<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO
________________.
Commission file number 0-22170
EPOCH PHARMACEUTICALS, INC.
(exact name of small business issuer as specified in its charter)
Delaware 91-1311592
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
1725 220th Street, S.E., No. 104, Bothell, Washington 98021
(Address of principal executive offices)
(425) 485-8566
(Issuer's telephone number)
NOT APPLICABLE
-------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 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
--------- ---------
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at July 21, 1997
----- ----------------------------
<S> <C>
Common Stock, $.01 par value 14,746,709
Redeemable Common Stock Purchase Warrants 7,431,108
</TABLE>
Page 1 of ___ Pages
<PAGE> 2
EPOCH PHARMACEUTICALS, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page Number
<S> <C>
Item 1. Financial Statements
Balance Sheets as of December 31, 1996
and June 30, 1997 (unaudited)........................................................... 3
Statements of Operations (unaudited) for the three
months and six months ended June 30, 1996 and 1997...................................... 4
Statements of Cash Flows (unaudited) for the six months ended
June 30, 1996 and 1997.................................................................. 5
Notes to Financial Statements.......................................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................................ 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................................ 10
NOTE: Items 1-5 are omitted as they are not applicable.
SIGNATURE ................................................................................................ 11
</TABLE>
<PAGE> 3
EPOCH PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
1996 (UNAUDITED)
----------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 4,890,358 $ 3,332,950
Receivables ...................................................... 58,742 29,979
Prepaid expenses................................................... 69,989 52,746
----------------- ------------------
Total current assets........................................... 5,019,089 3,415,675
Equipment and leasehold improvements, net............................... 277,498 199,641
Other assets 21,150 21,150
----------------- ------------------
Total assets................................................... $ 5,317,737 $ 3,636,466
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable...................................................... $ 11,188 $ 5,761
Accounts payable................................................... 200,236 191,052
Accrued liabilities................................................ 230,555 288,511
----------------- ------------------
Total current liabilities...................................... 441,979 485,324
----------------- ------------------
Stockholders' equity:
Preferred stock, par value $.01; authorized 10,000,000
shares; no shares issued and outstanding....................... -- --
Common stock, par value $.01; authorized
30,000,000 shares; issued and outstanding
14,723,856 shares at December 31, 1996
and 14,746,709 at June 30, 1997................................ 147,239 147,467
Additional paid-in capital......................................... 52,892,549 52,903,543
Deferred compensation.............................................. (39,029) (7,419)
Accumulated deficit................................................ (48,125,001) (49,892,449)
----------------- ------------------
Total stockholders' equity..................................... 4,875,758 3,151,142
----------------- ------------------
Total liabilities and stockholders' equity..................... $ 5,317,737 $ 3,636,466
================= ==================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
EPOCH PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTH ENDED
JUNE 30, JUNE 30,
-------------------------------- ---------------------------------
1996 1997 1996 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Research contract revenue................................ $ -- $ 46,191 $ -- $ 89,711
Operating Expenses:
Research and development............................... $ 483,542 $ 632,342 $ 1,012,464 $ 1,280,576
General and administrative............................. 121,763 358,678 529,079 813,669
-------------- -------------- -------------- --------------
Total operating expenses............................ 605,305 991,020 1,541,543 2,094,245
-------------- -------------- -------------- --------------
Operating loss...................................... (605,305) (944,829) (1,541,543) (2,004,534)
Other income (expense):
Interest income........................................ 26,250 45,154 62,193 97,176
Interest and financing expense......................... (23,495) (982) (179,251) (1,593)
Other income........................................... 4,601 40,240 9,401 71,508
-------------- -------------- -------------- --------------
Loss from continuing operations..................... (597,949) (860,417) (1,649,200) (1,837,443)
Discontinued operations:
Loss from operations of discontinued
Diagnostics Division................................ (79,934) -- (72,901) --
Gain on disposal of Diagnostics Division............... -- 50,000 -- 70,000
-------------- -------------- -------------- --------------
Net loss............................................ (677,883) (810,417) (1,722,101) (1,767,443)
============== ============== ============== ==============
Loss per share from continuing operations................ (0.08) (0.06) (0.22) (0.12)
Loss per share from discontinued operations.............. (0.01) -- (0.01) --
-------------- -------------- -------------- --------------
Net loss per share.................................. (0.09) (0.06) (0.23) (0.12)
============== ============== ============== ==============
Weighted average common shares outstanding............... 7,756,794 14,743,934 7,390,616 14,736,774
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
EPOCH PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------------------
1996 1997
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ......................................................... $ (1,722,101) $ (1,767,443)
Adjustments to reconcile net loss to net cash used in
operating activities:
Continuing operations:
Depreciation and amortization................................. 127,014 97,130
Amortization of discount on notes payable..................... 122,326 --
Changes in operating assets and liabilities:
Other assets.................................................. 21,573 46,006
Accounts payable and accrued liabilities...................... (446,745) 80,382
Other current liabilities..................................... (625) --
Discontinued operations:
Changes in current assets and current liabilities............. 75,334 --
--------------- ----------------
Net cash used in operating activities........................... (1,823,224) (1,543,925)
--------------- ----------------
Cash used in investing activities - acquisition of equipment
and leasehold improvements..................................... (30,516) (19,275)
--------------- ----------------
Cash flows from financing activities:
Principal payments on notes payable............................... (1,324,019) (5,427)
Proceeds from sale of common stock................................ 4,632,500 --
Exercise of warrants and stock options............................ 666,994 11,222
--------------- ----------------
Net cash provided by financing activities......................... 3,975,475 5,795
--------------- ----------------
Net increase (decrease) in cash and cash equivalents.............. 2,121,735 (1,557,408)
Cash and cash equivalents at beginning of period....................... 3,739,144 4,890,358
--------------- ----------------
Cash and cash equivalents at end of period............................. $ 5,860,879 $ 3,332,950
=============== ================
Supplemental disclosure of cash flow information-cash
payments made during the period for interest................... $ 68,101 $ 1,593
=============== ================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
EPOCH PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(1) BASIS OF PRESENTATION
Epoch Pharmaceuticals, Inc. ("Epoch" or "the Company"), was organized to
develop, manufacture and market therapeutic and diagnostic products utilizing
oligonucleotide technology. In November 1995, the Company sold substantially all
of its diagnostics assets to Becton, Dickinson and Company. The Company's
continuing activities are focused on the development of therapeutic technologies
and products. The Company's revenues from continuing operations to date are
primarily from Federal government and other research grants and contracts.
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required to be presented for complete financial
statements. The accompanying financial statements include all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented.
The financial statements and related disclosures have been prepared with the
presumption that users of the interim financial information have read or have
access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes thereto included in the
Company's Annual Report on Form 10-KSB as filed with the Securities and Exchange
Commission on March 31, 1997.
The Company has experienced significant quarterly fluctuations in operating
results and it expects that these fluctuations in revenue, expenses and net
losses will continue.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS; PLAN OF OPERATIONS
At June 30, 1997, the Company had cash and cash equivalents of $3,333,000 which
provides sufficient working capital to operate approximately nine months. The
Company's continuing operations are research and development, and will not
generate working capital in the near term to fund future operations.
In June 1996, the Company announced that it intends to exchange for every two
Redeemable Common Stock Purchase Warrants, which were issued in conjunction with
the Company's public offering in September 1993 at $6.50 per share (the "Public
Warrants"), one new warrant to purchase one share of the Company's Common Stock
until June 20, 2001, that is exercisable at $2.50 per share (the "Exchange
Warrants"). Each Exchange Warrant shall be redeemable by the Company at any time
after eighteen months from the date that they are issued at $0.05 per warrant,
provided that the closing trading price per share of Common Stock is at least
$3.75 for twenty consecutive trading days. In June 1997 this exchange of
warrants was completed, with 2,603,825 of the Public Warrants being exchanged
for 1,301,912 of the Exchange Warrants.
6
<PAGE> 7
Since inception, the Company has financed its operations primarily through the
sales of its equity securities. In addition, the Company received $8,510,000
from the sale of the diagnostics division. To continue operations, the Company
will be required to sell additional equity securities, borrow additional funds,
or obtain additional financing through licensing, joint venture, or other
collaborative arrangements. The Company is pursuing such financing arrangements
but has no commitments for such financing and there can be no assurance that
such financing will be available on satisfactory terms, if at all.
In July 1997, Fred Craves, Chairman of the Board of Directors and Chief
Executive Officer of the Company purchased on the public market 127,500 shares
of the Company's Common Stock at a price of $0.4375.
In July 1997, Sanford S. Zweifach, President and Chief Financial Officer of the
Company purchased on the public market 25,000 shares of the Company's Common
Stock at a price of $0.4375. Simultaneously with the purchase, the Company
loaned Mr. Zweifach, with full recourse, $12,192 due in two years at an interest
rate of 7%.
In July 1997, Rich B. Meyer, Jr., Vice President, Research and Development of
the Company purchased on the public market 25,000 shares of the Company's Common
Stock at a price of $0.4375. Simultaneously with the purchase, the Company
loaned Mr. Meyer, with full recourse, $12,192 due in two years at an interest
rate of 7%.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per share
(EPS), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires that dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of operations. Under this new statement, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution. Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently required fully diluted EPS. SFAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, and earlier application is not
permitted. When adopted, the Company will be required to restate its EPS data
for all prior periods presented. The Company does not expect the impact of the
adoption of this statement to be material to previously reported EPS amounts.
This Quarterly Report on Form 10-QSB contains certain forward-looking statements
that are based on current expectations. In light of the important factors that
can materially affect results, including those set forth below and elsewhere in
this Quarterly Report on Form 10-QSB, the inclusion of forward-looking
information herein should not be regarded as a representation by the Company or
any other person that the objectives or plans of the Company will be achieved.
The Company may encounter competitive, technological, financial and business
challenges making it more difficult than expected to continue to develop and
market therapeutic technologies and
7
<PAGE> 8
products; the market may not accept the Company's therapeutic products; the
Company may be unable to retain existing key management personnel; and there may
be other material adverse changes in the Company's operations or business.
Certain important factors affecting the forward-looking statements made herein
include, but are not limited to (i) the successful development of viable
therapeutic technologies and products, (ii) accurately forecasting capital
expenditures, and (iii) obtaining new sources of external financing. Assumptions
relating to budgeting, marketing, product development and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its marketing,
capital expenditure or other budgets, which may in turn affect the Company's
financial position and results of operations.
Future operating results may be impacted by a number of factors that could cause
actual results to differ materially from those stated herein, which reflect
management's current expectations. These factors include industry specific
factors, the Company's ability to maintain access to external financing sources
and its financial liquidity, the Company's ability to timely develop and produce
commercially viable therapeutic products and the Company's ability to manage
expense levels.
RESULTS OF OPERATIONS
The following discussion of results of operations reflects the Company's
Diagnostics Division as discontinued operations for the three months and six
months ended June 30, 1996 and 1997.
Research and development expenses for the three months and six months ended June
30, 1997 increased $149,000 and $268,000, respectively, over the same periods in
the prior year as a result of increased research activity. Additional increases
in expenditures for research and development throughout 1997 are anticipated as
the Company devotes additional resources to these efforts.
General and administrative expenses increased $237,000 in the three month period
ended June 30, 1997 and $285,000 in the six month period ended June 30, 1997
compared to the prior year periods. In July 1996 the In Re Blech Securities
Litigation suit was dismissed. Accordingly, $250,000 of estimated costs which
had been accrued for this matter was reversed as a reduction of expenses in the
three and six month periods ended June 30, 1996.
Additionally, general and administrative expenses in the six month period ended
June 30, 1997 included $153,000 in fees toward filing patents on new
technologies, the majority of which was incurred in the first quarter, as
compared to $43,000 in the comparable six month period ended June 30, 1996. The
Company believes that these patents, if issued, will improve the Company's
proprietary position with regards to its targeted gene mutagenesis technologies.
There can be no assurance that the Company's patent applications will result in
further issued patents or that such issued patents will offer protection against
competitors with similar technology. Additionally, there can be no assurance
that any manufacture, use or sale of the Company's technology or products will
not infringe on patents or proprietary rights of others, and the Company may be
unable to obtain licenses or other rights to these other technologies that may
be required for commercialization of the Company's proposed products. Additional
variations in, general and administrative expenses are the result of normal
business fluctuations.
8
<PAGE> 9
Interest income in the three month and six month periods ended June 30, 1997
increased compared with the respective periods in the prior year due to higher
investable cash balances.
Interest expense in the current periods decreased from the respective periods in
the prior year primarily due to $122,000 of debt discount having been amortized
in the first quarter of 1996 related to a $480,000 warrant price adjustment
associated with a bridge refinancing. The price adjustment was credited to
additional paid-in capital and the debt discount was amortized over the term of
the notes. At March 31, 1996 the discount had been fully amortized.
Additionally, all significant notes payable were repaid in 1996.
In November 1996, the Company entered into an agreement with Saigene Corporation
(Saigene), whereby Epoch transferred its remaining diagnostic technologies to
Saigene for $1,100,000. The $1,100,000 is in the form of an 8% note receivable
with terms of $50,000 down and $10,000 per month. The note is secured by the
assets and technologies transferred to Saigene in the agreement. The balance of
the note was originally due March 31, 1997, or upon Saigene completing financing
arrangements, whichever occurs first. On June 20, 1997, the note was amended to
payments of $10,000 per month up to the closing of an anticipated private
placement in September 1997 by Saigene and increasing to $20,000 per month after
completion of the anticipated private placement. If the private placement raises
$1,500,000 or more, then Epoch is to receive a payment on the note of $500,000.
Additionally, Epoch now holds a 12% equity position in Saigene. The note must by
repaid in full upon completion of any additional financing in excess of
$1,000,000 or on June 20, 1999, whichever occurs first.
Due to the uncertainty of Saigene obtaining financing, the Company has recorded
as Gain on Disposal of Diagnostics Division only that portion of the gain,
$50,000 and $70,000, for which cash payments were received during the quarter
and six month periods ended June 30, 1997, respectively. As of June 30, 1997,
Saigene was current on all payments, however, the Company does not anticipate
receiving the balance of the note receivable when due, and there is no assurance
Saigene will obtain financing to pay this debt.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased by $1,557,000 from December 31, 1996 to June 30, 1997 as a result
of disbursements for normal operating expenditures.
The Company's primary future needs for capital are for continued research and
development. The Company's working capital requirements may vary depending upon
numerous factors including the progress of the Company's research and
development, competitive and technological advances, the FDA regulatory process
and other factors.
The Company will require additional funds to continue its operations and, over
the longer term, will require substantial additional funds to maintain and
expand its research and development activities and to ultimately commercialize,
with or without the assistance of corporate partners, any of its proposed
products. The Company will seek collaborative or other arrangements with larger
pharmaceutical companies, under which such companies would provide additional
capital to the
9
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Company in exchange for exclusive or non-exclusive license or other rights to
certain of the technologies and products the Company is developing. However, the
competition for such arrangements with major pharmaceutical companies is
intense, with a large number of biopharmaceutical companies attempting to
satisfy their funding requirements through such arrangements. There can be no
assurance that an agreement or agreements will arise from these discussions in a
timely manner, or at all, or that revenues that may be generated thereby will
offset operating expenses sufficiently to satisfy the Company's short- or
long-term funding requirements. Additional equity or debt financings may be
required, and there can be no assurance that funds will be available from such
financings on favorable terms, or at all.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.69 Asset Purchase Agreement made as of November 26, 1996, by
and between Epoch Pharmaceuticals, Inc. and Saigene
Corporation.
10.70 Secured Promissory Note dated as of November 7, 1996
executed by Saigene Corporation in favor of Epoch
Pharmaceuticals, Inc.
10.71 Sideletter dated June 20, 1997 between Epoch
Pharmaceuticals, Inc. and Saigene Corporation amending the
terms of the Secured Promissory Note dated as of November 7,
1996.
27 Financial Data Schedule.
(B) REPORTS ON FORM 8-K
None
ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES
Beginning in April 1997 and continuing through June 1997, the Company
offered to exchange for every two Public Warrants one new Exchange Warrant. As
of June 30, 1997, 46 holders of the Public Warrants exchanged an aggregate of
2,603,825 Public Warrants for 1,301,912 Exchange Warrants. The issuance of the
Exchange Warrants was exempt from the registration requirements of Section 5 of
the Securities Act of 1933, as amended, by reason of Section 3(a)(9) thereunder
and based upon the following facts: (i) the Exchange Warrants were offered by
the same entity that issued the Public Warrants; (ii) the holders of the Public
Warrants were not required to part with anything of value besides the Public
Warrants; (iii) the exchange was offered exclusively to the Company's existing
security holders; and (iv) the Company did not pay any corporation for the
solicitation of the exchange.
10
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EPOCH PHARMACEUTICALS, INC.
Date: August 12, 1997 By: /s/ SANFORD S. ZWEIFACH
---------- ---------------------------------
Sanford S. Zweifach
President/Chief Financial Officer
11
<PAGE> 12
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.69 Asset Purchase Agreement made as of November 26, 1996, by
and between Epoch Pharmaceuticals, Inc. and Saigene
Corporation.
10.70 Secured Promissory Note dated as of November 7, 1996
executed by Saigene Corporation in favor of Epoch
Pharmaceuticals, Inc.
10.71 Sideletter dated June 20, 1997 between Epoch
Pharmaceuticals, Inc. and Saigene Corporation amending the
terms of the Secured Promissory Note dated as of November 7,
1996.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.69
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of November
26, 1996, by and between EPOCH PHARMACEUTICALS, INC., a Delaware corporation,
("Seller") and Saigene Corporation, a Delaware corporation ("Purchaser").
This Agreement is entered into with reference to the following facts:
A. Seller has been engaged in the business (the "Business") of
developing diagnostic products based on biotechnology principles (the
"Technology").
B. Seller and Purchaser have negotiated for the sale and purchase of
certain of the assets of Seller related to Technology pursuant to the terms and
conditions hereof.
C. Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser, the Assets (as defined below) under the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Seller and Purchaser agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 Sale of Assets. Subject to the provisions of this Agreement, Seller
agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, at
the Closing (as defined below), all right, title and interest of Seller in and
to the following, and only the following, assets, properties and rights of
Seller used in the Business (collectively, "Assets"):
(a) The machinery, equipment, tools, and other tangible
personal properties and assets of Seller used in the Business specifically
listed on Schedule 1.1(a) (the "Equipment");
<PAGE> 2
(b) The patents, patent applications, process specifications,
drawings, documentation relating to the Technology; all as specifically listed
on Schedule 1.1(b);
(c) All rights relating to the government grants described in
Schedule 1.1(c);
(d) All rights relating to the contracts described in Schedule
1.1(d); and
(e) All rights relating to licenses described in Schedule
1.1(e).
Except for the warranties set forth specifically herein, Seller makes
no representation or warranties as to the Technology or any of the Assets to be
transferred hereunder, and Purchaser acknowledges that the Assets will be
transferred hereunder on an "as-is" basis. SELLER DISCLAIMS ALL IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR USE.
1.2 Purchase Price and Manner of Payment; Allocation.
(a) Purchase Price. The total purchase price for the
Assets shall be $1,100,000, payable as follows:
(i) Purchaser shall deliver to Seller a cashiers check in
the amount of $50,000 (the "Initial Cash Portion").
(ii) Purchaser shall execute and deliver to Seller a
Secured Promissory Note in the principal amount of $1,050,000, in substantially
the form of Exhibit "A" hereto (the "Note").
(iii) Purchaser shall execute and deliver to Seller a
Security Agreement in substantially the form of Exhibit "C" hereto evidencing
Seller's first priority security interest
2
<PAGE> 3
in the Assets (the "Security Agreement"), and a UCC-1 Financing Statement
evidencing the security interest in the Assets.
The Purchase Price shall be allocated among the Assets as set forth on
Schedule 1.2(a) attached hereto. Seller and Purchaser each agree that it will
not take a position on any income tax return, before any governmental agency, or
in any judicial proceeding that is in any way inconsistent with this Section
1.2. Purchaser shall be responsible for all sales taxes, to the extent
applicable.
2. CLOSING. The Closing of the purchase and sale provided for in this Agreement
(the "Closing") shall be held at the offices of Seller in Bothell, Washington at
10:00 a.m. on November 26, 1996 (the "Closing Date"), or at such location, time,
or date as the parties shall mutually agree upon. In the event the Closing Date
is delayed notwithstanding the best efforts of the parties as a result of any
circumstance beyond the reasonable control of the parties or as a result of
legitimate business reasons, the Closing Date shall be reasonably extended, but
in no event beyond November 29, 1996.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. Seller hereby represents and
warrants as follows:
3.1 Organization. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Delaware with full
power and authority to sell the Assets.
3.2 Authority. Seller has full power and authority to enter into this
Agreement and the documents and other agreements contemplated hereby and to
carry out the transactions contemplated hereby and thereby. All necessary
corporate action has been taken by Seller to authorize the execution, delivery,
performance of this Agreement and each of the documents and other agreements
contemplated hereby to be executed by Seller, and each of this Agreement and
such documents and other agreements is the valid and binding obligation of
Seller.
3
<PAGE> 4
3.3 Title to Assets. Except as specifically disclosed in Schedule 3.3
attached hereto, Seller has good and marketable title, legal and equitable, to
the Assets. As of the Closing, none of the Assets shall be subject to any
mortgage, pledge, lien, litigation, conditional sales agreement, security
interest, encumbrance, tax liability or other charge.
3.4 Consents. Except as set forth on Schedule 3.4, no consents of third
parties are required for the sale, conveyance, assignment, and transfer from
Seller to Purchaser of all Seller's right, title and interest in and to any of
the Assets.
4. ADDITIONAL AGREEMENTS.
4.1 Negative Covenants. Between the date hereof and the Closing Date,
Seller will not, without the prior written consent of Purchaser:
(a) sell, assign, lease or otherwise transfer or dispose of any of
the Assets;
(b) take any action which would cause any of the representations
and warranties set forth in Section 3 to be untrue in any material respect at
the Closing Date; or
(c) subject any of Assets to any lien, charge, or encumbrance.
4.2 Access to Operations. Between the date hereof and the Closing Date,
Seller will permit Purchaser and its authorized representatives to inspect the
Assets during normal business hours as Purchaser may reasonably request.
4.3 Facilities Lease. Purchaser and Seller shall enter into a
Facilities Lease and Administrative Support Contract (the "Facilities Lease") in
substantially the form attached hereto as Exhibit "D", whereby Seller shall
grant to Purchaser a non-exclusive right to enter and use portions of Seller's
premises, for a period of thirty (30) days following an IPO by Saigene or April
1, 1997, whichever comes first, commencing on October 1, 1996, for a monthly fee
of
4
<PAGE> 5
$6,000 for the first three months and $9,760 thereafter (the"Facility Fee").
Purchaser agrees to accrue for the first three months $3,760 per month payable
to the Seller thirty (30) days following an IPO by Saigene or April 1, 1997
which ever comes first. There shall be a proration of the Facility Fee for the
month of September in the amount of $2,000.
4.4 Purchaser Operating Expenses. On or before December 15, 1996,
Purchaser shall reimburse Seller for operating expenses of Purchaser paid by
Seller as listed on Schedule 4.5, which, as of the date hereof, amount to
$40,088. To the extent that there are additional expenses authorized by
Purchaser beyond the amount stated herein, which have been incurred by Seller on
Purchaser's behalf, Purchaser agrees to reimburse Seller said additional amounts
on or before December 15, 1996.
4.5 Cooperation with Respect to Government Grants. Seller agrees to
reasonably cooperate with Purchaser in connection with the transfer of any and
all government grants relating to the Business and/or the Technology from Seller
to Purchaser, including the execution of such documents as may be reasonably
necessary, in the opinion of Purchaser, to effect the transfer of such grants.
4.6 Confidentiality of Information. Seller agrees to regard and
preserve as confidential all information relating or pertaining to the Business,
the Technology, all projects, products, customers, trade secrets, confidential
information (including business and financial information) or unpublished
know-how, whether patented or unpatented, and to all activities of Seller
relating to the Business and Technology, and not to publish or disclose any part
of such information to others or use the same for its own purposes or the
purposes of others. Any information of Seller relating to the Business and
Technology which is not readily available to the public shall be considered by
Seller to be confidential information and therefore within the scope of this
Agreement, unless Purchaser advises Seller otherwise in writing.
4.7 Non-Competition. Seller agrees that, for a period of three years
immediately following the Closing, Seller will not interfere with the activities
of Purchaser in connection with
5
<PAGE> 6
the Business and Technology in any manner. Particularly, but without limitation,
Seller agrees to refrain from the following acts, commencing with the date of
this agreement:
(a) initiating contact with any employee, consultant or other
independent contract of Purchaser for the purpose of hiring away such employee,
consultant or other independent contractor; and
(b) soliciting customers of Purchaser.
4.8 Virginia Mason. Seller agrees that it will use its reasonable
efforts, in cooperation with Purchaser, to have the rights under the certain
Subcontract Research Agreement between Seller and Virginia Mason Research
Center, a copy of which is attached hereto as Exhibit "E" assigned to Purchaser.
The foregoing shall not be construed so as to require Purchaser to make any
payment or incur more than nominal expense to assign or transfer such rights, or
to otherwise suffer any more than a nominal detriment.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents and
warrants as follows:
5.1 Organization. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Delaware, with
full power and authority to own or lease its properties and to conduct its
business in a manner and in the places where such properties are owned or leased
or such business are presently conducted by it.
5.2 Authority. Purchaser has full power and authority to enter into
this Agreement and the documents and other agreements contemplated hereby and
assume the rights and obligations of Purchaser, and to carry out the transaction
contemplated hereby and thereby. All necessary action has been taken by
Purchaser to authorize the execution, delivery, and performance of this
Agreement and the documents and other agreements contemplated hereby to
6
<PAGE> 7
be executed by the Purchaser, and each of the same shall be the valid and
binding obligation of the Purchaser.
5.3 Absence of Litigation. There are no claims, actions, proceedings or
investigations pending which seek to delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect or restrict the Purchaser's ability to consummate the
transactions contemplated hereby.
6. CONDITIONS.
6.1 Conditions Precedent to Obligations of Purchaser. The obligations
of Purchaser to consummate this Agreement are subject to the fulfillment (or the
written waiver thereof by Purchaser), prior to or at the Closing, of each of the
following conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the Seller contained in Section 3 shall be
true and correct in all respects, and Seller shall, on or before the Closing
Date, have performed all of its covenants and obligations hereunder which by the
terms hereof are to be performed on or before the Closing Date.
(b) Approval of Documents. All actions, proceedings, instruments
and documents required to carry out this Agreement and documents and other
agreements contemplated hereby or any undertaking incidental thereto, and all
other related legal matters shall be reasonably satisfactory in form and
substance to Purchaser and its counsel.
(c) Consents and Approvals. The consents or approvals of the
lessors of any party to any contract or agreement to which Seller is a party or
subject, as disclosed on Schedule 3.4, necessary for the consummation of the
transactions contemplated hereby in the manner herein provided, shall have been
obtained.
7
<PAGE> 8
6.2 Conditions Precedent to Obligations to Seller. The Seller's
obligation to consummate this Agreement is subject to the fulfillment prior to
or at the Closing of each of the following conditions precedent:
(a) Consents. All other approvals and consents of any governmental
authority and any other person which shall be necessary in order to carry out
the transactions contemplated hereby shall have been obtained.
(b) Representations; Warranties; Covenants. Each of the
representations and warranties of Purchaser contained in Section 5 shall be true
and correct as though made on and as of the Closing Date; Purchaser shall, on or
before the Closing Date, have performed all of its obligations hereunder which
by the terms hereof are to be performed on or before the Closing Date.
(c) Approval of Documents. All actions, proceedings, instruments
and documents required to carry out this Agreement and the documents and other
agreements contemplated hereby or any undertaking incidental thereto, and all
other related legal matters shall be reasonably satisfactory in substance to
Seller and its counsel.
(d) Resignation of Employees. Seller's employees listed on Schedule
6.2(d) attached hereto shall have resigned effective as of September 20, 1996,
and Seller shall have received duly executed copies of the Severance Agreements
from such employees.
7. CLOSING PROCEDURE.
7.1 Items to be Delivered by Seller at Closing. At the Closing Seller
shall deliver to Purchaser the following:
8
<PAGE> 9
(a) an executed instrument of transfer in the form of Exhibit B
hereto transferring to Purchaser all of Seller's right, title, and interest in
and to the Assets upon delivery to purchaser pursuant to Section 7.3 (the
"General Assignment and Bill of Sale"); and
7.2 Items to be Delivered by Purchaser at Closing. At the Closing
Purchaser shall deliver to Seller the following:
(a) the Initial Cash Portion;
(b) the Note;
(c) the Security Agreement;
(d) the Financing Statement on Form UCC-1;
7.3 Actions Upon Closing. Upon the Closing, Seller shall take all steps
as may be required to put Purchaser in actual possession and control of the
Assets, at Seller's facility in Bothell, Washington. Purchaser shall pay all
moving costs, including costs of crating and loading of the Assets.
7.4 Further Assurances. Seller from time to time after the Closing, at
Purchaser's request, will execute, acknowledge and deliver to Purchaser such
other instruments and documents and will take such other actions and execute and
deliver such other documents, certifications and further assurances as Purchaser
may reasonably require in order to vest more effectively in Purchaser, or to put
Purchaser more fully in possession of, any of the Assets. Each of the parties
hereto will cooperate with the other and execute and deliver to the other such
other instruments and documents and take such further actions as may be
reasonably requested from time to time by the other party to carry out, evidence
and confirm the intended purposes of this Agreement.
9
<PAGE> 10
8. TERMINATION OF AGREEMENT.
8.1 Termination. At any time prior to the Closing, this Agreement may
be terminated:
(a) by mutual consent of Seller and Purchaser;
(b) by Purchaser if there has been a material misrepresentation,
breach of warranty, or breach of covenant by Seller in its representations,
warranties, and covenants set forth herein;
(c) by Seller if there has been a material misrepresentation,
breach of warranty, or breach of covenant by Purchaser in its representation,
warranties, and covenants set forth herein;
(d) by Purchaser if any one or more of the conditions stated in
Sections 6.1 or 7.1 hereof has not been satisfied at or prior to the Closing;
(e) by Seller if any one or more of the conditions stated in
Sections 6.2 or 7.2 hereof have not been satisfied at or prior to the Closing;
or
(f) by either party if the Closing has not occurred by November 29,
1996, provided however, that such party is not in breach hereof.
9. MISCELLANEOUS.
9.1 Brokers, Commissions. Seller and Purchaser each represent that in
connection with the sale and transfer contemplated by this Agreement, neither
has retained the services of a broker. Seller and Purchaser shall each hold the
other harmless, against any and all claims for brokerage commissions, finders
fees, or the like, arising from their respective actions.
10
<PAGE> 11
9.2 Fees and Expenses. Each of the parties will bear its own expenses
in connection with the negotiation and the consummation of the transactions
contemplated by this Agreement. Each party shall be solely responsible for its
respective legal, accounting, and other out-of-pocket expenses in connection
with the negotiation and the consummation of the transactions contemplated by
this Agreement.
9.3 Governing Law. This Agreement shall be construed under and governed
by the laws of the state of Washington.
9.4 Assignment. The benefits and obligations of any party to this
Agreement may not be assigned, except upon the written consent of the other
party. This Agreement shall be binding upon, and shall be enforceable by and
enure to the benefit of, the parties named herein and their respective
successors and assigns.
9.5 Confidentiality. Purchaser agrees that unless and until the Closing
has been consummated, Purchaser will hold in strict confidence, and not use to
the detriment of Seller, all data and information obtained in connection with
this transaction or Agreement with respect to the business activities of Seller,
and that Purchaser will not disclose any of said information to any other party
whatsoever without written consent of Seller.
9.6 Entire Agreement. This Agreement and the documents and other
agreements referenced herein contain the entire Agreement between the parties
with respect to the subject matter hereof; all representations, promises, and
prior or contemporaneous understandings between the parties with respect to the
subject matter hereof, are merged into and expressed in this Agreement and such
documents and other agreements; and any and all prior agreements between the
parties with respect to the subject matter hereof are hereby cancelled.
9.7 Amendment. This Agreement may be amended, modified, or supplemented
only by an instrument in writing signed by the parties to this Agreement.
11
<PAGE> 12
9.8 Publicity and Disclosure. No press releases or any public
disclosure, or disclosures to any employees of Seller or Purchaser, either
written or oral, of the transactions contemplated by this Agreement shall be
made without the prior knowledge and written consent of Seller. Seller shall
provide any public announcement of the execution of this Agreement or the sale
and purchase of the Assets as herein described to Purchaser for review prior to
release.
9.9 Notices. All notices, requests, demands, and other communications
hereunder shall be deemed to have been duly given on the date received if
delivered personally, telecopied, or mailed by commercial express mail service:
TO SELLER: EPOCH PHARMACEUTICALS, INC.
1725 220th Street, S.E., No. 104
Bothell, Washington 98021
Attn: Sanford S. Zweifach, President and CFO
TO PURCHASER: SAIGENE CORPORATION
1725 220th Street, S.E., No. 104
Bothell, Washington 98021
Attn: Allan G. Cochrane, President and COO
or to such other address or telecopier number which either party may notify the
other party as provided above.
9.10 Headings. The headings of the Sections of this Agreement are for
the convenience of reference only, and do not form a part hereof, and in no way
modify, interpret or construe the meanings of the parties.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement.
9.12 Waiver; Severability. The failure of any of the parties to this
Agreement to require the performance of term or obligation under this Agreement
or the waiver by any of the parties to this Agreement of any breach hereunder
shall not prevent subsequent enforcement of
12
<PAGE> 13
such term or obligation or be deemed a waiver of any subsequent breach
hereunder. In case any one or more of the provisions of this Agreement shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement but this Agreement shall be construed as if such invalid or
illegal or unenforceable provision or part of a provision had never been
contained herein.
9.13 Sales, Transfer and Documentary Taxes, Etc. Purchaser shall pay
all state and local taxes, documentary and other transfer taxes, if any, due as
a result of the purchase, sale, or transfer of the Assets.
9.14 Arbitration. Any controversy, claim or dispute among the parties
hereto arising out of or related to this Agreement or the breach hereto, which
cannot be settled amicably by the parties, shall be submitted for binding
arbitration in accordance with the provisions contained herein and in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
("Rules") in King County, Washington. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. The arbitrator shall
determine all questions of fact and law relating to any controversy, claim or
dispute hereunder, including but not limited to whether or not any such
controversy, claim or dispute is subject to the arbitration provisions contained
herein. The award shall include the award of attorneys' fees and expenses to the
prevailing party.
IN WITNESS WHEREOF, each of the parties hereto have caused
this Agreement to be executed by its duly authorized representative as of the
date set forth above.
"SELLER"
EPOCH PHARMACEUTICALS, INC.
By: _______________________________________
Sanford S. Zweifach
Its: President and Chief Financial Officer
13
<PAGE> 14
"PURCHASER"
SAIGENE CORPORATION
By: _______________________________________
Allan G. Cochrane
Its: President and Chief Operating Officer
14
<PAGE> 1
EXHIBIT 10.70
EXHIBIT A
SECURED PROMISSORY NOTE
$1,050,000 November 7, 1996
Bothell, Washington
SAIGENE CORPORATION, a Delaware corporation ("Obligor"), for value
received, hereby promises to pay to Epoch Pharmaceuticals, Inc., a Delaware
corporation ("Payee"), or order, at the address set forth below or at such other
place as Payee designates in writing, the principal sum of ONE MILLION FIFTY
THOUSAND AND NO/100THS DOLLARS ($1,050,000), together with interest from the
date hereof on unpaid principal at the rate of eight percent (8%) per annum,
computed on a basis of a 365-day year and actual days elapsed.
Principal and interest shall be payable in consecutive monthly
installments of $10,000 per month, beginning on November 15, 1996 and continuing
on the 15th day of each month thereafter through and including March 15, 1997,
with all principal outstanding and accrued and unpaid interest due and payable
on the earlier of (i) March 31, 1997 or (ii) the closing of Obligor's next round
of financing (including the private placement or public offering of Obligor's
securities). This Note may be prepaid at any time, in whole or in part, without
premium or penalty and without prior notice to, or consent of, Payee. Any
payments with respect to this Note will be credited first to the payment of
accrued but unpaid interest and then to the repayment of principal. Principal
and interest will be payable in lawful money of the United States of America.
Upon any payment in full of all principal and interest payable under this Note,
this Note will be surrendered to Obligor for cancellation.
The indebtedness evidenced by this Note is secured by, and this Note is
the "Note" referred to in, that certain Security Agreement dated as of the date
of this Note and between the Obligor and the Payee.
By acceptance of this Note, Payee represents and acknowledges to
Obligor that by reason of its business and financial experience it has the
capacity to protect its own interests in this transaction and is accepting this
Note for its own account and not with a view to distribution.
If any of the following events (hereafter called "Events of Default")
shall occur:
(a) If Obligor shall default in the payment of any principal
or interest due under this Note when the same shall become due and
payable; or
(b) If Obligor shall make a general assignment for the benefit
of creditors; or
(c) If Obligor shall file a voluntary petition in bankruptcy,
or shall be adjudicated a bankrupt or insolvent, or shall file any
petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under the present or any future Federal Bankruptcy Act or other
applicable federal, state or other statute, law or regulation, or shall
file any answer admitting the material
<PAGE> 2
allegation of a petition filed against Obligor in such proceeding, or
shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Obligor of all or any substantial
part of the properties of Obligor; or
(d) If, within sixty (60) days after a court of competent
jurisdiction shall have entered an order, judgment or decree approving
any complaint or petition against Obligor seeking reorganization,
dissolution or similar relief under the present or any future Federal
Bankruptcy Act or other applicable federal, state or other statute, law
or regulation, such order, judgment or decree shall not have been
dismissed or stayed pending appeal, or if, within sixty (60) days after
the appointment, without the consent or acquiescence of Obligor, of any
trustee, receiver or liquidator of Obligor or of all or any substantial
part of the properties of Obligor, such appointment shall not have been
vacated or stayed pending appeal, or if, within sixty (60) days after
the expiration of any such stay, shall not have been vacated;
then, and in each and every such case, Payee may by notice in writing to Obligor
declare all amounts under this Note to be forthwith due and payable and
thereupon the balance shall become so due and payable, without presentation,
protest or further demand or notice of any kind, all of which are hereby
expressly waived.
This Note may be transferred only upon surrender of the original Note
for registration of transfer, duly endorsed, or accompanied by a duly executed
written instrument of transfer in form satisfactory to Obligor and only in
compliance with applicable Federal and State securities laws. Thereupon, a new
note for like principal amount and interest will be issued to, and registered in
the name of, the transferee. Interest and principal are payable only to the
registered holder of the Note. The provisions hereof will bind and inure to the
benefit of the parties and their respective successors and permitted assigns.
Obligor waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest, and notice of dishonor. No delay on
the part of Payee in exercising any right under this Note will operate as a
waiver of such right under this Note.
If the indebtedness represented by this Note or any part thereof is
collected at law or in equity or in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after default, Obligor will pay, in addition to the principal and interest
payable on this Note, reasonable attorneys' fees and costs incurred by Payee.
Any notice or other communication (except payment) required or
permitted under this Note will be in writing and will be deemed to have been
given upon delivery if personally delivered or three days after deposit if
deposited in the United States mail for mailing by certified mail, postage
prepaid, and addressed as follows:
If to Payee: Epoch Pharmaceuticals, Inc.
c/o Chief Financial Officer
1725 220th Street, S.E., No. 104
Bothell, Washington 98021
2
<PAGE> 3
If to Obligor: Saigene Corporation
c/o Chief Financial Officer
1725 220th Street, S.E., No. 104
Bothell, Washington 98021
Any payment will be deemed made upon receipt by Payee. Payee or Obligor
may change their address for purposes of this paragraph by giving to the other
party notice in conformance with this paragraph of such new address.
This Note is being delivered in and will be construed in accordance
with the laws of the State of Washington.
IN WITNESS WHEREOF, the Obligor has caused this Promissory Note to be
duly executed and delivered on and as of the date first written above.
SAIGENE CORPORATION
By: ____________________________________
Its: _______________________________
ACKNOWLEDGED AND AGREED TO:
EPOCH PHARMACEUTICALS, INC.
By: __________________________________
Sanford S. Zweifach, President
[SIGNATURE PAGE TO SECURED PROMISSORY NOTE]
3
<PAGE> 1
EXHIBIT 10.71
SAIGENE CORPORATION
1725 220TH STREET SE
BOTHELL, WA 98021
PHONE: 206-485-5377
FAX: 206-486-8336
June 20, 1997
Mr. Sanford S. Zweifach
President/CFO
Epoch Pharmaceuticals, Inc.
1725 220th St. SE, #104
Bothell, Washington 98021
Dear Sandy:
As indicated in your June 11, 1997 letter, Saigene proposes the following terms
for retirement of the asset purchase agreement note with Epoch Pharmaceuticals.
a) A cash payment of $500,000 upon closing of a private placement
offering led by Round Hill Securities for $1.5 million or more
(see attached engagement letter).
b) The balance of the Epoch note will be repaid at the rate of
$10,000 a month up to closing of the private placement and
increase to $20,000 per month with interest continuing to accrue.
The balance of the note will be paid in full in the event of any
future financing of $1.0 million or more whichever comes first. In
either case it is agreed the balance of the note will be paid in
full within 24 months.
c) On or before Friday June 27, 1996 Saigene will bring current its
debt services obligations presently in the amount of $32,068.17.
d) Saigene will pay accrued rent in the amount of $11,280 upon
closing of the private placement.
e) In addition to recognizing Epoch's present 12% equity position,
Saigene will agree to a 2% fully diluted equity penalty per month,
if Saigene fails to meet its monthly note and rent payment on time
with no cure period.
In consideration of the following Epoch agrees to:
a) Grant Saigene a ninety (90) day standstill on the Epoch note in
order for Saigene to complete the private placement.
b) Issue a letter to Round Hill indicating this extension.
c) Agree to provide facilities and administrative support in
accordance with the current terms on a month to month basis.
Sincerely, Agreed to _______________________________
Sanford S. Zweifach
Epoch Pharmaceuticals, Inc.
Allan G. Cochrane President/CFO
President/COO
Enclosure
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,332,950
<SECURITIES> 29,979
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,415,675
<PP&E> 199,641
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,636,466
<CURRENT-LIABILITIES> 485,324
<BONDS> 0
0
0
<COMMON> 147,467
<OTHER-SE> 3,003,675
<TOTAL-LIABILITY-AND-EQUITY> 3,636,466
<SALES> 0
<TOTAL-REVENUES> 89,711
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,004,534
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,593
<INCOME-PRETAX> (1,767,443)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,837,443)
<DISCONTINUED> 70,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,767,443)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
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