreases were the result of cash used to fund the Company's
operations.
The Company relocated to a smaller facility in North Andover, MA in the
second quarter of 1999. In conjunction with this move, the Company sold in
auction substantially all of its lab and office equipment. Auction receipts were
approximately $300,000. An additional book loss was recorded in the second
quarter in the amount of $157,000 as a result of this auction.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company's primary source of cash has been
financing activities, which have consisted of private placements of equity
securities, two public offerings, and the sale of common stock in conjunction
with the Joint Collaboration Agreement. Private placements of equity securities
provided the Company with aggregate proceeds of $42,999,000 through 1998. 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 diabetes and obesity. In March 1998, Johnson & Johnson paid
the Company a $10 million initial fee and purchased $10 million of Ergo common
stock. In addition, Johnson & Johnson had committed to provide Ergo with
significant, additional financial support in the form of milestone payments upon
achievement of other specified development, regulatory and commercial objectives
and reimbursement of certain development expenses subject to the terms of the
Joint Collaboration Agreement. The Joint Collaboration Agreement was terminated
by Johnson & Johnson on January 3, 1999.
Cash, cash equivalents and short-term investments were $30,510,438 and
$33,713,307 at June 30, 1999 and December 31, 1998, respectively. The overall
decrease in cash, cash equivalents and short-term investments at June 30, 1999,
was due primarily to the funding of the operating activities of the Company.
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. 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. On November 20, 1998, the Company received a letter from the
FDA that its NDA for ERGOSET-Registered Trademark- tablets for the treatment of
type 2 diabetes was not approvable, citing the overall benefit to risk ratio.
The Company has begun the appeal process within the FDA of the not-approvable
letter for ERGOSET -Registered Trademark- tablets sent to the Company by the
Division of Metabolic and Endocrine Drug Products of FDA.
As of June 30, 1999, the Company's net investment in equipment and
leasehold improvements was approximately $49,000.
10
<PAGE>
Based on the decisions of the Advisory Committee and the Endocrinologic
and Metabolic Drugs Division of the FDA, discussed above, the Company terminated
the funding of its pre-clinical development programs. The Company expects that
its available cash, cash equivalents, short-term investments, and expected
interest income will fund its operations through 2000. In the event that the
appeal is successful and the FDA approves the NDA for ERGOSET-Registered
Trademark- tablets, the Company will need additional capital and marketing
assistance prior to launching the product for commercial marketing. There can be
no assurance that the Company will be able to raise the capital necessary to
complete the development and/or initial commercial launch of ERGOSET-Registered
Trademark- tablets or that the Company will be able to find a corporate partner
to commercially market the product. 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.
The terms of the Company's Series D Preferred Stock prohibit the Company
from paying dividends on the common stock.
YEAR 2000
The Company has developed a plan to address its computer systems'
compliance with the Year 2000 and all internal acceptance testing was completed
in June 1999. The Company is in the process of ascertaining the status of its
vendors' Year 2000 compliance efforts. The Company currently believes that the
cost of addressing the Year 2000 issue will not be material to the Company's
business, operations or financial condition.
While the Company believes its internal data processing and computer
applications will not be materially altered by any date sensitive calculations,
there can be no guarantee that the systems of other companies on which the
Company relies will be converted in a timely manner.
11
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCOLSURES ABOUT MARKET RISK
There were no material changes in the Company's exposure to market risk
from December 31, 1998.
12
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
---------
27 - Financial Data Schedule
Reports on Form 8-K:
--------------------
None.
13
<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/ J. Richard Crowley
--------------------------------
J. Richard Crowley
Acting Controller (principal
accounting officer)
Date: August 11, 1999
--------------------------------
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 18150350
<SECURITIES> 12360088
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30635660
<PP&E> 62192
<DEPRECIATION> 12684
<TOTAL-ASSETS> 30691216
<CURRENT-LIABILITIES> 3905868
<BONDS> 0
0
5957290
<COMMON> 142545
<OTHER-SE> 20685513
<TOTAL-LIABILITY-AND-EQUITY> 30691216
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 3967376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (778872)
<INCOME-PRETAX> (3188504)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3188504)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3188504)
<EPS-BASIC> (.24)
<EPS-DILUTED> (.24)
</TABLE>
