<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 March 31, 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)
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 April 26, 1999 there were 14,254,467 shares of common stock, par value $.01
per share, of the registrant outstanding.
1
<PAGE>
ERGO SCIENCE CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998 ....................................................3
Consolidated Statements of Operations for the three
months ended March 31, 1999 and 1998 .................................4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 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>
March 31, December 31,
1999 1998
---------------------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,392,694 $ 15,715,708
Short-term investments ................................................ 19,102,173 17,997,599
Prepaid and other current assets ...................................... 309,214 593,125
------------- -------------
Total current assets ......................................... 31,804,081 34,306,432
Equipment and leasehold improvements, net ...................................... 434,465 367,123
Other assets ................................................................... 2,720 51,313
------------- -------------
Total assets ................................................. $ 32,241,266 $ 34,724,868
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ................................. $ 4,104,445 $ 4,477,254
Current portion of capital lease obligations .......................... 299,509 266,136
------------- -------------
Total current liabilities .................................... 4,403,954 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
March 31, 1999 and December 31, 1998 (liquidation preferences
were $8,702,065 and $8,574,718 at March 31, 1999
and December 31, 1998, respectively) ........................ 5,827,395 5,700,048
Common stock, $.01 par value, authorized 50,000,000 at
March 31, 1999 and December 31, 1998; issued and outstanding
14,254,467 shares at March 31, 1999 and December 31, 1998 ... 142,545 142,545
Additional paid-in capital ............................................ 111,808,624 111,977,063
Cumulative dividends on preferred stock ............................... (3,817,828) (3,690,481)
Deferred compensation ................................................. (135,011) (390,568)
Accumulated deficit ................................................... (85,988,413) (83,912,725)
------------- -------------
Total stockholders' equity ................................... 27,837,312 29,825,882
------------- -------------
Total liabilities and stockholders' equity ........... $ 32,241,266 $ 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 March 31,
-----------------------------
1999 1998
---- ----
<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 ........... 1,314,273 3,699,251
General and administrative.......... 1,181,456 2,189,916
---------- ---------
(2,495,729) 8,377,687
---------- ---------
Net operating income (loss) (2,495,729) 6,866,833
Other Income:
Interest ........................... 420,041 297,852
---------- ---------
Net income (loss) .................. (2,075,688) 7,164,685
Accretion of dividends on preferred stock (127,347) (120,039)
------------ -----------
Net loss to common stockholders ............. $ (2,203,035) $ 7,044,646
------------ ------------
------------ ------------
Earnings (loss) per common share:
Basic .............................. $ (0.15) $ .52
------------ ------------
------------ ------------
Diluted ............................ $ (0.15) $ .49
------------ ------------
------------ ------------
Weighted average common shares outstanding:
Basic .............................. 14,254,467 13,613,357
------------ ------------
------------ ------------
Diluted ............................ 14,254,467 14,624,246
------------ ------------
------------ ------------
</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,
----------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income ..................................................... $ (2,075,688) $ 7,164,685
Adjustments to reconcile net income (loss) to cash provided by
(used by) operating activities:
Depreciation and amortization ..................................... 5,843 223,596
Noncash compensation .............................................. 87,118 114,309
Changes in operating assets and liabilities:
Receivables .................................................. -- (5,244,520)
Inventory .................................................... -- 424,320
Prepaid and other current assets ............................. 283,911 10,778
Other assets ................................................. 48,593 (16,585)
Accounts payable and accrued expenses ........................ (372,809) 699,124
---------- ---------
Net cash (used in) provided by operating activities ............................ (2,023,032) 3,375,707
---------- ---------
Cash Flows from investing activities:
Purchase of short-term investments .................................... (19,102,173) (15,889,286)
Proceeds from maturity of short-term investments ...................... 17,997,599 9,537,000
Purchase of equipment and leasehold improvements ...................... (73,185) (60,085)
------------ ------------
Net cash (used in) investing activities ........................................ (1,177,759) (6,412,371)
------------ ------------
Cash flows from financing activities:
Principal payments under capital lease obligations .................... (122,223) (107,030)
Proceeds from issuance of common stock ................................ -- 10,000,000
Proceeds from stock options exercised ................................. -- 349,778
------------ ------------
Net cash (used in) provided by financing activities ............................ (122,223) 10,242,748
------------ ------------
Net (decrease) increase in cash and cash equivalents ........................... (3,323,014) 7,206,084
Cash and cash equivalents at beginning of period ............................... 15,715,708 13,923,115
------------ ------------
Cash and cash equivalents at end of period ..................................... $ 12,392,694 $ 21,129,199
------------ ------------
------------ ------------
</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, 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 March 31, 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.
6
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
Commercial paper .................................... $10,663,476 $ 4,371,496
Federal agency notes ................................ 8,438,697 13,626,103
--------- ----------
Total short-term investments ............... $19,102,173 $17,997,599
----------- -----------
----------- -----------
</TABLE>
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 March 31, 1999 and 1998, the Company had 1,559,457 and
1,787,921 options outstandings, 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.
Basic loss per common share is the same as diluted loss per common share.
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 mediation.
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 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 AND ANTI-OBESITY MARKETS IS INTENSE;
OTHER PRODUCTS HAVE BEEN RECENTLY APPROVED FOR THESE INDICATIONS 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
8
<PAGE>
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.
From inception through the first quarter of 1999, the Company has 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 on signing
and has received approximately $6.4 million from Johnson & Johnson for its
share of development expenses.
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 the 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- tables sent to the Company by the Division of Metabolic and
Endocrine Drug Products of FDA. The Company is also considering other
strategic alternatives.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
There were no product-related revenues for the three month period ended
March 31, 1999. Revenues for the first quarter of 1998 were $15,244,520. The
Company's revenue for the three month period ended March 31, 1998 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 sold
at cost, all derived from the Joint Collaboration Agreement.
Research and development expenses decreased from $3,699,251 to $1,320,760
for the three month period ended March 31, 1998 and 1999, respectively. This
decrease was mainly due to the reduction of the Company's workforce by
approximately 50% and the discontinued funding of all its pre-clinical
development programs.
General and administrative expenses decreased from $2,189,916 to
$1,343,408 for the three month period ended March 31, 1998 and 1999,
respectively. The decrease was mostly attributable to the reduction of the
Company's workforce by approximately 50%.
Interest income increased from $297,852 to $420,041 for the three month
period ended March 31, 1998 and 1999, respectively. The increase is due to the
additional cash and short-term
9
<PAGE>
investments held by the Company that were received in 1998 as part of the Joint
Collaboration Agreement with Johnson & Johnson.
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 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 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 on January 3, 1999, therefore there
will be no further financial support from this arrangement.
Cash, cash equivalents and short-term investments were $31,494,867
and $33,713,307 at March 31, 1999 and December 31, 1998, respectively. The
overall decrease in cash, cash equivalents and short-term investments at
March 31, 1999, was due primarily to the funding of the operating activities
of the Company.
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 at 14 clinical sites across the
United States enrolling approximately 300 clinically obese subjects to
evaluate the safety and efficacy of ERGOSET -Registered Trademark- tablets to
treat clinical obesity. In July 1998, enrollment for this study was
completed. Final study results are anticipated to be reported in the first
half of 1999.
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 is 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- tables
sent to the Company by the Division of Metabolic and Endocrine Drug Products
of FDA.
10
<PAGE>
As of March 31, 1999, the Company's net investment in equipment and
leasehold improvements was $434,465. Because of the workforce reduction of
approximately 50%, the Company does not expect that additional equipment and
facilities will be needed. The Company will not renew the lease on one of its
laboratory facilities that expires in July 1999 and is in the process of a
buyout of its lease in its Corporate office space. The Company will relocate
to a smaller facility in the second quarter of 1999.
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 mid-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 complete the development and/or initial commercial launch of ERGOSET
- -Registered Trademark- tablets with such capital resources 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. The Company expects that all internal acceptance
testing will be completed by mid-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. The Company will initiate
communications with third party vendors and request that they represent that
their products and services are to be Year 2000 compliant and that they have a
program to test for compliance.
11
<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.
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/ J. RICHARD CROWLEY
--------------------------------
J. Richard Crowley
Acting Controller (principal accounting
officer)
Date: 5/13/1999
--------------------------------
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 12392694
<SECURITIES> 19102173
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 309214
<PP&E> 6339463
<DEPRECIATION> 5904998
<TOTAL-ASSETS> 32241266
<CURRENT-LIABILITIES> 4403964
<BONDS> 0
0
5827395
<COMMON> 142545
<OTHER-SE> 21867372
<TOTAL-LIABILITY-AND-EQUITY> 32241266
<SALES> 420041
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2495729
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (420041)
<INCOME-PRETAX> (2075688)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2075688)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2075688)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
