<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, 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: 0-21130
ENERGY BIOSYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-3078857
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4200 Research Forest Drive
The Woodlands, Texas 77381
(address of principal executive offices) (zip code)
281-364-6100
(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
--- ---
As of May 12, 1997 there were outstanding 11,712,758 shares of Common
Stock, par value $.01 per share, of registrant.
1
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ENERGY BIOSYSTEMS CORPORATION
Form 10-Q for the quarter Ended March 31, 1997
INDEX
Page
----
Statement Regarding Forward-Looking Statements 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 4
Balance Sheets as of March 31, 1997 (unaudited)
and December 31, 1996 5
Statements of Operations for the Three Months
Ended March 31, 1997 and 1996 (Unaudited) 6
Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1996 (Unaudited) 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
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ENERGY BIOSYSTEMS CORPORATION
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements other
than statements of historical facts included in this Form 10-Q are forward-
looking statements. The expectations reflected in the forward-looking
statements are based on the Company's current views with respect to future
events as well as assumptions made by and information currently available to
management. Important factors that could cause actual results to differ
materially from expectations ("Cautionary Statements") are disclosed in this
Form 10-Q and in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "Form 10-K"), including without limitation under the
caption "Liquidity and Capital Resources" included in this Form 10-Q and under
the caption "Item 1. Business - Risk Factors" in the Form 10-K. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements.
3
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ENERGY BIOSYSTEMS CORPORATION
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made herein are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
The information presented in the accompanying financial statements is
unaudited, but in the opinion of management, reflects all adjustments (which
include only normal recurring adjustments) necessary to present fairly such
information.
4
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ENERGY BIOSYSTEMS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 11,505,873 $ 3,106,004
Short term investments 5,372,940 5,891,584
Prepaid expenses and other current assets 800,518 767,893
------------ ------------
Total current assets 17,679,331 9,765,481
Notes receivable -- 6,683
Furniture, equipment and leasehold improvements, net 2,945,509 3,136,635
Intangible and other assets, net 835,326 801,832
------------ ------------
Total assets $ 21,460,166 $ 13,710,631
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 389,865 $ 537,583
Deferred revenue 180,000 193,500
Obligations under capital lease 9,697 11,632
Note payable 159,829 252,443
------------ ------------
Total current liabilities 739,391 995,158
Stockholders' equity:
Series A Convertible Preferred Stock, $0.01 par value
(liquidation value $100,000 and $24,000,000, respectively;
508,800 shares authorized, 2,000 and 480,000 shares issued
and outstanding, respectively) 96,577 23,295,585
Series B Convertible Preferred Stock, $0.01 par value
(liquidation value $35,105,000; 760,000 shares
authorized, 702,100 and zero shares issued and
outstanding, respectively) 33,353,958 --
Common Stock, $0.01 par value (30,000,000 shares
authorized, 11,605,377 and 11,497,135 issued
and outstanding, respectively) 116,054 114,972
Additional paid-in capital 32,642,741 32,018,218
Accumulated deficit (45,488,555) (42,713,302)
------------ ------------
Total stockholders' equity $ 20,720,775 $ 12,715,473
------------ ------------
Total liabilities and stockholder's equity $ 21,460,166 $ 13,710,631
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ENERGY BIOSYSTEMS CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1997 1996
----- ----
REVENUES:
Sponsored research revenues $ 451,452 $ 500,472
Interest and investment income 128,914 252,570
------------ ------------
Total revenues 580,366 753,042
------------ ------------
COSTS AND EXPENSES:
Research and development 2,174,714 2,015,769
General and administrative 602,464 621,225
------------ ------------
Total costs and expenses 2,777,178 2,636,994
------------ ------------
NET LOSS ($2,196,812) ($1,883,952)
============ ============
NET LOSS PER COMMON SHARE ($0.25) ($0.23)
============ ============
SHARES USED IN COMPUTING NET
LOSS PER COMMON SHARE 11,528,456 10,995,000
============ ============
The accompanying notes are an integral part of these financial statements.
6
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ENERGY BIOSYSYSTEMS CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,196,812) $(1,883,952)
Adjustments to reconcile net loss to net cash provided
(used) in operating activities:
Depreciation and amortization 333,047 265,230
Changes in assets and liabilities:
Decrease in trading securities --- 973,555
Decrease (increase) in prepaid expenses and other
current assets (32,625) 121,233
Increase in intangible and other assets and notes
receivable (42,563) (22,420)
Decrease in accounts payable and accrued
liabilities (147,718) (116,118)
Decrease in deferred revenues (13,500) (283,500)
----------- -----------
Net cash used in operating activities (2,100,171) (945,972)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (126,170) (156,206)
Net purchase of investments 518,644 (464,762)
----------- -----------
Net cash provided by (used in) investing activities 392,474 (620,968)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on capital lease obligations (1,935) (1,741)
Payment on notes payable (92,614) (110,580)
Issuance of stock, net 10,202,115 307,379
----------- -----------
Net cash provided by financing activities 10,107,566 195,058
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 8,399,869 (1,371,882)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 3,106,004 6,172,400
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $11,505,873 $ 4,800,518
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
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ENERGY BIOSYSTEMS CORPORATION
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Energy BioSystems Corporation (the "Company"), formerly Environmental
BioScience Corporation, was incorporated in the State of Delaware on December
20, 1989. Since inception, the Company has devoted substantially all of its
efforts to research and development. The Company's revenues consist of
sponsored research revenues and interest income. Management of the Company
anticipates continued operating losses for at least the next several years. The
accompanying unaudited interim financial statements reflect all adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results for the interim periods presented. These financial statements
should be read in conjunction with the Company's Annual Report on Form 10-K, as
filed with the Securities and Exchange Commission, for the fiscal year ended
December 31, 1996.
Net Loss Per Common Share
Net loss per share has been computed by dividing the net loss, which has
been increased for periodic accretion and accrued dividends on the Series A
Convertible Preferred Stock issued in October 1994 and the Series B Convertible
Preferred Stock issued in February and March 1997, by the weighted average
number of shares of common stock outstanding during the period. In all
applicable periods, common stock equivalents were antidilutive and, accordingly,
were not included in the computation.
Pending Accounting Change
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting No. 128, "Earnings Per Share." Statement 128 simplifies
the standards for computing earnings per share previously found in APB Opinion
No. 15, Earnings per Share, and makes them comparable to international earnings
per share standards. The Statement also retroactively revises the presentation
of earnings per share in the financial statements. The Company will adopt this
Standard for the year ended December 31, 1997 and management believes that this
statement will have no material impact on its financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2. SERIES B CONVERTIBLE PREFERRED STOCK
In February and March 1997, the Company sold an aggregate of 224,100
shares of Series B Convertible Preferred Stock ("Series B Preferred Stock") at
$50.00 per share in a private placement. The net proceeds from the offering
were approximately $10.2 million. The placement agent for the Series B
Preferred Stock received warrants to purchase an aggregate of 20,319 shares of
Series B Preferred Stock at an exercise price of $50.00 per share of Series B
Preferred Stock in addition to customary commissions. The warrants have been
recorded at an estimated fair value of $466,000 which was computed using the
Black-Scholes option pricing
8
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ENERGY BIOSYSTEMS CORPORATION
model and the following assumptions: risk free interest rate of 6.51 percent;
expected dividend yield of zero; expected life of three years, and an expected
volatility of 68 percent.
Dividends on the Series B Preferred Stock are cumulative from February
27, 1997 and payable semi-annually commencing May 1, 1997, at an annual rate
equal to (i) $4.00 per share of Series B Preferred Stock to the extent the
dividend is paid in cash and (ii) $4.50 per share of Series B Preferred Stock to
the extent the dividend is paid in common stock. Dividends on shares of Series
B Preferred Stock will be payable in cash or common stock of the Company or a
combination thereof, at the Company's option.
Shares of Series B Preferred Stock are convertible at the option of the
holder at any time after the expiration of 60 days following the last date of
original issuance into shares of common stock at a conversion price equal to
$7.25 per share, subject to certain adjustments. The Series B Preferred Stock
may be redeemed by the Company under certain circumstances during the period
beginning on February 26, 1999 and is required to be redeemed, subject to
certain limitations, on February 26, 2002 at a redemption price of $50.00 per
share, plus accrued and unpaid dividends. It is the Company's intent, however,
to redeem the Series B Preferred Stock for common stock. Accordingly, the
Series B Preferred Stock is included in stockholders' equity.
Concurrently with the private placement, the Company conducted an
exchange offering and consent solicitation with respect to its outstanding
Series A Convertible Preferred Stock ("Series A Preferred Stock"), pursuant to
which the Company offered to exchange one share of Series B Preferred Stock for
each of its 480,000 outstanding shares of Series A Preferred Stock and requested
that the holders of its Series A Preferred Stock consent to the ranking of the
Series B Preferred Stock on a parity with the Series A Preferred Stock with
respect to the payment of dividends and liquidation preference. The Company did
not receive any cash proceeds from the exchange offering. Of the 480,000
shares of Series A Preferred Stock outstanding, 478,000 shares were exchanged
for the same number of shares of Series B Preferred Stock.
The carrying amount of the Series B Preferred Stock is increased for
accrued and unpaid dividends plus periodic accretion, using the effective
interest method, such that the carrying amount will equal the redemption amount
on the Series B Preferred Stock on February 26, 2002.
NOTE 3. SERIES A CONVERTIBLE PREFERRED STOCK
In October 1994, the Company sold 480,000 shares of Series A Preferred
Stock at $50.00 per share in a private placement. The net proceeds from the
offering were approximately $22.2 million. The placement agents for the Series
A Preferred Stock received warrants to purchase an aggregate of 28,800 shares of
Series A Preferred Stock at an exercise price of $50.00 per share of Series A
Preferred Stock in addition to customary commissions.
Dividends on the Series A Preferred Stock are cumulative from October
27, 1994 and payable semi-annually commencing May 1, 1995, at an annual rate
equal to (i) $4.00 per share to the extent the dividend is paid in cash and (ii)
$4.50 per share to the extent the dividend is paid in common stock. During the
first quarter of 1997, the Company paid $690,000 in dividends by issuing 98,214
shares of common stock in conjunction with the exchange of Series A Preferred
Stock for Series B Preferred Stock. All but 2,000 shares of the 480,000 shares
of Series A Preferred Stock outstanding were exchanged for shares of Series B
Preferred Stock in the exchange offering. See Note 2.
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ENERGY BIOSYSTEMS CORPORATION
Shares of Series A Preferred Stock are convertible into shares of the
Company's common stock at the option of the holder at a conversion price equal
to $8.25 per share of common stock, subject to certain adjustments. The
Series A Preferred Stock may be redeemed by the Company under certain
circumstances during the period beginning on November 7, 1996 and is required to
be redeemed, subject to certain limitations, on November 7, 1999 at a redemption
price of $50.00 per share, plus accrued and unpaid dividends. It is the
Company's intent, however, to redeem the Series A Preferred Stock for common
stock. Accordingly, the Series A Preferred Stock is included in stockholders'
equity.
The carrying amount the Series A Preferred Stock is increased for
accrued and unpaid dividends plus periodic accretion, using the effective
interest method, such that the carrying amount will equal the redemption amount
on the Series A Preferred Stock on November 7, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Since its inception in December 1989, the Company has devoted
substantially all resources to its research and development. To date, all of
the Company's revenues have resulted from interest income and sponsored research
payments from collaborative agreements. The Company has incurred cumulative net
losses since inception and expects to incur substantial losses for at least the
next several years, due primarily to the increase in its research and
development activities and acceleration of the development of its biocatalyst,
fermentation and bioreactor programs. The Company expects that losses will
fluctuate from quarter to quarter and that such fluctuations may be substantial.
As of March 31, 1997 the Company's accumulated deficit was $45,449,900.
Results of Operations
The Company had total revenues for the three months ended March 31, 1997
and 1996 of $580,366 and $753,042, respectively. The decrease resulted
primarily from a decrease in interest and investment income. The Company had
sponsored research revenues of $451,452 during the first three months of 1997 as
compared to $500,472 during the first three months of 1996. The Company
recognized revenues of $13,500 and $283,500 under its research collaboration
agreement with Petrolite Corporation ("Petrolite") for the three month periods
ended March 31, 1997 and 1996, respectively. Payments under the Petrolite
agreement were initiated on April 1, 1992 and the final payment was received in
March 1994. Revenue attributable to the Petrolite agreement, however, is
recognized ratably over the period for which research and development costs are
incurred under the terms of the agreement. The decrease of $49,020 in sponsored
research revenues resulted from a decreases in revenues recognized under the
Petrolite and the Carbide/Graphite Group, Inc. ("Carbide/Graphite") agreements,
offset in part by an increase in the sponsored research revenues received from a
National Institute of Standards and Technology (" NIST") grant.
Interest and other investment income decreased by $123,656 for the first
three months of 1997 compared to the first three months of 1996 primarily as a
result of the decrease in the
10
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ENERGY BIOSYSTEMS CORPORATION
available cash during the first two months of 1997 from which interest and other
investment income are generated.
The Company had research and development expenses for the three months
ended March 31, 1997 and 1996 of $2,174,714 and $2,015,769, respectively. The
increase in research and development expenses of $158,945 for the three months
ended March 31, 1997 as compared to the corresponding prior year period resulted
primarily from the addition of 12 research and development personnel. The
Company expects its research and development expenses to increase during the
remainder of 1997, reflecting increased expenditures related to hiring
additional personnel.
The Company had general and administrative expenses for the three months
ended March 31, 1997 and 1996 of $602,464 and $621,225, respectively. The
decrease of $18,761 for the three months ended March 31, 1997 as compared to the
first quarter of 1996 resulted from a decrease in consulting fees offset in part
by an increase in professional fees. The Company expects a slight increase in
its general and administrative expenses during the remainder of 1997 in support
of its expanded research activities and corporate development activities.
Liquidity and Capital Resources
The Company completed its initial public offering in March 1993
resulting in net cash proceeds of approximately $14.9 million. In October 1994
the Company privately placed 480,000 shares of its Series A Convertible
Preferred Stock resulting in net cash proceeds of approximately $22.2 million.
Dividends on the Series A Preferred Stock are cumulative from the date of the
initial closing, October 27, 1994, and are payable in cash or common stock of
the Company, or a combination thereof, at an annual rate equal to $4.00 per
share to the extent the dividend is paid in cash and $4.50 per share to the
extent the dividend is paid in common stock. The shares of Series A Preferred
Stock are convertible into shares of the Company's common stock at the option of
the holder at a conversion price equal to $8.25 per share of common stock,
subject to adjustment in certain circumstances. During the first quarter of
1997 the Company paid $690,000 in dividends by issuing 98,214 shares of common
stock.
In February 1997 the Company privately placed 224,100 shares of its
Series B Preferred Stock resulting in net proceeds of approximately $10.2
million. Dividends on the Series B Preferred Stock are cumulative from the date
of the initial closing, February 27, 1997, and are payable in cash or common
stock of the Company, or a combination thereof, at an annual rate equal to $4.00
per share to the extent the dividend is paid in cash and $4.50 per share to the
extent the dividend is paid in common stock. The shares of Series B Preferred
Stock are convertible into shares of the Company's common stock at the option of
the holder at a conversion price equal to $7.25 per share of common stock,
subject to adjustment in certain circumstances.
Prior to its initial public offering, the Company had financed its
operations through private placements of equity securities, revenues from
collaborative research agreements and interest income earned on the net proceeds
from these private placements.
For the three months ended March 31, 1997, the Company used $2,100,171
of net cash in operating activities, incurred $126,170 in capital expenditures,
and received $10,107,566 from
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ENERGY BIOSYSTEMS CORPORATION
financing activities. At March 31, 1997, the Company had cash, cash equivalents,
and short term investments totaling $16,878,813 and working capital of
$16,939,940.
The Company intends to spend approximately $600,000 during the remainder
of 1997 for the purchase of laboratory and analytical instrumentation. The
Company also expects to incur substantial additional research and development
expenses, including expenses associated with biocatalyst, fermentation and
bioreactor development. The Company has funding commitments through 1997
requiring the Company to spend approximately $64,000 under research and
development agreements. The Company also expects its general and administrative
expenses to increase slightly during the remainder of 1997 in support of its
research and corporate development activities.
To supplement its research and development budgets, the Company intends
to seek additional collaborative research and development agreements with
corporate partners. In this regard, the Company has entered into collaborative
agreements with The Petrolite Corporation, the Exploration and Production
Technology Division of Texaco, Inc., Total Raffinage Distribution S.A., The M.
W. Kellogg Company, Koch Refining Company and Carbide/Graphite Group, Inc.,
among others, as more fully described in the Company's Annual Report on Form 10-
K for the year ended December 31, 1996.
The Company believes that its available cash, investments and interest
income will be adequate to satisfy its funding needs through year-end 1998. The
Company's future funding requirements will depend on many factors, including the
progress of the Company's research and development, timing of environmental
regulations, the rate of technological advances, determinations as to the
commercial potential of the Company's technology under development, the status
of competitive technology, the establishment of biocatalyst manufacturing
capacity or third-party manufacturing arrangements and the establishment of
collaborative relationships. The Company may seek additional funding through
public or private financings, including equity financings, and through
collaborative arrangements.
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ENERGY BIOSYSTEMS CORPORATION
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
The Company previously reported the information required by subsection
(c) of this Item with respect to the issuance of shares of the Company's Series
B Convertible Preferred Stock in the Company's Current Report on Form 8-K dated
February 27, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
a. Exhibits
<S> <C>
3.1 Certificate of Powers, Designation, Preferences and Rights of
the Series B Convertible Preferred Stock (incorporated by
reference to Exhibit 3.1(d) of the Company's Annual Report on Form
10-K for the year ended December 31, 1996)
4.1 Form of Stock Purchase Agreement, dated as of February 21, 1997,
by and between the Company and Purchasers of the Series B
Convertible Preferred Stock (incorporated by reference to Exhibit
4.2 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996).
4.2 Form of Stock Exchange Agreement, dated as of February 21, 1997,
by and between the Company and the Exchange Holders of Series A
Convertible Preferred Stock (incorporated by reference to Exhibit
4.3 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.1 Energy BioSystems Corporation 1997 Stock Option Plan.
11.1 Statement regarding Computation of Per Share Earnings.
27.1 Financial Data Schedule.
b. Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated February 27, 1997
during the three months ended March 31, 1997. Such report related to the
issuance by the Company of an aggregate of 702,100 shares of Series B
Convertible Preferred Stock of the Company in a private placement and
exchange offering.
</TABLE>
13
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ENERGY BIOSYSTEMS CORPORATION
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.
Energy BioSystems Corporation
By: /s/ John H. Webb
----------------------------------------------------------
John H. Webb President and Chief Executive Officer
Date: May 14, 1997
By: /s/ Paul G. Brown III
----------------------------------------------------------
Paul G. Brown III Vice President, Finance and Administration
Date: May 14, 1997
14
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EXHIBIT 10.1
ENERGY BIOSYSTEMS CORPORATION
1997 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under this Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonqualified stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. No incentive Stock Options may be granted
under this Plan unless this Plan has been approved by the stockholders of the
Company.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees, as
applicable, that is administering the Plan pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of Directors in
accordance with paragraph (a) of Section 4 of the Plan.
(e) "Company" means Energy BioSystems Corporation, a Delaware corporation.
(f) "Consultant" means any consultant or advisor to the Company or any
Parent or Subsidiary.
(g) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal leave; provided,
however, that for purposes of Incentive Stock Options, such leave is for a
period of not more that ninety (90) days, unless reemployment upon expiration
of such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (ii) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries or its successor.
(h) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(j) "Fair Market Value" means, as of any date, the value of Stock
determined as follows:
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(i) If the Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported, as quoted on such systems or
exchange or the exchange with the greatest volume of trading in Stock for the
last market trading day prior to the time of determination) as reported in the
Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Stock is quoted on The Nasdaq Stock Market (but not
on The Nasdaq National Market) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high and low asked prices for the Stock; or
(iii) In the absence of an established market for the Stock, the
Fair Market Value thereof shall be determined in good faith by the
Administrator.
(k) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(l) "Nonqualified Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(m) "Option" means a stock option granted pursuant to the Plan.
(n) "Optioned Stock" means the Stock subject to an Option.
(o) "Optionee" means an Employee or Consultant who receives an Option.
(p) "Parent" means a "parent corporation," whether now or hereafter
existing, as define in Section 424(e) of the Code.
(q) "Plan" means this 1997 Stock Option Plan.
(R) "Share" means a share of the Stock, as adjusted in accordance with
Section 12 of the Plan.
(s) "Stock" means the Common Stock, par value $.01 per share of the
Company.
(t) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum number of shares of Stock which may be optioned and sold
under the Plan is 100,000 shares. The shares may be authorized, but unissued,
or reacquired Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and Officers. With
respect to grants of Options to Employees who are also officers or directors of
the Company, the Plan shall be administered by (A) the Board or (B) a Committee
designated by the Board to administer the Plan, which
2
<PAGE>
Committee shall be constituted in such a manner as to permit the Plan to comply
with Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan. Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan. Notwithstanding the foregoing, the Plan shall not be
administered by the Board if (a) the Company and its officers and directors are
then subject to the requirements of Section 16 of the Exchange Act and (b) the
Board's administration of the Plan would prevent the Plan from Complying with
Rule 16b-3.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to directors, non-
director officers and Employees who are neither directors nor officers.
(iii) Administration With Respect to Consultants and Other Employees.
With respect to grants of Options to Employees or Consultants who are neither
directors nor officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the legal requirements relating to
the administration of incentive stock option plans, if any, of corporate and
securities laws applicable to the Company and of the Code (the "Applicable
Laws"). Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution thereof, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board to
such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Stock, in accordance with
Section 2(j) of the Plan;
(ii) to select the officers, Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Stock to be covered by each
such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not limited
to, the per share exercise price for the Shares to be issued pursuant to the
exercise of an Option and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Option or other
award and/or the shares of Stock relating thereto, based in each case on such
factors as the Administrator shall determine, in its sole discretion);
3
<PAGE>
(vii) to determine whether and under what circumstances an Option may
be bought-out for cash under subsection 9(f);
(viii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
this Plan shall be deferred wither automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during the deferral period); and
(ix) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Stock covered by such Option
shall have declined since the date the Option was granted.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options. Neither the Board, the Committee nor any
member thereof shall be liable for any act, omission, interpretation,
construction or determination made in connection with the Plan in good faith,
and the members of the Board and of the Committee shall be entitled to
indemnification and reimbursement by the Company in respect of any claim,
loss, damage or expense (including counsel fees) arising therefrom to the full
extent permitted by law.
5. Eligibility.
(a) Nonqualified Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonqualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonqualified Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they are granted, and the Fair Market Value
of the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the otherwise agreed in writing
by the Company and such Optionee.
(e) The maximum number of shares subject to Options which may be issued to
any Optionee under the Plan during any period of three consecutive years is
100,000 shares.
6. Term of Plan. The Plan shall become effective upon its adoption by
the Board of Directors. It shall continue in effect until January 14, 2007,
unless extended by the Board or sooner terminated under Section 14 of the
Plan. No grants of Options will be made pursuant to the Plan after January 14,
2007.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Incentive Stock Option granted to an Optionee who, at
the time the Option is granted, owns Stock representing more than ten percent
(10%) of the voting power of all classes
4
<PAGE>
of stock of the Company or any Parent or Subsidiary, the term of the Option
shall be five (5) years from the date of grant thereof or such shorter term as
may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, provided that, in the case of an Incentive Stock Option:
(i) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(ii) granted to any Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Share to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other shares of the Company's capital stock
which (x) in the case of shares of the Company's capital stock acquired upon
exercise of an Option wither have been owned by the Optionee for more than six
months on the date of surrender or were not acquired, directly or indirectly,
from the Company, and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised, (5) authorization for the Company to retain from the total
number of Shares as to which said Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) any combination of the foregoing methods
of payment, or (8) such other consideration and method of payment for the
issuance of Shares to the extent permitted under Applicable Laws.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permitted under the terms of
the Plan. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised, and the Optionee deemed to
be a stockholder of the Shares being purchased upon exercise, when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(b) of the
Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercise.
(b) Termination of Employment. In the event of termination of an
Optionee's relationship as a Consultant (unless such termination is for purposes
of becoming an Employee of the Company) or Continuous Status as an Employee with
the Company (as the case may be), such Optionee
5
<PAGE>
may, but only within ninety (90) days (or such other period of time as is
determined by the Board, with such determination in the case of an Incentive
Stock Option being made at the time of grant of the Option and not exceeding
ninety (90) days) after the date of such termination (but in no event later that
the expiration date of the term of such Option as set forth in the Option
Agreement ), exercise his Option to the extent that Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of such termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's relationship as a
Consultant or Continuous Status as an Employee as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may,
but only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth
in the Option Agreement), exercise the Option to the extent otherwise entitled
to exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option to the extent so entitled with the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent the Optionee was entitled to exercise the Option at the
date of death. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if the Optionee's estate (or such other
person who acquired the right to exercise the Option) does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transaction.
(f) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Stock Withholding to Satisfy Tax Obligations. At the discretion of
the Administrator, Optionees may satisfy withholding obligations as provided in
this paragraph. When an a Optionee incurs tax liability in connection with an
Option, which tax liability is subject to tax withholding under applicable tax
laws, and the Optionee is obligated to pay the Company an amount required to be
withheld under applicable tax laws, the Optionee may satisfy the withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
upon exercise of the Option, that number of Shares having a Fair Market Value
equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
6
<PAGE>
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of the
Administrator; and
(d) if the Optionee is subject to Rule 16b-3, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
12. Changes in the Company's Capital Structure. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or the rights thereof, or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Stock outstanding, without receiving
compensation therefor in money, services or property, then (a) the number,
class, and per share price of shares of Stock subject to outstanding Options
hereunder shall be appropriately adjusted in such a manner as to entitle an
Optionee to receive upon exercise of an Option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received had he exercised his Option in full immediately prior to the event
requiring the adjustment; and (b) the number and class of shares of Stock then
reserved for issuance under the Plan shall be adjusted by substituting for the
total number and class of shares of Stock then reserved that number and class of
shares of Stock that would have been received by the owner of an equal number of
outstanding shares of each class of Stock as the result of the event requiring
adjustment.
If the Company shall be a party to a merger or similar reorganization
after which the Company is not the surviving corporation, or if there is a sale
of all or substantially all the Common Stock or a sale of all or substantially
all of the assets of the Company, or if the Company is to be liquidated or
dissolved (any of which events shall constitute a ("Significant Transaction"),
then, subject to the provisions hereof, the Administrator, in its discretion,
may accelerate the vesting of all outstanding Options or take such other action
with respect to outstanding Options as it deems appropriate, including, without
limitation, canceling such Options and paying the Optionees an amount equal to
the value of such Options, as determined by the Board.
Notwithstanding the foregoing, if a Significant Transaction shall occur in
connection with or following a Change in Control (as defined below), in
connection with which Significant Transaction the holder of any Option is not
fully vested shall not receive, in respect of such Options, a substitute award
of stock options containing substantially similar terms to and having an equal
or greater fair market value than such Option, then the Administrator shall
either (i) accelerate the vesting of such Option within a reasonable time prior
to the completion of such Significant Transaction on the same basis as holders
of Stock, subject to such holder's exercise of such Option) or (ii) cancel such
Option in consideration of the payment to the holder thereof of an amount (in
cash) equal to the fair market value of such Option. For
7
<PAGE>
purposes of the foregoing, the fair market value attributable to Options shall
be determined by the Administrator either, at its election, (x) in accordance
with the Black-Scholes method (for purposes of which volatility shall be
measured over the preceding one year period and the risk-free interest rate
shall be the rate of U.S. treasury bills with a maturity corresponding to the
remaining term of such Option) or (y) to be an amount equal to the fair market
value of the Stock subject to such Option less the exercise price thereof and
(iii) the fair market value of (A) any Option shall be determined as of the
date, wither of the Change in Control or of the Significant Transaction, that
results in the greater fair market value of such Options, and (B) any substitute
award shall be determined as of the date of the Significant Transaction. A
"Change in Control" shall be deemed to occur if:
(i) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) shall
become (directly or indirectly) the beneficial owner (within the meaning of Rule
13d-3 promulgated under such Act) of more than 50% of the combined voting
power of the then outstanding voting securities of EBC entitled to vote
generally in the election of directors ("Voting Power"); or
(ii) EBC's stockholders shall approve a merger or consolidation, sale
or disposition of all or substantially all of EBC's assets or a plan of
liquidation of dissolution of EBC, other than (A) a merger or consolidation in
which the voting securities of EBC outstanding immediately prior thereto will
become (by operation of law), or are to be converted into voting securities of
the surviving corporation or its parent corporation that, immediately after such
merger or consolidation, (x) are owned by the same person or entity or persons
or entities that owned the voting securities of EBC immediately prior thereto
and (y) possess at least 75% of the Voting Power held by the voting securities
of the surviving corporation or its parent corporation, or (B) a merger or
consolidation effected to implement a recapitalization of EBC (or similar
transaction) in which no person acquires more than 50% of the Voting Power.
Except as expressly provided herein, the issue by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
for cash or property, or for labor or services wither upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number, class, or price of shares of Stock then subject to
outstanding Options.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the applicable requirements of The Nasdaq Stock Market or an
established stock exchange), the Company shall obtain stockholder approval of
any Plan amendment in such manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain is full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
8
<PAGE>
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange which the Shares may be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any aforementioned
relevant provision of law.
16. Reservation of Shares. The Company, during the term of this Plan,
will at times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements
("Option Agreement") in such form as the applicable Administrator shall approve
from time to time.
18. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
generally provided to all stockholders of the Company. The Company shall not be
required to provide such information to persons whose duties in connection with
the Company assure their access to equivalent information.
19. Governing Law; Construction. All rights and obligations under the
Plan shall be governed by, and the Plan shall be construed in accordance with,
the laws of the State of Delaware without regard to the principles of conflicts
of laws. Titles and headings to Sections herein are for the purpose of
reference only, and shall in no way limit, define or otherwise affect the
meaning or interpretation of any provisions of the Plan.
9
<PAGE>
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
-----------------------------------------------------
The following schedules reflect the information used in calculating the
number of shares in the computation of net loss per share for each of the
periods set forth in the Statements of Operations.
1
<PAGE>
ENERGY BIOSYSTEMS CORPORATION
COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
WEIGHTED AVERAGE SHARES OUTSTANDING:
<TABLE>
<CAPTION>
TOTAL # DAYS
SHARES OUTSTANDING
- ----------------------------------------------------
<S> <C> <C> <C>
11,497,135 x 15 = 172,457,025
11,502,135 x 1 = 11,502,135
11,502,235 x 7 = 80,515,645
11,502,395 x 18 = 207,043,110
11,505,395 x 8 = 92,043,160
11,506,053 x 13 = 149,578,689
11,507,163 x 6 = 69,042,978
11,605,377 x 22 = 255,378,294
-- -------------
90 1,037,561,036 11,528,456
==========
FOR THE THREE MONTHS ENDED MARCH 31, 1997
LOSS PER SHARE:
Net Loss plus dividend accrual
plus accretion of offering costs ($2,870,560) = ($0.25)
- --------------------------------- ---------------- ==========
Weighted Avg. Shares 11,528,456
</TABLE>
2
<PAGE>
ENERGY BIOSYSTEMS CORPORATION
COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
WEIGHTED AVERAGE SHARES OUTSTANDING:
<TABLE>
<CAPTION>
TOTAL # DAYS
SHARES OUTSTANDING
- ----------------------------------------------------
<S> <C> <C> <C>
10,584,268 x 23 = 243,438,164
11,107,568 x 14 = 155,505,952
11,139,268 x 27 = 300,760,236
11,140,768 x 8 = 89,126,144
11,142,868 x 19 = 211,714,492
-- -------------
91 1,000,544,988 10,995,000
============
FOR THE THREE MONTHS ENDED MARCH 31, 1996
LOSS PER SHARE:
Net Loss plus dividend accrual
plus accretion of offering costs ($2,503,079) = ($0.23)
---------------- ============
Weighted Avg. Shares 10,995,000
</TABLE>
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANTS QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,505,873
<SECURITIES> 5,372,940
<RECEIVABLES> 492,951
<ALLOWANCES> 0
<INVENTORY> 12,586
<CURRENT-ASSETS> 17,679,331
<PP&E> 6,276,893
<DEPRECIATION> 3,331,384
<TOTAL-ASSETS> 21,460,166
<CURRENT-LIABILITIES> 739,391
<BONDS> 0
0
33,353,958
<COMMON> 116,054
<OTHER-SE> 32,642,741
<TOTAL-LIABILITY-AND-EQUITY> 21,460,166
<SALES> 0
<TOTAL-REVENUES> 580,366
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,776,877
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 301
<INCOME-PRETAX> (2,196,812)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,196,812)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,196,812)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> 0
</TABLE>
