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Previous: PENNFED FINANCIAL SERVICES INC, 8-A12G/A, 1998-10-14 |
Next: EMPIRIC ENERGY INC, 10QSB/A, 1998-10-14 |
<PAGE> 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, 1998
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)
<TABLE>
<S> <C>
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)
</TABLE>
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, 1998, REGISTRANT HAD 14,097,375 SHARES OF COMMON STOCK
OUTSTANDING.
=============================================================================
<PAGE> 2
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Financial Statements
August 31, 1998
(See accompanying review report of
KPMG Peat Marwick LLP)
<PAGE> 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, 1998, and the related statements of
operations and cash flows for the three-month periods ended August 31, 1998 and
1997 and for the period from June 19, 1985 (inception) through August 31, 1998.
We have also reviewed the statements of shareholders' equity (deficit) for the
three-month period ended August 31, 1998 and for the period from June 19, 1985
(inception) through August 31, 1998. 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, 1998,
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, 1998 (not presented herein); and in our report dated
July 6, 1998, 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, 1998 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 Peat Marwick LLP
-------------------------
September 25, 1998
<PAGE> 4
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Balance Sheets
August 31, 1998 (unaudited) and May 31, 1998
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
ASSETS 1998 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 24,784,663 26,473,577
Short-term marketable securities 26,501,806 27,030,902
Prepaid expenses 300,283 373,151
Other current assets 173,892 17,657
------------ ------------
Total current assets 51,760,644 53,895,287
Property, plant and equipment, net 2,955,958 2,996,937
Other assets 27,002 27,255
------------ ------------
$ 54,743,604 56,919,479
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 514,575 1,037,267
Accrued expenses 90,504 81,522
Accrued compensation and benefits 271,030 253,345
------------ ------------
Total current liabilities 876,109 1,372,134
Other liabilities 100,000 98,976
------------ ------------
Total liabilities 976,109 1,471,110
------------ ------------
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
14,097,375 shares at August 31, 1998 and
May 31, 1998, respectively 140,974 140,974
Additional paid-in capital 116,047,635 116,047,635
Deficit accumulated during the
development stage (62,421,114) (60,740,240)
------------ ------------
Total shareholders' equity 53,767,495 55,448,369
------------ ------------
$ 54,743,604 56,919,479
============ ============
</TABLE>
See accompanying independent auditors' review report.
<PAGE> 5
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Operations
Three months ended August 31, 1998 and 1997 and
for the period from June 19, 1985 (inception)
through August 31, 1998
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS ENDED FROM
AUGUST 31, JUNE 19, 1985
------------------------- THROUGH
1998 1997 AUGUST 31, 1998
------------ ----------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues - license income $ -- -- 3,000,000
Costs and expenses:
Research and development 1,806,653 1,585,734 54,093,470
General and administrative 590,559 582,465 27,489,919
----------- ----------- -----------
2,397,212 2,168,199 81,583,389
----------- ----------- -----------
Other income and expense:
Interest income 716,338 838,405 16,245,509
Interest expense -- -- 83,234
----------- ----------- -----------
716,338 838,405 16,162,275
----------- ----------- -----------
Net loss $(1,680,874) (1,329,794) (62,421,114)
=========== =========== ===========
Net loss per share $ (0.12) (0.09) (7.55)
=========== =========== ===========
Shares used in calculation of
per share data 14,097,375 14,092,375 8,267,822
=========== ============ ===========
</TABLE>
See accompanying independent auditors' review report.
<PAGE> 6
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Shareholders' Equity (Deficit)
Three months ended August 31, 1998 and for the
period from June 19, 1985 (inception) through August 31, 1998
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------- ---------------------
NUMBER AGGREGATE NUMBER AGGREGATE
OF SHARES AMOUNT OF SHARES AMOUNT
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Issuance of common stock on August 27, 1985 -- $ -- 3,500,000 $ 35,000
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 -- -- 3,500,000 35,000
Net loss -- -- -- --
Deferred compensation relating to grant of stock options -- -- -- --
Amortization of deferred compensation -- -- -- --
--------- --------- --------- ---------
Balance at May 31, 1987 -- -- 3,500,000 35,000
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 -- -- 3,500,000 35,000
Issuance of common stock at $24.21 per share on June 7, 1988
(net of costs of issuance of $240,000) -- -- 413,020 4,130
Conversion of Series A convertible preferred stock to
common stock on June 7, 1988 -- -- 1,250,000 12,500
Conversion of Series B convertible preferred stock to
common stock on June 7, 1988 -- -- 1,003,165 10,032
Exercise of stock options at $2.00 per share -- -- 47,115 471
Issuance of common stock at $28.49 per share on
March 6, 1989 (net of costs of issuance of $21,395) -- -- 175,525 1,755
Issuance of common stock at $28.49 per share on March 30,
1989 (net of costs of issuance of $10,697) -- -- 87,760 878
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 -- -- 6,476,585 64,766
Net loss -- -- -- --
Deferred compensation relating to grant of stock options -- -- -- --
Amortization of deferred compensation -- -- -- --
--------- --------- --------- ---------
Balance at May 31, 1990 -- -- 6,476,585 64,766
Net loss -- -- -- --
Amortization of deferred compensation -- -- -- --
--------- --------- --------- ---------
Balance at May 31, 1991 -- -- 6,476,585 64,766
Exercise of stock warrants at $5.60 per share -- -- 90,000 900
Net loss -- -- -- --
Amortization of deferred compensation -- -- -- --
--------- --------- --------- ---------
Balance at May 31, 1992 -- -- 6,566,585 65,666
Exercise of stock warrants at $7.14 per share -- -- 15,000 150
Issuance of common stock at $15.19 per share
on April 19, 1993 (net of costs of issuance of $20,724) -- -- 374,370 3,744
Net loss -- -- -- --
Amortization of deferred compensation -- -- -- --
--------- --------- --------- ---------
Balance at May 31, 1993 -- $ -- 6,955,955 $ 69,560
--------- --------- --------- ---------
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE SERIES B CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK
-------------------- --------------------- ADDITIONAL
NUMBER AGGREGATE NUMBER AGGREGATE PAID-IN
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock on August 27, 1985 -- $ -- $ -- $ -- (28,000)
Issuance of Series A convertible preferred stock at $4.00 per share
on August 27, 1985 (net of costs of issuance of $79,150) 250,000 250,000 -- -- 670,850
Net loss -- -- -- -- --
-------- --------- --------- --------- ----------
Balance at May 31, 1986 250,000 250,000 -- -- 642,850
Net loss -- -- -- -- --
Deferred compensation relating to grant of stock options -- -- -- -- 2,340,000
Amortization of deferred compensation -- -- -- -- --
-------- --------- --------- --------- ----------
Balance at May 31, 1987 250,000 250,000 -- -- 2,982,850
Issuance of Series B convertible preferred stock at $35.68 per share
on August 14, 1987 (net of costs of issuance of $75,450) -- -- 200,633 200,633 6,882,502
Net loss -- -- -- -- --
Amortization of deferred compensation -- -- -- -- --
-------- --------- --------- --------- ----------
Balance at May 31, 1988 250,000 250,000 200,633 200,633 9,865,352
Issuance of common stock at $24.21 per share on June 7, 1988
(net of costs of issuance of $240,000) -- -- -- -- 9,749,870
Conversion of Series A convertible preferred stock to
common stock on June 7, 1988 (250,000) (250,000) -- -- 237,500
Conversion of Series B convertible preferred stock to
common stock on June 7, 1988 -- -- (200,633) (200,633) 190,601
Exercise of stock options at $2.00 per share -- -- -- -- 93,759
Issuance of common stock at $28.49 per share on
March 6, 1989 (net of costs of issuance of $21,395) -- -- -- -- 4,976,855
Issuance of common stock at $28.49 per share on March 30,
1989 (net of costs of issuance of $10,697) -- -- -- -- 2,488,356
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) -- -- -- -- 7,443,118
Net loss -- -- -- -- --
Deferred compensation relating to grant of stock options -- -- -- -- 683,040
Amortization of deferred compensation -- -- -- -- --
-------- --------- --------- --------- ----------
Balance at May 31, 1989 -- -- -- -- 35,728,451
Net loss -- -- -- -- --
Deferred compensation relating to grant of stock options -- -- -- -- 699,163
Amortization of deferred compensation -- -- -- -- --
-------- --------- --------- --------- ----------
Balance at May 31, 1990 -- -- -- -- 36,427,614
Net loss -- -- -- -- --
Amortization of deferred compensation -- -- -- -- --
-------- --------- --------- --------- ----------
Balance at May 31, 1991 -- -- -- -- 36,427,614
Exercise of stock warrants at $5.60 per share -- -- -- -- 503,100
Net loss -- -- -- -- --
Amortization of deferred compensation -- -- -- -- --
-------- --------- --------- --------- ----------
Balance at May 31, 1992 -- -- -- -- 36,930,714
Exercise of stock warrants at $7.14 per share -- -- -- -- 106,890
Issuance of common stock at $15.19 per share
on April 19, 1993 (net of costs of issuance of $20,724) -- -- -- -- 5,663,710
Net loss -- -- -- -- --
Amortization of deferred compensation -- -- -- -- --
-------- --------- --------- --------- ----------
Balance at May 31, 1993 -- $ -- $ -- $ -- 42,701,314
-------- --------- --------- --------- ----------
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
DEFICIT TOTAL
ACCUMULATED SHARE-
DURING THE DEFERRED HOLDER'S
DEVELOPMENT COMPEN- EQUITY
STAGE SATION (DEFICIT)
------------- ----------- ----------
<S> <C> <C> <C>
Issuance of common stock on August 27, 1985 -- -- 7,000
Issuance of Series A convertible preferred stock at $4.00 per share
on August 27, 1985 (net of costs of issuance of $79,150) -- -- 920,850
Net loss (607,688) -- (607,688)
----------- ---------- ----------
Balance at May 31, 1986 (607,688) -- 320,162
Net loss (2,429,953) -- (2,429,953)
Deferred compensation relating to grant of stock options -- (2,340,000) --
Amortization of deferred compensation -- 720,000 720,000
----------- ---------- ----------
Balance at May 31, 1987 (3,037,641) (1,620,000) (1,389,791)
Issuance of Series B convertible preferred stock at $35.68 per share
on August 14, 1987 (net of costs of issuance of $75,450) -- -- 7,083,135
Net loss (3,057,254) -- (3,057,254)
Amortization of deferred compensation -- 566,136 566,136
----------- ---------- ----------
Balance at May 31, 1988 (6,094,895) (1,053,864) 3,202,226
Issuance of common stock at $24.21 per share on June 7, 1988
(net of costs of issuance of $240,000) -- -- 9,754,000
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 -- -- 94,230
Issuance of common stock at $28.49 per share on
March 6, 1989 (net of costs of issuance of $21,395) -- -- 4,978,610
Issuance of common stock at $28.49 per share on March 30,
1989 (net of costs of issuance of $10,697) -- -- 2,489,234
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) -- -- 7,443,118
Net loss (791,206) -- (791,206)
Deferred compensation relating to grant of stock options -- (683,040) --
Amortization of deferred compensation -- 800,729 800,729
----------- ---------- ----------
Balance at May 31, 1989 (6,886,101) (936,175) 27,970,941
Net loss (3,490,394) -- (3,490,394)
Deferred compensation relating to grant of stock options -- (699,163) --
Amortization of deferred compensation -- 546,278 546,278
----------- ---------- ----------
Balance at May 31, 1990 (10,376,495) (1,089,060) 25,026,825
Net loss (5,579,872) -- (5,579,872)
Amortization of deferred compensation -- 435,296 435,296
----------- ---------- ----------
Balance at May 31, 1991 (15,956,367) (653,764) 19,882,249
Exercise of stock warrants at $5.60 per share -- -- 504,000
Net loss (7,006,495) -- (7,006,495)
Amortization of deferred compensation -- 254,025 254,025
----------- ---------- ----------
Balance at May 31, 1992 (22,962,862) (399,739) 13,633,779
Exercise of stock warrants at $7.14 per share -- -- 107,040
Issuance of common stock at $15.19 per share
on April 19, 1993 (net of costs of issuance of $20,724) -- -- 5,667,454
Net loss (8,066,609) -- (8,066,609)
Amortization of deferred compensation -- 254,025 254,025
----------- ---------- ----------
Balance at May 31, 1993 (31,029,471) (145,714) 11,595,689
----------- ---------- ----------
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------- ---------------------
NUMBER AGGREGATE NUMBER AGGREGATE
OF SHARES AMOUNT OF SHARES AMOUNT
--------------------- ---------------------
<S> <C> <C> <C> <C>
Net loss -- $ -- -- $ --
Issuance of common stock at $6.50 per share on May 26, 1994
(net of costs of issuance of $2,061,149) -- -- 2,500,000 25,000
Cancellation of stock options -- -- -- --
Amortization of deferred compensation -- -- -- --
-------- -------- ----------- ---------
Balance at May 31, 1994 -- -- 9,455,955 94,560
Net loss -- -- -- --
Issuance of common stock at $6.50 per share on June 20, 1994
(net of issuance costs of $172,500) -- -- 375,000 3,750
Exercise of stock options at $7.14 per share -- -- 10,000 100
Exercise of stock options at $2.00 per share -- -- 187,570 1,875
Cancellation of stock options -- -- -- --
Amortization of deferred compensation -- -- -- --
-------- -------- ----------- ---------
Balance at May 31, 1995 -- -- 10,028,525 100,285
Net loss -- -- -- --
Issuance of common stock at $17.75 per share on August 9, 1995
(net of issuance costs of $3,565,125) -- -- 2,925,000 29,250
Issuance of common stock at $17.75 per share on September 11, 1995
(net of issuance costs of $423,238) -- -- 438,750 4,388
Exercise of stock options at $2.00 per share -- -- 182,380 1,824
Exercise of stock options at $6.38 per share -- -- 1,500 15
Exercise of stock options at $7.14 per share -- -- 10,000 100
Cancellation of stock options -- -- -- --
Amortization of deferred compensation -- -- -- --
-------- -------- ----------- --------
Balance at May 31, 1996 -- -- 13,586,155 135,862
Net loss -- -- -- --
Exercise of stock options at $0.20 per share -- -- 263,285 2,633
Exercise of stock options at $2.00 per share -- -- 232,935 2,329
Exercise of stock options at $7.14 per share -- -- 10,000 100
Amortization of deferred compensation -- -- -- --
-------- -------- ----------- ---------
Balance at May 31, 1997 -- -- 14,092,375 140,924
Net loss -- -- -- --
Exercise of stock options at $7.14 per share -- -- 5,000 50
Amortization of deferred compensation -- -- -- --
-------- -------- ----------- ---------
Balance at May 31, 1998 -- -- 14,097,375 140,974
Net loss (unaudited) -- -- -- --
-------- -------- ----------- ---------
Balance at August 31, 1998 (unaudited) -- -- 14,097,375 $140,974
======== ======== =========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 10
<TABLE>
<CAPTION>
SERIES A SERIES B
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK
-------------------- --------------------- ADDITIONAL
NUMBER AGGREGATE NUMBER AGGREGATE PAID-IN
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL
-------------------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Net loss -- $ -- -- $ -- --
Issuance of common stock at $6.50 per share on May 26, 1994 -- -- -- -- 14,163,851
(net of costs of issuance of $2,061,149)
Cancellation of stock options -- -- -- -- (85,400)
Amortization of deferred compensation -- -- -- -- --
-------- ---------- --------- ---------- ------------
Balance at May 31, 1994 -- -- -- -- 56,779,765
Net loss -- -- -- -- --
Issuance of common stock at $6.50 per share on June 20, 1994 -- -- -- -- 2,261,250
(net of issuance costs of $172,500)
Exercise of stock options at $7.14 per share -- -- -- -- 71,300
Exercise of stock options at $2.00 per share -- -- -- -- 373,264
Cancellation of stock options -- -- -- -- (106,750)
Amortization of deferred compensation -- -- -- -- --
-------- ---------- --------- ---------- ------------
Balance at May 31, 1995 -- -- -- -- 59,378,829
Net loss -- -- -- -- --
Issuance of common stock at $17.75 per share on August 9, 1995 -- -- -- -- 48,324,374
(net of issuance costs of $3,565,125)
Issuance of common stock at $17.75 per share on September 11, 1995 -- -- -- -- 7,360,187
(net of issuance costs of $423,238)
Exercise of stock options at $2.00 per share -- -- -- -- 362,937
Exercise of stock options at $6.38 per share -- -- -- -- 9,555
Exercise of stock options at $7.14 per share -- -- -- -- 71,300
Cancellation of stock options -- -- -- -- (80,062)
Amortization of deferred compensation -- -- -- -- --
-------- ---------- --------- ---------- ------------
Balance at May 31, 1996 -- -- -- -- 115,427,120
Net loss -- -- -- -- --
Exercise of stock options at $0.20 per share -- -- -- -- 50,025
Exercise of stock options at $2.00 per share -- -- -- -- 463,540
Exercise of stock options at $7.14 per share -- -- -- -- 71,300
Amortization of deferred compensation -- -- -- -- --
-------- ---------- --------- ---------- ------------
Balance at May 31, 1997 -- -- -- -- 116,011,985
Net loss -- -- -- -- --
Exercise of stock options at $7.14 per share -- -- -- -- 35,650
Amortization of deferred compensation -- -- -- -- --
-------- ---------- --------- ---------- ------------
Balance at May 31, 1998 -- -- -- -- 116,047,635
Net loss (unaudited) -- -- -- -- --
-------- ---------- --------- ---------- ------------
Balance at August 31, 1998 (unaudited) -- $ -- -- $ -- 116,047,635
======== ========== ========= ========== ============
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
DEFICIT TOTAL
ACCUMULATED SHARE-
DURING THE DEFERRED HOLDERS'
DEVELOPMENT COMPEN- EQUITY
STAGE SATION (DEFICIT)
----------- ---------- ----------
<S> <C> <C> <C>
Net loss (7,363,810) -- (7,363,810)
Issuance of common stock at $6.50 per share on May 26, 1994 -- -- 14,188,851
(net of costs of issuance of $2,061,149)
Cancellation of stock options -- 85,400 --
Amortization of deferred compensation -- 267 267
----------- ---------- ----------
Balance at May 31, 1994 (38,393,281) (60,047) 18,420,997
Net loss (7,439,013) -- (7,439,013)
Issuance of common stock at $6.50 per share on June 20, 1994 -- -- 2,265,000
(net of issuance costs of $172,500)
Exercise of stock options at $7.14 per share -- -- 71,400
Exercise of stock options at $2.00 per share -- -- 375,139
Cancellation of stock options -- 106,750 --
Amortization of deferred compensation -- (67,892) (67,892)
----------- ---------- ----------
Balance at May 31, 1995 (45,832,294) (21,189) 13,625,631
Net loss (4,778,875) -- (4,778,875)
Issuance of common stock at $17.75 per share on August 9, 1995 -- -- 48,353,624
(net of issuance costs of $3,565,125)
Issuance of common stock at $17.75 per share on September 11, 1995 -- -- 7,364,575
(net of issuance costs of $423,238)
Exercise of stock options at $2.00 per share -- -- 364,761
Exercise of stock options at $6.38 per share -- -- 9,570
Exercise of stock options at $7.14 per share -- -- 71,400
Cancellation of stock options -- 80,062 --
Amortization of deferred compensation -- (62,726) (62,726)
----------- ---------- ----------
Balance at May 31, 1996 (50,611,169) (3,853) 64,947,960
Net loss (4,245,693) -- (4,245,693)
Exercise of stock options at $0.20 per share -- -- 52,658
Exercise of stock options at $2.00 per share -- -- 465,869
Exercise of stock options at $7.14 per share -- -- 71,400
Amortization of deferred compensation -- 2,569 2,569
----------- ---------- ----------
Balance at May 31, 1997 (54,856,862) (1,284) 61,294,763
Net loss (5,883,378) -- (5,883,378)
Exercise of stock options at $7.14 per share -- -- 35,700
Amortization of deferred compensation -- 1,284 1,284
----------- ---------- ----------
Balance at May 31, 1998 (60,740,240) -- 55,448,369
Net loss (unaudited) (1,680,874) -- (1,680,874)
----------- ---------- ----------
Balance at August 31, 1998 (unaudited) (62,421,114) -- 53,767,495
=========== ========== ==========
</TABLE>
<PAGE> 12
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Cash Flows
Three months ended August 31, 1998 and 1997 and for the
period from June 19, 1985 (inception) through August 31, 1998
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS ENDED FROM
AUGUST 31, JUNE 19, 1985
--------------------------- THROUGH
1998 1997 AUGUST 31, 1998
------------- ------------ ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,680,874) (1,329,794) (62,421,114)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 164,306 114,752 13,532,598
Amortization of deferred compensation -- 642 3,449,991
Loss on sale of equipment -- -- 66,359
Changes in assets and liabilities:
Prepaid expenses 72,868 68,356 (411,294)
Other current assets (165,402) (242,891) (2,070,143)
Other assets -- 4,166 (42,147)
Accounts payable (522,692) (196,293) 514,575
Accrued expenses 8,982 15,810 90,504
Accrued compensation and benefits 17,685 18,442 271,030
Other liabilities 1,024 (4,126) 100,000
------------ ----------- -----------
Net cash used in operating activities (2,104,103) (1,550,936) (46,919,641)
------------ ----------- -----------
Cash flows from investing activities:
Purchase of property, plant, equipment
and capitalized engineering costs (113,907) (148,968) (14,609,095)
Proceeds from matured marketable securities 25,649,200 10,049,200 310,440,781
Proceeds from sale of marketable securities -- -- 7,141,656
Purchase of marketable securities (25,120,104) (21,918,561) 344,084,244)
Proceeds from sale of equipment -- -- 76,587
------------ ----------- -----------
Net cash used in investing activities 415,189 (12,018,329) (41,034,315)
------------ ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock -- -- 102,363,528
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 -- -- 112,738,619
------------- ----------- -----------
Net increase (decrease) in cash (1,688,914) (13,569,265) 24,784,663
Cash at beginning of period 26,473,577 21,367,496 --
------------ ----------- -----------
Cash at end of period $ 24,784,663 7,798,231 24,784,663
============ =========== ===========
</TABLE>
See accompanying independent auditors' review report.
<PAGE> 13
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Notes to Financial Statements
August 31, 1998
(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, 1999. The interim financial
statements should be read in connection with the audited financial
statements for the year ended May 31, 1998.
(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, per share amounts reflect the use of the
Basic method only.
<PAGE> 14
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, 1998,
Northfield incurred operating losses totaling $62,421,000.
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, 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
attributable to anticipated future clinical trials for domestic and
international markets, monitoring and reporting the results of such trials and
continuing process development associated with improving the Company's
<PAGE> 15
manufacturing capacity to 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 expanded commercial operations.
RESULTS OF OPERATIONS
The Company reported no revenues for either of the three-month periods
ended August 31, 1998 or 1997. From its inception through August 31, 1998, 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,
1998 totaled $2,397,000, an increase of $229,000 from the $2,168,000 reported in
the first quarter of fiscal 1998. Measured on a percentage basis, total expenses
in the first quarter of fiscal 1999 increased by 10.6%. This increase was
primarily due to increased costs associated with the Company's expanding
clinical trials.
<PAGE> 16
Research and development expenses for the first quarter of fiscal 1999
totaled $1,807,000, an increase of $221,000, or 13.9%, from the $1,586,000
reported in the first quarter of fiscal 1998. The majority of the increase in
research and development expenses resulted from increases associated with
conducting and producing PolyHeme for use in the Company's clinical trials.
Phase II clinical trials remain open and are on-going, enrolling high volume
trauma patients. During the quarter, Northfield also started amortizing
accumulated capitalized engineering costs. The Company anticipates that research
and development expenses will increase over the next several quarters.
Additional costs are planned for expanded multi-center clinical trials,
third-party clinical monitoring as well as costs to manufacture additional
product.
General and administrative expenses in the first quarter of fiscal 1999
totaled $591,000 compared to expenses of $582,000 in the first quarter of 1998,
representing an increase of $9,000, or 1.5%. Northfield continues to focus its
resources on research and development activities. The Company will continue to
prioritize research and development over general and administrative expenses.
INTEREST INCOME
Interest income in the first quarter of fiscal 1999 totaled $716,000, or a
$122,000 decrease from the $838,000 in interest income reported in the first
quarter of fiscal 1998. Lower interest rates in fiscal 1999 combined with lower
available investment balances
<PAGE> 17
accounted for the decrease. Interest income is expected to remain below prior
year levels for the remainder of fiscal 1999 as the Company continues to utilize
its existing cash resources.
NET LOSS
The net loss for the first quarter ended August 31, 1998 was $1,681,000, or
$.12 per basic share, compared to a net loss of $1,330,000, or $.09 per basic
share, for the first quarter ended August 31, 1997. The increase in the loss per
basic share is primarily the result of the increase in the dollar loss.
LIQUIDITY AND CAPITAL RESOURCES
From its inception through August 31, 1998, the Company has used cash in
operating activities and for the purchase of property, plant, equipment and
engineering services in the amount of $61,529,000. For the three-month periods
ended August 31, 1998 and 1997, these cash expenditures totaled $2,218,000 and
$1,700,000, respectively. The net cash outlay for the first quarter of fiscal
1999 of $2,218,000 reflects the increased level of clinical trials currently
underway.
<PAGE> 18
The Company has financed its research and development and other activities
to date primarily through the public and private sale of its equity securities
and, to a more limited extent, through the license of product rights. As of
August 31, 1998, the Company had cash and marketable securities totaling
$51,286,000.
The Company believes its existing capital resources will be adequate to
satisfy its operating capital requirements and maintain its existing pilot
manufacturing plant and office facilities for approximately the next 36-48
months. Thereafter, the Company is likely to require substantial additional
capital to continue its operations. If the company uses its own resources to
fund the construction of a commercial-scale manufacturing facility, which is
estimated to cost approximately $45 million, it will significantly accelerate
the Company's need to raise additional capital.
The Company 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.
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
<PAGE> 19
commercial manufacturing facility, competitive and technological advances, the
FDA regulatory process, changes in the Company's marketing and distribution
strategy and other factors.
YEAR 2000
The Company has reviewed its internal computer applications and has
consulted with its vendors who provide software services. The Company believes
it is substantially year 2000 compliant and that any required changes in coding
will be handled in a manner non-disruptive to the business and at a minimal
cost.
Northfield is dependent in its 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 Northfield or any of Northfield's significant suppliers
experience disruption due to the year 2000 issue, the Company's operations could
adversely affected.
<PAGE> 20
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.
<PAGE> 21
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 13, 1998.
NORTHFIELD LABORATORIES INC.
By: /s/ Richard E. DeWorskin
-------------------------------
Richard E. DeWorskin
Chairman of the Board and Chief
Executive Officer
By: /s/ Jack J. Kogut
------------------------------
Secretary and Treasurer
(principal financial officer
and principal accounting
officer)
<PAGE> 1
Exhibit 15
ACKNOWLEDGMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
REGARDING INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors
Northfield Laboratories Inc.:
With respect to the registration statements of Form S-8 of Northfield
Laboratories Inc., we acknowledge our awareness of the use therein of our report
dated September 25, 1998 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
-------------------------
KPMG Peat Marwick LLP
Chicago, Illinois
October 12, 1998
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<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
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