ERGO SCIENCE CORP /DE/ - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

-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 No. 0-26988

ERGO SCIENCE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		04-3565746
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

790 Turnpike Street
North Andover, Massachusetts		01845
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (978) 688-8833

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 October 31, 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.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ERGO SCIENCE CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
	2004			2003
ASSETS

Current assets:
Cash and cash equivalents	$	26,333,212		$	27,102,617
Prepaid and other current assets	29,793			14,169
Total current assets	26,363,005			27,116,786
Equipment and leasehold improvements, net	—			472
Total assets	$	26,363,005		$	27,117,258

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	207,670		$	274,358
Income taxes payable	—			94,000
Total current liabilities	207,670			368,358

Stockholders’ equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized; 6,903 shares of Series D preferred stock issued and outstanding at September 30, 2004 and December 31, 2003 (liquidation preference of $12,045,683 at September 30, 2004)	4,306,520			4,306,520
Common stock, $.01 par value, 50,000,000 shares authorized; 7,149,578 shares issued and outstanding at September 30, 2004 and December 31, 2003	71,496			71,496
Additional paid-in capital	111,880,321			111,880,321
Cumulative dividends on preferred stock	(2,296,953		)	(2,296,953		)
Accumulated deficit	(85,388,392		)	(84,794,827		)
Treasury stock (at cost), 1,335,722 shares at September 30, 2004 and December 31, 2003	(2,417,657		)	(2,417,657		)
Total stockholders’ equity	26,155,335			26,748,900
Total liabilities and stockholders’ equity	$	26,363,005		$	27,117,258

The accompanying notes are an integral part of the consolidated financial statements

ERGO SCIENCE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,							Nine Months Ended September 30,
	2004				2003			2004			2003
Operating expenses:
Research and development	$	—			$	9,788		$	—		$	32,469
General and administrative	204,815				358,970			791,678			854,731
	204,815				368,758			791,678			887,200
Net operating loss	(204,815			)	(368,758		)	(791,678		)	(887,200			)

Other Income:
Interest	79,619				58,549			198,113			205,900
Other income	—				100,000			—			100,000
Net loss	$	(125,196		)	$	(210,209	)	$	(593,565	)	$		(581,300	)

Net Loss per common share:
Basic and Diluted	$		(0.02	)	$	(0.03	)	$	(0.10	)	$		(0.08	)

Weighted average common shares outstanding:
Basic and Diluted	5,813,856				6,263,936			5,813,856			6,851,120

The accompanying notes are an integral part of the consolidated financial statements

ERGO SCIENCE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2004			2003
Cash flows from operating activities:
Net loss	$	(593,565	)	$	(581,300	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	472			1,519
Changes in operating assets and liabilities:
Prepaid and other current assets	(15,624		)	26,667
Accounts payable and accrued expenses	(66,688		)	(43,384		)
Income taxes payable	(94,000		)	—
Net cash used in operating activities	(769,405		)	(596,498		)
Cash flows from financing activities:
Payment for purchase of treasury stock	—			(2,417,657		)
Net cash used in financing activities	—			(2,417,657		)
Net decrease in cash and cash equivalents	(769,405		)	(3,014,155		)
Cash and cash equivalents at beginning of period	27,102,617			24,938,233
Cash and cash equivalents at end of period	$	26,333,212		$	21,924,078

The accompanying notes are an integral part of the consolidated financial statements

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 September 30, 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 and nine months ended September 30, 2004 and 2003 would have been increased to the pro forma amounts indicated below:

	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
Net loss:
As reported	$	125,196		$	210,209		$		593,565	$	581,300
Pro forma stock compensation expense	1,055			5,393			5,413			26,461
Pro forma net loss	$	126,251		$	215,602		$	598,978		$		607,761
Net loss per share—basic and diluted
As reported	$		0.02	$		0.03	$	0.10		$		0.08
Pro forma	0.02			0.03			0.10			0.09

The fair value of each stock option was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

		2001
Expected Life		5 years
Expected Volatility		50%
Dividend Yield		0%
Weighted Average Risk-free Interest Rate		4.77%

No stock options were granted during the nine month period ending September 30, 2004 or in the fiscal years ending December 31, 2003 or 2002.

2. Cash Equivalents

The Company considers all highly liquid investments with a maturity of 90 days or less at the date of purchase to be cash equivalents.

Debt securities are classified as held-to-maturity when the Company has positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost.

At September 30, 2004 and December 31, 2003, cash and cash equivalents were comprised primarily of investments in U.S. government obligations that mature within 90 days of purchase.

3. Net Loss Per Common Share

Basic earnings/loss per common share is computed by dividing net income/loss by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income by the sum of the weighted average number of common shares outstanding for the period plus all potentially dilutive securities, such as stock options.

During the three and nine month periods ended September 30, 2004 and 2003 options to purchase 28,375 and 213,625 shares of common stock, respectively, were not included in the computation of diluted net loss per share since their inclusion would be antidilutive as a result of the net losses incurred.

ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion contains forward-looking statements. Forward-looking statements reflect Ergo’s current views with respect to future events. Actual results may vary materially and adversely from those anticipated, believed, assumed, estimated or otherwise indicated. Important factors that could cause actual results to differ materially include, without limitation:

• Ergo is a company in transition;

• the transfer restrictions implemented on the Company’s common stock set forth in the Certificate of Incorporation may delay or prevent takeover bids by third parties and may delay or frustrate any attempt by the Company’s stockholders to replace or remove the current management; and

• the Company believes that it has qualified for exclusions from the definition of “investment company”‘ under the Investment Company Act of 1940 at all relevant times since our incorporation; however, if the Securities and Exchange Commission takes a contrary position and prevails, the Company would be subject to significant restrictions on our business and on its ability to acquire one or more established businesses.

Overview

We are a company in transition. From our incorporation through March 2001, we were engaged in the development of ERGOSET® tablets for the treatment of type 2 diabetes.

In March 2001, we decided that the next phase of the development of ERGOSET® would be better undertaken by a company that has more experience with human drug development and more resources for regulatory approval and marketing than we do.

At our Annual Meeting of Stockholders held on October 15, 2001, stockholders approved the imposition of transfer restrictions on our common stock. These transfer restrictions were implemented on October 19, 2001.

On November 24, 2003 we sold all of our scientific and research assets and certain other intellectual property assets to Pliva d.d., a company organized under the laws of Croatia (“Pliva”). At the time of the sale, we received $5,498,000 in cash. Upon the occurrence of certain events outlined in the asset purchase agreement, we may be able to receive an additional $500,000. In accordance with the asset purchase agreement, Pliva has one year from the closing date to obtain the right to certain patents from Massachusetts General Hospital (“MGH Patents”). If Pliva is not able to obtain such rights, then Pliva shall retain the additional $500,000 and shall have no further obligation to pay that amount to us. In addition, Pliva has assumed our future obligations under the LSU Royalty Agreement. Also as part of the agreement, Pliva has agreed to make payments to one of our wholly-owned subsidiaries, Ergo Texas Holdings, Inc. (“Ergo Texas”), to cover certain payments required to be made in the event that ERGOSET® or another specified drug is approved by the Food and Drug Administration.

We are now currently seeking one or more established businesses to acquire. Our assets currently consist of substantial unrecognized tax benefits and approximately $26 million in cash and cash equivalents. We intend to continue to conserve our cash and other assets.

From inception through September 30, 2004, the Company has been unprofitable except for 2003. We were profitable in 2003 solely because of the sale of the Company’s science assets to Pliva in the fourth quarter.

Results of Operations

For the Three Months Ended September 30, 2004 and 2003

Research and Development Expenses. Research and development expenses in the three-month period ended September 30, 2003 consisted primarily of salary expense of the former CEO who spent a portion of his time dealing with FDA related issues prior to the asset sale to Pliva in November 2003. We have expensed all of our research and development costs as they have been incurred.

Research and development expenses decreased from $9,788 to $0 for the three month periods ended September 30, 2003 and 2004, respectively. The Company no longer has research and development expenses as a result of the sale of the Company’s science assets to Pliva in November 2003.

General and Administrative Expenses. General and administrative expenses consist primarily of compensation for personnel, professional services, which include consultants, legal fees, accounting, audit and tax fees, and administrative expenses associated with operating as a public company.

General and administrative expenses decreased from $358,970 to $204,815 for the three month periods ended September 30, 2003 and 2004, respectively. The decrease in 2004 of approximately $154,000 was primarily due to decreases in legal costs of $140,000, professional fees of $58,000 and state franchise taxes of $8,000, offset by increases in salaries of $52,000. The decrease in legal fees is due to a reduction in activity incurred by the Company in evaluating its strategic alternatives. The decrease in professional fees relates primarily to a decrease in board of director fees of $25,000 and a decrease in other professional fees of $35,000 related to the treasury stock purchase in the prior year.

Interest income increased from $58,549 to $79,619 for the three month period ended September 30, 2003 and 2004, respectively. The increase is due primarily to a general increase of market interest rates in the third quarter.

Net loss decreased from $210,209 to $125,196 for the three month periods ended September 30, 2003 and 2004, respectively. The decrease in net loss is primarily due to a decrease in general and administrative costs incurred by the Company.

For the Nine Months Ended September 30, 2004 and 2003

Research and Development Expenses. Research and development expenses in the nine-month period ended September 30, 2003 consisted primarily of salary expense of the former CEO who spent a portion of his time dealing with FDA related issues prior to the asset sale to Pliva in November 2003. We have expensed all of our research and development costs as they have been incurred.

Research and development expenses decreased from $32,469 to $0 for the nine month periods ended September 30, 2003 and 2004, respectively. The Company no longer has research and development expenses as a result of the sale of the Company’s science assets to Pliva in November 2003.

General and administrative expenses decreased from $854,731 to $791,678 for the nine-month periods ended September 30, 2003 and 2004, respectively. The decrease in 2004 of approximately $63,000 was primarily due to decreases in legal fees of $166,000, professional fees of $35,000 and general office expenses of $5,000, offset by increases in salaries of $100,000, which was due to an increase in personnel by the Company to facilitate its goal of acquiring an established business, travel expenses of $19,000, audit related fees of $24,000 related to the Company’s financial statement audit, review of SEC filings and income tax preparation. The increase in salaries is due primarily to the hiring of a new employee to assist the Company in evaluating its strategic alternatives as it seeks to acquire one or more established businesses. The increase in travel expenses is a result of costs incurred by the Company as it seeks to acquire one or more established businesses.

Interest income decreased from $205,900 to $198,113 for the nine-month periods ended September 30, 2003 and 2004, respectively. The decrease is due primarily to a general reduction of market interest rates.

Net loss increased from $581,300 to $593,565 for the nine-month periods ended September 30, 2003 and 2004, respectively. The increase in net loss is primarily due to the recognition of other income in 2003 in the amount of $100,000 for the sale of the Company’s domain name, ergo.com, offset by decreases in general and administrative costs incurred by the Company.

Liquidity and Capital Resources

Resources

Since the Company’s inception, its primary source of cash has been from financing activities, which have consisted of private placements of equity securities, two public offerings, and the sale of common stock in conjunction with the signing of the Joint Collaboration Agreement with Johnson and Johnson on February 23, 1998. The Joint Collaboration Agreement was terminated by Johnson

and Johnson on January 3, 1999. Private placements of equity securities provided us with aggregate proceeds of $42,999,000 through 1998.

On November 24, 2003 the Company sold all of our scientific and research assets and certain other intellectual property assets to Pliva d.d., a company organized under the laws of Croatia (“Pliva”). At the time of the sale, we received $5,498,000 in cash. Upon the occurrence of certain events outlined in the asset purchase agreement, we may be able to receive an additional $500,000. In accordance with the asset purchase agreement, Pliva has one year from the closing date to obtain the right to certain patents from Massachusetts General Hospital (“MGH Patents”). If Pliva is not able to obtain such rights, then Pliva shall retain the additional $500,000 and shall have no further obligation to pay that amount to us. In addition, Pliva has assumed our future obligations under the LSU Royalty Agreement. Also as part of the agreement, Pliva has agreed to make payments to one of our wholly-owned subsidiaries, Ergo Texas Holdings, Inc. (“Ergo Texas”), to cover certain payments required to be made in the event that ERGOSET® or another specified drug is approved by the Food and Drug Administration.

Cash and cash equivalents were $27,102,617 and $26,333,212 at December 31, 2003 and September 30, 2004, respectively. The overall decrease in cash and cash equivalents at September 30, 2004 was due to cash payments made by the Company during the ordinary course of business.

Cash used in operating activities was $596,498 and $769,405 for the nine-month periods ended September 30, 2003 and 2004, respectively. The increase is cash used for operating activities was primarily due to increased spending for payroll of approximately $100,000 and a federal income tax payment made in the first quarter of the current fiscal year in the amount of $94,000, offset by decreases in general operating costs of $21,000.

The Company made cash payments in the first quarter of the current fiscal year and the prior fiscal year in the amount of $85,000 each year for the annual premiums for its Directors and Officers insurance policy.

Our only source of cash in the nine months ended September 30, 2004 was interest income of $198,113 generated by our investment of cash and cash equivalents in government obligations. Barring unforeseen circumstances, we expect interest income to continue to be our primary source of cash until we acquire an income producing business. The only securities we currently hold are U.S. government obligations with maturities of 90 days or less. We expect to continue to hold similar securities exclusively until we acquire an operating business.

In October 2004, the Company received a federal income tax refund in the amount of $94,000. This amount relates to an overpayment made on the Company’s 2003 federal income tax return.

We have concentrated our efforts on conserving our cash while considering our strategic alternatives. However, our use of cash has fluctuated significantly from quarter to quarter and we anticipate that this pattern will continue.

Requirements

Our primary use of cash prior to March 2001 was in operating activities to fund research and development, including preclinical studies and clinical trials. Since then our primary use of cash has been in general and administrative expenses and in evaluating and implementing strategic alternatives. In addition, we purchased 1,335,722 shares of our common stock on August 1, 2003, from our then-largest stockholder, Court Square Capital Limited, for $2,417,657.

We expect that (in the absence of a strategic change) our available cash and expected interest income will fund our current operations for at least the next 12 months and until we identify an acquisition candidate. In the event that the Company purchases a business, we may require additional capital to complete the acquisition.

Depending on the decisions that are made, our capital requirements may exceed our current resources. In such event, we would have to seek additional debt or equity financing from private or public sources. To the extent we raise additional capital by issuing equity securities, ownership dilution to existing stockholders will result, and future investors may be granted rights superior to those of existing stockholders. To the extent that we borrow funds, the lenders of such funds will have claims to our assets before there can be any distribution to our stockholders. There can be no assurance, however, that additional financing, either debt or equity, will be available from any source or, if available, will be available on terms acceptable to us.

We cannot pay dividends on our common stock without first obtaining the written consent of the holders of a majority of our outstanding series D exchangeable preferred stock.

New Accounting Pronouncements

In March 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF No. 03-06, Participating Securities and Two-Class Method under FASB Statement No. 128, Earning per Share. EITF No. 03-06 addresses a number of questions regarding the computation of earnings per share (“EPS”) by companies that have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings of the company when, and if, it declares dividends on its common stock. The issue also provides further guidance in applying the two-class method of calculating EPS. It clarifies what constitutes a participating security and how to apply the two-class method of computing EPS once it is determined that a security is participating, including how to allocate undistributed earnings to such a security. The consensuses reached on EITF No. 03-06 is eff ective for fiscal periods beginning after March 31, 2004. The Company has incurred losses for the three and nine month periods ended September 30, 2004 and 2003 and as its Series D Preferred Shares do not have a contractual obligation to share in the losses of the Company, ETIF 03-06 has no effect on its reported earnings per share.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in the Company’s exposure to market risk from December 31, 2003.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the quarterly period ended September 30, 2004, Charles E. Finelli, our Chief Executive Officer and acting Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Based on these evaluations, he believes that:

(a) our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

(b) our disclosure controls and procedures were effective in ensuring that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There has not been any change in our internal control over financial reporting that occurred during our quarterly period ended September 30, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.

OTHER INFORMATION


ITEM 1.		LEGAL PROCEEDINGS

		None.

ITEM 2.		CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

		None.

ITEM 3.		DEFAULTS UPON SENIOR SECURITIES

		None.

ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

		None.

ITEM 5.		OTHER INFORMATION

		None.

ITEM 6.		EXHIBITS

	31.1	Certification of Principal Executive Officer and acting Principal Financial Officer pursuant to Exchange Act Rule 13 a-14(a).

	32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

INDEX TO EXHIBITS

ERGO SCIENCE CORPORATION

Exhibit No.		Exhibit

3.1		Amended and Restated Certificate of Incorporation of the Registrant. Filed as exhibit 3.1 to the Registrant’s registration statement on Form S-4 (File No. 333-69172) filed with the Commission on September 7, 2001, and incorporated by reference herein.
3.2		By-Laws of the Registrant. Filed as exhibit 3.2 to the Registrant’s registration statement on Form S-4 (File No. 33-98162) filed with the Commission on September 7, 2001, and incorporated by reference herein.
4.1		Form of Stock Certificate of the Registrant’s Common Stock, par value $.01 per share. Filed as Exhibit 4.1 to the Registrant’s registration statement on Form S-4 (File No. 333-69172) filed with the Commission on September 7, 2001, and incorporated by reference herein.
10.1		Novated License and Royalty Agreement dated May 1, 1995, between the Board of Supervisors of Louisiana State University and Agricultural and Mechanical College, the Registrant, E. Science Incorporated, a Delaware corporation formerly known as Ergo Science Incorporated that is a subsidiary of the Registrant (“Ergo Science Incorporated”), and Ergo Research Corporation, a Delaware corporation that is a subsidiary of the Registrant. Filed as exhibit 10.2 to the Registrant’s registration statement on Form S-1 (File No. 33-98162) filed with the Commission on November 27, 1995, and incorporated by reference herein.
10.2		Indemnification Agreement dated October 6, 1995, between the Registrant and Manuel Cincotta, Jr., together with a schedule identifying substantially identical documents and setting forth the material details in which those documents differ from the foregoing document. Filed as exhibit 10.18 to the Registrant’s registration statement on Form S-1 (File No. 33-98162) filed with the Commission on November 27, 1995, and incorporated by reference herein.
10.3		Form of Indemnification Agreement between the Registrant and each of the Registrant’s officers and directors. Filed as exhibit 10.1 to the Registrant’s registration statement on Form S-4 (File No. 333-69172) filed with the Commission on September 7, 2001, and incorporated by reference herein.
10.4		Ergo Science Corporation 2001 Employee, Director and Consultant Stock Plan. Filed as Exhibit 10.3 to the Registrant’s registration statement on Form S-4 (File No. 333-69172) filed with the Commission on September 7, 2001, and incorporated herein by reference.
10.5		Ergo Science Corporation Stock Option Plan for Non-Employee Directors. Filed as Exhibit 99.2 to the Registrant’s registration statement on Form S-8 (File No. 333-73222) filed with the Commission on November 13, 2001, and incorporated herein by reference.
10.6		Ergo Science Corporation Amended and Restated 1995 Long-Term Incentive Plan. Filed as Exhibit 99.3 to the Registrant’s registration statement on Form S-8 (File No. 333-73222) filed with the Commission on November 13, 2001, and incorporated herein by reference.
10.7		Amended and Restated Option Agreement, dated October 12, 1993, between Ergo Science Incorporated and Albert H. Meier, Ph.D.; First Amendment to Amended and Restated Option Agreement, dated April 27, 1995, among the Registrant, Ergo Science Incorporated and Albert H. Meier, Ph.D.; and Second Amendment to Amended and Restated Option Agreement, dated November 6, 1995, between the Registrant and Albert H. Meier, Ph.D. Filed as Exhibit 99.4 to the Registrant’s registration statement on Form S-8 (File No. 333-73222) filed with the Commission on November 13, 2001, and incorporated herein by reference.
10.8		Option Agreement, dated March 1, 1993, between Ergo Science Incorporated and David R. Burt; First Amendment to Option Agreement, dated April 27, 1995, among the Registrant, Ergo Science Incorporated and David R. Burt; Second Amendment to Option Agreement, dated October 6, 1995, between the Registrant and David R. Burt; and Third Amendment to Option Agreement, dated November 6, 1995, between the Registrant and David R. Burt. Filed as Exhibit 99.5 to the Registrant’s registration statement on Form S-8 (File No. 333-73222) filed with the Commission on November 13, 2001, and incorporated herein by reference.

10.9		License Agreement effective as of February 1, 1997, between The General Hospital Corporation and Ergo Science Corporation and Ergo Research Corporation. Filed as Exhibit 10.1 to the Registrant’s quarterly filing on Form 10-Q filed with the Commission on May 15, 1997 and incorporated by reference herein. [Portions of this exhibit have been omitted and filed separately with the Commission in accordance with Rule 406 of the Securities Act and the Registrant’s request for confidential treatment.]
10.10		Settlement Agreement dated as of October 6, 2000 between the Registrant and Louisiana State University. Filed as Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K (File No. 000-26988) filed with the Commission on April 2, 2001, and incorporated herein by reference.
10.11		Stock Purchase Agreement, dated as of August 1, 2003, by and between the Company and Court Square Capital Limited. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-26988) filed with the Commission on August 14, 2003, and incorporated herein by reference.
10.12		Assignment Agreement, dated as of June 30, 2003, by and between the Company and Ergo Verisherungsgruppe AG regarding the sale of the ergo.com domain name. Filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-26988) filed with the Commission on August 14, 2003, and incorporated herein by reference.
10.13		Asset Purchase Agreement, dated as of November 24, 2003, by and between the Company and PLIVA d.d regarding the sale of the Company’s intellectual property. Filed as Exhibit 10.12 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 26, 2003 and incorporated herein by reference.
31.1		Certification of Principal Executive Officer and acting Principal Financial Officer pursuant to Exchange Act Rule 13 a-14(a).
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.


PART I.	FINANCIAL INFORMATION

ITEM 1.		Financial Statements

		Unaudited Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003

		Unaudited Consolidated Statements of Operations for the three months and nine months ended September 30, 2004 and 2003

		Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003

		Unaudited Notes to Consolidated Financial Statements

ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk

ITEM 4.		Controls and Procedures

PART II.	OTHER INFORMATION

SIGNATURES

INDEX TO EXHIBITS

ERGO SCIENCE CORPORATION

By:	/s/ Charles E. Finelli
	Charles E. Finelli
	President, Chief Executive Officer, and acting Chief Financial Officer,
	Principal Executive and Principal Financial and Accounting Officer

Date:	November 15, 2004