##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR
THE QUARTERLY PERIOD ENDED February 28, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 COMMISSION FILE NUMBER 0-24050
 NORTHFIELD LABORATORIES INC.
  DELAWARE
(State or other jurisdiction 
of incorporation or organization)
    
    36-3378733
(I.R.S. Employer
Identification Number)1560 SHERMAN AVENUE, SUITE 1000, EVANSTON, 
ILLINOIS
(Address of principal executive offices)
    
    60201-4800
(Zip Code)
  þ o
  o þ o
 o þ




---



##### 



TABLE OF CONTENTS
  CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATIONREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMPART IITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART IIITEM 1. LEGAL PROCEEDINGSITEM 6. EXHIBITSSIGNATURES 
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION




---



##### 



Report of Independent Registered Public Accounting Firm
 
     (signed) KPMG LLP




---



##### 



Part
I
FINANCIAL INFORMATION
 
 Item
1. Financial Statements.
 NORTHFIELD LABORATORIES INC.
   February 28,
    
    
    May 31,2007
    
    
    2006(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    26,116,066
    
    
    
    39,304,602Restricted cash
    
    
    223,454
    
    
    
    926,492Marketable securities
    
    
    20,779,220
    
    
    
    33,679,022Prepaid expenses
    
    
    226,926
    
    
    
    813,104Total current assets
    
    
    47,345,666
    
    
    
    74,723,220Property, plant, and equipment
    
    
    21,682,216
    
    
    
    15,654,049Accumulated depreciation
    
    
    (13,240,063
    )
    
    
    (14,575,118
    )Net property, plant, and equipment
    
    
    8,442,153
    
    
    
    1,078,931Other assets
    
    
    19,550
    
    
    
    68,941$
    55,807,369
    
    
    
    75,871,092Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    3,330,236
    
    
    
    4,481,804Accrued expenses
    
    
    162,105
    
    
    
    134,006Accrued compensation and benefits
    
    
    741,475
    
    
    
    742,038Government grant liability
    
    
    223,454
    
    
    
    926,492Other
    
    
    5,198
    
    
    
    249,580Total liabilities
    
    
    4,462,468
    
    
    
    6,533,920Shareholders equity:Preferred stock, $.01 par value. Authorized 5,000,000 shares;
none issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value. Authorized 60,000,000 shares;
issued 26,916,541 at February 28, 2007 and 26,777,655 at
May 31, 2006
    
    
    269,165
    
    
    
    267,777Additional paid-in capital
    
    
    244,514,954
    
    
    
    241,240,276Deficit accumulated during the development stage
    
    
    (193,413,825
    )
    
    
    (172,136,429
    )Deferred compensation
    
    
    
    
    
    
    (9,059
    )51,370,294
    
    
    
    69,362,565Less cost of common shares in treasury; 1,717 shares and
1,717 shares, respectively
    
    
    (25,393
    )
    
    
    (25,393
    )Total shareholders equity
    
    
    51,344,901
    
    
    
    69,337,172$
    55,807,369
    
    
    
    75,871,092




---



##### 



NORTHFIELD LABORATORIES INC.
  
 Cumulative
from
June 19, 1985Three months ended February 28
    
    

Nine months ended February 28,
    
    
    through2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    February 28, 2007(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Revenues  license income
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000,000Costs and expenses:Research and development
    
    
    4,476,365
    
    
    
    5,786,424
    
    
    
    15,927,707
    
    
    
    16,453,600
    
    
    
    163,708,905General and administrative
    
    
    2,269,980
    
    
    
    1,453,876
    
    
    
    7,534,628
    
    
    
    4,302,696
    
    
    
    62,810,5286,746,345
    
    
    
    7,240,300
    
    
    
    23,462,335
    
    
    
    20,756,296
    
    
    
    226,519,433Other income and expense:Interest income
    
    
    634,577
    
    
    
    845,342
    
    
    
    2,184,939
    
    
    
    2,311,500
    
    
    
    30,263,763Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,234$
    634,577
    
    
    
    845,342
    
    
    
    2,184,939
    
    
    
    2,311,500
    
    
    
    30,180,529Net loss before cumulative effect of change
in accounting principle
    
    
    (6,111,768
    )
    
    
    (6,394,958
    )
    
    
    (21,277,396
    )
    
    
    (18,444,796
    )
    
    
    (193,338,904
    )Cumulative effect of change
in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,921Net loss
    
    $
    (6,111,768
    )
    
    
    (6,394,958
    )
    
    
    (21,277,396
    )
    
    
    (18,444,796
    )
    
    
    (193,413,825
    )Net loss per share  basic and diluted
    
    $
    (0.23
    )
    
    
    (0.24
    )
    
    
    (0.79
    )
    
    
    (0.69
    )
    
    
    (17.14
    )Shares used in calculation of
per share data  basic and diluted
    
    
    26,911,357
    
    
    
    26,769,380
    
    
    
    26,877,075
    
    
    
    26,764,146
    
    
    
    11,281,878




---



##### 



NORTHFIELD LABORATORIES INC.
  
 Deficit
    
    
    
    
    
    
    
    
    
    
    TotalSeries A convertible
    
    
    Series B convertible
    
    
    
    
    
    
    accumulated
    
    
    
    
    
    
    
    
    
    
    share-Preferred stock
    
    
    Common stock
    
    
    preferred stock
    
    
    preferred stock
    
    
    Additional
    
    
    during the
    
    
    Deferred
    
    
    
    
    
    
    holdersNumber
    
    
    Aggregate
    
    
    Number
    
    
    Aggregate
    
    
    Number
    
    
    Aggregate
    
    
    Number
    
    
    Aggregate
    
    
    paid-in
    
    
    development
    
    
    compen-
    
    
    Treasury
    
    
    equityof shares
    
    
    amount
    
    
    of shares
    
    
    amount
    
    
    of shares
    
    
    amount
    
    
    of shares
    
    
    amount
    
    
    capital
    
    
    stage
    
    
    sation
    
    
    shares
    
    
    (deficit)Issuance of common stock on August 27, 1985
    
    
    
    
    
    $
    
    
    
    
    3,500,000
    
    
    $
    35,000
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    (28,000
    )
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    7,000Issuance of Series A convertible preferred stock at $4.00 per share on
August 27, 1985 (net of costs of issuance of $79,150)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    670,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    920,850Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (607,688
    )
    
    
    
    
    
    
    
    
    
    
    (607,688
    )Balance at May 31, 1986
    
    
    
    
    
    
    
    
    
    
    3,500,000
    
    
    
    35,000
    
    
    
    250,000
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    642,850
    
    
    
    (607,688
    )
    
    
    
    
    
    
    
    
    
    
    320,162Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,429,953
    )
    
    
    
    
    
    
    
    
    
    
    (2,429,953
    )Deferred compensation relating to grant of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,340,000
    
    
    
    
    
    
    
    (2,340,000
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    720,000
    
    
    
    
    
    
    
    720,000Balance at May 31, 1987
    
    
    
    
    
    
    
    
    
    
    3,500,000
    
    
    
    35,000
    
    
    
    250,000
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    2,982,850
    
    
    
    (3,037,641
    )
    
    
    (1,620,000
    )
    
    
    
    
    
    
    (1,389,791
    )Issuance of Series B convertible preferred stock at $35.68 per share on
August 14, 1987 (net of costs of issuance of $75,450)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,633
    
    
    
    200,633
    
    
    
    6,882,502
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,083,135Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,057,254
    )
    
    
    
    
    
    
    
    
    
    
    (3,057,254
    )Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    566,136
    
    
    
    
    
    
    
    566,136Balance at May 31, 1988
    
    
    
    
    
    
    
    
    
    
    3,500,000
    
    
    
    35,000
    
    
    
    250,000
    
    
    
    250,000
    
    
    
    200,633
    
    
    
    200,633
    
    
    
    9,865,352
    
    
    
    (6,094,895
    )
    
    
    (1,053,864
    )
    
    
    
    
    
    
    3,202,226Issuance of common stock at $24.21 per share on June 7, 1988
(net of costs of issuance of $246,000)
    
    
    
    
    
    
    
    
    
    
    413,020
    
    
    
    4,130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,749,870
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,754,000Conversion of Series A convertible preferred stock to common stock
on June 7, 1988
    
    
    
    
    
    
    
    
    
    
    1,250,000
    
    
    
    12,500
    
    
    
    (250,000
    )
    
    
    (250,000
    )
    
    
    
    
    
    
    
    
    
    
    237,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Series B convertible preferred stock to common stock
on June 7, 1988
    
    
    
    
    
    
    
    
    
    
    1,003,165
    
    
    
    10,032
    
    
    
    
    
    
    
    
    
    
    
    (200,633
    )
    
    
    (200,633
    )
    
    
    190,601
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options at $2.00 per share
    
    
    
    
    
    
    
    
    
    
    47,115
    
    
    
    471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,759
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,230Issuance of common stock at $28.49 per share on March 6, 1989
(net of costs of issuance of $21,395)
    
    
    
    
    
    
    
    
    
    
    175,525
    
    
    
    1,755
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,976,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,978,610Issuance of common stock at $28.49 per share on March 30, 1989
(net of costs of issuance of $10,697)
    
    
    
    
    
    
    
    
    
    
    87,760
    
    
    
    878
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,488,356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,489,234Sale of options at $28.29 per share to purchase common stock at $.20
per share on March 30, 1989 (net of costs of issuance of $4,162)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,443,118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,443,118Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (791,206
    )
    
    
    
    
    
    
    
    
    
    
    (791,206
    )Deferred compensation relating to grant of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    683,040
    
    
    
    
    
    
    
    (683,040
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    800,729
    
    
    
    
    
    
    
    800,729Balance at May 31, 1989
    
    
    
    
    
    
    
    
    
    
    6,476,585
    
    
    
    64,766
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,728,451
    
    
    
    (6,886,101
    )
    
    
    (936,175
    )
    
    
    
    
    
    
    27,970,941Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,490,394
    )
    
    
    
    
    
    
    
    
    
    
    (3,490,394
    )Deferred compensation relating to grant of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    699,163
    
    
    
    
    
    
    
    (699,163
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    546,278
    
    
    
    
    
    
    
    546,278Balance at May 31, 1990
    
    
    
    
    
    
    
    
    
    
    6,476,585
    
    
    
    64,766
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,427,614
    
    
    
    (10,376,495
    )
    
    
    (1,089,060
    )
    
    
    
    
    
    
    25,026,825Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,579,872
    )
    
    
    
    
    
    
    
    
    
    
    (5,579,872
    )Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    435,296
    
    
    
    
    
    
    
    435,296Balance at May 31, 1991
    
    
    
    
    
    
    
    
    
    
    6,476,585
    
    
    
    64,766
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,427,614
    
    
    
    (15,956,367
    )
    
    
    (653,764
    )
    
    
    
    
    
    
    19,882,249Exercise of stock warrants at $5.60 per share
    
    
    
    
    
    
    
    
    
    
    90,000
    
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    503,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    504,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,006,495
    )
    
    
    
    
    
    
    
    
    
    
    (7,006,495
    )Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    254,025
    
    
    
    
    
    
    
    254,025Balance at May 31, 1992
    
    
    
    
    
    
    
    
    
    
    6,566,585
    
    
    
    65,666
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,930,714
    
    
    
    (22,962,862
    )
    
    
    (399,739
    )
    
    
    
    
    
    
    13,633,779Exercise of stock warrants at $7.14 per share
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,890
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107,040Issuance of common stock at $15.19 per share on April 19, 1993
(net of costs of issuance of $20,724)
    
    
    
    
    
    
    
    
    
    
    374,370
    
    
    
    3,744
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,663,710
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,667,454Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,066,609
    )
    
    
    
    
    
    
    
    
    
    
    (8,066,609
    )Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    254,025
    
    
    
    
    
    
    
    254,025Balance at May 31, 1993
    
    
    
    
    
    
    
    
    
    
    6,955,955
    
    
    
    69,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,701,314
    
    
    
    (31,029,471
    )
    
    
    (145,714
    )
    
    
    
    
    
    
    11,595,689Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,363,810
    )
    
    
    
    
    
    
    
    
    
    
    (7,363,810
    )Issuance of common stock at $6.50 per share on May 26, 1994
(net of costs of issuance of $2,061,149)
    
    
    
    
    
    
    
    
    
    
    2,500,000
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,163,851
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,188,851Cancellation of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85,400
    )
    
    
    
    
    
    
    85,400
    
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    267Balance at May 31, 1994
    
    
    
    
    
    
    
    
    
    
    9,455,955
    
    
    
    94,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,779,765
    
    
    
    (38,393,281
    )
    
    
    (60,047
    )
    
    
    
    
    
    
    18,420,997Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,439,013
    )
    
    
    
    
    
    
    
    
    
    
    (7,439,013
    )Issuance of common stock at $6.50 per share on June 20, 1994
(net of issuance costs of $172,500)
    
    
    
    
    
    
    
    
    
    
    375,000
    
    
    
    3,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,261,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,265,000Exercise of stock options at $7.14 per share
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,400Exercise of stock options at $2.00 per share
    
    
    
    
    
    
    
    
    
    
    187,570
    
    
    
    1,875
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373,264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375,139Cancellation of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (106,750
    )
    
    
    
    
    
    
    106,750
    
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,892
    )
    
    
    
    
    
    
    (67,892
    )Balance at May 31, 1995
    
    
    
    
    
    $
    
    
    
    
    10,028,525
    
    
    $
    100,285
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    59,378,829
    
    
    $
    (45,832,294
    )
    
    $
    (21,189
    )
    
    
    
    
    
    $
    13,625,631




---



##### 



NORTHFIELD LABORATORIES INC.
  
 Deficit
    
    
    
    
    
    
    
    
    
    
    TotalSeries A convertible
    
    
    Series B convertible
    
    
    
    
    
    
    accumulated
    
    
    
    
    
    
    
    
    
    
    share-Preferred stock
    
    
    Common stock
    
    
    preferred stock
    
    
    preferred stock
    
    
    Additional
    
    
    during the
    
    
    Deferred
    
    
    
    
    
    
    holdersNumber
    
    
    Aggregate
    
    
    Number
    
    
    Aggregate
    
    
    Number
    
    
    Aggregate
    
    
    Number
    
    
    Aggregate
    
    
    paid-in
    
    
    development
    
    
    compen-
    
    
    Treasury
    
    
    equityof shares
    
    
    amount
    
    
    of shares
    
    
    amount
    
    
    of shares
    
    
    amount
    
    
    of shares
    
    
    amount
    
    
    capital
    
    
    stage
    
    
    sation
    
    
    shares
    
    
    (deficit)Net loss
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (4,778,875
    )
    
    $
    
    
    
    
    
    
    
    $
    (4,778,875
    )Issuance of common stock at $17.75 per share on August 9, 1995
(net of issuance costs of $3,565,125)
    
    
    
    
    
    
    
    
    
    
    2,925,000
    
    
    
    29,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,324,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,353,624Issuance of common stock at $17.75 per share on September 11, 1995
(net of issuance costs of $423,23)
    
    
    
    
    
    
    
    
    
    
    438,750
    
    
    
    4,388
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,360,187
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,364,575Exercise of stock options at $2.00 per share
    
    
    
    
    
    
    
    
    
    
    182,380
    
    
    
    1,824
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    362,937
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    364,761Exercise of stock options at $6.38 per share
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,555
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,570Exercise of stock options at $7.14 per share
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,400Cancellation of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80,062
    )
    
    
    
    
    
    
    80,062
    
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,726
    )
    
    
    
    
    
    
    (62,726
    )Balance at May 31, 1996
    
    
    
    
    
    
    
    
    
    
    13,586,155
    
    
    
    135,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,427,120
    
    
    
    (50,611,169
    )
    
    
    (3,853
    )
    
    
    
    
    
    
    64,947,960Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,245,693
    )
    
    
    
    
    
    
    
    
    
    
    (4,245,693
    )Exercise of stock options at $0.20 per share
    
    
    
    
    
    
    
    
    
    
    263,285
    
    
    
    2,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,025
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,658Exercise of stock options at $2.00 per share
    
    
    
    
    
    
    
    
    
    
    232,935
    
    
    
    2,329
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    463,540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    465,869Exercise of stock options at $7.14 per share
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,400Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,569
    
    
    
    
    
    
    
    2,569Balance at May 31, 1997
    
    
    
    
    
    
    
    
    
    
    14,092,375
    
    
    
    140,924
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,011,985
    
    
    
    (54,856,862
    )
    
    
    (1,284
    )
    
    
    
    
    
    
    61,294,763Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,883,378
    )
    
    
    
    
    
    
    
    
    
    
    (5,883,378
    )Exercise of stock options at $7.14 per share
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,700Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,284
    
    
    
    
    
    
    
    1,284Balance at May 31, 1998
    
    
    
    
    
    
    
    
    
    
    14,097,375
    
    
    
    140,974
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,047,635
    
    
    
    (60,740,240
    )
    
    
    
    
    
    
    
    
    
    
    55,448,369Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,416,333
    )
    
    
    
    
    
    
    
    
    
    
    (7,416,333
    )Non-cash compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,354
    
    
    
    
    
    
    
    
    
    
    
    14,354Exercise of stock options at $7.14 per share
    
    
    
    
    
    
    
    
    
    
    17,500
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,950Exercise of stock warrants at $8.00 per share
    
    
    
    
    
    
    
    
    
    
    125,000
    
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    998,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Balance at May 31, 1999
    
    
    
    
    
    
    
    
    
    
    14,239,875
    
    
    
    142,399
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117,185,514
    
    
    
    (68,156,573
    )
    
    
    
    
    
    
    
    
    
    
    49,171,340Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,167,070
    )
    
    
    
    
    
    
    
    
    
    
    (9,167,070
    )Non-cash compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,112Exercise of stock options at $13.38 per share
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,425
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,450Balance at May 31, 2000
    
    
    
    
    
    
    
    
    
    
    14,242,375
    
    
    
    142,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117,276,051
    
    
    
    (77,323,643
    )
    
    
    
    
    
    
    
    
    
    
    40,094,832Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,174,609
    )
    
    
    
    
    
    
    
    
    
    
    (10,174,609
    )Non-cash compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options at $6.38 per share
    
    
    
    
    
    
    
    
    
    
    6,000
    
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,280Exercise of stock options at $10.81 per share
    
    
    
    
    
    
    
    
    
    
    17,500
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    189,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    189,175Balance at May 31, 2001
    
    
    
    
    
    
    
    
    
    
    14,265,875
    
    
    
    142,659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117,503,271
    
    
    
    (87,498,252
    )
    
    
    
    
    
    
    
    
    
    
    30,147,678Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,717,360
    )
    
    
    
    
    
    
    
    
    
    
    (10,717,360
    )Balance at May 31, 2002
    
    
    
    
    
    
    
    
    
    
    14,265,875
    
    
    
    142,659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117,503,271
    
    
    
    (98,215,612
    )
    
    
    
    
    
    
    
    
    
    
    19,430,318Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,250,145
    )
    
    
    
    
    
    
    
    
    
    
    (12,250,145
    )Balance at May 31, 2003
    
    
    
    
    
    
    
    
    
    
    14,265,875
    
    
    
    142,659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117,503,271
    
    
    
    (110,465,757
    )
    
    
    
    
    
    
    
    
    
    
    7,180,173Issuance of common stock at $5.60 per share on July 28, 2003
(net of costs of issuance of $909,229)
    
    
    
    
    
    
    
    
    
    
    1,892,857
    
    
    
    18,928
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,671,843
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,690,771Issuance of common stock to directors at $6.08 per share on
October 30, 2003
    
    
    
    
    
    
    
    
    
    
    12,335
    
    
    
    123
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,000Deferred compensation related to stock grants
    
    
    
    
    
    
    
    
    
    
    25,500
    
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,995
    
    
    
    
    
    
    
    (191,250
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,630
    
    
    
    
    
    
    
    35,630Issuance of common stock at $5.80 per share on January 29, 2004
(net of costs of issuance of $1,126,104)
    
    
    
    
    
    
    
    
    
    
    2,585,965
    
    
    
    25,860
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,846,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,872,493Issuance of common stock at $5.80 per share on February 18, 2004
(net of costs of issuance of $116,423)
    
    
    
    
    
    
    
    
    
    
    237,008
    
    
    
    2,370
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,255,853
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,258,223Issuance of common stock at $5.80 per share on April 15, 2004
(net of costs of issuance of $192,242)
    
    
    
    
    
    
    
    
    
    
    409,483
    
    
    
    4,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,178,664
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,182,759Issuance of common stock at $12.00 per share on May 18, 2004
(net of costs of issuance of $1,716,831.36)
    
    
    
    
    
    
    
    
    
    
    1,954,416
    
    
    
    19,544
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,716,616
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,736,160Exercise of stock options at $6.38 per share
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,700Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,573,798
    )
    
    
    
    
    
    
    
    
    
    
    (14,573,798
    )Balance at May 31, 2004
    
    
    
    
    
    
    
    
    
    
    21,398,439
    
    
    
    213,984
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166,534,302
    
    
    
    (125,039,555
    )
    
    
    (155,620
    )
    
    
    
    
    
    
    41,553,111Deferred compensation related to stock grants
    
    
    
    
    
    
    
    
    
    
    5,500
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,055
    
    
    
    
    
    
    
    (71,110
    )
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,121
    
    
    
    
    
    
    
    122,121Exercise of stock options between $5.08 and $14.17 per share
    
    
    
    
    
    
    
    
    
    
    167,875
    
    
    
    1,679
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,739,585
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,741,264Cost of shares in treasury, 1,717 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,393
    )
    
    
    (25,393
    )Issuance of common stock to directors at $12.66 per share on
September 21, 2004
    
    
    
    
    
    
    
    
    
    
    5,925
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,941
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,000Issuance of common stock at $15.00 per share on February 9, 2005
(net of costs of issuance of $4,995,689)
    
    
    
    
    
    
    
    
    
    
    5,175,000
    
    
    
    51,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,577,561
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,629,311Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,321,456
    )
    
    
    
    
    
    
    
    
    
    
    (20,321,456
    )Balance at May 31, 2005
    
    
    
    
    
    
    
    
    
    
    26,752,73
    
    
    
    267,527
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240,997,444
    
    
    
    (145,361,011
    )
    
    
    (104,609
    )
    
    
    (25,393
    )
    
    
    95,773,958Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,550
    
    
    
    
    
    
    
    95,550Exercise of stock options at $7.13 and $10.66 per share
    
    
    
    
    
    
    
    
    
    
    2,875
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,295
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,324Issuance of common stock to directors at $13.05 per share
on September 29, 2005
    
    
    
    
    
    
    
    
    
    
    5,750
    
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,000Issuance of common stock to director at $13.21 per share
on October 3, 2005
    
    
    
    
    
    
    
    
    
    
    1,135
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,988
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Issuance of common stock to director at $10.67 per share on
February 24, 2006
    
    
    
    
    
    
    
    
    
    
    1,406
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,986
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Exercise of stock options at $10.66, $5.15 and $11.09 per share
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,155Exercise of stock options at $10.66 and $7.13 per share
    
    
    
    
    
    
    
    
    
    
    2,750
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,668Exercise of stock options at $5.15 and $7.13 per share
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,905
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,935Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,775,418
    )
    
    
    
    
    
    
    
    
    
    
    (26,775,418
    )Balance at May 31, 2006
    


    
    
    
    
    
    
    
    
    
    26,777,655
    
    
    
    267,777
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    241,240,276
    
    
    
    (172,136,429
    )
    
    
    (9,059
    )
    
    
    (25,393
    )
    
    
    69,337,172Eliminate remaining deferred compensation (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,059
    )
    
    
    
    
    
    
    9,059
    
    
    
    
    
    
    
    Exercise of stock options at $5.15 and $7.13 per share (unaudited)
    
    
    
    
    
    
    
    
    
    
    2,750
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,133Exercise of stock options at $7.13 per share (unaudited)
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,355Issuance of common stock to directors at $13.03 per share on
September 20, 2006 (unaudited)
    
    
    
    
    
    
    
    
    
    
    6,912
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,931
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,000Exercise of stock options at $11.44 per share (unaudited)
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,400Exercise of stock options at $5.15, $11.92 and $13.21
per share (unaudited)
    
    
    
    
    
    
    
    
    
    
    3,125
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,646
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,677Exercise of stock options at $5.08 and $6.08 per share (unaudited)
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,200Exercise of stock options at $5.15 per share (unaudited)
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,421
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,451Exercise of stock options at $11.92 per share (unaudited)
    
    
    
    
    
    
    
    
    
    
    375
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,467
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,471Exercise of warrants at $6.88 per share (unaudited)
     
    
    
    
    
    
    
    
    
    
   96,974
    
    
    
    969
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    666,212

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    667,181Share-based compensation (unaudited)
        
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
2,265,257
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,265,257Net loss (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,277,396
    )
    
    
    
    
    
    
    
    
    
    
    (21,277,396
    )Balance at February 28, 2007 (unaudited)
    
    
    
    
    
    $
    
    
    
    
    26,916,541
    
    
    $
    269,165
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    244,514,954
    
    
    $
    (193,413,825
    )
    
    $
    
    
    
    
    (25,393
    )
    
    $
    51,344,901




---



##### 



NORTHFIELD LABORATORIES
  
 CumulativefromJune 19, 1985Nine months ended February 28,
    
    
    through2007
    
    
    2006
    
    
    February 28, 2007(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net loss
    
    $
    (21,277,396
    )
    
    
    (18,444,796
    )
    
    
    (193,413,825
    )Adjustments to reconcile net loss to net
cash used in operating activities:Marketable security amortization
    
    
    (941,208
    )
    
    
    (1,301,084
    )
    
    
    (3,239,411
    )Depreciation and amortization
    
    
    378,491
    
    
    
    204,220
    
    
    
    19,323,262Stock based compensation
    
    
    2,355,257
    
    
    
    191,588
    
    
    
    6,416,281Loss of sale of equipment
    
    
    
    
    
    
    
    
    
    
    66,359Changes in assets and liabilities:Restricted cash
    
    
    703,038
    
    
    
    
    
    
    
    (223,454
    )Prepaid expenses
    
    
    586,178
    
    
    
    545,654
    
    
    
    (436,137
    )Other current assets
    
    
    
    
    
    
    139,808
    
    
    
    Other assets
    
    
    49,391
    
    
    
    328
    
    
    
    (1,840,460
    )Accounts payable
    
    
    (1,151,568
    )
    
    
    (128,953
    )
    
    
    3,330,236Accrued expenses
    
    
    28,099
    
    
    
    (30,120
    )
    
    
    162,105Government grant liability
    
    
    (703,038
    )
    
    
    
    
    
    
    223,454Accrued compensation and benefits
    
    
    (563
    )
    
    
    80,161
    
    
    
    741,475Other liabilities
    
    
    (244,382
    )
    
    
    (12,342
    )
    
    
    5,198Net cash used in operating activities
    
    
    (20,217,701
    )
    
    
    (18,755,536
    )
    
    
    (168,884,917
    )Cash flows from investing activities:Purchase of property, plant, equipment, and
capitalized engineering costs
    
    
    (7,741,713
    )
    
    
    (484,575
    )
    
    
    (27,690,026
    )Proceeds from sale of land and equipment
    
    
    
    
    
    
    
    
    
    
    1,863,023Proceeds from matured marketable securities
    
    
    75,000,000
    
    
    
    146,794,000
    
    
    
    692,646,352Proceeds from sale of marketable securities
    
    
    
    
    
    
    
    
    
    
    7,141,656Purchase of marketable securities
    
    
    (61,158,990
    )
    
    
    (84,972,708
    )
    
    
    (717,333,597
    )Net cash provided by (used in) investing activities
    
    
    6,099,297
    
    
    
    61,336,717
    
    
    
    (43,372,592
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    929,868
    
    
    
    121,147
    
    
    
    237,055,003Payment of common stock issuance costs
    
    
    
    
    
    
    
    
    
    
    (14,128,531
    )Proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    6,644,953Proceeds
from sale of stock options to purchase common shares
    
    
    
    
    
    
    
    
    
    
    7,443,118Proceeds from issuance of notes payable
    
    
    
    
    
    
    
    
    
    
    1,500,000Repayment of notes payable
    
    
    
    
    
    
    
    
    
    
    (140,968
    )Net cash provided by financing activities
    
    
    929,868
    
    
    
    121,147
    
    
    
    238,373,575Net increase (decrease) in cash
    
    
    (13,188,536
    )
    
    
    42,702,328
    
    
    
    26,116,066Cash at beginning of period
    
    
    39,304,602
    
    
    
    6,800,405
    
    
    
    Cash at end of period
    
    $
    26,116,066
    
    
    
    49,502,733
    
    
    
    26,116,066Supplemental Schedule of Noncash Financing Activities:Exercise of stock option, 5,000 shares in exchange for
1,717 treasury shares.
    
    $
    
    
    
    
    
    
    
    
    25,393




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##### 



Northfield Laboratories Inc.
(a company in the development stage)
 Notes to the Financial Statements
 February 28, 2007
(unaudited)
 (1) BASIS OF PRESENTATION
  (2) RECLASSIFICATIONS
  (3) USE OF ESTIMATES
  (4) COMPUTATION OF NET LOSS PER SHARE
  (5) SHARE-BASED COMPENSATION




---



##### 








---



##### 



Three months
    
    
    Nine monthsEnded
    
    
    EndedFebruary 28, 2006
    
    
    February 28, 2006Net loss as reported
    
    $
    (6,394,958
    )
    
    $
    (18,444,796
    )Add: Stock based compensation expense
included in statements of
operations
    
    
    35,818
    
    
    
    191,588Deduct: Total stock based compensation
expense determined under the fair
value method for all awards
    
    
    (604,259
    )
    
    
    (2,304,112
    )Pro forma net loss
    
    $
    (6,963,399
    )
    
    $
    (20,557,320
    )Basic and diluted earnings per share:As reported
    
    
    (.24
    )
    
    
    (.69
    )Pro forma
    
    
    (.26
    )
    
    
    (.77
    )
   Three Months Ended
    
    
    Nine Months EndedFebruary 28,
    
    
    February 28,
    
    
    February 28,
    
    
    February 28,2007
    
    
    2006
    
    
    2007
    
    
    2006Fair Value
    
    
    
    
    
    
    2,143,309
    
    
    
    1,090,890
    
    
    
    3,802,905Expected volatility
    
    
    73.1
    %
    
    
    71.5
    %
    
    
    73.1
    %
    
    
    71.5
    %Risk-free interest rate
    
    
    5.0
    %
    
    
    4.4
    %
    
    
    5.0
    %
    
    
    4.4
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected lives
    
    6.8 years
    
    7.0 years
    
    6.8 years
    
    7.0 years




---



##### 



WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateRange of
    
    
    Average
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Prices
    
    
    Exercise Price
    
    
    Terms (years)
    
    
    ValueOutstanding at May 31, 2006
    
    
    1,747,375
    
    
    $
    3.62 - $19.00
    
    
    $
    11.11Granted at Fair Value
    
    
    65,000
    
    
    $
    9.65 - $11.59
    
    
    $
    10.83Exercised
    
    
    3,500
    
    
    $
    5.15 - $7.13
    
    
    $
    6.43Expired
    
    
    0Cancelled
    
    
    16,000
    
    
    $
    5.15 -- $15.15
    
    
    $
    12.80Outstanding at August 31, 2006
    
    
    1,791,875
    
    
    $
    3.62 -- $19.00
    
    
    $
    11.10
    
    
    
    6.06
    
    
    
    2,797,666Exercisable at August 31, 2006
    
    
    533,500
    
    
    $
    3.62 -- $15.90
    
    
    $
    11.24
    
    
    
    6.06
    
    
    
    353,500Granted at Fair Value
    
    
    62,500
    
    
    $
    13.03 - $14.68
    
    
    $
    13.10Exercised
    
    
    28,125
    
    
    $
    5.08 - $13.21
    
    
    $
    7.83Expired
    
    
    5,000
    
    
    $
    11.44
    
    
    $
    11.44Cancelled
    
    
    9,375
    
    
    $
    10.66 -- $22.02
    
    
    $
    17.07Outstanding at November 30, 2006
    
    
    1,811,875
    
    
    $
    3.62 -- $19.00
    
    
    $
    11.18
    
    
    
    6.23
    
    
    $
    8,312,282Exercisable at November 30, 2006
    
    
    983,625
    
    
    $
    3.62 -- $15.90
    
    
    $
    9.54
    
    
    
    6.23
    
    
    $
    5,663,189Granted at Fair Value
    
    
    0
    
    
    
    
    
    
    
    Exercised
    
    
    3,375
    
    
    $
    5.15 - $11.92
    
    
    $
    5.90Expired
    
    
    95,000
    
    
    $
    10.81
    
    
    $
    10.81Cancelled
    
    
    31,125
    
    
    $
    11.92 - $13.05
    
    
    $
    12.86Outstanding at February 28, 2007
    
    
    1,682,375
    
    
    $
    3.62 -- $18.55
    
    
    $
    11.08
    
    
    
    6.62
    
    
    $
    29,700Exercisable at February 28, 2007
    
    
    1,116,500
    
    
    $
    3.62 -- $18.55
    
    
    $
    10.27
    
    
    
    6.62
    
    
    $
    29,700




---



##### 



(6) RECENTLY ISSUED ACCOUNTING STANDARD
   (7) RESTRICTED CASH
  (8) MARKETABLE SECURITIES




---



##### 



(9) PROPERTY, PLANT & EQUIPMENT
   (10) LEGAL PROCEEDINGS
    
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 RECENT DEVELOPMENTS




---



##### 



RESULTS OF OPERATIONS
  OPERATING EXPENSES




---



##### 








---



##### 



INTEREST INCOME
   NET LOSS
   LIQUIDITY AND CAPITAL RESOURCES




---



##### 



CRITICAL ACCOUNTING POLICIES
  NET DEFERRED TAX ASSETS VALUATION




---



##### 



CONTRACTUAL OBLIGATIONS
  LESS THANContractual Obligations
    
    TOTAL
    
    
    ONE YEAR
    
    
    1-3 YEARSLease Obligations (1)
    
    $
    817,004
    
    
    $
    358,509
    
    
    
    458,495Other Obligations (2)
    
    $
    1,230,000
    
    
    $
    1,230,000
    
    
    
    Total Contractual Cash
Obligation
    
    $
    2,047,004
    
    
    $
    1,588,509
    
    
    $
    458,495
   RECENT ACCOUNTING PRONOUNCEMENTS




---



##### 



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  
 ITEM 4. CONTROLS AND PROCEDURES.
  
 Part II
 OTHER INFORMATION
 
 Item 1. Legal Proceedings




---



##### 








---



##### 



Item 6. Exhibits.
 
 Exhibit 15
    
    Letter regarding unaudited interim financial informationExhibit 31.1
    
    Certification of Steven A. Gould, M.D., pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934Exhibit 31.2
    

Certification
of Donna ONeill-Mulvihill, pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934Exhibit 32.1
    
    Certification of Steven A. Gould, M.D., pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002Exhibit 32.2
    
    Certification of Donna ONeill-Mulvihill, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002




---



##### 



SIGNATURES
  Signature
    
    Title/s/ Steven A. Gould, M.D.
Steven A. Gould, M.D.
    
    Chairman of the Board and Chief
Executive Officer/s/ Donna ONeill-Mulvihill
Donna ONeill-Mulvihill
    
    Vice President of Finance