-----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, ORlJ0Pa3nA7N/YryoU3G6ryVwd4DETtWWnq0PneMY48iCyuiQ/7iBarJRxFVLDFn MTvg3DdFBAjFOMp1wZLNUQ== 0000950137-98-000122.txt : 19980115 0000950137-98-000122.hdr.sgml : 19980115 ACCESSION NUMBER: 0000950137-98-000122 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980114 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: 98506745 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 (4TH QTR) 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 NOVEMBER 30, 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 NOVEMBER 30, 1997, REGISTRANT HAD 14,092,375 SHARES OF COMMON STOCK OUTSTANDING. ============================================================= 2 NORTHFIELD LABORATORIES INC. (a company in the development stage) Financial Statements November 30, 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 November 30, 1997, the related statements of operations for the three months ended November 30, 1997 and 1996, and the related statements of operations, shareholders' equity (deficit), and cash flows for the six months ended November 30, 1997 and 1996, and for the period from June 19, 1985 (inception) through November 30, 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' (deficit) is fairly stated, in all material respects, in relation to the statements from which it has been derived. /s/ KPMG PEAT MARWICK LLP December 22, 1997 4 NORTHFIELD LABORATORIES INC. (a company in the development stage) Balance Sheets November 30, 1997 (unaudited) and May 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------ November 30, May 31, ASSETS 1997 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Current assets: Cash $ 10,175,279 21,367,496 Short-term marketable securities 45,656,875 38,926,904 Prepaid expenses 221,647 334,875 Other current assets 241,793 417,693 - ------------------------------------------------------------------------------------------------------------------------------------ Total current assets 56,295,594 61,046,968 Property, plant and equipment, net 3,155,676 1,263,361 Other assets 27,758 32,432 - ------------------------------------------------------------------------------------------------------------------------------------ $ 59,479,028 62,342,761 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------------------------------------ Current liabilities: Accounts payable 448,528 656,816 Accrued expenses 101,759 121,559 Accrued compensation and benefits 264,168 175,800 - ------------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 814,455 954,175 - ------------------------------------------------------------------------------------------------------------------------------------ Other liabilities 91,760 93,823 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 906,215 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 November 30, 1997 and May 31, 1997 140,924 140,924 Additional paid-in capital 116,011,985 116,011,985 Deficit accumulated during the development stage (57,580,096) (54,856,862) Deferred compensation - (1,284) - ------------------------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 58,572,813 61,294,763 - ------------------------------------------------------------------------------------------------------------------------------------ $ 59,479,028 62,342,761 - ------------------------------------------------------------------------------------------------------------------------------------
See accompanying independent auditors' review report. 5 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Operations Three and six months ended November 30, 1997 and 1996 and for the period from June 19, 1985 (inception) through November 30, 1997
- --------------------------------------------------------------------------------------------------------------------------------- Cumulative Three months Six months from ended November 30, ended November 30, June 19, 1985 -------------------------------------------------------- through 1997 1996 1997 1996 Nov. 30, 1997 - --------------------------------------------------------------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenues - license income $ - - - - 3,000,000 Costs and expenses: Research and development 1,565,291 1,419,212 3,151,025 2,679,167 48,762,790 General and administrative 622,031 541,280 1,204,496 1,080,145 25,765,405 - --------------------------------------------------------------------------------------------------------------------------------- 2,187,322 1,960,492 4,355,521 3,759,312 74,528,195 - --------------------------------------------------------------------------------------------------------------------------------- Other income and expense: Interest income 793,882 821,387 1,632,287 1,649,927 14,031,333 Interest expense - - - - 83,234 - --------------------------------------------------------------------------------------------------------------------------------- 793,882 821,387 1,632,287 1,649,927 13,948,099 - --------------------------------------------------------------------------------------------------------------------------------- Net loss $(1,393,440) (1,139,105) (2,723,234) (2,109,385) (57,580,096) ================================================================================================================================= Net loss per share $ (0.10) (0.08) (0.19) (0.15) (7.28) ================================================================================================================================= Shares used in calculation of per share data 14,092,375 13,984,825 14,092,375 13,893,491 7,911,293 =================================================================================================================================
See accompanying independent auditors' review report. 6 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statement of Shareholders' Equity (Deficit) Six months ended November 30, 1997 and for the period from June 19, 1985 (inception to November 30, 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 - $ - - ------------------------------------------------------------------------------------------------------------------------------------
(Continued) 7 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statement of Shareholders' Equity (Deficit) Six months ended November 30, 1997 and for the period from June 19, 1985 (inception to November 30, 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 - -----------------------------------------------------------------------------------------------------------------------------------
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 November 30, 1997 (unaudited) - $ - - ------------------------------------------------------------------------------------------------------------------------------------
See accompanying independent auditors' review report. (Continued) 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 - - - - - - - (2,723,234) - (2,723,234) - - - - - - - - 1,284 1,284 - ---------------------------------------------------------------------------------------------------------------------------------- 14,092,375 $ 140,924 - $ - - $ - 116,011,985 (57,580,096) - 58,572,813 - ----------------------------------------------------------------------------------------------------------------------------------
(Continued) 10 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Cash Flows Six months ended November 30, 1997 and 1996 and for the period from June 19, 1985 (inception) through November 30, 1997
================================================================================================ Cumulative from Six months ended November 30, June 19, 1985 ----------------------------- through 1997 1996 Nov. 30, 1997 - ------------------------------------------------------------------------------------------------ (unaudited) (unaudited) (unaudited) Cash flows from operating activities: Net loss $ (2,723,234) (2,109,385) (57,580,096) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 200,505 242,505 13,067,628 Amortization of deferred compensation 1,284 1,286 3,449,991 Loss on sale of equipment - - 66,359 Changes in assets and liabilities: Prepaid expenses 113,228 147,618 (221,647) Other current assets 120,899 (1,342) (2,183,878) Other assets 4,168 24,999 (43,156) Accounts payable (208,288) (519,224) 448,528 Accrued expenses (19,800) (60,813) 101,759 Accrued compensation and benefits 88,368 13,319 264,168 Other liabilities (2,063) (8,251) 91,760 - ------------------------------------------------------------------------------------------------ Net cash used in operating activities (2,424,933) (2,269,288) (42,538,584) - ------------------------------------------------------------------------------------------------ Cash flows from investing activities: Purchase of property, plant, equipment, and capitalized engineering costs (2,037,313) (189,796) (14,408,767) Proceeds from matured marketable securities 25,039,199 28,049,200 260,781,580 Proceeds from sale of marketable securities - - 7,141,656 Purchase of marketable securities (31,769,170) (27,018,996) (313,580,112) Proceeds from sale of equipment - - 76,587 - ------------------------------------------------------------------------------------------------ Net cash provided by (used in) investing activities (8,767,284) 840,408 (59,989,056) - ------------------------------------------------------------------------------------------------ Cash flows from financing activities: Proceeds from issuance of common stock - 343,867 102,327,828 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 - 343,867 112,702,919 - ------------------------------------------------------------------------------------------------ Net increase (decrease) in cash (11,192,217) (1,085,013) 10,175,279 Cash at beginning of period 21,367,496 11,688,744 - - ------------------------------------------------------------------------------------------------ Cash at end of period $ 10,175,279 10,603,731 10,175,279 ================================================================================================
See accompanying independent auditors' review report. 11 NORTHFIELD LABORATORIES INC. (a company in the development stage) Notes to Financial Statements November 30, 1997 =============================================================================== (1) BASIS OF PRESENTATION The interim financial statements presented are unaudited but, 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. 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 through November 30, 1997, Northfield incurred operating losses totaling $57,580,000. 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, its ability to obtain sufficient quantities of blood to commercially manufacture PolyHeme, its ability to 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 attributable to conducting future clinical trials, monitoring and reporting the results of such trials and continuing process development associated with increases in the Company's manufacturing capacity to permit commercial scale production of PolyHeme. The Company expects that general and administrative expenses will 13 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 Second Quarter Ended November 30, 1997 and 1996. The Company reported no revenues for either of the three-month periods ended November 30, 1997 or 1996. From its inception through November 30, 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 second fiscal quarter ended November 30, 1997 totaled $2,187,000, an increase of $227,000 from the $1,960,000 reported in the second quarter of fiscal 1997. Measured on a percentage basis, total expenses in the second quarter of fiscal 1998 increased by 11.6%. 14 Research and development expenses for the second quarter of fiscal 1998 totaled $1,565,000, an increase of $146,000, or 10.3%, from the $1,419,000 reported in the second quarter of fiscal 1997. The quarter over quarter increase in research and development expenses resulted from expanded efforts in clinical trials and preparatory efforts for commercial manufacturing. For the six-month period ended November 30, 1997, research and development expenses totaled $3,151,000, representing an increase of $472,000, or 17.6%, from the six-month period ended November 30, 1996. Substantially all of the fiscal year to date increase over the comparable prior year period comes from increased expenses related to the Phase III clinical trials. Increased spending was also recorded for preparatory and analysis work for the commercial manufacturing facility. 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 second quarter of fiscal 1998 totaled $622,000 compared to expenses of $541,000 in the second quarter of 1997, representing an increase of $81,000, or 15.0%. During the quarter increased expenses were incurred for professional services related to legal counsel on multiple contract and patent issues and public relations for enhanced shareholder information. Travel expenditures have also increased due 15 to business development efforts. The Company anticipates that general and administrative expenses will continue to increase over the remainder of the fiscal year. General and administrative expenses for the six-month period ended November 30, 1997 totaled $1,205,000 which is a $125,000 increase, or 11.6%, from the $1,080,000 in the comparable prior year period. The increases are principally reported in travel and professional services. Travel has increased due to business development efforts and professional services have increased in the areas of legal and public relations. INTEREST INCOME Interest income in the second quarter of fiscal 1998 equaled $794,000, or a $27,000 decrease from the $821,000 in interest income reported in the second quarter of fiscal 1997. Higher interest rates in fiscal 1998 somewhat offset lower available investment balances and caused a quarter over quarter decrease in interest income. Interest income for the six-month period ended November 30, 1997 totaled $1,632,000 or a $18,000 decrease from the comparable prior year period. Slightly higher interest rates offset declining available investment balances combined for the slight year over year decline in interest income. 16 Interest income is forecast to decline over the remainder of the fiscal year as the cost of expanded clinical trials and investments in a commercial facility will significantly lower available investment balances. NET LOSS The net loss for the second quarter ended November 30, 1997 was $1,393,000, or $.10 per share, compared to a net loss of $1,139,000, or $.08 per share, for the second quarter ended November 30, 1996. The increase in the net loss per share is the result of the increase in the dollar net loss mitigated by an increase in shares outstanding. For the six-month period ended November 30, 1997, Northfield reported a net loss of $2,723,000, or $.19 per share, compared to the comparable prior year period results of a net loss of $2,109,000, or $.15 per share. Higher research and administrative expenses, partially offset by a greater number of shares outstanding in fiscal 1998, caused the reported net loss and per share net loss to increase. LIQUIDITY AND CAPITAL RESOURCES From its inception through November 30, 1997, the Company has expended cash in operating activities and for the purchase of property, plant, equipment and engineering services in the amount of $56,947,000. For the three-month and six-month periods ended November 30, 1997, 17 these cash expenditures totaled $2,762,000 and $4,462,000, respectively. The second quarter fiscal 1998 net cash outlay was high, compared to the first quarter expenditure of $1,700,000, due primarily to land acquisition costs related to the Company's planned commercial-scale manufacturing facility. 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 November 30, 1997, the Company had cash and marketable securities totaling $55,832,000. 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 be $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. 18 The Company's capital requirements may vary materially from those now anticipated because of the results of the clinical testing of PolyHeme, the establishment of relationships with strategic partners, changes in the scale, timing or cost of the Company's commercial manufacturing facility, competitive and technological advances, the FDA regulatory process, changes in the Company's marketing and distribution strategy, and other factors. 19 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) EXHIBIT 10.5.1 - 1996 Stock Option Plan EXHIBIT 15 - Letter RE: Unaudited Interim Financial Information EXHIBIT 27 - Financial Data Schedule (b) None. 20 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 January 14, 1998. 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-10.5.1 2 1996 STOCK OPTION PLAN 1 EXHIBIT 10.5.1 NORTHFIELD LABORATORIES INC. 1996 STOCK OPTION PLAN 1. PURPOSE The purpose of the Plan is to promote the long-term success of the Company for the benefit of the Company's stockholders by encouraging the Company's directors, officers, employees and consultants to have meaningful investments in the Company. The Company believes that the possibility of participation under the Plan will provide the Company's directors, officers, employees and consultants with an incentive to perform more effectively and will assist the Company in attracting and retaining directors, officers, employees and consultants of outstanding training, experience and ability. 2. DEFINITIONS "Authorized Plan Shares" has the meaning set forth in Section 6(a). "Award" means an award or grant of a Stock Option made to a Participant pursuant to Section 8. "Award Agreement" means the agreement provided in connection with an Award in accordance with Section 10. "Award Date" means the date that an Award is made, as specified in the Award Agreement with respect to such Award. "Board of Directors" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Company" means Northfield Laboratories Inc., a Delaware corporation. "Committee" means the Stock Option Committee of the Board of Directors or any successor committee thereto. "Common Stock" means the Company's Common Stock, par value $.01 per share. 2 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "Fair Market Value" on any date means the average of the highest and the lowest sales prices of a share of Common Stock on The Nasdaq Stock Market, Inc. ("Nasdaq") for such date; provided that if no sales of Common Stock are reported on Nasdaq for such date or, in the opinion of the Committee, the sales of Common Stock on such date are insufficient to constitute a representative market, then the Fair Market Value of a share of Common Stock on such date shall be deemed to be the average of the highest and lowest prices of a share of Common Stock as reported on Nasdaq for the next preceding day on which sales of Common Stock are reported and a representative market exists. "ISO" means any Stock Option designated in an Award Agreement as an "Incentive Stock Option" within the meaning of Section 422 of the Code. "Non-Qualified Stock Option" means any Stock Option that is not an ISO. "Option Price" means the purchase price of one share of Common Stock under a Stock Option. "Participant" means a director, officer or employee of the Company who has been selected by the Committee to receive an Award under the Plan. "Plan" means the Northfield Laboratories Inc. 1996 Stock Option Plan, as amended from time to time. "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange Commission pursuant to the Exchange Act, as amended from time to time. "Settlement Date" means, with respect to any Stock Option that has been exercised in whole or in part, the date or dates upon which shares of Common Stock are to be delivered to the Participant and the Option Price therefor paid. "Stock Option" means any right to purchase shares of Common Stock awarded pursuant to Section 8. 3. TERM The Plan shall be effective as of October 1, 1996 and shall remain in effect through September 30, 2006. After termination of the Plan, no further Awards may be granted but outstanding Awards shall remain effective in accordance with their terms and the terms of the Plan. 3 4. PLAN ADMINISTRATION (a) The Committee shall be responsible for administering the Plan. The Committee shall be comprised of two or more members of the Board of Directors, all of whom shall be "non-employee directors" as defined in Rule 16b-3 and "outside directors" as that term is used in Section 162 of the Code and the regulations promulgated thereunder. The Committee shall have full and exclusive discretionary power to interpret the Plan and determine eligibility for benefits and to adopt such rules, regulations and guidelines for administering the Plan as the Committee may deem necessary or proper. Such power shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions and, subject to Section 11, adopting modifications and amendments to the Plan or any Award Agreement. The Committee may delegate to one or more of its members or to one or more agents or advisors such non-discretionary administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. (b) The Committee may employ attorneys, consultants, accountants and other persons and the Committee, the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Participants, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or any Award, and all members of the Committee shall be fully protected by the Company, to the fullest extent permitted by applicable law, in respect of any such action, determination or interpretation. 5. ELIGIBILITY Awards shall be limited to persons who are directors, officers or employees of or consultants to the Company. In determining the persons to whom Awards shall be made, the Committee shall, in its sole discretion, take into account the nature of the person's duties, past and potential contributions to the success of the Company and such other factors as the Committee shall deem relevant in connection with accomplishing the purposes of the Plan. A person who has received an Award or Awards pursuant to the Plan, or who has received stock options or other awards under any other plan or agreement now 4 or hereafter in effect, may receive an additional Award or Awards pursuant to the Plan. 6. AUTHORIZED AWARDS; LIMITATIONS Except for adjustments pursuant to Section 7, the maximum number of shares of Common Stock that shall be available for issuance under the Plan (the "Authorized Plan Shares") shall be 500,000. If an Award expires unexercised or is forfeited, surrendered, canceled, terminated or settled in cash in lieu of Common Stock, the shares of Common Stock that were theretofore subject (or potentially subject) to such Award may again be made subject to an Award Agreement. Common Stock that may be issued under the Plan may be either authorized and unissued shares, or issued shares that have been reacquired by the Company and that are being held as treasury shares. No fractional shares of Common Stock shall be issued under the Plan; provided that cash, in an amount equal to the Fair Market Value of a fractional share of Common Stock as of the Settlement Date of the Award shall be paid in lieu of any fractional shares in the settlement of Awards payable in shares of Common Stock. 7. ADJUSTMENTS AND REORGANIZATIONS (a) The Committee may make such adjustments to Awards granted under the Plan (including the terms, exercise price and otherwise) as it deems appropriate in the event of changes that impact the Company or the Company's share price or share status, provided that any such actions are consistently and equitably applied to all affected Participants. Notwithstanding the foregoing, insofar as any Award is subject to performance goals established to qualify payments thereunder as "performance-based compensation" as described in Section 162(m) of the Code, the Committee shall have no power to adjust such Awards other than negative discretion and the power to adjust Awards for corporate transactions, in either case to the extent permissible under regulations interpreting Code Section 162(m). (b) In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, stock split, extraordinary dividend, spin-off, rights offering, share combination or other change in the corporate structure of the Company affecting the Common Stock, the number of Authorized Plan Shares and the kind of shares that may be delivered under the Plan shall be subject to such equitable adjustment as the Committee, in its sole discretion, may deem appropriate in order to preserve the benefits or potential benefits to be made available under the Plan, and the number and kind and price of shares subject to outstanding Awards and any other terms of outstanding Awards shall be subject to such 5 equitable adjustment as the Committee, in its sole discretion, may deem appropriate in order to prevent dilution or enlargement of outstanding Awards. 8. AWARDS (a) Stock Options granted under the Plan may be either ISOs or Non-Qualified Stock Options. The Committee may grant any Participant one or more ISOs, Non-Qualified Stock Options or both types of Stock Options. The Option Price of a Stock Option shall be not less than 100% of the Fair Market Value of a share of Common Stock on the Award Date. Stock Options granted pursuant to the Plan shall be subject to such additional terms, conditions or restrictions as may be provided in the Award Agreement relating to such Stock Option. (b) Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to ISOs shall be interpreted, amended or altered, nor shall any discretion or authority awarded under the Plan be exercised, so as to disqualify the Plan under Section 422 of the Code or, without the consent of the Participants affected, to disqualify any ISO under Section 422 of the Code. An ISO shall not be granted to an individual who, on the date of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company. The aggregate Fair Market Value, determined on the Award Date, of the shares of Common Stock or other stock with respect to which one or more ISOs that are exercisable for the first time by the Participant during any particular calendar year shall not exceed the $100,000 limitation imposed by Section 422(d) of the Code. (c) The Option Price shall be paid in full at the time of the exercise of the Stock Option and may be paid in any of the following methods or combinations thereof: (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) by the delivery of shares of Common Stock having an aggregate Fair Market Value on the date of such exercise equal to the Option Price; (iii) by the Participant's simultaneous exercise of Stock Options, sale of shares of Common Stock acquired thereby and application of the proceeds therefrom to the payment of the Option Price pursuant to procedures established by the Committee from time to time; or 6 (iv) in any other manner that the Committee shall approve. 9. TRANSFERABILITY AND BENEFICIARIES Unless otherwise determined by the Committee in its sole discretion, no Awards under the Plan shall be assignable, alienable, saleable or otherwise transferable other than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order (as defined by the Code) or Title I of the Employee Retirement Income Security Act or the rules thereunder. 10. AWARD AGREEMENTS Awards under the Plan shall be evidenced by Award Agreements that set forth the details, conditions and limitations for each Award, which may include the term of an Award, the provisions applicable in the event the Participant's employment with the Company terminates and the Company's authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind any Award. 11. AMENDMENTS The Committee may suspend, terminate or amend the Plan as it deems necessary or appropriate to better achieve the purposes of the Plan; provided that without the approval of the Company's stockholders, no such amendment shall be made for which stockholder approval is necessary to comply with any applicable tax or regulatory requirement. 12. TAX WITHHOLDING The Company shall have the right to (a) make deductions from any settlement of an Award made under the Plan, including the delivery or vesting of shares, or require that shares or cash, or both, be withheld from any Award, in each case in an amount sufficient to satisfy withholding of any federal, state or local taxes required by law and (b) take such other action as may be necessary or appropriate to satisfy any such withholding obligations. The Committee may determine the manner in which such tax withholding may be satisfied and may permit shares of Common Stock (rounded up to the next whole number) to be used to satisfy required tax withholding based on the Fair Market Value of any such shares of Common Stock as of the Settlement Date of the applicable Award. For this purpose, the Committee may permit the use of outstanding shares held by the applicable Participant or shares issued or issuable upon the settlement of the applicable Award. 7 13. OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS Unless otherwise specifically determined by the Committee in its sole discretion, settlements of Awards received by a Participant under the Plan shall not be deemed a part of the Participant's regular, recurring compensation for purposes of calculating payments or benefits from any Company benefit plan or severance program. Further, the Company may adopt other compensation programs, plans or arrangements as it deems appropriate or necessary. 14. UNFUNDED PLAN Unless otherwise determined by the Committee in its sole discretion, the Plan shall be unfunded and shall not create or be construed to create a trust or a separate fund or funds. The Plan shall not establish any fiduciary relationship between the Company and any Participant or other person. To the extent any person holds any rights by virtue of a grant awarded under the Plan, such right (unless otherwise determined by the Committee in its sole discretion) shall be no greater than the right of an unsecured general creditor of the Company. 15. FUTURE RIGHTS No person shall have any claim or right to be granted an Award under the Plan and no Participant shall have any right under the Plan to be retained in the employment of or to serve as a consultant to the Company. 16. GOVERNING LAW The validity, construction and effect of the Plan and all Award Agreements, and any actions taken or relating to the Plan or any Award Agreement, shall be determined in accordance with applicable federal law and the internal laws, and not the law of conflicts, of the State of Delaware. 17. SUCCESSORS AND ASSIGNS The Plan shall be binding on all successors and assigns of each Participant, including without limitation the estate of such Participant and the executor, administrator or trustee of such estate, and any receiver or trustee in bankruptcy or representative of the Participant's creditors. 18. RIGHTS AS A STOCKHOLDER Except as otherwise provided in any Award Agreement, a Participant shall have no rights as a stockholder of the Company until he or she becomes the holder of record of Common Stock. 8 19. AWARDS; COMPLIANCE WITH SECTION 16 No Award or other transaction shall be permitted under the Plan which would have the effect of imposing liability for a Participant under Section 16 of the Exchange Act. Irrespective of any other provision of the Plan or any Award Agreement, any such Award or other transaction purportedly made under or pursuant to the Plan shall be void ab initio. EX-15 3 LETTER: ACKNOWLEDGEMENT OF ACCOUNTS 1 Exhibit 15 ACKNOWLEDGMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS REGARDING INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors Northfield Laboratories Inc.: With respect to registration statement No. 333-15877 on Form S-8 of Northfield Laboratories Inc., we acknowledge our awareness of the use therein of our report dated December 22, 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. /s/ KPMG PEAT MARWICK LLP Chicago, Illinois January 12, 1998 EX-27 4 FDS
5 6-MOS MAY-31-1998 JUN-01-1997 NOV-30-1997 10,175,279 45,656,875 0 0 0 56,295,594 13,154,477 9,998,801 59,479,028 814,455 0 0 0 140,924 58,431,889 59,479,028 0 0 0 0 0 0 0 (2,723,234) 0 (2,723,234) 0 0 0 (2,723,234) (.19) (.19)
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