UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2004 |
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-OR- |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
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Commission File No. 0-26988 |
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ERGO SCIENCE CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware |
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04-3565746 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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790 Turnpike Street |
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01845 |
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(Address of principal executive offices) |
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(Zip Code) |
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Registrant’s telephone number, including area code: (978) 688-8833 |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.)
Yes o No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
At April 30, 2004 there were 5,813,856 shares of common stock (net of 1,335,722 shares of treasury stock), par value $.01 per share, of the registrant outstanding.
ERGO SCIENCE CORPORATION
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ERGO SCIENCE CORPORATION
(Unaudited)
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March 31, |
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December 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
26,652,509 |
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$ |
27,102,617 |
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Prepaid and other current assets |
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76,246 |
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14,169 |
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Total current assets |
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26,728,755 |
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27,116,786 |
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Equipment and leasehold improvements, net |
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184 |
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472 |
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Total assets |
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$ |
26,728,939 |
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$ |
27,117,258 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
272,070 |
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$ |
274,358 |
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Income taxes payable |
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— |
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94,000 |
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Total current liabilities |
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272,070 |
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368,358 |
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Stockholders’ equity: |
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Preferred stock, $.01 par value, 10,000,000 shares authorized; 6,903 shares of Series D preferred stock issued and outstanding at March 31, 2004 and December 31, 2003 (liquidation preference of $11,694,840 at March 31, 2004) |
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4,306,520 |
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4,306,520 |
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Common stock, $.01 par value, 50,000,000 shares authorized;7,149,578 shares issued and outstanding at March 31, 2004 and December 31, 2003 |
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71,496 |
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71,496 |
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Additional paid-in capital |
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111,880,321 |
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111,880,321 |
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Cumulative dividends on preferred stock |
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(2,296,953 |
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(2,296,953 |
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Accumulated deficit. |
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(85,086,858 |
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(84,794,827 |
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Treasury stock (at cost), 1,335,722 shares at March 31, 2004 |
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(2,417,657 |
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(2,417,657 |
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Total stockholders’ equity |
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26,456,869 |
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26,748,900 |
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Total liabilities and stockholders’ equity |
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$ |
26,728,939 |
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$ |
27,117,258 |
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The accompanying notes are an integral part of the consolidated financial statements
3
ERGO SCIENCE CORPORATION
(Unaudited)
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Three Months Ended March 31, |
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2004 |
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2003 |
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Operating expenses: |
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Research and development |
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$ |
— |
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$ |
9,800 |
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General and administrative |
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350,163 |
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235,483 |
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Total operating expenses |
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(350,163 |
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(245,283 |
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Other income: |
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Interest income |
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58,132 |
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75,882 |
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Net loss |
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$ |
(292,031 |
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(169,401 |
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Loss per common share: |
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Basic and diluted |
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(0.05 |
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(0.02 |
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Weighted average common shares outstanding: |
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Basic and diluted |
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5,813,856 |
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7,149,578 |
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The accompanying notes are an integral part of the consolidated financial statements
4
ERGO SCIENCE CORPORATION
(Unaudited)
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Three Months Ended |
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2004 |
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2003 |
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Cash flows from operating activities: |
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Net loss |
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$ |
(292,031 |
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(169,401 |
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Adjustments to reconcile net loss to cash used in operating activities: |
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Depreciation and amortization |
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288 |
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893 |
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Changes in operating assets and liabilities: |
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Prepaid and other current assets |
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(62,077 |
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(57,481 |
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Accounts payable and accrued expenses |
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(2,288 |
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13,138 |
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Income taxes payable |
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(94,000 |
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— |
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Net cash used in operating activities |
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(450,108 |
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(212,851 |
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Net decrease in cash and cash equivalents |
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(450,108 |
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(212,851 |
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Cash and cash equivalents at beginning of period |
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27,102,617 |
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24,938,223 |
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Cash and cash equivalents at end of period |
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$ |
26,652,509 |
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$ |
24,725,382 |
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The accompanying notes are an integral part of the consolidated financial statements
5
ERGO SCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying financial statements are unaudited and have been prepared by Ergo Science Corporation (“Ergo” or the “Company”) in accordance with generally accepted accounting principles.
Certain information and footnote disclosure normally included in the Company’s annual financial statements have been condensed or omitted. The interim financial statements, in the opinion of management, reflect all adjustments (including normal recurring accruals) necessary for a fair statement of the results for the interim periods ended March 31, 2004 and 2003.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the fiscal year. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2003, which are contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Stock Based Compensation
Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) requires that companies either recognize compensation expense for grants of stock, stock options, and other equity instruments based on fair value, or provide pro forma disclosure of net income or loss and earnings or loss per share in the notes to the financial statements. The Company follows the disclosure provisions of SFAS 123 and applies APB Opinion 25 and related interpretations in accounting for its employee plans. Accordingly, no compensation cost has been recognized for its stock option plans since all options issued were for a fixed number of shares and had fixed exercise prices equal to the fair market value of the common stock on the grant date. The effects of applying SFAS 123 in this pro forma disclosure are not likely to be representative of the effects on reported income or loss for future years. Had compensation cost for the Company’s stock-based compensation plans been determined based on the fair value at the grant dates as calculated in accordance with SFAS 123, the Company’s net loss and loss per share for the three months ended March 31, 2004 and 2003, would have been increased to the pro forma amounts indicated below:
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Three months ended |
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2004 |
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2003 |
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Net loss: |
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As reported |
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$ |
292,031 |
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$ |
169,401 |
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Add: Pro forma stock compensation expense |
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