-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B4nysmeFfAq637uiHHJS62PvHWmAgvrAkaMmUaa8dymDt2Y+so/3AKAs8EYgDlB+ c2AzpbunJ8cikr74ZwdLDQ== 0000950137-97-003382.txt : 19971016 0000950137-97-003382.hdr.sgml : 19971016 ACCESSION NUMBER: 0000950137-97-003382 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHFIELD LABORATORIES INC /DE/ CENTRAL INDEX KEY: 0000920947 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 363378733 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24050 FILM NUMBER: 97696259 BUSINESS ADDRESS: STREET 1: 1560 SHERMAN AVE STREET 2: SUITE 1000 CITY: EVANSTON STATE: IL ZIP: 60201-4800 BUSINESS PHONE: 8478643500 MAIL ADDRESS: STREET 1: 1560 SHERMAN AVE STE 1000 STREET 2: 37TH FLOOR CITY: EVANSTON STATE: IL ZIP: 60201-4800 10-Q 1 FORM 10-Q DATED AUGUST 31, 1997 1 ============================================================================= SECURITIES AND EXCHANGE COMMISSION WASHINGTON, 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 PERIOD ENDED AUGUST 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ______________ COMMISSION FILE NUMBER 0-24050 NORTHFIELD LABORATORIES INC. (Exact name of registrant as specified in its charter) DELAWARE 36-3378733 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 1560 SHERMAN AVENUE, SUITE 1000, EVANSTON, ILLINOIS 60201-4800 (Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 864-3500 FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT: NOT APPLICABLE 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 X NO --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN CONFIRMED BY A COURT. YES ___ NO __ AS OF AUGUST 31, 1997, REGISTRANT HAD 14,092,375 SHARES OF COMMON STOCK OUTSTANDING. ============================================================= 2 NORTHFIELD LABORATORIES INC. (a company in the development stage) Financial Statements August 31, 1997 (See accompanying review report of KPMG Peat Marwick LLP) 3 INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors Northfield Laboratories Inc.: We have reviewed the balance sheet of Northfield Laboratories Inc. (a company in the development stage) as of August 31, 1997, and the related statements of operations and cash flows for the three-month periods ended August 31, 1997 and 1996 and for the period from June 19, 1985 (inception) through August 31, 1997. We have also reviewed the statements of shareholders' equity (deficit) for the three-month period ended August 31, 1997 and for the period from June 19, 1985 (inception) through August 31, 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of Northfield Laboratories Inc. as of May 31, 1997, and the related statements of operations, shareholders' equity (deficit), and cash flows for the year then ended and for the period from June 19, 1985 (inception) through May 31, 1997 (not presented herein); and in our report dated July 3, 1997, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of May 31, 1997 and in the accompanying statement of shareholders' equity (deficit) is fairly stated, in all material respects, in relation to the statement from which it has been derived. September 26, 1997 1 4 NORTHFIELD LABORATORIES INC. (a company in the development stage) Balance Sheets August 31, 1997 (unaudited) and May 31, 1997
============================================================================================ August 31, May 31, ASSETS 1997 1997 - -------------------------------------------------------------------------------------------- Current assets: Cash $ 7,798,231 21,367,496 Short-term marketable securities 50,796,265 38,926,904 Prepaid expenses 266,519 334,875 Other current assets 633,085 417,693 - -------------------------------------------------------------------------------------------- Total current assets 59,494,100 61,046,968 Plant and equipment, net 1,325,329 1,263,361 Other assets 28,013 32,432 - -------------------------------------------------------------------------------------------- $ 60,847,442 62,342,761 ============================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------------------- Current liabilities: Accounts payable 460,523 656,816 Accrued expenses 137,369 121,559 Accrued compensation and benefits 194,242 175,800 - -------------------------------------------------------------------------------------------- Total current liabilities 792,134 954,175 Other liabilities 89,697 93,823 - -------------------------------------------------------------------------------------------- Total liabilities 881,831 1,047,998 - -------------------------------------------------------------------------------------------- Shareholders' equity: Preferred stock, $.01 par value. Authorized 5,000,000 shares; none issued and outstanding -- -- Common stock, $.01 par value. Authorized 20,000,000 shares; issued and outstanding 14,092,375 shares at August 31, 1997 and May 31, 1997, respectively 140,924 140,924 Additional paid-in capital 116,011,985 116,011,985 Deficit accumulated during the development stage (56,186,656) (54,856,862) Deferred compensation (642) (1,284) - -------------------------------------------------------------------------------------------- Total shareholders' equity 59,965,611 61,294,763 - -------------------------------------------------------------------------------------------- $ 60,847,442 62,342,761 ============================================================================================
See accompanying independent auditors' review report. 2 5 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Operations Three months ended August 31, 1997 and 1996 and for the period from June 19, 1985 (inception) through August 31, 1997
=============================================================================================================== Cumulative Three months ended from August 31, June 19, 1985 ---------------------- through 1997 1996 August 31, 1997 - --------------------------------------------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) Revenues - license income $ -- -- 3,000,000 Costs and expenses: Research and development 1,585,734 1,259,955 47,197,499 General and administrative 582,465 538,865 25,143,374 - --------------------------------------------------------------------------------------------------------------- 2,168,199 1,798,820 72,340,873 - --------------------------------------------------------------------------------------------------------------- Other income and expense: Interest income 838,405 828,540 13,237,451 Interest expense -- -- 83,234 - --------------------------------------------------------------------------------------------------------------- 838,405 828,540 13,154,217 - --------------------------------------------------------------------------------------------------------------- Net loss $(1,329,794) (970,280) (56,186,656) =============================================================================================================== Net loss per share $ (0.09) (0.07) (7.22) =============================================================================================================== Shares used in calculation of per share data 14,092,375 13,803,149 7,783,078 ===============================================================================================================
See accompanying independent auditors' review report. 3 6 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statement of Shareholders' Equity (Deficit) Three months ended August 31, 1997 and for the period from June 19, 1985 (inception) to August 31, 1997
- --------------------------------------------------------------------------------------------------------------------------------- Preferred stock ----------------------- Number Aggregate of shares amount - --------------------------------------------------------------------------------------------------------------------------------- Issuance of common shares at $0.002 per share on August 27, 1985 - $ - Issuance of Series A convertible preferred shares at $4.00 per share on August 27, 1985 (net of costs of issuance of $79,150) - - Net loss - - - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1986 - - Net loss - - Deferred compensation relating to grant of stock options - - Amortization of deferred compensation - - - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1987 - - Issuance of Series B convertible preferred shares at $35.68 per share on August 14, 1987 (net of costs of issuance of $75,450) - - Net loss - - Amortization of deferred compensation - - - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1988 - - Issuance of common shares at $24.21 per share on June 7, 1988 (net of costs of issuance of $246,000) - - Conversion of Series A convertible preferred shares to common shares on June 7, 1988 - - Conversion of Series B convertible preferred shares to common shares on June 7, 1988 - - Exercise of stock options at $2.00 per share - - Issuance of common shares at $28.49 per share on March 6, 1989 (net of costs of issuance of $21,395) - - Issuance of common shares at $28.49 per share on March 30, 1989 (net of costs of issuance of $10,697) - - Sale of options at $28.29 per share to purchase common shares at $.20 per share on March 30, 1989 (net of costs of issuance of $4,162) - - Net loss - - Deferred compensation relating to grant of stock options - - Amortization of deferred compensation - - - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1989 - - Net loss - - Deferred compensation relating to grant of stock options - - Amortization of deferred compensation - - - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1990 - - Net loss - - Amortization of deferred compensation - - - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1991 - - Exercise of stock warrants at $5.60 per share - - Net loss - - Amortization of deferred compensation - - - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1992 - - Exercise of stock warrants at $7.14 per share - - Issuance of common shares at $15.19 per share on April 19, 1993 (net of costs of issuance of $20,724) - - Net loss - - Amortization of deferred compensation - - - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1993 - $ - - ---------------------------------------------------------------------------------------------------------------------------------
4 7 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statement of Shareholders' Equity (Deficit) Three months ended August 31, 1997 and for the period from June 19, 1985 (inception) to August 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------- Series A convertible Series B convertible Deficit Total Common stock preferred stock preferred stock accumulated share- ------------------------ --------------------- ----------------------- Additional during the Deferred holders' Number Aggregate Number Aggregate Number Aggregate paid-in development compen- equity of shares amount of shares amount of shares amount capital stage sation (deficit) - ----------------------------------------------------------------------------------------------------------------------------------- 3,500,000 $35,000 - $ - - $ - (28,000) - - 7,000 - - 250,000 250,000 - - 670,850 - - 920,850 - - - - - - - (607,688) - (607,688) - ----------------------------------------------------------------------------------------------------------------------------------- 3,500,000 35,000 250,000 250,000 - - 642,850 (607,688) - 320,162 - - - - - - - (2,429,953) - (2,429,953) - - - - - - 2,340,000 - (2,340,000) - - - - - - - - - 720,000 720,000 - ----------------------------------------------------------------------------------------------------------------------------------- 3,500,000 35,000 250,000 250,000 - - 2,982,850 (3,037,641) (1,620,000) (1,389,791) - - - - 200,633 200,633 6,882,502 - - 7,083,135 - - - - - - - (3,057,254) - (3,057,254) - - - - - - - - 566,136 566,136 - ----------------------------------------------------------------------------------------------------------------------------------- 3,500,000 35,000 250,000 250,000 200,633 200,633 9,865,352 (6,094,895) (1,053,864) 3,202,226 413,020 4,130 - - - - 9,749,870 - - 9,754,000 1,250,000 12,500 (250,000) (250,000) - - 237,500 - - - 1,003,165 10,032 - - (200,633) (200,633) 190,601 - - - 47,115 471 - - - - 93,759 - - 94,230 175,525 1,755 - - - - 4,976,855 - - 4,978,610 87,760 878 - - - - 2,488,356 - - 2,489,234 - - - - - - 7,443,118 - - 7,443,118 - - - - - - - (791,206) - (791,206) - - - - - - 683,040 - (683,040) - - - - - - - - - 800,729 800,729 - ----------------------------------------------------------------------------------------------------------------------------------- 6,476,585 64,766 - - - - 35,728,451 (6,886,101) (936,175) 27,970,941 - - - - - - - (3,490,394) - (3,490,394) - - - - - - 699,163 - (699,163) - - - - - - - - - 546,278 546,278 - ----------------------------------------------------------------------------------------------------------------------------------- 6,476,585 64,766 - - - - 36,427,614 (10,376,495) (1,089,060) 25,026,825 - - - - - - - (5,579,872) - (5,579,872) - - - - - - - - 435,296 435,296 - ----------------------------------------------------------------------------------------------------------------------------------- 6,476,585 64,766 - - - - 36,427,614 (15,956,367) (653,764) 19,882,249 90,000 900 - - - - 503,100 - - 504,000 - - - - - - - (7,006,495) - (7,006,495) - - - - - - - - 254,025 254,025 - ----------------------------------------------------------------------------------------------------------------------------------- 6,566,585 65,666 - - - - 36,930,714 (22,962,862) (399,739) 13,633,779 15,000 150 - - - - 106,890 - - 107,040 374,370 3,744 - - - - 5,663,710 - - 5,667,454 - - - - - - - (8,066,609) - (8,066,609) - - - - - - - - 254,025 254,025 - ----------------------------------------------------------------------------------------------------------------------------------- 6,955,955 $ 69,560 - $ - - $ - 42,701,314 (31,029,471) (145,714) 11,595,689 - -----------------------------------------------------------------------------------------------------------------------------------
5 8 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statement of Shareholders' Equity (Deficit), Continued
================================================================================================================================= Preferred stock ------------------------ Number Aggregate of shares amount - --------------------------------------------------------------------------------------------------------------------------------- Net loss -- $ -- Issuance of common shares at $6.50 per share on May 26, 1994 (net of costs of issuance of $2,061,149) -- -- Cancellation of stock options -- -- Amortization of deferred compensation -- -- - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1994 -- -- Net loss -- -- Issuance of common shares at $6.50 per share on June 20, 1994 (net of issuance costs of $172,500) -- -- Exercise of stock options at $7.14 per share -- -- Exercise of stock options at $2.00 per share -- -- Cancellation of stock options -- -- Amortization of deferred compensation -- -- - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1995 -- -- Net loss -- -- Issuance of common stock at $17.75 per share on August 9, 1995 (net of issuance costs of $3,565,125) -- -- Issuance of common stock at $17.75 per share on September 11, 1995 (net of issuance costs of $423,238) -- -- Exercise of stock options at $2.00 per share -- -- Exercise of stock options at $6.38 per share -- -- Exercise of stock options at $7.14 per share -- -- Cancellation of stock options -- -- Amortization of deferred compensation -- -- - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1996 -- -- Net loss -- -- Exercise of stock options at $0.20 per share -- -- Exercise of stock options at $2.00 per share -- -- Exercise of stock options at $7.14 per share -- -- Amortization of deferred compensation -- -- - --------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1997 -- -- Net loss (unaudited) -- -- Amortization of deferred compensation (unaudited) -- -- - --------------------------------------------------------------------------------------------------------------------------------- Balance at August 31, 1997 (unaudited) -- $ -- =================================================================================================================================
See accompanying independent auditors' review report. 6 9 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statement of Shareholders' Equity (Deficit), Continued
================================================================================================================================== Series A convertible Series B convertible Deficit Total Common stock preferred stock preferred stock accumulated share- - --------------------- ------------------------ ---------------------- Additional during the Deferred holders' Number Aggregate Number Aggregate Number Aggregate paid-in development compen- equity of shares amount of shares amount of shares amount capital stage sation (deficit) - --------------------------------------------------------------------------------------------------------------------------------- -- $ -- -- $ -- -- $ -- -- (7,363,810) -- (7,363,810) 2,500,000 25,000 -- -- -- -- 14,163,851 -- -- 14,188,851 -- -- -- -- -- -- (85,400) -- 85,400 -- -- -- -- -- -- -- -- -- 267 267 - --------------------------------------------------------------------------------------------------------------------------------- 9,455,955 94,560 -- -- -- -- 56,779,765 (38,393,281) (60,047) 18,420,997 -- -- -- -- -- -- -- (7,439,013) -- (7,439,013) 375,000 3,750 -- -- -- -- 2,261,250 -- -- 2,265,000 10,000 100 -- -- -- -- 71,300 -- -- 71,400 187,570 1,875 -- -- -- -- 373,264 -- -- 375,139 -- -- -- -- -- -- (106,750) -- 106,750 -- -- -- -- -- -- -- -- -- (67,892) (67,892) - --------------------------------------------------------------------------------------------------------------------------------- 10,028,525 100,285 -- -- -- -- 59,378,829 (45,832,294) (21,189) 13,625,631 -- -- -- -- -- -- -- (4,778,875) -- (4,778,875) 2,925,000 29,250 -- -- -- -- 48,324,374 -- -- 48,353,624 438,750 4,388 -- -- -- -- 7,360,187 -- -- 7,364,575 182,380 1,824 -- -- -- -- 362,937 -- -- 364,761 1,500 15 -- -- -- -- 9,555 -- -- 9,570 10,000 100 -- -- -- -- 71,300 -- -- 71,400 -- -- -- -- -- -- (80,062) -- 80,062 -- -- -- -- -- -- -- -- -- (62,726) (62,726) - --------------------------------------------------------------------------------------------------------------------------------- 13,586,155 135,862 -- -- -- -- 115,427,120 (50,611,169) (3,853) 64,947,960 -- -- -- -- -- -- -- (4,245,693) -- (4,245,693) 263,285 2,633 -- -- -- -- 50,025 -- -- 52,658 232,935 2,329 -- -- -- -- 463,540 -- -- 465,869 10,000 100 -- -- -- -- 71,300 -- -- 71,400 -- -- -- -- -- -- -- -- 2,569 2,569 - --------------------------------------------------------------------------------------------------------------------------------- 14,092,375 140,924 -- -- -- -- 116,011,985 (54,856,862) (1,284) 61,294,763 -- -- -- -- -- -- -- (1,329,794) -- (1,329,794) -- -- -- -- -- -- -- -- 642 642 - --------------------------------------------------------------------------------------------------------------------------------- 14,092,375 $ 140,924 -- $ -- -- $ -- 116,011,985 (56,186,656) (642) 59,965,611 =================================================================================================================================
7 10 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Cash Flows Three months ended August 31, 1997 and 1996 and for the period from June 19, 1985 (inception) through August 31, 1997
- ------------------------------------------------------------------------------------------------------------ Cumulative Three months ended from August 31, June 19, 1985 ------------------------------ through 1997 1996 August 31, 1997 - ------------------------------------------------------------------------------------------------------------ (unaudited) (unaudited) (unaudited) Cash flows from operating activities: Net loss $ (1,329,794) (970,280) (56,186,656) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 114,752 121,252 12,981,875 Amortization of deferred compensation 642 643 3,449,349 Loss on sale of equipment - 66,359 Changes in assets and liabilities: Prepaid expenses 68,356 75,783 (266,519) Other current assets (242,891) 45,437 (2,547,668) Other assets 4,166 12,499 (43,158) Accounts payable (196,293) (446,725) 460,523 Accrued expenses 15,810 (45,498) 137,369 Accrued compensation and benefits 18,442 701 194,242 Other liabilities (4,126) (2,682) 89,697 - --------------------------------------------------------------------------------------------------------- Net cash used in operating activities (1,550,936) (1,208,870) (41,664,587) - --------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchase of plant, equipment, and capitalized engineering costs (148,968) (62,704) (12,520,422) Proceeds from matured marketable securities 10,049,200 27,049,200 245,791,581 Proceeds from sale of marketable securities - - 7,141,656 Purchase of marketable securities (21,918,561) (27,290,834) (303,729,503) Proceeds from sale of equipment - - 76,587 - --------------------------------------------------------------------------------------------------------- Net cash provided by (used in) in investing activities (12,018,329) (304,338) (63,240,101) - --------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from issuance of common stock - 303,867 102,327,828 Payment of common stock issuance costs - - (5,072,012) Proceeds from issuance of preferred stock - - 6,644,953 Proceeds from sale of stock options to purchase common shares - - 7,443,118 Proceeds from issuance of notes payable - - 1,500,000 Repayment of notes payable - - (140,968) - --------------------------------------------------------------------------------------------------------- Net cash provided by financing activities - 303,867 112,702,919 - --------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash (13,569,265) (1,209,341) 7,798,231 Cash at beginning of period 21,367,496 11,688,744 - - --------------------------------------------------------------------------------------------------------- Cash at end of period $ 7,798,231 10,479,403 7,798,231 - ---------------------------------------------------------------------------------------------------------
See accompanying independent auditors' review report. 8 11 NORTHFIELD LABORATORIES INC. (a company in the development stage) Notes to Financial Statements August 31, 1997 (1) BASIS OF PRESENTATION The interim financial statements as of August 31, 1997 and 1996, in the opinion of management, have been prepared in conformity with generally accepted accounting principles applied on a basis consistent with those of the annual financial statements. Such interim financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The results of operations for the interim period presented are not necessarily indicative of the results to be expected for the year ending May 31, 1998. The interim financial statements should be read in connection with the audited financial statements for the year ended May 31, 1997. (2) COMPUTATION OF NET LOSS PER SHARE The net loss per common and common equivalent share has been computed using the weighted average number of common shares outstanding for each period. Common equivalent shares from stock options and warrants are excluded from the computation as their effect is antidilutive. 9 12 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Since its incorporation in 1985, Northfield Laboratories Inc. ("Northfield" or the "Company") has devoted substantially all of its efforts and resources to the research, development and clinical testing of its potential product, PolyHeme. Northfield has incurred operating losses during each year of its operations since inception and expects to incur substantial additional operating losses for the next several years. From its inception to August 31, 1997, Northfield incurred operating losses totaling $56,186,656. The Company's success will depend on several factors including its ability to obtain Food & Drug Administration regulatory approval of PolyHeme and the Company's manufacturing facilities, obtain sufficient quantities of blood to manufacture PolyHeme in commercial quantities, manufacture and distribute PolyHeme in a cost-effective manner, and enforce its patent positions. The Company has experienced significant delays in the development and clinical testing of PolyHeme. There can be no assurance that the Company will be able to achieve these goals or that it will be able to realize product revenues or profitability on a sustained basis or at all. The Company anticipates that research and development expenses will increase during the foreseeable future. These expected increases are related to the conducting of future clinical trials, the monitoring and reporting of results of such trials and continuing process development associated with increases in the Company's manufacturing capacity to 10 13 permit commercial scale production of PolyHeme. The Company expects that general and administrative expenses will increase over the foreseeable future due to increased expenses relating to the expansion of the Company's organization in support of commercial operations. RESULTS OF OPERATIONS For the First Quarter Ended August 31, 1997 and 1996. The Company reported no revenues for either of the three-month periods ended August 31, 1997 or 1996. From its inception through August 31, 1997, the Company has reported total revenues of $3,000,000, all of which were derived from licensing fees. OPERATING EXPENSES Operating expenses for the Company's first fiscal quarter ended August 31, 1997 totaled $2,168,000, an increase of $369,000 from the $1,799,000 reported in the first quarter of fiscal 1997. Measured on a percentage basis, total expenses in the first quarter of fiscal 1998 increased by 20.5%. Research and development expenses for the first quarter of fiscal 1998 totaled $1,586,000, an increase of $326,000, or 25.9%, from the $1,260,000 reported in the first 11 14 quarter of fiscal 1997. All of the increase in research and development expenses resulted from increases associated with clinical trials. Increased start up costs for the Phase III trials were incurred for study initiation fees, site recruitment and qualification, training for the contract research organization and in finalizing case report forms. Phase II clinical trials remain open and are on-going, enrolling high volume trauma patients. Higher expense was also incurred in increasing pilot manufacturing to provide PolyHeme for the Company's expanded clinical trials. The Company anticipates that research and development expenses will increase over the next several quarters. Additional costs are being planned for expanded multi-center clinical trials, third-party clinical monitoring and third-party product testing. General and administrative expenses in the first quarter of fiscal 1998 totaled $582,000 compared to expenses of $539,000 in the first quarter of 1997, representing an increase of $43,000, or 8.1%. During the quarter, Northfield made a concerted effort to make itself more visible to the investing and scientific communities. This effort resulted in higher public relations and travel expenses compared to the prior fiscal year. The Company is planning to continue this effort over the balance of the fiscal year. The Company anticipates that general and administrative expenses will exceed fiscal 1997 levels as a result of business development efforts and with the ongoing costs of serving an expanding shareholder base. 12 15 INTEREST INCOME Interest income in the first quarter of fiscal 1998 equaled $838,000, or a $9,000 increase from the $829,000 in interest income reported in the first quarter of fiscal 1997. Higher interest rates in fiscal 1998 more than offset lower available investment balances and allowed a small quarter over quarter gain. The level of interest income to be earned over the balance of fiscal 1998 will be dependent primarily on the rate of investment spending Northfield makes to prepare for commercialization of its PolyHeme product. NET LOSS The net loss for the first quarter ended August 31, 1997 was $1,330,000, or $.09 per share, compared to a net loss of $970,000, or $.07 per share, for the first quarter ended August 31, 1996. The increase in the loss per share is the result of the increase in the dollar loss mitigated by having additional shares outstanding. LIQUIDITY AND CAPITAL RESOURCES From its inception through August 31, 1997, the Company has expended cash in operating activities and for the purchase of plant, equipment and engineering services in the amount of $54,185,000. For the three-month periods ended August 31, 1997 and 1996, these cash expenditures totaled $1,700,000 and $1,272,000, respectively. The first quarter 13 16 fiscal 1998 net cash outlay of $1,700,000 was comparatively high and reflected the stepped up level of clinical and business development effort currently underway. The Company has financed its research and development and other activities to date through the sale of public and private securities and, to a more limited extent, through the license of product rights. As of August 31, 1997, the Company had cash and marketable securities totaling $58,594,000. The Company believes existing capital resources will be adequate to satisfy its operating capital requirements for approximately the next 18-24 months. Thereafter, the Company may require substantial additional funds to test and seek regulatory approval for PolyHeme and to build a commercial capability. The capital required to construct a commercial scale manufacturing facility is estimated to cost $40-$45 million. The Company may use existing resources to finance a commercial manufacturing facility or it may enter into collaborative arrangements with strategic partners which could provide the Company with additional funding or absorb expenses otherwise payable by the Company. The Company has engaged in discussions with a number of potential strategic partners, though these discussions are at preliminary stages and there can be no assurance that any such arrangement will be consummated. 14 17 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) EXHIBIT 15 - Letter RE: Unaudited Interim Financial Information EXHIBIT 27 - Financial Data Schedule (b) None. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on October 14, 1997. NORTHFIELD LABORATORIES INC. By: _________________________ Richard E. DeWoskin Chairman of the Board and Chief Executive Officer By: _________________________ Jack J. Kogut Vice President - Finance, Secretary and Treasurer (principal financial officer and principal accounting officer) EX-15 2 ACKNOWLEDGEMENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 15 ACKNOWLEDGMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS REGARDING INDEPENDENT AUDITOR'S REVIEW REPORT The Board of Directors Northfield Laboratories Inc.: With respect to the registration statement on Form S-8 of Northfield Laboratories Inc., we acknowledge our awareness of the use therein of our report dated September 26, 1997 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. KPMG Peat Marwick LLP Chicago, Illinois October 10, 1997 EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS MAY-31-1998 JUN-01-1997 AUG-31-1997 7,798,231 50,796,265 0 0 0 59,494,100 11,266,131 9,940,802 60,847,442 792,134 0 0 0 140,924 59,824,687 60,847,442 0 0 0 0 0 0 0 (1,329,794) 0 (1,329,794) 0 0 0 (1,329,794) (0.09) (0.09)
-----END PRIVACY-ENHANCED MESSAGE-----