-----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, NPH4iVh6ne8vyxxA7sS9ra9rnczcl0pzH7WLQBhRXTrF86ugk1q6YzhqBacaA6fh +4O1fNlU1r3eKsD65AanOw== 0000950137-99-003681.txt : 19991018 0000950137-99-003681.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950137-99-003681 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991015 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: 99728767 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 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, C.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, 1999 OR [ ] TRANSITION REPORT 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, EVANSTAON, 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 ISSUER 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, 1999, REGISTRANT HAD 14,239,875 SHARES OF COMMON STOCK OUTSTANDING ================================================================================ 2 NORTHFIELD LABORATORIES INC. (a company in the development stage) Financial Statements August 31, 1999 (See accompanying Review Report of KPMG LLP) 3 INDEPENDENT ACCOUNTANTS' 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, 1999, and the related statements of operations and cash flows for the three-month periods ended August 31, 1999 and 1998 and for the period from June 19, 1985 (inception) through August 31, 1999. We have also reviewed the statements of shareholders' equity (deficit) for the three-month period ended August 31, 1999 and for the period from June 19, 1985 (inception) through August 31, 1999. 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, 1999, 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, 1999 (not presented herein); and in our report dated July 2, 1999, 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, 1999 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. /s/ KPMG LLP October 6, 1999 4 NORTHFIELD LABORATORIES INC. (a company in the development stage) Balance Sheets August 31, 1999 (unaudited) and May 31, 1999
AUGUST 31, MAY 31, ASSETS 1999 1999 ------------ ----------- Current assets: Cash $ 22,031,844 25,855,668 Short-term marketable securities 23,156,541 21,705,449 Prepaid expenses 232,775 302,240 Other current assets 343,122 268,430 ------------ ----------- Total current assets 45,764,282 48,131,787 Property, plant, and equipment, net 2,938,281 2,755,565 Other assets 75,091 75,344 ------------ ----------- $ 48,777,654 50,962,696 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,111,695 1,325,030 Accrued expenses 145,465 120,624 Accrued compensation and benefits 235,400 221,000 ------------ ----------- Total current liabilities 1,492,560 1,666,654 Other liabilities 131,364 124,702 ------------ ----------- Total liabilities 1,623,924 1,791,356 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 14,239,875 shares at August 31, 1999 and May 31, 1999, respectively 142,399 142,399 Additional paid-in capital 117,207,045 117,185,514 Deficit accumulated during the development stage (70,195,714) (68,156,573) ------------ ----------- Total shareholders' equity 47,153,730 49,171,340 ------------ ----------- $ 48,777,654 50,962,696 ============ ===========
See accompanying independent accountants' review report. 5 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Operations Three months ended August 31, 1999 and 1998 and for the period from June 19, 1985 (inception) through August 31, 1999
CUMULATIVE THREE MONTHS ENDED FROM AUGUST 31, JUNE 19, 1985 ---------------------------- THROUGH 1999 1998 AUGUST 31, 1999 ------------ ----------- --------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) Revenues - license income $ -- -- 3,000,000 Costs and expenses: Research and development 2,124,203 1,806,653 62,071,783 General and administrative 484,800 590,559 29,695,525 ------------ ---------- ----------- 2,609,003 2,397,212 91,767,308 ------------ ---------- ----------- Other income and expense: Interest income 569,862 716,338 18,654,828 Interest expense -- -- (83,234) ------------ ---------- ----------- 569,862 716,338 18,571,594 ------------ ---------- ----------- Net loss $ (2,039,141) (1,680,874) (70,195,714) ============ ========== =========== Net loss per basic share $ (0.14) (0.12) (8.08) ============ ========== =========== Shares used in calculation of per share data 14,239,875 14,097,375 8,687,445 ============ ========== ===========
See accompanying independent accountants' review report. 6 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Shareholders' Equity (Deficit) Three months ended August 31, 1999 and for the period from June 19, 1985 (inception) through August 31, 1999
PREFERRED STOCK -------------------- NUMBER AGGREGATE OF SHARES AMOUNT -------------------- Issuance of common stock on August 27, 1985 -- $ -- Issuance of Series A convertible preferred stock 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 stock 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 stock at $24.21 per share on June 7, 1988 (net of costs of issuance of $246,000) -- -- Conversion of Series A convertible preferred stock to common stock on June 7, 1988 -- -- Conversion of Series B convertible preferred stock to common stock on June 7, 1988 -- -- Exercise of stock options at $2.00 per share -- -- Issuance of common stock at $28.49 per share on March 6, 1989 (net of costs of issuance of $21,395) -- -- Issuance of common stock 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 stock 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 stock 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 -- -- ------ ------
7
SERIES A CONVERTIBLE SERIES B CONVERTIBLE COMMON STOCK PREFERRED STOCK PREFERRED STOCK - --------------------- ----------------------- ----------------------- DEFICIT 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) Statements of Shareholders' Equity (Deficit), continued Three months ended August 31, 1999 and for the period from June 19, 1985 (inception) through August 31, 1999
PREFERRED STOCK -------------------- NUMBER AGGREGATE OF SHARES AMOUNT ---------- --------- Net loss -- $ -- Issuance of common stock 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 stock 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 -- -- Exercise of stock options at $7.14 per share -- -- Amortization of deferred compensation -- -- ------ ------ -- -- Balance at May 31, 1998 -- -- Net loss -- -- Non-cash compensation -- -- Exercise of stock options at $7.14 per share -- -- Exercise of stock warrants at $8.00 per share -- -- ------ ------ -- -- Balance at May 31, 1999 -- -- Net loss (unaudited) -- -- Non-cash compensation (unaudited) -- -- ------ ------ Balance at August 31, 1999 (unaudited) -- $ -- ====== ======
See accompanying independent accountants' review report. 9
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 -- -- -- -- -- -- -- (5,883,378) -- (5,883,378) 5,000 50 -- -- -- -- 35,650 -- -- 35,700 -- -- -- -- -- -- -- -- 1,284 1,284 - ----------- ----------- --------- --------- ---------- ---------- ------------ ------------ ----------- ----------- 14,097,375 140,974 -- -- -- -- 116,047,635 (60,740,240) -- 55,448,369 -- -- -- -- -- -- -- (7,416,333) -- (7,416,333) -- -- -- -- -- -- 14,354 -- -- 14,354 17,500 175 -- -- -- -- 124,775 -- -- 124,950 125,000 1,250 -- -- -- -- 998,750 -- -- 1,000,000 - ----------- ----------- --------- --------- ---------- ---------- ------------ ------------ ----------- ----------- 14,239,875 142,399 -- -- -- -- 117,185,514 (68,156,573) -- 49,171,340 -- -- -- -- -- -- -- (2,039,141) -- (2,039,141) -- -- -- -- -- -- 21,531 -- -- 21,531 - ----------- ----------- --------- --------- ---------- ---------- ------------ ------------ ----------- ----------- 14,239,875 $ 142,399 -- $ -- -- $ -- 117,207,045 (70,195,714) -- 47,153,730 =========== =========== ========= ========= ========== ========== ============ ============ =========== ===========
10 NORTHFIELD LABORATORIES INC. (a company in the development stage) Statements of Cash Flows Three months ended August 31, 1999 and 1998 and for the period from June 19, 1985 (inception) through August 31, 1999
CUMULATIVE THREE MONTHS ENDED FROM AUGUST 31, JUNE 19, 1985 ------------------------------ THROUGH 1999 1998 AUGUST 31, 1999 -------------- ------------- --------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) Cash flows from operating activities: Net loss $ (2,039,141) (1,680,874) (70,195,714) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 87,138 164,306 13,945,204 Non-cash compensation 21,531 -- 3,485,876 Loss on sale of equipment -- -- 66,359 Changes in assets and liabilities: Prepaid expenses 69,465 72,868 (343,786) Other current assets (74,692) (165,402) (2,239,373) Other assets -- -- (91,247) Accounts payable (213,335) (522,692) 1,111,695 Accrued expenses 24,841 8,982 145,465 Accrued compensation and benefits 14,400 17,685 235,400 Other liabilities 6,662 1,024 131,364 -------------- -------------- ---------------- Net cash used in operating activities (2,103,131) (2,104,103) (53,748,757) -------------- -------------- ---------------- Cash flows from investing activities: Purchase of property, plant, equipment, and capitalized engineering costs (269,601) (113,907) (15,003,013) Proceeds from matured marketable securities 3,549,200 25,649,200 337,389,981 Proceeds from sale of marketable securities -- -- 7,141,656 Purchase of marketable securities (5,000,292) (25,120,104) (367,688,179) Proceeds from sale of equipment -- 76,587 -------------- -------------- ---------------- Net cash used in investing activities (1,720,693) 415,189 (38,082,968) -------------- -------------- ---------------- Cash flows from financing activities: Proceeds from issuance of common stock -- -- 103,488,478 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 -- -- 113,863,569 -------------- -------------- ---------------- Net increase (decrease) in cash (3,823,824) (1,688,914) 22,031,844 Cash at beginning of period 25,855,668 26,473,577 -- -------------- -------------- ---------------- Cash at end of period $ 22,031,844 24,784,663 22,031,844 ============== ============== ================
See accompanying independent accountants' review report. 11 NORTHFIELD LABORATORIES INC. (a company in the development stage) Notes to Financial Statements August 31, 1999 (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, 2000. The interim financial statements should be read in connection with the audited financial statements for the year ended May 31, 1999. (2) COMPUTATION OF NET LOSS PER SHARE Basic earnings per share is based on the weighted average number of shares outstanding and excludes the dilutive effect of unexercised common stock equivalents. Diluted earnings per share is based on the weighted average number of shares outstanding and includes the dilutive effect of unexercised common stock equivalents. Because the Company reported a net loss for all periods presented, basic and diluted per share amounts are the same. (3) RECLASSIFICATIONS Certain reclassifications were made to the prior period financial statements in order to conform with the current period presentation. (4) SUBSEQUENT EVENTS On September 14, 1999, the Company sold a parcel of undeveloped land in Waukegan, Illinois back to its original owner in accordance with the terms of the original purchase agreement. No gain or loss was recognized on the sale. On September 16, 1999, the Company executed a lease amendment to include the space adjacent to its current Mt. Prospect, Illinois facility. The first lease option expires on August 30, 2004. 12 Item 2.) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Since Northfield's incorporation in 1985, we have devoted substantially all of our efforts and resources to the research, development and clinical testing of our potential product, PolyHeme(TM). We have incurred operating losses during each year of our operations since inception and expect to incur substantial additional operating losses for the next several years. From Northfield's inception through August 31, 1999, we have incurred operating losses totaling $70,196,000. Our success will depend on several factors, including our ability to obtain Food & Drug Administration regulatory approval of PolyHeme and our manufacturing facilities, obtain sufficient quantities of blood to manufacture PolyHeme in commercial quantities, manufacture and distribute PolyHeme in a cost-effective manner, and enforce our patent positions. We have experienced significant delays in the development and clinical testing of PolyHeme. We cannot ensure that we will be able to achieve these goals or that we will be able to realize product revenues or profitability on a sustained basis or at all. We anticipate that research and development expenses will increase during the foreseeable future. These expected increases are attributable to anticipated future clinical trials, monitoring and reporting the results of these trials and continuing process development associated with improving our manufacturing capacity to permit commercial-scale production of PolyHeme. We expect that general and administrative expenses will increase over the foreseeable future due to increased 13 expenses relating to the expansion of our organization in support of expanded commercial operations. RESULTS OF OPERATIONS We reported no revenues for either of the three-month periods ended August 31, 1999 or 1998. From Northfield's inception through August 31, 1999, we have reported total revenues of $3,000,000, all of which were derived from licensing fees. OPERATING EXPENSES Operating expenses for our first fiscal quarter ended August 31, 1999 totaled $2,609,000, an increase of $212,000 from the $2,397,000 reported in the first quarter of fiscal 1999. Measured on a percentage basis, total expenses in the first quarter of fiscal 2000 increased by 8.8%. This increase was primarily due to increased costs associated with our clinical trials, expanding our manufacturing organization, as well as preparing regulatory documentation for our current manufacturing facility. Research and development expenses for our first quarter of fiscal 2000 totaled $2,124,000, an increase of $317,000, or 17.5%, from the $1,807,000, reported in the first quarter of fiscal 1999. The majority of the increase in research and development expenses resulted from increases associated with conducting our clinical trials, producing PolyHeme for use in our 14 clinical trials, expansion of our manufacturing organization and validation services. Phase III and Phase II clinical trials remain open and are ongoing. We anticipate that research and development expenses will continue to increase significantly for the foreseeable future. Additional costs are being planned for multi-center clinical trials, third party clinical monitoring, biostatistical analysis, report preparation, expanding our manufacturing organization and developing additional sources of hemoglobin. General and administrative expenses in the first quarter of fiscal 2000 totaled $485,000 compared to expenses of $591,000 in the first quarter of 1999, representing a decrease of $106,000, or 17.9%. The decrease is due primarily to lower costs for professional services and travel. We continue to prioritize research and development over general and administrative expenses. General and administrative expenses have not increased as we were able to effectively control general and administrative costs while increasing the level of research and development activity. We expect the level of general and administrative expenses to increase during the next several quarters. INTEREST INCOME Interest income in the first quarter of fiscal 1999 totaled $570,000, or a $146,000 decrease from the $716,000 in interest income reported in the first quarter of fiscal 1998. Lower interest rates in fiscal 2000 combined with lower available investment balances accounted for 15 the decrease. Interest income is expected to remain below prior year levels for the remainder of fiscal 2000 as we continue to utilize our existing cash resources to fund our business. NET LOSS The net loss for the first quarter ended August 31, 1999 was $2,039,000, or $.14 per basic share, compared to a net loss of $1,681,000, or $.12 per basic share, for the first quarter ended August 31, 1998. The increase in the loss per basic share is primarily the result of the increase in the dollar loss associated with our ongoing clinical trials and validation services. LIQUIDITY AND CAPITAL RESOURCES From Northfield's inception through August 31, 1999, we have used cash in operating activities and for the purchase of property, plant, equipment and engineering services in the amount of $68,752,000. For the three-month periods ended August 31, 1999 and 1998, these cash expenditures totaled $2,373,000, and $2,218,000, respectively. The increased cash outlay for the first quarter of fiscal 2000 compared to the comparable prior year period reflects an increased level of capital spending for manufacturing capacity. We have financed our research and development and other activities to date primarily through the public and private sale of equity securities and, to a more limited extent, through the license of product rights. As of August 31, 1999, we had cash and marketable securities totaling 16 $45,188,000. During fiscal 1999, Northfield notified the seller of a parcel of undeveloped land previously purchased for use as our initial commercial-scale manufacturing facility of our intention to delay development of the site. Under the terms of our purchase contract, the seller has the right to repurchase the property for an amount equal to our acquisition cost of approximately $1,800,000. The original seller of the property gave notice of intent to repurchase the property in August 1999 and we closed the transaction and received the proceeds in September 1999, the second quarter of fiscal year 2000. We believe our existing capital resources will be adequate to satisfy our operating capital requirements and maintain our existing pilot manufacturing plant and office facilities for approximately the next two to three years. Thereafter, we are likely to require substantial additional capital to continue our operations. We are currently unable to fund the construction of a large-scale greenfield manufacturing facility, which is estimated to cost approximately $45 million, without raising substantial additional capital. Currently, we are planning a two-step expansion. After a two month shutdown this fall, new equipment will be installed in our current manufacturing facility bringing our manufacturing capacity to approximately 10,000 units. As part of the second step of our planned expansion, we amended our existing lease in September 1999 to include space adjacent to our current manufacturing facility. Initial engineering on the additional space is currently underway. Preliminary engineering indicates additional capacity of 50-60,000 units could be developed in approximately 16-18 months at a cost of $18-20 million. Northfield is taking this approach due to the capital required to build 17 a greenfield facility with a 300,000 unit capacity. Northfield views the smaller facility as financially prudent yet large enough for commercial viability. We may enter into collaborative arrangements with strategic partners which could provide us with additional funding or absorb expenses we would otherwise be required to pay. We have engaged in discussions with a number of potential strategic partners. These discussions are at various stages and we cannot ensure that any of these arrangements will be consummated. Our capital requirements may vary materially from those now anticipated because of the results of our clinical testing of PolyHeme, the establishment of relationships with strategic partners, changes in the scale, timing or cost of our commercial manufacturing facility, competitive and technological advances, the FDA regulatory process, changes in our marketing and distribution strategy and other factors. YEAR 2000 We have reviewed our internal computer applications and have consulted with our vendors who provide software services. We believe we are substantially year 2000 compliant and that any required changes in coding or hardware will be handled in a manner non-disruptive to our business and at a minimal cost. We have reviewed our non-information technology systems and have determined that any required repair or replacement of embedded technology should not have a significant impact on our operations. We are dependent in our operations on a number of suppliers whose individual status in achieving a year 2000 conversion is not known at this time. In the event that we or any of our significant suppliers experience disruption due to the year 2000 issue, our operations would be adversely affected. Given our assessment of year 2000 readiness, formal contingency plans will be developed on an ad hoc basis should the need arise. 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, 1999. NORTHFIELD LABORATORIES INC. By /s/ RICHARD E. DEWOSKIN --------------------------------------- Richard E. DeWoskin Chairman of the Board and Chief Executive Officer By /s/ JACK J. KOGUT --------------------------------------- Jack J. Kogut Secretary and Treasurer (principal financial officer and principal accounting officer) 19 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. EX-15 2 ACKNOWLEDGEMENT OF INDEPENDENT CERT. PUB. ACCOUNT. 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 statements of Form S-8 of Northfield Laboratories Inc., we acknowledge our awareness of the use therein of our report dated October 6, 1999 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 LLP ------------------------- KPMG LLP Chicago, Illinois October 13, 1999 EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS MAY-31-2000 JUN-01-1999 AUG-31-1999 22,031,844 23,156,541 0 0 0 45,764,282 13,748,722 10,810,441 48,777,654 1,492,560 0 0 0 142,399 47,011,331 48,777,654 0 0 0 0 0 0 0 (2,039,141) 0 (2,039,141) 0 0 0 (2,039,141) (0.14) (0.14)
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