UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
      FORM 10-K
      FOR
    ANNUAL AND TRANSITION
    REPORTS PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended May 31, 2008o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    0-24050
 NORTHFIELD LABORATORIES
    INC.
 (Exact name of Registrant as
    Specified in Its Charter)
  Delaware

36-3378733(State of Other Jurisdiction of
    Incorporation or Organization)

(I.R.S. Employer
    Identification Number)1560 Sherman Avenue, Suite 1000, Evanston, Illinois

60201-4800(Address of Principal Executive
    Offices)

(Zip Code)   (847) 864-3500
 Registrants telephone number,
    including area code:
    Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per share

The Nasdaq Stock Market LLC     o x
  o x
  x o
  Regulation S-K 10-K Form 10-K. x
  12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company x(Do not check if a smaller reporting company)   12b-2 o x
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K. www.northfieldlabs.com. Form 10-K




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CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING INFORMATION




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##### 



PART I
  ITEM 1.
    Business.  ®
  
    at the scene of injury
    during transport to the hospital via ground or air ambulance
    unplanned hemorrhage in the operating room
    lack of compatible blood
    depletion of the available blood supply due to multiple,
    simultaneous injured patients
    limited blood inventory in remote or rural hospitals
    religious objection to blood transfusion
    periodic blood shortages             3




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##### 



BACKGROUND
      OUR
    PRODUCT
            Universal Compatibility.
  Oxygen-Carrying Ability.
 4




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##### 



Blood Volume Replacement.
  Impact on Disease Transmission.
  Extended Shelf Life.
  OUR
    PIVOTAL PHASE III TRIAL
        30-day
    TRIAL
    DESIGN AND CLINICAL ENDPOINTS
   5




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##### 



PHASE III
    TRIAL RESULTS
  Efficacy
    Analysis
    as randomized
 6




---



##### 



treatment they actually received
  appropriately randomized and correctly
    treated
    DAY 30
    MORTALITY
  PolyHeme Group





Control Group(Deaths/Number


Mortality Rate


(Deaths/Number


Mortality Rate


Upper Limitof Patients)


(%)


of Patients)


(%)


(%)MITT


47/350



13



35/364



10



7.65
%As Treated


46/349



13



36/365



10



7.06
%Per Protocol


31/279



11



29/311



9



6.21
%           IDMC
    Cardiac Subcommittee Analysis
   7




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##### 



IDMC
    Cardiac Subcommittee MI Analysis
  PolyHeme


Control(n=349)


(n=365)Probable MI


43 (12%)



30 (8%)Possible MI


150 (43%)



160 (44%)Total Possible or Probable MI


193 (55%)



190 (52%)Indeterminate


72 (21%)



111 (30%)Absent MI


84 (24%)



64 (18%)   BIOLOGICS
    LICENSE APPLICATION
         8




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##### 



RECENT
    DEVELOPMENTS
  Journal of the
    American Medical Association Circulation
    THE
    MARKET OPPORTUNITY
         9




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##### 



MANUFACTURING
    AND MATERIAL SUPPLY
         10




---



##### 



MARKETING
    STRATEGIES
          COMPETITION
     11




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##### 



GOVERNMENT
    REGULATION
  FDA
    Approval of Biological Products
        and is successful
 12




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##### 



i.e.
   13




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##### 



The Food
    and Drug Administration Amendments Act of 2007
    
    Clinical Trial Registration and Results
    Posting.  Certain information about clinical
    trials must be submitted to NIH, including a description of the
    trial, participation criteria, location of trial sites, and
    contact information. In September 2008, the law will require
    that certain results information be submitted. Because our
    clinical trials conducted to date were completed in 2006, they
    are not subject to the new law, although they were registered
    under a pre-existing statute governing registration of
    controlled trials testing treatments for serious or
    life-threatening conditions. Future trials conducted in the
    course of developing PolyHeme will be subject to FDAAAs
    more burdensome registration and results posting requirements.
    Compliance must be documented in various agency submissions,
    including the currently planned BLA. Failure to comply may
    result in significant civil penalties.
    Postmarketing Studies and Clinical
    Trials.  Before or after approving a BLA, FDA
    may require the conduct of post-approval studies or clinical
    trials to investigate a known serious risk, assess signals of
    serious risk, or identify an unexpected serious risk when data
    indicate the potential for such risk. Post-approval requirements
    under the new law may be based on information about other
    products that are chemically or pharmacologically related, but
    if imposed after approval, must be based on new safety
    information, broadly defined to include new analyses of existing
    information. Further, a post-approval study may be required only
    if FDA determines that the new active postmarket risk
    identification system (also created by FDAAA) and the existing
    passive adverse event reporting system are inadequate. In light
    of the fact that we are seeking approval of PolyHeme on the
    basis of a single pivotal efficacy study, it is possible that
    FDA will require one or more post-approval studies or trials,
    which may require substantial expense. Significant civil fines
    may be imposed for noncompliance.
    Risk Evaluation and Mitigation Strategies
    (REMS).  FDAAA authorizes FDA, before or after
    approving a BLA, to require submission of a REMS if necessary to
    ensure that the benefits of the product outweigh the 14




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##### 



risks. A REMS may include a medication guide to provide better
    information to consumers about the products risks and
    benefits, a plan for communication with healthcare providers,
    restrictions on a products distribution, or a safety
    registry. Sponsors of products subject to a REMS are required to
    submit periodic assessments of the strategy at specified
    intervals, and again, face significant penalties for failure to
    comply. FDAs REMS authority supplements the agencys
    previous authority to negotiate risk minimization action plans
    (RiskMAPs) to minimize known and preventable safety risks or
    otherwise impose burdens, such as limits on prescribing,
    distribution, or direct-to-consumer advertising, on an
    applicants ability to commercialize its product. A REMS
    could significantly impact the marketability of PolyHeme.  
    Best Pharmaceuticals for Children Act/Pediatric Research
    Equity Act.  FDAAA reauthorized FDA to require
    pediatric testing of certain drugs. PolyHeme was not tested in
    pediatric patients, and, under FDAAA, we could be required to
    conduct post-marketing studies in pediatric patients.  Foreign
    Approvals
      PATENTS
    AND PROPRIETARY RIGHTS
         15




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##### 



RESEARCH
    AND DEVELOPMENT
    HUMAN
    RESOURCES
    CORPORATE
    INFORMATION
  www.northfieldlabs.com Form 10-K, Form 10-Q, Form 8-K,
  Item 1A.
    Risk
    Factors.  You should consider the following matters when reviewing the
    information contained in this document. You also should consider
    the other information incorporated by reference in this
    document.
  We are a
    development stage company without revenues or profits.
    We have a
    history of losses and our future profitability is
    uncertain.
    Our
    financial resources are limited and we will need to raise
    additional capital in the future to continue our
    business.
   16




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##### 



We are
    developing a single product that is subject to a high level of
    technological risk.
    We are
    required to receive FDA approval before we may sell PolyHeme
    commercially, data from our clinical trials to date may not be
    adequate to obtain FDA approval, and we may be required to
    conduct additional clinical trials in the future.
       17




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18




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##### 



There may
    be limitations in the supply of the starting material for
    PolyHeme.
    The
    market may not accept our product.
    
    relative convenience and ease of administration;
    the prevalence and severity of any adverse side effects;
    effectiveness of our sales and marketing strategy; and
    the price of PolyHeme compared with competing therapies.    We rely
    on third parties to perform data collection and analysis with
    respect to our clinical trial and to assist in the preparation
    of our BLA for PolyHeme, which may result in costs and delays
    that prevent us from successfully commercializing our
    product.
      
    these third parties do not successfully carry out their
    contractual duties or regulatory obligations or meet expected
    deadlines;
    these third parties need to be replaced; or
    the work performed by these third parties does not satisfy
    applicable regulatory requirements or is not usable for other
    reasons.    Our
    activities are and will continue to be subject to extensive
    government regulation.
     19




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##### 



and/or
    We
    currently manufacture PolyHeme at a single location and, if we
    were unable to utilize this facility, our ability to manufacture
    PolyHeme will be significantly affected, and we will be delayed
    or prevented from commercializing PolyHeme.
   20




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##### 



Failure
    to increase manufacturing capacity may impair PolyHemes
    market acceptance and prevent us from achieving
    profitability.
  scale-up scale-up
  There are
    significant competitors developing similar products.
   21




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##### 



We do not
    have experience in the sale and marketing of medical
    products.
      Our
    profitability will be affected if we incur product liability
    claims in excess of our insurance coverage.
      We depend
    on the services of a limited number of key personnel.
   22




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##### 



Our
    ability to generate revenue from our product will depend on
    reimbursement and drug pricing policies and
    regulations.
        Failure
    to obtain regulatory approval in foreign jurisdictions would
    prevent our product from being marketed abroad.
      Failure
    to maintain effective internal controls over financial reporting
    could have a material adverse effect on our business, operating
    results and stock price.
   23




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##### 



We are
    subject to a variety of federal, state and local laws, rules and
    regulations related to the discharge or disposal of toxic,
    volatile or other hazardous chemicals.
    We are
    subject to a putative class action lawsuit.
  Rule 10b-5
  RISKS
    RELATED TO OUR INTELLECTUAL PROPERTY
  Our
    success depends upon our ability to protect our intellectual
    property and our proprietary technology.
   24




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##### 



We rely
    on trade secrets and other confidential information to maintain
    our proprietary position.
    We may be
    involved in lawsuits to protect or enforce our patents, which
    could be expensive and time consuming.
     25




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##### 



Third
    parties may own or control patents or patent applications that
    are infringed by our product or technologies.
        RISKS
    RELATED TO OUR COMMON STOCK
  Our stock
    price could be volatile.
    
    regulatory developments relating to our PolyHeme product;
    announcements by us relating to the results of our clinical
    trials of PolyHeme;
    developments relating to our efforts to obtain additional
    financing to fund our operations;
    announcements by us regarding transactions with potential
    strategic partners;
    announcements relating to blood substitute products being
    developed by our competitors;
    changes in industry trends or conditions;
    our issuance of additional equity or debt securities; and
    sales of significant amounts of our common stock or other
    securities in the market. 26




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##### 



We have
    received notice that our common stock may be delisted from the
    Nasdaq Global Market unless we are able to achieve compliance
    with Nasdaqs minimum bid requirement.
           27




---



##### 



Anti-takeover
    provisions contained in our charter and bylaws could discourage
    potential takeover attempts.
    Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.      Item 3.
    Legal
    Proceedings.  Rule 10b-5
 28




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##### 



Item 4.
    Submission
    of Matters to a Vote of Security Holders.    PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  MARKET
    INFORMATION
    Fiscal Quarter Ended

High


LowFebruary 28, 2006

$
14.45


$
8.86May 31, 2006


11.30



8.62August 31, 2006


13.10



8.06November 30, 2006


16.36



10.29February 28, 2007


17.94



3.73May 31, 2007


5.93



1.36August 31, 2007


1.76



1.00November 30, 2007


3.08



.75February 29, 2008


1.35



.95May 31, 2008


1.20



.76August 31, 2008 (through July 31, 2008)


.96



.37  29




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##### 



STOCK
    PERFORMANCE GRAPH
    Comparison
    of Five  Year Cumulative Total Returns
 Performance Graph for
 Northfield Laboratories, Inc.
  
    The Stock Performance Graph is not deemed to be soliciting
    material or to be filed with the Securities and Exchange
    Commission under the Securities Act of 1933, as amended, or the
    Securities Exchange Act of 1934, as amended, or incorporated by
    reference in any document so filed.
 30




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##### 



HOLDERS
    OF RECORD
    DIVIDENDS
    ISSUER
    PURCHASES OF EQUITY SECURITIES
    RECENT
    SALES OF UNREGISTERED SECURITIES
   31




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##### 



Item 6.
    Selected
    Financial Data    CumulativeJune 19,1985throughYears Ended May 31,


May 31,2008


2007


2006


2005


2004


2008(In thousands, except per share data)Statement of Operations Data:Revenues:License income

$



















$
3,000Costs and expenses:Research and development

$
15,916


$
21,060


$
24,165


$
16,600


$
10,777


$
184,757General and administrative


5,812



9,374



5,832



4,990



3,854



70,463Interest income (net)


1,320



2,763



3,222



1,268



131



32,078Net loss

$
(20,409
)

$
(27,671
)

$
(26,775
)

$
(20,322
)

$
(14,574
)

$
(220,216
)Net loss per share basic and

$
(.76
)

$
(1.03
)

$
(1.00
)

$
(0.88
)

$
(0.86
)

$
(16.67
)Shares used in calculation of per share data(1)


26,955



26,906



26,770



23,069



16,932



13,214Balance Sheet Data:Cash and marketable securities

$
20,726


$
40,158


$
72,984


$
98,131


$
42,487Total assets


29,985



50,119



75,871



100,002



44,179Total liabilities


3,003



4,777



6,534



4,228



2,626Deficit accumulated during development stage


(220,216
)


(199,808
)


(172,136
)


(145,361
)


(125,040
)Total shareholders equity


26,982



45,342



69,337



95,774



41,553     (1)
    
    Computed on the basis described in Note 1 of the Notes to
    Financial Statements. Excludes 2,090,125 shares reserved
    for issuance upon the exercise of stock options and
    115,418 shares reserved for issuance for stock warrants as
    of May 31, 2008. Additional stock options for a total of
    526,000 were available for grant as of May 31, 2008 under
    our employee stock option plans.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  RECENT
    DEVELOPMENTS
       32




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##### 



RESULTS
    OF OPERATIONS
    OPERATING
    EXPENSES
          INTEREST
    INCOME
    12-month
 33




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##### 



NET
    LOSS
    LIQUIDITY
    AND CAPITAL RESOURCES
              CRITICAL
    ACCOUNTING POLICIES
    SHARE-BASED
    COMPENSATION
   34




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##### 



NET
    DEFERRED TAX ASSETS VALUATION
    CONTRACTUAL
    OBLIGATIONS
    Less thanContractual Obligations

Total


One Year


1-3 YearsLease Obligations(1)

$
367,248


$
367,248



Other Obligations(2)


1,776,900



1,776,900



Total Contractual Cash Obligations

$
2,144,148


$
2,144,148



     (1)
    
    The lease for our Evanston headquarters is cancelable with six
    months notice combined with a termination payment equal to three
    months base rent at any time after February 14, 2009. If
    the lease is cancelled as of February 15, 2009 unamortized
    broker commissions of $17,470 would also be due.(2)
    
    Represents payments required to be made upon termination of
    employment agreements with three of our executive officers. The
    employment contracts renew automatically unless terminated.
    Figures shown represent compensation payable upon the
    termination of the employment agreements for reasons other than
    death, disability, cause or voluntary termination of employment
    by the executive officer other than for good reason. Additional
    payments may be required under the employment agreements in
    connection with a termination of employment of the executive
    officer following a change in control of Northfield.  RECENT
    ACCOUNTING PRONOUNCEMENTS
  The Fair Value Option for Financial Assets
    and Financial Liabilities
  Fair Value
    Measurements
 35




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##### 



No. FAS 157-2, Effective Date of FASB Statement No. 157, FAS No. 157-2,
  Business Combinations. Business combinations.
  Accounting for
    Uncertainty in Income Taxes  an Interpretation of
    SFAS 109, Accounting for Income Taxes
  ITEM 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.    ITEM 8.
    Financial
    Statements and Supplemental Data.    ITEM 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure.    ITEM 9A.
    Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Change in
    Internal Control Over Financial Reporting
   36




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##### 



Managements
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f)
  Limitations
    on the Effectiveness of Controls
    Item 9B.
    Other
    Information.    PART III
  Items 10
    Through 14.
  Form 10-K Form 10-K. Form 10-K.
  PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules.           37




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##### 



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)
  TABLE OF
    CONTENTS
   
 PAGEReport of Independent Registered Public
    Accounting Firm


39Balance Sheets, May 31, 2008 and 2007


40Statements of Operations, Fiscal Years ended
    May 31, 2008 and 2007, and the cumulative period from
    June 19, 1985 (inception) through May 31, 2008


41Statements of Shareholders Equity
    (Deficit), Fiscal Years ended May 31, 2008 and 2007, and
    the cumulative period from June 19, 1985 (inception)
    through May 31, 2008


42Statements of Cash Flows, Fiscal Years ended
    May 31, 2008 and 2007, and the cumulative period from
    June 19, 1985 (inception) through May 31, 2008


46Notes to Financial Statements


47   38




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##### 



Report
    of Independent Registered Public Accounting Firm                39




---



##### 



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)BALANCE SHEETSMay 31, 2008 and May 31, 2007
  May 31,


May 31,2008


2007ASSETSCurrent assets:Cash and cash equivalents

$
12,746,540



23,224,026Restricted cash


301,292



529,752Marketable securities


7,979,830



16,934,204Prepaid expenses


696,253



673,192Other current assets






212,854Total current assets


21,723,915



41,574,028Property, plant, and equipment


19,747,948



19,588,246Accumulated depreciation


(11,506,730
)


(11,063,080
)Net property, plant, and equipment


8,241,218



8,525,166Other assets


19,550



19,550$
29,984,683



50,118,744LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
1,917,260



3,573,025Accrued expenses


111,637



101,118Government grant liability


301,292



529,752Accrued compensation and benefits


658,012



565,709Total current liabilities


2,988,201



4,769,604Other liabilities


14,392



7,431Total liabilities


3,002,593



4,777,035Shareholders equity:Preferred stock, $.01 par value. Authorized
    5,000,000 shares; none issued and outstanding






Common stock, $.01 par value. Authorized
    60,000,000 shares; issued 26,960,233 at May 31, 2008
    and 26,916,541 atMay 31, 2007


269,602



269,165Additional paid-in capital


246,954,375



244,905,543Deficit accumulated during the development stage


(220,216,494
)


(199,807,606
)27,007,483



45,367,102Less cost of common shares in treasury; 1,717 shares and
    1,717 shares, respectively


(25,393
)


(25,393
)Total shareholders equity


26,982,090



45,341,709$
29,984,683



50,118,744    40




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##### 



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)STATEMENTS OF OPERATIONSYears ended May 31, 2008 and 2007 and
    the cumulative period from June 19, 1985
    (inception) through May 31, 2008
  CumulativefromJune 19, 1985Years Ended May 31,


through2008


2007


May 31, 2008Revenues  license income

$








3,000,000Costs and expenses:Research and development


15,916,141



21,059,618



184,756,957General and administrative


5,812,451



9,374,395



70,462,74621,728,592



30,434,013



255,219,703Other income and expense:Interest income


1,319,704



2,762,836



32,161,364Interest expense










83,2341,319,704



2,762,836



32,078,130Net loss before cumulative effect of change in accounting
    principle


(20,408,888
)


(27,671,177
)


(220,141,573
)Cumulative effect of change in accounting principle










74,921Net loss

$
(20,408,888
)


(27,671,177
)


(220,216,494
)Net loss per share  basic and diluted

$
(0.76
)


(1.03
)


(16.67
)Shares used in calculation of per share data  basic
    and diluted


26,954,530



26,906,407



13,214,051    41




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##### 



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)STATEMENTS OF SHAREHOLDERS EQUITY
    (DEFICIT)Years ended May 31, 2008 and 2007 and the cumulative
    period
    from June 19, 1985 (inception) through May 31,
    2008
  Preferred stock


Common stockNumber


Aggregate


Number


Aggregateof shares


amount


of shares


amountIssuance of common stock on August 27, 1985





$




3,500,000


$
35,000Issuance of Series A convertible preferred stock at $4.00
    per share on August 27, 1985 (net of costs of issuance of
    $79,150)














Net loss














Balance at May 31, 1986










3,500,000



35,000Net loss














Deferred compensation relating to grant of stock options














Amortization of deferred compensation














Balance at May 31, 1987










3,500,000



35,000Issuance of Series B convertible preferred stock at $35.68
    per share on August 14, 1987 (net of costs of issuance of
    $75,450)














Net loss














Amortization of deferred compensation














Balance at May 31, 1988










3,500,000



35,000Issuance of common stock at $24.21 per share on June 7,
    1988 (net of costs of issuance of $246,000)










413,020



4,130Conversion of Series A convertible preferred stock to
    common stock on June 7, 1988










1,250,000



12,500Conversion of Series B convertible preferred stock to
    common stock on June 7, 1988










1,003,165



10,032Exercise of stock options at $2.00 per share










47,115



471Issuance of common stock at $28.49 per share on March 6,
    1989 (net of costs of issuance of $21,395)










175,525



1,755Issuance of common stock at $28.49 per share on March 30,
    1989 (net of costs of issuance of $10,697)










87,760



878Sale of options at $28.29 per share to purchase common stock at
    $.20 per share on March 30, 1989 (net of costs of issuance
    of $4,162)














Net loss














Deferred compensation relating to grant of stock options














Amortization of deferred compensation














Balance at May 31, 1989










6,476,585



64,766Net loss














Deferred compensation relating to grant of stock options














Amortization of deferred compensation














Balance at May 31, 1990










6,476,585



64,766Net loss














Amortization of deferred compensation














Balance at May 31, 1991










6,476,585



64,766Exercise of stock warrants at $5.60 per share










90,000



900Net loss














Amortization of deferred compensation














Balance at May 31, 1992










6,566,585



65,666Exercise of stock warrants at $7.14 per share










15,000



150Issuance of common stock at $15.19 per share on April 19,
    1993 (net of costs of issuance of $20,724)










374,370



3,744Net loss














Amortization of deferred compensation














Balance at May 31, 1993










6,955,955



69,560Net loss














Issuance of common stock at $6.50 per share on May 26, 1994
    (net of costs of issuance of $2,061,149)










2,500,000



25,000Cancellation of stock options














Amortization of deferred compensation














Balance at May 31, 1994










9,455,955



94,560Net loss














Issuance of common stock at $6.50 per share on June 20,
    1994 (net of issuance costs of $172,500)










375,000



3,750Exercise of stock options at $7.14 per share










10,000



100Exercise of stock options at $2.00 per share










187,570



1,875Cancellation of stock options














Amortization of deferred compensation














Balance at May 31, 1995










10,028,525



100,285Net loss














Issuance of common stock at $17.75 per share on August 9,
    1995 (net of issuance costs of $3,565,125)










2,925,000



29,250Issuance of common stock at $17.75 per share on
    September 11, 1995 (net of issuance costs of $423,238)










438,750



4,388Exercise of stock options at $2.00 per share










182,380



1,824Exercise of stock options at $6.38 per share










1,500



15Exercise of stock options at $7.14 per share










10,000



100Cancellation of stock options














Amortization of deferred compensation














Balance at May 31, 1996





$




13,586,155


$
135,862    42




---



##### 



DeficitSeries A convertible


Series B convertible





accumulated








Totalpreferred stock


preferred stock


Additional


during the








shareholdersNumber


Aggregate


Number


Aggregate


paid-in


development


Deferred


Treasury


equityof shares


amount


of shares


amount


capital


stage


compensation


shares


(deficit)


$







$



$
(28,000
)

$



$







$
7,000250,000



250,000











670,850















920,850



















(607,688
)










(607,688
)250,000



250,000











642,850



(607,688
)










320,162



















(2,429,953
)










(2,429,953
)















2,340,000







(2,340,000
)






























720,000







720,000250,000



250,000











2,982,850



(3,037,641
)


(1,620,000
)






(1,389,791
)







200,633



200,633



6,882,502















7,083,135



















(3,057,254
)










(3,057,254
)























566,136







566,136250,000



250,000



200,633



200,633



9,865,352



(6,094,895
)


(1,053,864
)






3,202,226















9,749,870















9,754,000(250,000
)


(250,000
)










237,500























(200,633
)


(200,633
)


190,601































93,759















94,230















4,976,855















4,978,610















2,488,356















2,489,234















7,443,118















7,443,118



















(791,206
)










(791,206
)















683,040







(683,040
)






























800,729







800,729















35,728,451



(6,886,101
)


(936,175
)






27,970,941



















(3,490,394
)










(3,490,394
)















699,163







(699,163
)






























546,278







546,278















36,427,614



(10,376,495
)


(1,089,060
)






25,026,825



















(5,579,872
)










(5,579,872
)























435,296







435,296















36,427,614



(15,956,367
)


(653,764
)






19,882,249















503,100















504,000



















(7,006,495
)










(7,006,495
)























254,025







254,025















36,930,714



(22,962,862
)


(399,739
)






13,633,779















106,890















107,040















5,663,710















5,667,454



















(8,066,609
)










(8,066,609
)























254,025







254,025















42,701,314



(31,029,471
)


(145,714
)






11,595,689



















(7,363,810
)










(7,363,810
)















14,163,851















14,188,851















(85,400
)






85,400































267







267















56,779,765



(38,393,281
)


(60,047
)






18,420,997



















(7,439,013
)










(7,439,013
)















2,261,250















2,265,000















71,300















71,400















373,264















375,139















(106,750
)






106,750































(67,892
)






(67,892
)















59,378,829



(45,832,294
)


(21,189
)






13,625,631



















(4,778,875
)










(4,778,875
)















48,324,374















48,353,624















7,360,187















7,364,575















362,937















364,761















9,555















9,570















71,300















71,400















(80,062
)






80,062































(62,726
)






(62,726
)


$







$



$
115,427,120


$
(50,611,169
)

$
(3,853
)





$
64,947,960  43




---



##### 



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)
    STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)
    Years ended May 31, 2008 and 2007 and the cumulative
    period
    from June 19, 1985 (inception) through May 31,
    2008
  Preferred stock


Common stockNumber


Aggregate


Number


Aggregateof shares


amount


of shares


amountNet loss





$







$
Exercise of stock options at $0.20 per share










263,285



2,633Exercise of stock options at $2.00 per share










232,935



2,329Exercise of stock options at $7.14 per share










10,000



100Amortization of deferred compensation














Balance at May 31, 1997










14,092,375



140,924Net loss














Exercise of stock options at $7.14 per share










5,000



50Amortization of deferred compensation














Balance at May 31, 1998










14,097,375



140,974Net loss














Non-cash compensation














Exercise of stock options at $7.14 per share










17,500



175Exercise of stock warrants at $8.00 per share










125,000



1,250Balance at May 31, 1999










14,239,875



142,399Net loss














Non-cash compensation














Exercise of stock options at $13.38 per share










2,500



25Balance at May 31, 2000










14,242,375



142,424Net loss














Non-cash compensation














Exercise of stock options at $6.38 per share










6,000



60Exercise of stock options at $10.81 per share










17,500



175Balance at May 31, 2001










14,265,875



142,659Net loss














Balance at May 31, 2002










14,265,875



142,659Net loss














Balance at May 31, 2003










14,265,875



142,659Issuance of common stock at $5.60 per share on July 28,
    2003 (net of costs of issuance of $909,229)










1,892,857



18,928Issuance of common stock to directors at $6.08 per share on
    October 30, 2003










12,335



123Deferred compensation related to stock grants










25,500



255Amortization of deferred compensation














Issuance of common stock at $5.80 per share on January 29,
    2004 (net of costs of issuance of $1,126,104)










2,585,965



25,860Issuance of common stock at $5.80 per share on February 18,
    2004 (net of costs of issuance of $116,423)










237,008



2,370Issuance of common stock at $5.80 per share on April 15,
    2004 (net of costs of issuance of $192,242)










409,483



4,095Issuance of common stock at $12.00 per share on May 18,
    2004 (net of costs of issuance of $1,716,831.36)










1,954,416



19,544Exercise of stock options at $6.38 per share










15,000



150Net loss














Balance at May 31, 2004










21,398,439



213,984Deferred compensation related to stock grants










5,500



55Amortization of deferred compensation














Exercise of stock options between $5.08 and $14.17 per share










167,875



1,679Cost of shares in treasury, 1,717 shares














Issuance of common stock to directors at $12.66 per share on
    September 21, 2004










5,925



59Issuance of common stock at $15.00 per share on February 9,
    2005 (net of costs of issuance of $4,995,689)










5,175,000



51,750Net loss














Balance at May 31, 2005










26,752,739



267,527Amortization of deferred compensation














Exercise of stock options at $7.13 and $10.66 per share










2,875



29Issuance of common stock to directors at $13.05 per share on
    September 29, 2005










5,750



57Issuance of common stock to director at $13.21 per share on
    October 3, 2005










1,135



12Issuance of common stock to director at $10.67 per share on
    February 24, 2006










1,406



14Exercise of stock options at $10.66, $5.15 and $11.09 per share










8,000



80Exercise of stock options at $10.66 and $7.13 per share










2,750



28Exercise of stock options at $5.15 and $7.13 per share










3,000



30Net loss














Balance at May 31, 2006










26,777,655



267,777Eliminate remaining deferred compensation














Exercise of stock options at $5.15 and $7.13 per share










2,750



28Exercise of stock options at $7.13 per share










750



7Issuance of common stock to directors at $13.03 per share on
    September 20, 2006










6,912



69Exercise of stock options at $11.44 per share










10,000



100Exercise of stock options at $5.15, $11.92 and $13.21 per share










3,125



31Exercise of stock options at $5.08 and $6.08 per share










15,000



150Exercise of stock options at $5.15 per share










3,000



30Exercise of stock options at $11.92 per share










375



4Exercise of warrants at $6.88 per share










96,974



969Share-based compensation














Net loss














Balance at May 31, 2007










26,916,541



269,165Issuance of common stock to directors at $2.06 per share on
    September 25, 2007










43,692



437Share-based compensation














Net loss














Balance at May 31, 2008





$




26,960,233


$
269,602    44




---



##### 



Deficit








TotalSeries A convertible


Series B convertible





accumulated








share-preferred stock


preferred stock


Additional


during the


Deferred





holdersNumber


Aggregate


Number


Aggregate


paid-in


development


compen-


Treasury


equityof shares


amount


of shares


amount


capital


stage


sation


shares


(deficit)


$







$



$



$
(4,245,693
)

$







$
(4,245,693
)















50,025















52,658















463,540















465,869















71,300















71,400























2,569







2,569















116,011,985



(54,856,862
)


(1,284
)






61,294,763



















(5,883,378
)










(5,883,378
)















35,650















35,700























1,284







1,284















116,047,635



(60,740,240
)










55,448,369



















(7,416,333
)










(7,416,333
)















14,354















14,354















124,775















124,950















998,750















1,000,000















117,185,514



(68,156,573
)










49,171,340



















(9,167,070
)










(9,167,070
)















57,112















57,112















33,425















33,450















117,276,051



(77,323,643
)










40,094,832



















(10,174,609
)










(10,174,609
)















































38,220















38,280















189,000















189,175















117,503,271



(87,498,252
)










30,147,678



















(10,717,360
)










(10,717,360
)















117,503,271



(98,215,612
)










19,430,318



















(12,250,145
)










(12,250,145
)















117,503,271



(110,465,757
)










7,180,173















9,671,843















9,690,771















74,877















75,000















190,995







(191,250
)






























35,630







35,630















13,846,633















13,872,493















1,255,853















1,258,223















2,178,664















2,182,759















21,716,616















21,736,160















95,550















95,700



















(14,573,798
)










(14,573,798
)















166,534,302



(125,039,555
)


(155,620
)






41,553,111















71,055







(71,110
)






























122,121







122,121















1,739,585















1,741,264



























(25,393
)


(25,393
)















74,941















75,000















72,577,561















72,629,311



















(20,321,456
)










(20,321,456
)















240,997,444



(145,361,011
)


(104,609
)


(25,393
)


95,773,958























95,550







95,550















29,295















29,324















74,943















75,000















14,988















15,000















14,986















15,000















65,075















65,155















26,640















26,668















16,905















16,935



















(26,775,418
)










(26,775,418
)















241,240,276



(172,136,429
)


(9,059
)


(25,393
)


69,337,172















(9,059
)






9,059























17,105















17,133















5,348















5,355















89,931















90,000















114,300















114,400















24,646















24,677















81,050















81,200















15,420















15,450















4,466















4,470















666,211















667,180















2,655,849















2,655,849



















(27,671,177
)










(27,671,177
)















244,905,543



(199,807,606
)






(25,393
)


45,341,709















89,563















90,000















1,959,269















1,959,269



















(20,408,888
)










(20,408,888
)


$







$



$
246,954,375


$
(220,216,494
)

$




(25,393
)

$
26,982,090  45




---



##### 



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)STATEMENTS OF CASH FLOWSYears ended May 31, 2008 and 2007
    and the cumulative period from June 19, 1985
    (inception) through May 31, 2008
  CumulativefromJune 19, 1985Years ended May 31,


through2008


2007


May 31, 2008Cash flows from operating activities:Net loss

$
(20,408,888
)


(27,671,177
)


(220,216,494
)Adjustments to reconcile net loss to net cash used in operating
    activities:Marketable security amortization


(520,947
)


(1,213,864
)


(4,033,014
)Depreciation and amortization


640,480



488,891



20,074,142Share based compensation


2,049,269



2,745,849



8,856,142Loss on sale of equipment


2,423



19,729



88,511Changes in assets and liabilities:Restricted cash


228,460



396,740



758,212Prepaid expenses


(23,061
)


139,912



(905,464
)Other current assets


212,854



(212,854
)


(1,896,251
)Other assets






49,391



55,791Accounts payable


(1,655,765
)


(908,779
)


1,917,260Accrued expenses


10,519



(32,888
)


111,637Government grant liability


(228,460
)


(396,740
)


(758,212
)Accrued compensation and benefits


92,303



(176,329
)


658,012Other liabilities


6,961



(249,580
)


6,961Current other liabilities






7,431



7,431Net cash used in operating activities


(19,593,852
)


(27,014,268
)


(195,275,336
)Cash flows from investing activities:Purchase of property, plant, equipment, and capitalized
    engineering costs


(358,955
)


(7,954,855
)


(28,262,123
)Proceeds from sale of land and equipment










1,863,023Proceeds from matured marketable securities


56,161,753



88,000,000



761,808,105Proceeds from sale of marketable securities










7,141,656Purchase of marketable securities


(46,686,432
)


(70,041,318
)


(772,902,357
)Net cash provided by (used in) investing activities


9,116,366



10,003,827



(30,351,696
)Cash flows from financing activities:Proceeds from issuance of common stock






929,865



237,055,000Payment of common stock issuance costs










(14,128,531
)Proceeds from issuance of preferred stock










6,644,953Proceeds from sale of stock options to purchase common shares










7,443,118Proceeds from issuance of notes payable










1,500,000Repayment of notes payable










(140,968
)Net cash provided by financing activities






929,865



238,373,572Net increase (decrease) in cash


(10,477,486
)


(16,080,576
)


12,746,540Cash at beginning of period


23,224,026



39,304,602



Cash at end of period

$
12,746,540



23,224,026



12,746,540Supplemental Schedule of Noncash Financing Activities :


Exercise of stock option, 5,000 shares in exchange for
    1,717 treasury shares

$








25,393    46




---



##### 



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)
    NOTES TO FINANCIAL STATEMENTS
    May 31, 2008 and 2007  (1)
    Summary
    of Significant Accounting Policies  Description
    of Operations in the Development Stage
    Basis
    of Presentation
    Going
    Concern Uncertainty
      Cash
    and Cash Equivalents
    Restricted
    Cash
      Marketable
    Securities
  held-to-maturity. Held-to-maturity Held-to-maturity
 47




---



##### 



Property,
    Plant, and Equipment
    Treasury
    Shares
    Computation
    of Net Loss Per Share
      CumulativeFromJune 19, 1985Through2008


2007


May 31, 2008Stock options


1,885,750



1,714,375



821,850Warrants


115,418



163,905



90,7832,001,168



1,878,280



912,633   in-the-money, out-of-the-money, out-of-the-money
  Stock
    Based Compensation
     48




---



##### 



Year Ended


Year EndedMay 31, 2008


May 31, 2007Fair value


681,500



1,160,525Expected volatility


95.9
%


75.8
%Risk-free interest rate


4.82
%


5.0
%Dividend yield






Expected lives


6.3 years



6.7 years   Financial
    Instruments
    Use of
    Estimates
    (2)
    Marketable
    Securities  other-than-temporary
 49




---



##### 



Gross UnrealizedAmortized Cost

Fair Value

(Losses)Corporate debt securities

$
7,979,830


$
7,979,440


$
(390
)Total

$
7,979,830


$
7,979,440


$
(390
)     Gross UnrealizedAmortized Cost

Fair Value

(Losses)Corporate debt securities

$
16,934,204


$
16,934,479


$
275Total

$
16,934,204


$
16,934,479


$
275     (3)
    Property,
    Plant, and Equipment    Useful Life


2008


2007Land





$
2,758,364


$
2,758,364Building


39.5 years



3,996,548



3,996,549Building improvements


39.5 years



46,380



Manufacturing equipment


5 years



9,743,577



9,817,151Laboratory equipment


5 years



1,267,129



1,267,870Office furniture and equipment


7 years



875,130



848,516Computer equipment


3 years



519,306



359,411Leasehold improvements


Lease Term



66,564



65,435Capitalized engineering costs


3 years



474,950



474,950$
19,747,948


$
19,588,246Less accumulated depreciation and Amortization






(11,506,730
)


(11,063,080
)$
8,241,218



8,525,166     (4)
    Shareholders
    Equity       50




---



##### 



51




---



##### 



52




---



##### 



(5)
    Income
    Taxes   53




---



##### 



2008


2007Deferred tax assets:Net operating loss carryforwards

$
73,000,000


$
68,000,000Tax credit carryforwards


6,100,000



5,700,000Other


2,700,000



2,600,00081,800,000



76,300,000Valuation allowance


(81,800,000
)


(76,300,000
)Net deferred tax assets

$



$
     and/or and/or
  (6)
    Stock
    Option Plan       54




---



##### 



2008


2007Weighted





WeightedAverage





AverageExercise





ExerciseOptions


Price


Options


PriceOutstanding at beginning of year


1,681,375


$
11.08



1,746,375


$
11.11Granted


587,500



1.44



152,500



10.58Exercised










35,000



7.51Cancelled


108,750



10.89



82,500



12.70Expired


70,000



12.83



100,000



10.84Outstanding at end of year


2,090,125


$
8.32



1,681,375


$
11.08Options exercisable at year end


1,287,500


$
10.11



1,121,000


$
10.26Weighted-average fair value of options granted during the year

$
1.16






$
7.61   55




---



##### 



Options Outstanding


Options ExercisableWeighted





Options


WeightedAverage


Weighted


Exercisable


Average


WeightedRemaining


Average


At


Remaining


AverageRange of

Number


Contractual


Exercise


May 31,


Contractual


ExerciseExercise Prices

Outstanding


Life


Price


2008


Life


Price$ 1.36  4.09


749,500



8.26


$
1.94



206,250



6.06


$
3.235.08  7.13


184,625



4.86



5.56



184,625



4.86



5.567.50  9.65


182,500



5.73



7.59



177,500



5.66



7.5310.62  13.06


667,500



6.25



12.31



476,375



5.75



12.2013.21  15.41


86,000



4.45



14.23



77,750



4.18



14.3018.55


220,000



6.66



18.55



165,000



6.66



18.55     (7)
    Stock
    Warrants          Black-Scholes
    (8)
    Leases/commitments   56




---



##### 



Years EndingMay 31,

Amount2009

$
367,2482010


0$
367,248   (9)
    Employee
    Benefit Plan    (10)
    Quarterly
    Financial Information (Unaudited)    Quarter Ended(In thousands except per share data)May 31,


Feb. 28,


Nov. 30,


Aug. 31,


May 31,


Feb. 28,


Nov. 30,


Aug. 31,2008


2008


2007


2007


2007


2007


2006


2006Revenues






























Costs and expenses:Research and development


4,528



3,670



3,940



3,778



5,132



4,476



5,625



5,826General and administrative


1,339



1,481



1,482



1,510



1,839



2,270



2,701



2,5645,867



5,151



5,422



5,288



6,971



6,746



8,326



8,390Other income and expense:Interest income


117



319



401



482



578



635



723



827Interest expense






























Cumulative effect of change in accounting principle






























Net loss


(5,750
)


(4,831
)


(5,021
)


(4,805
)


(6,393
)


(6,112
)


(7,603
)


(7,563
)Net loss per share  basic and diluted


(0.21
)


(0.18
)


(0.19
)


(0.18
)


(0.24
)


(0.23
)


(0.28
)


(0.28
)Shares used in calculation


26,955



26,959



26,938



26,915



26,906



26,911



26,800



26,776   (11)
    Legal
    Proceedings   57




---



##### 



Rule 10b-5
 58




---



##### 



EXHIBITS
  Number

Description3
.1

Restated Certificate of Incorporation of the Registrant
    (incorporated herein by reference to Exhibit 3.1 to the
    Registrants Current Report on
    Form 8-K
    filed by the Registrant with the Commission on October 5,
    2005 and Exhibit 3.11 to the Registrants Quarterly
    Report on
    Form 10-Q
    for the Registrants quarter ended November 30, 1999)3
.2

Restated Bylaws of the Registrant (incorporated herein by
    reference to Exhibit 3.1 to the Registrants Current
    Report on
    Form 8-K
    filed by the Registrant with the Commission on November 30,
    2007)10
.1

Sublease dated as of April 20, 1988 between the Registrant
    and First Illinois Bank of Evanston, N.A., as Trustee
    (incorporated herein by reference to Exhibit 10.1 to the
    Registrants Registration Statement on
    Form S-1,
    filed with the Securities and Exchange Commission (the
    Commission) on March 25, 1994, File
    No. 33-76856
    (the
    S-1
    Registration Statement))10
.2

Amendment to Sublease dated as of January 7, 1998 between
    the Registrant and Bank One of Illinois, N.A., as successor to
    First Illinois Bank of Evanston, N.A. (incorporated herein by
    reference to Exhibit 10.1.1 to the Registrants
    Quarterly Report on
    Form 10-Q
    for the Registrants quarter ended February 28, 1998)10
.4

Second Amendment to Lease between the Registrant and Rotary
    International (incorporated by reference to Exhibit 10.1 to
    the
    Form 8-K
    filed by the Registrant with the Commission on March 7,
    2005)10
.5

License Agreement dated as of March 6, 1989 between the
    Registrant and KabiVitrum AB (predecessor of
    Pharmacia & Upjohn Inc.) (incorporated herein by
    reference to Exhibit 10.6 to the
    S-1
    Registration Statement)10
.6

License Agreement dated as of July 20, 1990 between the
    Registrant and Eriphyle BV (incorporated herein by reference to
    Exhibit 10.7 to the
    S-1
    Registration Statement)10
.7*

Northfield Laboratories Inc. 401(K) Plan (incorporated herein by
    reference to Exhibit 10.14 to the
    S-1
    Registration Statement)10
.8*

Northfield Laboratories Inc. Nonqualified Stock Option Plan for
    Outside Directors (incorporated herein by reference to
    Exhibit 10.15 to the Registrants Annual Report on
    Form 10-K
    for the Registrants fiscal year ended May 31, 1994)10
.9*

Northfield Laboratories Inc. 1996 Stock Option Plan
    (incorporated herein by reference to Exhibit 10.5.1 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the Registrants quarter ended November 30, 1997)10
.10*

Northfield Laboratories Inc. 1999 Stock Option Plan
    (incorporated herein by reference to Exhibit 10.10 to the
    Registrants Annual Report on
    Form 10-K
    for the Registrants fiscal year ended May 31, 1999)10
.11*

Northfield Stock Option Plan for New Employees (incorporated
    herein by reference to Exhibit 10.12 to the
    Registrants Registration Statement on
    Form S-3
    filed with the Securities and Exchange Commission on
    June 27, 2003, File
    No. 333-106615
    the
    S-3
    Registration Statement)10
.12*

Northfield Laboratories Inc. 2003 Equity Compensation Plan
    (incorporated herein by reference to Exhibit 10.1 to the
    Registrants Registration Statement on
    Form S-8
    filed with the Securities and Exchange Commission on
    October 30, 2003, File
    No. 333-110110)10
.13*

Employment Agreement dated as of January 25,2005 between
    the Registrant and Steven A. Gould, M.D. (incorporated
    herein by reference to Exhibit 99.1 to the
    Form 8-K
    filed by the Registrant with the Commission on February 1,
    2005)10
.14*

Employment Agreement dated as of January 25, 2005 between
    the Registrant and Jack J. Kogut (incorporated herein by
    reference to Exhibit 99.2 to the
    Form 8-K
    filed by the Registrant with the Commission on February 1,
    2005)10
.15*

Form of Indemnification Agreement  Director and
    Executive Officer (incorporated herein by reference to
    Exhibit 10.18 to the Registrants Quarterly Report on
    Form 10-Q
    for the Registrants quarter ended February 28, 2001)10
.16*

Form of Indemnification Agreement  Director
    (incorporated herein by reference to Exhibit 10.19 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the Registrants quarter ended February 28, 2001)10
.17*

Form of Indemnification Agreement  Executive Officer
    (incorporated herein by reference to Exhibit 10.20 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the Registrants quarter ended February 28, 2001)   59




---



##### 



Number

Description10
.18

Agreement of Purchase and Sale dated June 12, 2006 between
    First Industrial, L.P. and the Registrant (incorporated herein
    by reference to Exhibit 10.8 to the Registrants
    Annual Report on
    Form 10-K
    for the Registrants fiscal year ended May 31, 2007)23
.1

Consent of Independent Registered Public Accounting Firm31
.1

Certification Pursuant to
    Rule 13a-14(a)/15d-14(a)31
.2

Certification Pursuant to
    Rule 13a-14(a)/15d-14(a)32
.1

Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 200232
.2

Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act
    of 2002     *
    
    Indicates a management contract or compensatory plan or
    arrangement required to be filed as an exhibit to
    Form 10-K
    pursuant to Item 14(c). 60




---



##### 



SIGNATURES
    NORTHFIELD LABORATORIES INC.
  By:
    /s/  Steven
    A. Gould, M.D.        Signature

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

Chairman of the Board and Chief Executive Officer
    (principal executive officer)/s/  Donna
    ONeill-MulvihillDonna
    ONeill-Mulvihill

Vice President Finance
    (principal financial and accounting officer)/s/  John
    F. BierbaumJohn
    F. Bierbaum

Director/s/  Bruce
    S. ChelbergBruce
    S. Chelberg

Director/s/  Alan
    L. HellerAlan
    L. Heller

Director/s/  Paul
    M. Ness, M.D.Paul
    M. Ness, M.D.

Director/s/  David
    A. SavnerDavid
    A. Savner

Director/s/  Edward
    C. Wood, Jr.Edward
    C. Wood, Jr.

Director  61