<PAGE>
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

FOR THE PERIOD ENDED FEBRUARY 29, 2004

                                       OR

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

FOR THE TRANSITION PERIOD FROM _______________TO _______________

                         COMMISSION FILE NUMBER 0-24050

                          NORTHFIELD LABORATORIES INC.
             (Exact name of registrant as specified in its charter)

                      DELAWARE                                36-3378733
            (State or other jurisdiction                   (I.R.S. Employer
         of incorporation or organization)              Identification Number)

1560 SHERMAN AVENUE, SUITE 1000, EVANSTON, ILLINOIS           60201-4800
      (Address of principal executive offices)                (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:      (847) 864-3500

FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT: NOT APPLICABLE

    INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.

                                 YES [X] NO [ ]

    INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN RULE 12b-2 OF THE EXCHANGE ACT).

    YES [X]  NO [ ]

     AS OF APRIL 12, 2004, REGISTRANT HAD 19,019,540 SHARES OF COMMON STOCK
OUTSTANDING

================================================================================

<PAGE>



                 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
                                  INFORMATION

This Quarterly Report contains forward-looking statements concerning, among
other things, our prospects, clinical and regulatory developments affecting our
potential product and our business strategies. These forward-looking statements
are identified by the use of such terms as "intends," "expects," "plans,"
"estimates," "anticipates," "should," "believes" and similar terms.

These forward-looking statements involve risks and uncertainties. Actual results
may differ materially from those predicted by the forward-looking statements
because of various factors and possible events, including those discussed under
"Risk Factors" in our Annual Report on Form 10-K filed with the Securities and
Exchange Commission. Because these forward-looking statements involve risks and
uncertainties, actual results may differ significantly from those predicted in
these forward-looking statements. You should not place undue weight on these
statements. These statements speak only as of the date of this document or, in
the case of any document incorporated by reference, the date of that document.

All subsequent written and oral forward-looking statements attributable to
Northfield or any person acting on our behalf are qualified by the cautionary
statements in this section and in our Annual Report. We will have no obligation
to revise these forward-looking statements.





<PAGE>
                     INDEPENDENT ACCOUNTANTS' REVIEW REPORT

The Board of Directors
Northfield Laboratories Inc.:


We have reviewed the balance sheet of Northfield Laboratories Inc. (a company in
the development stage) as of February 29, 2004, and the related statements of
operations for the three and nine month periods and cash flows for the nine
month periods ended February 29, 2004 and February 28, 2003, and for the period
from June 19, 1985 (inception) through February 29, 2004. We have also reviewed
the statements of shareholders' equity (deficit) for the nine-month period ended
February 29, 2004 and for the period from June 19, 1985 (inception) through
February 29, 2004. These financial statements are the responsibility of the
Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States of
America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the balance sheet of Northfield
Laboratories Inc. as of May 31, 2003, and the related statements of operations,
shareholders' equity (deficit), and cash flows for the year then ended and for
the period from June 19, 1985 (inception) through May 31, 2003 (not presented
herein); and in our report dated July 28, 2003, we expressed an unqualified
opinion on those financial statements. In our opinion, the information set forth
in the accompanying balance sheet as of May 31, 2003 and in the accompanying
statement of shareholders' equity (deficit) is fairly stated, in all material
respects, in relation to the statements from which it has been derived.

As discussed in note 4 to the financial statements, the Company adopted
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations", as of June 1, 2003.


/s/ KPMG LLP


Chicago, Illinois
April 5, 2004

<PAGE>



                          NORTHFIELD LABORATORIES INC.
                      (a company in the development stage)

                                 Balance Sheets

                       February 29, 2004 and May 31, 2003


<Table>
<Caption>

                                                                     FEBRUARY 29,         MAY 31,
                                    ASSETS                               2004              2003
                                                                     -------------     -------------
<S>                                                                  <C>               <C>
Current assets:
    Cash                                                             $  18,699,170         4,897,962
    Marketable securities                                                3,074,808         1,992,297
    Prepaid expenses                                                       263,064           688,755
    Other current assets                                                    29,367                --
                                                                     -------------     -------------

             Total current assets                                       22,066,409         7,579,014

Property, plant, and equipment, net                                      1,138,430         1,596,026
Other assets                                                                86,306            71,399
                                                                     -------------     -------------

Total assets                                                         $  23,291,145         9,246,439
                                                                     =============     =============

                     LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                 $     556,286         1,462,586
    Accrued expenses                                                        35,611            61,519
    Accrued compensation and benefits                                      324,063           377,117
                                                                     -------------     -------------

             Total current liabilities                                     915,960         1,901,222

Other liabilities                                                          259,164           165,044
                                                                     -------------     -------------

             Total liabilities                                           1,175,124         2,066,266
                                                                     -------------     -------------

Shareholders' equity:
    Preferred stock, $.01 par value. Authorized 5,000,000 shares;
      none issued and outstanding                                               --                --
    Common stock, $.01 par value. Authorized 30,000,000 shares;
      issued and outstanding 19,019,540 at February 29, 2004
      and 14,265,875 at May 31, 2003                                       190,195           142,659
    Additional paid-in capital                                         142,543,472       117,503,271
    Deficit accumulated during the development stage                  (120,438,163)     (110,465,757)
    Deferred compensation                                                 (179,483)               --
                                                                     -------------     -------------

             Total shareholders' equity                                 22,116,021         7,180,173
                                                                     -------------     -------------

Total liabilities and shareholders' equity                           $  23,291,145         9,246,439
                                                                     =============     =============
</Table>

See accompanying notes to financial statements.



<PAGE>


                             NORTHFIELD LABORATORIES INC.
                         (a company in the development stage)

                               Statements of Operations

Three and nine months ended February 29, 2004 and February 28, 2003 and for the
        period from June 19, 1985 (inception) through February 29, 2004


<Table>
<Caption>


                                                                                                                 CUMULATIVE
                                              THREE MONTHS ENDED                 NINE MONTHS ENDED                  FROM
                                         FEBRUARY 29,     FEBRUARY 28,     FEBRUARY 29,     FEBRUARY 28,       JUNE 19, 1985
                                         ------------     ------------     ------------     ------------           THROUGH
                                             2004             2003             2004            2003          FEBRUARY 29, 2004
                                         ------------     ------------     ------------     ------------     -----------------
                                          (unaudited)      (unaudited)     (unaudited)      (unaudited)          (unaudited)
                                         ------------     ------------     ------------     ------------     -----------------
<S>                                      <C>              <C>              <C>              <C>              <C>
Revenues - license income                $         --               --               --               --             3,000,000
                                         ------------     ------------     ------------     ------------     -----------------
Costs and expenses:

   Research and development                 2,630,388        2,203,047        7,387,751        6,472,161           103,584,788
   General and administrative                 882,913          745,528        2,587,086        2,635,430            43,229,799
                                         ------------     ------------     ------------     ------------     -----------------

                                            3,513,301        2,948,575        9,974,837        9,107,591           146,814,587
                                         ------------     ------------     ------------     ------------     -----------------

Other income and expense:
   Interest income                             28,880           43,673           77,352          181,239            23,534,579
   Interest expense                                --               --               --               --                83,234
                                         ------------     ------------     ------------     ------------     -----------------

                                               28,880           43,673           77,352          181,239            23,451,345
                                         ------------     ------------     ------------     ------------     -----------------

Cumulative effect of change in
   accounting principle                            --               --           74,921               --                74,921
                                         ------------     ------------     ------------     ------------     -----------------

          Net loss                       $ (3,484,421)      (2,904,902)      (9,972,406)      (8,926,352)         (120,438,163)
                                         ============     ============     ============     ============     =================

Net loss per share - basic and
   diluted                               $      (0.20)           (0.20)           (0.62)           (0.63)               (11.91)
                                         ============     ============     ============     ============     =================

Shares used in calculation of
   per share data - basic and diluted      17,092,979       14,265,875       16,069,729       14,265,875            10,114,701
                                         ============     ============     ============     ============     =================
</Table>


See accompanying notes to financial statements.


<PAGE>


                          NORTHFIELD LABORATORIES INC.
                      (a company in the development stage)

                  Statements of Shareholders' Equity (Deficit)

   Nine months ended February 29, 2004 and for the period from June 19, 1985
                     (inception) through February 29, 2004

<Table>
<Caption>

                                                                                                 COMMON STOCK
                                                                           ---------------------------------------------------------
                                                                              NUMBER       AGGREGATE       NUMBER         AGGREGATE
                                                                             OF SHARES      AMOUNT        OF SHARES        AMOUNT
                                                                           ------------   ------------   ------------   ------------

<S>                                                                        <C>            <C>            <C>            <C>
Issuance of common stock on August 27, 1985                                          --   $         --      3,500,000   $     35,000
Issuance 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         35,000
Net loss                                                                             --             --             --             --
Deferred compensation relating to grant of stock options                             --             --             --             --
Amortization of deferred compensation                                                --             --             --             --
                                                                           ------------   ------------   ------------   ------------

Balance at May 31, 1987                                                              --             --      3,500,000         35,000
Issuance 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         35,000
Issuance of common stock at $24.21 per share on June 7, 1988 (net
   of costs of issuance of $246,000)                                                 --             --        413,020          4,130
Conversion of Series A convertible preferred stock to common stock
   on June 7, 1988                                                                   --             --      1,250,000         12,500
Conversion of Series B convertible preferred stock to common stock
   on June 7, 1988                                                                   --             --      1,003,165         10,032
Exercise of stock options at $2.00 per share                                         --             --         47,115            471
Issuance of common stock at $28.49 per share on March 6, 1989
   (net of costs of issuance of $21,395)                                             --             --        175,525          1,755
Issuance of common stock at $28.49 per share on March 30, 1989
   (net of costs of issuance of $10,697)                                             --             --         87,760            878
Sale 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         64,766
Net loss                                                                             --             --             --             --
Deferred compensation relating to grant of stock options                             --             --             --             --
Amortization of deferred compensation                                                --             --             --             --
                                                                           ------------   ------------   ------------   ------------

Balance at May 31, 1990                                                              --             --      6,476,585         64,766
Net loss                                                                             --             --             --             --
Amortization of deferred compensation                                                --             --             --             --
                                                                           ------------   ------------   ------------   ------------

Balance at May 31, 1991                                                              --             --      6,476,585         64,766
Exercise of stock warrants at $5.60 per share                                        --             --         90,000            900
Net loss                                                                             --             --             --             --
Amortization of deferred compensation                                                --             --             --             --
                                                                           ------------   ------------   ------------   ------------

Balance at May 31, 1992                                                              --             --      6,566,585         65,666
Exercise of stock warrants at $7.14 per share                                        --             --         15,000            150
Issuance of common stock at $15.19 per share on April 19, 1993
   (net of costs of issuance of $20,724)                                             --             --        374,370          3,744
Net loss                                                                             --             --             --             --
Amortization of deferred compensation                                                --             --             --             --
                                                                           ------------   ------------   ------------   ------------

Balance at May 31, 1993                                                              --   $         --      6,955,955   $     69,560
                                                                           ------------   ------------   ------------   ------------
</Table>

See accompanying notes to financial statements.




<PAGE>


<Table>
<Caption>


    SERIES A CONVERTIBLE              SERIES B CONVERTIBLE                            DEFICIT                              TOTAL
       PREFERRED STOCK                   PREFERRED STOCK                             ACCUMULATED                            SHARE-
-----------------------------     -----------------------------      ADDITIONAL      DURING THE         DEFERRED          HOLDERS'
  NUMBER          AGGREGATE         NUMBER          AGGREGATE         PAID-IN        DEVELOPMENT         COMPEN-           EQUITY
 OF SHARES         AMOUNT          OF SHARES          AMOUNT          CAPITAL           STAGE            SATION          (DEFICIT)
------------     ------------     ------------     ------------     ------------     ------------     ------------     ------------
<S>              <C>              <C>              <C>              <C>              <C>              <C>              <C>

          --     $         --               --     $         --     $    (28,000)    $         --     $         --     $      7,000

     250,000          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          720,000
------------     ------------     ------------     ------------     ------------     ------------     ------------     ------------

     250,000          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          566,136
------------     ------------     ------------     ------------     ------------     ------------     ------------     ------------

     250,000          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
------------     ------------     ------------     ------------     ------------     ------------     ------------     ------------
</Table>



<PAGE>



                          NORTHFIELD LABORATORIES INC.
                      (a company in the development stage)

                  Statements of Shareholders' Equity (Deficit)

             Nine months ended February 29, 2004 and for the period
            from June 19, 1985 (inception) through February 29, 2004


<Table>
<Caption>
                                                                        PREFERRED STOCK                    COMMON STOCK
                                                                  ------------------------------------------------------------
                                                                     NUMBER        AGGREGATE        NUMBER         AGGREGATE
                                                                    OF SHARES        AMOUNT        OF SHARES         AMOUNT
                                                                  ------------    ----------------------------    ------------
<S>                                                               <C>            <C>              <C>             <C>
Net 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          25,000
Cancellation of stock options                                               --              --              --              --
Amortization of deferred compensation                                       --              --              --              --
                                                                  ------------    ------------    ------------    ------------

Balance at May 31, 1994                                                     --              --       9,455,955          94,560
Net loss                                                                    --              --              --              --
Issuance of common stock at $6.50 per share on June 20, 1994
   (net of issuance costs of $172,500)                                      --              --         375,000           3,750
Exercise of stock options at $7.14 per share                                --              --          10,000             100
Exercise of stock options at $2.00 per share                                --              --         187,570           1,875
Cancellation of stock options                                               --              --              --              --
Amortization of deferred compensation                                       --              --              --              --
                                                                  ------------    ------------    ------------    ------------

Balance at May 31, 1995                                                     --              --      10,028,525         100,285
Net 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          29,250
Issuance of common stock at $17.75 per share on September 11,
   1995 (net of issuance costs of $423,238)                                 --              --         438,750           4,388
Exercise of stock options at $2.00 per share                                --              --         182,380           1,824
Exercise of stock options at $6.38 per share                                --              --           1,500              15
Exercise of stock options at $7.14 per share                                --              --          10,000             100
Cancellation of stock options                                               --              --              --              --
Amortization of deferred compensation                                       --              --              --              --
                                                                  ------------    ------------    ------------    ------------

Balance at May 31, 1996                                                     --              --      13,586,155         135,862
Net loss                                                                    --              --              --              --
Exercise of stock options at $0.20 per share                                --              --         263,285           2,633
Exercise of stock options at $2.00 per share                                --              --         232,935           2,329
Exercise of stock options at $7.14 per share                                --              --          10,000             100
Amortization of deferred compensation                                       --              --              --              --
                                                                  ------------    ------------    ------------    ------------

Balance at May 31, 1997                                                     --              --      14,092,375         140,924
Net loss                                                                    --              --              --              --
Exercise of stock options at $7.14 per share                                --              --           5,000              50
Amortization of deferred compensation                                       --              --              --              --
                                                                  ------------    ------------    ------------    ------------

Balance at May 31, 1998                                                     --              --      14,097,375         140,974
Net loss                                                                    --              --              --              --
Non-cash compensation                                                       --              --              --              --
Exercise of stock options at $7.14 per share                                --              --          17,500             175
Exercise of stock warrants at $8.00 per share                               --              --         125,000           1,250
                                                                  ------------    ------------    ------------    ------------

Balance at May 31, 1999                                                     --              --      14,239,875         142,399
Net loss                                                                    --              --              --              --
Non-cash compensation                                                       --              --              --              --
Exercise of stock options at $13.38 per share                               --              --           2,500              25
                                                                  ------------    ------------    ------------    ------------

Balance at May 31, 2000                                                     --              --      14,242,375         142,424
Net loss                                                                    --              --              --              --
Non-cash compensation                                                       --              --              --              --
Exercise of stock options at $6.38 per share                                --              --           6,000              60
Exercise of stock options at $10.81 per share                               --              --          17,500             175
                                                                  ------------    ------------    ------------    ------------

Balance at May 31, 2001                                                     --              --      14,265,875         142,659

Net loss                                                                    --              --              --              --
                                                                                  ------------    ------------    ------------

Balance at May 31, 2002                                                     --              --      14,265,875         142,659

Net loss                                                                    --              --              --              --
                                                                                  ------------    ------------    ------------

Balance at May 31, 2003                                                     --              --      14,265,875         142,659


Issuance of common stock at $5.60 per share on July 28, 2003
   (net of costs of issuance of $909,229)                                   --              --       1,892,857          18,928
Issuance of common stock to directors at $6.08 per share on
   October 30, 2003                                                         --              --          12,335             123
Deferred compensation related to stock grants                               --              --          25,500             255
Amortization 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          25,860
Issuance of common stock at $5.80 per share on February 18,
   2004 (net of costs of issuance of $116,423)                              --              --         237,008           2,370
Net loss                                                                    --              --              --              --
                                                                  ------------    ------------    ------------    ------------
Balance at February 29, 2004                                                      $               $ 19,019,540    $    190,195
                                                                  ============    ============    ============    ============
</Table>

See accompanying notes to financial statements.
<PAGE>

<Table>
<Caption>


    SERIES A CONVERTIBLE            SERIES B CONVERTIBLE                           DEFICIT                             TOTAL
       PREFERRED STOCK                PREFERRED STOCK                            ACCUMULATED                           SHARE-
-----------------------------   -----------------------------    ADDITIONAL       DURING THE         DEFERRED         HOLDERS'
  NUMBER         AGGREGATE       NUMBER          AGGREGATE        PAID-IN        DEVELOPMENT         COMPEN-          EQUITY
 OF SHARES         AMOUNT       OF SHARES          AMOUNT         CAPITAL           STAGE            SATION          (DEFICIT)
-------------   -------------   -------------   -------------   -------------    -------------    -------------    -------------
<S>             <C>             <C>             <C>             <C>              <C>              <C>              <C>
           --   $          --              --   $          --   $          --       (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
           --              --              --              --              --       (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)              --
           --              --              --              --              --               --           11,767           11,767
           --              --              --              --      13,846,633               --               --       13,872,493
           --              --              --              --       1,255,853               --               --        1,258,223
           --              --              --              --              --       (9,972,406)              --       (9,972,406)
-------------   -------------   -------------   -------------   -------------    -------------    -------------    -------------
           --   $          --              --   $          --   $ 142,543,472     (120,438,163)   $    (179,483)   $  22,116,021
=============   =============   =============   =============   =============    =============    =============    =============
</Table>

<PAGE>





                          NORTHFIELD LABORATORIES INC.
                      (a company in the development stage)

                            Statements of Cash Flows

            Nine months ended February 29, 2004 and February 28, 2003
                      and for the period from June 19, 1985
                      (inception) through February 29, 2004


<Table>
<Caption>
                                                                                                         CUMULATIVE
                                                                          NINE MONTHS ENDED                 FROM
                                                                      FEBRUARY 29, FEBRUARY 28,         JUNE 19, 1985
                                                                    -----------------------------          THROUGH
                                                                        2004             2003         FEBRUARY 29, 2004
                                                                    ------------     ------------     -----------------
<S>                                                                 <C>              <C>              <C>
Cash flows from operating activities:
   Net loss                                                         $ (9,972,406)      (8,926,352)         (120,438,163)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
       Depreciation and amortization                                     519,850          604,762            17,622,920
       Non-cash compensation                                              86,767               --             3,639,490
       Loss on sale of equipment                                              --               --                66,359
       Changes in assets and liabilities:
         Prepaid expenses                                                425,691          246,787              (472,275)
         Other current assets                                            (29,367)         (14,845)           (1,925,618)
         Other assets                                                    (14,907)              --                (8,056)
         Accounts payable                                               (906,300)        (622,865)              556,286
         Accrued expenses                                                (25,908)         (48,510)               35,611
         Accrued compensation and benefits                               (53,054)          14,136               324,063
         Other liabilities                                                94,120           (8,839)              259,164
                                                                    ------------     ------------     -----------------

             Net cash used in operating activities                    (9,875,514)      (8,755,726)         (100,340,219)
                                                                    ------------     ------------     -----------------

Cash flows from investing activities:
   Purchase of property, plant, equipment, and
     capitalized engineering costs                                       (72,505)        (172,863)          (18,744,195)
   Proceeds from sale of land and equipment                                   --               --             1,863,023
   Proceeds from matured marketable securities                         2,000,000               --           411,537,352
   Proceeds from sale of marketable securities                                --               --             7,141,656
   Purchase of marketable securities                                  (3,072,260)      (1,953,138)         (421,704,407)
                                                                    ------------     ------------     -----------------

             Net cash used in investing activities                    (1,144,765)      (2,126,001)          (19,906,571)
                                                                    ------------     ------------     -----------------

Cash flows from financing activities:
   Proceeds from issuance of common stock                             26,973,243               --           130,722,626
   Payment of common stock issuance costs                             (2,151,756)              --            (7,223,769)
   Proceeds from issuance of preferred stock                                  --               --             6,644,953
   Proceeds from sale of stock options to
     purchase common shares                                                   --               --             7,443,118
   Proceeds from issuance of notes payable                                    --               --             1,500,000
   Repayment of notes payable                                                 --               --              (140,968)
                                                                    ------------     ------------     -----------------

             Net cash provided by financing activities                24,821,487               --           138,945,960
                                                                    ------------     ------------     -----------------

             Net (decrease) increase in cash                          13,801,208      (10,881,727)           18,699,170

Cash at beginning of period                                            4,897,962       17,668,687                    --
                                                                    ------------     ------------     -----------------

Cash at end of period                                               $ 18,699,170        6,786,960            18,699,170
                                                                    ============     ============     =================
</Table>


See accompanying notes to financial statements.

<PAGE>



                          NORTHFIELD LABORATORIES INC.

                      (A COMPANY IN THE DEVELOPMENT STAGE)

                          NOTES TO FINANCIAL STATEMENTS

                                FEBRUARY 29, 2004



(1)      BASIS OF PRESENTATION

The interim financial statements presented are unaudited but, in the opinion of
management, have been prepared in conformity with accounting principles
generally accepted in the United States of America applied on a basis consistent
with those of the annual financial statements. Such interim financial statements
reflect all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation of the financial position and the results of operations for
the interim periods presented. The results of operations for the interim periods
presented are not necessarily indicative of the results to be expected for the
year ending May 31, 2004. The interim financial statements should be read in
connection with the audited financial statements for the year ended May 31,
2003.

(2)      COMPUTATION OF NET LOSS PER SHARE

Basic earnings per share is based on the weighted average number of shares
outstanding and excludes the dilutive effect of unexercised common stock
equivalents. Diluted earnings per share is based on the weighted average number
of shares outstanding and includes the dilutive effect of unexercised common
stock equivalents. Because the Company reported a net loss for all periods
presented, basic and diluted per share amounts are the same. Of the total
options outstanding as of February 29, 2004, the Company has 1,033,500 options
with an exercise price less than the market price and 181,000 options with an
exercise price greater than the market price that were excluded from the
earnings per share calculation.

(3)      GOING CONCERN UNCERTAINTY

The financial statements of the Company have been presented based on the
assumption that the Company will continue as a going concern. The Company,
however, may not be able to continue as going concern because it expects to
experience significant future losses and currently has insufficient capital
resources to fund its continuing operations. The Company believes its existing
capital resources will be adequate to satisfy its operating capital requirements
and maintain its existing manufacturing plant and office facilities for nine to
twelve months. In addition, the Company expects its existing capital resources
will be sufficient to support expenditures incurred in connection with the
Company's ongoing Phase III clinical trials during this period. Thereafter, the
Company will require substantial additional funding to continue its operations
and complete its planned clinical trials.

In July 2003, the Company raised $10,600,000 in gross proceeds through an
offering of its common stock. In January 2004, the Company raised $14,998,597 in
gross proceeds through an offering of its common stock and in February 2004, the
Company raised an additional $1,374,646 in gross proceeds through the issuance
of additional shares to existing shareholders from the Company's January
offering. The Company may issue additional equity or debt securities or enter
into collaborative arrangements with strategic partners, which could provide the
Company with additional funding or absorb expenses the Company would otherwise
be required to pay. The Company is also pursuing potential sources of government
funding. Any one or a combination of these sources may be utilized to raise
additional capital. We believe our ability to raise additional capital will
depend primarily on the progress we make toward the commercialization of our
potential product, as well as general conditions in the business and financial
markets. There can be no assurance that the Company will be successful in
raising additional capital. The Company's inability to raise

<PAGE>
sufficient levels of capital could materially delay or prevent the
commercialization of its PolyHeme(R) blood substitute product and could result
in the cessation of the Company's business. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

(4)      ASSET RETIREMENT OBLIGATIONS

The Company adopted Statement of Financial Accounting Standards, SFAS No. 143 -
"Accounting for Asset Retirement Obligations" as of June 1, 2003. The cumulative
effect of the change in accounting principle upon implementation was to
recognize a net asset of $17,800, an increase in liabilities of $92,721 and an
increase in net loss of $74,921, or $0.01 per share.

The obligation relates to the restoration of a leased manufacturing facility to
its original condition. A liability of $100,000 had been recorded in a prior
period.

The Company's asset retirement obligations are included in other liabilities.
The balances and changes thereto are summarized below:

<Table>
<Caption>

                                               QUARTER ENDED FEBRUARY 29, 2004
------------------------------------------------------------------------------
<S>                                            <C>
Obligation at June 1, 2003                                            $192,721
Accretion                                                               13,008
                                                                      --------
Obligation at February 29, 2004                                       $205,729
------------------------------------------------------------------------------
</Table>

If the change in accounting had been applied retroactively, the Company's pro
forma net loss for the three and nine months ended February 28, 2003 would have
been $2,909,592 and $8,996,582. The Company's pro forma liability at February
28, 2003 would have been $188,742.

(5)      STOCK OPTIONS

The Company accounts for its fixed plan stock options under the intrinsic value
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations in
accounting for options granted to directors, officers, and key employees under
the plans. As such, compensation expense is recorded on the date of grant and
amortized over the period of service only if the current market value of the
underlying stock exceeded the exercise price. No stock-based employee
compensation cost is reflected in net loss, as each option granted under these
plans had an exercise price equal to the market value of the underlying common
stock on the date of grant.

The following table illustrates the effect on net loss if the Company had
applied the fair value recognition provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation", to the
measurement of stock-based employee compensation, including a straight-line
recognition of compensation costs over the related vesting periods for fixed
awards:


<PAGE>

<Table>
<Caption>
                                          THREE MONTHS ENDED                 NINE MONTHS ENDED
                                        FEB 29,         FEB. 28,         FEB. 29,         FEB. 28,
                                         2004            2003              2004             2003
                                     ------------     ------------     ------------     ------------
                                     (unaudited)      (unaudited)      (unaudited)       (unaudited)

<S>                                  <C>                <C>              <C>              <C>
Net loss as reported                 $ (3,484,421)      (2,904,902)      (9,972,406)      (8,926,352)
Add:  stock-based employee
compensation expense included in
reported net earnings (loss), net
of related tax effects                     11,767                0           86,767                0
Deduct:  total stock based
compensation expense
determined under the fair
value method for all awards,
net of related tax effects               (156,098)        (169,808)        (590,712)        (509,423)
                                     ------------     ------------     ------------     ------------
                                       (3,628,752)      (3,074,710)     (10,476,351)      (9,435,775)
                                     ============     ============     ============     ============
Basic and diluted loss per share:
         As reported                 $      (0.20)           (0.20)           (0.62)           (0.63)

         Pro forma                   $      (0.21)           (0.22)           (0.65)           (0.66)
                                     ============     ============     ============     ============
</Table>


<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

         As of February 29, 2004, Northfield Laboratories Inc. ("Northfield")
had available cash balances of $21,774,000. This balance represents an increase
of $11,964,000 from the $9,810,000 we reported as of November 30, 2003. The
increase in cash is the result of successful offering transactions completed on
January 29, 2004 and February 18, 2004 in which we sold a combined 2,823,000
shares of our common stock and raised $16,373,000 in gross proceeds. The
offerings were made pursuant to a shelf registration statement, which allows us
to issue up to $50.0 million in securities. To date, we have issued
approximately $27.0 million in securities under this registration statement.

         We forecast that this $21,774,000 will be sufficient to fund current
operational costs and third party costs for our Phase III pre-hospital trauma
trial of our PolyHeme(R) blood substitute product for approximately the next 9
to 12 months.

         As we have previously announced, our goal is to have at least 20 Level
I trauma centers, the most sophisticated sites for trauma care, participate in
our trial. As of February 29, 2004, there were 22 institutions in 18 cities that
had publicly disclosed their intent to participate in our clinical trial. As of
that date, five of the institutions were already enrolling patients and the
other 17 were actively engaged in the community consultation that is required
prior to initiating enrollment as mandated in the federal regulation that
permits certain trials to be performed with an exception from the requirement
for informed consent. We are also in dialogue with a number of additional
potential sites that have not yet publicly disclosed their intent to participate
in the trial.

<PAGE>

         We plan to obtain as large a network of institutions as possible to
allow enrollment to be completed at the earliest possible date. We are seeking
to use sites that have the potential to enroll approximately one patient per
week based on prior experience documented in the trauma registry at each
institution. If that goal is achieved, once 20 sites are open it would take
approximately 36 weeks to complete enrollment in our trial if there were no
unanticipated challenges. Since we are still ramping up to the 20 or more sites,
we believe it will require approximately one year to complete enrollment in our
trial. Since the first site was only initiated in late December 2003, however,
we believe it is still too early to be certain about the accuracy of this
planned timetable. The anticipated third party costs to complete enrollment has
been previously estimated to be $15 million, although our experience to date
suggests that these costs may approximate $16.5 million. These costs are in
addition to our ongoing operational costs.

We expect that we will need to raise additional capital to fund operations
through the completion of enrollment in our Phase III pre-hospital trauma trial.
We may issue additional equity or debt securities, or utilize other financing
vehicles, to provide additional capital. During April 2004, existing
shareholders from our January offering may purchase an additional 409,000 shares
of our common stock at $5.80 per share, which will generate gross proceeds of
approximately $2.4 million. We believe our ability to raise additional capital
will depend primarily on the progress we make toward the commercialization of
PolyHeme, as well as general conditions in the business and financial markets.
Our inability to raise sufficient levels of capital would severely impair our
current operations and would raise significant doubt about our ability to
continue as a going concern.

         The post-enrollment stage of our trial will include the monitoring and
source verification of the collected data, locking the database, the complete
analysis of the data, and the preparation of the final study report. Once the
study report is completed, it must be included with the full clinical,

<PAGE>

preclinical and manufacturing components that will comprise a final Biologics
License Application, or BLA, to be submitted to FDA for review. A number of
months will be required after completion of enrollment in our trial to first
complete the final study report and to then complete the final BLA. We will
require additional funds to support these specific post-enrollment activities,
as well as the ongoing operations for Northfield that will include the necessary
tasks to prepare for the commercialization of PolyHeme.

         Since Northfield's incorporation in 1985, we have devoted substantially
all of our efforts and resources to the research, development and clinical
testing of PolyHeme. We have incurred operating losses during each year of our
operations since inception and expect to incur substantial additional operating
losses for the next several years. From Northfield's inception through February
29, 2004, we have incurred operating losses totaling $120,438,000.

         We will be required to successfully complete our Phase III pre-hospital
trauma trial to obtain FDA regulatory approval before PolyHeme can be sold
commercially. The FDA regulatory process is subject to significant risks and
uncertainties, including those described under "Risk Factors" in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission. We
therefore cannot at this time reasonably estimate the timing of any future
revenues from the commercial sale of PolyHeme.

         Our success will depend on several factors, including our ability to
obtain FDA regulatory approval of PolyHeme and our manufacturing facilities, our
ability to obtain sufficient quantities of blood to manufacture PolyHeme in
commercial quantities, our ability to manufacture and distribute PolyHeme in a
cost-effective manner, our ability to enforce our patent positions and the
availability of sufficient capital to fund these activities. We have experienced
significant delays



<PAGE>

in the development and clinical testing of PolyHeme. We cannot ensure that we
will be able to achieve these goals or that we will be able to realize product
revenues or profitability on a sustained basis or at all.

RESULTS OF OPERATIONS

        We reported no revenues for the three and nine-month periods ended
February 29, 2004 and February 28, 2003. From Northfield's inception through
February 29, 2004, we have reported total revenues of $3,000,000, all of which
were derived from licensing fees.

OPERATING EXPENSES

         Operating expenses for our third fiscal quarter ended February 29, 2004
totaled $3,513,000, an increase of $564,000, or 19.1%, from the $2,949,000
reported in the third quarter of fiscal 2003. The difference was primarily due
to increased costs associated with initiating and adding sites in our Phase III
pre-hospital trauma trial.

         Research and development expenses for the third quarter of fiscal 2004
totaled $2,630,000, an increase of $427,000, or 19.4%, from the $2,203,000
reported in the third quarter of fiscal 2003. Higher expenses were recognized
during the third quarter of fiscal 2004 related to launch and ramp up costs for
our Phase III pre-hospital trauma trial. These costs included site qualification
visits, costs incurred for community consultation and public disclosure as
required under our FDA-approved clinical trial protocol, site training for
logistics and data recording, and training for analyzing patient blood samples.
As of February 29, 2004, 22 clinical sites have been authorized by their
Institutional Review Boards to conduct community consultation regarding their


<PAGE>

participation in the pre-hospital trial. Of these, five sites are enrolling
patients and 17 are actively engaged in various stages of community consultation
and public disclosures. In addition, Northfield is actively working with
multiple other sites that are evaluating participation in our trial.

         We anticipate that research and development expenses will increase
significantly from current levels during the fourth quarter of our fiscal year.
Additional costs are anticipated for community disclosure, multi-center patient
payments, clinical monitoring, database preparation, biostatistical analysis,
independent safety appraisal and project management. Multiple additional sites
are planning to enroll patients during the fourth quarter. We continue to plan
for 20 or more enrolling sites before calendar year end.

         General and administrative expenses in the third quarter of fiscal 2004
totaled $883,000 compared to expenses of $746,000 in the third quarter of 2003,
representing an increase of $137,000, or 18.4%. This increase was due primarily
to higher insurance costs, higher professional service costs relating to
intellectual property and enhancing our visibility with governmental entities.

         We anticipate an increase in general and administrative expenses,
specifically for market analysis and research, over the balance of the fiscal
year. Our focus is centered on successfully executing our Phase III pre-hospital
trauma trial. An effort, however, will be initiated to enhance our assessment of
the potential market and begin to develop plans for the commercial launch of
PolyHeme.

         For the nine-month period ended February 29, 2004, operating expenses
of $9,975,000 exceeded the operating expenses of $9,108,000 incurred in the
nine-month period ended



<PAGE>

February 28, 2003. The dollar increase was $867,000 and the percentage increase
equaled 9.5%. The increases can primarily be attributed to the required work for
our Phase III pre-hospital trauma trial. For the nine-month period ending
February 29, 2004, research and development costs were 74.1% of total operating
expenses. In the comparable prior fiscal year nine-month period, research and
development costs equaled 71.1% of total operating expenses.

         Research and development expenses for the nine-month period ended
February 29, 2004 totaled $7,388,000, which represents a $916,000, or 14.2%,
increase from the comparable expenses incurred of $6,472,000 in the nine-month
period ended February 28, 2003. During the current fiscal year, our most
important activity was the launch of our Phase III pre-hospital trauma trial.
This was accomplished by obtaining the required regulatory approvals, preparing
site required documentation for both community consultation and institutional
review board approval, and formalizing, communicating and conducting site
training for logistical and data issues. These efforts and executing the trial
are the sources of the increased expenses.

         General and administrative expenses for the nine-month period ended
February 29, 2004 totaled $2,587,000, which represents a decrease of $48,000, or
1.8%, from the expense incurred of $2,635,000 in the comparable prior year
period. The decrease is primarily the result of a reduction in our use of
outside professional services.

INTEREST INCOME

         Interest income in the third quarter of fiscal 2004 totaled $29,000, or
a $15,000 decrease from the $44,000 in interest income reported in the third
quarter of fiscal 2003. Lower yielding investment options accounted for the
decrease in interest income. Our sales of common stock



<PAGE>

during the current fiscal year have raised investment fund levels to the point
that even in today's very low interest rate market, fourth quarter interest
income in fiscal 2004 should moderately exceed the interest income earned in the
comparable prior year period.

         On a fiscal year to date basis, interest income of $77,000 was $104,000
lower than in the comparable prior year period. Lower yielding investment
options caused the decrease in interest income. In spite of higher available
cash balances for the fourth quarter of the current fiscal year, we anticipate
total year interest income will be significantly less than was earned in the
prior fiscal year.

NET LOSS

         The net loss for the third quarter ended February 29, 2004 was
$3,484,000, or $0.20 per share, compared to a net loss of $2,905,000, or $0.20
per share, for the third quarter ended February 28, 2003. The $579,000 increased
net loss in the current quarter compared to the third quarter of the prior year
was primarily the result of increased research and development spending. On a
per share basis, the increased net loss was diluted by the additional shares
outstanding from successful fund raising efforts this fiscal year and resulted
in the loss per share being the same in both reporting periods.

         On a fiscal year to date basis, we reported a loss of $9,972,000, or
$0.62 per share compared to a prior period loss of $8,926,000, or $0.63 per
share. The increased net loss of $1,046,000 in the first nine-months of the
current fiscal year compared to the same period in the



<PAGE>

prior year is diluted by the increased number of shares outstanding in the
current fiscal year and caused the nine-month loss per share in the current year
to decrease by $.01.

LIQUIDITY AND CAPITAL RESOURCES

         From Northfield's inception through February 29, 2004, we have used
cash for operating activities and for the purchase of property, plant, equipment
and engineering services in the amount of $119,084,000. For the nine-month
periods ended February 29, 2004 and February 28, 2003, these cash expenditures
totaled $9,948,000 and $8,929,000, respectively. The increased cash outlay for
the first nine-month period of fiscal 2004 compared to the comparable period in
the prior year is the result of a higher level of research and development
expenses related to our Phase III pre-hospital trauma trial in the current year.

         We have financed our research and development and other activities to
date through the public and private sale of equity securities and, to a more
limited extent, through the license of product rights. In the current fiscal
year, we sold 4,715,830 shares of our common stock in two registered direct
offering transactions that generated gross proceeds before expenses of
$26,973,000. Net proceeds from these offerings were approximately $24.8 million.
As of February 29, 2004, we had cash and marketable securities totaling
$21,774,000.

         We believe our existing capital resources will be adequate to satisfy
our operating capital requirements and maintain our existing manufacturing plant
and office facilities for approximately the next 9 to 12 months. In addition,
our existing capital resources are expected to be sufficient to support
expenditures incurred in connection with the expansion and execution of the


<PAGE>

enrollment phase of our Phase III pre-hospital trauma trials during this period.
Thereafter, we will require substantial additional funding to continue our
operations and report our data to FDA. Our inability to raise sufficient levels
of capital would severely impair our current operations and raise significant
doubt about our ability to continue as a going concern.

We may issue additional equity or debt securities or enter into collaborative
arrangements with strategic partners, which could provide us with additional
funding or absorb expenses we would otherwise be required to pay. We are also
pursuing potential sources of government funding. Any one or a combination of
these sources may be utilized to raise additional capital. During April 2004,
existing shareholders from our January offering may purchase an additional
409,000 shares of our common stock at $5.80 per share, which will generate gross
proceeds of approximately $2.4 million. We believe our ability to raise
additional capital will depend primarily on the progress we make toward the
commercialization of PolyHeme, as well as general conditions in the business and
financial markets. Our inability to raise sufficient levels of capital could
materially delay or prevent the commercialization of PolyHeme, even if it is
approved by FDA. We cannot ensure that we will be able to achieve product
revenues or profitability on a sustained basis or at all.

         Our capital requirements may vary materially from those now anticipated
because of the timing and results of our clinical testing of PolyHeme, the
establishment of relationships with strategic partners, changes in the scale,
timing or cost of our planned commercial manufacturing facility, competitive and
technological advances, the FDA regulatory process, changes in our marketing and
distribution strategy and other factors.

<PAGE>

CRITICAL ACCOUNTING POLICIES

         The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported therein. We believe the
following critical accounting policy reflects our more significant judgments and
estimates used in the preparation of our financial statements.

NET DEFERRED TAX ASSETS VALUATION

         We record our net deferred tax assets in the amount that we expect to
realize based on projected future taxable income. In assessing the
appropriateness of our valuation, assumptions and estimates are required, such
as Northfield's ability to generate future taxable income. In the event we were
to determine that it was more likely than not we would be able to realize our
deferred tax assets in the future in excess of their carrying value, an
adjustment to recognize the deferred tax assets would increase income in the
period such determination was made. As of February 29, 2004, we have recorded a
100% percent valuation allowance against our net deferred tax assets.

CONTRACTUAL OBLIGATIONS

    The following table reflects a summary of our contractual cash obligations
as of February 29, 2004:

<TABLE>
<CAPTION>
                                                           LESS THAN           1-3              4-5             6+
CONTRACTUAL CASH OBLIGATIONS                TOTAL           ONE YEAR          YEARS            YEARS           YEARS
----------------------------              ----------       ---------        ---------        ---------       ---------
<S>                                       <C>              <C>              <C>              <C>             <C>
Lease Obligations (1)                     $3,559,784         864,897        1,380,082        1,051,844         262,961

Other Obligations (2)                      1,305,453         834,620          470,833               --              --
                                          ----------       ---------        ---------        ---------       ---------
Total Contractual Cash Obligations        $4,865,237       1,699,517        1,850,915        1,051,844         262,961
                                          ==========       =========        =========        =========       =========
</TABLE>

<PAGE>
    (1) The lease for our Evanston headquarters may be canceled with six months
notice combined with a termination payment equal to six months base rent and six
months of additional rental payments. If the lease were terminated today, the
termination payment would be $315,530. The Mt. Prospect lease for our
manufacturing facility has been renewed through August 2009.

    (2) Includes payments required under employment agreements for Steven A.
Gould, M.D., our Chairman and Chief Executive Officer, and Jack J. Kogut, our
Senior Vice President and Chief Financial Officer, and obligations under a
consulting agreement. The employment agreements provide for a minimum of
one-year severance and additional payments under certain circumstances.

RECENT ACCOUNTING PRONOUNCEMENTS

         In August 2001, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 143, "Accounting for Asset Retirement Obligations," which
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and for the associated asset retirement
costs. FASB Statement No. 143 requires an enterprise to record the fair value of
an asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development and/or normal use of
the assets. The enterprise also is to record a corresponding increase to the
carrying amount of the related long-lived asset (i.e., the associated asset
retirement costs) and to depreciate that cost over the life of the asset. The
liability is changed at the end of each period to reflect the passage of time
and changes in the estimated



<PAGE>

future cash flows underlying the initial fair value measurement. We adopted this
standard as of June 1, 2003. Upon adoption, the cumulative effect of the change
in accounting principle was to recognize a net asset of $17,800, an increase in
liabilities of $92,721 and an increase in net loss of $74,921, or $.01 per
share.

         In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liability and Equity. SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
also requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003, except for certain mandatorily redeemable financial instruments. For
certain mandatorily redeemable financial instruments the Statement will be
effective on January 1, 2005. The effective date has been deferred indefinitely
for certain other types of mandatorily redeemable financial instruments. The
adoption of SFAS No. 150 did not have a significant impact on our consolidated
financial position, results of operations, or cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

         We currently do not have any foreign currency exchange risk. We invest
our cash and cash equivalents in government securities, certificates of deposit
and money market funds. These investments are subject to interest rate risk.
However, due to the nature of our short-term investments, we believe that the
financial market risk exposure is not material. A one percentage point decrease
on an investment balance of $21.7 million would decrease interest income by
$217,000 on an annual basis.

ITEM 4. CONTROLS AND PROCEDURES.

         Based on their evaluation as of the end of the period covered by this
report, our Chief Executive Officer and Senior Vice President and Chief
Financial Officer have concluded that Northfield's disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, are effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Securities
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
There were no changes in our internal control over financial reporting that
occurred during our most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.






<PAGE>


                           PART II. OTHER INFORMATION

Item 6. Exhibits

        a)   Exhibit 15    -    Acknowledgment of Independent Certified Public
                                Accountants

             Exhibit 31.1  -    Certification of Steven A. Gould, M.D., pursuant
                                to Section 302 of the Sarbanes-Oxley Act of 2002

             Exhibit 31.2  -    Certification of Jack J. Kogut, pursuant to
                                Section 302 of the Sarbanes-Oxley Act of 2002

             Exhibit 32.1  -    Certification of Steven A. Gould, M.D., pursuant
                                to 18 U.S.C. Section 1350, as adopted pursuant
                                to Section 906 of the Sarbanes-Oxley Act of 2002

             Exhibit 32.2  -    Certification of Jack J. Kogut, pursuant to 18
                                U.S.C. Section 1350, as adopted pursuant to
                                Section 906 of the Sarbanes-Oxley Act of 2002


        b)   On January 26, 2004 the Registrant filed Form 8-K relating to a
             registered direct offering registered on Form S-3.


<PAGE>




                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company in the capacities indicated on April 13, 2004.

       SIGNATURE                                           TITLE

/s/ Steven A. Gould, M.D.                        Chairman of the Board and Chief
-------------------------                        Executive Officer (Principal
Steven A. Gould, M.D.                            Executive Officer)

/s/ Jack J. Kogut                                Sr. Vice President and Chief
-------------------------                        Financial Officer
Jack J. Kogut