<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(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 number 0-19777
DUSA Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-3103129
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
181 University Avenue, Suite 1208
Toronto, Ontario M5H 3M7 CANADA
(Address of principal executive offices)
(Zip Code)
(416) 363-5059
(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 month (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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
9,365,950 shares as of May 7, 1998
<PAGE> 2
PART I.
ITEM 1. FINANCIAL STATEMENTS
DUSA PHARMACEUTICALS, INC
(a development stage company)
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (interest bearing) $ 627,459 $ 4,033,267
U.S. government securities available for sale, at
market (cost-$10,324,014 and $8,760,498
respectively) 10,319,407 8,733,875
Accrued interest receivable 80,175 87,792
Other current assets 67,839 84,151
------------ ------------
11,094,880 12,939,085
FIXED ASSETS 158,899 142,163
------------ ------------
$ 11,253,779 $ 13,081,248
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 416,222 $ 745,074
Accrued charges 173,126 316,823
------------ ------------
589,348 1,061,897
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, no par, 20,000,000 shares authorized,
9,365,950 issued and outstanding 36,746,993 36,746,993
Deficit accumulated during the development stage (26,077,955) (24,701,019)
Net unrealized loss on U.S. government securities
available for sale (4,607) (26,623)
------------ ------------
10,664,431 12,019,351
------------ ------------
$ 11,253,779 $ 13,081,248
============ ============
</TABLE>
See the accompanying notes to the Consolidated Financial Statements
-2-
<PAGE> 3
DUSA PHARMACEUTICALS, INC
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM
FEBRUARY 21,
THREE MONTHS THREE MONTHS 1991 (DATE OF
ENDED ENDED INCORPORATION)
MARCH 31, MARCH 31, TO MARCH 31,
1998 1997 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
REVENUE
<S> <C> <C> <C>
Interest income $ 160,908 $ 251,146 $ 5,066,518
Gain (loss) on foreign currency exchange (2,059) (1,523) 18,217
Gain on sale of U.S. government securities -- -- 322,659
Unrealized loss on U.S. government securities
available for sale -- -- (62,832)
------------ ------------ ------------
158,849 249,623 5,344,562
------------ ------------ ------------
RESEARCH AND DEVELOPMENT COSTS 1,079,732 1,336,330 23,145,332
------------ ------------ ------------
OPERATING COSTS
General and administration 443,831 336,337 8,191,766
Depreciation and amortization 12,222 13,643 148,251
------------ ------------ ------------
456,053 349,980 8,340,017
------------ ------------ ------------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (1,376,936) (1,436,687) (26,140,787)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- 62,832
------------ ------------ ------------
NET LOSS $ (1,376,936) $ (1,436,687) $(26,077,955)
============ ============ ============
BASIC AND DILUTED NET LOSS PER COMMON
SHARE $ (0.15) $ (0.15) $ (4.24)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,365,950 9,355,950 6,145,610
============ ============ ============
</TABLE>
See the accompanying notes to the Consolidated Financial Statements
-3-
<PAGE> 4
DUSA PHARMACEUTICALS, INC
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM
FEBRUARY 21,
1991 (DATE OF
THREE MONTHS THREE MONTHS INCORPORATION)
ENDED ENDED TO
MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss $ (1,376,936) $ (1,436,687) $ (26,077,955)
Adjustments to reconcile net loss to net cash used in
operating activities
Amortization of premiums and accretion of
discounts on U.S. government securities
available for sale and investment securities, net (42,964) (17,160) (40,492)
Depreciation and amortization 12,222 13,643 148,251
Loss (gain) on foreign currency exchange 2,059 1,523 (18,217)
Gain on sale of U.S. government securities
available for sale -- -- (322,659)
Unrealized loss on U.S. government securities
available for sale -- -- 62,832
Cumulative effect of change in accounting principle -- -- (62,832)
Write-off of intangible assets -- -- 307,519
Compensation expense resulting from extension of
outstanding stock options terms -- -- 557,260
Changes in other assets and liabilities impacting
cash flows from operations:
Accrued interest receivable 7,617 80,603 (80,175)
Other current assets 16,312 14,100 (67,839)
Accounts payable (328,852) (296,438) 416,222
Accrued charges (143,697) (57,119) 173,126
License agreement obligations -- -- (12,203)
---------- --------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,854,239) (1,697,535) (25,017,162)
---------- --------- -----------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES
Purchases of U.S. government securities available for
sale and investment securities (4,620,552) (3,181,246) (107,281,981)
Proceeds from maturing U.S. government securities
available for sale and investment security 3,100,000 6,860,000 43,545,000
Proceeds from sale of U.S. government securities
available for sale -- -- 53,776,118
Intangible assets -- -- (193,022)
Purchases of fixed assets (28,958) (33,123) (290,229)
Advances by a former parent -- -- (2,867,900)
Repayment of advances to former parent -- -- 2,867,900
---------- --------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,549,510) 3,645,631 (10,444,114)
---------- --------- -----------
</TABLE>
-4-
<PAGE> 5
DUSA PHARMACEUTICALS, INC
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM
FEBRUARY 21,
1991 (DATE OF
THREE MONTHS THREE MONTHS INCORPORATION)
ENDED ENDED TO
MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES
Stock offering costs $ -- $ -- $ (5,048,255)
Issuance of common stock and underwriters' options -- -- 43,402,816
Payment received on note receivable from director -- -- 68,047
Redemption of option held by former parent -- -- (2,250,000)
Receipt of Section 16(b) common stock profits -- -- 17,125
Payment on license agreement obligations -- -- (119,215)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- 36,070,518
------------ ------------ ------------
EFFECT OF EXCHANGE RATES ON CASH (2,059) (1,523) 18,217
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH (3,405,808) 1,946,573 627,459
CASH AT BEGINNING OF PERIOD 4,033,267 1,686,090 --
------------ ------------ ------------
CASH AT END OF PERIOD $ 627,459 $ 3,632,663 $ 627,459
============ ============ ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION
Issuance of common stock for promissory note from
former parent $ 150,000
============
License agreement obligations incurred in the
acquisition of an intangible asset $ 131,418
============
Deferred stock offering costs offset against common
stock $ 5,048,255
============
Note receivable from director originating upon
exercise of options for common stock $ 68,047
============
Interest paid $ 12,594
============
</TABLE>
There were no income tax payments made during the periods.
See the accompanying notes to the Consolidated Financial Statements
-5-
<PAGE> 6
DUSA PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The Consolidated Balance Sheet as of March 31, 1998, the Consolidated
Statements of Operations for the three-month periods ended March 31, 1998,
and 1997 and for the period from February 21, 1991 (date of incorporation)
to March 31, 1998, and the Consolidated Statements of Cash Flows for the
three-month periods ended March 31, 1998, and 1997 and for the period from
February 21, 1991 (date of incorporation) to March 31, 1998, have been
prepared by the Company, without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in
cash flows as of March 31, 1998, and for all periods presented have been
made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with the Company's December 31,
1997 audited consolidated financial statements and notes thereto.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, DUSA Pharmaceuticals New York,
Inc. All significant intercompany accounts have been eliminated on
consolidation.
2. The Company's United States government securities available for sale
consist of securities of the United States government, and its agencies,
with interest rates and yields ranging from 4.72% to 6.32%, and maturity
dates ranging from April 1, 1998 to August 10, 1999.
3. In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. SFAS No. 130
requires all items that are required to be recognized under accounting
standards as components of comprehensive income be reported with the same
prominence as other financial statements. As required, the Company adopted
SFAS No. 130 in the quarter ended March 31, 1998. All prior period
comprehensive amounts have been restated in accordance with SFAS No. 130.
The Company's comprehensive loss is as follows:
<TABLE>
<CAPTION>
Cumulative
period from
Three Months Three Months February 21,
ended ended 1991 (date of
March 31, March 31, incorporation) to
1998 1997 March 31, 1998
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net loss $ (1,376,936) $ (1,436,687) $(26,077,955)
Net unrealized loss on U.S. government
securities available for sale 22,016 (6,062) (4,607)
------------ ------------ ------------
Comprehensive loss $ (1,354,920) $ (1,442,749) $(26,082,562)
============ ============ ============
</TABLE>
-6-
<PAGE> 7
4. Basic and diluted net loss per common share is based on the weighted
average number of shares outstanding during each period. Certain common
stock issuances (2,200,000) were made at prices less than the initial
public offering price. Accordingly, the associated shares are included in
the calculation of net loss per share as if they were outstanding for the
entire period. Stock options are not included in the computation of the
weighted average number of shares outstanding during the period as the
effect would be antidilutive.
5. The Company has entered into a series of agreements for research projects
and clinical studies. As of March 31, 1998, future payments to be made
pursuant to these agreements, under certain terms and conditions, total
$1,533,705 for the remainder of 1998, and $125,781 for 1999.
-7-
<PAGE> 8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes to Consolidated Financial Statements
for the year ended December 31, 1997 and for the three-month periods ended March
31, 1998, and March 31, 1997, respectively. The Company is a development-stage
pharmaceutical company engaged primarily in the development of proprietary
methods of photodynamic therapy ("PDT") and photodetection ("PD") utilizing
Levulan(R), the Company's brand of aminolevulinic acid ("ALA"). The Company has
raised funds through its initial public offering of the Company's common stock
in January 1992, private placements and additional public offerings in December
1995 and May 1996. The Company's wholly-owned subsidiary, DUSA Pharmaceuticals
New York, Inc., located in Valhalla, New York, is the Company's center for its
research and development activities.
The Company completed its Phase III clinical trials using Levulan(R) PDT
for the treatment of precancerous actinic keratosis (AK's) of the skin in 1997,
and is currently in the process of compiling the New Drug Application (NDA) to
be filed with the Food and Drug Administration (FDA). The Company's third-party
manufacturer is nearing completion of the production of the Company's required
GMP batches of its Kerastick(TM), drug filled applicator supplies, and the
Company expects to file its NDA late in the second quarter.
During the quarter, the Company made significant progress towards
finalizing a definitive agreement with a major multi-national pharmaceutical
company for the marketing of the Company's AK product and development of other
dermatology products. The agreement, as currently negotiated, provides for
license and termination fees, milestone payments for regulatory approvals,
research and development funding, royalties and transfer fees for products. An
agreement-in-principle was announced on March 13, 1998, and since then the
Company has been working with the partner on finalizing the contract, and, most
recently, bringing the agreement into conformance with the partner's current
corporate-wide financial licensing principles. Although this process has taken
longer than expected, DUSA continues to work towards concluding a mutually
satisfactory transaction as quickly as possible. The Company remains confident
that such a transaction is attainable, although a successful conclusion cannot
be guaranteed until an agreement is signed.
-8-
<PAGE> 9
Financial Condition
The Company's total assets were $11,253,779 as of March 31, 1998, compared
to $13,081,248 as of December 31, 1997. The decline of assets, which is within
managements' expectations, will continue as research and development activities
proceed, until and unless the Company receives additional funds as part of the
anticipated corporate alliance or from other financing activities. As of March
31, 1998, the Company had outstanding current liabilities of $589,348 as
compared to $1,061,897 as of December 31, 1997. The decrease in current
liabilities from December 31, 1997 is due to timing of the payment of expenses.
Since its inception the Company has had no long-term debt. The Company held
United States government securities at a fair market value of $10,319,407 as of
March 31, 1998, as compared to $8,733,875 as of December 31, 1997, as the funds
in the Company's cash account were invested during the quarter in government
securities. In the three-month period ending March 31, 1998, the Company
incurred an operational net loss of $1,376,936, compared to $1,436,687 for the
three-month period ended March 31, 1997. (See "Results of Operations").
Management is continuing to focus its resources on finalizing the documents
for the AK NDA, completing the dermatology strategic alliance and conducting
on-going clinical trials of its bladder cancer detection and hair removal
indications. Full development and testing of all potential indications which are
currently under development would require additional funding. The timing of the
expenditures will be dependent on various factors, including the filing of its
AK NDA, progress of the Company's research and development programs, the results
of preclinical and clinical trials, the timing of regulatory marketing
approvals, competitive developments, payments under any collaborative
arrangements, if any, entered into by the Company and the availability of
alternate financing. There can be no assurance, however, that such funds will be
sufficient to enable the Company to obtain regulatory marketing approval or to
market any product for any indications currently under development. Therefore,
there is no way to predict the timing or magnitude of the revenues from the
marketing of the Company's product or whether any such revenues will be
realized. Consequently, in order to maintain
-9-
<PAGE> 10
the current research and development program beyond 1998, it will be necessary
to raise additional funds through the dermatology or other corporate alliances,
financings, or other sources.
If sufficient funds are available, the Company may also use its resources
to acquire by license, purchase or other arrangements, businesses, technologies,
or products that enhance or expand the Company's business. The Company is
actively seeking relationships with pharmaceutical or other suitable
organizations to market the Company's products and technologies, or provide
funding for research projects.
During the quarter, the Company continued development efforts in other
therapeutic and diagnostic areas including endometrial ablation and acne.
Numerous independent investigator-sponsored studies also continue as scientific
interest in ALA PDT/PD remains high. In dermatology, recent studies have
included treatment of skin cancers (basal cell carcinoma, squamous cell
carcinomas, and cutaneous T-cell lymphomas), psoriasis, onychomycosis and
genital warts. Internal indications include detection and/or treatment of
Barrett's esophagus, gastro-intestinal tumors, oral cavity cancer, brain cancer,
and cervical cancer, among others, and prevention of restenosis. Certain of
these indications may be targeted for more advanced development by the Company
over the next 6-12 months.
Results of Operations
The Company has had no sales to date. Interest income, earned primarily on
United States government securities, decreased to $160,908 for the three-month
period ended March 31, 1998, as compared to $251,146 for the three-month period
ended March 31, 1997, as the Company continues to expend funds for ongoing
research and development. This trend is expected to continue throughout the
Company's development stage, unless the Company raises funds as part of a
strategic alliance or other financing activities. Interest income for the
cumulative period from February 21, 1991 (date of incorporation) to March 31,
1998 was $5,066,518.
Research and development costs for the three-month period ended March 31,
1998, were $1,079,732 compared to $1,336,330 for the three-month period ended
March 31, 1997. The 1998 costs included a minimum royalty of CDN. $100,000
($70,927) paid to PARTEQ, the licensing arm of Queens University (the Company's
licensors) under the Amended and Restated License Agreement entered on March 11,
1998. The decrease in expenditures for the 1998 quarter is attributable to a
lack of expenses relating to the Phase III AK clinical trials which were
completed in 1997, and the Company's focus on preparation of the NDA which
utilizes personnel resources but not extensive
-10-
<PAGE> 11
research costs. Research and development costs are expected to increase, with an
increasing number of clinical studies and the hiring of additional research and
development personnel as necessary, following filing of the AK NDA. Total
research and development costs for the cumulative period from February 21, 1991
(date of incorporation) to March 31, 1998 were $23,145,332. Costs and
development fees associated with all agreements for research projects and
clinical studies commit the Company to make payments of $1,533,705, for the
remainder of 1998.
Operating expenses were $456,053 and $349,980, respectively, for the
three-month periods ended March 31, 1998, and March 31, 1997 respectively.
Operating expenses are expected to increase in the future as the Company
continues to hire additional financial and administrative personnel, as
required. The Company also expects that its research and development offices in
New York will be expanded to accommodate additional personnel, and that it will
require leased office space in New England for several employees who are
expected to join the Company shortly from Lumenetics, Inc. ("Lumenetics"),
including its principals.
Lumenetics has been providing services under a consulting agreement
relating to light device technology and development. The Company and Lumenetics
are finalizing an agreement whereby the Company will acquire Lumenetics in an
exchange of shares valued at approximately $100,000. Contemporaneously with
this share exchange, the consulting agreement will be terminated.
The Company incurred a net loss of $1,376,936, or $0.15 per share, for the
three-month period ended March 31, 1998, as compared to a net loss of
$1,436,687, or $0.15 per share, for the three-month period ended March 31, 1997.
Net losses for the cumulative period from February 21, 1991 (date of
incorporation) to March 31, 1998 were $26,077,955, or $4.24 per share.
Liquidity and Capital Resources
The Company's United States government securities available for sale have
an aggregate cost of $10,324,014 and a current aggregate market value of
$10,319,407 as of March 31, 1998, resulting in a net unrealized loss on
securities available for sale of $4,607, the provision for which has been
charged to shareholders' equity. The slight decline in the market value of the
Company's government securities was the result of fluctuating interest rates in
the United States from the time these securities were acquired. Some losses
could be realized, depending upon the timing of the Company's need to convert
government securities into cash to meet its working capital requirements. The
Company's securities currently have interest rates and yields ranging from 4.72%
to 6.32%, and maturity dates ranging from April 1, 1998 to August 10, 1999. The
Company believes it has sufficient capital resources to proceed with its current
development program for Levulan(R) PDT/ PD through 1998. Management is focusing
initial pivotal clinical trials on a limited number of indications to enhance
the Company's ability to complete the regulatory process, but full development
and testing of all potential indications which are currently under development
would require additional funding (see "Financial Condition"). If a strategic
alliance has not been concluded or other funding is not available to the Company
by the end of
-11-
<PAGE> 12
1998, the Company's research and development program will be scaled back while
it awaits regulatory action on its AK NDA. The Company has invested its funds in
liquid investments, so that it will have ready access to its cash reserves, as
needed, for the funding of its development plans on a short-term and long-term
basis.
The foregoing Management Discussion and Analysis contains various
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1993 which represent the Company's expectations or beliefs concerning
future events, including, but not limited to statements regarding management's
expectations of the timing of the filing of the Company's first NDA, regulatory
approval, the commencement of sales, the sufficiency of the Company's assets and
cash flow for the Company's future liquidity and capital resource needs, and the
expected increase in research and development costs and operating expenses.
These forward-looking statements are further qualified by important factors that
could cause actual results to differ materially from those in the
forward-looking statements. These factors include, without limitation, the
completion of a definitive strategic alliance agreement; dependence upon
third-parties to manufacture its products, changing market conditions,
availability of suitable light sources, results of its clinical trials, the
impact of competitive products and pricing, and the timely development, FDA
approval and market acceptance of the Company's products, none of which can be
assured. Results actually achieved may differ materially from expected results
included in these statements as a result of these or other factors.
Inflation
Although inflation rates have been comparatively low in recent years,
inflation is expected to apply upward pressure on the operating costs of the
Company. The Company has included an inflation factor in its cost estimates,
however, the overall net effect of inflation on the operations of the Company
should be minimal.
-12-
<PAGE> 13
PART II- OTHER INFORMATION
Item 1-5.
None.
Item 6. Exhibits.
a) Exhibits 27 - Financial Data Schedule, which is submitted
electronically to the Securities and Exchange Commission for
information only and not filed.
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.
DUSA PHARMACEUTICALS, INC.
DATE May 12, 1998 BY: /S/D. GEOFFREY SHULMAN
------------- -------------------------
D. GEOFFREY SHULMAN, MD, FRCPC
PRESIDENT, CHIEF EXECUTIVE OFFICER, AND CHIEF
FINANCIAL OFFICER
-13-
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
27 Financial Data schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and not filed.
</TABLE>
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF OPERATIONS,
AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE PERIOD ENDING MARCH 31, 1998. </LEGEND>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 627,459
<SECURITIES> 10,319,407
<RECEIVABLES> 80,175
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,094,880
<PP&E> 158,899
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,253,779
<CURRENT-LIABILITIES> 589,348
<BONDS> 0
0
0
<COMMON> 36,746,993
<OTHER-SE> (26,077,955)
<TOTAL-LIABILITY-AND-EQUITY> (11,253,779)
<SALES> 0
<TOTAL-REVENUES> 158,849
<CGS> 0
<TOTAL-COSTS> 1,079,732
<OTHER-EXPENSES> 456,053
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,376,936)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,376,936)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,376,936)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
