##### Table of Contents



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 November 30, 2006
 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 6. EXHIBITSSIGNATURESLetter Regarding Unaudited Interim Financial InformationCertification of Steven A. Gould, M.D.Certification of John J. HindsCertification of Steven A. Gould, M.D.Certification of John J. Hinds    Table of Contents  
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     (signed) KPMG LLP




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##### Table of Contents



Part
I
FINANCIAL INFORMATION
 
 Item
1. Financial Statements.
 NORTHFIELD LABORATORIES INC.
   November 30,
    
    
    May 31,2006
    
    
    2006(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    30,839,591
    
    
    
    39,304,602Restricted cash
    
    
    227,458
    
    
    
    926,492Marketable securities
    
    
    20,792,724
    
    
    
    33,679,022Prepaid expenses
    
    
    782,334
    
    
    
    813,104Other assets
    
    
    38,129
    
    
    
    Total current assets
    
    
    52,680,236
    
    
    
    74,723,220Property, plant, and equipment
    
    
    21,562,127
    
    
    
    15,654,049Accumulated depreciation
    
    
    (13,090,764
    )
    
    
    (14,575,118
    )Net property, plant, and equipment
    
    
    8,471,363
    
    
    
    1,078,931Other assets
    
    
    19,550
    
    
    
    68,941$
    61,171,149
    
    
    
    75,871,092Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    3,641,577
    
    
    
    4,481,804Accrued expenses
    
    
    93,870
    
    
    
    134,006Accrued compensation and benefits
    
    
    986,412
    
    
    
    742,038Government grant liability
    
    
    227,458
    
    
    
    926,492Other
    
    
    6,021
    
    
    
    249,580Total liabilities
    
    
    4,955,338
    
    
    
    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 26,816,192 at November 30, 2006 and 26,777,655 at
May 31, 2006
    
    
    268,162
    
    
    
    267,777Additional paid-in capital
    
    
    243,275,100
    
    
    
    241,240,276Deficit accumulated during the development stage
    
    
    (187,302,058
    )
    
    
    (172,136,429
    )Deferred compensation
    
    
    
    
    
    
    (9,059
    )56,241,204
    
    
    
    69,362,565Less cost of common shares in treasury; 1,717 shares and
1,717 shares, respectively
    
    
    (25,393
    )
    
    
    (25,393
    )Total shareholders equity
    
    
    56,215,811
    
    
    
    69,337,172$
    61,171,149
    
    
    
    75,871,092




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##### Table of Contents



NORTHFIELD LABORATORIES INC.
  
 CumulativefromJune 19, 1985Three months ended November 30,
    
    
    Six months ended November 30,
    
    
    through2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    November 30, 2006(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Revenues
 license income
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000,000Costs and
expenses:Research and development
    
    
    5,625,231
    
    
    
    5,573,302
    
    
    
    11,451,344
    
    
    
    10,667,176
    
    
    
    159,232,541General and administrative
    
    
    2,700,999
    
    
    
    1,459,825
    
    
    
    5,264,648
    
    
    
    2,848,819
    
    
    
    60,540,5488,326,230
    
    
    
    7,033,127
    
    
    
    16,715,992
    
    
    
    13,515,995
    
    
    
    219,773,089Other income
and expenses:Interest income
    
    
    723,175
    
    
    
    764,016
    
    
    
    1,550,363
    
    
    
    1,466,158
    
    
    
    29,629,186Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,234$
    723,175
    
    
    
    764,016
    
    
    
    1,550,363
    
    
    
    1,466,158
    
    
    
    29,545,952Net loss
before cumulative effect of change in accounting principle
    
    
    (7,603,055
    )
    
    
    (6,269,111
    )
    
    
    (15,165,629
    )
    
    
    (12,049,837
    )
    
    
    (187,227,137
    )Cumulative
effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,921Net loss
    
    $
    (7,603,055
    )
    
    
    (6,269,111
    )
    
    
    (15,165,629
    )
    
    
    (12,049,837
    )
    
    
    (187,302,058
    )Net loss per
share  basic and diluted
    
    $
    (0.28
    )
    
    
    (0.23
    )
    
    
    (0.57
    )
    
    
    (0.45
    )
    
    
    (16.60
    )Shares used
in calculation of per share data  basic and diluted
    
    
    26,800,028
    
    
    
    26,758,538
    
    
    
    26,790,669
    
    
    
    26,754,947
    
    
    
    11,281,878




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##### Table of Contents



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




---



##### Table of Contents



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 $423,238)
    
    
    
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    26,752,739
    
    
    
    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
    
    
    
    
    
    
    
    9,059Exercise 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,200Share-based
compensation (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,702,444
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,702,444Net loss (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,165,629
    )
    
    
    
    
    
    
    
    
    
    
    (15,165,629
    )Balance at November 30, 2006 (unaudited)
    
    
    
    
    
    $
    
    
    
    
    26,816,192
    
    
    $
    268,162
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    243,275,100
    
    
    $
    (187,302,058
    )
    
    $
    
    
    
    
    (25,393
    )
    
    $
    56,215,811




---



##### Table of Contents



NORTHFIELD LABORATORIES INC.
  
 CumulativefromJune 19, 1985Six months ended November 30,
    
    
    through2006
    
    
    2005
    
    
    November 30, 2006(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net loss
    
    $
    (15,165,629
    )
    
    
    (12,049,837
    )
    
    
    (187,302,058
    )Adjustments to reconcile net loss to net
cash used in operating activities:Marketable security amortization
    
    
    (696,573
    )
    
    
    (971,514
    )
    
    
    (2,994,776
    )Depreciation and amortization
    
    
    245,815
    
    
    
    123,043
    
    
    
    19,190,586Stock based compensation
    
    
    1,801,503
    
    
    
    155,768
    
    
    
    5,862,527Loss of sale of equipment
    
    
    
    
    
    
    
    
    
    
    66,359Changes in assets and liabilities:Prepaid expenses
    
    
    30,770
    
    
    
    290,882
    
    
    
    (991,545
    )Other assets
    
    
    11,262
    
    
    
    34,588
    
    
    
    (1,878,589
    )Accounts payable
    
    
    (840,227
    )
    
    
    (899,519
    )
    
    
    3,641,577Accrued expenses
    
    
    (40,136
    )
    
    
    (3,164
    )
    
    
    93,870Government grant liability
    
    
    (699,034
    )
    
    
    
    
    
    
    227,458Accrued compensation and benefits
    
    
    244,374
    
    
    
    557,936
    
    
    
    986,412Other liabilities
    
    
    (243,559
    )
    
    
    (14,806
    )
    
    
    6,021Net cash used in operating activities
    
    
    (15,351,434
    )
    
    
    (12,776,623
    )
    
    
    (163,092,158
    )Cash flows from investing activities:Purchase of property, plant, equipment, and
capitalized engineering costs
    
    
    (7,638,247
    )
    
    
    (235,644
    )
    
    
    (27,586,560
    )Proceeds from sale of land and equipment
    
    
    
    
    
    
    
    
    
    
    1,863,023Proceeds from matured marketable securities
    
    
    58,000,000
    
    
    
    99,170,000
    
    
    
    675,646,352Proceeds from sale of marketable securities
    
    
    
    
    
    
    
    
    
    
    7,141,656Purchase of marketable securities
    
    
    (44,417,129
    )
    
    
    (49,357,247
    )
    
    
    (700,591,736
    )Net cash provided by (used in) investing activities
    
    
    5,944,624
    
    
    
    49,577,109
    
    
    
    (43,527,265
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    242,765
    
    
    
    29,324
    
    
    
    236,367,900Payment 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
    
    
    242,765
    
    
    
    29,324
    
    
    
    237,686,472Net increase (decrease) in cash
    
    
    (9,164,045
    )
    
    
    36,829,810
    
    
    
    31,067,049Cash at beginning of period
    
    
    39,304,602
    
    
    
    6,800,405
    
    
    
    Restricted cash
    
    
    699,034
    
    
    
    
    
    
    
    (227,458
    )Cash at end of period
    
    $
    30,839,591
    
    
    
    43,630,215
    
    
    
    30,839,591Supplemental Schedule of Noncash Financing Activities :Exercise of stock option, 5,000 shares in exchange for
1,717 treasury shares
    
    $
    
    
    
    
    
    
    
    
    25,393




---



##### Table of Contents



NORTHFIELD
LABORATORIES INC.
 
 (1) BASIS OF PRESENTATION
  (2) USE OF ESTIMATES
  (3) COMPUTATION OF NET LOSS PER SHARE
  (4) SHARE-BASED COMPENSATION




---



##### Table of Contents



nd




---



##### Table of Contents



Three months
    
    
    Six monthsEnded
    
    
    EndedNovember 30, 2005
    
    
    November 30, 2005Net loss as reported
    
    
    (6,269,111
    )
    
    $
    (12,049,837
    )Add: Stock based compensation expense
included in statements of
operations
    
    
    122,705
    
    
    
    155,770Deduct: Total stock based compensation
expense determined under the fair
value method for all awards
    
    
    (1,144,955
    )
    
    
    (1,642,070
    )Pro forma net loss
    
    $
    (7,291,361
    )
    
    $
    (13,536,137
    )Basic and diluted earnings per share:As reported
    
    
    (.23
    )
    
    
    (.45
    )Pro forma
    
    
    (.27
    )
    
    
    (.51
    )
   Three Months Ended
    
    Six Months EndedNovember 30,
    
    November 30,
    
    November 30,
    
    November 30,2006
    
    2005
    
    2006
    
    2005Fair value
    
    $
    580,000
    
    
    $
    1,144,955
    
    
    $
    1,090,890
    
    
    $
    1,642,070Expected volatility
    
    
    72.6
    %
    
    
    73.5
    %
    
    
    73.1
    %
    
    
    71.6
    %Risk-free interest rate
    
    
    5.0
    %
    
    
    4.2
    %
    
    
    5.0
    %
    
    
    4.2
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected lives
    
    6.7 years
    
    7.0 years
    
    6.8 years
    
    7.2 years




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##### Table of Contents



WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateRange of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Prices
    
    
    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
    
    
    $
    5,663,189
  (5) RECENTLY ISSUED ACCOUNTING STANDARD
   (6) RESTRICTED CASH




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##### Table of Contents



(7) MARKETABLE SECURITIES
   (8) PROPERTY, PLANT & EQUIPMENT
   (9) LEGAL PROCEEDINGS




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 RECENT DEVELOPMENTS




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##### Table of Contents



RESULTS OF OPERATIONS
  OPERATING EXPENSES




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##### Table of Contents



INTEREST INCOME
   NET LOSS
   LIQUIDITY AND CAPITAL RESOURCES




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
  NET DEFERRED TAX ASSETS VALUATION




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##### Table of Contents



CONTRACTUAL OBLIGATIONS
  LESS THANContractual Obligations
    
    TOTAL
    
    
    ONE YEAR
    
    
    1-3 YEARSLease Obligations (1)
    
    $
    905,152
    
    
    $
    356,819
    
    
    
    548,333Other Obligations (2)
    
    $
    1,230,000
    
    
    $
    1,230,000
    
    
    
    Total Contractual Cash Obligation
    
    $
    2,135,152
    
    
    $
    1,586,819
    
    
    $
    548,333
 
 (1)
    
    The lease for our Evanston headquarters is cancelable with six months notice combined with
a termination payment equal to three months base rent at any time after February 14, 2009. If the
lease is cancelled as of February 15, 2009, unamortized broker commissions of $17,470 would also be
due.(2)
    
    Represents payments required to be made upon termination of employment agreements with two
of our executive officers. The employment contracts renew automatically unless terminated. Figures
shown represent compensation payable upon the termination of the employment agreements for reasons
other than death, disability, cause or voluntary termination of employment by the executive officer
other than for good reason. Additional payments may be required under the employment agreements in
connection with a termination of employment of the executive officers following a change in control
of Northfield. RECENT ACCOUNTING PRONOUNCEMENTS
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES.
  
 Part II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
    Item 1A. Risk Factors
  We are required to receive FDA approval before we may sell PolyHeme commercially, data from our
clinical trials to date may not be adequate to obtain FDA approval, and we may be required to
conduct additional clinical trials in the future




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  Nominee
    
    For
    
    WithheldSteven A. Gould, M.D.
    
    
    23,994,437
    
    
    
    1,029,596John F. Bierbaum
    
    
    24,756,760
    
    
    
    267,273Bruce S. Chelberg
    
    
    23,543,084
    
    
    
    1,480,949Alan L. Heller
    
    
    24,771,074
    
    
    
    252,959Paul M. Ness, M.D.
    
    
    23,484,952
    
    
    
    1,539,081David A. Savner
    
    
    24,714,607
    
    
    
    309,426Edward C. Wood, Jr.
    
    
    24,756,986
    
    
    
    258,047
   Proposal
    
    For
    
    Against
    
    AbstainThe proposal to ratify the
appointment of KPMG LLP
as independent registered public accounting firm for the
Company to serve for the Companys
2007 fiscal year was approved.
    
    
    24,785,317
    
    
    
    144,904
    
    
    
    93,812




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##### Table of Contents



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 John J. Hinds, 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 John J. Hinds, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002




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##### Table of Contents



SIGNATURES
  Signature
    
    Title/s/ Steven A. Gould, M.D.

Steven A. Gould, M.D.
    
    Chairman of the Board and Chief
Executive Officer/s/ John J. Hinds

John J. Hinds
    
    Vice President of Finance