##### Table of Contents



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, 2007o

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 Form 10-K Form 10-K. x
  Rule 12b-2
  o x o
  Rule 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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##### Table of Contents



PART I
  ITEM 1.
    Business.  ®
              BACKGROUND
     3




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OUR
    PRODUCT
            Universal Compatibility.
  Oxygen-Carrying Ability.
  Blood Volume Replacement.
  Impact on Disease Transmission.
  Extended Shelf Life.
 4




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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
  treatment they actually received
 6




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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



13.4



35/364



9.6



7.65AT


46/349



13.2



36/365



9.9



7.06PP


31/279



11.1



29/311



9.1



6.21   £ £
  DAY 1
    MORTALITY
  PolyHeme Group





Control Group(Deaths/Number of


Mortality Rate


(Deaths/Number of


Mortality RatePatients)


(%)


Patients )


(%)MITT


34/350



9.7



27/364



7.4AT


33/349



9.5



28/365



7.7PP


20/279



7.2



22/311



7.1   Safety
    Analysis
    £
   7




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£
    THE
    MARKET OPPORTUNITY
               8




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MANUFACTURING
    AND MATERIAL SUPPLY
          MARKETING
    STRATEGIES
         9




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COMPETITION
        GOVERNMENT
    REGULATION
   10




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11




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PATENTS
    AND PROPRIETARY RIGHTS
     12




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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.
   13




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Our
    financial resources are limited and we will need to raise
    additional capital in the future to continue our
    business.
    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.
       14




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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. 15




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Our
    activities are and will continue to be subject to extensive
    government regulation.
             16




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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.
    Failure
    to increase manufacturing capacity may impair PolyHemes
    market acceptance and prevent us from achieving
    profitability.
   17




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scale-up scale-up
  There are
    significant competitors developing similar products.
    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.
     18




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We depend
    on the services of a limited number of key personnel.
    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.
   19




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Failure
    to maintain effective internal controls over financial reporting
    could have a material adverse effect on our business, operating
    results and stock price.
      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 and have received
    requests from both the SEC and the Senate Committee on Finance
    asking us voluntarily to provide information.
  Rule 10b-5
   20




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RISKS
    RELATED TO OUR INTELLECTUAL PROPERTY
  Our
    success depends upon our ability to protect our intellectual
    property and our proprietary technology.
    We rely
    on trade secrets and other confidential information to maintain
    our proprietary position.
   21




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We may be
    involved in lawsuits to protect or enforce our patents, which
    could be expensive and time consuming.
          Third
    parties may own or control patents or patent applications that
    are infringed by our product or technologies.
     22




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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.    Anti-takeover
    provisions contained in our charter and bylaws could discourage
    potential takeover attempts.
    Item 1B.
    Unresolved
    Staff Comments.   23




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##### Table of Contents



Item 2.
    Properties.      Item 3.
    Legal
    Proceedings.  Rule 10b-5
      Item 4.
    Submission
    of Matters to a Vote of Security Holders.   24




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##### Table of Contents



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 29, 2005

$
23.85


$
15.35May 31, 2005


16.19



10.71August 31, 2005


15.10



11.32November 30, 2005


15.50



11.45February 28, 2006


14.45



8.86May 31, 2006


11.30



8.62August 31, 2006


11.00



10.74November 30, 2006


15.59



15.05February 28, 2007


3.98



3.81May 31, 2007


1.55



1.46August 31, 2007 (through
    July 31, 2007)


1.46



1.21  25




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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.
 26




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HOLDERS
    OF RECORD
    DIVIDENDS
    ISSUER
    PURCHASES OF EQUITY SECURITIES
    RECENT
    SALES OF UNREGISTERED SECURITIES
    SECURITIES
    AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
    PLANS
   27




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


May 31,2007


2006


2005


2004


2003


2007(In thousands, except per share data)Statement of Operations
    Data:Revenues:License income

$




















3,000Costs and expenses:Research and development

$
21,060


$
24,165



16,600



10,777



8,819



168,841General and administrative


9,374



5,832



4,990



3,854



3,643



64,650Interest income (net)


2,763



3,222



1,268



131



212



30,841Net loss

$
(27,671
)

$
(26,775
)


(20,322
)


(14,574
)


(12,250
)


(199,808
)Net loss per share basic and
    diluted

$
(1.03
)

$
(1.00
)


(0.88
)


(0.86
)


(0.86
)


(17.42
)Shares used in calculation of per
    share data(1)


26,906



26,770



23,069



16,932



14,266



11,470Balance Sheet Data:Cash and marketable securities

$
40,688


$
73,910



98,131



42,487



6,890Total assets


50,119



75,871



100,002



44,179



9,246Total liabilities


4,777



6,534



4,228



2,626



2,066Deficit accumulated during
    development stage


(199,808
)


(172,136
)


(145,361
)


(125,040
)


(110,466
)Total shareholders equity


45,342



69,337



95,774



41,553



7,180     (1)
    
    Computed on the basis described in Note 1 of the Notes to
    Financial Statements. Excludes 1,681,375 shares reserved
    for issuance upon the exercise of stock options and
    115,418 shares reserved for issuance for stock warrants as
    of May 31, 2007. Additional stock options for a total of
    1,426,500 were available for grant as of May 31, 2007 under
    our employee stock option plans.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  RECENT
    DEVELOPMENTS
     28




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RESULTS
    OF OPERATIONS
    OPERATING
    EXPENSES
           29




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Share-Based Payment
      INTEREST
    INCOME
      12-month
  NET
    LOSS
     30




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LIQUIDITY
    AND CAPITAL RESOURCES
              CRITICAL
    ACCOUNTING POLICIES
    NET
    DEFERRED TAX ASSETS VALUATION
    CONTRACTUAL
    OBLIGATIONS
    Less thanContractual Obligations

Total


One Year


1-3 YearsLease Obligations(1)

$
727,447


$
360,198


$
367,248Other Obligations(2)


1,230,000



1,230,000



Total Contractual Cash Obligations

$
1,957,447


$
1,590,198


$
367,248  31




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##### Table of Contents



(1)
    
    The lease for our Evanston headquarters is cancelable with six
    months notice combined with a termination payment equal to three
    months base rent at any time after February 14, 2009. If
    the lease is cancelled as of February 15, 2009 unamortized
    broker commissions of $17,470 would also be due.(2)
    
    Represents payments required to be made upon termination of
    employment agreements with two of our executive officers. The
    employment contracts renew automatically unless terminated.
    Figures shown represent compensation payable upon the
    termination of the employment agreements for reasons other than
    death, disability, cause or voluntary termination of employment
    by the executive officer other than for good reason. Additional
    payments may be required under the employment agreements in
    connection with a termination of employment of the executive
    officer following a change in control of Northfield.  RECENT
    ACCOUNTING PRONOUNCEMENTS
  The Fair Value Option for Financial
    Assets and Financial Liabilities
  Fair Value
    Measurements
  Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements
  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.   32




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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
    Managements
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f)
  Limitations
    on the Effectiveness of Controls
    Item 9B.
    Other
    Information.   33




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PART III
  Items 10
    Through 14.
  Form 10-K Form 10-K. Form 10-K.
  PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules.           34




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##### 



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


36Report of
    Independent Registered Public Accounting Firm on Internal
    Control Over Financial Reporting


37Balance Sheets,
    May 31, 2007 and 2006


38Statements of
    Operations, Fiscal Years ended May 31, 2007, 2006 and 2005,
    and the cumulative period from June 19, 1985 (inception)
    through May 31, 2007


39Statements of
    Shareholders Equity (Deficit), Fiscal Years ended
    May 31, 2007, 2006, and 2005, and the cumulative period
    from June 19, 1985 (inception) through May 31,
    2007


40Statements of Cash
    Flows, Fiscal Years ended May 31, 2007, 2006, and 2005, and
    the cumulative period from June 19, 1985 (inception)
    through May 31, 2007


44Notes of Financial
    Statements


45Consent of Independent Registered Public Accounting FirmCertification Pursuant to Rule 13a-14(a)/15d-14(a)Certification Pursuant to Rule 13a-14(a)/15d-14(a)Certification Pursuant to 18 U.S.C. Section 1350Certification Pursuant to 18 U.S.C. Section 1350   35




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Report of
    Independent Registered Public Accounting Firm           Internal Control-Integrated
    Framework
        36




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Report of
    Independent Registered Public Accounting Firm     Internal Control 
    Integrated Framework
        Internal Control  Integrated Framework Internal Control 
    Integrated Framework
        37




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##### Table of Contents



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)BALANCE
    SHEETSMay 31, 2007 and May 31, 2006
  May 31,


May 31,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
23,224,026



39,304,602Restricted cash


529,752



926,492Marketable securities


16,934,204



33,679,022Prepaid expenses


673,192



813,104Other current assets


212,854



Total current assets


41,574,028



74,723,220Property, plant, and equipment


19,588,246



15,654,049Accumulated depreciation


(11,063,080
)


(14,575,118
)Net property, plant, and equipment


8,525,166



1,078,931Other assets


19,550



68,941$
50,118,744



75,871,092LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
3,573,025



4,481,804Accrued expenses


101,118



134,006Accrued compensation and benefits


565,709



742,038Government grant liability


529,752



926,492Other






249,580Total current liabilities


4,769,604



6,533,920Other liabilities


7,431



Total liabilities


4,777,035



6,533,920Shareholders equity:Preferred stock, $.01 par
    value. Authorized 5,000,000 shares; none issued and
    outstanding






Common stock, $.01 par value.
    Authorized 60,000,000 shares; issued 26,916,541 at
    May 31, 2007 and 26,777,655 at May 31, 2006


269,165



267,777Additional paid-in capital


244,905,543



241,240,276Deficit accumulated during the
    development stage


(199,807,606
)


(172,136,429
)Deferred compensation






(9,059
)45,367,102



69,362,565Less cost of common shares in
    treasury; 1,717 shares and 1,717 shares, respectively


(25,393
)


(25,393
)Total shareholders equity


45,341,709



69,337,172$
50,118,744



75,871,092    38




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##### Table of Contents



NORTHFIELD
    LABORATORIES INC.
    (a Company in the development stage)STATEMENTS OF OPERATIONSYears ended May 31, 2007, 2006 and 2005 and
    the cumulative period from June 19, 1985
    (inception) through May 31, 2007
  CumulativefromJune 19, 1985Years Ended May 31,


through2007


2006


2005


May 31, 2007Revenues  license income

$












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


21,059,618



24,165,407



16,599,736



168,840,816General and administrative


9,374,395



5,832,297



4,989,620



64,650,29530,434,013



29,997,704



21,589,356



233,491,111Other income and expense:Interest income


2,762,836



3,222,286



1,267,900



30,841,660Interest expense














83,234$
2,762,836



3,222,286



1,267,900



30,758,426Net loss before cumulative effect
    of change in accounting principle


(27,671,177
)


(26,775,418
)


(20,321,456
)


(199,732,685
)Cumulative effect of change in
    accounting principle














74,921Net loss

$
(27,671,177
)


(26,775,418
)


(20,321,456
)


(199,807,606
)Net loss per share 
    basic and diluted

$
(1.03
)


(1.00
)


(0.88
)


(17.42
)Shares used in calculation of per
    share data  basic and diluted


26,906,407



26,769,860



23,069,166



11,470,012    39




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NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)Years ended May 31, 2007, 2006 and 2005 and the
    cumulative period
    from June 19, 1985 (inception) through May 31,
    2007
  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    40




---



##### Table of Contents



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  41




---



##### Table of Contents



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)
  STATEMENTS
    OF SHAREHOLDERS EQUITY (DEFICIT)
    Years ended May 31, 2007, 2006 and 2005 and the cumulative
    period
    from June 19, 1985 (inception) through May 31,
    2007
  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 compensationNet lossBalance at May 31, 2007





$




26,916,541


$
269,165      42




---



##### Table of Contents



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)


$







$



$



$
(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  43




---



##### Table of Contents



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)STATEMENTS OF CASH FLOWSYears ended May 31, 2007, 2006 and 2005
    and the cumulative period from June 19, 1985
    (inception) through May 31, 2007
  CumulativefromJune 19, 1985Years ended May 31,


through2007


2006


2005


May 31, 2007Cash flows from operating
    activities:Net loss

$
(27,671,177
)


(26,775,418
)


(20,321,456
)


(199,807,606
)Adjustments to reconcile net loss
    to net cash used in operating activities:Marketable security amortization


(1,213,864
)


(1,695,897
)


(537,201
)


(3,512,067
)Depreciation and amortization


488,891



668,063



447,633



19,433,662Share based compensation


2,745,849



200,550



197,121



6,806,873Loss on sale of equipment


19,729











86,088Changes in assets and liabilities:Restricted cash


396,740



926,492







529,752Prepaid expenses


139,912



13,637



(212,077
)


(882,403
)Other current assets


(212,854
)


139,808



(138,726
)


(2,109,105
)Other assets


49,391



(451
)






55,791Accounts payable


(908,779
)


1,156,234



1,487,919



3,573,025Accrued expenses


(32,888
)


23,327



(6,328
)


101,118Government grant liability


(396,740
)


(926,492
)






(529,752
)Accrued compensation and benefits


(176,329
)


202,255



120,970



565,709Other current liabilities


(249,580
)










Other liabilities


7,431



(2,002
)


(1,174
)


7,431Net cash used in operating
    activities


(27,014,268
)


(26,069,894
)


(18,963,319
)


(175,681,484
)Cash flows from investing
    activities:Purchase of property, plant,
    equipment, and capitalized engineering costs


(7,954,855
)


(912,057
)


(275,076
)


(27,903,168
)Proceeds from sale of land and
    equipment














1,863,023Proceeds from matured marketable
    securities


88,000,000



187,794,000



18,315,000



705,646,352Proceeds from sale of marketable
    securities














7,141,656Purchase of marketable securities


(70,041,318
)


(128,445,934
)


(105,664,266
)


(726,215,925
)Net cash provided by (used in)
    investing activities


10,003,827



58,436,009



(87,624,342
)


(39,468,062
)Cash flows from financing
    activities:Proceeds from issuance of common
    stock


929,865



138,082



79,340,871



237,055,000Payment of common stock issuance
    costs










(4,995,689
)


(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



138,082



74,345,182



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


(16,080,576
)


32,504,197



(32,242,479
)


23,224,026Cash and cash equivalents at
    beginning of period


39,304,602



6,800,405



39,042,884



Cash and cash equivalents at end of
    period

$
23,224,026



39,304,602



6,800,405



23,224,026Supplemental Schedule of Noncash
    Financing Activities:Exercise of stock option,
    5,000 shares in exchange for 1,717 treasury shares

$








25,393



25,393    44




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##### Table of Contents



NORTHFIELD
    LABORATORIES INC.
    (a company in the development stage)NOTES TO FINANCIAL STATEMENTSMay 31, 2007 and 2006
  (1)
    Summary
    of Significant Accounting Policies  Description
    of Operations in the Development Stage
    Basis
    of Presentation
      Cash
    and Cash Equivalents
    Restricted
    Cash
      Marketable
    Securities
    Property,
    Plant, and Equipment
   45




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##### Table of Contents



Treasury
    shares
    Computation
    of Net Loss Per Share
      CumulativeFromJune 19, 1985Through2007


2006


2005


May 31, 2007Stock options


1,714,375



1,562,500



1,290,563



764,202Warrants


163,905



212,392



212,392



89,6631,878,280



1,774,892



1,502,955



853,865     Stock
    Based Compensation
         46




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##### Table of Contents



Year Ended


Year EndedMay 31, 2006


May 31, 2005Net loss as reported


(26,775,418
)

$
(20,321,456
)Add: Stock based compensation
    expense included in statements of operations


200,550



197,121Deduct: Total stock based
    compensation expense determined under the fair value method for
    all awards


(2,721,700
)


(1,659,343
)Pro forma net loss

$
(29,296,568
)

$
(21,783,678
)Basic and diluted earnings per
    share:As reported


(1.00
)


(.88
)Pro forma


(1.09
)


(.94
)       Year Ended


Year Ended


Year EndedMay 31, 2007


May 31, 2006


May 31, 2005Fair Value


1,160,525



5,446,235



4,598,160Fair value per share

$
7.61


$
12.71


$
11.76Expected volatility


75.8
%


71.0
%


71.3
%Risk-free interest rate


5.0
%


4.2
%


4.0
%Dividend yield










Expected lives


6.7 years



7.2 years



7.7 years   Financial
    Instruments
    Use of
    Estimates
   47




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##### Table of Contents



Reclassifications
    (2)
    Miscellaneous
    Receivable    (3)
    Marketable
    Securities      Gross UnrealizedAmortized Cost


Fair Value


Gains/(Losses)Certificates of Deposit

$



$



$
US Government and agency securities










Corporate debt securities


16,934,204



16,934,479



275Total

$
16,934,204


$
16,937,479


$
275     Gross UnrealizedAmortized Cost


Fair Value


(Losses)Certificates of Deposit

$



$



$
US Government and agency securities










Corporate debt securities


33,679,022



33,677,649



(1,373
)Total

$
33,679,022


$
33,677,649


$
(1,373
)    48




---



##### Table of Contents



(4)
    Property,
    Plant, and Equipment    Useful Life

2007


2006Land



$
2,758,364



Building

39.5 years


3,996,549



Manufacturing equipment

5 years


9,817,151



10,263,545Laboratory equipment

5 years


1,267,870



1,340,440Office furniture and equipment

7 years


848,516



815,100Computer equipment

3 years


359,411



287,468Leasehold improvements and asset
    retirement obligations

Lease term


65,435



1,818,600Capitalized engineering costs

3 years


474,950



1,128,89619,588,246



15,654,049Less accumulated depreciation and
    amortization




(11,063,080
)


(14,575,118
)$
8,525,166


$
1,078,931     (5)
    Asset
    Retirement Obligations          Year EndedMay 31, 2006Obligation at June 1

$
228,972Accretion


20,607Obligation at May 31

$
249,579     (6)
    Shareholders
    Equity   49




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##### Table of Contents



50




---



##### Table of Contents



51




---



##### Table of Contents



52




---



##### Table of Contents



(7)
    Income
    Taxes        2007


2006Deferred tax assets:Net operating loss carryforwards

$
68,000,000


$
61,000,000Tax credit carryforwards


5,700,000



5,000,000Other


2,600,000



2,300,00076,300,000



68,300,000Valuation allowance


(76,300,000
)


(68,300,000
)Net deferred tax assets

$



$
     (8)
    Stock
    Option Plan       53




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##### Table of Contents



54




---



##### Table of Contents



2007


2006


2005Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseOptions


Price


Options


Price


Options


PriceOutstanding at beginning of year


1,746,375


$
11.11



1,377,625


$
10.61



1,203,500


$
8.64Granted


152,500



10.58



428,500



12.72



391,000



16.23Exercised


35,000



7.51



16,625



8.31



167,875



10.37Canceled


82,500



12.70



43,125



12.14



49,000



7.85Expired


100,000Outstanding at end of year


1,681,375


$
11.08



1,746,375


$
11.11



1,377,625


$
10.61Options exercisable at year end


1,121,000


$
10.26



943,500


$
9.94



680,125


$
9.51Weighted-average fair value of
    options granted during the year

$
7.61






$
12.71






$
11.76   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


2007


Life


Price$ 3.61  6.50


343,500



6.02


$
4.64



304,125



6.04


$
4.667.13  9.65


228,375



6.37



7.65



168,500



6.34



7.6210.62  12.76


463,500



6.76



11.93



236,750



7.27



11.4912.90  15.41


426,000



6.57



13.31



301,625



6.48



13.4118.55


220,000



7.67



18.55



110,000



7.67



18.55     (9)
    Stock
    Warrants         55




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##### Table of Contents



(10)
    Leases/commitments          Years EndingMay 31,

Amount2008

$
360,1982009


367,248$
727,446   (11)
    Employee
    Benefit Plan    (12)
    Quarterly
    Financial Information (Unaudited)   56




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##### Table of Contents



Quarter Ended(In thousands except per share data)May 31,


Feb. 28,


Nov. 30,


Aug. 31,


May 31,


Feb. 28,


Nov. 30,


Aug. 31,2007


2007


2006


2006


2006


2006


2005


2005Revenues






























Costs and expenses:Research and development


5,132



4,476



5,625



5,826



7,712



5,786



5,573



5,094General and administrative


1,839



2,270



2,701



2,564



1,530



1,454



1,460



1,3896,971



6,746



8,326



8,390



9,242



7,240



7,033



6,483Other income and expense:Interest income


578



635



723



827



911



845



764



702Interest expense






























Cumulative effect of change in
    accounting principle






























Net loss


(6,393
)


(6,112
)


(7,603
)


(7,563
)


(8,331
)


(6,395
)


(6,269
)


(5,781
)Net loss per share 
    basic and diluted


(0.24
)


(0.23
)


(0.28
)


(0.28
)


(0.31
)


(0.24
)


(0.23
)


(0.22
)Shares used in calculation


26,906



26,911



26,800



26,776



26,770



26,769



26,759



26,751   (13)
    Legal
    Proceedings  Rule 10b-5
     57




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##### Table of Contents



EXHIBITS
  Number

Description3
.1

Restated Certificate of Amendment
    to Certificate of Incorporation of the Registrant (incorporated
    herein by reference to 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
    Form 8-K
    filed by the Registrant with the Commission on August 15,
    2005)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) 58




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##### Table of Contents



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, 2006)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). 59




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##### Table of Contents



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  60