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, 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 number: 0-27718
NEOSE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3549286
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 Witmer Road
Horsham, Pennsylvania 19044
--------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(215) 441-5890
--------------------------------------------------------
(Registrant's telephone number, including area code)
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: 9,563,744 shares of
common stock, $.01 par value, were outstanding as of July 29, 1998.
<PAGE>
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Balance Sheets (unaudited) at December 31, 1997 and June 30, 1998........................................3
Statements of Operations (unaudited) for the three and six months ended
June 30, 1997 and 1998, and from the period of inception through
June 30, 1998............................................................................................4
Statements of Cash Flows (unaudited) for the three and six months ended
June 30, 1997 and 1998, and from the period of inception through
June 30, 1998............................................................................................5
Notes to Unaudited Financial Statements..................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................................................7
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings.......................................................................................12
Item 2. Changes in Securities and Use of Proceeds...............................................................12
Item 3. Defaults Upon Senior Securities.........................................................................12
Item 4. Submission of Matters to a Vote of Security Holders.....................................................12
Item 5. Other Information.......................................................................................12
Item 6. Exhibits and Reports on Form 8-K........................................................................12
SIGNATURES.......................................................................................................13
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
BALANCE SHEETS
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Assets December 31, 1997 June 30, 1998
----------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,098 $ 10,323
Marketable securities 26,205 26,209
Restricted funds 450 162
Prepaid expenses and other current assets 514 879
-------- --------
Total current assets 44,267 37,573
Property and equipment, net 14,616 14,434
Other assets 3 --
-------- --------
Total assets $ 58,886 $ 52,007
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 1,040 $ 910
Accounts payable 347 267
Accrued expenses 1,628 826
-------- --------
Total current liabilities 3,015 2,003
Long-term debt 8,917 8,306
-------- --------
Total liabilities 11,932 10,309
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares
authorized, none issued -- --
Common stock, $.01 par value, 30,000 shares
authorized; 9,525 and 9,546 shares issued and
outstanding 95 95
Additional paid-in capital 81,807 82,091
Deferred compensation (361) (390)
Deficit accumulated during the development-stage (34,587) (40,098)
-------- --------
Total stockholders' equity 46,954 41,698
-------- --------
Total liabilities and stockholders' equity $ 58,886 $ 52,007
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30, Period from inception
----------------------- ----------------------- (January 17, 1989)
1997 1998 1997 1998 to June 30, 1998
-------- -------- -------- -------- --------------------
<S> <C> <C> <C> <C> <C>
Revenue from collaborative agreements $ 313 $ 254 $ 625 $ 265 $ 6,220
Operating expenses:
Research and development 1,980 2,137 3,749 4,852 35,844
General and administrative 776 1,024 1,689 1,739 14,817
-------- -------- -------- -------- --------
Total operating expenses 2,756 3,161 5,438 6,591 50,661
-------- -------- -------- -------- --------
Operating loss (2,443) (2,907) (4,813) (6,326) (44,441)
Interest income 587 522 1,171 1,093 6,302
Interest expense (186) (140) (229) (278) (1,959)
-------- -------- -------- -------- --------
Net loss $ (2,042) $ (2,525) $ (3,871) $ (5,511) $(40,098)
======== ======== ======== ======== ========
Basic and diluted net loss per share $ (0.22) $ (0.26) $ (0.42) $ (0.58)
======== ======== ======== ========
Basic and diluted weighted-average
shares outstanding 9,495 9,543 9,295 9,537
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months ended Period from
June 30, inception
---------------------- (January 17, 1989)
1997 1998 to June 30, 1998
-------- -------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,871) $ (5,511) $(40,098)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 377 788 3,844
Common stock issued for noncash and other charges -- -- 35
Changes in operating assets and liabilities:
Restricted funds (2,129) 288 (91)
Prepaid expenses and other current assets (178) (365) (879)
Other assets 12 3 --
Accounts payable 46 (80) 267
Accrued expenses 1 (802) 144
Deferred revenue -- -- --
Other liabilities (79) -- --
-------- -------- --------
Net cash used in operating activities (5,821) (5,679) (36,778)
-------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment (9,309) (477) (16,240)
Proceeds from sale-leaseback of equipment -- -- 1,382
Purchases of marketable securities (19,014) (992) (27,800)
Proceeds from sales of marketable securities -- 988 1,591
-------- -------- --------
-------- -------- --------
Net cash used in investing activities (28,323) (481) (41,067)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of debt 9,329 -- 11,955
Repayment of debt (405) (741) (4,036)
Proceeds from issuance of preferred stock, net -- -- 29,497
Proceeds from issuance of common stock, net 87 87 621
Proceeds from public offerings, net 20,339 -- 49,466
Proceeds from exercise of stock options and warrants, net 70 39 737
Dividends paid -- -- (72)
-------- -------- --------
Net cash provided by (used in) financing
activities 29,420 (615) 88,168
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (4,724) (6,775) 10,323
Cash and cash equivalents, beginning of period 32,845 17,098 --
======== ======== ========
Cash and cash equivalents, end of period $ 28,121 $ 10,323 $ 10,323
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 194 $ 296 $ 1,857
======== ======== ========
Noncash financing activities:
Issuance of common stock for dividends $ -- $ -- $ 90
======== ======== ========
Issuance of common stock to employees in lieu of
cash compensation $ -- $ -- $ 44
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The unaudited financial statements (i) as of June 30, 1998; (ii) for
the three and six months ended June 30, 1997 and 1998; and (iii) for the period
from inception (January 17, 1989) to June 30, 1998, contained herein have been
prepared by Neose Technologies, Inc. ("Neose" or the "Company") in accordance
with generally accepted accounting principles for interim financial information.
They do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
management's opinion, the unaudited information includes all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the financial position, results of operations and cash flows for the periods
presented. The results of operations for the interim periods shown in this
report are not necessarily indicative of results expected for the full year. The
financial statements should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
2. Agreement with Bristol-Myers Squibb
In June 1998, the Company entered into an agreement with Bristol-Myers
Squibb ("BMS") to develop and manufacture complex carbohydrates for two
oncologic vaccines being developed by BMS. In addition, the agreement provides
for the payment of fees by BMS to Neose as the Company achieves certain
milestones under the agreement.
3. Net Loss Per Share
The Company has adopted Statement of Financial Accounting Standards No.
128 ("SFAS 128"), "Earnings per Share," which supersedes APB Opinion No. 15
("APB No.15"), "Earnings per Share," and which is effective for all periods
ending after December 15, 1997. SFAS 128 requires dual presentation of basic and
diluted earnings per share ("EPS") for complex capital structures on the face of
the Statements of Operations. Basic EPS is computed by dividing net income by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution from the exercise or conversion of
securities into common stock. For the three and six months ended June 30, 1997
and 1998, the effect of the exercise of outstanding stock options and warrants
was excluded from the calculation of diluted EPS because its effect was
antidilutive.
4. Reclassifications
Certain prior year amounts have been reclassified to conform with
current year presentation.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The statements set forth below that are not historical facts or
statements of current condition are forward-looking statements. Such
forward-looking statements may be identified by, among other things, the use of
forward-looking terminology such as "expects," "continues," "may," "will," or
"anticipates," or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy or intentions. These forward-looking
statements, such as statements regarding present or anticipated scientific
progress, development of potential pharmaceutical products, future revenues,
capital expenditures, research and development expenditures, future financings
and collaborations, management, manufacturing development and capabilities, and
other statements regarding matters that are not historical facts, involve
predictions. The Company's actual results, performance, or achievements could
differ materially from the results expressed in, or implied by, these
forward-looking statements. Potential risks and uncertainties that could affect
the Company's actual results, performance, or achievements include, but are not
limited to, the "Risk Factors" set forth in Item 1 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (the "Form 10-K"), and
general financial, economic, regulatory, and political conditions affecting the
biotechnology industry in general. Given these uncertainties, current or
prospective investors are cautioned not to place undue reliance on any such
forward-looking statements. Furthermore, the Company disclaims any obligation or
intent to update any such factors or forward-looking statements to reflect
future events or developments.
The Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three and six months ended June 30, 1998, and as
of June 30, 1998, should be read in conjunction with the Management's Discussion
and Analysis of Financial Condition and Results of Operations for the year ended
December 31, 1997, included in the Company's Form 10-K and the Company's 1997
Annual Report.
Overview
Neose, a development-stage company, commenced operations in 1990, and
has devoted substantially all of its resources to the development of its
enzymatic carbohydrate synthesis technology and to the discovery and development
of complex carbohydrates for a variety of applications, including nutritional
additives and pharmaceuticals.
In December 1992, the Company entered into collaborative agreements
with Abbott Laboratories ("Abbott"), under which Abbott has licensed technology
from Neose for the development by Abbott of breast milk oligosaccharides as
additives to infant formula and other nutritional products. The Company has
received approximately $11.2 million in contract payments, license fees,
milestone payments, and equity investments in connection with its agreements
with Abbott. The Company has not generated any material revenues from
operations, except for revenues from collaborative agreements, including its
agreements with Abbott.
The Company has incurred losses since its inception and, as of June 30,
1998, had a deficit accumulated during the development stage of approximately
$40.1 million. The Company anticipates incurring additional losses over at least
the next several years. Such
7
<PAGE>
losses may fluctuate significantly from quarter to quarter and are expected to
increase as the Company expands its research and development programs, and as
the Company expands its manufacturing capabilities. The Company anticipates that
the only material sources of revenue for the next several years will be payments
under its collaborative agreements, license fees, payments from future
collaborative agreements, if any, and interest income. Payments under
collaborative agreements will be subject to significant fluctuation in both
timing and amount. Therefore, the Company's results of operations for any period
may not be comparable to the results of operations for any other period.
Results of Operations
Revenues
Revenues from collaborative agreements for the three and six months
ended June 30, 1998, were $254,000 and $265,000, respectively, compared to
$313,000 and $625,000, respectively, for the corresponding periods in 1997. The
decreases were due to decreased non-recurring revenues received during the 1998
periods.
Operating Expenses
Research and development expenses for the three and six months ended
June 30, 1998, were $2,137,000 and $4,852,000, respectively, compared to
$1,980,000 and $3,749,000, respectively, for the corresponding periods in 1997.
The increases were primarily attributable to increased (i) funding of academic
and clinical outside research, (ii) depreciation expense related to significant
property and improvements expenditures made during 1997, and (iii) expenditures
related to the Company's joint development agreement with McNeil Specialty
Products Company, a subsidiary of Johnson & Johnson ("J&J").
General and administrative expenses for the three and six months ended
June 30, 1998, were $1,024,000 and $1,739,000, respectively, compared to
$776,000 and $1,689,000, respectively, for the corresponding periods in 1997.
The increases were primarily attributable to increased patent expenses during
the 1998 periods.
Interest Income and Expense
Interest income for the three and six months ended June 30, 1998, was
$522,000 and $1,093,000, respectively, compared to $587,000 and $1,171,000,
respectively, for the corresponding periods in 1997. The decreases were due to
lower average cash and marketable securities balances during the 1998 periods.
Interest expense for the three and six months ended June 30, 1998, was
$140,000 and $278,000, respectively, compared to $186,000 and $229,000,
respectively, for the corresponding periods in 1997. The differences in interest
expense for the 1998 periods from the 1997 periods were due to different average
loan balances outstanding during the 1998 periods.
8
<PAGE>
Net Loss
The Company incurred net losses of $2,525,000 and $5,511,000, or $0.26
and $0.58 per share, for the three and six months ended June 30, 1998,
respectively, compared to $2,042,000 and $3,871,000, or $0.22 and $0.42 per
share, respectively, for the corresponding periods in 1997.
Liquidity and Capital Resources
From inception through June 30, 1998, the Company incurred a cumulative
net loss of approximately $40.1 million, and financed its operations through (i)
public and private offerings of its securities, (ii) revenues from its
collaborative agreements, and (iii) the issuance of long-term debt. The Company
had $36.5 million in cash and marketable securities as of June 30, 1998,
compared to $43.3 million as of December 31, 1997.
The Company and Abbott have entered into collaborative agreements under
which Abbott has licensed technology from Neose to develop breast milk
oligosaccharides as additives to infant formula and other nutritional products.
Abbott has exclusive manufacturing rights, and development and regulatory
responsibilities for these nutritional additives.
The Company's agreements with Abbott provide, in part, for the receipt
by the Company of a milestone payment and license fees, if commercialization
occurs. Under this arrangement, Neose has received to date approximately $11.2
million in contract payments, milestone payments, and equity investments from
Abbott. Also, Neose is to receive $5 million within 60 days of the first
commercial sale, if any, of infant formula containing nutritional additives
manufactured using the Company's technology. Abbott has agreed to pay Neose
ongoing fees based on the dry weight of infant formula sold containing
nutritional additives manufactured using the Company's technology. The Company
is required to credit $3.75 million of the license fees against the ongoing fees
in equal amounts over four years. In addition, Abbott has agreed to renegotiate
the fees due Neose on the sale of products covered by the technology licensed to
Abbott by Neose in any case where, aside from and in addition to such
technology, Neose has made a contribution in the methods, processes, or
compounds used in the manufacture of the product that both parties agree will
result in a substantial commercial advantage. There can be no assurance that
Abbott will use the Company's technology to commercialize any oligosaccharide.
Thus, there can be no assurance that the Company will ever receive any further
revenues from Abbott.
Abbott has the option at any time prior to the first commercial sale,
if any, of infant formula containing an oligosaccharide manufactured using the
technology licensed from the Company, to elect to make the underlying license
agreement with the Company non-exclusive, in which event the license fees
payable to the Company after commercialization would be reduced by 50%, and
Abbott's obligations to make milestone payments would be terminated. Abbott also
has the right to terminate the underlying license agreement upon 60 days'
notice, in which event it would have no further funding obligations to the
Company. In addition, because Abbott has failed to make a certain regulatory
filing by a specified date, Neose, at its option, may now similarly elect to
convert the license of the
9
<PAGE>
Company's technology to a non-exclusive license to Abbott on the same financial
terms. Neose has not exercised that right, and Neose and Abbott are currently
engaged in discussions concerning possible modifications of their agreements.
Neose has been advised that Abbott is continuing to use the Company's technology
to pursue the development and commercialization of infant formula containing an
oligosaccharide. There can be no assurance that Neose would be able to interest
another party in a non-exclusive license for these purposes in the event that
either party elects to convert to a non-exclusive license.
Further revenues, if any, from the Company's agreements with Abbott
will depend on Abbott's own competitive, marketing, and strategic
considerations, including the relative advantages of alternative products being
developed or marketed by competitors. Furthermore, Abbott is responsible for
developing any oligosaccharides manufactured using the Company's technology,
completing manufacturing scale-up activities, and assuring that the compounds,
when used as nutritional additives, comply with applicable regulatory
requirements, which requirements have not yet been satisfied by Abbott. The
amount and timing of resources Abbott commits to these activities are entirely
within Abbott's control. There can be no assurance that Abbott will use the
Company's technology to pursue the development and commercialization of any
products. No assurance can be given that the agreements will result in the
successful commercialization of any oligosaccharides manufactured using the
Company's technology, or that any future milestone payments or fees will be
received by the Company. The suspension or termination of the Company's
agreement with Abbott, the conversion by Abbott to a non-exclusive license of
the Company's technology, or a delay by Abbott in the development or
commercialization of any nutritional additives manufactured using the Company's
technology may have a material adverse effect on the Company's business,
financial condition, and results of operations.
In June 1998, the Company entered into an agreement with Bristol-Myers
Squibb ("BMS") to develop and manufacture complex carbohydrates for two
oncologic vaccines being developed by BMS. In addition, the agreement provides
for the payment of fees by BMS to Neose as the Company achieves certain
milestones under the agreement. BMS may terminate the agreement upon 90 days'
notice.
In November 1997, the Company entered into a joint development
agreement with J&J for the joint development of novel technology for the
large-scale production of a class of carbohydrates for a number of consumer
health and other applications. Under the terms of the agreement, the costs of
such joint development will be borne equally by Neose and J&J, and the
technology developed will be owned jointly. Either party may terminate the
agreement on 30 days' notice. If the technology development is successful,
agreements will need to be reached between Neose and J&J concerning the future
structure and financing of a large-scale manufacturing facility, product
development, marketing, and sales.
In connection with the purchase of its facility and the expansion of
its GMP manufacturing capabilities, in March 1997, the Company issued, through
the Montgomery County (Pennsylvania) Industrial Development Authority, $9.4
million of taxable and tax-exempt bonds. The bonds are supported by a AA-rated
letter of credit, and a reimbursement agreement between the Company's bank and
the letter of credit issuer. The
10
<PAGE>
interest rate on the bonds will vary weekly, depending on market rates for
AA-rated taxable and tax-exempt obligations. As of June 30, 1998, the effective,
blended interest rate was 7% per annum, including letter-of-credit and other
fees. To provide credit support for this arrangement, the Company has given a
first mortgage on the land, building, improvements, and certain machinery and
equipment to its bank. In addition, the Company has agreed to certain covenants
for the maintenance of minimum cash and short-term investment balances, and for
minimum working capital requirements, and is required to post cash collateral if
it does not meet certain of such covenants.
During the six months ended June 30, 1998, the Company purchased
approximately $477,000 of property, equipment, and building improvements.
The Company has incurred negative cash flows from operations since its
inception, and has expended, and expects to continue to expend in the future,
substantial funds to continue its research and development programs. The Company
expects that its existing capital resources will be adequate to fund its capital
requirements through 1999. No assurance can be given that there will be no
change that would consume available resources significantly before such time.
The Company's future capital requirements and the adequacy of available funds
will depend on many factors, including progress in its research and development
activities, including its pharmaceutical discovery and development programs, the
magnitude and scope of these activities, progress with preclinical studies and
clinical trials, the costs involved in preparing, filing, prosecuting,
maintaining, and enforcing patent claims and other intellectual property rights,
competing technological and market developments, changes in existing
collaborative relationships, the ability of the Company to establish additional
collaborative arrangements, the cost of manufacturing scale-up, the development
of effective marketing activities and arrangements, and acquiring technology
rights.
To the extent that funds generated from the Company's operations,
together with its existing capital resources, are insufficient to meet current
or planned operating requirements, it is likely that the Company will seek to
obtain additional funds through equity or debt financings, collaborative or
other arrangements with collaborators and others, and from other sources. The
terms and prices of any such financings may be significantly more favorable than
those obtained by present stockholders of the Company, which could have the
effect of diluting or adversely affecting the holdings or the rights of existing
stockholders of the Company. There can be no assurance that additional financing
will be available when needed or on terms acceptable to the Company.
If adequate additional funds are not available for these purposes or
otherwise, the Company's business, financial condition, and results of
operations will be materially and adversely affected. In such circumstances, the
Company may be required to delay, scale back, or eliminate certain of its
research and product development activities or certain other aspects of its
business or attempt to obtain funds through collaborative arrangements that may
require the Company to relinquish some or all of its rights to certain of its
intellectual property, product candidates, or products.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities and Use of Proceeds. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
A. The Company's Annual Meeting of Stockholders was held on June
11, 1998.
B. The motions before stockholders were:
1. To elect seven Directors.
<TABLE>
<CAPTION>
Votes Votes Votes Broker
Name of Director For Against Withheld Abstentions Nonvotes
---------------- --- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Stephen A. Roth, Ph.D 8,408,598 -- 13,086 -- --
P. Sherrill Neff 8,408,598 -- 13,086 -- --
William F. Hamilton, Ph.D 8,408,680 -- 13,004 -- --
Douglas J. MacMaster, Jr 8,408,680 -- 13,004 -- --
Lindsay A. Rosenwald, M.D 8,408,680 -- 13,004 -- --
Lowell E. Sears 8,408,680 -- 13,004 -- --
Jerry A. Weisbach, Ph.D 8,408,680 -- 13,004 -- --
</TABLE>
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K. None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
NEOSE TECHNOLOGIES, INC.
Date: July 31, 1998 By: /s/ P. Sherrill Neff
---------------------
P. Sherrill Neff
President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,323
<SECURITIES> 26,209
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,573
<PP&E> 17,532
<DEPRECIATION> 3,098
<TOTAL-ASSETS> 52,007
<CURRENT-LIABILITIES> 2,003
<BONDS> 8,306
0
0
<COMMON> 95
<OTHER-SE> 41,603
<TOTAL-LIABILITY-AND-EQUITY> 52,007
<SALES> 0
<TOTAL-REVENUES> 265
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,591
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 278
<INCOME-PRETAX> (5,511)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,511)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,511)
<EPS-PRIMARY> (.58)
<EPS-DILUTED> (.58)
</TABLE>
