<PAGE> 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 NOVEMBER 30, 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 NOVEMBER 30, 1999, REGISTRANT HAD 14,239,875 SHARES OF COMMON STOCK
OUTSTANDING
================================================================================
<PAGE> 2
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Financial Statements
November 30, 1999
(See accompanying Review Report of KPMG LLP)
<PAGE> 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 November 30, 1999, and the related
statements of operations for the three-month period ended November 30, 1999
and 1998, and statements of operations and cash flows for the six-month
periods ended November 30, 1999 and 1998 and for the period from June 19,
1985 (inception) through November 30, 1999. We have also reviewed the
statements of shareholders' equity (deficit) for the six-month period ended
November 30, 1999 and for the period from June 19, 1985 (inception) through
November 30, 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
December 14, 1999
<PAGE> 4
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Balance Sheets
November 30, 1999 (unaudited) and May 31, 1999
<TABLE>
<CAPTION>
NOVEMBER 30, MAY 31,
ASSETS 1999 1999
------------------ -------------
<S> <C> <C>
Current assets:
Cash $ 20,850,040 25,855,668
Short-term marketable securities 23,110,903 21,705,449
Prepaid expenses 186,262 302,240
Other current assets 454,014 268,430
------------------ -------------
Total current assets 44,601,219 48,131,787
Property, plant, and equipment, net 2,275,966 2,755,565
Other assets 74,839 75,344
------------------ -------------
$ 46,952,024 50,962,696
================== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,608,965 1,325,030
Accrued expenses 84,327 120,624
Accrued compensation and benefits 255,404 221,000
------------------ -------------
Total current liabilities 1,948,696 1,666,654
Other liabilities 134,708 124,702
------------------ -------------
Total liabilities 2,083,404 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 November 30, 1999 and May 31, 1999, respectively 142,399 142,399
Additional paid-in capital 117,228,576 117,185,514
Deficit accumulated during the development stage (72,502,355) (68,156,573)
------------------ -------------
Total shareholders' equity 44,868,620 49,171,340
------------------ -------------
$ 46,952,024 50,962,696
================== =============
</TABLE>
See accompanying independent accountants' review report.
<PAGE> 5
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Operations
Three and six months ended November 30, 1999 and 1998 and for the
period from June 19, 1985 (inception) through November 30, 1999
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS ENDED SIX MONTHS ENDED FROM
NOVEMBER 30, NOVEMBER 30, JUNE 19, 1985
-------------------------------- -------------------------- THROUGH
1999 1998 1999 1998 NOVEMBER 30, 1999
---------------- ------------- ----------- ----------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues -- license income $ -- -- -- -- 3,000,000
Costs and expenses:
Research and development 2,362,427 1,876,252 4,486,630 3,682,905 64,434,210
General and administrative 523,505 560,459 1,008,305 1,151,018 30,219,030
---------------- ------------- ----------- ----------- -----------------
2,885,932 2,436,711 5,494,935 4,833,923 94,653,240
---------------- ------------- ----------- ----------- -----------------
Other income and expense:
Interest income 579,291 672,046 1,149,153 1,388,384 19,234,119
Interest expense -- -- -- -- 83,234
---------------- ------------- ----------- ----------- -----------------
579,291 672,046 1,149,153 1,388,384 19,150,885
---------------- ------------- ----------- ----------- -----------------
Net loss $ (2,306,641) (1,764,665) (4,345,782) (3,445,539) (72,502,355)
================ ============= =========== =========== =================
Net loss per basic share $ (0.16) (0.13) (0.31) (0.24) (8.25)
================ ============= =========== =========== =================
Shares used in calculation of per share data 14,239,875 14,107,045 14,239,875 14,102,184 8,784,463
================ ============= =========== =========== =================
</TABLE>
See accompanying independent accountants' review report.
<PAGE> 6
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Shareholders' Equity (Deficit)
Six months ended November 30, 1999 and for the
period from June 19, 1985 (inception) through November 30, 1999
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE
PREFERRED STOCK COMMON STOCK PREFERRED STOCK
--------------------- ----------------------- -----------------------
NUMBER AGGREGATE NUMBER AGGREGATE NUMBER AGGREGATE
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT
--------------------- --------- ------------ --------- -----------
<S> <C> <C> <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) -- -- -- -- 250,000 250,000
Net loss -- -- -- -- -- --
----------- --------- --------- ------------ --------- -----------
Balance at May 31, 1986 -- -- 3,500,000 35,000 250,000 250,000
Net loss -- -- -- -- -- --
Deferred compensation relating to grant of
stock options -- -- -- -- -- --
Amortization of deferred compensation -- -- -- -- -- --
----------- --------- --------- ------------ --------- -----------
Balance at May 31, 1987 -- -- 3,500,000 35,000 250,000 250,000
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 35,000 250,000 250,000
Issuance of common stock at $24.21 per share on
June 7, 1988 (net of costs of issuance of $246,000) -- -- 413,020 4,130 -- --
Conversion of Series A convertible preferred stock
to common stock on June 7, 1988 -- -- 1,250,000 12,500 (250,000) (250,000)
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>
(Continued)
See accompanying independent accountants' review report.
<PAGE> 7
<TABLE>
<CAPTION>
SERIES B CONVERTIBLE DEFICIT TOTAL
PREFERRED STOCK ACCUMULATED SHARE-
---------------------- ADDITIONAL DURING THE DEFERRED HOLDERS'
NUMBER AGGREGATE PAID-IN DEVELOPMENT COMPEN- EQUITY
OF SHARES AMOUNT CAPITAL STAGE SATION (DEFICIT)
--------- ----------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock on August 27, 1985 -- $ -- (28,000) -- -- 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) -- -- 670,850 -- -- 920,850
Net loss -- -- -- (607,688) -- (607,688)
--------- ----------- ---------- ------------ ---------- -----------
Balance at May 31, 1986 -- -- 642,850 (607,688) -- 320,162
Net loss -- -- -- (2,429,953) -- (2,429,953)
Deferred compensation relating to grant of
stock options -- -- 2,340,000 -- (2,340,000) --
Amortization of deferred compensation -- -- -- -- 720,000 720,000
--------- ----------- ---------- ------------ ---------- -----------
Balance at May 31, 1987 -- -- 2,982,850 (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) 200,633 200,633 6,882,502 -- -- 7,083,135
Net loss -- -- -- (3,057,254) -- (3,057,254)
Amortization of deferred compensation -- -- -- -- 566,136 566,136
--------- ----------- ---------- ------------ ---------- -----------
Balance at May 31, 1988 200,633 200,633 9,865,352 (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 $246,000) -- -- 9,749,870 -- -- 9,754,000
Conversion of Series A convertible preferred stock
to common stock on June 7, 1988 -- -- 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 -- -- 94,230
Issuance of common stock at $28.49 per share on
March 6, 1989 (net of costs of issuance of $21,395) -- -- 4,976,855 -- -- 4,978,610
Issuance of common stock at $28.49 per share on
March 30, 1989 (net of costs of issuance of $10,697) -- -- 2,488,356 -- -- 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 -- -- 7,443,118
Net loss -- -- -- (791,206) -- (791,206)
Deferred compensation relating to grant of stock options -- -- 683,040 -- (683,040) --
Amortization of deferred compensation -- -- -- -- 800,729 800,729
--------- ----------- ---------- ------------ ---------- -----------
Balance at May 31, 1989 -- -- 35,728,451 (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 -- (699,163) --
Amortization of deferred compensation -- -- -- -- 546,278 546,278
--------- ----------- ---------- ------------ ---------- -----------
Balance at May 31, 1990 -- -- 36,427,614 (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 -- -- 36,427,614 (15,956,367) (653,764) 19,882,249
Exercise of stock warrants at $5.60 per share -- -- 503,100 -- -- 504,000
Net loss -- -- -- (7,006,495) -- (7,006,495)
Amortization of deferred compensation -- -- -- -- 254,025 254,025
--------- ----------- ---------- ------------ ---------- -----------
Balance at May 31, 1992 -- -- 36,930,714 (22,962,862) (399,739) 13,633,779
Exercise of stock warrants at $7.14 per share -- -- 106,890 -- -- 107,040
Issuance of common stock at $15.19 per share on
April 19, 1993 (net of costs of issuance of $20,724) -- -- 5,663,710 -- -- 5,667,454
Net loss -- -- -- (8,066,609) -- (8,066,609)
Amortization of deferred compensation -- -- -- -- 254,025 254,025
--------- ----------- ---------- ------------ ---------- -----------
Balance at May 31, 1993 -- -- 42,701,314 (31,029,471) (145,714) 11,595,689
--------- ----------- ---------- ------------ ---------- -----------
</TABLE>
(Continued)
<PAGE> 8
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Shareholders' Equity (Deficit), continued
Six months ended November 30, 1999 and for the
period from June 19, 1985 (inception) through November 30, 1999
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE
PREFERRED STOCK COMMON STOCK PREFERRED STOCK
----------------------- ----------------------- -----------------------
NUMBER AGGREGATE NUMBER AGGREGATE NUMBER AGGREGATE
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT
---------- --------- --------- ------------ --------- -----------
<S> <C> <C> <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 -- -- -- -- -- --
Non-cash compensation -- -- -- -- -- --
Exercise of stock options at $7.14 per share -- -- 17,500 175 -- --
Exercise of stock warrants at $8.00 per share -- -- 125,000 1,250 -- --
---------- --------- ---------- ------------ --------- -----------
Balance at May 31, 1999 -- -- 14,239,875 142,399 -- --
Net loss (unaudited) -- -- -- -- -- --
Non-cash compensation (unaudited) -- -- -- -- -- --
---------- --------- ---------- ------------ --------- -----------
Balance at November 30, 1999 (unaudited) -- $ -- 14,239,875 $ 142,399 -- $ --
========== ========= ========== ============ ========= ===========
</TABLE>
See accompanying independent accountants' review report.
(Continued)
<PAGE> 9
<TABLE>
<CAPTION>
SERIES B CONVERTIBLE DEFICIT TOTAL
PREFERRED STOCK ACCUMULATED SHARE-
--------------------- ADDITIONAL DURING THE DEFERRED HOLDERS'
NUMBER AGGREGATE PAID-IN DEVELOPMENT COMPEN- EQUITY
OF SHARES AMOUNT CAPITAL STAGE SATION (DEFICIT)
--------- --------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net loss -- $ -- -- (7,363,810) -- (7,363,810)
Issuance of common stock at $6.50 per share on
May 26, 1994 (net of costs of issuance of $2,061,149) -- -- 14,163,851 -- -- 14,188,851
Cancellation of stock options -- -- (85,400) -- 85,400 --
Amortization of deferred compensation -- -- -- -- 267 267
--------- --------- ----------- ------------ ---------- -----------
Balance at May 31, 1994 -- -- 56,779,765 (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 (net of issuance costs of $172,500) -- -- 2,261,250 -- -- 2,265,000
Exercise of stock options at $7.14 per share -- -- 71,300 -- -- 71,400
Exercise of stock options at $2.00 per share -- -- 373,264 -- -- 375,139
Cancellation of stock options -- -- (106,750) -- 106,750 --
Amortization of deferred compensation -- -- -- -- (67,892) (67,892)
--------- --------- ----------- ------------ ---------- -----------
Balance at May 31, 1995 -- -- 59,378,829 (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 (net of issuance costs of $3,565,125) -- -- 48,324,374 -- -- 48,353,624
Issuance of common stock at $17.75 per share on
September 11, 1995 (net of issuance costs of $423,238) -- -- 7,360,187 -- -- 7,364,575
Exercise of stock options at $2.00 per share -- -- 362,937 -- -- 364,761
Exercise of stock options at $6.38 per share -- -- 9,555 -- -- 9,570
Exercise of stock options at $7.14 per share -- -- 71,300 -- -- 71,400
Cancellation of stock options -- -- (80,062) -- 80,062 --
Amortization of deferred compensation -- -- -- -- (62,726) (62,726)
--------- --------- ----------- ------------ ---------- -----------
Balance at May 31, 1996 -- -- 115,427,120 (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 -- -- 50,025 -- -- 52,658
Exercise of stock options at $2.00 per share -- -- 463,540 -- -- 465,869
Exercise of stock options at $7.14 per share -- -- 71,300 -- -- 71,400
Amortization of deferred compensation -- -- -- -- 2,569 2,569
--------- --------- ----------- ------------ ---------- -----------
Balance at May 31, 1997 -- -- 116,011,985 (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 -- -- 35,650 -- -- 35,700
Amortization of deferred compensation -- -- -- -- 1,284 1,284
--------- --------- ----------- ------------ ---------- -----------
Balance at May 31, 1998 -- -- 116,047,635 (60,740,240) -- 55,448,369
Net loss -- -- -- (7,416,333) -- (7,416,333)
Non-cash compensation -- -- 14,354 -- -- 14,354
Exercise of stock options at $7.14 per share -- -- 124,775 -- -- 124,950
Exercise of stock warrants at $8.00 per share -- -- 998,750 -- -- 1,000,000
--------- --------- ----------- ------------ ---------- -----------
Balance at May 31, 1999 -- -- 117,185,514 (68,156,573) -- 49,171,340
Net loss (unaudited) -- -- -- (4,345,782) -- (4,345,782)
Non-cash compensation (unaudited) -- -- 43,062 -- -- 43,062
--------- --------- ----------- ------------ ---------- -----------
Balance at November 30, 1999 (unaudited) -- $ -- 117,228,576 (72,502,355) -- 44,868,620
========= ========= =========== ============ ========== ===========
</TABLE>
<PAGE> 10
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Cash Flows
Six months ended November 30, 1999 and 1998 and for the
period from June 19, 1985 (inception) through November 30, 1999
<TABLE>
<CAPTION>
CUMULATIVE
SIX MONTHS ENDED FROM
NOVEMBER 30, JUNE 19, 1985
--------------------------------- THROUGH
1999 1998 NOVEMBER 30, 1999
---------------- ------------ -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (4,345,782) (3,445,539) (72,502,355)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 195,277 317,652 14,053,343
Non-cash compensation and other adjustments 74,328 -- 3,538,673
Loss on sale of equipment -- -- 66,359
Changes in assets and liabilities:
Prepaid expenses 115,978 109,549 (395,473)
Other current assets (185,584) (34,987) (2,350,265)
Other assets -- -- 6,953
Accounts payable 283,935 (514,168) 1,608,965
Accrued expenses (36,298) (11,629) 84,326
Accrued compensation and benefits 34,404 12,348 255,404
Other liabilities 10,006 1,024 134,708
---------------- ------------ -----------------
Net cash used in operating activities (3,853,736) (3,565,750) (55,499,362)
---------------- ------------ -----------------
Cash flows from investing activities:
Purchase of property, plant, equipment,
and capitalized engineering costs (1,532,874) (197,063) (16,266,286)
Proceeds from matured marketable securities 3,549,200 30,649,200 337,389,981
Proceeds from sale of marketable securities -- -- 7,141,656
Purchase of marketable securities (4,954,654) (25,366,442) (367,642,541)
Proceeds from sale of equipment, land 1,786,436 -- 1,863,023
---------------- ------------ -----------------
Net cash provided by (used in) investing activities (1,151,892) 5,085,695 (37,514,167)
---------------- ------------ -----------------
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 -- 124,950 7,443,118
Proceeds from issuance of notes payable -- -- 1,500,000
Repayment of notes payable -- -- (140,968)
---------------- ------------ -----------------
Net cash provided by financing activities -- 124,950 113,863,569
---------------- ------------ -----------------
Net increase (decrease) in cash (5,005,628) 1,644,895 20,850,040
Cash at beginning of period 25,855,668 26,473,577 --
---------------- ------------ -----------------
Cash at end of period $ 20,850,040 28,118,472 20,850,040
================ ============ =================
</TABLE>
See accompanying independent accountants' review report.
<PAGE> 11
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Notes to Financial Statements
November 30, 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, per share amounts reflect
the use of the Basic method only.
(3) RECLASSIFICATIONS
Certain reclassifications were made to the prior period financial
statements in order to conform with the current period presentation.
(4) SIGNIFICANT 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 35,000 square foot space adjacent to its current Mt. Prospect,
Illinois facility under comparable lease terms. The first lease option
expires on August 30, 2004.
<PAGE> 12
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, PolyHemeTM. 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 November 30, 1999, we have incurred operating
losses totaling $72,502,000.
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 remain at current levels
over the balance of the fiscal year.
<PAGE> 13
RESULTS OF OPERATIONS
We reported no revenues for either of the three-month periods ended
November 30, 1999 or 1998. From Northfield's inception through November 30,
1999, we have reported total revenues of $3,000,000, all of which were derived
from licensing fees.
OPERATING EXPENSES
Operating expenses for our second fiscal quarter ended November 30,
1999 totaled $2,886,000, an increase of $449,000 from the $2,437,000 reported in
the second quarter of fiscal 1999. Measured on a percentage basis, total
expenses in the second quarter of fiscal 2000 increased by 18.4%. This increase
was primarily due to increased costs associated with our ongoing clinical
trials, expanding our manufacturing organization, as well as preparing
regulatory documentation for our manufacturing facility.
Research and development expenses for our second quarter of fiscal 2000
totaled $2,362,000, an increase of $486,000, or 25.9%, from the $1,876,000,
reported in the second quarter of fiscal 1999. The majority of the increase in
research and development expenses resulted from costs associated with conducting
our clinical trials, producing PolyHeme for use in our clinical trials,
expansion of our manufacturing organization and validation services. Phase III
and Phase II clinical trials remain open and are ongoing.
<PAGE> 14
For the six-month period ended November 30, 1999, research and
development expenses totaled $4,487,000, representing an increase of $804,000,
or 21.8%, from the six-month period ended November 30, 1998. Substantially all
of the fiscal year to date increase over the comparable prior year period comes
from increased expenses related to the Company's Phase III clinical trials,
adding personnel to the manufacturing organization and validation services.
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 the manufacturing
organization and developing additional sources of hemoglobin.
General and administrative expenses in the second quarter of fiscal
2000 totaled $524,000 compared to expenses of $560,000 in the second quarter of
1999, representing a decrease of $36,000, or 6.4%. 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 that general and administrative expenses
will remain at current levels over the balance of the fiscal year.
General and administrative expenses for the six-month period ended
November 30, 1999 totaled $1,008,000 which represents a $143,000, or 12.4%,
decrease from the $1,151,000 in the
<PAGE> 15
comparable prior year period.
INTEREST INCOME
Interest income in the second quarter of fiscal 2000 totaled $579,000,
or a $93,000 decrease from the $672,000 in interest income reported in the
second quarter of fiscal 1999. Lower interest rates in fiscal 2000 combined with
lower available investment balances accounted for 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.
Interest income for the six-month period ended November 30, 1999
totaled $1,149,000, or a $239,000 decrease from the comparable prior year
period. Lower interest rates combined with declining available investment
balances caused the year over year decline in interest income.
NET LOSS
The net loss for the second quarter ended November 30, 1999 was
$2,307,000, or $.16 per basic share, compared to a net loss of $1,765,000, or
$.13 per basic share, for the second quarter ended November 30, 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.
For the six-month period ended November 30, 1999, Northfield reported a
loss of $4,346,000, or $.31 per basic share, compared to the comparable prior
year period results of a
<PAGE> 16
loss of $3,446,000, or $.24 per basic share. Higher research and development
expenses, including manufacturing organization expansion, in fiscal 2000 caused
the reported loss and per basic share loss to increase.
LIQUIDITY AND CAPITAL RESOURCES
From Northfield's inception through November 30, 1999, we have used
cash for operating activities and for the purchase of engineering services and
property, plant and equipment in the amount of $71,766,000. For the three-month
periods ended November 30, 1999 and 1998, these cash expenditures totaled
$3,014,000, and $ 1,545,000, respectively. The increased cash outlay for the
second quarter of fiscal 2000 compared to the comparable prior year period
reflects an increased level of capital spending. During the second quarter,
Northfield substantially completed the planned upgrade of its prototype
manufacturing facility.
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 licensing of product rights. As of November
30, 1999, we had cash and marketable securities totaling $43,961,000.
During fiscal 1999, Northfield notified the seller of a parcel of
undeveloped land previously purchased as the site for our initial
commercial-scale manufacturing facility of our intention to delay development of
the site. Under the terms of the land purchase contract, the seller had the
right to repurchase the property for an amount equal to our acquisition cost of
<PAGE> 17
approximately $1,786,000. 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. After
a two month shutdown this fall, new equipment was installed in our current
manufacturing facility bringing our annual 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. Engineering on the additional space is currently
underway and 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
evaluating this approach due to the capital required to build a greenfield
facility with a 300,000 unit capacity. Northfield's views the smaller facility
as financially prudent yet large enough for commercial viability.
We may enter into collaborative arrangements with strategic partners
who 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.
<PAGE> 18
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
At this writing, we have entered year 2000. Critical external utilities
remain available. Internal control systems and data processing applications are
working as expected. No disruption to our business has occurred. We expect final
assessment of the year 2000 issues will not be available until the end of the
third fiscal quarter, February 29, 2000. We remain confident that any unforeseen
internal year 2000 issues will be resolved without significant financial or
operational impact.
<PAGE> 19
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 12, 2000.
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)
<PAGE> 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBIT 3.11 - Restated Certificate of Incorporation
EXHIBIT 10.41 - Amendment to Lease
EXHIBIT 15 - Letter RE: Unaudited Interim Financial Information
EXHIBIT 27 - Financial Data Schedule
(b) None.
<PAGE> 1
EXHIBIT 3.11
RESTATED CERTIFICATE OF INCORPORATION
OF
NORTHFIELD LABORATORIES INC.
--------------------------------------------
Pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware
--------------------------------------------
Northfield Laboratories Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
The original Certificate of Incorporation of the Corporation was filed
on June 19, 1985.
A Restated Certificate of Incorporation of the Corporation was filed on
May 5, 1994.
This Restated Certificate of Incorporation amends and restates the
Certificate of Incorporation of the Corporation as heretofore in effect. This
Restated Certificate of Incorporation has been proposed by the Board of
Directors and adopted by the stockholders of the Corporation in the manner and
by the vote prescribed by Sections 242 and 245 of the General Corporation Law of
the State of Delaware, and is as follows:
1. Corporate Name. The name of the Corporation is Northfield
Laboratories Inc.
2. Registered Office and Agent. The address, including street, number,
city and county, of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware
<PAGE> 2
19801. The name of the registered agent of the Corporation in the State of
Delaware at such address is The Corporation Trust Company.
3. Purpose. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
4. Authorized Capital Stock. The total number of shares of stock which
the Corporation shall have authority to issue is 35,000,000 shares, consisting
of 30,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 5,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"). The Preferred Stock may be issued from time to time in one
or more series. The Board of Directors of the Corporation (the "Board of
Directors") is expressly authorized to provide for the issuance of the Preferred
Stock in one or more series, and to fix the number of shares and to determine or
alter for each such series, such voting powers, full or limited, or no voting
powers, and such designations, preferences, and relative, participating,
optional or other rights, and such qualifications, limitations or restrictions
thereof, as shall be stated and expressed in the resolution or resolutions
adopted by the Board of Directors providing for the issuance of such shares and
as may be permitted by the General Corporation Law of the State of Delaware. The
Board of Directors is also expressly authorized to increase or decrease (but not
below the number of shares of such series outstanding) the number of shares of
any series subsequent to the issuance of shares of that series. In case the
number of shares of any such series shall so decrease, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
5. Action by Stockholders. Special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors. Any action
required or permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of such holders and may not
be effected by any consent in writing by such stockholders. At any annual or
special meeting of the stockholders of the Corporation, only such business shall
be conducted as shall have been brought before such meeting in the manner
provided in the Bylaws of the Corporation.
6. Board of Directors. The business and affairs of the Corporation
shall be managed and controlled by a Board of Directors consisting of not less
than three nor more than eleven persons. The exact number of directors within
the minimum and maximum numbers specified in the preceding sentence shall be
fixed from time to time by the Board of Directors pursuant to a resolution
adopted by a majority of the entire Board of Directors. Subject to the rights of
the holders of any series of Preferred Stock outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filed
by a majority of the directors then in office, and the directors so chosen shall
hold office for a term expiring at the next annual meeting of stockholders of
the Corporation. No decrease in the
<PAGE> 3
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director. In discharging the duties of their respective
positions, the Board of Directors, committees of the Board of Directors,
individual directors and officers may, in considering the best long-term and
short-term interests of the Corporation, consider the effects of any action
(including, without limitation, action which may involve or relate to a change
or potential change in control of the Corporation) upon employees, suppliers and
customers of the Corporation, communities in which offices or other
establishments of the Corporation are located, and all other pertinent factors.
7. Fair Price Provision.
(a) The affirmative vote of the holders of at least 80 percent of
the outstanding shares of Voting Stock (as hereinafter defined) held by
stockholders other than an Interested Stockholder (as hereinafter defined)
shall be required for the approval or authorization of any Business
Combination (as hereinafter defined) of the Corporation with any
Interested Stockholder; provided that the 80 percent voting requirement
shall not be applicable if:
(i) the Continuing Directors (as hereinafter defined) of the
Corporation by at least a two-thirds vote (A) have expressly approved
in advance the acquisition of the outstanding shares of Voting Stock
that caused such Interested Stockholder to become an Interested
Stockholder or (B) have expressly approved such Business Combination,
either in advance of or subsequent to such Interested Stockholder
having become an Interested Stockholder; or
(ii) the cash or fair market value (as determined by at least
two-thirds of the Continuing Directors) of the property, securities or
other consideration to be received per share by holders of Voting Stock
of the Corporation in the Business Combination is not less than the
Highest Per Share Price or the Highest Equivalent Price (as such terms
are hereinafter defined) paid by the Interested Stockholder in
acquiring any Voting Stock of the Corporation.
(b) For purposes of this Section 7:
(i) the term "Business Combination" shall mean (A) any
merger or consolidation of the Corporation or a subsidiary of the
Corporation with or into an Interested Stockholder, (B) any sale,
lease, exchange, transfer, license or other disposition, including,
without limitation, a mortgage or any other security device, of all or
any Substantial Part (as hereinafter defined) of the assets either of
the Corporation (including, without limitation, any voting securities
of a subsidiary) or of a subsidiary
<PAGE> 4
of the Corporation to an Interested Stockholder, (C) any merger or
consolidation of an Interested Stockholder with or into the Corporation
or a subsidiary of the Corporation, (D) any sale, lease, exchange,
transfer or other disposition, including, without limitation, a
mortgage or other security device, of all or any Substantial Part of
the assets of an Interested Stockholder to the Corporation or a
subsidiary of the Corporation, (E) the issuance of any securities of
the Corporation or a subsidiary of the Corporation to an Interested
Stockholder, (F) any recapitalization that would have the effect of
increasing the voting power of an Interested Stockholder and (G) any
agreement, contract or other arrangement providing for any of the
transactions described in this definition of Business Combination;
(ii) the term "Interested Stockholder" shall mean and include
any individual, corporation, partnership or other person or entity
which, together with its Affiliates and Associates (as defined in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as in effect at the date of the adoption of this
Restated Certificate of Incorporation by the stockholders of the
Corporation (collectively, and as so in effect, the "Exchange Act"))
Beneficially Owns (as defined in Rule 13d-3 of the Exchange Act) in the
aggregate 15 percent or more of the outstanding Voting Stock of the
Corporation, and any Affiliate or Associate of any such individual,
corporation, partnership or other person or entity;
(iii) any share of Voting Stock of the Corporation that any
Interested Stockholder has the right to acquire at any time
(notwithstanding that Rule 13d-3 deems such shares to be beneficially
owned only if such right may be exercised within 60 days) pursuant to
any agreement, or upon exercise of conversion rights, warrants or
options or otherwise, shall be deemed to be Beneficially Owned by the
Interested Stockholder and to be outstanding for purposes hereof;
(iv) the term "Substantial Part" shall mean more than 15
percent of the fair market value as determined by two-thirds of the
Continuing Directors of the total consolidated assets of the
Corporation and its subsidiaries taken as a whole as of the end of its
most recent fiscal year ended prior to the time the determination is
being made;
(v) for the purposes of subparagraph (ii) of Section 7(a), the
term "other consideration to be received" shall include, without
limitation, Common Stock or other capital stock of the Corporation
retained by its existing stockholders other than Interested
Stockholders or other parties to such Business Combination in the event
of a Business Combination in which the Corporation is the surviving
corporation;
<PAGE> 5
(vi) the term "Voting Stock" shall mean all of the outstanding
shares of Common Stock and the outstanding shares of Preferred Stock
entitled to vote on each matter on which the holders of record of
Common Stock shall be entitled to vote, and each reference to a
proportion of shares of Voting Stock shall refer to such proportion of
the votes entitled to be cast by such shares;
(vii) the term "Continuing Director" shall mean a Director who
(A) was a member of the Board of Directors of the Corporation
immediately prior to the time that the Interested Stockholder involved
in a Business Combination became an Interested Stockholder or (B) is
not an Interested Stockholder or an Affiliate or an Associate of an
Interested Stockholder and whose nomination or election to the Board of
Directors is recommended or approved by a majority of the Directors
deemed to be Continuing Directors pursuant to clause (A) hereof;
(viii) an Interested Stockholder shall be deemed to have
acquired a share of the Voting Stock of the Corporation at the time
when such Interested Stockholder became the Beneficial Owner thereof.
With respect to the shares owned by Affiliates, Associates or other
persons whose ownership is attributed to an Interested Stockholder
under the foregoing definition of Interested Stockholder, if the price
paid by such Interested Stockholder for such shares is not determinable
by two-thirds of the Continuing Directors, the price so paid shall be
deemed to be the higher of (A) the price paid upon the acquisition
thereof by the Affiliate, Associate or other person or (B) the market
price of the shares in question at the time when the Interested
Stockholder became the Beneficial Owner thereof; and
(ix) the terms "Highest Per Share Price" and "Highest
Equivalent Price" as used in this Section 7 shall mean the following:
If there is only one class of capital stock of the Corporation issued
and outstanding, the Highest Per Share Price shall mean the highest
price that can be determined to have been paid at any time by the
Interested Stockholder for any share or shares of that class of capital
stock. If there is more than one class of capital stock of the
Corporation issued and outstanding, the Highest Equivalent Price shall
mean with respect to each class and series of capital stock of the
Corporation, the amount determined by two-thirds of the Continuing
Directors, on whatever basis they believe is appropriate, to be the
highest per share price equivalent of the highest price that can be
determined to have been paid at any time by the Interested Stockholder
for any share or shares of any class or series of capital stock of the
Corporation. In determining the Highest Per Share Price and Highest
Equivalent Price, all
<PAGE> 6
purchases by the Interested Stockholder shall be taken into account
regardless of whether the shares were purchased before or after the
Interested Stockholder became an Interested Stockholder. The Highest
Per Share Price and the Highest Equivalent Price shall include any
brokerage commissions, transfer taxes and soliciting dealers' fees paid
by the Interested Stockholder with respect to the shares of capital
stock of the Corporation acquired by the Interested Stockholder. In the
case of any Business Combination with an Interested Stockholder, the
Continuing Directors shall determine the Highest Equivalent Price for
each class and series of the capital stock of the Corporation.
8. Indemnification. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including, without
limitation, attorneys' fees and expenses), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including, without
limitation, attorneys' fees and expenses) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is
<PAGE> 7
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Any indemnification under the previous two paragraphs of this Section 8
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in such paragraphs. Such determination
shall be made (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
(b) if such quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion or (c) by the stockholders of the Corporation.
Expenses (including attorneys' fees and expenses) incurred by a
director, officer, employee or agent in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized in this Section 8.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 8 shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity as to action in another
capacity while holding such office.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Section 8.
For purposes of this Section 8 references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving as the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section 8 with respect to the resulting or surviving
corporation as he
<PAGE> 8
would have with respect to such constituent corporation if its separate
existence had continued.
For purposes of this Section 8, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Section
8.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 8 shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
9. Liability of Directors. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (a) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) under Section 174 of the General
Corporation Law of the State of Delaware, as the same exists or hereafter may be
amended, or (d) for any transaction from which the director derived an improper
personal benefit. Any repeal or modification of this Section 9 by the Board of
Directors or stockholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
Nothing herein shall limit or otherwise affect the obligation or right of the
Corporation to indemnify its directors pursuant to the provisions of this
Restated Certificate of Incorporation, the Bylaws of the Corporation or as may
be permitted by the General Corporation Law of the State of Delaware.
10. Amendment. The provisions of this Restated Certificate of
Incorporation may not be amended, altered or repealed in any respect unless such
action is approved by the affirmative vote of the holders of at least 80 percent
of the outstanding shares of Voting Stock (as defined in Section 7) of the
Corporation at a meeting of the stockholders of the Corporation duly called for
the consideration of such amendment, alteration or repeal; provided that if
there is an Interested Stockholder (as defined in Section 7), such action must
also be approved by the affirmative vote of the holders of at least 80 percent
of the outstanding shares of Voting Stock held by stockholders other than the
Interested Stockholder.
<PAGE> 9
11. Bylaws. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to (a)
make, alter or repeal the Bylaws of the Corporation, and (b) adopt from time to
time Bylaw provisions with respect to indemnification of directors, officers,
employees, agents and other persons as it shall deem expedient and in the best
interests of the Corporation and to the extent permitted by law.
12. Voting by Ballot. Elections of directors need not be by written
ballot unless the Bylaws of the Corporation so provide.
* * * * *
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by its Chief Executive Officer and attested by its Secretary as of this
November 3, 1999.
NORTHFIELD LABORATORIES INC.
/s/ Richard E. DeWoskin
-------------------------------------
Richard E. DeWoskin
Chief Executive Officer
ATTEST:
/s/ Jack J. Kogut
-------------------------------------
Jack J. Kogut
Secretary
<PAGE> 1
Exhibit 10.41
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE (hereinafter referred to as the "Third
Amendment"), dated September 16, 1999 is between OTR, an Ohio general
partnership acting as the duly authorized nominee of the board of The State
Teachers Retirement System of Ohio (hereinafter referred to as "Lessor"), whose
address is 275 East Broad Street, Columbus, Ohio 43215, and NORTHFIELD
LABORATORIES, INC., a Delaware corporation (hereinafter referred to as
"Lessee").
W I T N E S S E T H:
A. Lessor and Lessee have entered into a certain Lease dated June 8,
1989 which Lease was amended by First Amendment to Lease dated November 24, 1992
(hereinafter referred to as the "First Amendment to Lease") and by Second
Amendment to Lease dated May 5, 1998 (hereinafter referred to as the "Second
Amendment to Lease" and said Lease as amended by the First Amendment to Lease
and the Second Amendment to Lease is hereinafter referred to as the "Lease"),
with respect to certain premises as therein described (hereinafter referred to
as the "Original Premises") located in the Property (hereinafter referred to as
"Property") known and described as 1200 Business Center Drive, Suite 200, Mt.
Prospect, Illinois 60056.
B. Lessor and Lessee now desire to expand the Original Premises by
adding certain additional premises which the parties hereto acknowledge contain
an area of thirty-five thousand four hundred and twenty-four (35,424) square
feet and which are depicted on Exhibit "A" attached hereto and by this reference
incorporated herein (hereinafter referred to as the "Expansion Space"). The
parties hereto acknowledge that upon the addition of the Expansion Premises to
the Original Premises the total area demised to Lessee shall increase to
fifty-five thousand eight hundred and twenty-four (55,824) square feet and
Lessee's Pro Rata Share shall increase to fifty-two and 66/100 percent (52.66%).
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions contained in this Agreement and the foregoing recitals which are, by
this reference, incorporated herein, the parties agree as follows:
1. DEMISE. The Lessor hereby demises the Expansion Premises to Lessee
for a term commencing on September 15, 1999 (hereinafter referred to as the "New
Start Date") whereupon all references in the Lease to the Premises shall be
deemed to refer to the Original Premises and the Expansion Premises. The Lessee
hereby accepts the Expansion Premises in their present "as-is" condition. The
Lessee's taking possession of the Expansion Premises shall be deemed to the
Lessee's acceptance of the Expansion Premises in the order and condition as then
exists. No promise of the Lessor to alter, remodel, decorate, clean or improve
the Expansion Premises of the Property and no representation respecting the
condition of the Expansion Premises or the Property have been made by the Lessor
or by any agent or representative of the Lessor to the Lessee. Any improvement,
alteration, addition or installation to the Expansion Premises shall be made
only in compliance with the terms of Article VIII of the Lease. Notwithstanding
the foregoing, Lessee shall not be required to post a performance bond.
Furthermore, Lessor approves (xxxxxxxx xxxxxxxxxx xxxxxxxxxxxx xxxxxx) as the
contractor and (xxxxxxxx xxxxxxxxxx xxxxxxxxxxxx xxxxxx) subcontractors for the
improvements, alterations, additions or installations to the Expansion Premises
and approves the space plan and plans and specifications attached hereto and
incorporated herein as Exhibit "B" (the "Plans"). Lessor reserves the right to
notify Lessee, at or
<PAGE> 2
prior to the termination of the Lease, that Lessee must remove the improvements
installed by Lessee under the terms of this paragraph, at Lessee's sold cost and
expense and repair or restore any damage caused by the installation or such
removal. Lessor acknowledges that the Plans do not show layouts for machinery
and piping because of the confidential nature of Lessee's trade secrets. Any
charges for Lessor's engineer shall be limited to those charges for inspection
and engineering time as set forth in Article VIII for structural items, building
systems and other items shown on the Plans. Any inspections of construction
operations performed by Lessor or Lessor's agents shall be reasonable and Lessor
and Lessor's agents agree to not disclose to any independent third party the
nature of such construction, unless required by law, court order or in relation
to any litigation arising out of this Lease or the improvements. Effective on
the New Start Date the Lessee's Pro Rata Share shall increase to be fifty-two
and 66/100 percent (52.66%) of the Excess Real Estate Taxes for the applicable
Lease Year, and the term Lessee's Pro Rata Share of Excess Expenses shall mean
fifty-two and 66/100 percent (52.66%) of the Excess Expenses for the applicable
Lease Year.
2. TERM. The terms of the Lease is hereby extended for a period of one
(1) month and shall terminate on August 30, 2004 ("Term").
3. BASE RENT.
(a) Commencing on the New Start Date and terminating on June 30,
2002 the Annual Base Rent shall be the sum of TWO HUNDRED SIXTY-SEVEN THOUSAND
NINE HUNDRED FIFTY-FIVE AND 20/100 ($267,955.20) DOLLARS which shall be payable
monthly, in advance on the first day of each and every month during such
period, in equal monthly installments in the amount of TWENTY-TWO THOUSAND THREE
HUNDRED TWENTY-NINE AND 60/100 ($22,329.60) DOLLARS. The Annual Base Rent is
comprised of Annual Base Rent for the Original Premises in the amount of NINETY
SEVEN THOUSAND NINE HUNDRED TWENTY AND 00/100 ($97,920.00) DOLLARS and Annual
Base Rent for the Expansion Space in the amount of ONE HUNDRED SEVENTY THOUSAND
THIRTY-FIVE AND 20/100 ($170,035.20) DOLLARS.
(b) The Annual Base Rent for the period commencing on July 1, 2002
and terminating on August 30, 2004 shall be the sum of TWO HUNDRED EIGHTY-FOUR
THOUSAND SEVEN HUNDRED TWO AND 40/100 ($284,702.40) DOLLARS which shall be
payable monthly, in advance on the first day of each and every month during such
period, in equal monthly installments in the amount of TWENTY THREE THOUSAND
SEVEN HUNDRED TWENTY FIVE AND 20/100 ($23,725.20) DOLLARS.
If the New Start Date is a date other than the first day of a calendar
month the monthly rent attributable to the Expansion Space for the remainder of
the first calendar month shall be prorated based upon the number of days in such
month. If the Term expires on a day other than the last day of a calendar month,
the rent for such month shall be prorated based upon the ratio that the number
of days of the Term in such month bears to the total number of days in such
month.
4. COMMERCIAL. The words "small scale" appearing in the eighth
line of the second paragraph of the Lease and in Article VI of the Lease shall
be deleted and replaced with the word "commercial".
5. MORTGAGE. Lessor represents that as of the date of this Third
Amendment, there is no mortgage encumbering the Property.
<PAGE> 3
6. DAMAGE BY FIRE OR OTHER CASUALTY. The number one hundred
twenty (120) appearing in line 4 and line 8 of the first paragraph, line 4 and
line 7 of the second paragraph, and line 4 of the third paragraph of Article XII
is hereby deleted and replaced with the number three hundred sixty-five (365).
7. NOTICES. Paragraph C. of Article XVII is hereby deleted and
the following Paragraph C is hereby inserted in place thereof:
C. All notices, demands, requests, consents and approvals that
may or are required to be given by either party to the other shall
be in writing and shall be deemed given when sent by United States
certified or registered mail, postage prepaid, or by overnight
courier (a) if for Lessor addressed to Lessee at Suite 1000, 1560
Sherman Avenue, Evanston, Illinois 60201, Attention: Jack Kogut
with a copy to Sidney Saltz, Jenner & Block, One IBM Plaza,
Chicago, Illinois 60601, or at such other place as Lessee may from
time to time designate by notice to Lessor, or (b) if for Lessor,
addressed to Insignia/ESG, Inc., 8420 W. Bryn Mawr, Suite 900,
Chicago, Illinois 60631 with a copy to Lessor, c/o OTR, 275 East
Broad Street, Columbus, Ohio 43215, Attention: Real Estate Manager,
or at such other place as Lessor may from time to time designate by
notice to Lessee. All consents and approvals provided for herein
must be in writing to be valid. Notice shall be deemed to have been
given if addressed and sent as above provided on the date of
delivery or, if delivery is refused, on the date of such attempted
delivery.
8. NOTICE UPON ENTRY. After the phrase "Lessee's security and
cleanliness" in line 12 of Article XX in the Rider to Lease, the phrase "and
confidentiality" is hereby added.
9. PARKING RIGHTS. The numbers forty-three (43) and twenty-two
(22) appearing in the third paragraph of Article XXI are hereby deleted and the
numbers one hundred and eighteen (118) and sixty-two (62), respectively, are
inserted in place thereof.
10. OPTION TO RENEW. Lessee shall have the option to renew the
Lease for two (2) successive five (5) year terms, commencing on the expiration
of the Term as set forth in Paragraph 2 hereof, in accordance with the terms and
conditions of Article XXIV of the Lease.
11. ASSIGNMENT AND SUBLETTING. The phrase "provided, however, such
parent, subsidiary or affiliate has a financial net worth, as evidenced by
financial statements prepared by a certified public accountant in excess of the
total financial net worth of all parties obligated under the terms and
conditions constituting the obligations of Lessee herein" beginning in line 10
of Article XXX in the Rider to Lease is hereby deleted.
12. WATER USE. Article XXXI of the Lease is hereby amended to
provide that Lessee agrees it shall cause the water service to the Premises to
be separately metered and Lessee shall be responsible for all costs and expenses
arising in connection with said installation of facilities necessary for the
separate metering including without limitation all increased sewer charges
directly attributable to Lessee's water use at the Premises. Pursuant to Article
XXXI of the Lease, the category of water service and sewer charges is hereby
excluded from the computation of Operating Expenses.
<PAGE> 4
13. BROKERAGE COMMISSION. Except for any broker, agent or other
person named below, Lessor and Lessee represent and warrant each to the other
that each has dealt with no broker, agent or other person in connection with
this transaction and that no broker, agent or other person brought about this
transaction. Lessor hereby agrees to pay Insignia/ESG, Inc. ("Agent") a leasing
commission as set forth in that certain Management Agreement between Lessor and
Agent, from which Agent has agreed to pay a "co-op" leasing commission to
Cushman & Wakefield of Illinois, Inc. ("Co-op Broker"). Lessee agrees to
indemnify and hold Lessor harmless from and against any claims by any other
broker, agent or other person (including, without limitation, Co-op Broker)
claiming a commission to other form of compensation by virtue of having dealt
with Lessee with regard to this leasing transaction. The provisions of this
Paragraph 6 shall survive the termination of the Lease as amended by this Third
Amendment.
14. NON-CONFLICTING LEASE TERMS RATIFIED. Except as modified
herein, the terms, covenants and conditions of the Lease are ratified and
confirmed and the parties shall be bound by, and shall have the benefits of, all
the terms, covenants and conditions of the Lease.
15. THIRD AMENDMENT CONTROLS. If any terms, covenants or
conditions of this Third Amendment conflict with the terms, covenants and
conditions of the Lease, then the terms and conditions of this Third Amendment
shall control.
16. EXCULPATION. This Third Amendment to Lease is executed by
certain employees of The State Teachers Retirement System of Ohio, not
individually, but solely on behalf of Lessor, the authorized nominee and agent
for The State Teachers Retirement Board of Ohio ("STRBO"). In consideration for
entering into this Third Amendment to Lease, Lessee hereby waives any rights to
bring a cause of action against the individuals executing this Lease on behalf
of Lessor (except for any cause of action based upon lack of authority or
fraud), and all persons dealing with Lessor must look solely to the Property for
the enforcement of any claim against Lessor, and the obligations under the
Lease, as amended hereby, are not binding upon, nor shall resort be had to the
private property of any of, the trustees, officers, directors, employees or
agents of STRBO.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
<PAGE> 5
IN WITNESS WHEREFORE, the parties to this Third Amendment to Lease
Agreement have extended the same on the day and year written above.
LESSOR:
OTR, an Ohio General Partnership
By:
------------------------------------
Its:
-------------------------------
LESSEE:
NORTHFIELD LABORATORIES INC.,
a Delaware Corporation
By:
------------------------------------
Its:
-------------------------------
<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 registration statements of Form S-8 of Northfield Laboratories
Inc., we acknowledge our awareness of the use therein of our report dated
December 14, 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
January 12, 2000
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