UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the nine month period ended APRIL 30, 2003
--- TRANSITION REPORT UNDER SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission file number 000-23399
NOVADEL PHARMA INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-2407152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
31 State Highway 12
Flemington, New Jersey 08822
(Address of Principal Executive Offices) (Zip Code)
(908)782-3431
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes___No__
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 17,762,161 shares of common
stock outstanding as of June 15, 2003.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
--- ---
NOVADEL PHARMA INC.
BALANCE SHEETS
April 30 July 31,
2003 2002
------------ -----------
(UNAUDITED) (NOTE 1)
ASSETS
CURRENT ASSETS:
Cash $ 2,596,000 $ 3,314,000
Accounts receivable - trade, less allowance for
doubtful accounts of $88,000 at April 30, 2003 and
July 31, 2002 -- 1,000
Prepaid expenses and other current assets 131,000 96,000
------------ ------------
Total Current Assets 2,727,000 3,411,000
------------ ------------
FURNITURE, FIXTURES, AND EQUIPMENT, LESS
ACCUMULATED DEPRECIATION 559,000 406,000
OTHER ASSETS 356,000 22,000
------------ ------------
$ 3,642,000 $ 3,839,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable-trade $ 247,000 $ 125,000
Accrued expenses and other current liabilities 500,000 191,000
------------ ------------
Total Current Liabilities 747,000 316,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.01 par value:
Authorized 1,000,000 shares, none issued
Common stock, $.001 par value:
Authorized - 50,000,000 shares
Issued and outstanding 16,411,842 and 14,448,817;
respectively 16,000 14,000
Additional paid-in capital 17,046,000 13,322,000
Accumulated Deficit (14,167,000) (9,813,000)
------------ ------------
Total Stockholders' Equity (Deficiency) 2,895,000 3,523,000
------------ ------------
$ 3,642,000 $ 3,839,000
============ ============
See accompanying notes to financial statements.
2
NOVADEL PHARMA INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
April 30, April 30,
----------------------------------------------------------------------------------
2003 2002 2003 2002
------------- ------------ ------------ ------------
CONSULTING REVENUES -- $ 81,000 -- $ 335,000
CONSULTING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 878,000 2,139,000 4,478,000 3,011,000
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (878,000) (2,058,000) (4,478,000) (2,676,000)
BUY-OUT OF CONSULTANT'S
CONTRACT -- -- -- (32,000)
INTEREST INCOME 7,000 17,000 40,000 32,000
------------ ------------ ------------ ------------
NET LOSS BEFORE TAXES (871,000) (2,041,000) (4,438,000) (2,676,000)
DEFFERED INCOME TAX BENEFIT -- -- 84,000 88,000
------------ ------------ ------------ ------------
NET LOSS $ (871,000) $ (2,041,000) $ (4,354,000) $ (2,588,000)
============ ============ ============ ============
BASIC AND DILUTED LOSS PER SHARE $ (.06) $ (.15) $ (.30) $ (.25)
============ ============ ============ ============
SHARES USED IN COMPUTATION OF
BASIC AND DILUTED LOSS PER
SHARE 15,155,662 13,432,765 14,731,391 10,332,959
============ ============ ============ ============
See accompanying notes to financial statements.
3
NOVADEL PHARMA INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(Unaudited)
Common Stock
--------------------------------
Stockholders'
Par Paid-in Accumulated Equity
Shares Value Capital Deficit (Deficiency)
------------ ------------ ------------ ------------ ------------
BALANCE, JULY 31, 2002 14,448,817 $ 14,000 $ 13,322,000 $ (9,813,000) $ 3,523,000
NINE MONTHS ENDED APRIL 30, 2003 --
Stock issued in connection with private 1,863,333 1,000 2,510,000 -- 2,511,000
placements, net of costs
Shares issued for Warrants exercised 99,692 1,000 9,000 -- 10,000
Options issued for services -- -- 1,198,000 -- 1,198,000
Warrants issued for services -- -- 7,000 -- 7,000
Net Loss -- -- -- (4,354,,000) (4,354,000)
------------ ------------ ------------ ------------- ------------
BALANCE, APRIL 30, 2003 16,411,842 $ 16,000 $ 17,046,000 $ (14,167,000) $ 2,895,000
============ ============ ============ ============= ============
See accompanying notes to financial statements.
4
NOVADEL PHARMA INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
April 30,
--------------------------------------
2003 2002
----------- ------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net (loss) $(4,354,000) $(2,588,000)
Adjustments to reconcile net income (loss) to net cash
flows from operating activities:
Warrants issued for Services 7,000 47,000
Options Issued for Services 1,198,000 1,348,000
Shares issued for Warrants exercised 10,000 --
Depreciation & Amortization 111,000 45,000
Allowance for Doubtful Accounts -- 89,000
Changes in operating assets and liabilities:
Accounts receivable 1,000 (94,000)
Prepaid expenses and other current assets (35,000) (22,000)
Demand note receivable, officer -- 60,000
Due from joint venture partner for reimbursable expenses -- (4,000)
Other Assets (334,000) (1,000)
Accounts payable - trade 122,000 191,000
Accrued expenses and other current liabilities 309,000 119,000
----------- -----------
Net cash flows from operating activities (2,965,000) (810,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of property and equipment (264,000) (179,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES -
Proceeds received from issuance of common
stock through a private placement offering 2,511,000 4,934,000
----------- -----------
NET CHANGE IN CASH (718,000) 3,945,000
CASH, BEGINNING OF PERIOD 3,314,000 585,000
----------- -----------
CASH, END OF PERIOD $ 2,596,000 $ 4,530,000
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ -- $ --
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
See accompanying notes to financial statements.
5
NOVADEL PHARMA INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION:
The balance sheet at the end of the preceding fiscal year has
been derived from the audited balance sheet contained in the
Company's Form 10-KSB and is presented for comparative
purposes. All other financial statements are unaudited. In the
opinion of management, all adjustments, which include only
normal recurring adjustments necessary to present fairly the
financial position, results of operations and cash flows for
all periods presented, have been made in the interim
statements. Results of operations for interim periods are not
necessarily indicative of the operating results for a full
year.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
Before the end of the calendar year, it will be necessary for
the Company to obtain additional financing and/or consummate a
strategic alliance with a well-funded business partner. There
are a number of risks and uncertainties related to the
Company's attempt to complete a financing or strategic
partnering arrangement that are outside the control of the
Company. We may not be able to successfully obtain additional
financing on terms acceptable to the Company, or at all. These
uncertainties raise substantial doubt as to the Company's
ability to continue as a going concern.
Footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the published
rules and regulations of the Securities and Exchange
Commission. The financial statements in this report should be
read in conjunction with the financial statements and notes
thereto included in the Form 10-KSB of NOVADEL PHARMA INC.
(the "Company"), for the year ended July 31, 2002.
NOTE 2 - PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Approximately $86,000 of prepaid supplies; $41,000 of prepaid
insurance; $2,000 of employee loan and $2000 of other are
included in the $131,000 total.
OTHER ASSETS:
Approximately $351,000 of security deposits are included in
the $354,000 total. The remainder is other assets.
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Approximately $221,000 of accrued payroll and related payroll
taxes; $168,000 of accrued employee vacation and $104,000 of
accrued legal and professional fees are included in the
$500,000 total. The remainder is other accrued expenses and
other current liabilities.
NOTE 3 - PRIVATE PLACEMENT:
During April 2003, the Company received net proceeds of
approximately $2,511,000 from a total of 27.95 Units of the
Company's securities. Each Unit consisted of sixty six
thousand, six hundred, sixty seven (66,667) common shares, par
value $.001, and sixteen thousand, six hundred, sixty seven
(16,667) warrants. Each warrant entitled the holder to
purchase an additional share of the company's common stock at
an exercise price of $2.00 within five (5) years. The terms of
the placement provide that if at any time following the
closing of the offering and continuing for a period of two (2)
years thereafter we offer shares of our common stock for sale
in a capital raising transaction, we will permit the investors
to purchase such number of shares of common stock to maintain
their pro rata ownership percentages of NovaDel and that if,
at any timed following the closing of the offering for a
period of one year, we sold shares of common stock in a
capital raising transaction (of at least $1 million) at a per
share price less than $1.50, we will issue to the investors
additional shares of common stock (so that they would receive
their original shares at such lower price). The sale price of
each Unit was $100,000 ($1.50 per share). (See also notes 4
and 7) As partial compensation to the placement agent, the
Company became obligated to issue to the placement agent
warrants to purchase 93,167 shares of the Company's common
stock at an exercise price of $1.65 per share. The warrants
have a term of five (5) years.
6
NOTE 4 - STOCK OPTIONS AND WARRANTS:
The Company follows the intrinsic method of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25) and related interpretations in
accounting for its employee stock options because, as
discussed below, Financial Accounting Standards Board
Statement No. 123, "Accounting for Stock-Based Compensation"
(FAS 123) requires use of option valuation models that were
not developed for use in valuing employee stock options. FAS
123 permits a company to elect to follow the intrinsic method
of APB 25 rather than the alternative fair value accounting
provided under FAS 123, but requires pro forma net income and
earnings per share disclosures as well as various other
disclosures not required under APB 25 for companies following
APB 25. The Company has adopted the disclosure provisions
required under Financial Accounting standards Board Statement
No. 148, "Accounting for Stock-Based Compensation Transition
and Disclosure" (FAS 148). Under APB 25, because the exercise
price of the Company's stock options equals the market price
of the underlying stock on the date of grant, no compensation
expense was recognized.
Pro forma information regarding net income and earnings per
share is required by FAS 123 and FAS 148, and has been
determined as if the Company had accounted for its employee
stock options under the fair value method of that Statement.
The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition,
options valuation models require the input of highly
subjective input assumptions including the expected stock
price volatility. Because the Company's employee stock options
have characteristics significantly different from those of
traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily
provide a reliable measure of the fair value of its employee
stock options.
For purposes of pro forma disclosures, the estimated fair
value of options is amortized to expense over the options'
vesting period. The Company's pro forma information follows:
3 Months Ended 9 Months Ended
April 30, April 30,
----------------------------------------------------------------------
2003 2002 2003 2002
------------- ----------- ------------- -----------
Net Loss, as reported $ (871,000) $ $ (4,554,000) $(2,588,000)
(2,041,000)
Stock-based employee compensation expense (238,000) -- (437,000) (1,439,000)
under fair value method, net of related tax effects
----------- ----------- ------------ -----------
Pro forma net loss $(1,109,000) $(2,041,000) $(4,791,00) $(4,027,000)
=========== =========== ============ ===========
Loss per share:
Basic and diluted, as reported $ (.06) $ (.15) $ (.30) $ (.25)
=========== =========== ============ ===========
Basic and diluted, pro forma $ (.07) $ (.15) $ (.33) $ (.39)
=========== =========== ============ ===========
In October 2002, the Company issued 75,000 options under the
1998 Option Plan and 200,000 Non-Plan options to its then
President. These options vested immediately, have an exercise
price of $1.30 and expire during October 2007.
In November 2002, the Company decided to extend for one year
the expiration date of its publicly traded Warrants (i.e. to
November 18, 2003). All other provisions of the Warrants
remain unchanged.
7
In December 2002, pursuant to an employment agreement with
Gary A. Shangold, M.D. (see Note 5, below) 1,000,000 options
were issued at an exercise price of $1.93 per share with a 5
year life. The options vest and become exercisable in three
equal annual installments commencing December 1, 2003
During March 2003, the Company granted an aggregate of 140,000
stock options under the Company's 1998 Option Plan,
exercisable at $1.51 per share for a term of five (5) years,
to nine (9) employees.
In March 2003, the board issued 10,000 stock options to each
of two (2) directors under the Company's 1998 Option Plan.
These options have an exercise price of $1.51 and a term of 5
years.
In March 2003, the board issued 100,000 Non-Plan options to
each of two new independent directors. These options have an
exercise price of $1.51 and a term of 5 years.
During April 2003, the Company received net proceeds of
approximately $2,560,000 from a total of 27.95 Units of the
Company's securities. Each Unit consisted of sixty six
thousand, six hundred, sixty seven (66,667) common shares, par
value $.001, and sixteen thousand, six hundred, sixty seven
(16,667) warrants. Each warrant entitled the holder to
purchase an additional share of the company's common stock at
an exercise price of $2.00 within five (5) years. The sale
price of each Unit was $100,000 ($1.50 per share). (See also
notes 3 and 7) As partial compensation to the placement agent,
the Company became obligated to issue to the placement agent
warrants to purchase 93,167 shares of the Company's common
stock at an exercise price of $1.65 per share. The warrants
have a term of five (5) years.
Note 5 - Deferred income tax benefit:
During December 2002, the Company received approximately
$84,000 as consideration for transferring approximately
$1,116,000 of New Jersey net operating loss tax benefit to a
third party corporation buyer. The Technology Tax Certificate
Transfer Program for transferring net operating loss and R & D
tax benefits is the responsibility of New Jersey Economic
Development Authority.
Note 6 - Contracts:
In December 2002, the Company entered into a three-year
employment agreement with Gary A. Shangold, M.D. pursuant to
which he agreed to serve as the Company's President and Chief
Executive Officer. The Company agreed to pay Dr. Shangold an
annual base salary of $350,000 and a guaranteed bonus of
$150,000. In addition, Dr. Shangold is eligible to receive:
(i) an annual discretionary bonus of up to $262,500, which
shall be determined at the sole discretion of the Board; and
(ii) an investment and fee bonus equal to 5% of all amounts up
to an aggregate of $7,500,000 (i.e., $375,000) invested in, or
earned by, the Company during his term. The Company is
obligated to pay Dr. Shangold at least $200,000 on or before
June 30, 2003. Such investment and fee bonus shall be reduced
by certain proceeds received by Dr. Shangold from his former
employer. Pursuant to the agreement, Dr. Shangold was also
granted Non-Plan options (see Note 3, above) to purchase
1,000,000 shares of the Company's common stock (at an exercise
price of $1.93 per share) which vest over a three year period.
Such options have a term of five (5) years.
In March 2003, the Company entered into a 10 year lease for
approximately 31,200 sq. feet of office, laboratory,
manufacturing and warehouse space. These premises are
presently being fitted-out. Occupancy should begin, in stages,
during the third quarter 2003. When fully occupied,
anticipated to be during the 4th quarter 2003, the annual rent
will be approximately $300,000 plus a proportionate share of
real estate taxes and common areas.
8
In April 2003, the Company entered into a license and
development agreement with Manhattan Pharmaceuticals, Inc. for
the worldwide, exclusive rights to the Company's proprietary
lingual spray technology to deliver Propofol for
pre-procedural sedation. The terms of the agreement calls for
certain milestone and other payments, the first of which was
received during June 2003.
Note 7 - Subsequent Events:
In May 2003, the Company entered into a three-year employment
agreement with Barry Cohen pursuant to which he agreed to
serve as the Company's Vice President, New Business & New
Product Development. The Company agreed to pay Mr. Cohen an
annual base salary of $185,000. Pursuant to the agreement, Mr.
Cohen was also granted Plan options to purchase up to 75,000
shares of the Company's common stock at an exercise price of
$2.04 per share (110% of the fair market value on the grant
date) which vest, subject to conditions, over a three year
period. Such options have a term of ten (10) years.
During May 2003, the Company completed a private placement and
received additional net proceeds of approximately $1,850,000
from the placement of a total of 20.05 Units of the Company's
securities. Each Unit consisted of sixty six thousand, six
hundred, sixty seven (66,667) common shares, par value $.001,
and sixteen thousand, six hundred, sixty seven (16,667)
warrants. Each warrant entitles the holder to purchase an
additional share of the company's common stock at an exercise
price of $2.00 within five (5) years. The sale price of each
Unit was $100,000 ($1.50 per share). The terms of the
placement provide that if at any time following the closing of
the offering and continuing for a period of two (2) years
thereafter we offer shares of our common stock for sale in a
capital raising transaction, we will permit the investors to
purchase such number of shares of common stock to maintain
their pro rata ownership percentages of NovaDel and that if,
at any timed following the closing of the offering for a
period of one year, we sold shares of common stock in a
capital raising transaction (of at least $1 million) at a per
share price less than $1.50, we will issue to the investors
additional shares of common stock (so that they would receive
their original shares at such lower price). For this portion
of the private placement, the placement agent received, as
additional compensation, warrants to purchase an additional
66,850 shares of the Company's common stock at an exercise
price of $1.65 per share. These warrants have a term of five
(5) years. "See also note 4".
9
NOVADEL PHARMA INC.
Part I, Item 2. Management's Discussion and Analysis
Novadel Pharma inc., a Delaware corporation (the "Company"), is engaged in
development of novel application drug delivery systems for presently marketed
prescription and over-the-counter ("OTC") drugs and has been a consultant to the
pharmaceutical industry. Since 1992, the Company has used its consulting
revenues to fund its own product development activities.
Since its inception, substantially all of the Company's revenues have been
derived from its consulting activities. The Company has had a history of
recurring losses from operation, giving rise to an accumulated deficit at April
30, 2003 of approximately $14,167,000. For the 9 months ending April 30, 2003,
the Company has had no revenue from consulting as the Company has shifted its
emphasis away from product development consulting for its clients and to
development of its own products.
For the reasons stated above, the Company anticipates that it will incur
substantial operating expenses in connection with the testing and approval of
its proposed delivery systems, and expects these expenses will result in
continuing and significant operating losses until such time, if ever, that the
Company is able to achieve adequate sales levels.
In view of the Company's very limited resources, its anticipated expenses and
the competitive environment in which the Company operates, there can be no
assurance that its operations will be sustained for the duration of the next
fiscal year.
RESULTS OF OPERATIONS
THE NINE MONTHS ENDED APRIL 2003 [THE "2003 PERIOD"] AND APRIL 2002 [THE "2002
PERIOD"]
Operating revenues for the 2003 Period decreased approximately $335,000 to $0
from $335,000 for the 2002 Period.
Total costs and expenses for the 2003 Period increased approximately $1,435,000
or 47% to $4,478,000 from $3,043,000 for the 2002 Period. This increase includes
approximately: $665,000 in payroll expenses primarily due to the hiring of
additional employees and an increase of the vacation pay accrual; $362,000 in
legal & professional fees; $140,000 in laboratory testing and clinical studies
costs; $129,000 in consultants fees primarily due to a non-cash charge for
options issued to consultants; $66,000 in depreciation and amortization expenses
due to the earlier purchases of internal laboratory equipment; $51,000 in
employee recruiting; $47,000 in insurance expenses due to additional employees
and generally increased premiums; $28,000 in inside laboratory expenses; $17,000
in trade show and conference expenses; $12,000 in office expenses due to
additional employees; $11,000 in automobile expenses; $11,000 in travel
expenses; $10,000 in outside services primarily due to environmental waste
removal costs and $9,000 in rent expenses.
Costs and expenses decreases for the 2003 period, as compared to the 2002
period, includes approximately: $89,000 in bad debt expense; $32,000 in buy-out
of contract with a consultant; $8,000 in sample purchases primarily due to
returns of earlier purchases and $6,000 in meetings and memberships.
Interest income increased approximately $8,000 or 25% to $40,000 for the 2003
Period from $32,000 for the 2002 Period due to an increased average cash
balance.
Deferred income tax benefit for the 2003 period was approximately $84,000
compared to approximately $88,000 for the 2002 period. These benefits resulted
from the sale of the Company's New Jersey net operating losses.
The resulting net loss for the 2003 Period was $4,354,000 (net loss per share of
$0.30) compared to a net loss of $2,588,000 (net loss per share of $0.25) for
the 2002 Period.
10
THE THREE MONTHS ENDED APRIL 2003 [THE "2003 PERIOD"] AND APRIL 2002 [THE "2002
PERIOD"]
Operating revenues for the 2003 Period decreased approximately $81,000 to $0
from $81,000 for the 2002 Period.
Total costs and expenses for the 2003 Period decreased approximately $1,261,000
or 59% to $878,000 from $2,139,000 for the 2002 Period. This decrease includes
approximately: $1,369,000 in consultants fees; $18,000 in travel expenses;
$12,000 in trade shows and conferences and $7,000 in laboratory testing and
clinical studies expenses.
Costs and expenses increases for the 2003 period, as compared to the 2002
period, includes approximately: $145,000 in payroll expense primarily due to the
hiring of additional employees and an increase of the vacation pay accrual;
$42,000 in legal & professional fees; $20,000 in depreciation and amortization
expense due to the earlier purchases of internal laboratory equipment and
$13,000 in public company expenses due to increased directors' fees.
Interest income decreased approximately $10,000 or 59% to $7,000 for the 2003
period from $17,000 for the 2002 period due to a decreased average cash balance.
The resulting net loss for the 2003 Period was $871,000 (net loss per share of
$0.06) compared to a net loss of $2,041,000 (net loss per share of $0.15) for
the 2002 Period.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities approximated $2,965,000 for the 2003
Period compared to net cash used in operating activities of approximately
$810,000 for the 2002 Period. Net cash used in operating activities for both the
2003 and 2002 periods was primarily attributable to the net loss of $4,354,000
and $2,588,000, respectively. For the 2003 period, $264,000 was used for
investing activities compared to $179,000 for the 2002 Period. For the 2003
period, $2,511,000 was received from financing activities compared to $4,934,000
for the 2002 period. Total cash flow for the 2003 period decreased approximately
$718,000 as compared to a $3,945,000 increase for the 2002 period.
In May 2003, the Company completed its private placement, raising an additional
$2,006,000 of equity (see note 7). Before the end of the calendar year, it will
be necessary for the Company to obtain additional financing and/or consummate a
strategic alliance with a well funded business partner. There are a number of
risks and uncertainties related to the Company's attempt to complete a financing
or strategic partnering arrangement that are outside the control of the Company.
We may not be able to successfully obtain additional financing on terms
acceptable to the Company, or at all. These uncertainties raise substantial
doubt as to the Company's ability to continue as a going concern. The Company's
auditors have qualified their audit opinion with regard to the Company's ability
to continue as a going concern.
INFLATION
The Company does not believe that inflation has had a material effect on its
results of operations during the past three fiscal years. There can be no
assurance that the Company's business will not be affected by inflation in the
future.
Part 1, Item 3. Controls and Procedures
Within the 90-day period prior to the date of this report, our Chief Executive
Officer and Chief Financial Officer performed an evaluation of our disclosure
controls and procedures, which have been designed to permit us to effectively
identify and timely disclose important information. They concluded that the
controls and procedures were effective. Since the date of the evaluation, we
have made no significant changes in our internal controls or in other factors
that could significantly affect our internal controls.
11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
During April 2003, the Company received gross proceeds of approximately
$2,795,000 from the placement of a total of 27.95 Units of the
Company's securities. Each Unit consisted of sixty six thousand, six
hundred, sixty seven (66,667) common shares, par value $.001, and
sixteen thousand, six hundred, sixty seven (16,667) warrants. Each
warrant entitled the holder to purchase an additional share of the
company's common stock at an exercise price of $2.00 within five (5)
years. The sale price of each Unit was $100,000 ($1.50 per share). The
placement agent (Paramount Capital) was paid compensation of seven and
one half percent (7.5%) of the gross proceeds (($209,625) plus a non
accountable expense allowance of $25,000 and 160,017 warrants to
purchase additional shares of the Company's common stock at an exercise
price of $2.00 within five years.
Item 3. Defaults Upon Senior Securities
N/A
Item 4. Submissions of Matters to a Vote of Security Holders
On March 28, 2003, the Company held an annual meeting of
stockholders to vote on the election of directors, the ratification
of the Company's independent auditors and an amendment to the
Company's 1998 Stock Option Plan. Of the 14,548,509 shares of the
Company's Common Stock entitled to vote at the meeting, holders of
11,643,462 shares were present in person or were represented by
proxy at the meeting.
The directors elected at the meeting and the results of the voting
were as follows:
For Withheld
---------- ---------
Gary A. Shangold, M.D 11,643,462 0
Harry A. Dugger III, Ph.D 11,643,462 0
John H. Klein 11,643,462 0
Robert F. Schaul, Esq 11,643,462 0
William F. Hamilton, Ph.D 11,643,462 0
Lawrence J. Kessel, M.D., FACP 11,643,462 0
The above represented all of the directors of the Company on March
28, 2003.
The shares voted regarding the Board of Directors' proposal to
select the accounting firm of Wiss & Company, LLP, to serve as
independent auditors of the Company, were as follows:
For: 11,640,962
Against: 0
Abstain: 2,500
The shares voted regarding the Board of Directors' proposal to
amend the Company's 1998 Stock Option Plan, were as follows:
For: 11,488,162
Against: 155,300
Abstain: 0
Item 5. Other Information
N/A
12
Item 6. Exhibits List and Reports on Form 8-K
(a) List of Exhibits
Exhibit 10.28 Lease Agreement dated March 19, 2003, between
the Company and Macedo Business Park, II, L.L.C.
Exhibit 10.29 Amendment #1 of Lease Agreement dated March 19,
2003, between the Company and Macedo Business
Park, II, L.L.C.
Exhibit 10.30 Employment Agreement dated May 23, 2003, between the
Company and Barry C. Cohen.
Exhibit 11. Statement re: computation of earnings per share for
the nine months ended April 30, 2003
Exhibit 99.1. Certification of Chief Executive Officer and
Chief Financial Officer
b) Reports on Form 8-K
None
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOVADEL PHARMA INC
Dated: By:
June 18, 2003 /S/ GARY SANGOLD, M.D.
----------------------
Gary Shangold, M.D., President
(Principal Executive Officer)
Dated: By:
June 18, 2003 /S/ DONALD J. DEITMAN
---------------------
Donald J. Deitman
Chief Financial Officer
14
CERTIFICATION
I, GARY SHANGOLD, M.D., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of NovaDel Pharma Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors and material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: June 18, 2003
Gary Shangold, M.D.
President & Chief Executive Officer
/s/ GARY A. SHANGOLD, M.D.
--------------------------
(Signature)
15
CERTIFICATION
I, DONALD J. DEITMAN, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of NovaDel Pharma Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors and material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: June 18, 2003
Donald J. Deitman
Chief Financial Officer
/s/ DONALD J. DEITMAN
-----------------------
(Signature)
16