UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT
   PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
 
 EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD
   ENDED JUNE 30, 1999

[ ] TRANSITION REPORT
   PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
 
 EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM
           TO
 ________________

Commission File Number 0-23223

CURAGEN
   CORPORATION(Exact name of
   registrant as specified in its charter)

#### 

|Delaware                                                           |  | 06-1331400                                 
|------------------------------------------------------------------ |  | -------------------------------------------
|(State or other jurisdiction ofincorporation or
     organization) |  | (I.R.S. Employer
   
   Identification No.)

#### 

|555 Long Wharf Drive, 11th Floor, New Haven, Connecticut | 06511     
|-------------------------------------------------------- | ----------
|(Address of principal executive office)                  | (Zip Code)

Registrant's telephone
   number, including area code: (203) 401-3330

Indicate by check mark
   whether the registrant (1) has filed all reports required to be
   filed by Section 13 or15(d) of the Securities Exchange
   Act of 1934 during the preceding 12 months (or for such shorter
   period thatthe registrant was required to
   file such reports), and (2) has been subject to such filing
   requirements for thepast 90 days.

#### Yes [ X ] No [ ]

The number of shares
   outstanding of the Registrant's Common Stock as of July 31, 1999 was
   13,570,299.



CURAGEN CORPORATIONFORM 10-QINDEX

|PART I. Financial Information   |         | Page                                                                                                                 
|------------------------------- | ------- | ---------------------------------------------------------------------------------------------------------------------
|                                |         |                                                                                                                      
|                                | Item 1. | Financial Statements                                                                                                 
|                                |         |                                                                                                                      
|                                |         | Condensed Balance Sheets,
   June 30, 1999 (unaudited) and December 31, 1998                                         
|                                |         |                                                                                                                      
|                                |         | Condensed Statements of
     Operations,
   
   for the Three and Six Months Ended June 30, 1999 and 1998 (unaudited)
|                                |         |                                                                                                                      
|                                |         | Condensed Statements of
     Cash Flows,
   for the Six Months Ended June 30, 1999
     and 1998 (unaudited)         
|                                |         |                                                                                                                      
|                                |         | Notes to Condensed
     Financial Statements (unaudited)                                                             
|                                |         |                                                                                                                      
|                                | Item 2. | Management's
     Discussion and Analysis of Financial
   Condition and Results of Operations                        
|                                |         |                                                                                                                      
|PART II. Other
     Information |         |                                                                                                                      
|                                |         |                                                                                                                      
|                                | Item 2. | Changes in Securities
     and Use of Proceeds                                                                       
|                                |         |                                                                                                                      
|                                | Item 4. | Submission of Matters
     to a Vote of Security Holders                                                             
|                                |         |                                                                                                                      
|                                | Item 6. | Exhibits and Reports on
     Form 8-K                                                                                
|                                |         |                                                                                                                      
|Signatures                      |         | 12                                                                                                                   
|                                |         |                                                                                                                      
|Exhibit Index                   |         | 13                                                                                                                   
|                                |         |                                                                                                                      



CURAGEN CORPORATION
 
 CONDENSED BALANCE SHEETS

|                                                                            |  |                     
|--------------------------------------------------------------------------- |  | --------------------
|                                                                            |  | June 30,
   
   1999
|                                                                            |  |                     
|                                                                            |  | (unaudited)         
|ASSETS                                                                      |  |                     
|Current assets:                                                             |  |                     
|Cash and cash equivalents                                                   |  | $ 29,783,626        
|Grants receivable                                                           |  | 301,463             
|Accounts receivable                                                         |  | 6,250               
|Other current assets                                                        |  | 61,561              
|Prepaid expenses                                                            |  | 580,655             
|                                                                            |  |                     
|Total current assets                                                        |  | 30,733,555          
|                                                                            |  |                     
|                                                                            |  |                     
|Property and equipment, net                                                 |  | 17,609,748          
|Notes receivable related parties                                            |  | 89,202              
|Other assets                                                                |  | 388,583             
|                                                                            |  |                     
|Total assets                                                                |  | $ 48,821,088        
|                                                                            |  |                     
|                                                                            |  |                     
|LIABILITIES AND STOCKHOLDERS' EQUITY                                        | 
|Current liabilities:                                                        | 
|Accounts payable                                                            |  | $      970,823      
|Accrued bonuses                                                             |  | 547,027             
|Accrued expenses                                                            |  | 474,930             
|Accrued payroll                                                             |  | 273,389             
|Deferred revenue                                                            |  | 4,529,851           
|Deferred rent                                                               |  | 103,406             
|Current portion of obligations under
     capital leases                    |  | 2,714,130           
|                                                                            |  |                     
|Total current liabilities                                                   |  | 9,613,556           
|                                                                            |  |                     
|                                                                            |  |                     
|Long-term liabilities:                                                      | 
|Deferred rent, net of current portion                                       |  | 144,791             
|Interest payable                                                            |  | 21,000              
|Obligations under capital leases, net
     of current portion               |  | 9,055,303           
|                                                                            |  |                     
|Total long-term liabilities                                                 |  | 9,221,094           
|                                                                            |  |                     
|                                                                            |  |                     
|Commitments and contingencies                                               | 
|                                                                            | 
|Stockholders' equity:                                                       | 
|Common Stock; $.01 par value,
     issued and outstanding 13,444,699 shares | 
|at June 30, 1999, and
     13,316,757 shares at December 31, 1998           |  | 134,447             
|Additional paid-in capital                                                  |  | 72,345,498          
|Accumulated deficit                                                         |  | (42,071,578         
|Unamortized stock based compensation                                        |  | (421,929            
|                                                                            |  |                     
|Total stockholders' equity                                                  |  | 29,986,438          
|                                                                            |  |                     
|Total
     liabilities and stockholders' equity                             |  | $ 48,821,088        
|                                                                            |  |                     



See accompanying notes to condensed financial
   statements.





|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------ | ------------ | ------------------ | ------------- | ---------------- | ------------ | ----------- | ---------- | ----
|CURAGEN
     CORPORATION                                                                                                                                
|CONDENSED
     STATEMENTS OF OPERATIONS                                                                                                                 
|(unaudited)                                                                                                                                             
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                 
|                                                                                                                                                         |                                             |                          |              |                    |               |                 
|                                                                                                                                                         |                                             |                          |              |                    |               |                 
|                                                                                                                                                         |                                             |                          |              | Three Months Ended |               | Six Months Ended
|                                                                                                                                                         |                                             |                          |              | June 30,           |               | June 30,        
|                                                                                                                                                         |                                             |                          |              |                    |               |                 
|                                                                                                                                                         |                                             |                          |              | 1999               |               | 1998             |              | 1999        |            | 1998
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |            
|Revenue:                                                                                                                                                 |                                             |                          |              |                    |               |                  |              |            
|                                                                                                                                                         | Grant revenue                               | $59,516                  |              | $1,090,626         |               | $636,980         |              | $2,080,198 
|                                                                                                                                                         | Collaboration revenue                       | 3,273,171                |              | 1,625,000          |               | 5,367,650        |              | 2,625,000  
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |           
|                                                                                                                                                         |                                             | Total revenue            | 3,332,687    |                    | 2,715,626     |                  | 6,004,630    |             | 4,705,198 
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |             
|Operating expenses:                                                                                                                                      |                                             |                          |              |                    |               |                  |             
|                                                                                                                                                         | Grant research                              | 36,775                   |              | 435,546            |               | 417,386          |              | 1,107,699  
|                                                                                                                                                         | Collaborative research and
     development | 6,327,240                |              | 3,653,524          |               | 12,918,699       |              | 6,796,077  
|                                                                                                                                                         | General and administrative                  | 3,002,818                |              | 1,696,627          |               | 6,211,885        |              | 3,075,617  
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |           
|                                                                                                                                                         |                                             | Total operating expenses | 9,366,833    |                    | 5,785,697     |                  | 19,547,970   |             | 10,979,393
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |             
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |             
|Loss from operations                                                                                                                                     | (6,034,146)                                 |                          | (3,070,071)  |                    | (13,543,340)  |                  | (6,274,195) 
|Interest income (expense), net                                                                                                                           | 109,003                                     |                          | 571,054      |                    | 411,270       |                  | 607,665     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |            
|Net loss                                                                                                                                                 |                                             | (5,925,143)              |              | (2,499,017)        |               | (13,132,070)     |              | (5,666,530)
|Preferred dividends                                                                                                                                      | -                                           |                          | -            |                    | -             |                  | (508,435)   
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|Net loss attributable to
   
   common stockholders                                                                                                      | ($5,925,143)                                |                          | ($2,499,017) |                    | ($13,132,070) |                  | ($6,174,965)
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |             
|Basic and diluted net loss
   
   per share attributable to
   
   common stockholders                                                                   | ($0.44)                                     |                          | ($0.19)      |                    | ($0.98)       |                  | ($0.55)     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |             
|Weighted average number
   
   of shares used in computing
   
   basic and diluted net loss per
   
   share attributable to common
   
   stockholders | 13,409,237                                  |                          | 13,059,502   |                    | 13,419,893    |                  | 11,134,192  
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                         |                                             |                          |              |                    |               |                  |              |             |            |     
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|See accompanying
     notes to condensed financial statements.                                                                                          







|                                                          |                                                           |                                                  |              |               |                  |              |     
|--------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------------------ | ------------ | ------------- | ---------------- | ------------ | ----
|CURAGEN CORPORATION                                      
|CONDENSED STATEMENTS OF CASH FLOWS                       
|(unaudited)                                              
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          |                                                           |                                                  |              |               | Six Months Ended
|                                                          |                                                           |                                                  |              |               | June 30,        
|                                                          |                                                           |                                                  |              |               |                 
|                                                          |                                                           |                                                  |              |               | 1999             |              | 1998
|                                                          |                                                           |                                                  |              |               |                 
|                                                          | Cash flows from operating activities:                     |                                                  |              |               |                 
|                                                          | Net
     loss                                             |                                                  |              | ($13,132,070) |                  | ($5,666,530)
|                                                          | Adjustments to reconcile net loss to net cash             |                                                  |              |               |                 
|                                                          | used
     in operating activities:                        |                                                  |              |               |                 
|                                                          |                                                           | Depreciation and amortization                    |              | 2,813,398     |                  | 1,192,377   
|                                                          |                                                           | Non-monetary compensation                        |              | 361,954       |                  | 290,802     
|                                                          |                                                           | Stock-based 401(k) Employer Plan Match           |              | 129,078       |                  | -           
|                                                          | Changes in assets and liabilities:                        |                                                  |              |               |                 
|                                                          |                                                           | Grants receivable                                |              | 298,780       |                  | (304,099)   
|                                                          |                                                           | Accounts receivable                              |              | 4,948         |                  | 166,750     
|                                                          |                                                           | Prepaid expenses                                 |              | (87,219)      |                  | (359,551)   
|                                                          |                                                           | Other
     current assets                        |              | (48,645)      |                  | 12,583      
|                                                          |                                                           | Other
     assets                                |              | (37,681)      |                  | (181,917)   
|                                                          |                                                           | Accounts payable                                 |              | (1,807,177)   |                  | 2,330,405   
|                                                          |                                                           | Accrued payroll - related party                  |              | -             |                  | (308,125)   
|                                                          |                                                           | Accrued bonuses                                  |              | (294,358)     |                  | -           
|                                                          |                                                           | Accrued expenses                                 |              | (5,521)       |                  | (765,913)   
|                                                          |                                                           | Accrued payroll                                  |              | (51,534)      |                  | -           
|                                                          |                                                           | Deferred revenue                                 |              | (345,153)     |                  | 875,000     
|                                                          |                                                           | Deferred rent                                    |              | (51,702)      |                  | 39,256      
|                                                          |                                                           |                                                  |              |               |                 
|                                                          | Net
     cash used in operating activities                |                                                  | (12,252,902) |               | (2,678,962)     
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          | Cash flows from investing activities:                     |                                                  |              |               |                 
|                                                          |                                                           | Acquisitions of property and equipment           |              | (4,474,035)   |                  | (6,196,610) 
|                                                          |                                                           | Repayments from (loans to) - related parties     |              | 3,500         |                  | (110,000)   
|                                                          |                                                           |                                                  |              |               |                 
|                                                          | Net
     cash used in investing activities                |                                                  | (4,470,535)  |               | (6,306,610)     
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          | Cash flows from financing activities:                     |                                                  |              |               |                 
|                                                          |                                                           | Payments on capital lease obligations            |              | (1,200,867)   |                  | (807,979)   
|                                                          |                                                           | Redemption of Series B Preferred Stock           |              | -             |                  | (1,967,631) 
|                                                          |                                                           | Proceeds from issuance of Common Stock           |              | -             |                  | 48,662,480  
|                                                          |                                                           | Proceeds from exercise of employee stock options |              | 160,400       |                  | 105,780     
|                                                          |                                                           | Proceeds from sale-leaseback of equipment        |              | 4,253,535     |                  | 2,982,927   
|                                                          |                                                           | Payments of stock issuance costs                 |              | -             |                  | (3,426,361) 
|                                                          |                                                           |                                                  |              |               |                 
|                                                          | Net
     cash provided by financing activities            |                                                  | 3,213,068    |               | 45,549,216      
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          | Net
     (decrease) increase in cash and cash equivalents |                                                  | (13,510,369) |               | 36,563,644      
|                                                          | Cash
     and cash equivalents, beginning of period       |                                                  | 43,293,995   |               | 17,417,161      
|                                                          |                                                           |                                                  |              |               |                 
|                                                          | Cash
     and cash equivalents, end of period             |                                                  | $29,783,626  |               | $53,980,805     
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          | Supplemental cash flow information:                       |                                                  |              |               |                 
|                                                          | Interest paid                                             |                                                  |              | $544,899      |                  | $663,505    
|                                                          |                                                           |                                                  |              |               |                 
|                                                          | Supplemental schedule of non-cash financing transactions: |                                                  |              |               |                 
|                                                          | Obligations under capital leases                          |                                                  | $4,253,535   |               | $3,034,460      
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          |                                                           |                                                  |              |               |                  |              |     
|                                                          |                                                           |                                                  |              |               |                  |              |     
|See accompanying notes to condensed financial statements.





CURAGEN CORPORATION

NOTES TO CONDENSED
   FINANCIAL STATEMENTS(unaudited)

1. Basis of Presentation



The accompanying unaudited condensed
   financial statements have been prepared in accordance with generally
   accepted accounting principles for interim financial information and
   with the instructions to Form 10-Q and Article 10 of Regulation S-X.
   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 the Company's
   management, the accompanying unaudited condensed financial
   statements include all adjustments, consisting of only normal
   recurring accruals, necessary to present fairly the financial
   position, results of operations and cash flows of the Company.
   Interim results are not necessarily indicative of the results that
   may be expected for the entire year.

The accompanying condensed financial
   statements should be read in conjunction with the audited financial
   statements and notes thereto included in the Company's Annual Report
   on Form 10-K for the year ended December 31, 1998.

2. COR Therapeutics

The Company signed a product discovery
   and pharmacogenomics agreement with COR Therapeutics, Inc. ("COR
   ") in May 1999. Under the terms of this agreement, the Company
   will apply its SeqCallingTM
 , GeneCallingR
 , and PathCallingTM
 technologies, related services, and pharmacogenomics expertise to
   identify new drug targets and develop novel cardiovascular drugs.
   This renewable collaboration is valued at approximately $2.6 million
   for an initial period of 18 months. The Company may also receive
   milestone and royalty payments for products developed by COR as a
   result of this collaboration.





This Management's Discussion and
   Analysis of Financial Condition and Results of Operations as of June
   30, 1999 and for the three and six month periods ended June 30, 1999
   and 1998 should be read in conjunction with the sections of the
   Company's audited financial statements and notes thereto as well as
   the Company's "Management's Discussion and Analysis of
   Financial Condition and Results of Operations"that are
   included in the Company's Annual Report on Form 10-K for the year
   ended December 31, 1998.

#### Overview

CuraGen Corporation (the "Company" or
   "CuraGen") is a biotechnology company focusing on the
   application of genomics to the systematic discovery of genes,
   biological pathways and drug candidates in order to accelerate the
   discovery and development of the next generation of therapeutic,
   agricultural and diagnostic products. The Company was incorporated
   in November 1991 and, until March 1993, was engaged primarily in
   organizational activities, research and development of the Company's
   technology, grant preparation and obtaining financing. The Company
   has incurred losses since inception, principally as a result of
   research and development and general and administrative expenses in
   support of its operations. As of June 30, 1999, the Company had an
   accumulated deficit of $42,071,578. The Company anticipates
   incurring additional losses over at least the next several years as
   it expands its internal and collaborative gene discovery efforts,
   continues development of its technology and expands its operations.
   The Company expects that losses will fluctuate from quarter to
   quarter and that such fluctuations may be substantial.

Results of Operations

Three and Six Months Ended June 30, 1999 and
   1998

Revenue. Revenue for the three and six
   months ended June 30, 1999 was $3,332,687 and $6,004,630,
   respectively, an increase of $617,061 and $1,299,432, or 23% and
   28%, respectively, as compared to $2,715,626 and $4,705,198 for the
   corresponding periods in 1998. The increases were largely due to
   additional collaboration revenue recorded during 1999, under the
   Company's arrangements with Pioneer Hi-Bred International, Inc.,
   Glaxo Wellcome, Inc.,
 Hoffmann-La Roche Inc., Roche Vitamins
   Inc.,
 and
 COR Therapeutics, Inc.
 offset by a decrease in grant revenue due to the
   completion of two federal grants during the first and second
   quarters of 1999. The Company expects future revenues will continue
   to increase as additional collaborative arrangements are signed.

Operating Expenses. Grant research
   expenses for the three and six months ended June 30, 1999 of $36,775
   and $417,386 represented a decrease of $398,771 and $690,313, or 92%
   and 62%, respectively, compared to $435,546 and $1,107,699 for the
   three and six months ended June 30, 1998. The decrease in grant
   research expenses was primarily attributable to the completion of
   the Company's federal grants during the first and second quarters of
   1999.
 As a result of the completion of such
   federal grants, the Company foresees no additional grant research
   expenses in future periods, unless additional grant awards are
   received.

Collaborative research and development expenses
   for the three and six months ended June 30, 1999 were $6,327,240 and
   $12,918,699, respectively, compared to $3,653,524 and $6,796,077 for
   the three and six months ended June 30, 1998. The increases of
   $2,673,716 and $6,122,622 for the three and six months ended June
   30, 1999, respectively, or 73% and 90%, respectively, were primarily
   attributable to the Company's obligations under new and existing
   collaborations to fulfill research requirements, in addition to
   internal research efforts, which resulted in increased purchases of
   laboratory supplies, increased equipment depreciation and facilities
   expenses, and additional personnel costs. Future collaborative
   research and development expenses are expected to increase as
   additional personnel are hired and research and development
   facilities are expanded to accommodate the Company's collaborations
   and internal research.

General and administrative expenses
   for the three months ended June 30, 1999 increased 77% to $3,002,818
   as compared to $1,696,627 for the three months ended June 30, 1998.
   For the six months ended June 30, 1999 and 1998, general and
   administrative expenses were $6,211,885 and $3,075,617,
   respectively, an increase of $3,136,268 or 102%. The increases were
   primarily attributable to the expansion of administration
   facilities, increased payroll
 costs and the incurrence of related depreciation expense and legal
   expenses in support of developing the Company's intellectual
   property portfolios. Over the next several years, the Company
   anticipates percentage increases in general and administrative
   expenses will be proportionate to percentage increases in
   collaborative research and development expenses.

Interest Income, Net. Net
   interest income for the three months ended June 30, 1999 of $109,003
   decreased $462,051, or 81%, compared to $571,054 for the same period
   in 1998. For the six months ended June 30, 1999, net interest income
   of $411,270 decreased $196,395, or 32%, as compared to net interest
   income of $607,665 for the corresponding period in 1998. The
   decreases were primarily due to the lower balances held in the
   Company's cash and cash equivalent accounts, and additional interest
   expense paid on new capital lease obligations. The Company
   anticipates that net interest income will continue to decrease in
   the future, due to the anticipated decline in cash and cash
   equivalent balances, in addition to the expected increase in capital
   lease obligations.

Net Loss Attributable to Common
   Stockholders. For the three months ended June 30, 1999, the
   Company reported a net loss attributable to common stockholders of
   $5,925,143 or $0.44 per share as compared to $2,499,017 or $0.19 per
   share for the second quarter of 1998. Since inception, the Company
   has incurred operating losses, and as of June 30, 1999, had an
   accumulated deficit of $42,071,578 and therefore, has not paid any
   federal income taxes. Realization of deferred tax assets is
   dependent on future earnings, if any, the timing and amount of which
   are uncertain. Accordingly, valuation allowances in amounts equal to
   the deferred income tax assets have been established to reflect
   these uncertainties in all periods presented.

Liquidity and Capital Resources

As of June 30, 1999, the Company had
   $29.8 million in cash and cash equivalents, compared to $43.3
   million as of December 31, 1998. This decrease represents the
   utilization of funds for payment of laboratory facilities, supplies
   and payroll costs to support internal and collaborative research
   processes. The Company has financed its operations since inception
   primarily through its initial public offering of Common Stock,
   private placements of equity securities, government grants,
   collaborative research and development agreements and capital
   leases. As of June 30, 1999, the Company had recognized $27,441,759
   of cumulative sponsored research revenues from government grants and
   collaborative research agreements. To date, inflation has not had a
   material effect on the Company's business. During the next six
   months, the Company intends to drawdown a portion of the
   interest-bearing loan facilities available from Genentech, Inc. and
   Biogen, Inc., to support ongoing operating activities. These loan
   facilities contain annual borrowing limits, and subject to the terms
   of each agreement, the drawn-down portion of the loan may be
   converted at the Company's option into common stock.

The Company's investing activities have
   consisted primarily of acquisitions of equipment and expenditures
   for leasehold improvements. At June 30, 1999, the Company's gross
   investment in equipment, computers and leasehold improvements since
   inception was $24,574,439. At June 30, 1999, equipment with a gross
   book value of $14,868,609 secures the Company's equipment financing
   facility for equipment and tenant improvements in support of the
   laboratory expansions at the New Haven, Connecticut, Branford,
   Connecticut and Alachua, Florida locations. The Company had no
   material commitments for capital expenditures at June 30,1999.

Net cash used in operating activities
   was $12,252,902 for the six months ended June 30, 1999, compared to
   $2,678,962 for the same period ended June 30, 1998. Cash outflows
   for the six months ended June 30, 1999 primarily included payments
   on capital lease obligations, while cash inflows primarily included
   proceeds from sale-leasebacks of equipment.

At June 30, 1999, the
   Company had federal and Connecticut net operating loss carryforwards
   for income tax purposes of approximately $40,800,000. Federal net
   operating loss carryforwards expire beginning in 2008, and
   Connecticut net operating loss carryforwards began expiring in 1998.
   The Company also has federal and Connecticut research and
   development tax credit carryforwards for income tax purposes of
   approximately $2,300,000 and $3,100,000, respectively, at June 30,
   1999.

Year 2000 Compliance

The "Year 2000 Problem" arose because
   many existing computer programs use only the last two digits to
   refer to a year. Therefore, these computer programs may recognize a
   year that ends in "00" as the Year 1900 rather than the
   Year 2000. This could result in a significant disruption of
   operations and an inability to process certain transactions.



Strategic Plan

Early in 1998, upon going public, the
   Company assessed its internal computer systems. It was determined
   that because its computer applications use four digits to identify a
   year in the field date, the Company was in fact internally compliant
   with Year 2000 requirements. However, the Company has developed a
   strategic plan to estimate the potential risks related to third
   parties, with which it has relationships, including third parties
   that provide non-information technology systems to the Company. The
   third parties include financial institutions, vendors, payroll
   service providers, collaborative partners, utility companies and
   granting agencies. If any of these third parties encounter Year 2000
   problems, it could potentially have a significant outcome on the
   ability of the Company to effectively continue its normal daily
   operations.

The initial stage included
   distribution of inquiry letters to the Company's most significant
   third parties, followed by internal evaluation of the responses
   received. During the second quarter of 1999, the Company evaluated
   all responses and determined that, based on such responses,
   approximately 50% of the third parties were fully compliant,
   approximately 40% were still in the process of determining their
   compliance status, and the remaining 10% had not responded at all.
   Although the Company originally expected to complete the initial
   stage by the end of the first quarter of 1999, due to the delay in
   receiving complete responses from third parties, the initial stage
   was completed in July 1999.

Upon learning that certain third
   parties will not be Year 2000 compliant, the Company will correct
   and/or replace any vendors or vendor software, as soon as is
   feasible, as part of the second stage - implementation. The Company
   is contacting all currently non-compliant and non-responsive third
   parties to explain that if responses guaranteeing Year 2000
   compliance are not received by October 15, 1999, the Company will
   acquire new third party vendors who are Year 2000 compliant.

Costs

There have been no material historical
   costs incurred to date by the Company related to Year 2000
   compliance. While the Company cannot predict what impact the Year
   2000 problem may have on third parties, it does not currently
   believe that it will incur material costs in the implementation
   stage of resolving potential Year 2000 problems of third parties
   with whom it electronically interacts.

Risks

Currently, the Company is assessing
   the potential risks associated with non-compliance of its external
   third parties. While it is understood by the Company that the
   potential effect on results of operations could be serious and could
   have a material adverse affect on the Company's business or
   financial condition, at this time management has not determined the
   entire potential level of risk.

Contingency Plan

At the present time, the Company does
   not believe that a contingency plan is necessary. The Company will
   continue to monitor the need for a contingency plan based on the
   results of its Year 2000 compliance strategic plan.

Certain Factors That May Affect
   Results of Operations

This report may contain
   forward-looking statements that are subject to certain risks and
   uncertainties. These statements include statements regarding the
   expected future levels of losses, potential quarterly fluctuations
   in the levels of losses, the expected future increase in revenues,
   capital lease obligations and collaborative research and development
   expenses, the expected future decrease in grant research expenses
   and net interest income, the anticipated increases in general and
   administrative expenses, intended drawdowns on the interest-bearing
   loan facilities available from Genentech, Inc. and Biogen, Inc., as
   well as the Company's Year 2000 readiness. Such statements are based
   on management's current expectations and are subject to a number of
   factors and uncertainties that could cause actual results to differ
   materially from those described in the forward-looking statements.
   The Company cautions investors that there can be no assurance that
   actual results or business conditions will not differ materially
   from those projected or suggested in such forward-looking statements
   as a result of various factors, including, but not limited to, the
   following: the Company's early stage of development, technological
   uncertainty and product development risks, uncertainty of additional
   funding, reliance on research collaborations, competition, the
   Company's ability to protect its patents and proprietary rights and
   uncertainties relating to commercialization rights. For further
   information, refer to the more specific risks and uncertainties
   discussed throughout this discussion and analysis.





Part II - Other
   Information

Item 2. Changes in Securities and
   Use of Proceeds

In connection with the Company's
   initial public offering, the Company sold 3,275,000 shares of its
   Common Stock and received net offering proceeds of $33,160,350. On
   March 17, 1998, the Securities and Exchange Commission declared the
   Company's Registration Statement on Form S-1 (File No. 333-38051)
   effective.

The following table sets forth the
   Company's cumulative use of net offering proceeds as of June 30,
   1999:





The foregoing use of net offering
   proceeds does not represent a material change in the use of proceeds
   described in the Registration Statement.

Item 4. Submission of Matters to a
   Vote of Security Holders

The Company held its Annual Meeting of
   shareholders on May 12, 1999, and the following matters were voted
   on at that meeting:

1. The election of Robert E.
   Patricelli, J.D. and James L. Vincent as Class I Directors, each to
   serve for a three year term of office or until their successors are
   elected. The following chart shows the number of votes cast for or
   against each director, as well as the number of abstentions and
   broker nonvotes:





2. The proposal to increase by
   2,000,000 shares the aggregate number of shares for which stock
   options and stock awards may be granted under the Company's 1997
   Employee, Director and Consultant Stock Plan. The following chart
   shows the number of votes cast for or against the proposal, as well
   as the number of abstentions and broker nonvotes:



|FOR       | AGAINST | ABSTAIN | BROKER NONVOTES
|--------- | ------- | ------- | ---------------
|8,144,842 | 402,572 | 12,200  | 1,130,557      



Item 6. Exhibits and Reports on
   Form 8-K







SIGNATURES

Pursuant to the requirements of the
   Securities Exchange Act of 1934, the registrant has duly caused this
   report to be signed on its behalf by the undersigned thereunto duly
   authorized.

|Dated: August 13, 1999 |  | CuraGen Corporation                                                                                                                                                                     
|---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |  |                                                                                                                                                                                         
|                       |  | By: /s/ Jonathan M.
     Rothberg, Ph.D.
   Jonathan M. Rothberg, Ph.D.
   Chief Executive Officer, President and
   Chairman of the Board                                              
|                       |  |                                                                                                                                                                                         
|                       |  | By: /s/ David M. Wurzer
   David M. Wurzer
   Executive Vice-President, Treasurer
   and Chief Financial Officer, (principal
   financial and accounting officer of the
     registrant)





CURAGEN CORPORATION

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