<PAGE> 1
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, 1997
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 0-20096
GLIATECH INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1587242
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
23420 COMMERCE PARK ROAD
CLEVELAND, OHIO 44122
(Address of principal executive offices) (Zip Code)
(216) 831-3200
(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
--- ---
The number of shares outstanding of the registrant's Common Stock, $0.01 par
value per share, as of August 8, 1997 was 7,358,023 shares.
<PAGE> 2
GLIATECH INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1 Financial Statements:
Consolidated Balance Sheets - 1
December 31, 1996 and June 30, 1997 (unaudited)
Consolidated Statements of Operations -
for the three months and six months ended June 30, 1996 and 1997
and for the period from inception of operations
(August 31, 1988) through June 30, 1997 (unaudited) 2
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1997 and for the period from inception of
operations (August 31, 1988) through June 30, 1997 (unaudited) 3
Notes to Consolidated Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial Condition 5-9
and Results of Operations
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security-Holders 10
Item 6 Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLIATECH INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,120,547 $ 7,768,679
Short-term investments 8,875,222 6,039,311
Accounts receivable 331,157 447,630
Government grants receivable 7,290 127,133
Inventory at cost 387,118 333,380
Prepaid expenses and other 277,276 287,305
------------ ------------
Total current assets 18,998,610 15,003,438
Property and equipment, net 1,129,671 1,203,260
Other assets, net 675,959 662,966
------------ ------------
TOTAL ASSETS $20,804,240 $16,869,664
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other accrued expenses 1,369,583 1,672,135
Accrued compensation 204,328 74,999
Accrued clinical trial costs 796,861 861,863
Deferred research contract revenue 806,359 67,859
------------ ------------
Total current liabilities 3,177,131 2,676,856
Stockholders' equity:
Common stock 73,201 73,485
Additional paid-in capital 51,007,673 51,222,838
Deficit accumulated during the development stage (33,453,765) (37,103,515)
------------ ------------
Total stockholders' equity 17,627,109 14,192,808
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $20,804,240 $16,869,664
============ ============
</TABLE>
See notes to consolidated financial statements
1
<PAGE> 4
GLIATECH INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION OF
OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED (AUGUST 31, 1988)
JUNE 30 JUNE 30 THROUGH
---------------------------- ---------------------------- JUNE 30,
1996 1997 1996 1997 1997
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Product sales $205,850 $337,324 $282,196 $681,980 $1,851,485
Research contracts and licensing fees 714,435 738,500 1,428,870 1,477,000 7,466,219
Government grants 41,928 100,682 80,247 151,022 1,241,404
----------- ----------- ----------- ----------- ------------
Total revenues 962,213 1,176,506 1,791,313 2,310,002 10,559,108
OPERATING COSTS AND EXPENSES
Cost of products sold 72,480 138,963 119,468 263,704 785,675
Research and development 1,450,631 1,971,480 2,904,277 3,826,409 30,872,481
Selling, general and administrative 1,466,487 1,120,426 2,244,758 2,190,331 16,369,426
Depreciation and amortization 28,037 68,386 60,346 133,299 1,578,088
----------- ----------- ----------- ----------- ------------
Total operating cost and expenses 3,017,635 3,299,255 5,328,849 6,413,743 49,605,670
----------- ----------- ----------- ----------- ------------
Loss from operations (2,055,422) (2,122,749) (3,537,536) (4,103,741) (39,046,562)
Interest Income, net 275,415 217,179 580,417 453,991 2,882,069
----------- ----------- ----------- ----------- ------------
NET LOSS ($1,780,007) ($1,905,570) ($2,957,119) ($3,649,750) ($36,164,493)
=========== =========== =========== =========== ============
Net loss per common share ($0.24) ($0.26) ($0.40) ($0.50)
=========== =========== =========== ============
Shares used for purposes of computing
net loss per common share 7,311,724 7,346,836 7,308,268 7,341,461
=========== =========== =========== ============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
GLIATECH INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION OF
OPERATIONS
(AUGUST 31, 1988)
SIX MONTHS ENDED THROUGH
----------------------------- JUNE 30,
1996 1997 1997
------------ ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss ($2,957,119) ($3,649,750) ($36,164,493)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 60,346 133,299 1,578,088
Patent Cost Write-off 60,000 100,000 559,074
Loss on disposal of equipment 0 0 102,000
Compensation from issuance of stock and stock options 11,662 0 286,609
Changes in operating assets and liabilities:
Accounts receivable (41,931) (116,473) (447,630)
Inventory 2,971 53,738 (333,380)
Government grants receivable and other assets (88,406) (129,872) (424,437)
Accounts payable and other accrued expenses (225,666) 302,552 1,665,464
Deferred contract research revenue (211,221) (738,500) 67,859
Other liabilities 593,869 (23,503) 1,380,293
------------ ----------- ------------
Net cash used in operating activities (2,795,495) (4,068,509) (31,730,553)
INVESTING ACTIVITIES
Sale (purchase) of investments, net 1,033,715 2,835,911 (6,039,311)
Payment for patent rights and trademarks (50,969) (96,903) (1,282,648)
Payment of organization costs 0 0 (139,779)
Purchase of property and equipment (342,978) (196,992) (2,177,992)
------------ ----------- ------------
Net cash provided by (used in) investing activities 639,768 2,542,016 (9,639,730)
FINANCING ACTIVITIES
Payment of demand note from bank (400,000) 0 0
Principal payments on capital lease obligations 0 0 (565,601)
Proceeds from sale and leaseback 0 0 75,131
Proceeds from issuance of Preferred Stock, net 0 0 28,976,554
Proceeds from issuance of Common Stock, net (21,954) 0 19,817,280
Proceeds from exercise of stock options 42,190 174,625 335,597
Proceeds from exercise of warrants 0 0 500,001
------------ ----------- ------------
Net cash (used in) provided by financing activities (379,764) 174,625 49,138,962
------------ ----------- ------------
Increase (decrease) in cash and cash equivalents (2,535,491) (1,351,868) 7,768,679
Cash and cash equivalents at beginning of period 20,780,360 9,120,547 0
------------ ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $18,244,869 $7,768,679 $7,768,679
============ =========== ============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 6
GLIATECH INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six-month period ended 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. These financial statements should be read in conjunction with
the consolidated financial statements and footnotes thereto included in the
Annual Report on Form 10-K of Gliatech Inc. for the fiscal year ended December
31, 1996 filed with the Securities and Exchange Commission.
Note 2. Net Loss Per Share
Net loss per common share, for the three and six months ended June 30, 1997 and
1996, is based on the weighted average number of common shares outstanding.
Common equivalent shares relating to stock options and warrants are excluded as
their effect is anti-dilutive.
Note 3. Adoption of SFAS No. 128
In February 1997, Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share", was issued. SFAS No. 128 establishes standards for
computing and presenting earnings per share. The Company must adopt SFAS No. 128
for the year-ending 1997 and believes the effect of adoption will not be
material.
4
<PAGE> 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since commencing operations in 1988, the Company has been a development stage
company. The Company is developing and commercializing the ADCON(R) family of
products to inhibit excessive scarring and adhesions after surgery. Based on
European pivotal clinical studies and other compliance efforts and submission of
data, the Company obtained regulatory clearance to affix CE Marking on
ADCON(R)-L and ADCON(R)-T/N, thereby allowing ADCON(R)-L and ADCON(R)-T/N to be
marketed in the 15 European Union countries for lumbar disc surgery and tendon
and peripheral nerve surgeries, respectively. The Company has entered into
distribution agreements with independent distributors for ADCON(R)-L and
ADCON(R)-T/N in Argentina, Australia, Austria, Belgium, Canada, Egypt, France,
Germany, Iceland, Israel, Italy, Korea, The Netherlands, New Zealand, the
Republic of South Africa, Scandinavia, Singapore, Spain, Switzerland and the
United Kingdom. In addition, the Company is pursuing the development of
drug candidates for the treatment of certain nervous system disorders, including
Alzheimer's Disease. Since inception, the Company's revenues have been derived
primarily from contract research payments from a research contract with Janssen
Pharmaceutica, N.V. of Belgium ("Janssen"), a wholly-owned subsidiary of Johnson
& Johnson, to collaborate on the discovery and development of compounds to slow
the progression of Alzheimer's Disease (the "Janssen Agreement"). The Company
has also received revenues from product sales of ADCON(R)-L and ADCON(R)-T/N and
from various government grants which have been awarded to the Company.
RESULTS OF OPERATIONS
For the three and six month periods ended June 30, 1997 and 1996.
REVENUES
Total revenues increased approximately 22.3 percent to $1,176,506 in the second
quarter of 1997 from $962,213 in the second quarter of 1996 and 29.0 percent to
$2,310,002 in the first six months of 1997 from $1,791,313 in the first six
months of 1996. The increase in total revenues in both periods was primarily the
result of a 63.9 percent increase in product sales to $337,324 in the second
quarter of 1997 from $205,850 in the second quarter of 1996 and a 141.7 percent
increase in product sales to $681,980 in the first six months of 1997 from
$282,196 in the first six months of 1996. These increases in product sales
primarily resulted from sales of Gliatech's ADCON(R)-L and ADCON(R)-T/N products
in certain European countries, as well as other international countries. In
addition, contract research revenues increased 3.4 percent to $738,500 in the
second quarter of 1997 from $714,435 in the second quarter of 1996 and 3.4
percent to $1,477,000 in the first six months of 1997 from $1,428,870 in the
first six months of 1996. These contract revenues were from Gliatech's research
contract with Janssen.
5
<PAGE> 8
The Company's government-funded grant revenues increased approximately 140.1
percent to $100,682 in the second quarter of 1997 from $41,928 in the second
quarter of 1996 and 88.2 percent to $151,022 in the first six months of 1997
from $80,247 in the first six months of 1996. These increases were the result of
a higher level of government funded revenues primarily due to the two year award
of Phase II Small Business Innovation Research Program grant from the National
Institute of Neurological Disorders and Stroke, for research evaluating
histamine H3 receptor antagonists to treat Attention Deficit Hyperactive
Disorders (ADHD), which the Company received in February 1997 and which may
provide up to $750,000 in funding.
EXPENSES
Total operating expenses were $3,299,255 in the second quarter of 1997, compared
to $3,017,635 in the second quarter of 1996 and $6,413,743 in the first six
months of 1997 compared to $5,328,849 in the first six months of 1996. Cost of
products sold increased in the second quarter of 1997 to $138,963 compared to
$72,480 in the second quarter of 1996 and increased as a percentage of product
sales in the second quarter of 1997 to 41.2 percent from 35.2 percent in the
second quarter of 1996. This increase was primarily due to slightly less
efficient absorption of manufacturing overhead costs as a result of somewhat
smaller actual production volumes than had been anticipated for 1997. Cost of
products sold increased in the first six months of 1997 to $263,704 compared to
$119,468 in the first six months of 1996 but decreased as a percentage of
product sales in the first six months of 1997 to 38.7 percent from 42.3 percent
in the first six months of 1996. This percentage decrease was primarily due to
higher cost of products sold in the first quarter of 1996, which included costs
associated with the start-up of manufacturing processes with the contract
manufacturer for ADCON(R)-L.
Research and development expenses increased 35.9 percent to $1,971,480 in the
second quarter of 1997 from $1,450,631 in the second quarter of 1996 and
increased 31.8 percent to $3,826,409 in the first six months of 1997 from
$2,904,277 in the first six months of 1996. The increases in both periods were
primarily due to: (i) increased research contract expenses and purchases of
preclinical materials for preclinical and animal toxicology studies for
Gliatech's lead compound which is being developed for the treatment of ADHD;
(ii) increased costs associated with the U.S. clinical trial of ADCON(R)-L; and
(iii) increased costs associated with preclinical development of ADCON(R)-P for
use in pelvic/gynecological surgeries.
Selling, general and administrative expenses decreased 23.6 percent to
$1,120,426 in the second quarter of 1997, compared to $1,466,487 in the second
quarter of 1996 and decreased 2.4 percent to $2,190,331 in the first six months
of 1997 from $2,244,758 in the first six months of 1996. The decrease in
selling, general and administrative expenses for the second quarter and the
first six months of 1997 was primarily due to expenses incurred in the second
quarter of 1996 of approximately $500,000 associated with the filing of a
registration statement with the U.S. Securities and Exchange Commission (SEC) on
Form S-1 for an offering of Gliatech's common stock. Gliatech subsequently
withdrew the registration statement due to market conditions. The decrease in
general and administrative expenses for the first six months of 1997, as
discussed above, was
6
<PAGE> 9
somewhat offset by increases in sales and marketing expenses resulting from
Gliatech's sales and marketing efforts for ADCON(R)-L and ADCON(R)-T/N in
certain European markets and other selected countries outside of Europe.
INTEREST INCOME
Net interest income decreased to $217,179 in the second quarter of 1997 from
$275,415 in the second quarter of 1996 and decreased to $453,991 for the first
six months of 1997 from $580,417 for the first six months of 1996. The decrease
in both periods was due to lower cash balances during the first and second
quarters of 1997 as compared to the first and second quarters of 1996.
NET LOSS
Gliatech's net loss increased 7.1 percent to $1,905,570 in the second quarter of
1997, compared to $1,780,007 in the second quarter of 1996 and increased 23.4
percent to $3,649,750 for the first six months of 1997 from $2,957,119 for the
first six months of 1996. The increase in net loss in both periods is a result
of increased total expenses, which was slightly offset by increased revenues as
discussed above. The net loss per share was $0.26 in the second quarter of 1997,
compared to $0.24 in the second quarter of 1996 and $0.50 in the first six
months of 1997, compared to $0.40 in the first six months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company received net proceeds, after expenses of the offering, of
approximately $19,647,000 from its initial public offering in which the Company
sold 2,300,000 shares of Common Stock at an initial public offering price of
$9.50 per share in October 1995. Prior to the public offering, the Company had
financed its operations primarily through the private placement of its equity
securities and to a lesser extent through federally sponsored research grants
and research contract and licensing fees. Since its inception, the Company has
received $49,293,835 in net proceeds from equity financings. In addition, from
its inception through June 30, 1997, the Company has recognized revenue of
$7,466,219 from its research collaboration agreement with Janssen, $1,851,485
from product sales and $1,241,404 from several federally sponsored research
grants. Under the terms of the Agreement, Janssen is expected to pay the Company
approximately $1,400,000 during the remainder of fiscal 1997. The Company also
has established a $1,500,000 unsecured line of credit with a bank. As of June
30, 1997, the Company had no borrowings against the line of credit.
In order to preserve principal and maintain liquidity, the Company's funds are
invested in commercial paper and other short-term investments. As of June 30,
1997 and December 31, 1996, the Company's cash and cash equivalents and
short-term investments totaled $13,807,990 and $17,995,769, respectively.
7
<PAGE> 10
In 1996, the Company received revenues from two Phase I Small Business
Innovation Research (SBIR) grants for up to $100,000 each from the National
Institute of Neurological Disorders and Stroke (NINDS) division of the National
Institute of Heath (NIH) relating to the development of histamine H3 receptor
agents. In addition, in February 1997, the Company was awarded a Phase II SBIR
Program grant from the NINDS for research evaluating histamine H3 receptor
antagonists to treat Attention Deficit Hyperactive Disorders. The grant has a
two-year term and may provide as much as $750,000 in funding. If the Company is
successful in other Phase I research, additional Phase II awards may be sought
for funding to aid in further development of pharmaceutical compounds in
connection with ADHD and Cognition Modulation research, however, there is no
assurance that such Phase I research will be successful or that additional
funding will be obtained.
The Company anticipates that a substantial portion of the remaining proceeds of
its initial public offering will be used to fund clinical trials of ADCON(R)-L,
ADCON(R)-T/N and ADCON(R)-P, which is designed for use in pelvic and
gynecological surgeries, in the U.S. and the marketing efforts for sales
of the ADCON(R) products. In addition, the Company anticipates that these
proceeds will be used to fund continued development of additional ADCON(R)
products, for the research and development of products relating to its
Cognition Modulation program and for working capital and general corporate
purposes. The Company's future liquidity and capital requirements will depend
on many factors, including, but not limited to, the commercial potential of its
ADCON(R) family of products, the timing of regulatory approvals, the timing and
results of preclinical testing and clinical studies, the progress of the
Company's research and development programs and the ability of the Company to
establish and maintain collaborative arrangements with others for the purpose
of funding certain research and development programs. The Company believes that
its current cash position and other financial resources will enable it to
conduct its current and planned operations through at least fiscal 1998.
The Company anticipates that it will augment its cash balance through financing
transactions, government grants and further corporate alliances. No assurances
can be given that adequate levels of additional funding can be obtained on
favorable terms, if at all.
The Company is a party to a license agreement and a related sponsored research
agreement with a university that provides for a royalty of up to five percent of
revenues from products covered by these agreements. In 1995, a dispute regarding
inventorship of the ADCON(R) products, and the rights of the university to
receive royalties from sales of ADCON(R) products, arose between Gliatech and
the university. The university has threatened litigation regarding this dispute.
There has been no resolution to this matter. The Company is not able to make any
estimate of costs that may arise as a result of any outcomes from this dispute,
and there can be no assurance that the Company will not be required to pay any
costs or royalties or that any costs to the Company, or royalties that may
result, from this dispute will not have an adverse effect on the Company.
8
<PAGE> 11
Certain statements in this Quarterly Report on Form 10-Q constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results of the Company to be different from expectations expressed or implied by
such forward-looking statements. Such factors include but are not limited to,
uncertainty of market acceptance of the Company's products, uncertainty of final
results from the completed U.S. clinical study for ADCON(R)-L, delays in product
development of ADCON(R) products, the potential market size for ADCON(R)
products, ability to renew research collaborations, the productivity of
distributors of the ADCON(R) products and the uncertainty regarding regulatory
approvals, including the timing and content of decisions made by the FDA, and
uncertainty of future profitability.
9
<PAGE> 12
PART II
OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On May 14, 1997, at the Annual Meeting of Stockholders of Gliatech Inc., the
stockholders took the following actions:
(1) Elected as Directors all nominees designated in the Proxy Statement
dated April 7, 1997; and
(2) Approved the amendments to the Amended and Restated 1989 Stock Option
Plan; and
(3) Approved the appointment of the independent certified public
accountants of the Company for the current fiscal year.
The Directors were elected pursuant to the following vote:
BROKER
NOMINEE FOR WITHHELD ABSTAIN NON-VOTE
- ------- --- -------- ------- --------
Irving S. Shapiro 5,898,443 49,213 -- --
John L. Ufheil 5,898,443 49,213 -- --
In addition, the following Directors' term of office continued after the
meeting: Robert P. Pinkas, Thomas O. Oesterling, Ph.D., Allen Ford, Theodore E.
Haigler, Jr., and Robert D. Pavey.
The approval of the amendments to the Amended and Restated 1989 Stock Option
Plan was approved by the following vote:
BROKER
FOR AGAINST WITHHELD ABSTAIN NON-VOTE
- --- ------- -------- ------- --------
4,789,518 1,105,680 48,528 3,930 --
The approval of appointment of Ernst & Young LLP as independent certified public
accountants to the Company for its current fiscal year was approved by the
following vote:
BROKER
FOR AGAINST WITHHELD ABSTAIN NON-VOTE
- --- ------- -------- ------- --------
5,904,259 2,050 40,742 605 --
10
<PAGE> 13
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Statement regarding computation of per-share net loss
27.1 Financial data schedule
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form
8-K for the period covered by this Quarterly Report
on Form 10-Q.
11
<PAGE> 14
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.
Date: August 14, 1997 GLIATECH INC.
By: /s/ Rodney E. Dausch
------------------------------
Rodney E. Dausch
Vice President, Chief Financial Officer
and Secretary
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
12
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page Number
- ----------- ---------------------- -----------
11.1 Statement Regarding Computation of Per-Share Net Loss 14
27.1 Financial Data Schedule 15
<PAGE> 1
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER-SHARE NET LOSS
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1996 1997 1996 1997
---------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING 7,311,724 7,346,836 7,308,268 7,341,461
NET EFFECT OF ANTI-DILUTIVE STOCK AND STOCK
OPTIONS AND WARRANTS 0 0 0 0
---------------------------------- ---------------------------------
TOTAL 7,311,724 7,346,836 7,308,268 7,341,461
================================== =================================
NET LOSS ($1,780,007) ($1,905,570) ($2,957,119) ($3,649,750)
================================== =================================
PER-SHARE AMOUNT ($0.24) ($0.26) ($0.40) ($0.50)
================================== =================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLIATECH
INC'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,769
<SECURITIES> 6,039
<RECEIVABLES> 481
<ALLOWANCES> 33
<INVENTORY> 333
<CURRENT-ASSETS> 15,003
<PP&E> 2,529
<DEPRECIATION> 1,325
<TOTAL-ASSETS> 16,870
<CURRENT-LIABILITIES> 2,677
<BONDS> 0
<COMMON> 74
0
0
<OTHER-SE> 14,119
<TOTAL-LIABILITY-AND-EQUITY> 16,870
<SALES> 682
<TOTAL-REVENUES> 2,310
<CGS> 264
<TOTAL-COSTS> 264
<OTHER-EXPENSES> 6,150
<LOSS-PROVISION> 20
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,650)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,650)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,650)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> 0
</TABLE>
