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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 FEBRUARY 28, 2003
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 FEBRUARY 28, 2003, 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 February 28, 2003, and the related statements of
operations for the three-month periods ended February 28, 2003 and February 28,
2002, and the statements of operations and cash flows for the nine-month periods
ended February 28, 2003 and February 28, 2002 and for the period from June 19,
1985 (inception) through February 28, 2003. We have also reviewed the statements
of shareholders' equity (deficit) for the nine-month period ended February 28,
2003 and for the period from June 19, 1985 (inception) through February 28,
2003. 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 statement from which it has been derived.
/s/ KPMG LLP
Chicago, Illinois
March 20, 2003
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Balance Sheets
February 28, 2003 and May 31, 2002
FEBRUARY 28, MAY 31,
ASSETS 2003 2002
------------- -------------
(UNAUDITED)
Current assets:
Cash $ 6,786,960 17,668,687
Marketable securities 2,700,956 720,000
Prepaid expenses 293,216 540,003
Other current assets 16,280 1,437
------------- -------------
Total current assets 9,797,412 18,930,127
Property, plant, and equipment, net 1,773,245 2,232,204
Other assets 71,653 72,410
------------- -------------
$ 11,642,310 21,234,741
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 454,848 1,077,712
Accrued expenses 161,597 210,109
Accrued compensation and benefits 352,985 338,849
------------- -------------
Total current liabilities 969,430 1,626,670
Other liabilities 168,914 177,753
------------- -------------
Total liabilities 1,138,344 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 February 28, 2003
and May 31, 2002 142,659 142,659
Additional paid-in capital 117,503,271 117,503,271
Deficit accumulated during the development stage (107,141,964) (98,215,612)
------------- -------------
Total shareholders' equity 10,503,966 19,430,318
------------- -------------
$ 11,642,310 21,234,741
============= =============
See accompanying notes to financial statements.
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Operations
Three and nine months ended February 28, 2003 and 2002 and for the period
from June 19, 1985 (inception) through February 28, 2003
CUMULATIVE
THREE MONTHS ENDED NINE MONTHS ENDED FROM
FEBRUARY 28, FEBRUARY 28, JUNE 19, 1985
------------------------------ ------------------------------ THROUGH
2003 2002 2003 2002 FEBRUARY 28, 2003
------------ ------------ ------------ ------------ -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------ -----------------
Revenues - license income $ -- -- -- -- 3,000,000
------------ ------------ ------------ ------------ ------------
Costs and expenses:
Research and development 2,203,047 2,175,834 6,472,161 6,735,183 93,892,681
General and administrative 745,528 582,852 2,635,430 1,950,622 39,592,326
------------ ------------ ------------ ------------ ------------
2,948,575 2,758,686 9,107,591 8,685,805 133,485,007
------------ ------------ ------------ ------------ ------------
Other income and expense:
Interest income 43,673 167,966 181,239 738,808 23,426,277
Interest expense -- -- -- -- 83,234
------------ ------------ ------------ ------------ ------------
43,673 167,966 181,239 738,808 23,343,043
------------ ------------ ------------ ------------ ------------
Net loss $ (2,904,902) (2,590,720) (8,926,352) (7,946,997) (107,141,964)
============ ============ ============ ============ ============
Net loss per share - basic and dilute $ (0.20) (0.18) (0.63) (0.56) (10.93)
============ ============ ============ ============ ============
Shares used in calculation of
per share data - basic and diluted 14,265,875 14,265,875 14,265,875 14,265,875 9,799,783
============ ============ ============ ============ ============
See accompanying notes to financial statements.
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Shareholders' Equity (Deficit)
Nine months ended February 28, 2003 and for the period
from June 19, 1985 (inception) through February 28, 2003
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
-------- --------- --------- ---------
See accompanying notes to financial statements.
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)
Nine months ended February 28, 2003 and for the period
from June 19, 1985 (inception) through February 28, 2003
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 February 28, 2003 -- $ -- 14,265,875 $ 142,659
========= ========= ========== ==========
See accompanying notes to financial statements.
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
-- -- -- -- -- (8,926,352) -- (8,926,352)
- --------- ---------- --------- --------- ------------ ------------- ------------ ------------
-- $ -- -- $ -- $117,503,271 $(107,141,964) $ -- $ 10,503,966
========= ========== ========= ========= ============ ============= ============ ============
NORTHFIELD LABORATORIES INC.
(a company in the development stage)
Statements of Cash Flows
Nine months ended February 28, 2003 and 2002
and the cumulative period from June 19, 1985
(inception) through February 28, 2003
Cumulative
from
June 19, 1985
Nne months ended February 28, through
------------------------------- FEBRUARY 28,
2003 2002 2003
------------ ------------ ------------
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (8,926,352) (7,946,997) (107,141,964)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 604,762 647,858 16,895,476
Non-cash compensation -- -- 3,552,723
Loss on sale of equipment -- -- 66,359
Changes in assets and liabilities:
Prepaid expenses 246,787 205,502 (502,427)
Other current assets (14,845) 403,870 (1,912,533)
Other assets -- 49,100 6,851
Accounts payable (622,865) (1,288,254) 454,848
Accrued expenses (48,510) 17,560 161,597
Accrued compensation and benefits 14,136 53,799 352,985
Other liabilities (8,839) 8,513 168,914
------------ ------------ ------------
Net cash used in operating activities (8,755,726) (7,849,049) (87,897,171)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property, plant, equipment, and
capitalized engineering costs (172,863) (144,725) (18,630,227)
Proceeds from sale of land and equipment -- -- 1,863,023
Proceeds from matured marketable securities -- 22,279,200 408,817,352
Proceeds from sale of marketable securities -- -- 7,141,656
Purchase of marketable securities (1,953,138) (5,012,963) (418,632,147)
------------ ------------ ------------
Net cash provided by (used in) investing activities (2,126,001) 17,121,512 (19,440,343)
------------ ------------ ------------
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 (10,881,727) 9,272,463 6,786,960
Cash at beginning of period 17,668,687 6,435,540 --
------------ ------------ ------------
Cash at end of period $ 6,786,960 15,708,003 6,786,960
============ ============ ============
See accompanying notes to financial statements.
NORTHFIELD LABORATORIES INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2003
(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 periods 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 had 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 February 28,
2003, the Company had cash and marketable securities totaling
$9,488,000. 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 the Company may
be forced to cease 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, PolyHeme(TM). We have incurred operating
losses during each year of our operations since inception and expect to incur
substantial additional operating losses for the next several years. From
Northfield's inception through February 28, 2003, we have incurred operating
losses totaling $107,142,000.
RECENT EVENTS
On March 5, 2003, we announced that we had received clearance from the
Food and Drug Administration to proceed with a pivotal Phase III trial in which
PolyHeme will be used for the first time in civilian trauma applications to
treat severely injured patients before they reach the hospital. Under this
protocol, treatment with PolyHeme will begin at the scene of the injury and
continue during transport to the hospital by either ground or air ambulance.
We are currently in contact with over 30 potential clinical sites in an
effort to launch the trial at the earliest possible date and ultimately have at
least 20 sites open and enrolling patients. The process of initiating sites is
elongated due to the compliance requirements allowing for an exception to
informed consent. The review process of the institutional review board has begun
at a number of sites. We are engaged with a number of sites in coordinating the
process of informing the relevant community and seeking their response. This
upfront time of obtaining community input as well as institutional review board
approval has historically taken between six weeks at the earliest and over six
months at the longest before the first patient is enrolled. Once the trial
receives local approval, our goal is to enroll one patient per week at each
site.
We have also submitted a request for Special Protocol Assessment
("SPA") for our approved civilian trauma trials. SPA represents an
acknowledgement and confirmation of a
mutual agreement between the sponsoring company and FDA that successful
completion of a clinical trial will form the basis for product approval. If
agreement is reached, FDA reduces the agreement to writing and makes it part of
the administrative record.
On March 5, 2003, we received additional comment regarding special
protocol assessment relating to certain administrative and procedural details.
We are currently working to complete the final negotiations for special protocol
assessment with FDA to solidify our regulatory program. 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 approved civilian trauma trials,
we are 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.
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.
RESULTS OF OPERATIONS
We reported no revenues for either of the three-month periods or
nine-month periods ended February 28, 2003 or 2002. From Northfield's inception
through February 28, 2003, we have reported total revenues of $3,000,000, all of
which were derived from licensing fees.
OPERATING EXPENSES
Operating expenses for our third fiscal quarter ended February 28, 2003
totaled $2,949,000, an increase of $190,000 from the $2,759,000 reported in the
third quarter of the fiscal 2002. Measured on a percentage basis, operating
expenses in the third quarter of fiscal 2003 increased by 6.9%. The difference
was due primarily to higher costs for executive recruiting and scientific
consulting services. We are currently seeking to recruit a new vice president of
regulatory affairs and vice president of clinical affairs. Until these positions
are filled, we expect the duties of these officers will be performed by other
Northfield officers and by outside consultants.
For the nine-month period ended February 28, 2003, operating expenses
totaled $9,108,000, or a $422,000, or 4.9%, increase from the $8,686,000, of
operating expenses incurred during the nine-month period ended February 28,
2002. The majority of the expense increase occurred in the general and
administrative category and is attributable to the proxy contest in connection
with our 2002 annual meeting of shareholders.
Research and development expenses for the third quarter of fiscal 2003
totaled $2,203,000, an increase of $27,000, or 1.2%, from the $2,176,000
reported in the third quarter of fiscal 2002. Higher expenses were recognized
during the third quarter of fiscal 2003 for executive recruiting and scientific
consulting services.
Research and development expenses for the nine-month period ended
February 28, 2003
totaled $6,472,000, a decrease of $263,000, or 3.9%, from the $6,735,000
reported in the comparable prior year period. Increased expense for the purchase
of manufacturing supplies were offset by larger decreases in compensation costs
and expenses related to clinical trials from those incurred in the prior year
period. These additional costs were incurred as we build a supply of PolyHeme
for use in our recently approved civilian trauma trial.
We anticipate that research and development expenses will increase
moderately in the fourth quarter of fiscal 2003. Additional costs are being
planned for our civilian trauma trials, including third party clinical
monitoring, biostatistical analysis, report preparation and continued expansion
of our manufacturing organization. We are currently soliciting clinical sites to
participate in our upcoming trials. Once the sites are cleared to enroll
patients, we expect that the related study costs will increase significantly
starting in the first and second quarters of fiscal 2004. We estimate that the
total study costs for our civilian trauma trials will be approximately
$15,000,000.
General and administrative expenses in the third quarter of fiscal 2003
totaled $746,000 compared to expenses of $583,000 in the third quarter of 2002,
representing an increase of $163,000, or 28.0%. This increase was due primarily
to increased patent, public relations and directors and officers insurance
costs.
General and administrative expenses for the nine-month period ended
February 28, 2003 totaled $2,635,000, representing an increase of $684,000, or
35.1%, from general and administrative expenses incurred during the nine-month
period ended February 28, 2002. Virtually all of the $684,000 variance is
attributable to expenses related to the proxy contest in connection with our
2002 annual meeting and increased expenses for directors and officers insurance.
With the exception of continuing to enhance Northfield's investor
relations capabilities, we are not planning any new general and administrative
programs over the balance of the current fiscal year. Securing regulatory
approval for PolyHeme is our 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 third quarter of fiscal 2003 totaled $44,000, or
a $124,000 decrease from the $168,000 in interest income reported in the third
quarter of fiscal 2002. Short term available interest rates declined in excess
of 400 basis points from the third 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 nine-month period ended February 28, 2003, interest income
totaled $181,000, or a $558,000 decrease in interest income of $739,000, from
the nine-month period ended February 28, 2002. Lower investment balances and
lower interest rates combined to cause the decrease.
NET LOSS
Our net loss for the third quarter ended February 28, 2003 was
$2,905,000, or $0.20 per basic share, compared to a net loss of $2,591,000, or
$0.18 per basic share, for the third quarter ended February 28, 2002. The
increase in the net loss per basic share is primarily the result of costs
relating to increased purchases of manufacturing supplies, recruiting costs and
lower interest income.
Our nine-month net loss for the period ended February 28, 2003 totaled
$8,926,000, or $0.63 per basic share, compared to a net loss of $7,947,000, or
$0.56 per basic share, for the
nine-month period ended February 28, 2002, and is the result of the expenses
related to the proxy contest in connection with our 2002 annual meeting of
shareholders and lower interest income.
LIQUIDITY AND CAPITAL RESOURCES
From Northfield's inception through February 28, 2003, we have used
cash for operating activities and for the purchase of property, plant, equipment
and engineering services in the amount of $106,527,000. For the nine-month
periods ended February 28, 2003 and 2002, these cash expenditures totaled
$8,929,000 and $7,994,000, respectively. The increased net loss for the first
nine months of fiscal 2003 compared to the comparable prior year period resulted
in higher cash utilization.
We have had 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 February 28, 2003, we had cash and marketable securities totaling
$9,488,000.
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 six to nine months. We
will require substantial additional capital to continue our operations beyond
the next six to nine months and to conduct our planned clinical trials. Our
current cash position therefore raises substantial doubt regarding our ability
to continue as a going concern.
Northfield is actively pursuing additional financing to fund our
continued operations, including our planned civilian trauma trials. 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
may be forced to cease operations.
As of May 31, 2002, we had net operating loss carry forwards 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
May 31, 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 $28 to $32 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 of this facility. 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. We believe the
following critical accounting policy affects our more significant judgments and
estimates used in the preparation of our consolidated financial statements.
NET DEFERRED TAX ASSETS VALUATION
We record our net deferred tax assets in the amount that we expect to
realize based on projected future taxable income. In assessing the
appropriateness of our valuation, assumptions and estimates are required such as
our ability to generate future taxable income. In the event that we were to
determine that we would be able to realize our deferred tax assets in the future
in excess of our net recorded amount of zero, an adjustment to the deferred tax
asset would increase income in the period such determination was made. As of
February 28, 2003, we had recorded a 100% valuation allowance against our
deferred tax assets.
CONTRACTUAL OBLIGATIONS
The following table reflects a summary of our contractual cash obligations as of
February 28, 2003:
Less Than
Contractual Cash Obligations Total One Year 1-3 Years 4-5 Years
----- ---------- --------- ---------
Lease Obligations (1) $1,788,807 853,524 935,283 --
Other Obligations (2) 1,628,997 888,544 740,453 --
---------- ---------- --------- ---------
Total Contractual Cash Obligations $3,417,804 1,742,068 1,675,736 --
(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) Includes payments required under employment agreements for Steven A.
Gould, M.D. and Jack J. Kogut and obligations under 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 assets (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 of approximately $138,000, as the additional
costs required to restore our leased manufacturing facility back to its move in
condition.
In July 2002, the FASB released SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (FAS 146). FAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. This statement also establishes that fair value
is the objective for initial measurement of the liability. SFAS No. 146
is effective for exit or disposal activities after December 31, 2002. The
adoption did not have a material effect on the Company's financial position or
results of operations.
In November 2002, the FASB released FASB Interpretation No. 45 (FIN
45), Guarantor;s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires that a
guarantor recognize a liability for the fair value of an obligation assumed
under a guarantee. This interpretation also discusses additional disclosures to
be made in the interim and annual financial statements of the guarantor about
obligations under certain guarantees. The initial measurement and recognition
requirements of FIN 45 are effective prospectively for guarantees issued or
modified after December 31, 2002, regardless of the guarantors' fiscal year-end.
The disclosures requirements in this Interpretation are effective for financial
statements of interim or annual periods ending after December 15, 2002. The
adoption of FIN 45 did not have a material effect on the financial position,
results of operations, or cash flows of the Company.
In December 2002, the FASB released SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure, an amendment of FASB
Statement No. 123 (FAS 148). This Statement amends FASB Statement No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement No. 123 to require prominent disclosures in
both annual and interim financial statements. The provisions of the Statement
related to transition from the intrinsic-value to the fair-value method and
annual disclosures are effective for fiscal years ending after December 15,
2002. The provisions of the Statement related to interim disclosures are
effective in financial reports containing financial statements for interim
periods beginning after December 31, 2002. The adoption of FAS 148 will not have
a material effect on the financial position, results of operations, or cash
flows of the Company.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Our marketable security investments have been made for investment (as
opposed to trading) purposes. Interest rate risk with respect to our investments
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 by
their nature are less sensitive to interest rate movements. Our investments 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 $9.5 million would change
annual interest income by $95,000.
CONTROLS AND PROCEDURES
We maintain a set of disclosure controls, procedures and internal
controls designed to ensure that information required to be disclosed in our
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. Our principal executive and financial
officers have evaluated our 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 our 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 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.
SIGNATURES
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 April 14, 2003.
SIGNATURE TITLE
/s/ Steven A. Gould, M.D. Chairman of the Board and Chief
- ------------------------------- Executive Officer (Principal Executive
Steven A. Gould, M.D. Officer)
/s/ Jack J. Kogut Sr. Vice President and Chief
- ------------------------------- Financial Officer
Jack J. Kogut
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: April 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: April 14, 2003 /s/ Jack J. Kogut
-----------------------------
Jack J. Kogut
Chief Financial Officer