<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)


[X]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934

         For the fiscal year ended July 31, 2003

                                       OR

[ ]      TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

         For the transition period from                    to
                                        ------------------    ------------------

                          Commission file No. 000-23399

                               NOVADEL PHARMA INC.
--------------------------------------------------------------------------------
           (Name of small business issuer as specified in its charter)


              Delaware                                  22-2407152
  -------------------------------           ------------------------------------
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
   incorporation or organization)

    25 Minneakoning Road, Flemington, New Jersey                    08822
-----------------------------------------------------        -------------------
     (Address of principal executive offices)                     (Zip Code)

Issuer's telephone number, including area code: (908) 782-3431
                                                --------------

Securities registered pursuant to Section 12(b) of the Exchange Act:  None

Securities registered pursuant to Section 12(g) of the Exchange Act:
                  Common Stock, par value $.001 per share
                  Redeemable Common Stock Purchase Warrants

         Check whether the issuer (1) has 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 [ ]

         Check if there is no disclosure of delinquent  filings pursuant to Item
405 of Regulation S-B contained herein, and no disclosure will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X].

         State the issuer's revenues for its most recent fiscal year:  $2,000

         The aggregate  market value of the voting and non-voting  common equity
of the registrant held by  non-affiliates  of the registrant at October 27, 2003
was  approximately  $ 19,027,000  based upon the closing sale price of $2.01 for
the  Registrant's  Common  Stock,  $.001 par value,  as reported by the National
Association of Securities Dealers OTC Bulletin Board on October 27, 2003.



<PAGE>

         As of October 27, 2003 the Registrant  had 17,972,760  shares of Common
Stock, $.001 par value, outstanding.

         Documents incorporated by reference:        None



<PAGE>

                               NOVADEL PHARMA INC.


                          Annual Report on Form 10-KSB
                     For the Fiscal Year Ended July 31, 2003

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
                                     PART I
<S>                                                                                        <C>
Item 1.   Business                                                                         1
Item 2.   Properties                                                                      20
Item 3.   Legal Proceedings                                                               20
Item 4.   Submission of Matters to a Vote of Security Holders                             20

                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters                        20
                                                                                          22
Item 6.   Management's Discussion and Analysis or Plan of Operations                      22

Item 7.   Financial Statements                                                            25
Item 8.   Changes in and Disagreements with Accountants on Accounting                     25
          and Financial Disclosure
Item 8A.  Controls and Procedures                                                         25

                                    PART III

Item 9.   Directors and Executive Officers of the Registrant                              26
Item 10.  Executive Compensation                                                          30
Item 11.  Security Ownership of Certain Beneficial Owners and Management and Related      35
          Stockholder Matters
Item 12.  Certain Relationships and Related Transactions                                  37



Item 13.  Exhibits List and Reports on Form 8-K                                           38
Item 14.  Principal Accountant Fees and Services                                     F-1 thru F-16
</TABLE>


<PAGE>

                                     PART I

ITEM 1.  BUSINESS.

General

NovaDel Pharma Inc. (formerly known as Flemington  Pharmaceutical  Corporation),
is engaged in the  development of novel  application  drug delivery  systems for
presently marketed  prescription and  over-the-counter  ("OTC") drugs. Our (both
patented and patent-pending)  delivery systems are lingual sprays, enabling drug
absorption   through  the  oral  mucosa  and  more  rapid  absorption  into  the
bloodstream  than presently  available oral delivery  systems.  Our  proprietary
delivery  system  enhances and greatly  accelerates the onset of the therapeutic
benefits  which  the drugs are  intended  to  produce,  to  provide  therapeutic
benefits within minutes of administration. Our development efforts for our novel
drug delivery system are  concentrated on drugs which are already  available and
proven in the marketplace. In addition to increasing bioavailability by avoiding
metabolism by the liver before entry into the  bloodstream,  we believe that our
proprietary  delivery system offers the following  significant  advantages:  (i)
improved drug safety profile by reducing the required dosage, including possible
reduction of  side-effects;  (ii) improved  dosage  reliability;  (iii) allowing
medication to be taken without water; and (iv) improved patient  convenience and
compliance.

In light of the  material  expense  and  delays  associated  with  independently
developing and obtaining  approval of pharmaceutical  products,  we will seek to
develop   such   products   through   collaborative   arrangements   with  major
pharmaceutical  companies,  which will fund that  development.  Due to our small
revenue  base,  low level of  working  capital  and the  inability  to  conclude
development agreements with major pharmaceutical  companies, we have been unable
aggressively  to  pursue  our  product  development  strategy.  We will  require
significant  additional financing and/or a strategic alliance with a well-funded
development  partner to undertake our business plan. See "Management  Discussion
and Analysis."

At its inception in 1982, Novadel, then known as Pharmaconsult, was a consultant
to the pharmaceutical  industry,  focusing on product development  activities of
various  European  pharmaceutical  companies.  Since 1992  NovaDel  has used its
consulting revenues to fund its own product development activities. Our focus on
developing our own products evolved  naturally out of our consulting  experience
for other pharmaceutical companies. Substantially all of our revenues previously
were derived from our consulting activities. Consulting activities are no longer
a material  part of our  business.  In 1991,  we changed our name to  Flemington
Pharmaceutical  Corporation.  Effective  October 1, 2002, we changed our name to
NovaDel Pharma Inc. The Company's  principal business address is 25 Minneakoning
Road,,  Flemington,  New  Jersey,  08822,  and its  telephone  number  is  (908)
782-3431.

Safe harbor  statements under the private  securities  litigation  reform act of
1995

This Annual Report includes "forward-looking statements" as that term is defined
in the  Private  Securities  Litigation  Reform  Act of 1995.  The  safe  harbor
provisions of the Securities Exchange Act of 1934 and the Securities Act of 1933
apply  to  forward-looking  statements  made  by  us.  These  statements  can be
identified  by the  use  of  forward-looking  terminology  such  as  "believes,"
"expects," "may," "will," "should,"  "plans," "future,"  "intends,"  "continue,"
"estimate" or  "anticipates"  or the negatives or variations of these terms, and
other comparable  terminology.  In addition,  any statements discussing strategy
that involve risks and uncertainties are forward-looking.



                                       1
<PAGE>

Forward-looking  statements  involve risks and  uncertainties,  including  those
risks and  uncertainties  identified in, or incorporated by reference into, this
report. Due to these risks and uncertainties, the actual results that we achieve
may   differ   materially   from   these   forward-looking   statements.   These
forward-looking  statements are based on current expectations,  and we assume no
obligation to update this  information.  In preparing  this report,  we may have
made a number of assumptions and  projections  about the future of our business.
These assumptions and projections could be wrong for several reasons  including,
but not limited to, those  factors  identified  in the "Risk  Factors"  section,
below.

You are urged to carefully  review and consider the various  disclosures that we
make in this report .These  disclosures  attempt to advise interested parties of
the risk factors that may affect our business and the market price of our shares
of common stock.

Recent Developments - Private Placement.

In April and May 2003, we sold Units  (consisting  of common stock and warrants)
to accredited investors on a private placement basis.  Investors were issued one
warrant for each four shares  purchased.  An aggregate  of  3,200,345  shares of
common  stock and warrants for 800,095  shares were sold to the  investors.  The
warrants  are  exercisable  for five years,  at an  exercise  price of $2.00 per
share. The securities were sold through Paramount Capital,  Inc., a NASD broker-
dealer.  The gross  proceeds of the private  offering  were  approximately  $4.8
million.  For  its  services  as  placement  agent,  we  paid  Paramount  a 7.5%
commission fee of the aggregate amount raised (approximately  $360,000) and also
issued to Paramount  warrants to purchase  160,017  shares of common stock at an
exercise  price of $1.65 and 40,004 shares of common stock at an exercise  price
of $2.00.  In  connection  with the offering,  we agreed to file a  registration
statement with the Securities and Exchange  Commission to register the resale of
the shares of common  stock and the shares  underlying  the warrants (as well as
the shares underlying Paramount's warrants). We also agreed 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.  We also  agreed  that if, at any time  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).  See "Certain
Relationships and Related Transactions".



                                       2
<PAGE>

Product Development

Cardiovascular (Nitroglycerin)

NovaDel's  Nitroglycerin  product has been formulated and stability  testing has
been completed. A United States patent was issued in 1999. An IND was filed with
FDA in early 2002 and clinical  trials began in July 2002 and were  completed in
December 2002. NovaDel anticipates filing an NDA in the fourth quarter of 2003.


Loratadine Lingual Spray

A loratadine  lingual spray  formulation  has been  developed  and  successfully
undergone  stability  testing.  A Pre-IND meeting with FDA was held in the third
quarter  of 2000 and based on the  results  of that  meeting a plan for  further
development  was  prepared.  An IND was  filed and a  pharmacokinetic  study was
carried out under this IND to compare the plasma levels following administration
of a 5.0 mg and a 2.5 mg lingual spray to those after  administration of a 10 mg
tablet. Both lingual spray doses resulted in higher plasma levels concentrations
than the 10 mg  tablet.  In the case of the 5.0 mg dose the peak  plasma  levels
were greater than twice those of the tablet and those after the 2.5 mg dose were
about 50%  higher.  Therapeutic  plasma  levels  based on the  claimed  start of
antihistaminic  effect for the  Claritin(R)  tablet (1-3  hours)  were  achieved
between  24 and thirty  minutes.  Subsequently,  a "wheal  and flare"  study was
completed,  the  results  of which are  currently  being  evaluated.  NovaDel is
presently seeking a partner to complete development of this product.

Clemastine Lingual Spray

The  formulation of clemastine  lingual spray that was terminated by Novartis in
1998 was revised and a Pre-IND meeting with FDA was held in the third quarter of
2000.  Based on the results of that meeting a plan for further  development  was
prepared  and an IND was  filed.  A pilot  nasal  challenge  efficacy  study was
initiated in the second quarter of 2000. This study tested the relative response
of subjects challenged with allergy producing  substances to an OTC tablet (1.34
mg) and a lingual spray dose of 0.68 mg. The  antihistamine  was administered 15
minutes prior to the  challenge.  The results showed that the spray had the same
antihistaminic effect as the tablet when compared to placebo at 45 minutes after
dosing  even  though  the dose was only  half that of the  tablet.  Eight of the
parameters  measured in the study showed a clear trend that the spray was better
than the tablet and the tablet was better  than  placebo.  Even though the study
was only a pilot  study,  the  results  appear to  support  the  concept  that a
clemastine lingual spray could be a non-sedating  antihistamine  product in that
there  were two cases of  drowsiness  when the tablet was given and one with the
placebo  but none when the lingual  spray was  administered.  A  pharmacokinetic
dose-ranging  study has been  completed  and other pilot  studies  are  planned.
NovaDel is seeking a partner to complete development of this product.

Estradiol Sprays

NovaDel  presently  has two open IND's for the study of Estradiol  therapies and
has performed  pharmacokinetic studies. Due to questions that recently have been
raised about estrogen  therapy,  NovaDel is  reevaluating  the viability of this
development program.

Agreement with Manhattan Pharmaceuticals



                                       3
<PAGE>

In April  2003,  we  entered  into a  license  and  development  agreement  with
Manhattan Pharmaceuticals,  Inc. (Manhattan) for the worldwide, exclusive rights
to our lingual spray technology to deliver Propofol for pre-procedural sedation.
The terms of the agreement call for certain  milestones and other payments,  the
first of which was received  during June 2003. One of the Company's  Affiliates,
Dr.  Lindsay  Rosenwald,  is also an  Affiliate  of  Manhattan.  Manhattan  is a
development  stage  company  and has no  revenues  to date.  The  agreement  has
conditions  that  stipulate that Manhattan has to raise certain funds before the
Company receives the remaining license fee. There is no assurance that Manhattan
can achieve this.  If Manhattan is unable to raise  additional  funds,  there is
significant  doubt it would be able to fulfill its remaining  commitments to the
Company. See also Notes 6 and 7 to the Financial Statements.

Business Strategy

NovaDel's  strategy  is  to  concentrate  its  product  development   activities
primarily  on those  pharmaceuticals  for which there  already  are  significant
prescription  and OTC  sales,  where the use of  NovaDel's  innovative  delivery
system will greatly  enhance speed of onset of therapeutic  effect,  reduce side
effects  through a reduction of the amount of active drug substance  required to
produce  a  given  therapeutic   effect,  and  improve  patient  convenience  or
compliance.

In light of the  material  expense  and  delays  associated  with  independently
developing and obtaining  approval of pharmaceutical  products,  we will seek to
develop   such   products   through   collaborative   arrangements   with  major
pharmaceutical companies,  which will fund that development.  NovaDel 's lack of
working capital has impaired its ability to pursue its strategy. See "Management
Discussion and Analysis."

Patented and Patent Pending Delivery Systems

NovaDel has certain  patents and  pending  patent  applications  for its Lingual
(Oral) Spray  delivery  system.  FDA approval is not a  prerequisite  for patent
approval.  The  expected  year of  marketability  of a given  product  will vary
depending upon the specific drug product with which the delivery  system will be
utilized.  Each individual use of the delivery system will require  registration
with  and/or  approval  by the FDA  prior to  marketability,  and the  amount of
regulatory  oversight  required by the FDA will also depend on the specific type
of drug product for which the delivery system is implemented. The following is a
description of the oral dosage delivery system for which patent applications are
either granted or pending:

Lingual (Oral) Spray.  NovaDel's aerosol and pump spray formulations release the
drug in the form of a fine mist into the mouth for immediate absorption into the
bloodstream  via the mucosal  membranes.  NovaDel  believes  that this  delivery
system offers  certain  advantages,  including  improving the safety  profile of
certain drugs by lowering the required dosage,  improving dose reliability,  and
allowing  medication  to be taken without  water.  Drug  absorption  through the
mucosal membranes of the mouth is rapid and minimizes the first-pass  metabolism
effect (i.e.,  total or partial  inactivation of a drug as it passes through the
gastrointestinal tract and liver).

Proposed Products

NovaDel's  proposed products described below are subjected to laboratory testing
and stability studies and tested for therapeutic  comparison to the originators'
products by  qualified  laboratories  and  clinics.  To the extent that two drug
products with the same active  ingredients are substantially  identical in terms
of their rate and extent of absorption in the human body (bioavailability), they
are   considered   bioequivalent.   If   the   accumulated   data   demonstrates
bioequivalency,  submission  is then made to the



                                       4
<PAGE>

FDA (through  the filing of an ANDA) for its review and approval to  manufacture
and market.  If the accumulated data  demonstrates that there are differences in
the two drugs' rate and extent of  absorption  into the human body,  or if it is
intended to make additional or different claims regarding therapeutic effect for
the newly  developed  product,  submission  is made to the FDA via a NDA for its
review and approval under Section 505(b)(1) or Section 505(b)(2) of the FDC Act.
An NDA  submitted  under  section  505(b)(2)  of the FDC Act is  generally  less
complex than an ordinary NDA. It is NovaDel's  expectation  that the majority of
its products in development will require the filing of these shorter versions of
an NDA because the  products  are known  chemical  entities,  but NovaDel or its
licensees will be making new claims as to  therapeutic  effects or lessened side
effects, or both.

NovaDel  estimates  that  development  of  new  formulations  of  pharmaceutical
products,  including formulation,  testing and obtaining FDA approval, generally
takes  three  to five  years  for the  ANDA  process.  Development  of  products
requiring  additional  clinical  studies under Section  505(b)(2) NDAs, may take
four to seven years.  There can be no assurance  that  NovaDel's  determinations
will  prove  to be  accurate  or that  pre-marketing  approval  relating  to its
proposed products will be obtained on a timely basis, or at all. See "Government
Regulation."

         NovaDel's   currently   proposed   products  fall  into  the  following
therapeutic classes:

o        Cardiovascular (Nitroglycerin)

NovaDel's  Nitroglycerin  product has been formulated and stability  testing has
been completed. A United States patent was issued in 1999. An IND was filed with
FDA in early 2002 and clinical  trials began in July 2002 and were  completed in
December 2002. NovaDel anticipates filing an NDA in the fourth quarter of 2003.

o        Antihistamine (Loratadine) Lingual Spray

A loratadine  lingual spray  formulation  has been  developed  and  successfully
undergone  stability testing. An IND was filed in the fourth quarter of 2000 and
a pharmacokinetic  study was completed in the second quarter of 2001. A phase II
clinical trial has been completed and the results are being  evaluated.  NovaDel
is seeking a development partner to complete development of this product.

o        Antihistamine (Clemastine) Lingual Spray

The formulation of clemastine lingual spray was revised, and an IND was filed. A
pilot nasal  challenge  efficacy  study was  initiated in the second  quarter of
2000.  and was  completed in the fourth  quarter of 2000.  This study tested the
relative response of subjects challenged with allergy producing substances to an
OTC tablet (1.34 mg) and a lingual spray dose of 0.68 mg. The  antihistamine was
administered  15 minutes  prior to the  challenge.  The results  showed that the
spray had the same antihistaminic  effect as the tablet when compared to placebo
at 45  minutes  after  dosing  even  though  the dose was only  half that of the
tablet.  Eight of the parameters measured in the study showed a clear trend that
the spray was better  than the tablet  and the tablet was better  than  placebo.
Even though the study was only a pilot  study,  the results  support the concept
that a  clemastine  lingual  spray  could be an OTC  non-sedating  antihistamine
product in that there were two cases of drowsiness when the tablet was given and
one with the placebo but none when the lingual spray was administered.  A larger
confirmatory  study,  as well as other  pilot  studies,  is  needed.  NovaDel is
seeking a partner to complete development of this product.

Marketing and Distribution



                                       5
<PAGE>

NovaDel intends, generally, to license products developed with its technology to
other drug companies,  or to market its products to pharmaceutical  wholesalers,
drug  distributors,  drugstore  chains,  hospitals,  United States  governmental
agencies,  health  maintenance  organizations  and other drug  companies.  It is
anticipated  that  promotion  of  the  NovaDel  's  proposed  products  will  be
characterized by an emphasis on their  distinguishing  characteristics,  such as
dosage form and packaging,  as well as possible  therapeutic  advantages of such
products. NovaDel will seek to position its proposed products as alternatives or
as line extensions to brand-name  products.  NovaDel believes that to the extent
that the NovaDel 's formulated products are patent-protected,  such formulations
may offer  brand-name  manufacturers  the  opportunity  to expand their  product
lines.  Alternatively,  products  which  are  not  patented  may be  offered  to
brand-name  manufacturers  as  substitute  products  after patent  protection on
existing products expire.

Inasmuch as NovaDel does not have the financial or other  resources to undertake
extensive marketing activities,  NovaDel generally intends to seek to enter into
marketing  arrangements,   including  possible  joint  ventures  or  license  or
distribution arrangements, with third parties.

NovaDel believes that such third-party  arrangements  will permit it to maximize
the promotion and distribution of its products while minimizing NovaDel's direct
marketing  and  distribution  costs.  Except for the  agreement  with  Manhattan
Pharmaceutical, NovaDel has not entered into any agreements or arrangements with
respect to the marketing of its proposed  products and there can be no assurance
that it will do so in the future. See the discussion  regarding  Manhattan above
and  also  see  Notes  6 and 7 to  the  Financial  Statements.  There  can be no
assurance that NovaDel's proposed products can be successfully marketed.

Strategies relating to marketing of NovaDel's other proposed formulated products
have not yet been determined; these will be formulated in advance of anticipated
completion  of  development  activities  relating to the  particular  formulated
product. As a company, NovaDel has no experience in marketing or distribution of
its proposed proprietary products,  and NovaDel's ability to fund such marketing
activities will require NovaDel to raise  additional  funds and/or  consummate a
strategic alliance or combination with a well-funded business partner.

Manufacturing

NovaDel  has  determined  to  internalize  the  manufacturing  of  its  proposed
products.  Presently,  NovaDel has established a pilot manufacturing facility at
its  present  location,   which  it  believes  is  adequate  for  its  needs  in
manufacturing  our requirements for formulation  development,  stability testing
and clinical supplies. It has also leased a new, larger facility which will have
adequate  space  for  its  future   foreseeable   requirements   for  production
manufacturing  and warehouse  space.  This new space is presently being prepared
for  occupancy,  which  began  in third  quarter  of 2003.  The  manufacture  of
NovaDel's  pharmaceutical products will be subject to current Good Manufacturing
Processes  ("cGMP")  prescribed by the FDA, and pre-approval  inspections by the
FDA and foreign  authorities  prior to the  commercial  manufacture  of any such
products.  See "Government  Regulation" and "Raw Materials and Suppliers." There
can be no assurance,  however,  that NovaDel will be successful in  constructing
and maintaining such a manufacturing and warehousing facility in compliance with
cGMP.  If it is unable to do so, it will  become  necessary  for NovaDel to make
arrangements  with a third  party  contract  manufacturer  to satisfy  NovaDel's
requirements. There can be no assurance that, if necessary, NovaDel will be able
to do so, or be able to do so on  commercially  satisfactory  terms.  Failure of
NovaDel  to  complete  successfully  the  internalization  of its  manufacturing
requirements,  or to conclude an alternative contract manufacturing arrangement,
could have an adverse effect on NovaDel's efforts to obtain regulatory  approval
for or to commercialize its products.



                                       6
<PAGE>

It is  anticipated  that NovaDel will arrange  with  third-party  suppliers  for
supplies  of  active  and  inactive  pharmaceutical  ingredients  and  packaging
materials  used  in  the  manufacture  of  NovaDel's  proposed  products.  It is
NovaDel's   present   intent  to  seek  to  enter  into  similar   manufacturing
arrangements for other products to be developed by it in the future.

In  addition,  the raw  materials  necessary  for the  manufacture  of NovaDel's
products will, in all likelihood,  be purchased by NovaDel from suppliers in the
United States,  Europe and Japan and delivered to its manufacturing  facility by
such suppliers.

Accordingly,  NovaDel may be subject to various import duties applicable to both
finished  products and raw materials and may be affected by various other import
and  export   restrictions  as  well  as  other   developments   impacting  upon
international  trade.  These  international  trade factors  will,  under certain
circumstances,  have an impact on the  manufacturing  cost (which will, in turn,
have an impact  on the cost to  NovaDel  of the  manufactured  product).  To the
extent that  transactions  relating to the  purchase  of raw  materials  involve
currencies other than United States dollars (e.g.,  Swiss francs and Euros), the
operating  results  of  NovaDel  will be  affected  by  fluctuations  in foreign
currency exchange rates.

Raw Materials and Suppliers

NovaDel  believes that the active  ingredients  used in the  manufacture  of its
proposed pharmaceutical products are presently available from numerous suppliers
located  in  the  United  States,  Europe  and  Japan.  Generally,  certain  raw
materials,  including inactive ingredients,  are available from a limited number
of suppliers and certain packaging materials intended for use in connection with
NovaDel's  lingual  spray  products  may be  only  available  from  sole  source
suppliers.  Although NovaDel believes that it will not encounter difficulties in
obtaining  the inactive  ingredients  or packaging  materials  necessary for the
manufacture of its products, there can be no assurance that NovaDel will be able
to enter into  satisfactory  agreements  or  arrangements  for the  purchase  of
commercial quantities of such materials. The failure to enter into agreements or
otherwise arrange for adequate or timely supplies of principal raw materials and
the possible  inability to secure  alternative  sources of raw material supplies
could have a material  adverse effect on the ability to  manufacture  formulated
products.

Development  and regulatory  approval of NovaDel's  pharmaceutical  products are
dependent  upon  NovaDel's  ability to procure  active  ingredients  and certain
packaging  materials from FDA-approved  sources.  Since the FDA approval process
requires manufacturers to specify their proposed suppliers of active ingredients
and  certain  packaging  materials  in their  applications,  FDA  approval  of a
supplemental  application  to use a new  supplier  would be  required  if active
ingredients  or such  packaging  materials  were no  longer  available  from the
specified  supplier,  which could result in manufacturing  delays.  Accordingly,
NovaDel will seek to locate alternative FDA approved suppliers.

Government Regulation

The development,  manufacture and  commercialization of pharmaceutical  products
are  generally  subject to  extensive  regulation  by various  federal and state
governmental  entities. The FDA, which is the principal United States regulatory
authority,  has the  power to  seize  adulterated  or  misbranded  products  and
unapproved new drugs, to request their recall from the market, to enjoin further
manufacture  or sale,  to publicize  certain  facts  concerning a product and to
initiate  criminal  proceedings.  As  a  result  of  federal  statutes  and  FDA
regulations,  pursuant  to which new  pharmaceuticals  are  required  to undergo
extensive  and  rigorous  testing,   obtaining  pre-market  regulatory  approval
requires extensive time and expenditures.



                                       7
<PAGE>

Under  the  Food,   Drug  and  Cosmetic  (FDC)  Act,  a  new  drug  may  not  be
commercialized  or otherwise  distributed in the United States without the prior
approval of the FDA.

The FDA approval process relating to a new drug differs, depending on the nature
of the particular  drug for which  approval is sought.  With respect to any drug
product  with  active  ingredients  not  previously   approved  by  the  FDA,  a
prospective drug  manufacturer is required to submit a NDA,  including  complete
reports of pre-clinical, clinical and laboratory studies to prove such product's
safety,  quality and efficacy.  The NDA process generally  requires,  before the
submission  of the NDA,  submission  of an IND pursuant to which  permission  is
sought to begin  preliminary  clinical  testing of the new drug. An NDA based on
published safety and efficacy  studies  conducted by others may also be required
to be submitted for a drug product with a previously approved active ingredient,
if the method of delivery, strength or dosage is changed.  Alternatively, a drug
having the same active ingredients as a drug previously  approved by the FDA may
be eligible to be submitted under an ANDA, which is significantly less stringent
than the NDA approval process.

While the ANDA process  requires a manufacturer to establish  bioequivalence  to
the previously  approved drug, it permits the manufacturer to rely on the safety
and efficacy studies contained in the NDA for the previously approved drug.

The NDA approval process generally requires between ten (10) to twenty four (24)
months from NDA submission to pre-marketing approval, although in the case of an
NDA  submitted  pursuant to Section  505(b)(2) of the Act this time frame may be
significantly shorter.  NovaDel believes that most products developed in lingual
spray delivery systems (dosage forms) usually will require  submission of an NDA
under Section 505(b)(2).

NovaDel  estimates that the development of new  formulations  of  pharmaceutical
products,  including formulation,  testing and obtaining FDA approval, generally
takes four to seven years for the NDA process,  although  NDAs  submitted  under
Section  505(b)(2)  are  generally  less complex than an ordinary NDA and may be
acted  upon by the FDA in a shorter  period of time.  There can be no  assurance
that NovaDel's  determinations  will prove to be accurate or that  pre-marketing
approval  relating to its proposed  products will be obtained on a timely basis,
or at all. The FDA application procedure has become more rigorous and costly and
the  FDA  currently  performs  pre-approval  and  periodic  inspections  of each
finished dosage form and each active ingredient.

The  manufacture  of NovaDel's  pharmaceutical  products will be subject to cGMP
prescribed  by the FDA,  pre-approval  inspection  by the FDA  before  beginning
commercial manufacture of such products and periodic cGMP compliance inspections
by the FDA thereafter.

Competition

The  markets  which  NovaDel  intends  to enter  are  characterized  by  intense
competition.  NovaDel  will  be  competing  against  established  pharmaceutical
companies which  currently  market products which are equivalent or functionally
similar  to those  NovaDel  intends  to  market.  Prices  of drug  products  are
significantly affected by competitive factors and tend to decline as competition
increases. In addition, numerous companies are developing or may, in the future,
engage in the  development  of  products  competitive  with  NovaDel's  proposed
products.  NovaDel expects that technological developments will occur at a rapid
rate and that  competition  is likely to intensify as enhanced  delivery  system
technologies gain greater acceptance.  Additionally,  the markets for formulated
products which NovaDel has targeted for development  are intensely  competitive,
involving  numerous  competitors and products.  NovaDel will seek to enhance our
competitive position by focusing our efforts on our novel dosage forms.



                                       8
<PAGE>

Patents and Protection of Proprietary Information

NovaDel has applied for United  States and  foreign  patent  protection  for the
buccal spray  delivery  systems which are the primary  focus of its  development
activities  as  well  as  for  NovaDel's   delayed   contact   allergy   topical
formulations. Four United States patents have been issued and other applications
are pending.  There can be no assurance,  however,  that any  additional  patent
applications will be granted,  or, if granted,  will provide adequate protection
to NovaDel.  NovaDel also intends to rely on whatever protection the law affords
to trade secrets,  including unpatented know-how. Other companies,  however, may
independently  develop equivalent or superior  technologies or processes and may
obtain patents or similar rights with respect thereto.

Although NovaDel  believes that its technology has been developed  independently
and does not infringe on the patents of others,  there can be no assurance  that
the technology  does not and will not infringe on the patents of others.  In the
event of infringement,  NovaDel could, under certain circumstances,  be required
to modify its infringing product or process or obtain a license. There can be no
assurance  that  NovaDel  would be able to do either of those things in a timely
manner or at all, and failure to do so could have a material  adverse  effect on
NovaDel and its business.  In addition,  there can be no assurance  that NovaDel
will  have the  financial  or other  resources  necessary  to  enforce  a patent
infringement or proprietary  rights violation action or to defend itself against
such  actions  brought by others.  If any of the  products  developed by NovaDel
infringe upon the patent or proprietary  rights of others,  NovaDel could, under
certain  circumstances,  be enjoined or become  liable for damages,  which would
have a material adverse effect on NovaDel.

NovaDel also relies on confidentiality  and nondisclosure  arrangements with its
licensees and potential development  candidates.  There can be no assurance that
other  companies  will not acquire  information  which  NovaDel  considers to be
proprietary.  Moreover,  there can be no assurance that other companies will not
independently develop know-how comparable to or superior to that of NovaDel.

Buccal Nonpolar Sprays.  On April 12, 1996 NovaDel filed an application with the
United States Patent and Trademark  Office  ("USPTO") with claims  directed to a
buccal spray composition  containing certain amounts of propellant,  a non-polar
solvent,  and certain  classes of drugs,  as well as specific drugs within those
classes.  The application  also included  claims  directed to soft-bite  gelatin
capsules  containing  these drugs.  On  September 1, 1998 the USPTO  allowed the
claims directed to buccal spray  compositions,  but rejected the claims directed
to the capsules.  In November 1998 NovaDel  deleted the capsule claims from this
application  to pursue  issuance of a patent with claims  directed to the buccal
non-polar spray  compositions  and methods of  administering  the class of drugs
using the buccal  spray  compositions.  On  September  21, 1999 U.S.  Patent No.
5,955,098 issued to NovaDel with claims directed to the  above-described  buccal
non-polar spray compositions and methods.

On February 21, 1997,  NovaDel filed an application under the Patent Cooperation
Treaty  ("PCT") for the  above-subject  matter.  The  International  Preliminary
Examination  Authority issued an International  Preliminary  Examination  Report
alleging that the subject  matter of the invention  lacked novelty and/or lacked
an  inventive  step.  This  opinion,  with  which  NovaDel  disagrees,   is  not
dispositive.  The opinion,  however,  may be persuasive  to individual  national
patent offices in countries where NovaDel enters the national phase.

With respect to the above PCT application,  in October and November 1998 NovaDel
entered  the  national  phase in Canada and  Europe,  respectively,  with claims
directed to the above subject matter. On April 16, 2003 European patent no. EP 0
904 055 was granted to NovaDel  with claims  directed to  propellant  containing
buccal  non-polar spray  compositions  containing  similar drugs to those in the
corresponding



                                       9
<PAGE>

issued U.S.  patent.  In Canada,  a request for  examination  was filed with the
Canadian  Patent  Office on February 7, 2002.  An office action has not yet been
received from the Canadian Patent Office.

Buccal Polar Sprays.  On April 12, 1996,  NovaDel filed an application  with the
USPTO with claims  directed to propellant  free buccal polar spray  compositions
containing  certain  amounts of a polar solvent and certain classes of drugs, as
well as specific  drugs within those  classes.  The  application  also contained
claims   to   soft-bite    gelatin    capsules    containing   such   drugs.   A
continuation-in-part  ("CIP")  application  was filed  directed to this  subject
matter before the original  application  was allowed to go abandoned.  The USPTO
initially rejected the claims in the CIP application. NovaDel deleted the claims
from this application (including the soft-bite capsule claims) and replaced them
with claims  directed to methods of using the  above-described  propellant  free
buccal polar spray compositions to administer the drugs. On August 29, 2000 U.S.
Patent  No.   6,110,486   issued  to  NovaDel   with  claims   directed  to  the
above-described methods of administering the drugs

On  February  21,  1997  NovaDel  filed  a  PCT  application   directed  to  the
above-described  subject  matter.  The  International   Preliminary  Examination
Authority issued an International  Preliminary  Examination Report alleging that
the subject  matter of the invention  lacked  novelty and/or lacked an inventive
step.  This  opinion,  with which NovaDel  disagrees,  is not  dispositive.  The
opinion,  however,  may be persuasive to individual  national  patent offices in
countries where NovaDel enters the national phase.

With respect to the above PCT application,  in October and November 1998 NovaDel
entered the  national  phase in Canada and Europe,  respectively.  In Canada,  a
request for  Examination was filed on February 7, 2002. An office action has not
yet been received from the Canadian Patent Office. In Europe, claims directed to
using the  propellant  free buccal  polar spray  composition  to  manufacture  a
medicament   containing  the  various   classes  of  drugs  is  currently  being
prosecuted.

Buccal  Nonpolar  Spray for  Nitroglycerin.  On April  12,1996  NovaDel filed an
application  with the USPTO with claims  directed to a buccal  spray  containing
certain  amounts of  nitroglycerin,  a non-polar  solvent,  and a propellant The
claims were allowed and on February 9, 1999 the USPTO  issued a  U.S.Patent  No.
5,869,082 to NovaDel for said nitroglycerin buccal spray.

On  February  21,  1997,  NovaDel  filed  a  PCT  application  directed  to  the
above-described  subject  matter.  The  International   Preliminary  Examination
Authority issued an International  Preliminary  Examination Report alleging that
the subject matter of the invention lacks an inventive step. This opinion,  with
which  NovaDel  disagrees,  is not  dispositive.  The opinion,  however,  may be
persuasive  to individual  national  patent  offices in countries  where NovaDel
enters the national phase.

In October 1998,  NovaDel  entered the national  phase in Canada.  A request for
examination  was  filed on  February  7,  2002.  An office  action  has not been
received from the Canadian Patent Office.

In November  1998,  NovaDel  entered the  national  phase in Europe.  A European
patent was  granted on April 16, 2003 with  claims  directed  to a buccal  spray
containing  certain  amounts  of  nitroglycerin,  a  non-polar  solvent,  and  a
propellant.

Buccal Polar/Nonpolar Sprays or Capsules. On October 1, 1997 NovaDel filed a PCT
application designating a large number of countries including the United States,
directed to the above-described  subject matter. The application included claims
directed to a buccal spray  composition  containing  either a polar solvent with
certain  classes  of drugs,  as well as  specific  drugs in those  classes  or a
non-polar  solvent and a propellant  with certain  classes of drugs,  as well as
specific drugs in those classes; buccal spray composition containing a non-polar
solvent,  a  flavoring  agent,  and  certain  classes of drugs;  and



                                       10
<PAGE>

methods of administering  these drugs using the buccal spray  compositions.  The
application also contained claims to soft-bite gelatin capsules  containing such
drugs.  This application  differs from the first three  applications,  discussed
above, in that the claimed  compositions include different classes of drugs from
those described in the first three applications.  The International  Preliminary
Examination  Authority issued an International  Preliminary  Examination  Report
alleging that the subject  matter of the invention  lacked novelty and/or lacked
an  inventive  step.  This  opinion,  with  which  NovaDel  disagrees,   is  not
dispositive.  The opinion,  however,  may be persuasive  to individual  national
patent offices in countries where NovaDel enters the national phase.

On March 29, 2000,  NovaDel  entered the national  phase in the United States by
filing a CIP of the  above-identified  PCT application  with the USPTO.  The CIP
application   included   claims   directed  to  propellant   free  buccal  spray
compositions  containing  certain  amounts of polar or non-polar  solvents,  and
certain  classes of drugs,  as well as specific drugs in those  classes;  buccal
spray  compositions  containing  certain  amounts  of a  propellant,  a polar or
non-polar  solvent,  and certain  classes of drugs, as well as specific drugs in
those  classes;  and  methods of  administering  said drugs using these types of
buccal spray  compositions.  The application is currently being  prosecuted with
claims directed to the propellant free buccal spray  compositions and methods of
administering  said  drugs  using  these  types of  buccal  spray  compositions.
Subsequently,  a divisional  application was filed claiming priority to the CIP.
The divisional application is currently being prosecuted with claims directed to
the buccal spray  compositions  containing  certain  amounts of a propellant,  a
polar or non-polar  solvent,  and certain  classes of drugs, as well as specific
drugs in those classes and methods of administering said drugs using these types
of buccal spray compositions.

Based on the  above-identified  PCT  application,  NovaDel  entered the national
phase in Canada on March 29, 2000. A request for examination was filed on August
29,  2002.  An office  action has not been  received  from the  Canadian  Patent
Office.

Based on the above-identified PCT application, NovaDel also entered the national
phase in Japan on April 3,  2000.  A request  for  examination  has not yet been
filed. A request for examination  must be filed before October 1, 2004 to pursue
patent protection in Japan.

Based on the above-identified PCT application, NovaDel also entered the national
phase in Europe in April 2000. The European application includes claims directed
to propellant  free buccal spray  compositions  containing  certain amounts of a
polar solvent and certain  classes of drugs,  as well as specific drugs in those
classes and the use thereof to prepare a  medicament  for use as a buccal  spray
for transmucossal  administration.  Four divisional  applications  based on this
application  have also been filed in Europe.  The first  divisional  application
included claims directed to buccal spray compositions containing certain amounts
of a non-polar solvent,  a propellant,  and certain classes of drugs, as well as
specific  drugs in those classes and the use thereof to prepare a medicament for
use as a buccal spray for  transmucossal  administration.  The second divisional
application   included   claims   directed  to  propellant   free  buccal  spray
compositions  containing  certain  amounts of a non-polar  solvent,  and certain
classes  of  drugs,  as well as  specific  drugs in  those  classes.  The  third
divisional  application  included claims  directed to buccal spray  compositions
containing certain amounts of a non-polar solvent, a propellant, and an alkaloid
or analgesic.  The fourth divisional  application  included claims directed to a
buccal  spray  composition  containing  certain  amounts of a polar  solvent,  a
propellant,  and certain  classes of drugs,  as well as specific  drugs in those
classes.  Each of the above-identified  European applications is currently being
prosecuted.

Antihistamine  Syrup  and  Ointment.  On  November  10,  1997  NovaDel  filed an
application  with the USPTO with  claims  directed  to a spray  composition  for
topical  administration  containing an



                                       11
<PAGE>

antihistamine and a polar solvent or an antihistamine,  a non-polar solvent, and
a  propellant.  In October  1998,  the PTO rejected the claims.  The claims were
deleted  and  replaced  with a claim  directed  to a method of  controlling  the
occurrence  of delayed  contact  dermatitis  by  applying  a lotion  composition
containing  certain  amounts of certain  antihistamines  in certain amounts of a
polar or non-polar solvent.  On May 21, 2002 U.S. patent no. 6,391,282 issued to
for the above-described method.

On November 9, 1998  NovaDel  filed the  above-identified  application  with the
Canadian  Patent  Office and on October 29, 2002 a request for  examination  was
filed. An office action has not been received from the Canadian Patent Office.

General  Comment with  Respect to entering  the  national  phase for each of the
foregoing PCT Applications.  In addition to its patents and patent  applications
in the United  States,  NovaDel is interested in entering the national phase and
obtaining patent protection in Europe and Canada. At the present time, it is not
possible  accurately to predict the expenses  involved in pursuing the foregoing
applications in Canada and Europe. For example, NovaDel anticipates that, in the
case of the European applications,  it may become necessary to file appeals with
the Board of Appeals in Munich.  Expenses may exceed $100,000 (in the aggregate)
before a final disposition is obtained.

Product Liability

NovaDel  may be exposed to  potential  product  liability  claims by  consumers.
NovaDel  does not  presently  maintain  product  liability  insurance  coverage.
Although  NovaDel will seek to obtain product  liability  insurance prior to the
commercialization  of any products,  there can be no assurance that NovaDel will
obtain  such  insurance  or,  if  obtained,  that  any  such  insurance  will be
sufficient to cover all possible liabilities.  In the event of a successful suit
against  NovaDel,  insufficiency  of  insurance  coverage  could have a material
adverse effect on NovaDel. In addition,  certain food and drug retailers require
minimum  product  liability  insurance  coverage  as a  condition  precedent  to
purchasing  or accepting  products for retail  distribution.  Failure to satisfy
such  insurance  requirements  could  impede  the  ability  of  NovaDel  or  its
distributors  to achieve  broad retail  distribution  of its proposed  products,
which would have a material  adverse  effect  upon the  business  and  financial
condition of NovaDel.

Employees

The Company currently has twenty (20) full-time employees,  five (5) of whom are
executive  officers of the Company,  ten (10) of whom are  laboratory or support
personnel  and five (5) of whom are  engaged in  administrative  functions.  The
success of the Company will be  dependent in part,  upon its ability to hire and
retain additional  qualified sales,  manufacturing  and distribution  personnel,
however,  there can be no  assurance  that the  Company  will be able to hire or
retain such necessary personnel.

                                  Risk factors

You  should  carefully  consider  the  following  risk  factors  and  all  other
information  contained  in this Annual  Report  before  investing  in our common
stock.  Investing in our common stock involves a high degree of risk. Any of the
following risks could  adversely  affect our business,  financial  condition and
results of operations  and could result in a complete  loss of your  investment.
The risks and uncertainties described below are not the only ones we may face.

         We have a history of losses and our auditors have qualified their audit
opinion with regard to our ability to continue as a going concern



                                       12
<PAGE>

We had an accumulated deficit at July 31, 2003 of approximately $15,628,000.  We
incurred  operating  losses in all of the last eight  fiscal years ended July 31
including  a net loss of  approximately  $5,815,000  for the year ended July 31,
2003.  Because we increased our product  development  activities,  we anticipate
that we will incur substantial  operating  expenses in connection with continued
development,  testing and  approval of our proposed  products,  and expect these
expenses will result in continuing and,  perhaps,  significant  operating losses
until such time,  if ever,  that we are able to achieve  adequate  product sales
levels.  Because our rate of expenses is high,  and our very limited  resources,
our auditors  have  qualified  their audit opinion with regard to our ability to
continue as a going concern.

         We  will  require   significant   capital   requirements   for  product
development and commercialization

We have significant capital requirements  necessary to fund planned expenditures
in  connection  with the  research,  development,  testing  and  approval of our
proposed  products.  We  anticipate,  based on our  current  proposed  plans and
assumptions  relating to our  operations  (including the timetable of, and costs
associated  with,  new  product  development),  that the  proceeds of our recent
private  placement and projected cash flow from operations will be sufficient to
satisfy our  contemplated  cash  requirements  for the remainder of the calendar
year 2003.  Due to our small  revenue  base,  low level of working  capital  and
inability to increase the number of development  agreements with  pharmaceutical
companies,  we have been unable to aggressively  pursue our product  development
strategy.  We will require significant  additional  financing and/or a strategic
alliance  with a  well-funded  development  partner to  aggressively  pursue our
business plan. We have no current  arrangements  with respect to, or sources of,
additional  financing,  and there can be no assurance that additional  financing
will be  available  to us on  acceptable  terms,  if at  all.  Unless  we  raise
additional  financing or  significantly  reduce our  expenses,  we will not have
sufficient   funds   and  we   will   not  be  to   complete   development   and
commercialization   of  our  proposed  products  or  continue   operating.   See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

         Our business and revenue is dependent on the successful  development of
our products

Revenue  received  from  our  product   development   consists  of  payments  by
pharmaceutical   companies  for  research  and  bioavailability  studies,  pilot
clinical trials, and similar  milestone-related  payments. Our future growth and
profitability  will  be  dependent  upon  our  ability   successfully  to  raise
additional  funds to complete the  development of, obtain  regulatory  approvals
for,  and  license  out or  market,  our  proposed  products.  Accordingly,  our
prospects  must be considered in light of the risks,  expenses and  difficulties
frequently encountered in connection with the establishment of a new business in
a  highly   competitive   industry,   characterized   by  frequent  new  product
introductions.  We anticipate that we will incur substantial  operating expenses
in  connection  with the  development,  testing  and  approval  of our  proposed
products  and  expect  these  expenses  to result in  continuing  and,  perhaps,
significant  operating  losses  until  such time,  if ever,  that we are able to
achieve adequate levels of sales or license revenues.  There can be no assurance
that  we  will  be  able  to  raise  additional  financing,   increase  revenues
significantly, or achieve profitable operations.

         We do not have commercially available products

Our principal efforts are the development of, and obtaining regulatory approvals
for, our proposed  products.  We anticipate  that  marketing  activities for our
proprietary  products,  whether by us or one or more  licensees,  will not begin
until 2004 at the  earliest.  Accordingly,  it is not  anticipated  that we will
generate any revenues  from  royalties or sales of  proprietary  products  until
regulatory  approvals are obtained and marketing  activities begin. There can be
no assurance  that any of the  proposed  proprietary  products  will prove to be
commercially  viable, or if viable,  that they will reach the marketplace on the
timetables  desired by us. The failure or the delay of these products to achieve
commercial viability would have a material adverse effect on us. See "Business -
Proposed Products" and " - Government Regulation."



                                       13
<PAGE>

         We have not completed product development

The  development of our proposed  products has not been completed and we will be
required  to devote  considerable  effort  and  expenditures  to  complete  such
development.   In  addition  to  obtaining  adequate   financing,   satisfactory
completion  of  development,   testing,   government   approval  and  sufficient
production levels of such products must be obtained before the proposed products
will become  available  for  commercial  sale. We do not  anticipate  generating
material  revenue from product  sales until  perhaps 2004 or  thereafter.  Other
potential  products remain in the conceptual or very early development stage and
remain  subject to all the risks inherent in the  development of  pharmaceutical
products,  including  unanticipated  development problems,  and possible lack of
funds to  undertake  or continue  development.  These  factors  could  result in
abandonment or substantial  change in the  development of a specific  formulated
product.  There can be no assurance  that any of our proposed  products  will be
successfully  developed,  be  developed  on a timely  basis  or be  commercially
accepted once developed. The inability to successfully complete development,  or
a  determination  by us, for  financial  or other  reasons,  not to undertake to
complete development of any product,  particularly in instances in which we have
made significant capital  expenditures,  could have a material adverse effect on
us.

         We do not have direct consumer marketing experience

We have no experience in marketing or  distribution at the consumer level of our
proposed proprietary  products.  Moreover, we do not have the financial or other
resources  to  undertake   extensive   marketing  and  advertising   activities.
Accordingly,  we intend generally to rely on marketing  arrangements,  including
possible  joint  ventures  or license or  distribution  arrangements  with third
parties.  We have not entered into any  significant  agreements or  arrangements
with  respect to the  marketing of our  proposed  products,  and there can be no
assurance  that we will do so in the  future  or that any such  products  can be
successfully   marketed.   Our  strategy  to  rely  on  third  party   marketing
arrangements  could  adversely  affect  our  profit  margins.  See  "Business  -
Marketing and Distribution."

         We must comply with good manufacturing practices

The manufacture of our  pharmaceutical  products will be subject to current Good
Manufacturing Practices ("cGMP") prescribed by the FDA, pre-approval inspections
by the FDA or foreign authorities, or both, before commercial manufacture of any
such products and periodic cGMP  compliance  inspections  thereafter by the FDA.
There can be no assurance that we or any third party  manufacturer  will be able
to comply with cGMP or satisfy pre- or  post-approval  inspections in connection
with the  manufacture  of our proposed  products.  Failure or delay by us or any
such  manufacturer  to  comply  with  cGMP  or  satisfy  pre-  or  post-approval
inspections  would  have  a  material  adverse  effect  on us.  See  "Business--
Manufacturing."

         We are dependent on our suppliers

We believe that the active  ingredients  used in the manufacture of our proposed
pharmaceutical  products are presently available from numerous suppliers located
in the United States, Europe, India and Japan.



                                       14
<PAGE>

We believe that  certain raw  materials,  including  inactive  ingredients,  are
available  from a  limited  number  of  suppliers  and  that  certain  packaging
materials  intended for use in connection with our spray products  currently are
available  only from sole source  suppliers.  Although we do not believe we will
encounter  difficulties  in  obtaining  the  inactive  ingredients  or packaging
materials  necessary  for  the  manufacture  of our  products,  there  can be no
assurance  that  we  will  be able to  enter  into  satisfactory  agreements  or
arrangements  for the purchase of commercial  quantities of such  materials.  We
have a written supply agreement with Dynamit Nobel for certain raw materials for
the  nitroglycerin  lingual spray product.  With respect to other suppliers,  we
operate  primarily  on a purchase  order basis beyond which there is no contract
memorializing  our  purchasing   arrangements.   The  inability  to  enter  into
agreements or otherwise arrange for adequate or timely supplies of principal raw
materials  and the  possible  inability  to secure  alternative  sources  of raw
material supplies could have a material adverse effect on our ability to arrange
for the  manufacture  of  formulated  products.  In  addition,  development  and
regulatory  approval of our products are  dependent  upon our ability to procure
active  ingredients and certain packaging  materials from FDA-approved  sources.
Since the FDA approval process requires  manufacturers to specify their proposed
suppliers  of  active  ingredients  and  certain  packaging  materials  in their
applications,  FDA approval of a supplemental  application to use a new supplier
would be required if active  ingredients  or such  packaging  materials  were no
longer available from the originally  specified supplier,  which could result in
manufacturing delays. See "- Business- Raw Materials and Suppliers."

         We face intense competition

The markets which we intend to enter are  characterized by intense  competition.
We  or  our  licensees  may  be  competing  against  established  pharmaceutical
companies which  currently  market products which are equivalent or functionally
similar to those we intend to market.  Prices of drug products are significantly
affected by competitive factors and tend to decline as competition increases. In
addition, numerous companies are developing or may, in the future, engage in the
development of products  competitive with our proposed products.  We expect that
technological  developments  will occur at a rapid rate and that  competition is
likely  to  intensify  as  enhanced  dosage  from   technologies   gain  greater
acceptance.  Additionally,  the markets for  formulated  products  which we have
targeted  for  development  are  intensely   competitive,   involving   numerous
competitors  and  products.   Most  of  our  prospective   competitors   possess
substantially  greater  financial,  technical  and other  resources  than we do.
Moreover, many of these companies possess greater marketing capabilities than we
do,  including  the  resources  necessary to enable them to implement  extensive
advertising  campaigns.  There can be no assurance that we will have the ability
to compete successfully. See "Business - Competition."

         The  absence of product  liability  insurance  coverage  may affect our
business

We may be  exposed  to  potential  product  liability  claims by  consumers.  We
presently  maintain no product liability  insurance  coverage.  Although we will
seek to obtain product liability insurance before the  commercialization  of any
proprietary  products,  there can be no assurance that we will be able to obtain
such  insurance or, if obtained,  that any such  insurance will be sufficient to
cover all  possible  liabilities  to which we may be exposed.  In the event of a
successful  suit against us,  insufficiency  of insurance  coverage could have a
material  adverse  effect on us. In addition,  certain  food and drug  retailers
require minimum product liability insurance coverage as a condition precedent to
purchasing  or accepting  products for retail  distribution.  Failure to satisfy
such insurance  requirements  could impede the ability of us or our distributors
to achieve broad retail distribution of our proposed products,  which could have
a material adverse effect on us. See "Business - Product Liability."

         Extensive government regulation may affect our business

The development,  manufacture and  commercialization of pharmaceutical  products
are  generally  subject



                                       15
<PAGE>

to extensive regulation by various federal and state governmental  entities. The
FDA, which is the principal United States regulatory authority, has the power to
seize  adulterated or misbranded  products and unapproved new drugs,  to request
their  recall  from the  market,  to  enjoin  further  manufacture  or sale,  to
publicize   certain  facts  concerning  a  product  and  to  initiate   criminal
proceedings.  As a result of federal statutes and FDA  regulations,  pursuant to
which new  pharmaceuticals  are  required  to  undergo  extensive  and  rigorous
testing,  obtaining  pre-market  regulatory approval requires extensive time and
expenditures.  Under  the "FDC  Act",  a new drug may not be  commercialized  or
otherwise  distributed  in the United States  without the prior  approval of the
FDA. The FDA approval processes  relating to new drugs differ,  depending on the
nature of the particular drug for which approval is sought.  With respect to any
drug  product  with active  ingredients  not  previously  approved by the FDA, a
prospective  drug  manufacturer  is  required  to submit a new drug  application
("NDA"),  including  complete reports of  pre-clinical,  clinical and laboratory
studies to prove such product's safety and efficacy.  The NDA process  generally
requires,  before the  submission  of the NDA,  submission of an IND pursuant to
which  permission  is sought to begin  preliminary  clinical  testing of the new
drug.  An NDA,  based on  published  safety and  efficacy  studies  conducted by
others,  may  also  be  required  to be  submitted  for a  drug  product  with a
previously  approved  active  ingredient if the method of delivery,  strength or
dosage form is changed.  Alternatively, a drug having the same active ingredient
as a drug  previously  approved by the FDA may be eligible to be submitted under
an ANDA,  which is significantly  less stringent than the NDA approval  process.
While the ANDA process  requires a manufacturer to establish  bioequivalence  to
the previously  approved drug, it permits the manufacturer to rely on the safety
and efficacy studies  contained in the NDA for the previously  approved drug. We
believe that products  developed in spray dosage form will require submission of
an NDA. We estimate that the development of new  formulations of  pharmaceutical
products,  including formulation,  testing and obtaining FDA approval, generally
takes four to seven years for the NDA process.  There can be no  assurance  that
our  determinations  will prove to be  accurate or that  pre-marketing  approval
relating to our proposed products will be obtained on a timely basis, or at all.
The failure by us to obtain necessary regulatory approvals,  whether on a timely
basis, or at all, would have a material adverse effect on our business.

We may not be able to protect and enforce our intellectual property rights.

Our  patents,  pending  patents and other  intellectual  property  rights in the
United States and in selected other  countries may not be allowed or competitors
may  challenge  the  validity  or  scope  of  these  rights.  In  addition,  our
intellectual  property rights may not provide us with a significant  competitive
advantage. In addition, competitors may design around our proprietary technology
or develop competing technologies.  Effective patent,  trademark,  service mark,
copyright and trade secret  protection  may not be available in every country in
which we may offer our product.

We rely on a combination of patents, trademarks, trade secrets,  confidentiality
agreements and licensing  arrangements  to establish and protect our proprietary
technology.  Employees, consultants and customers have access to our proprietary
and  confidential   information.   Any  misuse  or   misappropriation   of  this
intellectual  property  could have an adverse  impact on our  business.  We take
steps  to  control  access  to,  and  the   distribution   of,  our  proprietary
information. We cannot guarantee, however, that such safeguards will protect our
intellectual property and other valuable competitive information.  If we fail to
successfully enforce our intellectual  property rights, our competitive position
will suffer.

Because our success  depends on our  proprietary  technology,  if third  parties
infringe  our  intellectual  property,  we may be forced  to expend  significant
resources  enforcing our rights or suffer competitive injury. We may not be able
to detect  infringement  and may lose our  competitive  position  in the  market
before we do so.



                                       16
<PAGE>

Although there are no pending lawsuits  regarding our technology or notices that
we are infringing upon  intellectual  property  rights of others,  litigation or
infringement  claims may occur in the future.  Such  litigation  or claims could
result in  substantial  costs,  and  diversion  of  resources  and could  have a
material  adverse effect on our business,  financial  condition,  and results of
operations.

         We are dependent on existing management

Our success is  substantially  dependent  on the efforts  and  abilities  of our
President and Chief  Executive  Officer,  Gary A. Shangold,  MD, our founder and
Chief Scientific Officer, Harry A. Dugger, III, Ph.D., our Chairman, John Klein,
our Chief Financial  Officer,  Donald Deitman,  our Vice President - Formulation
Development,  Mohammed Abd El-Shafy,  Ph.D., and our Vice President-New Business
and Product  Development,  Barry Cohen. Mr. Klein is not required to devote full
time to us.  Decisions  concerning  our business and our management are and will
continue to be made or significantly  influenced by these individuals.  The loss
or  interruption  of their  continued  services would have a materially  adverse
effect on our business operations and prospects.

         We are controlled by current stockholders, officers and directors

Our directors,  executive officers and principal stockholders and certain of our
affiliates  have the ability to influence the election of our directors and most
other stockholder actions.  Management and our affiliates currently beneficially
own (including shares they have the right to acquire)  approximately 55 % of our
common stock.  Specifically,  Dr. Rosenwald has the ability to exert significant
influence  over  the  election  of the  Board of  Directors  and  other  matters
submitted to our stockholders for approval. These arrangements may discourage or
prevent  any  proposed  takeover  of NovaDel,  including  transactions  in which
stockholders  might  otherwise  receive a premium for their shares over the then
current  market  prices.  Such  stockholders  may influence  corporate  actions,
including influencing elections of directors and significant corporate events.

         There is a potential  adverse  effect if we redeem our publicly  traded
warrants

The 680,000  warrants  issued in connection with our initial public offering may
be redeemed by us, at a redemption price of $.10 per warrant, upon not less then
thirty  days prior  written  notice  provided  the last sale price of our common
stock on the NASD OTC Bulletin  Board,  Nasdaq (or another  national  securities
exchange)  for twenty  consecutive  trading days ending within three days of the
notice of  redemption,  equals or exceeds 200% of the current  warrant  exercise
price ($5.80), subject to adjustment. Redemption of the warrants could force the
holders  thereof to exercise the  warrants and pay the exercise  price at a time
when it may be disadvantageous for the holders to do so, to sell the warrants at
the then  current  market  price  when  they  might  otherwise  wish to hold the
warrants, or to accept the redemption price, which is likely to be substantially
less  than the  market  value of the  warrants  at the time of  redemption.  The
warrants expire on November 18, 2003.

         The limited prior public market and trading  market may cause  possible
volatility in our stock price

There has only been a limited  public market for our securities and there can be
no assurance that an active trading market in our securities will be maintained.
The OTC Bulletin Board is an unorganized, inter-dealer,  over-the-counter market
which provides  significantly  less liquidity than the Nasdaq Stock market,  and
quotes  for  stocks  included  on the OTC  Bulletin  Board are not listed in the
financial  sections of newspapers  as are those for the Nasdaq Stock Market.  In
addition,  the stock market in recent years has  experienced  extreme  price and
volume  fluctuations that have  particularly  affected the market prices



                                       17
<PAGE>

of many smaller companies.  The trading price of our common stock is expected to
be subject to  significant  fluctuations  in response to variations in quarterly
operating  results,  changes in analysts' earnings  estimates,  announcements of
innovations  by us or our  competitors,  general  conditions  in the industry in
which we  operate  and other  factors.  These  fluctuation,  as well as  general
economic  and market  conditions,  may have a material or adverse  effect on the
market price of our common stock.

         Penny   stock   regulations   may  impose   certain   restrictions   on
marketability of our securities

The  Securities  and  Exchange   Commission  (the   "Commission")   has  adopted
regulations  which  generally  define a "penny stock" to be any equity  security
that has a market price (as defined) of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions.  As a result,
our  common  stock is subject to rules that  impose  additional  sales  practice
requirements  on  broker-dealers  who sell such securities to persons other than
established  customers and accredited  investors (generally those with assets in
excess of $1,000,000 or annual income exceeding  $200,000,  or $300,000 together
with their spouse).  For transactions  covered by these rules, the broker-dealer
must  make  a  special  suitability  determination  for  the  purchase  of  such
securities and have received the purchaser's  written consent to the transaction
prior to the  purchase.  Additionally,  for any  transaction  involving  a penny
stock, unless exempt, the rules require the delivery,  prior to the transaction,
of a risk disclosure  document mandated by the Commission  relating to the penny
stock market.  The  broker-dealer  must also disclose the commission  payable to
both the broker-dealer and the registered representative, current quotations for
the  securities  and,  if  the  broker-dealer  is the  sole  market  maker,  the
broker-dealer must disclose this fact and the  broker-dealer's  presumed control
over the market.  Finally,  monthly  statements must be sent  disclosing  recent
price information for the penny stock held in the account and information on the
limited  market in penny  stocks.  Consequently,  the  "penny  stock"  rules may
restrict the ability of broker-dealers to sell our securities and may affect the
ability of  investors to sell our  securities  in the  secondary  market and the
price at which such purchasers can sell any such securities.

Shareholders  should be aware that,  according  to the  Securities  and Exchange
Commission,  the  market  for penny  stocks has  suffered  in recent  years from
patterns of fraud and abuse. Such patterns include:

         o        control  of  the  market  for  the  security  by  one or a few
                  broker-dealers  that are  often  related  to the  promoter  or
                  issuer;

         o        manipulation  of  prices  through   prearranged   matching  of
                  purchases and sales and false and misleading press releases;

         o        "boiler room" practices  involving high pressure sales tactics
                  and  unrealistic  price  projections  by  inexperienced  sales
                  persons;

         o        excessive and undisclosed bid-ask differentials and markups by
                  selling broker-dealers; and

         o        the wholesale  dumping of the same securities by promoters and
                  broker-dealers after prices have been manipulated to a desired
                  level, along with the inevitable collapse of those prices with
                  consequent investor losses.

Our  management  is aware of the abuses that have occurred  historically  in the
penny stock market. Although we do not expect to be in a position to dictate the
behavior  of the market or of  broker-dealers  who  participate  in the  market,
management  will strive within the confines of practical  limitations to prevent
the described patterns from being established with respect to our common stock.



                                       18
<PAGE>

         Additional  authorized  shares of  common  stock  and  preferred  stock
         available for issuance may adversely affect the market

We are authorized to issue 50,000,000 shares of our common stock. As of July 31,
2003 there were  17,972,760  shares of our common stock issued and  outstanding.
However,  the total number of shares of common stock issued and outstanding does
not  include  the  exercise  of  options or  warrants.  We have  reserved  up to
15,325,755  shares of our  common  stock for  issuance  upon  exercise  of stock
options and warrants.  Of the reserved  shares, a total of 2,800,000 shares were
reserved  among  NovaDel's  1992,  1997 and 1998 Stock  Option  Plans,  of which
options to purchase an  aggregate  of  300,000,  450,000 and 892,500  shares are
issued and outstanding  under the respective  Plans.  (Collectively,  a total of
455,000  options  issued  among the three  Plans have been  exercised.)  Another
3,800,000  shares are reserved for issuance and available  for non-plan  options
granted pursuant to the terms of certain  employment  agreements.  A significant
number of such options and warrants contain provisions for cashless exercise.

Exercise of the outstanding convertible  securities,  will reduce the percentage
of common stock held by the public stockholders.  Further, the terms on which we
could obtain  additional  capital during the life of the convertible  securities
may be  adversely  affected,  and it should be expected  that the holders of the
convertible  securities  would  exercise them at a time when we would be able to
obtain equity  capital on terms more  favorable  than those provided for by such
convertible securities. As a result, any issuance of additional shares of common
stock may cause our current  shareholders to suffer  significant  dilution which
may adversely affect the market.

In addition to the  above-referenced  shares of common stock which may be issued
without shareholder  approval,  we have 1,000,000 shares of authorized preferred
stock,  the terms of which may be fixed by our Board of Directors.  We presently
have no issued and  outstanding  shares of preferred  stock and while we have no
present plans to issue any shares of preferred stock, our Board of Directors has
the authority,  without  shareholder  approval,  to create and issue one or more
series of such preferred  stock and to determine the voting,  dividend and other
rights of holders of such preferred stock. The issuance of any of such series of
preferred stock could have an adverse effect on the holders of common stock.

         Shares eligible for future sale may adversely affect the market

Of the  17,972,760  shares  of common  stock  outstanding  as of July 31,  2003,
14,472,415  shares  may be  available  for  public  sale by  means  of  ordinary
brokerage  transactions  in the open market  pursuant  to Rule 144,  promulgated
under the Act,  subject to certain  limitations.  In general,  under Rule 144, a
person (or persons  whose shares are  aggregated)  who has  satisfied a one-year
holding period may,  under certain  circumstances,  sell within any  three-month
period a number of  securities  which does not  exceed the  greater of 1% of the
then outstanding  shares of common stock or the average weekly trading volume of
the class  during the four  calendar  weeks  prior to such  sale.  Rule 144 also
permits,  under  certain  circumstances,  the sale of  securities,  without  any
limitation, by a person who is not an affiliate of NovaDel and who has satisfied
a two-year holding period.

We have  reserved up to  15,325,755  shares of common  stock for  issuance  upon
exercise of various stock options and warrants,  of which 1,600,000  shares were
registered under a Registration Statement on Form S-8 and 4,257,242 shares under
a  Registration  Statement on Form SB-2 under the Act. Any  substantial  sale of
common stock pursuant to Rule 144 or those  registration  statements may have an
adverse effect on the market price of our securities.



                                       19
<PAGE>

Limitation on director/officer liability

As  permitted by Delaware  law,  our  certificate  of  incorporation  limits the
liability  of our  directors  for  monetary  damages for breach of a  director's
fiduciary  duty except for  liability in certain  instances.  As a result of our
charter  provision and Delaware  law,  stockholders  may have limited  rights to
recover  against  directors  for breach of  fiduciary  duty.  In  addition,  our
certificate of incorporation  provides that we shall indemnify our directors and
officers to the fullest extent permitted by law.

         We have no history of paying dividends on our common stock

We have never paid any cash  dividends on our common stock and do not anticipate
paying any cash dividends on our common stock in the foreseeable future. We plan
to retain any future  earnings to finance  growth.  If we determine that we will
pay  dividends  to the holders of our common  stock,  there is no  assurance  or
guarantee that such dividends will be paid on a timely basis.


ITEM 2.  PROPERTIES

Our executive  offices are located at 25  Minneakoning  Road,,  Flemington,  New
Jersey. The facility, constituting approximately 31,800 square feet, is occupied
under a ten-year lease. Presently, we are only occupying a portion of the office
space in the  building;  the remaining  office,  laboratory,  manufacturing  and
warehousing  space is still being  fitted out. No rent or taxes were  payable on
this space during fiscal 2003. We also have  approximately  4,500 square feet of
laboratory and office space at 31 Route 12 West,  Flemington,  New Jersey, which
also formerly  housed our executive  offices.  We occupy that space under a five
year lease expiring in September 2005; during fiscal 2003, the Company paid rent
of approximately $92,000, including real estate taxes, for that space.

ITEM 3.  LEGAL PROCEEDINGS

There are no legal  proceedings  to which we are a party and we are not aware of
any possible pending proceedings.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of the fiscal year covered by this report,  no matters
were submitted to a vote of security holders, though the solicitation of proxies
or otherwise.



                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED

                  STOCKHOLDER MATTERS

                  (a) Market Information. Since the November 1997 closing of the
public offering,  the Company's Common Stock has traded in the  over-the-counter
market on the National  Association  of  Securities  Dealers,  Inc. OTC Bulletin
Board  System  ("OTC.BB").  Since  October 1, 2002,  the symbol has been "NVDL".
Before that,  the Common Stock traded  under the symbol  "FLEM".  The  following
table sets



                                       20
<PAGE>

forth the range of high and low closing bid  quotations  of the Common  Stock as
reported by the OTCBB for each fiscal  quarter for the past three fiscal  years.
High and low bid quotations  represent prices between dealers without adjustment
for retail mark-ups, mark-downs or commissions and may not necessarily represent
actual transactions.


<TABLE>
<CAPTION>
                                                                      Bid Prices
                                                                   High        Low
                                                                   ----        ---
    FISCAL  2003
<S>                                                                <C>         <C>
    First Quarter (August 1, 2002 through October 31, 2002)        1.90        1.13
    Second Quarter (November 1, 2002 through January 31, 2003)     2.80        1.44
    Third Quarter (February 1, 2003 through April 30, 2003)        2.43        1.50
    Fourth Quarter (May 1, 2003 through July 31, 2003)             2.20        1.50

    FISCAL 2002
    First Quarter (August 1, 2001 through October 31, 2001)         .60         .43
    Second Quarter (November 1, 2001 through January 31, 2002)     2.30         .63
    Third Quarter (February 1, 2002 through April 30, 2002)        3.79        2.40
    Fourth Quarter (May 1, 2002 through July 31, 2002)             3.62        1.65

    FISCAL  2001
    First Quarter (August 1, 2000 through October 25, 2000)       2.125        .969
    Second Quarter (November 1, 2000 through January 31, 2001)    1.562        .438
    Third Quarter (February 1, 2001 through April 30, 2001)       1.094        .550
    Fourth Quarter (May 1, 2001 through July 31, 2001)             .950        .510
</TABLE>

The closing bid price of the Company's Common Stock as reported by the OTCBB was
$2.01 on October 27, 2003.

              (b) Holders.  As of October 27, 2003 there were  approximately  74
record holders of the Company's Common Stock.

              (c)  Dividends.  We have never  declared or paid a dividend on our
Common Stock,  and management  expects that all or a substantial  portion of our
future  earnings will be retained for expansion or  development of our business.
The decision to pay dividends, if any, in the future is within the discretion of
the Board of Directors and will depend upon our earnings,  capital requirements,
financial condition and



                                       21
<PAGE>

other relevant  factors such as  contractual  obligations.  Management  does not
anticipate  that we will pay  dividends on the Common  Stock in the  foreseeable
future.  Moreover,  there can be no assurance that dividends can or will ever be
paid.

              (d) Recent Sales of Unregistered Securities.

In April and May 2003, we sold Units  (consisting  of common stock and warrants)
to accredited investors.  Investors were issued one warrant for each four shares
purchased.  The warrants are exercisable for five years, at an exercise price of
$2.00 per share.  The securities were sold through  Paramount  Capital,  Inc., a
NASD  broker-  dealer.   The  gross  proceeds  of  the  private   offering  were
approximately  $4.8  million.  For its  services  as  placement  agent,  we paid
Paramount a 7.5%  commission fee of the aggregate  amount raised  (approximately
$360,000) and also issued to Paramount  warrants to purchase  160,017  shares of
common stock at an exercise  price of $1.65 and 40,004 shares of common stock at
an exercise price of $2.00. In connection with the offering, we agreed to file a
registration  statement with the Securities and Exchange  Commission to register
the resale of the shares of common stock and the shares  underlying the warrants
(as well as the shares underlying Paramount's warrants). We also agreed 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.  We also  agreed  that if, at any time  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).

During  the  fourth  quarter of fiscal  2003,  a total of 210,577  shares of the
Company's  Common Stock were issued in connection with the cashless  exercise of
445,000 options.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

General

Since its  inception,  substantially  all of the  Company's  revenues  have been
derived  from  consulting  activities,  primarily  in  connection  with  product
development for various pharmaceutical  companies. The Company has had a history
of recurring  losses from operations,  giving rise to an accumulated  deficit at
July 31, 2003 of approximately  $15,628,000.  Although  substantially all of the
Company's revenues to date have been derived from its consulting  business,  the
future growth and  profitability  of the Company will be  principally  dependent
upon its ability to successfully  develop its products and to enter into license
agreements  with  drug  companies  who will  market  and  distribute  the  final
products.

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities  in the normal course of business.  The Company  incurred  losses
during the fiscal years ended July 31, 2003 (fiscal 2003) and 2002 (fiscal 2002)
and had an accumulated deficit at July 31, 2003 of approximately $15,628,000.

The  Company's  continued  existence  is  dependent  upon its ability to achieve
profitable operations or obtain additional  financing.  The Company is currently
seeking  collaborative  arrangements  with  pharmaceutical  companies  for joint
development of delivery  systems and the successful  marketing of these delivery
systems.  In order to pursue  this  strategy,  the  Company  will be required to
obtain  financing  and/or  consummate a strategic  alliance  with a  well-funded
business  partner in the near  future.  In view of



                                       22
<PAGE>

the Company's very limited  resources,  its anticipated  expenses  (resulting in
significant  operating  losses)  and the  competitive  environment  in which the
Company operates,  there can be no assurance that the Company's  operations will
be sustained for the duration of its next fiscal year.

Results of Operations

Fiscal Year 2003 Compared to Fiscal Year 2002

Consulting revenues for fiscal 2003 decreased  approximately  $337,000 or 99% to
$2,000 from $339,000 for fiscal 2002. This revenue  decrease for fiscal 2003 was
primarily  attributable to a decrease in project  management of clinical studies
for clients.

Consulting  expenses  increased  approximately  $86,000 or 9% to $1,048,000 from
$962,000 for fiscal 2002. This increase was due to increased  payroll and inside
laboratory  expenses.  Selling,  general and  administrative  expenses increased
approximately  $1,135,000 or 30% to $4,902,000  from $3,767,000 for fiscal 2002.
This increase was due, primarily, to the increase in payroll expenses.

Total costs and expenses for fiscal 2003 increased  approximately  $1,221,000 or
26% to approximately $5,950,000 from approximately $4,729,000 for fiscal 2002.

This increase includes approximately:  $880,000 in payroll expense primarily due
to additional employees;  $476,000 in deferred compensation expense attributable
to options issued to an employee with an exercise price significantly lower than
the current  share price;  $307,000 in legal &  professional  fees;  $104,000 in
laboratory testing and clinical studies costs;  $68,000 in insurance expense due
to additional employees and general premium increases; $26,000 in trade show and
conference  expenses;  $19,000 in office  expense due to  additional  employees;
$17,000 in  laboratory  expenses due to  additional  lab  employees;  $16,000 in
travel  expenses;  $14,000  in outside  services;  and,  $12,000  in  automobile
expenses.

Decreases in costs and  expenses  for the 2003  Period,  as compared to the 2002
Period,  includes  approximately:   $554,000  in  outside  consultant  fees  due
primarily to a reduction in the options issued to  consultants;  $131,000 in bad
debt expense; and, $20,000 in employee recruiting and relocation. A buy-out of a
consultant's  contract,  during the 2002 Period, without a corresponding expense
during the 2003 Period, resulted in an approximate $32,000 decrease in expenses.

Deferred income tax benefit for fiscal 2003 was  approximately  $84,000 compared
to approximately  $88,000 for fiscal 2002. These benefits resulted from the sale
of the Company's New Jersey net operating losses.

The resulting net loss for fiscal 2003 was $5,815,000  compared to a net loss of
$4,290,000 for fiscal 2002.

Liquidity and Capital Resources

From its  inception,  the  Company's  principal  sources  of  capital  have been
provided by consulting revenues, private placements and a public offering of its
securities,  as well as loans  and  capital  contributions  from  the  Company's
principal stockholders. At July 31, 2003 we had working capital of approximately
$2,799,000  as  compared  to working  capital  of  $3,095,000  at July 31,  2002
representing a net decrease in working capital of approximately $296,000. During
fiscal 2003,  we  successfully  closed an offering of our  securities  ("Private
Placement").  The  Private  Placement  provided  for the  sale of



                                       23
<PAGE>

approximately  3,200,000  shares of common stock,  par value $.001 per share. We
received proceeds, net of offering costs, of approximately $4,336,000.

Net cash used in operating  activities was  approximately  $4,320,000 for fiscal
2003  compared  to net  cash  used  in  operating  activities  of  approximately
$1,871,000  for fiscal 2002.  Net cash used in operating  activities  for fiscal
2003 was primarily attributable to the net loss of $5,815,000.

We believe that our current cash levels together with revenues from  operations,
will be  sufficient  to satisfy our cash  requirements  for calendar  year 2003.
However,  beyond  this point  there is  substantial  doubt  about our ability to
continue operations without obtaining additional financing and/or consummating a
strategic alliance with a well-funded business partner.  Although the Company is
actively  seeking  additional  financing  and strategic  alliances,  there are a
number of risks and uncertainties related to our attempt to complete a financing
or strategic partnering  arrangement that are outside our control. We may not be
able to successfully  obtain additional  financing on terms acceptable to us, or
at all.  These  uncertainties  raise  substantial  doubt  as to our  ability  to
continue as a going  concern.  Our auditors have  qualified  their audit opinion
with regard to our ability to continue as a going concern.

Critical Accounting Policies

Use of Estimates - The accompanying  financial  statements have been prepared in
conformity with accounting  principle  generally  accepted in the United States.
When more than one  accounting  principle,  or  method  of its  application,  is
generally  accepted,   management  selects  the  principle  or  method  that  is
appropriate  in  the  Company's  specific  circumstances.   Application  of  the
accounting  principles requires the Company's management to make estimates about
the future  resolution  of existing  uncertainties  and that affect the reported
amounts of assets, liabilities,  revenues, expense which in the normal course of
business are  subsequently  adjusted to actual  results.  Actual  results  could
differ from such estimates. In preparing these financial statements,  management
has made  its best  estimates  and  judgments  of the  amounts  and  disclosures
included in the financial statements giving due regard to materiality.

Revenue  Recognition,  Accounts Receivable and Allowance for Doubtful Accounts -
Revenue is recognized as earned. Invoices, for client project costs, are created
and  presented  at the end of each month,  for that month.  Accounts  Receivable
reflects  these  invoices  at the end of the  month in  which  the  invoice  was
created.  An  Allowance  for  Doubtful  Accounts  is  created  for each  invoice
remaining unpaid after 90 days from the invoice date.

Stock - Based  Compensation  - The  Company  uses  the  intrinsic  value  method
prescribed by APB Opinion No. 25 to measure  compensation  expense.  If the fair
value method had been used to measure compensation expense as prescribed by SFAS
No. 123, net loss would have increased to $6,301,000 for fiscal 2003.

Capital  Expenditures  - The Company  anticipates a twelve (12) to eighteen (18)
months to complete  the  remaining  build-out of its  recently  occupied  leased
facilities for laboratory and manufacturing purposes. Costs of the build-out and
necessary equipment are estimated to be up to $3,500,000

Off-Balance Sheet Arrangements

The Company does not have any so-called  "off-balance  sheet  arrangements" that
have or are  reasonably  likely  to  have a  current  or  future  effect  on its
financial condition, results of operations, liquidity or capital resources.


                                       24
<PAGE>

Inflation

We do not believe  that  inflation  has had a material  effect on our results of
operations  during the past three fiscal years.  There can be no assurance  that
our business will not be affected by inflation in the future.

New Accounting Pronouncements

See  Note 1 to the  Financial  Statements  for a  discussion  of New  Accounting
Pronouncements affecting the Company.


ITEM 7.  FINANCIAL STATEMENTS

The  response  to this item is  included  as a separate  section of this  report
commencing on page F-1.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

ITEM 8A. CONTROLS AND PROCEDURES

As of July 31, 2003, our Chief  Executive  Officer and Chief  Financial  Officer
performed  an  evaluation  of  the  effectiveness  of the  Company's  disclosure
controls  and  procedures  (as defined in SEC Rule  13a-15(e)),  which have been
designed  to ensure  that  material  information  related to the Company is made
known to them and timely disclosed. The Company's management,  including the CEO
and CFO,  does not expect  that the  Company's  disclosure  controls or internal
controls will prevent all error and all fraud. A control  system,  no matter how
well  conceived  and  operated,  can  provide  only  reasonable,  not  absolute,
assurance that the objectives of the control system are met. Further, the design
of a control  system must reflect the fact that there are resource  constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent  limitations in all control  systems,  no evaluation of controls
can provide  absolute  assurance that all control issues and instances of fraud,
if any,  within the Company have been detected.  Notwithstanding  the foregoing,
however,  based  upon  their  evaluations,  our CEO and CFO  concluded  that the
Company's  disclosure  controls are  effective to provide a reasonable  level of
assurance that material  information  relating to the Company is accumulated and
communicated to management,  including the CEO and CFO, as appropriate, to allow
timely decisions regarding required disclosure.

There have been no changes in the  Company's  internal  control  over  financial
reporting  that  occurred  during the period  covered by this  report  that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.



                                       25
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The names and ages of the Directors  and  Executive  Officers of the Company are
set out below.  All  Directors  are  elected  annually,  to serve until the next
annual meeting of stockholders  and until their  successors are duly elected and
qualified.  Officers are elected  annually by the Board and serve at the Board's
pleasure.

<TABLE>
<CAPTION>
-------------------------------------- ------- --------------------------- --------------------------------- ------------
                                                                                                              Director
                Name                    Age    Position with the Company         Principal Occupation           Since
-------------------------------------- ------- --------------------------- --------------------------------- ------------
<S>                                      <C>                                                                    <C>
Gary A. Shangold, M.D.                   49    President, Chief             President and Chief Executive       2003
                                               Executive Officer and            Officer of the Company
                                               Director
-------------------------------------- ------- --------------------------- --------------------------------- ------------
Harry A. Dugger, III, Ph.D.              67    Chief Scientific Officer    Chief Scientific Officer of the        -
                                                                                       Company
-------------------------------------- ------- --------------------------- --------------------------------- ------------
John H. Klein                            57    Chairman                               Consultant                2002
-------------------------------------- ------- --------------------------- --------------------------------- ------------
Robert F. Schaul, Esq.                   64    Secretary and Director                  Attorney                 1991
-------------------------------------- ------- --------------------------- --------------------------------- ------------
Donald J. Deitman                        60    Chief Financial Officer      Chief Financial Officer of the        -
                                                                                       Company
-------------------------------------- ------- --------------------------- --------------------------------- ------------
Mohammed Abd El-Shafy                    50    Vice President,              Vice President of Formulation         -
                                               Formulation Development       Development for the Company
-------------------------------------- ------- --------------------------- --------------------------------- ------------
William F. Hamilton, Ph.D.               64    Director                          University Professor           2003
-------------------------------------- ------- --------------------------- --------------------------------- ------------
Lawrence J. Kessel, M.D., FACP           49    Director                               Physician                 2003
-------------------------------------- ------- --------------------------- --------------------------------- ------------
Mark H. Rachesky, M.D.                   44    Director                           Investment Banker             2003
-------------------------------------- ------- --------------------------- --------------------------------- ------------
Charles Nemeroff, M.D., Ph.D.            54    Director                          University Professor           2003
-------------------------------------- ------- --------------------------- --------------------------------- ------------
Barry Cohen                              40    Vice President - New         Vice President - New Business         -
                                               Business and Product         and Product Development of the
                                               Development                             Company
-------------------------------------- ------- --------------------------- --------------------------------- ------------
</TABLE>


Gary  Shangold,  M.D.,  President,  Chief  Executive  Officer and Director.  Dr.
Shangold  joined NovaDel in December 2002 and was elected as a director in March
2003.  Previously  he had  been  Vice  President  and  Regulatory  Head  of Drug
Development at Johnson & Johnson Pharmaceutical  Research and Development,  LLC.
Before  joining the Johnson & Johnson  family of companies in 1992,  he had been
Medical Director of Obstetrics, Gynecology & Infertility at Serono Laboratories,
Inc. and had been a member of the faculty of  Obstetrics  and  Gynecology at the
University  of  Chicago's  Pritzker  School of Medicine  from 1983 to 1991.  Dr.
Shangold  also was an Associate  Clinical  Professor  at the Harvard  University
School of Medicine and a Clinical  Associate at Massachusetts  General Hospital.
Dr.  Shangold is a graduate of the University of  Pennsylvania  and received his
M.D. from Columbia University's College of Physicians and Surgeons.

Harry A. Dugger, III, Ph.D., Chief Scientific Officer. Dr. Dugger is the founder
of NovaDel and served as its  President and a Director from its inception in May
1982 until December 2002. Prior to founding NovaDel,  from June 1980 to November
1982, Dr. Dugger was employed as Vice  President of Research



                                       26
<PAGE>

and Development by Bauers-Kray Associates,  a company engaged in the development
of pharmaceutical  products. From 1964 to 1980, Dr. Dugger was Associate Section
Head for Research and  Development at Sandoz  Pharmaceuticals  Corporation.  Dr.
Dugger  received an MS in Chemistry  from the University of Michigan in 1960 and
received a Ph.D. in Chemistry from the University of Michigan in 1962.

John H. Klein,  Chairman of the Board. Mr. Klein joined NovaDel in February 2002
as a consultant  and as Chairman of its Board of  Directors.  From April 1996 to
the  present  Mr.  Klein  has  been  affiliated  with a number  of  enterprises,
including True North Capital (Chairman/ Managing  Director),  Kindred Healthcare
(Director),  US  Interactive,  Inc.  (Director),  America's  Plan  (Director and
Chairman),  Coleman Co., Inc. (Director),  Sunbeam Corp. (Director),  Bi- Logix,
Inc. (Director),  Strategic Business and Technology  Solutions,  LLC (Chairman),
Cybear  (Director and Chairman) and Image Vision  (Director and Vice  Chairman).
From 1996 to 1998,  Mr.  Klein was  Chairman  and CEO of Mim Corp.  From 1989 to
1996, he was President, CEO and Director of Zenith Laboratories,  Inc., which in
1995 merged into IVAX,  Inc.,  of which Mr. Klein was an  Executive  Officer and
President of its IVAX North  American  Multi-Source  Pharmaceutical  Group.  Mr.
Klein holds BS and MBA degrees from Roosevelt University, Chicago, Illinois.

Donald  Deitman,  Chief Financial  Officer.  Mr. Deitman joined NovaDel in 1998.
From 1988  until  joining  NovaDel,  Mr.  Deitman  was  employed  as a  business
consultant implementing multi-module MRP II software systems. From 1982 to 1988,
Mr. Deitman was corporate controller for FCS Industries, Inc. of Flemington, New
Jersey.  From 1975 to 1982,  he was  manager of  materials  and  systems for the
Walworth Company operations located in Linden and Elizabeth, NJ and from 1966 to
1975, he was employed by Ortho Pharmaceuticals, Inc. and Ortho Diagnostics, Inc.
Mr. Deitman received a BS in Accounting from Rutgers University in 1972.

Robert F. Schaul, Esq.,  Secretary and Director.  Mr. Schaul has been a Director
of NovaDel  since  November 1991 and was Vice  President,  Secretary and General
Counsel of NovaDel from November 1991 to February  1995. He has advised  NovaDel
since its formation.  Mr. Schaul is also a part-time Municipal Court Judge for a
number of New  Jersey  municipalities.  From 1995 to 1998,  Mr.  Schaul was Vice
President and General Counsel of Landmark Financial Corp. From 1989 to 1991, Mr.
Schaul  was a partner  with the law firm of Glynn,  Byrnes and  Schaul,  and for
twenty years prior  thereto was an attorney and partner with the law firm Kerby,
Cooper,  English,  Schaul & Garvin,  specializing  in business  law and business
related  litigation.  Mr. Schaul  received a BA from New York University in 1961
and a JD from Harvard University in 1964.

William F. Hamilton,  Ph.D.,  Director. Dr. Hamilton was elected to the Board in
March 2003. Dr.  Hamilton has served on the University of  Pennsylvania  faculty
since 1967,  and is the Landau  Professor  of  Management  and  Technology,  and
Director  of the Jerome  Fisher  Program in  Management  and  Technology  at The
Wharton School and the School of Engineering and Applied Science. He serves as a
director of the following publicly-held companies:  Neose Technologies,  Inc., a
company  developing a drug  manufacturing  process and  proprietary  drugs,  and
Digital Lightwave,  Inc., a manufacturer of  telecommunications  test equipment.
Dr. Hamilton  received his B.S. and M.S. in chemical  engineering and his M.B.A.
from the University of Pennsylvania, and his Ph.D. in applied economics from the
London  School of  Economics.  Dr.  Hamilton  is a member of the  Board's  Audit
Committee and Compensation Committee.

Lawrence Jay Kessel, MD, FACP , Director. Dr. Kessel was elected to the Board in
March 2003.  He is  President  of Lawrence J. Kessel,  MD &  Associates,  PC, Dr
Kessel is  president  of a five  physician  practice  specializing  in  Internal
Medicine and  Geriatrics  since 1984.  He graduated  Magna Cum Laude



                                       27
<PAGE>

with a B.S.  degree from the  University  of  Pittsburgh  as an honors  major in
Biology and subsequently graduated with an MD degree from Temple Medical School.
He  completed  a formal  residency  in Internal  Medicine  at Abington  Memorial
Hospital,  and is Board Certified in Internal Medicine with added  qualification
as a  diplomat  in  Geriatric  Medicine.  He is an active  staff  attending  and
Clinical  Instructor  at Chestnut  Hill  Hospital  (University  of  Pennsylvania
affiliate) and Roxborough Memorial Hospital in Philadelphia,  Pennsylvania.  Dr.
Kessel is a Board Reviewer for the American Board of Internal Medicine,  as well
as a Fellow  of the  American  College  of  Physicians.  He also  serves  on the
advisory board of Independence Blue Cross and is a Clinical Assistant  Professor
in the Department of Medicine at Temple  University  Medical  School.Dr.  Kessel
presently  serves as a  director  to  Cypress  Biosciences,  Inc.  of San Diego,
California,   NovaDel   Pharma   Inc,   of   Flemington,   New   Jersey,   Keryx
Biopharmaceuticals,  of New York,  New York,  and Dor  BioPharma,  Inc.  of Lake
Forest, Illinois. He previously served on the Board of Genta, Inc.

Mohammed  Abd  El-Shafy,  Ph.D.,  Vice  President-Formulation  Development.  Dr.
El-Shafy has been an employee of NovaDel since May of 2002. From 1999 to 2002 he
was employed as a Team Leader and Senior  Scientist with Nastech  Pharmaceutical
Inc.,  Hauppauge,  New York.  From 1998 to 1999 Dr. El-Shafy was a Post-Doctoral
Fellow at the  University  of  Wisconsin's  School of Pharmacy.  He received his
doctorate in 1997 from the School of  Pharmacy,  University  of Wales,  Cardiff,
Wales,  UK. From 1983 to 1993 he was an  Assistant  Lecturer  of  Pharmaceutical
Sciences on the Faculty of Pharmacy, Al-Azhar University, Cairo, Egypt.

Barry Cohen, Vice President of New Business and Product  Development.  Mr. Cohen
joined   Novadel   in  May   2003.   Before   joining   Novadel,   he  was  Vice
President-Business  Development at Keryx, and before that held several executive
marketing and business  development  positions at Novartis Consumer Health.  Mr.
Cohen holds a BBA in Marketing  from Hofstra  University and an MBA in Marketing
from Pace University.

Mark H. Rachesky,  M.D.,  Director.  Dr. Rachesky joined the Board in June 2003.
Dr.  Rachesky  is the  founder  and  President  of MHR Fund  Management  LLC and
affiliates,  investment managers of various private investment funds that invest
in  inefficient  market  sectors,   including  special  situation  equities  and
distressed  investments.  Dr. Rachesky is currently on the board of directors of
Neose Technologies,  Inc. a company developing a drug manufacturing  process and
proprietary  drugs. Dr. Rachesky is a graduate of Stanford  University School of
Medicine,  and Stanford  University School of Business.  Dr. Rachesky  graduated
from the University of Pennsylvania with a major in Molecular Aspects of Cancer.

Charles  Nemeroff,  M.D., Ph.D. Dr. Nemeroff joined the Board in September 2003.
Dr.  Nemeroff  has been the  Reunette W. Harris  Professor  and  Chairman of the
Department of Psychiatry and Behavioral  Sciences at the Emory University School
of Medicine in Atlanta,  Georgia, since 1991. He has served on the Mental Health
Advisory  Council of the National  Institute of Mental Health and the Biomedical
Research  Council for NASA.  Dr.  Nemeroff is a past  President  of the American
College  of  Psychiatrists  and a past  President  of the  American  College  of
Neuropsychopharmacology and is Editor-in-Chief of Neuropsychopharacology. He has
served as Editor-in-Chief of the Psychopharmacology  Bulletin,  Associate Editor
of Biological Psychiatry and as the  Co-Editor-in-Chief of both critical reviews
in  Neurobiology  and  Depression  and  Anxiety.  Dr.  Nemeroff  serves  on  the
Scientific Advisory Board of numerous pharmaceutical companies, including Acadia
Pharmaceuticals,  Astra Pharmaceuticals,  Forest Laboratories, Janssen, Organon,
Glaxo-SmithKline  Beecham and  Wyeth-Ayerst.  Dr. Nemeroff has received numerous
awards for his research,  including the Bowis Award from the American College of
Psychiatrists  and the Menninger Prize from the American  College of Physicians.
In 2002 he was elected to the Institute of Medicine.



                                       28
<PAGE>

Code of Ethics

 The Company's  Board of Directors has been actively  considering  adoption of a
Code of Ethics  to be  applicable  to its Chief  Executive  Officer  and  senior
financial  executives.  The Code of Ethics will be designed to deter wrong-doing
and promote  honest and ethical  behavior,  full,  fair,  timely,  accurate  and
understandable  disclosure,  and  compliance  with  applicable  laws.  The Board
anticipates  it will  adopt the Code of Ethics  before  the end of the  calendar
year.  Following adoption.  a copy of the Code of Ethics will be provided to any
person  without  charge upon written  request to the Secretary of the Company at
its executive offices, 25 Minneakoning Road, Flemington, N.J.


Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Exchange Act requires  officers,  directors and persons who
own more  than ten (10)  percent  of a class  of  equity  securities  registered
pursuant to Section 12 of the  Exchange  Act to file  reports of  ownership  and
changes in ownership  with both the SEC and the  principal  exchange  upon which
such  securities are traded or quoted.  Officers,  directors and persons holding
greater  than ten (10) percent of the  outstanding  shares of a class of Section
12-registered  equity  securities  ("Reporting  Persons")  are also  required to
furnish  copies of any such  reports  filed  pursuant  to  Section  16(a) of the
Exchange  Act with the  Company.  Based solely on a review of the copies of such
forms furnished to the Company, the Company believes that from August 1, 2002 to
July 31, 2003 all Section 16(a) filing requirements  applicable to its Reporting
Persons were complied with.



                                       29
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

                             EXECUTIVE COMPENSATION

The  following  table sets forth a summary  for the fiscal  years ended July 31,
2003,  2002  and  2001,  respectively,  of the cash  and  non-cash  compensation
awarded, paid or accrued by the Company to the Company's Chief Executive Officer
("CEO") and its four most  highly  compensated  officers  other than the CEO who
served in such  capacities at the end of fiscal 2003  (collectively,  the "Named
Executive Officers"). There were no restricted stock awards, long-term incentive
plan payouts or other compensation paid during fiscal 2001, 2002 and 2003 to the
Named Executive Officers, except as set forth below:



                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
------------------------------ ------- -------------------------------------- ------------------------------------- ----------------
                                                ANNUAL COMPENSATION                 LONG-TERM COMPENSATION
                                      -------------------------------------- -------------------------------------
                                                                                      AWARDS             PAYOUTS
                                                                             -------------------------- ----------
                                                                                           SECURITIES
                                                                              RESTRICTED   UNDER-LYING
                                                              OTHER ANNUAL      STOCK       OPTIONS/       LTIP        ALL OTHER
             NAME AND         FISCAL    SALARY       BONUS    COMPENSATION     AWARD(S)      SAR (1)     PAYOUTS      COMPENSATION
        PRINCIPAL POSITION     YEAR       ($)         ($)           ($)          ($)           (#)         ($)            ($)
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
<S>                             <C>       <C>         <C>            <C>          <C>       <C>              <C>         <C>
Gary A. Shangold, M.D.          2003      210,900     200,000        0            0         1,000,000        0           0
President and CEO
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
Harry A. Dugger, III, Ph.D.     2003      246,900        0           0            0          275,000         0        12,000
Chief Scientific Officer,
formerly President and CEO
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
                                2002      347,000        0           0            0             0            0        10,000

------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
                                2001      182,974        0           0            0             0            0           0
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
John H. Klein                   2003      300,000        0           0            0             0            0        72,000
Chairman
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
                                2002      150,000        0           0            0         1,000,000        0        36,000
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
Donald Deitman                  2003      124,200        0           0            0             0            0         7,200
Chief Financial Officer
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
                                2002      104,400        0           0            0             0            0         4,200
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
                                2001      70,800         0           0            0             0            0           0
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
Robert  C. Galler               2003      186,900        0           0            0          350,000         0           0
Vice President
Corporate Development
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
                                2002      143,600        0           0            0          700,000         0         6,600
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
Mohammed abd Al-Shafy, Ph.D.,   2003      144,000        0           0            0          100,000         0         5,400
Vice President -
Formulation Development
------------------------------ ------- ------------ ---------- -------------- ------------- ------------ ---------- ----------------
</TABLE>

         (1)      No Stock Appreciation Rights have been issued.


                                       30
<PAGE>


                        OPTION GRANTS IN LAST FISCAL YEAR
                               (individual grants)

The following table sets forth  information  with respect to the Named Executive
Officers concerning grants of options during fiscal 2003:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                              Option/SAR Grants in Last Fiscal Year
----------------------------------------------------------------------------------------------------------------------------------
                                                        Individual Grants
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
               (a)                              (b)                        (c)                    (d)                  (e)
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
              Name                   Number of Securities      % of Total Options/SARs     Exercise or Base        Expiration
                                    Underlying Options/SARs    Granted to Employees in       Price ($/Sh)             Date
                                          Granted (#)                Fiscal Year
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
<S>                                        <C>                          <C>                      <C>               <C>   <C>
Gary A. Shangold, M.D.                     1,000,000                    54 %                     $1.93             2 Dec 2007
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
Harry A Dugger III, Ph.D                    275,000                     15 %                     $0.70            14 Nov. 2011
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
John H. Klein                                  0                         N/A                     $2.40            31 Jan. 2012
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
Donald J. Deitman                              0                         N/A                      N/A                  N/A
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
Robert Galler                               350,000                     19 %                     $0.75            11 Dec. 2011
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
Mohammed Abd El-Shafy, Ph.D.                50,000                       3 %                     $1.51             27 Mar 2008
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
Barry Cohen                                 75,000                       4 %                     $2.04             13 May 2013
---------------------------------- -------------------------- -------------------------- ---------------------- ------------------
</TABLE>


                                       31
<PAGE>

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES


The following table sets forth  information  with respect to the Named Executive
Officers  concerning  the exercises of options during fiscal 2003 and the number
and value of unexercised options held as of the end of fiscal 2003.

<TABLE>
<CAPTION>
--------------------------------- ------------------- ------------------- ---------------------- -----------------------
                                                                         NUMBER OF SECURITIES
                                                                              UNDERLYING         VALUE OF UNEXERCISED
                                                                          UNEXERCISED OPTIONS    IN-THE-MONEY OPTIONS
                                  NUMBER OF SHARES                        AT FISCAL YEAR END;     AT FISCAL YEAR END
       NAME OF EXECUTIVE            ACQUIRED ON                              (EXERCISABLE/        ($); (EXERCISABLE/
            OFFICER                   EXERCISE       VALUE REALIZED ($)     UNEXERCISABLE)          UNEXERCISABLE)
--------------------------------- ------------------- ------------------- ---------------------- -----------------------
<S>                                      <C>                                   <C>     <C>           <C>       <C>
Harry A. Dugger, III, Ph.D.              0                   -                 920,000/0             716,600 / 0
-------------------------------- ------------------- ------------------- ---------------------- -----------------------
John H. Klein                            0                   -             333,333 / 666,667            0 / 0
-------------------------------- ------------------- ------------------- ---------------------- -----------------------
Gary A. Shangold, M.D.                   0                   -               0 / 1,000,000              0 / 0
-------------------------------- ------------------- ------------------- ---------------------- -----------------------
Donald Deitman                           0                   -                     -                      -
-------------------------------- ------------------- ------------------- ---------------------- -----------------------
Mohammed Abd El-Shafy, Ph.D.             0                   -              150,000/50,000             26,000/0
-------------------------------- ------------------- ------------------- ---------------------- -----------------------
Robert Galler                            0                   -                1,050,000/0            1,344,000/0
-------------------------------- ------------------- ------------------- ---------------------- -----------------------
Barry Cohen                              0                   -                 0/75,000                  0/0
-------------------------------- ------------------- ------------------- ---------------------- -----------------------
</TABLE>

Employment Agreements and Change in Control Arrangements

Gary A. Shangold, M.D.. In December 2002, Dr. Shangold entered into a three-year
employment  agreement  with NovaDel  pursuant to which he agreed to serve as its
President and Chief Executive  Officer.  We 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,  NovaDel during his
term.  We paid Dr.  Shangold a contractual  bonus of $200,000  during the fourth
quarter.  The investment 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 to purchase  1,000,000  shares of our common
stock (at an  exercise  price of $1.93 per  share)  which vest over a three year
period.

Harry A. Dugger,  III,  Ph.D. In February 2002,  effective  January 1, 2002, Dr.
Dugger entered into a new three-year  employment agreement at a base salary, for
the first year, of $248,500 per year (which  increases  each year by the greater
of the CPI index or 5%).  Except for the increase in base  salary,  there was no
material difference between the new employment  agreement and that previously in
effect.



                                       32
<PAGE>

John Klein.  In February  2002,  Mr. Klein  entered  into a one-year  consulting
agreement  (which was renewed in February 2003 for an additional  one year) at a
base  compensation of $300,000,  plus certain fringe  benefits of  approximately
$72,000 per year.  Pursuant to the agreement,  he was granted 1,000,000 non-plan
options  at  $2.40  per  share.   See   "Certain   relationships   and   related
transactions."  Mr. Klein is also  entitled to certain  bonuses,  in the form of
stock, stock options or other rights or property, as determined by the Board. In
addition,  Mr. Klein is entitled to receive  certain  success fees (based upon a
percentage  of net  revenues)  upon  completion  of certain  types of  corporate
transactions (i.e., strategic partnerships, licensing arrangements and the like)
which are  introduced  to NovaDel by Mr.  Klein.  The  percentage of net revenue
(which is between 4% - 10%)  depends  upon the share of profits  that NovaDel is
entitled to in such transactions.

Donald Deitman. In February 2002, effective January 1, 2002, Mr. Deitman entered
into a three year  employment  agreement  as our Chief  Financial  Officer.  The
agreement  provided for a base salary,  for the first year, of $125,000 per year
(which  increases  each year by the  greater of the CPI index or 5%).  All other
provisions  of the  agreement  are the  same as those in  effect  for our  other
executives.

Mohammed  Abd  El-Shafy,  Ph.D.  In May  2002,  we  entered  into a  three  year
employment    agreement   with   Dr.   El-Shafy,    who   was   appointed   Vice
President-Formulation Development. Pursuant to the agreement, he received a base
salary,  for the first  year,  of  $110,000,  which  increased  in April 2003 to
$180,000.  In addition,  he was granted  150,000  non-plan  options at $3.02 per
share.  Subsequently,  in March 2003,  Dr.  El-Shafy was granted  50,000 options
under the 1998 Option Plan at an exercise price of $1.51.

Barry Cohen. In May 2003, we entered into a three year employment agreement with
Barry  Cohen,  who  was  appointed  Vice  President-New   Business  and  Product
Development.  Pursuant to the agreement,  he receives a base salary of $185,000,
plus incentive bonuses.  Pursuant to the agreement, he was issued 75,000 options
(exercisable  at $2.04 per share)  under the 1998 Plan.  60,000 of such  options
vest in three equal  installments  commencing May 2004.  These options expire in
May  2008.  The  balance  of such  options  vest  upon  achievement  of  certain
objectives.

Robert C. Galler.  In August 2003,  Mr. Galler agreed to change from an employee
of the Company as our Vice  President - Corporate  Development  to a  consulting
arrangement.  At that time, his additional options to purchase 350,000 shares of
our common stock at an exercise price of $.75 per share vested.  In August 2003,
he entered into a consulting  agreement with the Company at a base  compensation
of  $180,000  per year and the vesting of  additional  options.  The  consulting
agreement terminates in February 2005.

The  foregoing   agreements  also  provide  for  certain   non-competition   and
non-disclosure covenants on the part of such executive. However, with respect to
the  non-competition  covenants,  a court  may  determine  not to  enforce  such
provisions or only partially enforce such provisions.  Additionally, each of the
foregoing  agreements  (other  than John  Klein)  provides  for  certain  fringe
benefits,  such as inclusion in pension,  profit sharing, stock option, savings,
hospitalization  and other  benefit  plans at such times as NovaDel  shall adopt
them.

Stock Option Plans

NovaDel  has  three  stock  option  plans,  adopted  in  1992,  1997  and  1998,
respectively  (collectively referred to as the "Plans"). The 1992 and 1997 Plans
provides for the issuance of options to purchase 500,000 shares of common stock,
and the 1998 Plan  provides  for the  issuance of options to purchase  1,800,000
shares of common stock, for a total of 2,800,000  shares.  The 1997 Stock Option


                                       33
<PAGE>

Plan is administered by William  Hamilton and Lawrence Kessel who constitute the
Compensation  Committee  of the Board of Directors  ("Committee"),  and the 1992
Stock  Option  Plan and 1998 Stock  Option Plan are  administered  by the entire
Board  of  Directors.  For  purposes  of  the  following  discussion,  the  term
"Committee"  will be used to reference  the  Committee  with respect to the 1997
Stock  Option Plan and the entire  Board of  Directors  with respect to the 1992
Stock Option Plan and 1998 Stock Option Plan, as  applicable.  The Committee has
sole  discretion and authority,  consistent with the provisions of the Plans, to
select the  Eligible  Participants  to whom  options  will be granted  under the
Plans,  the number of shares  which will be covered by each  option and the form
and terms of the agreement to be used. All employees and officers of the Company
are eligible to participate in the Plans.

At July 31, 2003,  300,000,  450,000 and 892,500 shares of our common stock were
reserved for issuance  pursuant to the 1992, 1997 and 1998 Plans,  respectively.
The exercise prices for the outstanding options reserved under the 1992 and 1997
Plans range  between $.63 and $2.00 per share;  and the exercise  prices for the
outstanding  options  reserved  under the 1998 Plan range between $.63 and $2.69
per share.

The  Committee is empowered to determine the exercise  price of options  granted
under the Plans, but the exercise price of ISOs must be equal to or greater than
the fair  market  value of a share of  common  stock on the date the  option  is
granted (110% with respect to optionees who own at least 10% of the  outstanding
common stock). The Committee has the authority to determine the time or times at
which options granted under the Plans become exercisable,  but options expire no
later  than ten  years  from  the date of grant  (five  years  with  respect  to
Optionees  who own at least 10% of the  outstanding  common  stock of  NovaDel).
Options are  nontransferable,  other than by will and the laws of  descent,  and
generally  may be  exercised  only by an employee  while  employed by NovaDel or
within 90 days  after  termination  of  employment  (one  year from  termination
resulting from death or disability).

No ISO may be  granted  to an  employee  if, as the  result of such  grant,  the
aggregate fair market value  (determined at the time each option was granted) of
the shares with respect to which ISOs are exercisable for the first time by such
employee  during any  calendar  year  (under  all such plans of NovaDel  and any
parent  and  subsidiary)  exceeds  $100,000.  The Plans do not  confer  upon any
employee any right with respect to the  continuation  of  employment by NovaDel,
nor do the Plans  interfere  in any way with the  employee's  right or NovaDel's
right to terminate the employee's employment at any time.

Non-Plan Options

As of July 31, 2003, we had 4,550,000  non-plan options  outstanding as follows:
600,000 options exercisable at $1.84 per share; 1,050,000 options exercisable at
$.75 per share;  1,000,000  options  exercisable  at $2.40 per share;  1,000,000
options exercisable at $1.93 per share; 200,000 options exercisable at $1.30 per
share;   200,000  options  exercisable  at  $151  per  share;   100,000  options
exercisable at $2.15 per share;  250,000 options exercisable at $3.18 per share;
and 150,000 options exercisable at $3.02 per share.

Compensation of Directors

The  Directors  of the  Company are  elected  annually  and serve until the next
annual  meeting  of  stockholders  and until a  successor  shall  have been duly
elected and qualified.  Effective  September 2003,  Directors of the Company who
are not employees or consultants  receive fees of $2,000 for each meeting of the
Board of Directors attended in person or $1,000 if participated in by telephone.
Directors  are also  compensated  $3,000 for  serving  or $5,000 for  chairing a
committee of the Board. Such Directors also are awarded 100,000 Non-Plan Options
upon their  election to the Board,  to vest in three equal  annual  installments
beginning on the first  anniversary  of their  appointment.  In  addition,  such
Directors are to be


                                       34
<PAGE>

awarded an additional  50,000  Non-Plan  Options for each year of service on the
Board  thereafter,  beginning on the first  anniversary of their election;  such
annually awarded options also vest over a three year period.  Such Directors are
also  reimbursed for expenses  incurred in connection  with their  attendance at
meetings of the Board of Directors or committees.  Directors may be removed with
or without cause by a vote of the majority of the stockholders  then entitled to
vote.

In March  2003,  we  issued  100,000  Non-Plan  Options  to each of Mr.  William
Hamilton  and Dr.  Lawrence  Kessel  upon  their  being  elected to the Board of
Directors.  In March  2003,  we also  issued  10,000  options to each of Messrs.
Schaul and Komreich  under the 1998 Plan.  All of these options have an exercise
price of $1.51;  the  options  issued to  Messrs.  Schaul and  Kornreich  vested
immediately, those issued to Drs. Hamilton and Kessel vest in three equal annual
installments beginning in March 2004 and expire in March 2008.

In June,  2003, we issued 100,000  Non-Plan Options to Dr. Mark H. Rachesky upon
his being  appointed to the Board of  Directors.  These options have an exercise
price of $2.15 and vest in three equal  annual  installments  beginning  in June
2004 and expire in June 2008.

There were no other arrangements  pursuant to which any Director was compensated
during fiscal 2003 for any services provided as a Director.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT AND RELATED MATTERS

The following table sets forth information,  as of October 15, 2003 with respect
to the  beneficial  ownership  of the  outstanding  shares of our  common  stock
(17,972,760  as of such date plus,  where  relevant  for  particular  beneficial
owners,  shares which such  beneficial  owner has the right to acquire within 60
days),  by (i) any holder  known to us owning more than five percent (5%) of the
outstanding shares; (ii) our officers and directors; and (iii) the directors and
officers of NovaDel as a group:

<TABLE>
<CAPTION>
      Title of        Name and Address or                               Amount and Nature of            Percentage of
       Class          Number in Group(1)                                Beneficial Ownership                Class
       -----          ------------------                                --------------------                -----
<S>                   <C>                                               <C>
Common Stock          Harry A. Dugger, III, Ph.D.                        2,104,003(2)                      11.1%

Common Stock          Gary A. Shangold, M.D.                               333,333(3)                       1.8%

Common Stock          John Klein                                           333,333(4)                       1.8%

Common Stock          Robert Galler                                      1.050,000(5)                       5.5%

Common Stock          Donald Deitman                                             0                           ___

Common Stock          Robert F. Schaul, Esq.                               274,286(6)                       1.5%

Common Stock          Mohammed Abd El-Shafy                                150,000(7)                        .8%

Common Stock          William F. Hamilton, Ph.D.                                 0(8)                        ___

Common Stock          Lawrence J. Kessel, M.D., FACP                             0(8)                        ___
</TABLE>


                                       35
<PAGE>

<TABLE>
<S>                   <C>                                                <C>
Common Stock          Barry Cohen                                                0(9)                        ___

Common Stock          Mark H. Rachesky                                     833,334(10)                      4.4%

Common Stock          Charles Nemeroff, M.D., Ph.D.                              0(11)                       ---

Common Stock          Lindsay Rosenwald                                 13,233,334(12)                      42.4%

Common Stock          Biomedical Investment Group, LLC                   5,333,334 (12)(13)                 22.9%

Common Stock          All Executive Officers and Directors as    4,028,289 (2)(3)(4) (6)(7)(8)(9)           26.9%
                      a group (11 persons)                                   (10) (11)
</TABLE>

(1) The address of all holders  listed  herein is c/o NovaDel  Pharma  Inc.,  25
Minneakoning Road, Flemington, New Jersey 08822.

(2) Includes options to purchase 200,000 shares of common stock  (exercisable at
$.70 per share)  issued  under the 1992 Stock  Option Plan which  expire in July
2006; options to purchase 50,000 shares of common stock (exercisable at $.70 per
share) under the 1997 Stock Option Plan which expire in December  2006;  options
to purchase 95,000 shares of common stock (exercisable at $.70 per share) issued
under the 1998 Stock  Option  Plan  which  expire in  January  2005;  options to
purchase 300,000 shares of common stock issued outside of the Plans (exercisable
at $1.84 per share)  which expire  November  2007;  options to purchase  200,000
shares of common stock  issued  outside of the Plans  (exercisable  at $1.30 per
share) which expire  October 2007;  options to purchase  75,000 shares of common
stock  (exercisable at $1.30 per share) issued under the 1998 Stock Option Plan,
which expire in October  2007;  152,000  shares owned by his daughter  Christina
Dugger; and 152,000 shares owned by his son Andrew Dugger.

(3) Does not include  Non-Plan  Options,  issued in December  2002,  to purchase
1,000,000 shares of common stock at an exercise price of $1.93 per share.  These
options vest in three equal annual installments, beginning in December 2003, and
expire in December 2007.

(4) Represents 333,333 Non-Plan Options exercisable at $2.40 per share. Does not
include  additional  Non-Plan options to purchase 666,667 shares of common stock
at an exercise price of $2.40 per share.  These  additional  options vest in two
equal installments in February 2004 and 2005. All of the options expire in 2012.

(5) Mr.  Galler was granted  Non-Plan  options to purchase  1,050,000  shares of
common stock,  at an exercise  price of $0.75 per share.  700,000 of the options
expire in September 2011; the remainder of 350,000 expire in December 2011.

(6)  Includes:  20,000  options,  issued under the 1992 Option Plan, to purchase
common  stock at an exercise  price of $.63 per share,  expiring in July,  2006;
25,000 options issued under the 1997 Option Plan, to purchase common stock at an
exercise price of $.63 per share,  expiring in March 2008; 10,000 options issued
under the 1998 Option Plan,  to purchase  common  stock at an exercise  price of
$.63 per share, expiring in September 2009: 95,000 options issued under the 1998
Option Plan,  to purchase  common stock at an exercise  price of $.63 per share,
expiring in January 2010;  75,000  options issued under the 1998 Option Plan, to
purchase  common  stock at an  exercise  price of $2.69 per share,  expiring  in
February 2012; and, 10,000 options issued under the 1998 Option Plan to purchase
common stock at an exercise price of $1.51 per share, expiring in March 2008.

(7) Includes  Non-Plan Options  exercisable at $3.02 per share; does not include
additional  Non-Plan  Options to purchase  50,000  shares of common  stock at an
exercise price of $3.02 per shar,.  which  additional  options vest in May 2004.
All of such options  expire in May 2012.  Also includes  50,000  options  issued
under the 1998  Option  Plan to purchase  common  stock at an exercise  price of
$1.51 per share, expiring in March 2008.



                                       36
<PAGE>

(8) Does not include  options to purchase  100,000  shares of common stock at an
exercise price of $1.51 per share, which shall vest in three annual installments
beginning March 2004.

(9) Does not include  75,000  options  issued  under the 1998 Plan,  to purchase
common stock at an exercise price of $2.01 per share.  The options expire in May
2008 and vest subject to certain conditions.

(10) Does not include  options to purchase  100,000 shares of common stock at an
exercise price of $2.15 per share, which shall vest in three annual installments
beginning June,  2004.  Includes  666,667 shares of common stock and warrants to
purchase  166,667 shares of common stock at an exercise price of $2.00 per share
which  expire in April,  2008.  Such shares and warrants are held by MHR Capital
Partnership, LP, which is controlled by Dr. Rachesky.

(11) Does not include  options to purchase  100,000 shares of common stock at an
exercise price of $1.85 per share, which shall vest in three annual installments
beginning September 2004.

(12)  Includes  3,950,000  shares  of  common  stock and  warrants  to  purchase
3,950,000  shares of common  stock at an exercise  price of $.75 per share which
expire in December  2008.  Also  includes  2,666,667  shares of common stock and
2,666,667 warrants to purchase 2,666,667 shares of common stock, which expire in
March 2009, owned by Biomedical  Investment Group, LLC, which is an affiliate of
Lindsay A. Rosenwald.

(13)  Includes  warrants  to  purchase  2,666,667  shares of common  stock at an
exercise price of $.75 per share which expire in March 2009.

Shareholder Approval of Equity Compensation Plans

The  following  table sets forth  information  as of the end of fiscal 2003 with
respect to the number of shares of the Company's Common Stock issuable  pursuant
to  equity  compensation  plans  which  have  and  have  not  been  approved  by
stockholders.

                      Equity Compensation Plan Information
<TABLE>
<CAPTION>
=============================== ============================ ============================ ============================

                                Number of securities to be    Weighted average exercise
                                  issued upon exercise of       price of outstanding         Number of securities
        Plan Category              outstanding options,         options, warrants and       remaining available for
                                    warrants and rights                rights                   future issuance
=============================== ============================ ============================ ============================
                                            (a)                          (b)                          (c)
=============================== ============================ ============================ ============================
<S>                             <C>                          <C>                          <C>
Equity compensation plans                    0                           N/A                          N/A
approved by security holders
=============================== ============================ ============================ ============================
Equity compensation plans not            3,717,472                     $1.658                         N/A
approved by security holders
=============================== ============================ ============================ ============================
TOTAL                                    3,717,472                     $1.658                         N/A
=============================== ============================ ============================ ============================
</TABLE>


                                       37
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

To the best of management's knowledge,  other than (i) compensation for services
as officers and directors  described  under Item 10, or (ii) as set forth below,
there were no material transactions,  or series of similar transactions,  or any
currently proposed  transactions,  or series of similar  transactions,  to which
NovaDel was or is to be a party, in which the amount involved  exceeds  $60,000,
and in which any director or executive  officer,  or any security  holder who is
known by us to own of  record or  beneficially  more than 5% of any class of our
common  stock,  or any member of the  immediate  family of any of the  foregoing
persons, has an interest.

During December 2001, we received net proceeds of approximately  $3,000,000 from
a private  placement  of  4,000,000  units,  which  were  purchased  by  Lindsay
Rosenwald.  Each unit  consisted  of one share of  common  stock,  and a warrant
(which  expires  December  2008) to purchase an  additional  share of our common
stock at an exercise price of $.75. As part of the purchase agreement, we agreed
to elect to the Board a Director to be  nominated  by Dr.  Rosenwald  (as of the
date hereof, no such nominee had been selected) and to permit Dr. Rosenwald or a
representative  of his to attend  Board  meetings.  Appropriate  confidentiality
agreements are in place to protect confidential  company  information.  In March
2002,  we received  net  proceeds  of  approximately  $2,000,000  from a private
placement of 2,666,667  additional units at a sale price of $.75 per unit. These
units were  purchased by Biomedical  Investment  Group LLC,  which is affiliated
with Dr. Rosenwald. These warrants expire in March 2009.

In April  2003,  we  entered  into a  license  and  development  agreement  with
Manhattan Pharmaceuticals,  Inc. (Manhattan) for the worldwide, exclusive rights
to out lingual spray technology to deliver Propofol for pre-procedural sedation.
The terms of the agreement call for certain  milestones and other payments,  the
first of which was received  during June 2003. One of the Company's  Affiliates,
Dr.  Lindsay  Rosenwald,  is also an  Affiliate  of  Manhattan.  Manhattan  is a
development  stage  company  and has no  revenues  to date.  The  agreement  has
conditions  that  stipulate  that  Manhattan  can achieve  this. If Manhattan is
unable to raise additional funds, there is significant doubt it would be able to
fulfill its remaining  commitments to the Company. See also Notes 6 and 7 to the
Financial Statements.

During fiscal 2003 the Company paid Mr. Schaul approximately  $160,000 for legal
services rendered to the Company.


                                     PART IV

ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K

         (a) (1) The  following  financial  statements  are included in Part II,
Item 7:

        Report of Independent Auditors                             Page F-1
        Balance Sheet                                                   F-2
        Statement of Operations                                         F-3
        Statement of Changes in Stockholders' Equity                    F-4
        Statement of Cash Flows                                         F-5
        Notes to Financial Statements                         F-2 thru F-16





                                       38
<PAGE>


INDEPENDENT AUDITORS'S REPORT

To the Audit Committee of NOVADEL PHARMA INC.

We have  audited the balance  sheet of NOVADEL  PHARMA INC.,  formerly  known as
Flemington  Pharmaceutical  Corporation  as of July 31,  2003,  and the  related
statements of operations, changes in stockholders' equity and cash flow for each
of the two years in the period then ended.  These  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of NOVADEL PHARMA INC. at July 31,
2003,  and the results of its  operations and its cash flows for each of the two
years in the period then ended,  are in conformity  with  accounting  principles
generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  the Company has had a recent history of recurring losses
from  operations,  giving rise to an accumulated  deficit through July 31, 2003,
and  is  currently  developing   pharmaceutical   products  which  will  require
substantial  financing to fund anticipated product development costs.  Resulting
operating  losses and negative  cash flows from  operations  are likely to occur
until, if ever,  profitability can be achieved through  successful  marketing of
newly  developed  products.  These  factors  raise  substantial  doubt about the
Company's ability to continue as going concern.  Management's plans in regard to
these matters are  described in Note 2. The financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.



                                                /s/ WISS & COMPANY, LLP

                                                WISS & COMPANY, LLP
Livingston, New Jersey
September 8, 2003



<PAGE>


                               NOVADEL PHARMA INC.

                                  BALANCE SHEET
                                  JULY 31, 2003

                                     ASSETS


<TABLE>
<CAPTION>
CURRENT ASSETS:
<S>                                                                              <C>
  Cash and equivalents .......................................................   $  3,086,000
  Accounts receivable - trade ................................................          2,000
  Prepaid expenses and other current assets ..................................        168,000
                                                                                 ------------

            Total Current Assets .............................................                  $  3,256,000

FURNITURE, FIXTURES, EQUIPMENT
and LEASEHOLD IMPROVEMENTS, LESS
ACCUMULATED DEPRECIATION OF $252,000 .........................................                       714,000



OTHER ASSETS .................................................................                       357,000
                                                                                                 -----------
                                                                                                 $ 4,327,000
                                                                                                 ===========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable-trade .....................................................   $    139,000
  Accrued expenses and other current liabilities .............................        318,000
                                                                                 ------------
     Total Current Liabilities ...............................................                  $    457,000


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Preferred stock, $.01 per value:
        Authorized shares, none issued .......................................      1,000,000
     Common stock $.001 par value:
        Authorized - 50,000,000 shares
           Issued and outstanding -17,972,760 shares .........................         18,000
   Additional paid-in capital ................................................     19,480,000
   Accumulated Deficit .......................................................    (15,628,000)
                                                                                 ------------
           Total Stockholders' Equity ........................................                     3,870,000
                                                                                                 -----------
                                                                                                 $ 4,327,000
                                                                                                 ===========
</TABLE>

See accompanying notes to financial statements.

                                       F-1


<PAGE>


                               NOVADEL PHARMA INC.
                             STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>
                                                                         Year Ended
                                                                          July 31,
                                                             ----------------------------------
                                                                 2003                  2002
                                                             ------------          ------------
<S>                                                          <C>                   <C>
CONSULTING REVENUES ................................         $      2,000          $    339,000

CONSULTING, RESEARCH AND DEVELOPMENT EXPENSES ......            1,048,000               962,000

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES .......            4,902,000             3,767,000
                                                             ------------          ------------

LOSS FROM OPERATIONS ...............................           (5,948,000)           (4,390,000)

BUY-OUT OF CONSULTANT'S CONTRACT ...................                   --               (32,000)

INTEREST INCOME ....................................               49,000                44,000
                                                             ------------          ------------

NET LOSS BEFORE TAXES ..............................           (5,899,000)           (4,378,000)

DEFERRED STATE INCOME TAX BENEFIT ..................               84,000                88,000
                                                             ------------          ------------

NET LOSS ...........................................         $ (5,815,000)         $ (4,290,000)
                                                             ============          ============


BASIC AND DILUTED LOSS
PER COMMON SHARE:
  Net Loss .........................................         $       (.38)         $       (.38)
                                                             ------------          ------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING           15,419,000            11,361,000
                                                             ============          ============
</TABLE>

See accompanying notes to financial statements.


                                      F-2
<PAGE>


                               NOVADEL PHARMA INC.
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                 Common Stock
                                        --------------------------------
                                                                             Additional
                                                              Par              Paid-in          Accumulated        Stockholders'
                                           Shares            Value             Capital            Deficit              Equity
                                        -------------    ---------------    --------------     ---------------     ---------------
<S>                                       <C>                   <C>           <C>                <C>                   <C>
BALANCE, JULY 31, 2002                    14,448,817            $14,000       $13,322,000        $(9,813,000)          $3,523,000
                                        -------------    ---------------    --------------     ---------------     ---------------

YEAR ENDED JULY 31, 2003
Common Shares Issued in connection
  with private placements, net of costs    3,200,345              3,000         4,333,000                   -           4,336,000
Shares issued for Options exercised          210,577                  -                 -                   -                   -
Shares issued for Warrants exercised         113,021              1,000            19,000                   -              20,000
Options issued for services                        -                  -         1,674,000                   -           1,674,000
Warrants issued for services                       -                  -             7,000                   -               7,000
Equity investment from related party               -                  -           125,000                   -             125,000
 Net Loss                                          -                  -                 -         (5,815,000)         (5,815,000)
                                        -------------    ---------------    --------------     ---------------     ---------------
BALANCE, JULY 31, 2003                    17,972,760            $18,000       $19,480,000       $(15,628,000)          $3,870,000
                                        =============    ===============    ==============     ===============     ===============
</TABLE>

See accompanying notes to financial statements.


                                      F-3
<PAGE>

                               NOVADEL PHARMA INC
                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   July 31
                                                                                 Year Ended
                                                                       --------------------------------
                                                                          2003                 2002
                                                                       -----------          -----------
CASH FLOW FROM OPERATING ACTIVITIES:
<S>                                                                    <C>                  <C>
  Net  loss                                                            $(5,815,000)         $(4,290,000)
  Adjustments to reconcile net loss to net cash
      flows from operating activities:
      Options issued for services                                        1,674,000            1,947,000
      Warrants issued for services                                           7,000               54,000
      Depreciation and amortization                                         81,000               77,000
      Allowances for Doubtful Accounts                                     (88,000)              79,000
      Changes in operating assets and liabilities:
      Accounts receivable                                                   87,000               12,000
      Demand note receivable, Officer                                           --               60,000
      Prepaid expenses and other current assets                            (72,000)             (39,000)
      Due from Joint Venture partner for reimbursable expenses                  --                6,000
      Other Assets                                                        (335,000)              (5,000)
      Accounts payable - trade                                              14,000              114,000
      Accrued expenses and other current liabilities                       127,000              114,000
                                                                       -----------          -----------
         Net cash flows from operating activities                       (4,320,000)          (1,871,000)
                                                                       -----------          -----------

CASH FLOWS FROM INVESTING ACTIVITIES -
  Purchase of property and equipment                                      (389,000)            (316,000)
                                                                       -----------          -----------
        Net cash flows from investing activities                          (389,000)            (316,000)
                                                                       -----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES -
  Proceeds received from the exercise of warrants                           20,000                   --
  Proceeds received from private placements                              4,336,000            4,916,000
  Capital contributions from related party                                 125,000                   --
                                                                       -----------          -----------
      Net cash flows from financing activities                           4,481,000            4,916,000
                                                                       -----------          -----------
NET CHANGE IN CASH                                                        (228,000)           2,729,000
CASH, BEGINNING OF YEAR                                                  3,314,000              585,000
                                                                       -----------          -----------
CASH, END OF YEAR                                                        3,086,000          $ 3,314,000
                                                                       ===========          ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
    Interest paid                                                      $        --          $        --
                                                                       ===========          ===========
    Income taxes paid                                                  $        --          $        --
                                                                       ===========          ===========
</TABLE>

See accompanying notes to financial statements.


                                      F-4
<PAGE>

                               NOVADEL PHARMA INC.

                          NOTES TO FINANCIAL STATEMENTS

Note 1 - Nature of the Business and Summary of Significant Accounting Policies:

Nature of the Business - NOVADEL PHARMA INC. (the "Company"), which was formerly
known as Flemington Pharmaceutical  Corporation, is incorporated in the State of
Delaware.  The  Company is engaged in the  development  of novel  pharmaceutical
products  combining  presently  marketed drugs with  patent-pending  oral dosage
delivery systems of the Company, designed to enhance and accelerate the onset of
the  therapeutic  benefits  which the drugs are  intended to produce and is also
engaged in domestic and international consulting activities.  Management intends
to develop the products in collaboration with pharmaceutical companies.

                  Revenues  and  Costs  -  Consulting   revenues  from  contract
                  clinical research are recognized as earned.

                  Consulting  contract  costs  normally  consist of fees paid to
                  outside  clinics for studies and an  allocable  portion of the
                  Company's operating expenses. General and administrative costs
                  pertaining to contracts are charged to expense as incurred.

                  Cash  Equivalents - Cash equivalents  include  certificates of
                  deposit and money market  instruments  purchased with original
                  maturities of three months or less.

                  Financial Instruments - Financial instruments include cash and
                  cash equivalents,  accounts  receivable,  accounts payable and
                  accrued   expenses.   The  amounts   reported  for   financial
                  instruments are considered to be reasonable  approximations of
                  their fair values. The fair value estimates  presented here in
                  were  based  on  market  or  other  information  available  to
                  management. The use of different assumptions and/or estimation
                  methodologies  could have a material  effect on the  estimated
                  fair value amounts.

                  Furniture,  Fixtures,  Equipment and Leasehold  Improvements -
                  Furniture,  fixtures, equipment and leasehold improvements are
                  stated at cost. The Company  provides for  depreciation  using
                  accelerated methods, based upon estimated useful lives of 5 to
                  7 years  for  furniture,  fixtures,  equipment  and  leasehold
                  improvements  over  the  useful  life of the  lease  term,  if
                  shorter, for leasehold improvements.

                  Advertising - The Company expenses advertising costs when they
                  are incurred.  The Company did not incur advertising  expenses
                  in 2003 and 2002.

                  Research and Development  Costs - All research and development
                  costs are  expensed as  incurred.  These  include all internal
                  costs,  external  costs related to services  contracted by the
                  Company and research services  conducted for others.  Research
                  and  development  costs  consist  primarily  of  salaries  and
                  benefits,   contractor   fees,   clinical   drug  supplies  of
                  preclinical  and  clinical  development  programs,  consumable
                  research  supplies and allocated  facility and  administrative
                  costs.  The  Company has  incurred  research  and  development
                  expenses that totaled $660,000 and $606,000 for 2003 and 2002,
                  respectively.

                  Income  Taxes  -  Temporary   differences   between  financial
                  statement and income tax reporting  result  primarily from net
                  operating losses. As a result of these temporary  differences,
                  the  Company  has  recorded  a  deferred  tax  asset  with  an
                  offsetting  valuation  allowance  for  the  same  amount.  The
                  Company  received  $84,000  and  $88,000  in  2003  and  2002,
                  respectively  from the  transfer  of New Jersey Net  operating
                  losses (See Note 8).



                                      F-5
<PAGE>

                  Defined  Contribution  Retirement  Plans - The  Company  has a
                  Simple  IRA  retirement  plan,  available  to  all  employees,
                  providing for contributions at management's discretion. During
                  the years  ended July 2003 and July  2002,  the  Company  made
                  contributions to the retirement plan of approximately  $15,000
                  and approximately $11,000, respectively.

                  Risk Concentrations:

                  (a)      Credit Risk - The Company maintains its cash balances
                           in  financial  institutions  that are  insured by the
                           Federal Deposit  Insurance  Corporation  (FDIC) up to
                           $100,000 each.  Such balances  during the fiscal year
                           ended 2003 have exceeded the FDIC limits.

                  (b)      Major Customers - During fiscal 2003, the Company had
                           revenue  from  one   customer   located  in  the  USA
                           approximating 100% of the Company's total revenue.

                           During fiscal 2002,  the Company had revenue from two
                           customers located in the United States  approximating
                           46 % and 40 %,  respectively,  of the Company's total
                           revenue.

                  (c)      Supplier  Dependence  -  The  Company  believes  that
                           certain    raw    materials,    including    inactive
                           ingredients, are available only from a limited number
                           of   suppliers   internationally   and  that  certain
                           packaging  materials  intended for use in  connection
                           with its spray products  currently are available from
                           limited supply sources.  The Company does not believe
                           it will encounter  difficulties in obtaining inactive
                           ingredients or packaging  materials necessary for the
                           manufacture of its products. However, there can be no
                           assurance that the Company will be able to enter into
                           satisfactory  purchasing  agreements or arrangements,
                           thereby,  causing  a  potential  significant  adverse
                           effect on the  Company's  ability to arrange  for the
                           manufacture of formulated products.

                  Use of Estimates - The preparation of financial  statements in
                  conformity  with  generally  accepted  accounting   principles
                  requires  management to make  estimates and  assumptions  that
                  affect the  reported  amounts of assets  and  liabilities  and
                  disclosures of contingent  assets and  liabilities at the date
                  of the  financial  statements  and  the  reported  amounts  of
                  revenues  and expenses  during the  reporting  period.  Actual
                  results could differ from those estimates.

                  Earnings (Loss) per Share - Statement of Financial  Accounting
                  Standards  (SFAS) No. 128,  "Earnings Per Share"  requires the
                  disclosure of both diluted and basic earnings per share. Basic
                  earnings  per share is based on the  weighted  average  of all
                  common shares outstanding. The computation of diluted earnings
                  per  share  does  not  assume  the  conversion,   exercise  or
                  contingent   issuance  of   securities   that  would  have  an
                  antidilutive effect on earnings per share.



                                      F-6
<PAGE>

<TABLE>
<CAPTION>
                                                                                                  Year ended July 31
                                                                                            --------------    --------------
                                                                                                2003              2002
                                                                                            --------------    --------------
                   Numerator:
<S>                                                                                           <C>               <C>
                        Net loss applicable to common shareholders - basic and diluted        (5,815,000)       (4,290,000)
                                                                                            ==============    ==============

                   Denominator:
                        Denominator for basic earnings (loss) per common share:
                            Weighted average shares                                            15,419,000        11,361,000
                   Effect of dilutive securities                                                        -                 -
                                                                                            --------------    --------------

                   Denominator for basic and diluted earnings (loss) per common share          15,419,000        11,361,000
                                                                                            ==============    ==============

                   Earnings (loss) per common share:
                          Basic and Diluted                                                         (.38)             (.38)
</TABLE>


                  The Company uses the intrinsic value method  prescribed by APB
                  Opinion No. 25 to measure  compensation  expense.  If the fair
                  value method had been used to measure  compensation expense as
                  prescribed  by SFAS No. 123, net loss would have  increased by
                  $486,000 or $.03 per share to $6,301,000 or $.41 per share for
                  fiscal 2003.  Net loss would have  increased by  $1,440,000 or
                  $.13 per share to  $5,730,000  or $.51 per  share  for  fiscal
                  2002.

                  Recent  Accounting  Pronouncements  -In November 22, 2002, the
                  FASB  issued  FASB  Interpretation  (FIN) No. 45,  Guarantor's
                  Accounting  and  Disclosure   Requirements   for   Guarantees,
                  including  Indirect  Guarantees of Indebtedness of Others. FIN
                  45 requires  that a liability  be recorded in the  guarantor's
                  balance sheet upon issuance of a guarantee.  In addition,  FIN
                  45 requires  disclosures  about the guarantees  that an entity
                  has issued,  including a rollforward  of the entity's  product
                  warranty  liabilities.  The Company  does not expect FIN 45 to
                  have a material impact on its financial  position,  results of
                  operations or cash flows.

                  In December 2002, the FASB issued SFAS No. 148, Accounting for
                  Stock-Based Compensation,  Transition and Disclosure. SFAS No.
                  148 provides alternative methods of transition for a voluntary
                  change  to the  fair  value  base  method  of  accounting  for
                  stock-based employee compensation.  SFAS No. 148 also requires
                  that  disclosures  of the pro  forma  effect of using the fair
                  value   method  of   accounting   for   stock-based   employee
                  compensation  be  displayed  more  prominently  and in tabular
                  format. Additionally,  SFAS No. 148 requires disclosure of the
                  pro  forma  effect  in  interim  financial   statements.   The
                  transition and annual  disclosure  requirements  are effective
                  for our 2003 fiscal year. The interim disclosure  requirements
                  are not effective. The Company does not expect the adoption of
                  SFAS  NO.  148 to  have a  material  impact  on its  financial
                  position, results of operations or cash flow.

                  In January  2003,  the FASB  issued FIN 46,  Consolidation  of
                  Variable Interest Entities. This Interpretation  clarifies the
                  application   of   Accounting   Research   Bulletin   No.  51,
                  Consolidated  Financial  Statements,  to certain  entities  in
                  which equity  investors do not have the  characteristics  of a
                  controlling  financial  interest  or do  not  have  sufficient
                  equity  at risk  for the  entity  to  finance  its  activities
                  without additional  subordinated  financial support from other
                  parties.  FIN 46 applies to variable interest entities created
                  after  January 31, 2003,  and is effective as of July 31, 2003
                  for variable  interest  entities  created prior to February 1,
                  2003.  The Company  does not expect the  adoption of FIN 46 to
                  have a material effect on its financial  position,  results of
                  operations or cash flows.

                  In April 2003,  the FASB issued  SFAS No.  149,  Amendment  of
                  Statement   133  on   Derivative   Instruments   and   Hedging


                                      F-7
<PAGE>

                  Activities. This statement amends SFAS No. 133, Accounting for
                  Derivative    Instruments   and   Hedging   Activities,    for
                  implementation   issues   related  to  the   definition  of  a
                  derivative  and  other  FASB  projects  related  to  financial
                  instruments.   SFAS  No.  149  requires  that  contracts  with
                  comparable  characteristics  be  accounts  for  in  a  similar
                  fashion.  SFAS No.  149  applies  prospectively  to  contracts
                  entered  into or modified  after June 30, 2003 and for hedging
                  relationships designated after June 30, 2003. The Company does
                  not  expect  the  adoption  of SFAS No. 149 to have a material
                  effect on its  financial  position,  results of  operations or
                  cash flows.

                  In May 2003,  the FASB  issued SFAS No.  150,  Accounting  for
                  Certain  Financial  Instruments with  Characteristics  of both
                  Liabilities and Equity. This statement  establishes  standards
                  for how an issuer  classifies and measures  certain  financial
                  instruments  with  characteristics  of  both  liabilities  and
                  equity.  SFAS No.  150  requires  that  financial  instruments
                  within the scope of SFS No. 150 be  classified  as a liability
                  or an  asset.  SFAS No.  150 is  effective  for all  financial
                  instruments entered into after May 31, 2003 and otherwise, the
                  beginning of the first interim period after June 15, 2003. The
                  Company does not expect the adoption of SFAS No. 150 to have a
                  material  effect  on  its  financial   position,   results  of
                  operations or cash flows.

Note 2 - Management's Plans to Overcome Operating and Liquidity Difficulties

                  The Company's financial  statements have been presented on the
                  basis  that  it is a going  concern,  which  contemplates  the
                  realization of assets and the  satisfaction  of liabilities in
                  the normal course of business.

                  The  Company's  continued  existence  is  dependent  upon  its
                  ability to achieve profitable  operations or obtain additional
                  financing.  The  Company is  currently  seeking  collaborative
                  arrangements  with  pharmaceutical  companies  for  the  joint
                  development of delivery  systems and the successful  marketing
                  of these  delivery  systems.  The Company is exploring  merger
                  opportunities  or other strategic  alternatives to fund future
                  operations.

                  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 its next
                  fiscal year.

Note 3 - Other assets and Accrued expenses:

                  Other assets - Approximately $352,000 of security deposits are
                  included in the $357,000 total. The remainder is other assets.

                  Accrued expenses and other current liabilities - Approximately
                  $76,000 of accrued payroll and related payroll taxes; $150,000
                  of accrued  employee  vacation,  $32,000 of other expenses and
                  $33,000 of accrued legal and professional fees are included in
                  the $318,000  total.  The remainder is other accrued  expenses
                  and other current liabilities.

Note 4 - Furniture, Fixtures and Equipment and Leasehold Improvements

                  Furniture,  fixtures,  and leasehold improvements equipment is
                  summarized as follows:

                                                              July 31, 2003
                                                             -----------------
                         Equipment                                  $ 713,000
                         Furniture and fixtures                       122,000
                         Leasehold improvements                       131,000
                                                             -----------------
                                                                      966,000
                         Less: Accumulated depreciation               252,000
                                                             =================
                                                                    $ 714,000
                                                             =================
Note 5 - Stockholders' equity:



                                      F-8
<PAGE>

                  Private  Placement  - In May 2003,  the  Company  completed  a
                  private  placement and received net proceeds of  approximately
                  $4,336,000 from the placement of a total of 48.01 Units of the
                  Company's  securities.   Each  Unit  consisted  of  sixty  six
                  thousand,  six  hundred,  sixty six and two  thirds  (66,666?)
                  common  shares,  par value $.001,  and sixteen  thousand,  six
                  hundred,  sixty six and two thirds  (16,666?)  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).

                  Preferred Stock - The Company's  Certificate of  Incorporation
                  authorizes the issuance of up to 1,000,000 shares of Preferred
                  Stock.  None of such  Preferred  Stock has been  designated or
                  issued to date.  The Board is  authorized  to issue  shares of
                  Preferred Stock from time to time in one or more series and to
                  establish  and designate any such series and to fix the number
                  of shares and the relative conversion rights, voting, terms of
                  redemption and liquidation.

Note 6 - Related Party Transactions:

                  License & Development  Agreement-  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
                  (see Note 7). One of the Company's major  shareholders is also
                  a significant shareholder in Manhattan Pharmaceuticals, Inc.

                  The terms of the agreement require Manhattan  Pharmaceuticals,
                  Inc.  (Manhattan)  to make  payments to the  Company  based on
                  achieving  certain  conditions  and  milestones.  The  Company
                  received  $125,000  of  a  $250,000   non-refundable  up-front
                  licensing  fee under the terms of the  agreement.  The Company
                  recorded  this  amount  as  additional  paid-in-capital.   The
                  remaining  $125,000  has not been  collected.  Manhattan  is a
                  development  stage  company and has no  revenues to date.  The
                  agreement has conditions  that stipulate that Manhattan has to
                  raise certain funds before the Company  receives the remaining
                  license fee.  There is no assurance that Manhattan can achieve
                  this. If Manhattan is unable to raise additional funds,  there
                  is significant doubt it would be able to fulfill its remaining
                  commitments to the Company.

                  Legal  Fees - The  Company  has  incurred  legal  fees with an
                  officer and director of the Company.  These fees  approximated
                  $160,000  and  $125,000  for the years ended July 31, 2003 and
                  2002, respectively.

                  Consulting  Agreement - In February  2002 the Company  entered
                  into a  consulting  agreement  with John H.  Klein,  effective
                  February 1, 2002. In addition, in February 2002, Mr. Klein was
                  elected as a member and  Chairman  of the  Company's  Board of
                  Directors  (see note 7).  The  Company  believes  Mr.  Klein's
                  extensive  and  successful  experience  in the  pharmaceutical
                  industry brings a strong benefit to the Company's Board.

Note 7 - Commitments and Contingencies:

                  Employment Agreements - In December 2002, Dr. Shangold entered
                  into a three-year  employment  agreement with NovaDel pursuant
                  to  which  he  agreed  to serve  as its  President  and  Chief
                  Executive  Officer.  We 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,  NovaDel  during his term.  We paid Dr.  Shangold a
                  contractual  bonus of $200,000 during the fourth quarter.  The
                  investment 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 to
                  purchase  1,000,000 shares of our common stock (at an exercise
                  price of $1.93 per share) which vest over a three year period.



                                      F-9
<PAGE>

                  In  February  2002,  effective  January 1, 2002,  the  Company
                  entered into an employment  agreement  with its then President
                  for a base annual salary of $248,500.  The agreement  provides
                  for annual cost of living  adjustments equal to the greater of
                  the increase in the Consumer Price Index or 5% with additional
                  increases  and bonuses as shall be approved by the Board.  The
                  agreement  has a  base  term  of  three  years,  which  became
                  effective  in  January  2002.   The  agreement  is  thereafter
                  renewable for additional one-year periods,  unless the Company
                  gives notice to the contrary.

                  In  February  2002,  the  Company  entered  into a  consulting
                  agreement  with its  Chairman  for a base  annual  retainer of
                  $300,000,  plus  reimbursement of various expenses and certain
                  success fees. The agreement has a base term of one year, which
                  became effective in February 2002. The agreement is thereafter
                  renewable for additional one-year periods,  unless the Company
                  gives  notice to the  contrary.  In  addition,  the  agreement
                  granted the consultant  1,000,000 non plan options to purchase
                  shares of the Company's  common stock at an exercise  price of
                  $2.40 per share;  as of the date of this  report  none of such
                  options had vested.

                  In  February  2002,  effective  January 1, 2002,  the  Company
                  entered into an employment  agreement with its Chief Financial
                  Officer for a base annual  salary of $125,000.  The  agreement
                  provides  for annual cost of living  adjustments  equal to the
                  greater of the increase in the Consumer Price Index or 5% with
                  additional  increases  and bonuses as shall be approved by the
                  Board.  The  agreement  has a base term of three years,  which
                  became  effective in January 2002. The agreement is thereafter
                  renewable for additional one-year periods,  unless the Company
                  gives notice to the contrary.

                  In  December  2001,  effective  the  Company  entered  into an
                  employment   agreement  with  its  Vice  President   Corporate
                  Development  for  a  base  annual  salary  of  $120,00,  later
                  increased  by an  amendment  to  $180,000.  The  agreement  as
                  amended has a base term of three years, which became effective
                  in December  2001.  The agreement is thereafter  renewable for
                  additional  one-year periods,  unless the Company gives notice
                  to the  contrary.  In  addition,  the  agreement  granted  the
                  employee  1,050,000 non plan options to purchase shares of the
                  Company's  common  stock at an  exercise  price  of $0.75  per
                  share; as of the date of this report 1,050,000 of such options
                  had vested (see Note 10).

                  In May 2002, the Company entered into an employment  agreement
                  with its Vice  President  Formulation  Development  for a base
                  annual salary of $110,000.  The agreement  provides for annual
                  cost  of  living  adjustments  equal  to  the  greater  of the
                  increase in the  Consumer  Price  Index or 5% with  additional
                  increases  and bonuses as shall be approved by the Board.  The
                  agreement  has a  base  term  of  three  years,  which  became
                  effective in May 2002.  The agreement is thereafter  renewable
                  for  additional  one-year  periods,  unless the Company  gives
                  notice to the contrary. In addition, the agreement granted the
                  employee  150,000 non plan  options to purchase  shares of the
                  Company's  common  stock at an  exercise  price  of $3.02  per
                  share;  as of the date of this report none of such options had
                  vested.

                  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
                  $2.20 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.

                  License and Development Agreement - 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  partially  received  during  June 2003
                  (See Note 6).



                                      F-10
<PAGE>

                  Leases - In August  2000,  the Company  entered  into a 5-year
                  lease  agreement,  effective  October 2000, for  approximately
                  4,500  square  feet of office,  laboratory  and  manufacturing
                  space.  Annual rent is approximately  $63,000 plus real estate
                  taxes,   currently  estimated  to  be  approximately   $11,000
                  annually.  Previously,  the Company  rented  office space on a
                  month to month  basis.  Rent  expense for the Company  totaled
                  approximately $92,000 and $75,000 for the years ended July 31,
                  2003, and 2002 respectively.

                  In March 2003,  the Company  entered  into a 10 year lease for
                  approximately   31,500  sq.   feet  of   office,   laboratory,
                  manufacturing   and  warehouse   space.   These  premises  are
                  presently being  fitted-out and some office space was occupied
                  during September 2003.  Additional  occupancy should begin, in
                  stages,  during the 4th calendar  quarter of 2003.  During the
                  first  5  years  of  the  lease,   the  annual  rent  will  be
                  approximately  $330,000  plus a  proportionate  share  of real
                  estate taxes and common  areas.  Beginning in the 6th year and
                  continuing through the 10th year of the lease, the annual rent
                  will be approximately  $363,000 plus a proportionate  share of
                  real estate taxes and common areas.

                  Future minimum rental payments as follows:

                        Year Ending July 31,

                                2004                    $480,000
                                2005                    $461,000
                                2006                    $443,000
                                2007                    $443,000
                                2008                    $443,000
                                2009 and thereafter     $443,000
                                                      ----------
                                                      $2,713,000

                  Government  Regulation  -  The  development,  manufacture  and
                  commercialization  of pharmaceuticals are subject to extensive
                  regulation by various federal and state  government  entities.
                  The  Company   cannot   determine  the  impact  of  government
                  regulations on the development of its delivery systems.

Note 8 - Income Taxes:

                  No provision for current and deferred income taxes is required
                  for the years ended July 31, 2003 and 2002.



                                      F-11
<PAGE>

                  The  significant  components of the Company's net deferred tax
     asset are summarized as follows:

<TABLE>
<CAPTION>
                                                                                            July 31
                                                                                --------------------------------
                                                                                   2003                 2002
                                                                                -----------          -----------
<S>                                                                             <C>                  <C>
           Net operating loss carryforwards ...........................         $ 5,300,000          $ 2,890,000
                                                                                -----------          -----------

                                                                                  5,300,000            2,890,000

          Valuation allowance .........................................           5,300,000            2,890,000
                                                                                -----------          -----------
          Net deferred tax asset ......................................         $        --          $        --
                                                                                ===========          ===========

         The  following  is a  reconciliation  of  income  tax  benefit
         computed at the 34% statutory rate to the provision for income
         taxes:

                                                                                   2003                 2002
                                                                                -----------          -----------
          Federal Tax at statutory rate ...............................         $ 1,977,000          $ 1,459,000
          State Income Tax ............................................             349,000              257,000
          Non deductible; options issued for services .................            (670,000)            (802,000)
          Valuation allowance .........................................          (1,656,000)            (914,000)
                                                                                -----------          -----------
                                                                                $        --          $        --
                                                                                ===========          ===========
</TABLE>

                  A valuation  allowance is provided when it is more likely than
                  not that some portion of the will not be realized. The Company
                  has  determined,  based  on the  Company's  prior  history  of
                  recurring   losses,   that  a  full  valuation   allowance  is
                  appropriate at July 31, 2003 and 2002.

                  At July 31,  2003,  the  Company  has  federal  and  state net
                  operating  loss  carryforwards  for  financial  reporting  and
                  income  tax   purposes  of   approximately   $15,500,000   and
                  $10,031,000, respectively, which can be used to offset current
                  and future taxable income through the year 2024.

                  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.
                  During  December  2001,  the  Company  received  approximately
                  $88,000 from this program.

Note 9 - Stock Options:

                  At July 31, 2003, the Company had three plans to allow for the
                  issuance  of stock  options and other  awards,  the 1992 Stock
                  Option  Plan,  the 1997 Stock  Option  Plan and the 1998 Stock
                  Option  Plan  (the  "Plans").  The  total  number of shares of
                  common stock reserved for issuance,  either as incentive stock
                  options  ("ISO's")  under  the  Internal  Revenue  Code  or as
                  non-qualified  options,  under  the  1992  and  1997  Plans is
                  500,000  shares each and 1,800,000  under the 1998 Plan.  ISOs
                  may be granted to  employees  and  officers of the Company and
                  non-qualified  may  be  granted  to  consultants,   directors,
                  employees  and  officers of the  Company.  Options to purchase
                  Company's  common  stock  could not be granted at a price less
                  than the fair market  value of the common stock at the date of
                  grant and will expire not more than ten years from the date of
                  grant.  ISOs granted to a 10% or more stockholder could not be
                  for less than 110% of fair market  value or for a term of more
                  than 5 years.



                                      F-12
<PAGE>

                  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 APR 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 FAS 123 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  fair  value of  options  granted  in 2003  and 2002  were
                  estimated  at the date of grant using a  Black-Scholes  option
                  pricing model with the following weighted-average assumptions,
                  respectively: risk-free interest rates of 4.0%, dividend yield
                  of 0.0%,  volatility  factors of the expected  market price of
                  the Company's common stock of 74% in 2003 and 72% in 2002, and
                  a weighted-average expected life of the options of five years.

                  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,
                  option 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:

<TABLE>
<CAPTION>
                                                                                        Fiscal Year Ended
                                                                                  June 30               June 30
                                                                               ------------------------------------
                                                                                    2003                 2002
                                                                               ----------------     ---------------
<S>                                                                               <C>                 <C>
                   Net income (loss) as reported                                  $(5,815,000)        $(4,290,000)

                   Stock-based employee compensation expense under fair
                      value method, net of related tax effects                         486,000           1,440,000
                                                                               ----------------     ---------------
                   Pro forma net loss                                             $ (6,301,000)        $(5,730,000)
                                                                               ================     ===============

                   Income / (Loss) per share:
                       Basic and diluted, as reported                                   $(.38)              $(.38)
                       Basic and diluted, pro forma                                     $(.41)              $(.50)
</TABLE>


                                      F-13
<PAGE>

                  Information  with  respect  to  stock  option  activity  is as
                  follows (in thousands, except exercise price amounts):

<TABLE>
<CAPTION>
                                                                             Outstanding Options
                                                                     ------------------------------------
                                          Options Available          Number of           Weighted Average
                                              for Grant               Options              Exercise Price
                                              ---------               -------              --------------
<S>                                        <C>                      <C>                    <C>
   Balance at August 1, 2001 ..........            --                  2,300                  $   1.53
   Additional Shares reserved .........         2,475                     --                        --
   Grants .............................         3,378                  3,378                      1.60
   Exercises ..........................            --                     10                       .63
   Cancellations ......................         1,190                  1,190                      1.42
                                                -----                  -----                  --------
   Balance at July 31, 2002 ...........           287                  4,478                      1.61
   Additional Shares reserved .........         2,575                     --                        --
   Grants .............................         2,159                  2,159                      1.60
   Exercises ..........................            --                    445                       .94
   Cancellations ......................            --                     --                        --
                                                -----                  -----                  --------
   Balance at July 31, 2003 ...........           703                  6,192                  $   1.66
                                                =====                  =====                  ========
   Option price per share: $.63 - $3.18
   Options exercisable: 4,100,000
</TABLE>



     The  following  table  summarizes  significant  ranges of  outstanding  and
     exercisable  plan and  non-plan  options  at July 31,  2003 (in  thousands,
     except exercise price amounts):

<TABLE>
<CAPTION>
                                              Outstanding Options                        Options Exercisable
                                 ----------------------------------------------     -------------------------------
                                                  Weighted          Weighted
                                                   Average          Average                           Weighted
                                                  Remaining         Exercise                           Average
   Range of Exercise Prices       Options       Life in Years         Price          Options       Exercise Price
   ------------------------      ----------     --------------      -----------     ----------     ----------------
<S>                                  <C>                  <C>            <C>            <C>                  <C>
$0.01 - $1.00..............          2,035                6.9            $ .75          2,035                $ .75
$1.01 - $2.00..............          2,395                4.1             1.77          1,195                 1.68
$2.01 - $3.00..............          1,362                8.3             2.40            520                 2.51
$3.01 - $4.00..............            400                8.7             3.12            350                 3.13
                                 ----------     --------------      -----------     ----------     ----------------
                                     6,192                6.2            $1.66          4,100                $1.45
                                 ==========     ==============      ===========     ==========     ================
</TABLE>

                  In addition to stock  options  issued by the Company under the
                  Plans,  the Company has reserved  13,383,316  shares of common
                  stock for non-plan options and warrants as detailed below.

                  Non-plan  Options  and  Warrants - At July 31, 2003 there were
                  outstanding  the following  classes and numbers of instruments
                  exercisable for Common Stock:

                  A. 680,000  Class A Warrants,  issued in  connection  with the
                  Public Offering,  exercisable until November 2003, to purchase
                  a like number of shares of Common  Stock at an exercise  price
                  of $5.80 per share.  These warrants were originally  scheduled
                  to expire during November 2002. Before expiration, the Company
                  extended the  expiration  date by one year, to November  2003.
                  The  Company  has not yet made any  decision as to whether the
                  expiration date might be further extended.



                                      F-14
<PAGE>

         B.       4,550,000 stock options, not issued under any of the plans, as
                  follows:

                  o        300,000 options issued on November 19, 1997,  vesting
                           immediately,  to the Company's then President, having
                           an  exercise  price of $1.84  per  share,  issued  in
                           connection  with  his  employment  agreement  in June
                           1997, exercisable until November 2007.

                  o        300,000 options issued on November 19, 1997,  vesting
                           immediately,  to the Company's then Chairman,  having
                           an  exercise  price of $1.84  per  share,  issued  in
                           connection  with  his  employment  agreement  in June
                           1997, exercisable until November 2007.

                  o        700,000  options issued in December 2001, and 350,000
                           options   issued  in  July  2003,   for  a  total  of
                           1,050,000, vesting immediately, to the Company's Vice
                           President  for Corporate  Development,  in connection
                           with  his  employment  agreement,  exercisable  until
                           December 2011.

                  o        1,000,000 options issued in February 2002, vesting in
                           three equal installments  beginning in February 2003,
                           to the Company's  present Chairman in connection with
                           his consulting agreement, having an exercise price of
                           $2.40 per share, exercisable until January 2012.

                  o        250,000   options  issued  in  April  2002,   vesting
                           immediately,  to a consultant  to provide  investment
                           banking assistance to the Company. These options have
                           an  exercise  price of $3.18 per  share,  exercisable
                           until April 2012.

                  o        150,000 options issued in May 2002,  vesting in three
                           equal  installments  beginning  November 15, 2002, to
                           the Company's Vice President Formulation Development,
                           in connection with his employment  agreement,  having
                           an  exercise  price of $3.02 per  share,  exercisable
                           until May 2012.

                  o        200,000  options  issued  in  October  2002,  to  the
                           Company's  Chief   Scientific   Officer,   having  an
                           exercise price of $1.30 per share,  exercisable until
                           October 2007.

                  o        1,000,000 options issued in December 2002, vesting in
                           three equal installments  beginning in December 2003,
                           to  the  Company's  present   President,   having  an
                           exercise   price  of  $1.93  per  share,   issued  in
                           connection with his employment agreement, exercisable
                           until December 2007.

                  o        100,000  options issued in March 2003, to each of two
                           directors, for a total of 200,000, having an exercise
                           price of $1.51 per  share,  exercisable  until  March
                           2008.

                  o        100,000  options  issued in June 2003, to a director,
                           having  an   exercise   price  of  $2.15  per  share,
                           exercisable until June 2008.

         C. 60,000 warrants issued to a public  relations  company,  exercisable
         until January 2007 at a price of $2.00.

         D. 4,000,000  warrants  issued to an investor,  in connection  with the
         fiscal year 2002 private placement,  exercisable until December 2008 at
         a price of $.75.



                                      F-15
<PAGE>

         E. 2,666,667  warrants  issued to an investor,  in connection  with the
         fiscal year 2002 private placement,  exercisable until December 2009 at
         a price of $.75.

         F. 200,000 warrants issued to a consulting  company,  exercisable until
         January 2010 at a price of $1.00.

         G. 200,000 warrants issued to each of two consulting  companies,  for a
         total of 400,000, exercisable until November 2010 at a price of $.75.

         H.  76,533  warrants  at $.75 per  share  issued to  broker/dealers  in
         connection with the fiscal year 2001 private  placement.  5,000 of such
         warrants  expire in December  2008,  and  remaining  warrants  (71,533)
         expire in May 2011.

         I.  210,017  warrants at $1.50 per share  issued to  broker/dealers  in
         connection with the fiscal year 2003 private placement.  93,167 of such
         warrants expire in April 2008, and remaining  warrants (116,850) expire
         in May 2008.

         J.  40,004  warrants  at $2.00 per share  issued to  broker/dealers  in
         connection with the fiscal year 2003 private placement.  23,292 of such
         warrants expire in April 2008, and remaining  warrants  (16,712) expire
         in May 2008.

         K.  800,095  warrants  at  $1.50  per  share  issued  to  investors  in
         connection with the fiscal year 2003 private placement. 465,841 of such
         warrants expire in April 2008, and remaining  warrants (334,254) expire
         in May 2008.

Note 10 - Subsequent Events:

         In August 2003,  Robert Galler agreed to terminate his employment  with
         the Company as Vice President - Corporate  Development and entered into
         a  consulting  agreement  with the  Company at a base  compensation  of
         $180,000 per year.  The  consulting  agreement  terminates  in February
         2005.


                                      F-16
<PAGE>

         (a) (2)  List of Exhibits


<TABLE>
<CAPTION>
                             Incorporated Documents                            SEC Exhibit Reference
                             ----------------------                            ---------------------
<S>               <C>
2.1               Agreement of Merger dated as of October 29,   As filed with the Registrant's Preliminary  Proxy
                  1998                                          Statement on October 20, 1998, File No. 000-23399

3.1               Certificate of Incorporation of the           As filed with the Registrant's Form SB-2, on
                  Registrant, as amended                        August 8, 1997, File No. 333-33201

3.2               Bylaws of the Registrant, as amended          As filed with the Registrant's Form SB-2, on
                                                                August 8, 1997, File No. 333-33201

4.1               Form of Warrant Agreement                     As filed with the Registrant's Form SB-2, on
                                                                October 31, 1997, File No. 333-33201

4.3               Form of Class A Warrant Certificate           As filed with the Registrant's Form SB-2, on
                                                                October 31, 1997, File No. 333-33201

4.4               Form of Underwriters' Option Agreement        As filed with the Registrant's Form SB-2, on
                                                                October 31, 1997, File No. 333-33201

10.1              Employment Agreement with Harry A. Dugger,    As filed with the Registrant's Form SB-2, on
                  III, Ph.D.                                    August 8, 1997, File No. 333-33201

10.2              Employment Agreement with John J. Moroney     As filed with the Registrant's Form SB-2, on
                                                                October 3, 1997, File No. 333-33201

10.3              Agreement dated December 7, 1996 between      As filed with the Registrant's Form SB-2, on
                  the Registrant and Altana, Inc.               August 8, 1997, File No. 333-33201

10.4              Registrant's 1992 Stock Option Plan           As filed with the Registrant's Form SB-2, on
                                                                August 8, 1997, File No. 333-33201

10.5              Form of Option Agreement under the 1992       As filed with the Registrant's Form SB-2, on
                  Stock Option Plan                             October 3, 1997, File No. 333-33201

10.6              Registrant's 1997 Stock Option Plan           As filed with the Registrant's Form SB-2, on
                                                                August 8, 1997, File No. 333-33201
10.7              Form of Option Agreement under the 1997       As filed with the Registrant's Form SB-2, on
                  Stock Option Plan                             October 3, 1997, File No. 333-33201

10.8              Agreement with Rapid Spray (Clemastine)       As filed with the Registrant's Form SB-2, on
                  Dated June 2, 1992                            August 8, 1997, File No. 333-33201

10.9              Agreement with Rapid Spray (Nitroglycerin)    As filed with the Registrant's Form SB-2, on
                  dated June 2, 1992                            August 8, 1997, File No. 333-33201
</TABLE>


<PAGE>

<TABLE>
<S>               <C>
10.10             Agreement with Creative Technologies, Inc.    As filed with the Registrant's Form SB-2, on
                  dated December 26, 1996                       October 3, 1997, File No. 333-33201

10.11             Registrant's 1998 Stock Option Plan           As filed with the Registrant's Preliminary  Proxy
                                                                Statement on October 20, 1998,
                                                                File No. 000-23399

10.12             Employment Agreement with Donald P. Cox,      As filed with the Registrant's Form 10-KSB on
                  Ph.D.                                         October 28, 1999, File No. 000-23399

10.13             Employment Agreement with Kenneth Cleaver,    As filed with the Registrant's Form 10-KSB on
                  Ph.D.                                         October 28, 1999, File No. 000-23399

10.14             Amendment to Consulting Agreement with        As filed with the Registrant's Form 10-KSB on
                  Saggi Capital Corp. dated March 25, 1998      October 28, 1999, File No. 000-23399

10.15             Agreement with Altana, Inc., dated December   As filed with the Registrant's Form 10-KSB/A on
                  7, 1996                                       September 26, 2001, File No. 000-23399

10.16             Agreement with CLL Pharma dated February      As filed with the Registrant's Form 10-KSB/A on
                  12, 1998                                      September 26, 2001, File No. 000-23399

10.17             Agreement with Nace Resources, Inc., dated    As filed with the Registrant's Form 10-KSB/A on
                  December 29, 1997, together with Amendment    September 26, 2001, File No. 000-23399
                  Number 1 dated February 9, 1998; Amendment
                  Number 2 dated November 29, 1999; and,
                  Amendment Number 3, dated May 5, 2000

10.18             Agreement  with  PolyMASC  Pharmaceuticals    As filed with the Registrant's Form 10-KSB/A
                  on plc, dated  July  25,  2000                September 26, 2001, File No. 000-23399


10.19             Authorization to proceed with Innovex, Inc.   As filed with the Registrant's Form 10-KSB/A on
                  and Novartis Pharmaceuticals Corp., dated     September 26, 2001, File No. 000-23399
                  June 15, 2000

10.20             Consulting Agreement with John Klein.         As filed with the Registrant's Form SB-2, on April
                                                                15,2002, File No. 333-86262

10.21             Employment Agreement with Robert Galler.      As filed with the Registrant's Form SB-2, on April
                                                                15,2002, File No. 333-86262

10.22             Employment Agreement Amendment No. 1 with     As filed with the Registrant's Form SB-2, on April
                  Robert Galler                                 15,2002, File No. 333-86262

10.23             Employment Agreement with Donald Deitman.     As filed with the Registrant's Form SB-2, on April
                                                                15,2002, File No. 333-86262

10.24             Common Stock and Warrant Purchase Agreement   Incorporated by Reference to Schedule 13D filed on
                  dated December 12, 2001.                      December 21, 2001 by Lindsay A. Rosenwald, M.D.
</TABLE>



<PAGE>



<TABLE>
<S>               <C>
10.25             Amendment No. 1 to Common Stock and Warrant   As filed with the Registrant's Form SB-2, on April
                  Purchase Agreement                            15,2002, File No. 333-86262

10.26             Employment Agreement with Mohammed Abd        As filed with the Registrant's Form SB-2,
                  El-Shafy, Ph.D                                Amendment #2, on September 3, 2002, File No.
                                                                333-86262
10.26             Employment Agreement with Gary A. Shangold,   As filed with the Registrant's Form 10-QSB for
                  MD                                            period ended January 31, 2003, File No. 000-23399

10.27             Amendment No. 1 of Employment Agreement       As filed with the Registrant's Form 10-QSB for
                  with Gary A. Shangold, MD                     period ended January 31, 2003, File No. 000-23399

10.28             Lease Agreement dated March 19, 2003, with    As filed with the Registrants' Form 10-QSB for
                  Macedo Business Park, II, L.L.C               period ended April 30, 2003, File No. 000-23399

10.29             Amendment No. 1 of Lease Agreement dated      As filed with the Registrant's Form 10-QSB for
                  March 19, 2003, with Macedo Business Park,    period ended April
                  30, 2003, File No. 000-23399 II, L.L.C.

10.30             Employment Agreement with Barry C. Cohen      As filed with the Registrant's Form 10-QSB for
                                                                period ended April 30, 2003, File No. 000-23399

10.31             *  Agreement with Manhattan
                  Pharmaceuticals, Inc. dated April 4, 2003.

11.1              *  Computation of earnings per share

23.1              * Consent of Wiss & Company LLP

31.1              *  Certification of Chief Executive
                  Officer  under Rule 13a-14(a)

31.2              *   Certification of Chief Financial
                  Officer under Rule 13a-14(a)

32.1              *  Certification of Chief Executive
                  Officer under 18 USC 1350

32.2              *   Certification of Chief Financial
                  Officer under 18 USC 1350

                  *   Filed herewith
</TABLE>

<PAGE>

         (b) Reports on Form 8-K

              No  reports  on Form 8-K were  filed  during  the last  quarter of
fiscal 2003.



ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES

         [This item is not yet effective.]




<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange  Act of 1934,  the  Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          NovaDel Pharma Inc.


Date: October 29, 2003                    By: /s/ Gary A. Shangold
                                              -------------------------------
                                              Gary A. Shangold, President


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
         this Report is signed below by the  following  persons on behalf of the
         Company and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
     Signatures                                       Title                                  Date
     ----------                                       -----                                  ----
<S>                                <C>                                                 <C>
/s/ Gary A. Shangold               President and Chief Executive Officer (Principal    October 29, 2003
----------------------             Executive Officer) and Director
Gary A. Shangold

/s/ Donald J. Deitman              Chief Financial Officer                             October 29, 2003
----------------------             (Principal Financial Officer)
Donald J. Deitman

/s/ John H. Klein                  Chairman of the Board and Director                  October 29, 2003
-----------------
John H. Klein

/s/ Robert F. Schaul               Secretary and Director                              October 29, 2003
--------------------
Robert F. Schaul

/s/ William F. Hamilton            Director                                            October 29, 2003
---------------------------
William F. Hamilton

/s/ Lawrence J. Kessel             Director                                            October 29, 2003
----------------------
Lawrence J. Kessel

/s/ Mark H. Rachesky               Director                                            October 29, 2003
--------------------
Mark H. Rachesky


/s/ Charles Nemeroff               Director                                            October 29, 2003
--------------------
Charles Nemeroff
</TABLE>