SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 000-26422
DISCOVERY LABORATORIES, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 94-3171943
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
350 South Main Street, Suite 307
Doylestown, Pennsylvania 18901
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrants' telephone number, including area code: (215) 340-4699
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
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. |X| Yes |_| No
As of May 8, 2000, 20,781,499 shares of Common Stock, par value $.001 per share,
were outstanding.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format: |_| Yes |X| No
953293.1 Page 1
<PAGE>
DISCOVERY LABORATORIES, INC.
Table of Contents
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<CAPTION>
Page
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (unaudited)
CONSOLIDATED BALANCE SHEETS --
As of March 31, 2000 (unaudited) and December 31, 1999 Page 3
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) --
For the Three Months Ended March 31, 2000 and March 31, 1999
and
for the Period from May 18, 1993 (Inception) through March 31,2000 Page 4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)--
For the Three Months Ended March 31, 2000 Page 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)--
For the Three Months Ended March 31, 2000 and March 31, 1999
and
for the Period from May 18, 1993 (Inception) through March 31, 2000 Page 6
Notes to Financial Statements Page 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations Page 7
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings. Page 10
Item 2. Change in Securities. Page 10
Item 3. Defaults Upon Senior Securities. Page 10
Item 4. Submission of Matters to a Vote of Security Holders. Page 10
Item 5. Other Information. Page 10
Item 6. Exhibits and Reports on Form 8-K. Page 10
Signatures Page 11
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953293.1 Page 2
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(a development stage company)
Consolidated Balance Sheets
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<CAPTION>
March 31, December 31,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 23,591,000 $ 3,547,000
Inventory 575,000 575,000
Prepaid expenses and other current assets 122,000 66,000
----------------- ----------------
Total current assets 24,288,000 4,188,000
Property and equipment, net of deprecation 447,000 426,000
Security deposits 18,000 18,000
----------------- ----------------
$ 24,753,000 $ 4,632,000
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 694,000 $ 425,000
Deferred revenue 1,036,000 1,036,000
Capitalized lease - current 15,000 15,000
----------------- ----------------
Total current liabilities 1,745,000 1,476,000
----------------- ----------------
Capitalized lease - noncurrent 44,000 48,000
----------------- ----------------
Commitments
Stockholders' Equity:
Preferred stock, $.001 par value; 5,000,000 shares authorized:
Series B convertible; None and 1,530,756 shares issued and outstanding at 2,000
March 31, 2000 and December 31, 1999, respectively
Series C redeemable convertible; None and 2,039 shares issued and outstanding 2,481,000
at March 31, 2000 and December 31, 1999, respectively.
Common stock, $.001 par value; 35,000,000 authorized; 20,721,135 and 9,689,240 21,000 10,000
shares issued and outstanding at March 31, 2000 and December 31, 1999
respectively
Treasury stock (at cost; 33,743 and 2,000 shares of common stock at March 31, (250,000) (5,000)
2000 and December 31, 1999, respectively)
Additional paid-in capital 57,828,000 33,749,000
Unearned portion of compensatory stock options (37,000) (37,000)
Deficit accumulated during the development stage (34,598,000) (33,092,000)
Total stockholders' equity 22,964,000 3,108,000
----------------- ----------------
$ 24,753,000 $ 4,632,000
================= ================
</TABLE>
See notes to financial statements Page 3
953293.1
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DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(a development stage company)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
May 18, 1993
Three Months Ended (Inception)
March 31, Through
--------------------------------- March 31,
2000 1999 2000
-------------- --------------- --------------
<S> <C> <C> <C>
Interest $ 22,000 $ 37,000 $ 1,490,000
License Fees 68,000
Research Grants 19,000 156,000
-------------- --------------- ---------------
41,000 37,000 1,714,000
-------------- --------------- ---------------
Expenses:
Write-off of acquired in-process
research and development and
supplies 13,508,000
Research and development 774,000 1,419,000 13,643,000
General and administrative 735,000 636,000 8,490,000
Interest 2,000 15,000
-------------- --------------- ---------------
Total expenses 1,511,000 2,055,000 35,656,000
-------------- --------------- ---------------
(1,470,000) (2,018,000) (33,942,000)
Minority interest in net loss of 26,000
subsidiary -------------- --------------- ---------------
Net loss (1,470,000) (2,018,000) (33,916,000)
Other comprehensive income:
Unrealized gain on marketable
securities available for sale (3,000)
-------------- ---------------- ----------------
Total comprehensive loss $ (1,470,000) $ (2,021,000) $ (33,916,000)
=============== ================ ================
Net loss per share - basic and diluted $(0.12) $(0.36)
====== ======
Weighted average number of common
shares outstanding 12,668,000 5,613,000
========== =========
</TABLE>
See notes to financial statements Page 4
953293.1
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(a development stage company)
Consolidated Statements of Changes in Stockholders' Equity
December 31, 1999 through March 31, 2000
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<CAPTION>
Preferred Stock
Common Stock Treasury Stock Series B Series C
-------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - 12/31/99 9,689,240 $ 10,000 (2,000) $ (5,000) 1,530,756 $ 2,000 2,039 $ 2,481,000
Exercise of Stock Options 445,259 - (31,743) (245,300)
Common placement
warrant conversions 14,130 -
Preferred placement
warrant conversions 8,511 -
Exercise of Class C & D
Warrants 2,480,009 3,000
Series B preferred stock
conversions 4,765,631 5,000 (1,530,756) (2,000)
Dividend Payable on Series
C preferred stock 36,000
Series C prefered stock
conversions 398,186 (2,039) (2,517,000)
Common stock issued in
payment for services 7,323 -
Issuance of private
placement units 2,902,846 3,000
Net Loss
- ------------------------------------------------------------------------------------------------------------------------
Balance - 03/31/00 20,721,135 $ 21,000 (33,743) $(250,300) - - - -
========================================================================================================================
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<CAPTION>
Deficit
Accumulated
Additional Unearned Portion of during
Paid-In Compensatory Stock Development
Capital Options Stage Total
<S> <C> <C> <C> <C>
Balance - 12/31/99 $ 33,749,000 $ (37,000) $ (33,092,000) $ 3,108,000
Exercise of Stock Options 440,000 $ 195,000
Common placement
warrant conversions - $ -
Preferred placement
warrant conversions - $ -
Exercise of Class C & D
Warrants 3,668,000 $ 3,671,000
Series B preferred stock
conversions (3,000) $ -
Dividend Payable on Series
C preferred stock (36,000) $ -
Series C prefered stock
conversions 2,517,000 $ -
Common stock issued in
payment for services 36,000 $ 36,000
Issuance of private
placement units 17,421,000 $ 17,424,000
Net Loss (1,470,000) $ (1,470,000)
- ----------------------------------------------------------------------------------------------------
Balance - 03/31/00 $ 57,828,000 $ (37,000) $ (34,598,000) $ 22,964,000
====================================================================================================
</TABLE>
See notes to financial statements Page 5
953293.1
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DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(a development stage company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended May 18, 1993
March 31, (Inception)
Through
March 31,
2000 999 2000
------------- --------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,470,000) $ (2,018,000) $ (33,916,000)
Adjustments to reconcile net loss to net cash used in operating
activities
Write-off of acquired in-process research and development and
supplies 13,508,000
Write-off of licenses 683,000
Depreciation and amortization 24,000 19,000 240,000
Compensatory stock options 8,000 142,000
Expenses paid using treasury stock and common stock 36,000 114,000
Changes in:
Prepaid expenses and other current assets (56,000) 126,000 (91,000)
Accounts payable and accrued expenses 269,000 279,000 561,000
Deferred revenue 1,036,000
Other assets (18,000)
Expenses paid on behalf of company 18,000
Employee stock compensation 42,000
Reduction of research and development supplies (161,000)
-------------- -------------- ----------------
Net cash used in operating activities (1,197,000) (1,586,000) (17,842,000)
-------------- -------------- ----------------
Cash flows from investing activities:
Purchase of furniture and equipment (45,000) (14,000) (591,000)
Proceeds from disposal of furniture and equipment 25,000
Acquisition of licenses (711,000)
Purchase of marketable securities (21,745,000)
Proceeds from sale or maturity of investments 1,078,000 22,150,000
Net cash payments on merger (1,670,000)
-------------- -------------- -----------------
Net cash provided by (used in) investing activities (45,000) 1,064,000 (2,542,000)
--------------- -------------- ----------------
Cash flows from financing activities:
Proceeds on private placements of units, net of expenses 17,424,000 40,146,000
Purchase of treasury stock (5,000) (95,000)
Principal payments under capital lease obligation (4,000) (14,000)
Collections on stock subscriptions and proceeds on conversion of
stock options and warrants 3,866,000 4,000 3,938,000
-------------- -------------- ----------------
Net cash (used in) provided by financing activities 21,286,000 (1,000) 43,975,000
-------------- --------------- ----------------
Net (decrease) increase in cash and cash equivalents 20,044,000 (523,000) 23,591,000
Cash and cash equivalents - beginning of period 3,547,000 1,474,000
-------------- -------------- ----------------
Cash and cash equivalents - end of period $ 23,591,000 $ 951,000 $ 23,591,000
============== ============== ================
Supplementary disclosure of cash flows information:
Interest Paid: $ 2,000 $ 15,000
Noncash transactions:
Accrued dividends on preferred stock $ 36,000 $ 51,000 $ 682,000
Common stock and treasury stock issued in payment of services 36,000 69,000 109,000
Preferred Stock issued for inventory 575,000
Treasury stock received on exercise of options 245,000 245,000
Equipment acquired through capitalized lease 73,000
Series C preferred stock dividends paid using common stock 204,000
</TABLE>
See notes to finanical statements Page 6
593293.1
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NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION
The Company
Discovery Laboratories, Inc. (the "Company") was formed to license and develop
pharmaceutical products to treat a variety of human diseases. The accompanying
financial statements include the accounts of the Company and its wholly owned
subsidiary, Acute Therapeutics, Inc. All intercompany balances and transactions
have been eliminated.
The accompanying unaudited, consolidated, condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information in accordance with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normally recurring accruals) considered for fair presentation have been
included. Operating results for the three-month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's 1999 Annual
Report on form 10-KSB.
The Company's activities since incorporation have primarily consisted of
conducting research and development, performing business and financial planning
and raising capital. Accordingly, the Company is considered to be in the
development stage, and expects to incur increasing losses and require additional
financial resources to achieve commercialization of its products.
The Company also depends on third parties to conduct research on the Company's
behalf through various research agreements. All of the Company's current
products under development are subject to license agreements that will require
the payment of future royalties.
Net Loss Per Share
Net loss per share is computed based on the weighted average number of common
shares outstanding for the periods and common shares issuable for little or no
cash consideration. Common shares issuable upon the exercise of options and
warrants and the conversion of convertible securities are not included in the
calculation of the net loss per share as their effect would be antidilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Plan of Operations
Since its inception, the Company has concentrated its efforts and resources on
the development and commercialization of pharmaceutical products and
technologies. The Company has been unprofitable since its inception and has
incurred a cumulative net loss of approximately $33.9 million as of March 31,
2000. The Company expects to incur significantly increasing operating losses
over the next several years, primarily due to the expansion of its research and
development programs, including clinical trials for some or all of its existing
products and technologies and other products and technologies that it may
acquire or develop. The Company's ability to achieve profitability depends upon,
among other things, its ability to discover and develop products, obtain
regulatory approval for its proposed products, and enter into agreements for
product development, manufacturing and commercialization. None of the Company's
products currently generates revenues and the Company does not expect to achieve
product revenues for the foreseeable future. Moreover, there can be no assurance
that the Company will ever achieve significant revenues or profitable operations
from the sale of any of its products or technologies.
The Company is a development stage pharmaceutical company that is focused on
developing compounds intended for neonatal use in critical care hospital
settings. The Company is also developing its lead product candidate,
Surfaxin(R), for the treatment of various critical care respiratory conditions.
The Company anticipates that during the next 12 months it will conduct
substantial research and development of its compounds.
The Company is currently engaged in the development and commercialization of
drugs for critical care that are intended to be used in a hospital setting. The
Company anticipates that during the next 12 months it will conduct substantial
research and development of its products under development and that it will
focus primarily on the conduct of clinical trials for Surfaxin(R) indications.
The Company expects to expand its research and development activities as a
result of its receipt of approximately $17.4 million of net proceeds from its
offering completed in
953293.1 Page 7
<PAGE>
March 2000. The Company anticipates the near term acquisition of equipment
necessary to manufacture Surfaxin(R). The Company also anticipates the hiring of
further personnel to augment the clinical development of Surfaxin(R).
SURFAXIN(R) (lucinactant)
Meconium Aspiration Syndrome (MAS)
The Company recently initiated a pivotal Phase 3 trial in MAS. The trial intends
to enroll 200 MAS patients. The Company announced results of a Phase 2 clinical
trial in MAS in full-term newborns in February 1999. The 22-patient Phase 2
trial showed an improvement in oxygenation parameters and a three-day savings on
mechanical ventilation. An Orphan Products Development Grant awarded to the
Company by the FDA Office of Orphan Products Development is expected to
contribute significantly towards reducing the costs of this Phase 3 trial. The
Company has received Fast Track designation for Surfaxin(R) from the FDA for
MAS.
Respiratory Distress Syndrome (RDS) in premature infants
The Company is currently planning to commence a Phase 3 clinical trial of
Surfaxin(R) for the treatment of RDS in premature infants during 2000. Such
trial, and any other clinical trials of the Company's products in development
that have not yet commenced, will require the approvals by the United States
Food and Drug Administration (the "FDA") and/or world health authorities. There
can be no assurance as to the receipt or the timing of such approvals.
Acute Lung Injury/Acute Respiratory Distress Syndrome (ALI/ARDS)
A pivotal Phase 2/3 clinical trial of Surfaxin for the treatment of ALI/ARDS
was commenced in July 1998. This trial was stopped on January 27, 2000 due to
the Company's cash position and so that a new Phase 2 ARDS/ALI trial could be
commenced using a new, less viscous formulation of Surfaxin(R). A new Phase 2
trial is currently being planned, which the Company expects to commence
following submission of a protocol and subsequent agreement by the FDA. The
Company has received Fast Track designation for Surfaxin(R) from the FDA for
ARDS.
SUPERVENT(TM) (tyloxapol)
Cystic Fibrosis (CF)
The Company began a Phase 2A clinical trial of SuperVent(TM) for the treatment
of CF on August 4, 1999. Preliminary analysis of the data show that
SuperVent(TM) decreased the amount of Interleukin 8 (IL-8) in the sputum of
treated patients compared to controls. IL-8 is an important body chemical that
causes the migration of inflammatory cells to the site of release. The Phase 2A
clinical trial involved 8 patients. An additional Phase 2 trial will likely be
required prior to commencement of a Phase 3 trial. Previously, the Company
completed a Phase 1 trial in 20 normal healthy volunteers and determined a dose
(1.25% tyloxapol concentration) that did not produce significant adverse
effects.
Chronic Bronchitis (CB)
The Company plans to investigate the potential clinical application of
SuperVent(TM) in CB following its successful Phase 2A trial in CF. A pilot study
will be reviewed during 2000.
DSC-103 (Vitamin D analog)
Postmenopausal Osteoporosis
On December 5, 1997 a Phase 1 clinical study of DSC-103 as a once-daily, orally
administered drug for the treatment of postmenopausal osteoporosis in the United
States was initiated. Part B of such trial was commenced on April 2, 1998 and
was successfully completed on June 29, 1998. The Company has had discussions
with the licensor of D5C-103 regarding the possibility of terminating its
license.
Results of Operations
The Company's expenses decreased from $2,055,000 in the first quarter of 1999 to
$1,511,000 in the first quarter of 2000. The decrease was primarily a slow-down
in research and development due to the Company's cash position. As a result of
the receipt of proceeds from the private placement completed in March, 2000, the
Company expects to significantly increase its research and development and
clinical trial efforts. As a result of the decreases in expenses, the Company's
total comprehensive net loss decreased from $2,021,000 in the first quarter of
1999 to $1,470,000 in the first quarter of 2000. In addition, due to the
reduction in the total
593293.1 Page 8
<PAGE>
comprehensive net loss and the increase in the weighted average common shares
outstanding during the first quarter of 2000, the Company's net loss per share
decreased from $0.36 in 1999 to $0.12 in 2000.
Liquidity
At March 31, 2000, the Company had working capital of $22.5 million. In March
2000, the Company completed a private placement pursuant to which it received
net proceeds of approximately $17.4 million. The Company believes it has
sufficient resources to meet its planned research and development activities
through the fourth quarter 2001.
The Company will be required to raise additional capital in order to meet its
business objectives, and there can be no assurance that it will be successful in
doing so or, in general, that the Company will be able to achieve its business
objectives.
The Company's working capital requirements will depend upon numerous factors,
including, without limitation, progress of the Company's research and
development programs, preclinical and clinical testing, timing and cost of
obtaining regulatory approvals, levels of resources that the Company devotes to
the development of manufacturing and marketing capabilities, technological
advances, status of competitors and the ability of the Company to establish
collaborative arrangements with other organizations.
Safe Harbor Statement Under the Private Securities Litigation Act of 1996
Certain statements set forth in this report, including, without limitation,
statements concerning the Company's research and development programs, the
possibility of submitting regulatory filings for the Company's products under
development, the seeking of collaboration arrangements with pharmaceutical
companies or others to develop, manufacture and market products, the research
and development of particular compounds and technologies and the period of time
for which the Company's existing resources will enable the Company to fund its
operations, are forward-looking statements. All such statements involve
significant risks and uncertainties. Actual results may differ materially from
those contemplated in the forward looking statements as a result of risks and
uncertainties, including but not limited to the following: the Company's ability
to obtain substantial additional funds; the uncertainties inherent in the
process of developing products of the kind being developed by the Company; the
Company's ability to establish additional collaborative and licensing
arrangements and the degree of success of the Company's collaboration partners;
the Company's ability to obtain and maintain all necessary patents or licenses;
the Company's ability to demonstrate the safety and efficacy of product
candidates and to receive required regulatory approvals; the Company's ability
to meet obligations and required milestones under its license agreement; the
Company's ability to compete successfully against other products and to market
products in a profitable manner; and other risks and uncertainties set forth in
the Company's filings with the Securities and Exchange Commission.
593293.1 Page 9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGE IN SECURITIES.
On March 23, 2000, the Company received approximately $17,400,000 in net
proceeds from the sale of 37.74 units in a private placement. Each unit consists
of 76,923 shares of common stock and Class E warrants to purchase an additional
15,385 shares of common stock at $7.38 per share. In connection with this
private placement, the placement agent, Paramount Capital, Inc. ("Paramount")
received fees of $1,321,000 and the Company agreed to issue to Paramount
warrants to purchase 348,341 shares of common stock at $8.11 per share.
During the Quarter ended March 31, 2000, the company received $3,671,689 in
proceeds from the exercise of 2,024,792 Class D warrants and 455,217 Class C
warrants.
For each of the issuances described above, the securities received by investors
were deemed to be exempt from registration under the Act in reliance on Section
4(2) thereof because such issuance did not involve a public offering. Investors
in each financing represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the securities
certificates issued in such transactions. The investors in each financing had
adequate access to information about the Company. Moreover, such investors
represented to the Company, and the Company believed, that they were experienced
in financial matters.
On March 3, 2000, Johnson & Johnson, Inc. elected to convert their shares of
Series C Preferred stock into 398,186 shares of common stock. Subsequent to this
conversion, the Company no longer has any shares of Series C Preferred stock
outstanding.
On March 14, 2000, the Company forced the conversion of all its outstanding
Series B Preferred Stock (827,750) into common. Pursuant to Section Fourth (B)
(5) of the Restated Certificate of Incorporation of the Company, the Company
exercised its right to cause the conversion. Subsequent to this conversion, the
Company no longer has any classes of Preferred stock outstanding nor any long
term debt.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
The Company has entered into an agreement to purchase an approximately 4,000
square foot building adjacent to its current headquarters in Doylestown
Pennsylvania for $515,000. The Company intendS to close on this purchase on June
30, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
1. Form of Class E Warrant
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
1. Form 8-K filed with the Commission on February 8, 2000.
2. Form 8-K filed with the Commission on March 7, 2000.
3. Form 8-K filed with the Commission on March 20, 2000.
4. Form 8-K filed with the Commission on March 29, 2000.
593293.1 Page 10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Discovery Laboratories, Inc.
(Registrant)
Date: May 15, 2000 /s/ Robert J. Capetola
---------------------------------
Robert J. Capetola, Ph.D.
President/Chief Executive Officer
Date: May 15, 2000 /s/ Evan Myrianthopoulos
---------------------------------
Evan Myrianthopoulos
Vice President, Finance
(Principal Financial Officer)
Date: May 15, 2000 /s/ Cynthia Davis
---------------------------------
Cynthia Davis
Controller
(Principal Accounting Officer)
953293.1 Page 11
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE. NEITHER SUCH WARRANTS NOR SUCH SECURITIES
MAY BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT SUCH
REGISTRATION, EXCEPT UPON DELIVERY TO THE COMPANY OF SUCH EVIDENCE AS MAY BE
SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
DISCOVERY LABORATORIES, INC.
----------------------------
Class E Warrant for the Purchase
of Shares of Common Stock
FOR VALUE RECEIVED, DISCOVERY LABORATORIES, INC., a Delaware
corporation (the "Company"), hereby certifies that ____________ (the "Holder"),
its designee or its permitted assigns is entitled to purchase from the Company,
at any time or from time to time commencing on March 21, 2000 and prior to 5:00
P.M., New York City time, on March 21, 2005 up to ________ fully paid and
non-assessable shares of common stock (subject to adjustment), $.001 par value
per share, of the Company for $7.375 per share (the "Purchase Agreement")
(subject to adjustment as provided herein) an aggregate purchase price of
$__________. (Hereinafter, (i) said common stock, $.001 par value per share, of
the Company, is referred to as the "Common Stock," (ii) the shares of the Common
Stock purchasable hereunder or under any other Warrant (as hereinafter defined)
are referred to as the "Warrant Shares," (iii) the aggregate purchase price
payable for the Warrant Shares purchasable hereunder is referred to as the
"Aggregate Warrant Price," (iv) the price payable for each of the Warrant Shares
is referred to as the "Per Share Warrant Price," (v) this Warrant, all similar
Warrants issued on the date hereof and all warrants hereafter issued in exchange
or substitution for this Warrant or such similar Warrants are referred to as the
"Warrants," and (vi) the holder of this Warrant is referred to as the "Holder"
and the holder of this Warrant and all other Warrants and Warrant Shares are
referred to as the "Holders" and Holders of more than 50% of the outstanding
Warrants and Warrant Shares are referred to as the "Majority of the Holders").
The Aggregate Warrant Price is not subject to adjustment.
By acceptance of this Warrant, the Holder agrees to comply
with all applicable provisions of the Purchase Agreement to the same extent as
if it were a party thereto.
1. Exercise of Warrant. a. This Warrant may be exercised in
whole at any time, or in part from time to time, commencing on March 21, 2000
and prior to 5:00 P.M., Eastern Standard Time, on March 21, 2005 by the Holder
by the surrender of this Warrant (with the
953108.1 5/12/2000 10:52a
<PAGE>
subscription form at the end hereof duly executed) at the address set forth in
Section 9(a) hereof, together with proper payment of the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in part,
with payment for the Warrant Shares made by certified or official bank check
payable to the order of the Company; or
b. If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder is
entitled to receive a new Warrant covering the Warrant Shares that have not been
exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares.
c. Upon surrender of this Warrant, the Company will (i) issue
a certificate or certificates in the name of the Holder for the largest number
of whole shares of the Common Stock to which the Holder shall be entitled and,
if this Warrant is exercised in whole, in lieu of any fractional share of the
Common Stock to which the Holder shall be entitled, pay to the Holder cash in an
amount equal to the fair value of such fractional share (determined in such
reasonable manner as the Board of Directors of the Company shall determine), and
(ii) deliver the other securities and properties receivable upon the exercise of
this Warrant, or the proportionate part thereof if this Warrant is exercised in
part, pursuant to the provisions of this Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees
that, prior to the expiration of this Warrant, the Company shall at all times
(i) have authorized and in reserve, and shall keep available, solely for
issuance and delivery upon the exercise of this Warrant, the shares of the
Common Stock and other securities and properties as from time to time shall be
receivable upon the exercise of this Warrant, free and clear of all restrictions
on sale or transfer, other than under Federal or state securities laws, and free
and clear of all preemptive rights and rights of first refusal and (ii) use its
best efforts to keep the Warrant Shares authorized for listing on the Nasdaq
National Market, the Nasdaq SmallCap Market or any national securities exchange
on which the Company's Common Stock is traded.
3. Protection Against Dilution. a. If, at any time or from
time to time after the date of this Warrant, the Company shall issue or
distribute to any holder of shares of Common Stock evidence of its indebtedness,
any other securities of the Company or any cash, property or other assets
(excluding a subdivision, combination or reclassification, or dividend or
distribution payable in shares of Common Stock, referred to in Section 3(b), and
also excluding cash dividends or cash distributions paid out of net profits
legally available therefor in the full amount thereof (any such non-excluded
event being herein called a "Special Dividend")), the Per Share Warrant Price
shall be adjusted by multiplying the Per Share Warrant Price then in effect by a
fraction, the numerator of which shall be the then Current Market Price in
effect on the record date of such issuance or distribution less the fair market
value (as determined in good faith by the Company's Board of Directors) of the
evidence of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then Current Market Price in effect on
the record date of such
953108.1 5/12/2000 10:52a -2-
<PAGE>
issuance or distribution. An adjustment made pursuant to this Subsection 3(a)
shall become effective immediately after the record date of any such Special
Dividend.
b. In case the Company shall hereafter (i) pay a dividend or
make a distribution to any holder of its capital stock in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its Common Stock
any shares of capital stock of the Company, the Per Share Warrant Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company that the Holder
would have owned immediately following such action had such Warrant been
exercised immediately prior thereto. An adjustment made pursuant to this
Subsection 3(b) shall become effective immediately after the record date in the
case of a dividend or distribution, and shall become effective immediately after
the effective date in the case of a subdivision, combination or
reclassification.
c. Except as provided in Subsections 3(a) and 3(b), in case
the Company shall hereafter issue or sell any Common Stock, any securities
convertible into Common Stock, any rights, options or warrants to purchase or
otherwise receive an issuance of Common Stock or any securities convertible
into, or exercisable or exchangeable for, Common Stock, in each case for a price
per share or entitling the holders thereof to purchase Common Stock at a price
per share (determined by dividing (i) the total amount, if any, received or
receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company upon
exercise thereof (the "Total Consideration") by (ii) the number of additional
shares of Common Stock issued, sold or issuable upon exercise of such
securities) that is less than the then (1) Current Market Price in effect on the
date of such issuance or sale and (2) the Redemption Price (as defined in
Section 7 below), then the Per Share Warrant Price shall be adjusted as of the
date of such issuance or sale by multiplying the Per Share Warrant Price then in
effect by a fraction, the numerator of which shall be (x) the sum of (A) the
number of shares of Common Stock outstanding on the record date of such issuance
or sale plus (B) the Total Consideration divided by the Current Market Price and
the denominator of which shall be (y) the number of shares of Common Stock
outstanding on the record date of such issuance or sale plus the maximum number
of additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities.
d. No adjustment in the Per Share Warrant Price shall be
required in the case of the issuance by the Company of Common Stock (i) pursuant
to the exercise of any warrant; (ii) pursuant to the exercise of any stock
options or warrants currently outstanding or securities issued after the date
hereof, which may be approved by the Company's Board of Directors pursuant to
any Company benefit plan or exercised, under any employee benefit plan of the
Company to officers, directors, consultants or employees, but only with respect
to such warrants or stock options as are exercisable at prices no lower than the
closing bid price of the Common Stock as of the date of grant thereof.
953108.1 5/12/2000 10:52a -3-
<PAGE>
e. In case of any capital reorganization or reclassification,
or any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation, or
in case of any sale or conveyance to another entity of the property of the
Company as an entirety or substantially as a entirety, or in the case of any
statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Company), the Holder of this Warrant shall have the right thereafter to receive
on the exercise of this Warrant the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this Section 3(e) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The Company shall require the issuer
of any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant to be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Warrants not less than thirty (30) days prior to such event. A sale of all
or substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
f. No adjustment in the Per Share Warrant Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.05 per share of Common Stock; provided, however, that any adjustments
which by reason of this Subsection 3(g) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment; provided,
further, however, that adjustments shall be required and made in accordance with
the provisions of this Section 3 (other than this Subsection 3(g)) not later
than such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
g. Whenever the Per Share Warrant Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3,
953108.1 5/12/2000 10:52a -4-
<PAGE>
the Company shall promptly prepare a brief statement of the facts requiring
such adjustment or modification and the manner of computing the same and cause
copies of such certificate to be mailed to the Holders of the Warrants. The
Company may, but shall not be obligated to unless requested by a Majority of the
Holders, obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Warrant
Price and the number of Warrant Shares in effect after such adjustment or the
effect of such modification, a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and cause copies
of such certificate to be mailed to the Holders of the Warrants.
h. If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock other than a
cash distribution out of earned surplus, the Company shall mail notice thereof
to the Holders of the Warrants not less than ten (10) days prior to the record
date fixed for determining stockholders entitled to participate in such dividend
or other distribution.
i. If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
j. Upon the expiration of any rights, options, warrants or
conversion privileges with respect to the issuance of which an adjustment to the
Per Share Warrant Price had been made, if such shall not have been exercised,
the number of Warrant Shares purchasable upon exercise of this Warrant, to the
extent this Warrant has not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (A) the fact that Common Stock, if any, actually
issued or sold upon the exercise of such rights, options, warrants or conversion
privileges, and (B) the fact that such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options, warrants or conversion
privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of decreasing the number of Warrant Shares
purchasable upon exercise of this Warrant by an amount in excess of the amount
of the adjustment initially made in respect of the issuance, sale or grant of
such rights, options, warrants or conversion privileges.
k. In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Board of Directors of the Company
shall in good faith determine
953108.1 5/12/2000 10:52a -5-
<PAGE>
the adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon such determination, the Company will promptly
mail a copy thereof to the Holder of this Warrant and shall make the adjustments
described therein.
4. Fully Paid Stock; Taxes. The shares of the Common Stock
represented by each and every certificate for Warrant Shares delivered upon the
exercise of this Warrant shall at the time of such delivery, be duly authorized,
validly issued and outstanding, fully paid and nonassessable, and not subject to
preemptive rights or rights of first refusal, and the Company will take all such
actions as may be necessary to assure that the par value, if any, per share of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company shall pay all documentary, stamp or similar taxes and
other similar governmental charges that may be imposed with respect to the
issuance or delivery of any Common Shares upon exercise of the Warrants (other
than income taxes); provided, however, that if the Common Shares are to be
delivered in a name other than the name of the Holder, no such delivery shall be
made unless the person requesting the same has paid to the Company the amount of
transfer taxes or charges incident thereto, if any.
5. Registration Under Securities Act of 1933. a. The Holder
shall have the right to participate in the registration rights granted to
Holders of Registrable Securities (as defined in the Subscription Agreement)
with respect to the Warrant Shares.
b. Until all of the Warrant Shares have been sold under a
registration statement declared effective by the Securities and Exchange
Commission or pursuant to Rule 144, the Company shall use its reasonable best
efforts to file with the Securities and Exchange Commission all current reports
and the information as may be necessary to enable the Holder to effect sales of
its shares in reliance upon Rule 144 promulgated under the Securities Act of
1933, as amended (the "Act").
6. Investment Intent; Limited Transferability. a. The Holder
represents, by accepting this Warrant, that it understands that this Warrant and
any securities obtainable upon exercise of this Warrant have not been registered
for sale under Federal or state securities laws and are being offered and sold
to the Holder pursuant to one or more exemptions from the registration
requirements of such securities laws. In the absence of an effective
registration of such securities or an exemption therefrom, any certificates for
such securities shall bear the legend set forth on the first page hereof. The
Holder understands that it must bear the economic risk of its investment in this
Warrant and any securities obtainable upon exercise of this Warrant for an
indefinite period of time, as this Warrant and such securities have not been
registered under Federal or state securities laws and therefore cannot be sold
unless subsequently registered under such laws, unless an exemption from such
registration is available.
b. The Holder, by its acceptance of this Warrant, represents
to the Company that it is acquiring this Warrant and will acquire any securities
obtainable upon exercise of this Warrant
953108.1 5/12/2000 10:52a -6-
<PAGE>
for its own account for investment and not with a view to, or for sale in
connection with, any distribution thereof in violation of the Act. The Holder
agrees that this Warrant and any such securities will not be sold or otherwise
transferred unless (i) a registration statement with respect to such transfer is
effective under the Act and any applicable state securities laws or (ii) such
sale or transfer is made pursuant to one or more exemptions from the Act.
c. In addition to the limitations set forth in Section 1, this
Warrant may not be sold, transferred, assigned or hypothecated by the Holder
except in compliance with the provisions of the Act and the applicable state
securities "blue sky" laws, and is so transferable only upon the books of the
Company which it shall cause to be maintained for such purpose. The Company may
treat the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants. All Warrants issued upon the
transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of the
Holder.
d. The Holder has been afforded (i) the opportunity to ask
such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
Warrants or the exercise of the Warrants; and (ii) the opportunity to request
such additional information which the Company possesses or can acquire without
unreasonable effort or expense.
e. The Holder did not (i) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio, whether closed circuit, or
generally available; or (ii) attend any seminar, meeting or investor or other
conference whose attendees were, to such Holder's knowledge, invited by any
general solicitation or general advertising.
f. The Holder is an "accredited investor" within the meaning
of Regulation D under the Act. Such Holder is acquiring the Warrants for its own
account and not with a present view to, or for sale in connection with, any
distribution thereof in violation of the registration requirements of the
Securities Exchange Act of 1934, without prejudice, however, to such Holder's
right, subject to the provisions of the Subscription Agreement and this Warrant,
at all times to sell or otherwise dispose of all or any part of such Warrants
and Warrant Shares.
g. Either by reason of such Holder's business or financial
experience or the business or financial experience of its professional advisors
(who are unaffiliated with and who are not compensated by the Company or any
affiliate, finder or selling agent of the Company, directly or indirectly), such
Holder has the capacity to protect such Holder's interests in connection with
the transactions contemplated by this Warrant and the Purchase Agreement.
953108.1 5/12/2000 10:52a -7-
<PAGE>
7. Optional Redemption. In the event that the closing bid
price for the Common Stock for any 20 Trading Days in any 30 consecutive Trading
Day period is at least 200% of the Per Share Warrant Price (the "Redemption
Price"), the Company shall be entitled to redeem the Warrants, or any of them,
at a per Warrant redemption price of $0.01, by 30 business days' written notice
to the Holder. Upon the expiration of such 30 business day period, all Warrants
noticed for redemption that have not theretofore been exercised by the Holder
shall, upon payment of the aggregate redemption price therefor, cease to
represent the right to purchase any shares of Common Stock and shall be deemed
cancelled without any further act or deed on the part of the Company. The Holder
undertakes to return the certificate representing any redeemed Warrants to the
Company upon their redemption and to indemnify the Company with respect to any
losses, claims, damages or liabilities arising from the Holder's failure to
return such certificate. In the event the certificate so returned represents a
number of Warrants in excess of the number being redeemed, the Company shall as
promptly as practicable issue to the Holder a new certificate for the number of
unredeemed Warrants.
8. Loss, etc., of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
9. Warrant Holder Not Stockholder. This Warrant does not
confer upon the Holder any right to vote on or consent to or receive notice as a
stockholder of the Company, as such, in respect of any matters whatsoever, nor
any other rights or liabilities as a stockholder, prior to the exercise hereof;
this Warrant does, however, require certain notices to Holders as set forth
herein.
10. Communication. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
a. the Company at Discovery Laboratories, Inc., 350 South Main
Street, Suite 307, Doylestown, Pennsylvania 18901, Attn: Evan Myrianthopoulos,
Vice President of Finance or such other address as the Company has designated in
writing to the Holder, or
b. the Holder at its address on the books of the Company, or
other such address as the Holder has designated in writing to the Company.
11. Headings. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction hereof.
953108.1 5/12/2000 10:52a -8-
<PAGE>
12. Applicable Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
13. Amendment, Waiver, etc. Except as expressly provided
herein, neither this Warrant nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought; provided, however, that any provisions hereof may be amended, waived,
discharged or terminated upon the written consent of the Company and the
Majority of the Holders.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed this 21st day of March, 2000.
DISCOVERY LABORATORIES, INC.
By:
Name: Robert J. Capetola, Ph.D.
Title: President and Chief Executive Officer
953108.1 5/12/2000 10:52a -9-
<PAGE>
SUBSCRIPTION
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Common Stock, par value $.001 per share, of
Discovery Laboratories, Inc. covered by said Warrant, and makes payment therefor
in full at the price per share provided by said Warrant.
Dated: ______________________ Signature:
Address:
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
Discovery Laboratories, Inc.
Dated: ______________________ Signature:
Address:
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of
Common Stock, par value $.001 per share, of Discovery Laboratories, Inc. covered
by the foregoing Warrant, and a proportionate part of said Warrant and the
rights evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer such part of said Warrant on the
books of the Company.
Dated: ______________________ Signature:
Address:
953108.1 5/12/2000 10:52a -10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM DISCOVERY
LABORATORIES, INC. FORM 10-QSB FOR THE PERIOD ENDED MARCH 31, 2000 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 23,591,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 575,000
<CURRENT-ASSETS> 24,288,000
<PP&E> 664,000
<DEPRECIATION> 217,000
<TOTAL-ASSETS> 24,753,000
<CURRENT-LIABILITIES> 1,745,000
<BONDS> 0
0
0
<COMMON> 21,000
<OTHER-SE> 22,943,000
<TOTAL-LIABILITY-AND-EQUITY> 24,753,000
<SALES> 19,000
<TOTAL-REVENUES> 41,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,509,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,000
<INCOME-PRETAX> (1,470,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,470,000)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
