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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE PERIOD ENDED NOVEMBER 30, 2002
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, EVANSTON, ILLINOIS 60201-4800
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 864-3500
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT: NOT APPLICABLE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
APPLICABLE ONLY TO 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, 2002, REGISTRANT HAD 14,265,875 SHARES OF COMMON STOCK
OUTSTANDING
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report contains forward-looking statements concerning, among
other things, our prospects, clinical and regulatory developments affecting our
potential product and our business strategies. These forward-looking statements
are identified by the use of such terms as "intends," "expects," "plans,"
"estimates," "anticipates," "should," "believes" and similar terms.
These forward-looking statements involve risks and uncertainties. Actual results
may differ materially from those predicted by the forward-looking statements
because of various factors and possible events, including those discussed under
"Risk Factors" in our Annual Report on Form 10-K filed with the Securities and
Exchange Commission. Because these forward-looking statements involve risks and
uncertainties, actual results may differ significantly from those predicted in
these forward-looking statements. You should not place a lot of weight on these
statements. These statements speak only as of the date of this document or, in
the case of any document incorporated by reference, the date of that document.
All subsequent written and oral forward-looking statements attributable to
Northfield or any person acting on our behalf are qualified by the cautionary
statements in this section and in our Annual Report. We will have no obligation
to revise these forward-looking statements.
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, 2002, and the related statements of
operations for the three-month periods ended November 30, 2002 and 2001, and
statements of operations and cash flows for the six-month periods ended November
30, 2002 and 2001, and for the period from June 19, 1985 (inception) through
November 30, 2002. We have also reviewed the statements of shareholders' equity
(deficit) for the six-month period ended November 30, 2002 and for the period
from June 19, 1985 (inception) through November 30, 2002. 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 auditing standards generally accepted in the United States of America, 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 accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the balance sheet of Northfield
Laboratories Inc. as of May 31, 2002, 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, 2002 (not presented
herein); and in our report dated July 16, 2002, 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, 2002 and in the accompanying
statement of shareholders' equity (deficit) is fairly stated, in all material
respects, in relation to the statements from which they have been derived.
/s/ KPMG LLP
Chicago, Illinois
December 16, 2002
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Balance Sheets
November 30, 2002 (unaudited) and May 31, 2002
NOVEMBER 30, MAY 31,
ASSETS 2002 2002
------------- ------------
Current assets:
Cash $ 9,374,093 17,668,687
Marketable securities 2,689,120 720,000
Prepaid expenses 439,501 540,003
Other current assets 11,387 1,437
------------- ------------
Total current assets 12,514,101 18,930,127
Property, plant, and equipment, net 1,956,869 2,232,204
Other assets 71,906 72,410
------------- ------------
$ 14,542,876 21,234,741
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 324,419 1,077,712
Accrued expenses 320,001 210,109
Accrued compensation and benefits 316,804 338,849
------------- ------------
Total current liabilities 961,224 1,626,670
Other liabilities 172,784 177,753
------------- ------------
Total liabilities 1,134,008 1,804,423
------------- ------------
Shareholders' equity:
Preferred stock, $.01 par value. Authorized 5,000,000 shares;
none issued and outstanding -- --
Common stock, $.01 par value. Authorized 30,000,000 shares;
issued and outstanding 14,265,875 at November 30, 2002
and May 31, 2002. 142,659 142,659
Additional paid-in capital 117,503,271 117,503,271
Deficit accumulated during the development stage (104,237,062) (98,215,612)
------------- ------------
Total shareholders' equity 13,408,868 19,430,318
------------- ------------
$ 14,542,876 21,234,741
============= ============
See accompanying notes to financial statements.
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Operations
Three and six month periods ended November 30, 2002 and 2001 and for the period
from June 19, 1985 (inception) through November 30, 2002
CUMULATIVE
THREE MONTHS ENDED SIX MONTHS ENDED FROM
NOVEMBER 30, NOVEMBER 30, JUNE 19, 1985
------------------------------- ----------------------------- THROUGH
2002 2001 2002 2001 NOVEMBER 30, 2002
------------ ------------ ------------ ------------ -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------ -----------------
Revenues - license income $ -- -- -- -- 3,000,000
------------ ------------ ------------ ------------ ------------
Costs and expenses:
Research and development 2,243,311 1,910,675 4,269,113 4,559,349 91,689,633
General and administrative 960,746 524,809 1,889,903 1,367,769 38,846,799
------------ ------------ ------------ ------------ ------------
3,204,057 2,435,484 6,159,016 5,927,118 130,536,432
------------ ------------ ------------ ------------ ------------
Other income and expense:
Interest income 60,196 269,780 137,566 570,842 23,382,604
Interest expense -- -- -- -- 83,234
------------ ------------ ------------ ------------ ------------
60,196 269,780 137,566 570,842 23,299,370
------------ ------------ ------------ ------------ ------------
Net loss $ (3,143,861) (2,165,704) (6,021,450) (5,356,276) (104,237,062)
============ ============ ============ ============ ============
Net loss per share - basic and diluted $ (0.22) (0.15) (0.42) (0.38) (10.71)
============ ============ ============ ============ ============
Shares used in calculation of
per share data - basic and diluted 14,265,875 14,265,875 14,265,875 14,265,875 9,736,023
============ ============ ============ ============ ============
See accompanying notes to financial statements.
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Shareholders' Equity (Deficit)
Six month period ended November 30, 2002 (unaudited) and for the period
from June 19, 1985 (inception) through November 30, 2002
COMMON STOCK
--------------------------------------------------------
NUMBER AGGREGATE NUMBER AGGREGATE
OF SHARES AMOUNT OF SHARES AMOUNT
--------- --------- --------- ---------
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 $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
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
-------- --------- --------- ---------
SERIES A CONVERTIBLE SERIES B CONVERTIBLE DEFICIT
PREFERRED STOCK PREFERRED STOCK ACCUMULATED TOTAL
- ------------------------- --------------------------- ADDITIONAL DURING THE SHAREHOLDERS'
NUMBER AGGREGATE NUMBER AGGREGATE PAID-IN DEVELOPMENT DEFERRED EQUITY
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL STAGE COMPENSATION (DEFICIT)
- --------- --------- --------- ---------- ----------- ------------ ------------ ------------
-- $ -- -- $ -- $ (28,000) $ -- $ -- $ 7,000
250,000 250,000 -- -- 670,850 -- -- 920,850
-- -- -- -- -- (607,688) -- (607,688)
- --------- --------- --------- --------- ----------- ------------ ----------- -----------
250,000 250,000 -- -- 642,850 (607,688) -- 320,162
-- -- -- -- -- (2,429,953) -- (2,429,953)
-- -- -- -- 2,340,000 -- (2,340,000) --
-- -- -- -- -- -- 720,000 720,000
- --------- --------- --------- --------- ----------- ------------ ----------- -----------
250,000 250,000 -- -- 2,982,850 (3,037,641) (1,620,000) (1,389,791)
-- -- 200,633 200,633 6,882,502 -- -- 7,083,135
-- -- -- -- -- (3,057,254) -- (3,057,254)
-- -- -- -- -- -- 566,136 566,136
- --------- --------- --------- --------- ----------- ------------ ----------- -----------
250,000 250,000 200,633 200,633 9,865,352 (6,094,895) (1,053,864) 3,202,226
-- -- -- -- 9,749,870 -- -- 9,754,000
(250,000) (250,000) -- -- 237,500 -- -- --
-- -- (200,633) (200,633) 190,601 -- -- --
-- -- -- -- 93,759 -- -- 94,230
-- -- -- -- 4,976,855 -- -- 4,978,610
-- -- -- -- 2,488,356 -- -- 2,489,234
-- -- -- -- 7,443,118 -- -- 7,443,118
-- -- -- -- -- (791,206) -- (791,206)
-- -- -- -- 683,040 -- (683,040) --
-- -- -- -- -- -- 800,729 800,729
- --------- --------- --------- --------- ----------- ------------ ----------- -----------
-- -- -- -- 35,728,451 (6,886,101) (936,175) 27,970,941
-- -- -- -- -- (3,490,394) -- (3,490,394)
-- -- -- -- 699,163 -- (699,163) --
-- -- -- -- -- -- 546,278 546,278
- --------- --------- --------- --------- ----------- ------------ ----------- -----------
-- -- -- -- 36,427,614 (10,376,495) (1,089,060) 25,026,825
-- -- -- -- -- (5,579,872) -- (5,579,872)
-- -- -- -- -- -- 435,296 435,296
- --------- --------- --------- --------- ----------- ------------ ----------- -----------
-- -- -- -- 36,427,614 (15,956,367) (653,764) 19,882,249
-- -- -- -- 503,100 -- -- 504,000
-- -- -- -- -- (7,006,495) -- (7,006,495)
-- -- -- -- -- -- 254,025 254,025
- --------- --------- --------- --------- ----------- ------------ ----------- -----------
-- -- -- -- 36,930,714 (22,962,862) (399,739) 13,633,779
-- -- -- -- 106,890 -- -- 107,040
-- -- -- -- 5,663,710 -- -- 5,667,454
-- -- -- -- -- (8,066,609) -- (8,066,609)
-- -- -- -- -- -- 254,025 254,025
- --------- --------- --------- --------- ----------- ------------ ----------- -----------
-- $ -- -- $ -- $42,701,314 $(31,029,471) $ (145,714) $11,595,689
- --------- --------- --------- --------- ----------- ------------ ----------- -----------
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Shareholders' Equity (Deficit)
Six month period ended November 30, 2002 (unaudited) and for the period
from June 19, 1985 (inception) through November 30, 2002
PREFERRED STOCK COMMON STOCK
--------------------------------------------------------
NUMBER AGGREGATE NUMBER AGGREGATE
OF SHARES AMOUNT OF SHARES AMOUNT
--------- --------- --------- ---------
Net loss -- $ -- -- $ --
Issuance of common stock at $6.50 per share on May 26, 1994 (net of
costs of issuance of $2,061,149) -- -- 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 -- -- -- --
Non-cash compensation -- -- -- --
Exercise of stock options at $13.38 per share -- -- 2,500 25
--------- --------- ---------- ----------
Balance at May 31, 2000 -- -- 14,242,375 142,424
Net loss -- -- -- --
Non-cash compensation -- -- -- --
Exercise of stock options at $6.38 per share -- -- 6,000 60
Exercise of stock options at $10.81 per share -- -- 17,500 175
--------- --------- ---------- ----------
Balance at May 31, 2001 -- -- 14,265,875 $ 142,659
Net loss -- -- -- --
--------- --------- ---------- ----------
Balance at May 31, 2002 -- -- 14,265,875 $ 142,659
--------- --------- ---------- ----------
Net loss -- -- -- --
Balance at November 30, 2002 -- $ -- 14,265,875 $ 142,659
========= ========= ========== ==========
SERIES A CONVERTIBLE SERIES B CONVERTIBLE DEFICIT
PREFERRED STOCK PREFERRED STOCK ACCUMULATED TOTAL
- ------------------------- --------------------------- ADDITIONAL DURING THE SHAREHOLDERS'
NUMBER AGGREGATE NUMBER AGGREGATE PAID-IN DEVELOPMENT DEFERRED EQUITY
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL STAGE COMPENSATION (DEFICIT)
- --------- --------- --------- ---------- ----------- ------------ ------------ ------------
-- $ -- -- $ -- $ -- $ (7,363,810) $ -- $ (7,363,810)
-- -- -- -- 14,163,851 -- -- 14,188,851
-- -- -- -- (85,400) -- 85,400 --
-- -- -- -- -- -- 267 267
- --------- --------- --------- --------- ------------ ------------- ----------- ------------
-- -- -- -- 56,779,765 (38,393,281) (60,047) 18,420,997
-- -- -- -- -- (7,439,013) -- (7,439,013)
-- -- -- -- 2,261,250 -- -- 2,265,000
-- -- -- -- 71,300 -- -- 71,400
-- -- -- -- 373,264 -- -- 375,139
-- -- -- -- (106,750) -- 106,750 --
-- -- -- -- -- -- (67,892) (67,892)
- --------- --------- --------- --------- ------------ ------------- ----------- ------------
-- -- -- -- 59,378,829 (45,832,294) (21,189) 13,625,631
-- -- -- -- -- (4,778,875) -- (4,778,875)
-- -- -- -- 48,324,374 -- -- 48,353,624
-- -- -- -- 7,360,187 -- -- 7,364,575
-- -- -- -- 362,937 -- -- 364,761
-- -- -- -- 9,555 -- -- 9,570
-- -- -- -- 71,300 -- -- 71,400
-- -- -- -- (80,062) -- 80,062 --
-- -- -- -- -- -- (62,726) (62,726)
- --------- --------- --------- --------- ------------ ------------- ----------- ------------
-- -- -- -- 115,427,120 (50,611,169) (3,853) 64,947,960
-- -- -- -- -- (4,245,693) -- (4,245,693)
-- -- -- -- 50,025 -- -- 52,658
-- -- -- -- 463,540 -- -- 465,869
-- -- -- -- 71,300 -- -- 71,400
-- -- -- -- -- -- 2,569 2,569
- --------- --------- --------- --------- ------------ ------------- ----------- ------------
-- -- -- -- 116,011,985 (54,856,862) (1,284) 61,294,763
-- -- -- -- -- (5,883,378) -- (5,883,378)
-- -- -- -- 35,650 -- -- 35,700
-- -- -- -- -- -- 1,284 1,284
- --------- --------- --------- --------- ------------ ------------- ----------- ------------
-- -- -- -- 116,047,635 (60,740,240) -- 55,448,369
-- -- -- -- -- (7,416,333) -- (7,416,333)
-- -- -- -- 14,354 -- 14,354
-- -- -- -- 124,775 -- -- 124,950
-- -- -- -- 998,750 -- -- 1,000,000
- --------- --------- --------- --------- ------------ ------------- ----------- ------------
-- -- -- -- 117,185,514 (68,156,573) -- 49,171,340
-- -- -- -- -- (9,167,070) -- (9,167,070)
-- -- -- -- 57,112 -- -- 57,112
-- -- -- -- 33,425 -- -- 33,450
- --------- --------- --------- --------- ------------ ------------- ----------- ------------
-- -- -- -- 117,276,051 (77,323,643) -- 40,094,832
-- -- -- -- -- (10,174,609) -- (10,174,609)
-- -- -- -- -- -- -- --
-- -- -- -- 38,220 -- -- 38,280
-- -- -- -- 189,000 -- -- 189,175
- --------- --------- --------- --------- ------------ ------------- ----------- ------------
-- -- -- -- 117,503,271 (87,498,252) -- 30,147,678
-- -- -- -- -- (10,717,360) -- (10,717,360)
- --------- --------- --------- --------- ------------ ------------- ----------- -----------
-- -- -- -- 117,503,271 (98,215,612) -- 19,430,318
- --------- ---------- --------- --------- ------------ ------------- ------------ ------------
-- -- -- -- -- (6,021,450) -- (6,021,450)
-- $ -- -- $ -- $117,503,271 $(104,237,062) $ -- $ 13,408,868
========= ========== ========= ========= ============ ============= ============ ============
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Cash Flows
Six month periods ended November 30, 2002 and 2001
and the cumulative period from June 19, 1985
(inception) through November 30, 2002
CUMULATIVE
FROM
SIX MONTHS ENDED NOVEMBER 30, JUNE 19, 1985
---------------------------------- THROUGH
2002 2001 NOVEMBER 30, 2002
------------ ----------- -----------------
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (6,021,450) (5,356,276) (104,237,062)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 406,623 431,905 16,697,337
Non-cash compensation -- -- 3,552,723
Loss on sale of equipment -- -- 66,359
Changes in assets and liabilities:
Prepaid expenses 100,502 47,600 (648,712)
Other current assets (9,950) 186,897 (1,907,638)
Other assets -- 49,101 6,851
Accounts payable (753,293) (970,902) 324,420
Accrued expenses 109,892 (51,794) 319,999
Accrued compensation and benefits (22,045) 58,825 316,804
Other liabilities (4,969) 6,134 172,784
------------ ----------- --------------
Net cash used in operating activities (6,194,690) (5,598,510) (85,336,135)
------------ ----------- --------------
Cash flows from investing activities:
Purchase of property, plant, equipment, and
capitalized engineering costs (146,766) (115,094) (18,604,130)
Proceeds from sale of land and equipment -- -- 1,863,023
Proceeds from matured marketable securities -- 10,679,200 408,817,352
Proceeds from sale of marketable securities -- -- 7,141,656
Purchase of marketable securities (1,953,138) (4,999,301) (418,632,146)
------------ ----------- --------------
Net cash provided by (used in) investing activities (2,099,904) 5,564,805 (19,414,246)
------------ ----------- --------------
Cash flows from financing activities:
Proceeds from issuance of common stock -- -- 103,749,383
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 -- -- 114,124,474
------------ ----------- --------------
Net (decrease) increase in cash (8,294,594) (33,705) 9,374,093
Cash at beginning of period 17,668,687 6,435,540
------------ ----------- --------------
Cash at end of period $ 9,374,093 6,401,835 9,374,093
============ =========== ==============
See accompanying notes to financial statements.
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Notes to Financial Statements
November 30, 2002
(1) BASIS OF PRESENTATION
The interim financial statements presented are unaudited but, in the
opinion of management, have been prepared in conformity with accounting
principles generally accepted in the United States of America 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, 2003. The interim financial statements
should be read in connection with the audited financial statements for
the year ended May 31, 2002.
(2) COMPUTATION OF NET LOSS PER SHARE
Basic earnings per share is based on the weighted average number of
shares outstanding and excludes the dilutive effect of unexercised
common stock equivalents. Diluted earnings per share is based on the
weighted average number of shares outstanding and includes the dilutive
effect of unexercised common stock equivalents. Because the Company
reported a net loss for all periods presented, basic and diluted per
share amounts are the same.
(3) LIQUIDITY
The Company has incurred recurring losses since its inception and
expects that significant additional expenditures will be required to
successfully commercialize PolyHeme. The Company has financed its
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,
2002, the Company had cash and marketable securities totaling
$12,063,000. The Company is actively pursuing additional financing to
fund its continued operations. The Company may also enter into
collaborative arrangements with strategic partners, which could provide
the Company with additional funding or absorb expenses the Company
would otherwise be required to pay. Any one or a combination of these
sources may be utilized to raise the required funding. Business or
market conditions may not be favorable, which could delay or prevent
the Company from raising additional capital or entering into a
collaborative arrangement. If the Company is unable to obtain
additional capital or enter into a collaborative arrangement, the
Company may be required to curtail its product development and other
activities and substantially reduce its scope of operations.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Since Northfield's incorporation in 1985, we have devoted substantially
all of our efforts and resources to the research, development and clinical
testing of our potential product, 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, 2002, we have incurred operating
losses totaling $104,237,000.
RECENT EVENTS
In August 2001, we submitted a Biologics License Application to the
Food and Drug Administration seeking regulatory approval for the commercial
manufacture and sale of PolyHeme. In November 2001, the FDA issued a refusal to
file letter with respect to our Biologics License Application. Since that time,
we have had numerous meetings and follow-up discussions with the FDA, have
responded to the FDA's questions and are attempting to reach a consensus with
the FDA in order to move forward as quickly as possible toward regulatory
approval for PolyHeme.
Based on our dialogue with the FDA, we submitted a proposed protocol to
the FDA in October 2002 for an additional clinical trial in which PolyHeme
would be used for the first time in civilian trauma applications to treat
severely injured patients before they reach a hospital. Under our proposed
protocol, treatment with PolyHeme would begin at the scene of the injury and
continue during transport to the hospital by either ground or air ambulance.
Because of the complex ethical and legal issues associated with obtaining a
waiver of informed consent as part of our proposed trial protocol, we announced
that we anticipated that the FDA would require
more than the traditional 30-day review period to complete its
evaluation of our proposal.
In November 2002, the FDA responded with questions and comments
regarding our protocol proposal. The FDA's response continued to encourage the
concept of a civilian trauma study in the urban prehospital setting, including
the proposed primary endpoint of increased survival. The response included
questions and comments related to many of the administrative aspects of
conducting such a trial in order to be certain that all requirements of the
specific regulation allowing for a waiver of consent are fully satisfied. In
particular, there were comments regarding the role of both the hospital
Institutional Review Board and the local community in authorizing such a study.
There were additional comments related to the collection and monitoring of
clinical data to ensure maximum safety of the enrolled patients.
We also submitted a request for special protocol assessment for our
proposed civilian trauma trial. A special protocol assessment represents an
acknowledgement and confirmation of a mutual agreement between the sponsoring
company and the FDA that successful completion of the proposed trial will form
the basis for product approval. If agreement is reached, the FDA reduces the
agreement to writing and makes it part of the administrative record. We also
intend to request that PolyHeme be designated as a fast track product. It may
then be possible for certain portions of our Biologics License Application to be
accepted for review prior to completion of our proposed clinical trial, a
so-called "rolling BLA." In parallel with our proposed civilian trauma trial, we
are also currently developing a treatment Investigational New Drug application
with the U.S. Army. The FDA regulatory
process is subject to significant risks and uncertainties. The nature, timing
and costs of the efforts necessary for us to obtain regulatory approval for
PolyHeme, and the timing of any future revenues from the commercial sale of
PolyHeme, cannot therefore be reasonably estimated at this time because of the
current regulatory status of PolyHeme and the wide range of possible outcomes
arising from our discussions with the FDA.
Our success will depend on several factors, including our ability to
obtain FDA 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,
enforce our patent positions and raise sufficient capital to fund these
activities. 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
additional clinical trials, monitoring and reporting the results of these trials
and continuing process development associated with improving our manufacturing
capacity to permit commercial-scale production of PolyHeme. We expect that
general and administrative expenses will increase over the foreseeable future as
a result of increased costs relating to the expansion of our organization in
support of anticipated commercial operations.
RESULTS OF OPERATIONS
We reported no revenues for either of the three-month periods or
six-month periods ended November 30, 2002 or 2001. From Northfield's inception
through November 30, 2002, 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,
2002 totaled $3,204,000, an increase of $769,000 from the $2,435,000 reported in
the second quarter of the fiscal 2002. Measured on a percentage basis, operating
expenses in the second quarter of fiscal 2003 increased by 31.6%. The difference
was due to higher costs for manufacturing supplies and higher costs for
professional services and associated costs incurred in connection with the
defense of a proxy contest relating to our 2002 annual meeting of shareholders.
Operating expenses for the six-month period ended November 30, 2002
totaled $6,159,000, an increase of $232,000, or 3.9%, from the $5,927,000
reported for the six-month period ended November 30, 2001. The increase was due
to higher costs associated with the defense of our contested proxy.
Research and development expenses for the second quarter of fiscal 2003
totaled $2,243,000, an increase of $332,000, or 17.4%, from the $1,911,000
reported in the second quarter of fiscal 2002. Higher expenses were recognized
during the second quarter of fiscal 2003 than in the second quarter of fiscal
2002 related to ongoing process enhancements to filters and packaging. The
fiscal 2003 second quarter expenses include evaluation purchases to assess new
technologies as well as production materials and some modest advance purchasing
to
mitigate anticipated price increases.
Research and development expenses for the six-month period ended
November 30, 2002 totaled $4,269,000, a decrease of $290,000, or 6.4%, from the
$4,559,000 reported in the comparable prior year period. Increases relating to
the purchase of manufacturing supplies were offset by larger decreases in
compensation and clinical trials related expenses from those incurred in the
prior year period.
We anticipate that research and development expenses will increase
significantly in the third and fourth quarter of fiscal 2003. Additional costs
are being planned for multi-center clinical trials in support of expanded
product indications, third party clinical monitoring, biostatistical analysis,
report preparation and continued expansion of our manufacturing organization.
Northfield is conducting a national search for a medical director to directly
oversee the planned clinical trials.
General and administrative expenses in the second quarter of fiscal
2003 totaled $961,000 compared to expenses of $525,000 in the second quarter of
2002, representing an increase of $436,000, or 83.0%. This increase was due to
increased professional service fees related to the proxy contest in connection
with our annual meeting and the increased cost of directors and officers
insurance, increased public relations costs and executive recruiting costs.
General and administrative expenses for the six-month period ended
November 30, 2002 totaled $1,890,000, representing an increase of $522,000, or
38.2%, from general and administrative expenses of $1,368,000 incurred during
the six-month period ended November 30, 2001. Virtually, all of the $522,000
variance is attributable to expenses incurred related to the proxy contest in
connection with our annual meeting. Other expenses incurred compared to the same
prior year period showed a reduction in compensation costs offsetting increased
expenses for directors and officers insurance, public relations and recruiting.
With the exception of enhancing the Company's investor relation
capabilities, Northfield is not planning any new general and administrative
programs over the balance of the fiscal year. Securing regulatory approval for
PolyHeme is the highest priority item. Once there is greater clarity on the
probability and timing of approval, general and administrative expenses are
expected to increase to support the commercialization of our product.
INTEREST INCOME
Interest income in the second quarter of fiscal 2003 totaled $60,000,
or a $210,000 decrease from the $270,000 in interest income reported in the
second quarter of fiscal 2002. Short term available interest rates declined in
excess of 400 basis points from the second quarter of fiscal
2002, which along with lower available investment balances accounted for the
decrease in interest income. In the absence of a major cash infusion, interest
income will continue to be significantly below prior year levels.
For the six-month period ended November 30, 2002, interest income
totaled $138,000, or a $433,000 decrease in interest income from the six-month
period ended November 30, 2001. Lower investment balances and lower interest
rates combined to cause the decrease.
NET LOSS
The net loss for the second quarter ended November 30, 2002 was
$3,144,000, or $.22 per basic share, compared to a net loss of $2,166,000, or
$.15 per basic share, for the second quarter ended November 30, 2001. The
increase in the loss per basic share is primarily the result of costs relating
to increased purchases of manufacturing supplies, expenses related to the proxy
contest in connection with our annual meeting and lower interest income.
The six-month net loss for the period ended November 30, 2002 totaled
$6,021,000, or $.42 per basic share, compared to a net loss of $5,356,000, or
$.38 per basic share for the six-month period ended November 30, 2001 and is the
result of the expenses related to the proxy contest
in connection with our annual meeting and lower interest income.
LIQUIDITY AND CAPITAL RESOURCES
From Northfield's inception through November 30, 2002, we have used
cash for operating activities and for the purchase of property, plant, equipment
and engineering services in the amount of $103,940,000. For the six-month
periods ended November 30, 2002 and 2001, these cash expenditures totaled
$6,341,000 and $5,713,000, respectively. The increased cash outlay for the first
half of fiscal 2003 compared to the comparable prior year period resulted from a
higher net loss.
We have incurred recurring losses since our inception and expect that
significant additional expenditures will be required to successfully
commercialize PolyHeme. 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, 2002, we had cash and marketable
securities totaling $12,063,000.
We believe our existing capital resources will be adequate to satisfy
our current operating requirements and maintain our existing pilot manufacturing
plant and office facilities for approximately the next 12 months. We will
require substantial additional capital to continue our operations beyond the
next 12 months and to conduct our planned additional clinical trials.
Northfield is actively pursuing additional financing to fund our
continued operations,
including the proposed additional clinical trials described above. We may issue
additional equity or debt securities to the public or in private placement
transactions. We may also enter into collaborative arrangements with strategic
partners, which could provide us with additional funding or absorb expenses we
would otherwise be required to pay. Any one or a combination of these sources
may be utilized to raise the required funding. Business or market conditions may
not be favorable, which could delay or prevent us from raising additional
capital or entering into a collaborative arrangement. If we are unable to obtain
additional capital or enter into a collaborative arrangement, we may be required
to curtail our product development and other activities and substantially reduce
our scope of operations.
As of May 31, 2002, we had net operating loss carryforwards of
approximately $98,000,000 to offset future federal taxable income through 2022.
Due to the degree of uncertainty related to the ultimate realization of such
prior losses, no benefit has been recognized in our financial statements
as of November 30, 2002.
We are currently unable to fund the construction of a large-scale
greenfield manufacturing facility, which is estimated to cost approximately $70
million, without raising substantial additional capital. Currently, we have
manufacturing capacity of approximately 10,000 units. Initial engineering on the
leased space adjacent to our existing manufacturing facility is completed. This
engineering indicates an additional capacity of 75,000 units could be developed
in approximately 16 to 20 months at a cost of approximately $30 million. Like a
large-scale greenfield manufacturing facility, significant additional funding
will be required before the smaller scale expansion facility could be completed.
Northfield has not yet committed to the build-out. We view the smaller facility
as
financially prudent yet large enough for commercial viability.
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.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported therein. The Company believes the
following critical accounting policy affects its more significant judgments and
estimates used in the preparation of its consolidated financial statements.
NET DEFERRED TAX ASSETS VALUATION
The Company records its net deferred tax assets in the amount that it expects to
realize based on projected future taxable income. In assessing the
appropriateness of its valuation, assumptions and estimates are required such as
the Company's ability to generate future taxable income. In the event that the
Company were to determine that it would be able to realize its deferred tax
assets in the future in excess of its net recorded amount, an adjustment to the
deferred tax asset would increase income in the period such determination was
made. As of November 30, 2002, the Company has recorded a 100 percent valuation
allowance against its deferred tax asset.
CONTRACTUAL OBLIGATIONS
The following table reflects a summary of the Company's contractual cash
obligations as of November 30, 2002:
Less Than
Contractual Cash Obligations Total One Year 1-3 Years 4-5 Years
------------- ------------- ------------- ------------
Lease Obligations(1) $2,001,072 851,462 1,076,154 73,456
Other Obligations(2) 1,849,364 886,775 962,589 ---
------------- ------------- ------------- ------------
Total Contractual Cash Obligations $3,850,436 1,738,237 2,038,743 73,456
(1) Northfield's Evanston lease agreement is cancellable with six months notice
combined with a termination payment equal to six months base rent and six
months of additional rental payments. If the lease were terminated today the
termination payment would be $315,530.
(2) Other obligations are comprised of employment agreements for Steven A.
Gould, M.D., Jack Kogut, combined with a consulting agreement.
RECENT ACCOUNTING PRONOUNCEMENTS
In August 2001, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 143, Accounting for Asset Retirement Obligations, which
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and for the associated asset retirement
costs. FASB Statement No. 143 requires an enterprise to record the fair value of
an asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development and/or normal use of
the assets. The enterprise also is to record a corresponding increase to the
carrying amount of the related long-lived asset (i.e., the associated asset
retirement costs) and to depreciate that cost over the life of the asset. The
liability is changed at the end of each period to reflect the passage of time
and changes in the estimated future cash flows underlying the initial fair value
measurement. Adoption of FASB Statement No. 143 is required for fiscal years
beginning after June 15, 2002. Upon adoption of this provision we expect to
record an additional liability and corresponding asset of approximately $138,000
to reflect the restoration costs for the leased facility that houses our current
manufacturing operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The marketable security investments of the Company have been made for investment
(as opposed to trading) purposes. Interest rate risk with respect to the
investments of the Company is not significant as all such investments are in
U.S. dollar cash equivalents and short-term investments (with maturities of less
than 12 months), which are by their nature less sensitive to interest rate
movements. The investments of the Company are generally made in U.S. government
and federal agency bonds, high-grade commercial paper, corporate bonds and
certificates of deposit. A one percentage point decrease or increase on an
investment balance of $12.1 million would change annual interest income by
$121,000.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains a set of disclosure controls and procedures and internal
controls designed to ensure that information required to be disclosed in the
Company's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The Company's principal
executive and financial officers have evaluated its disclosure controls and
procedures within 90 days prior to the filing of this Quarterly Report on Form
10-Q and have determined that such disclosure controls and procedures are
effective.
Subsequent to the Company's evaluation, there were no significant changes in
internal controls or other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II. OTHER INFORMATION
Item 6. Exhibits
a) Exhibit 10.17 - Form of Severance Protection Agreement between
Northfield Laboratories Inc. and each of the following
officers:
Marc Doubleday - Vice President Process Engineering
Robert McGinnis - Vice President Manufacturing
Development
Sophia Twaddell - Vice President Corporate
Communications
Exhibit 15 - Acknowledgment of Independent Certified Public
Accountants
Exhibit 99.1 - Certification of Chief Executive Officer
Exhibit 99.2 - Certification of Chief Financial Officer
b) Report on Form 8-K:
The Company filed a report dated August 9, 2002, in which Steven A.
Gould, M.D., Chief Executive Officer and Jack J. Kogut, Chief Financial
Officer of Northfield Laboratories Inc., submitted certifications to the
Securities and Exchange Commission pursuant to Section 906 of the
Sarbanes-Oxley Act.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company in the capacities indicated on January 14, 2003.
SIGNATURE TITLE
/s/ STEVEN A. GOULD, M.D.
- ----------------------------------- Chairman of the Board and Chief
Steven A. Gould, M.D. Executive Officer (principal executive
officer)
/s/ JACK J. KOGUT
- ----------------------------------- Vice President - Finance, Secretary and
Jack J. Kogut Treasurer (principal financial and
accounting officer)
CERTIFICATION
I, Steven A. Gould, M.D., Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Northfield
Laboratories Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us
by others within the registrant, particularly during the period in
which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: January 14, 2003 /s/ Steven A. Gould, M.D.
-------------------------
Steven A. Gould, M.D.
Chief Executive Officer
CERTIFICATION
I, Jack J. Kogut, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Northfield
Laboratories Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us
by others within the registrant, particularly during the period in
which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: January 14, 2003 /s/ Jack J. Kogut
-----------------
Jack J. Kogut
Chief Financial Officer