Edgar Filing: NOVADEL PHARMA INC

As filed with the Securities and Exchange Commission on February 13, 2004
Registration No. 333-_____

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

NovaDel Pharma Inc.
(Exact name of Registrant as Specified in Its Charter)

Delaware 2834 22-2407152
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of corporation or organization) Classification Code) Identification No.)

25 Minneakoning Road
Flemington, NJ 08822
(908) 782-3431
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(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)

Gary A. Shangold, M.D.
President and Chief Executive Officer
NovaDel Pharma Inc.
25 Minneakoning Road
Flemington, NJ 08822
(908) 782-3431
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(Name, address, including zip code, and telephone number
including area code, of agents for service)

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Copies to:
Ira L. Kotel, Esq.
Dickstein Shapiro Morin & Oshinsky LLP
1177 Avenue of the Americas, 47th Floor
New York, New York 10036-2714
(212) 835-1400

Approximate date of commencement of proposed sale to public: From
time to time or at one time after this Registration Statement becomes effective
in light of market conditions and other factors.

If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. |_|

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (the "Securities Act"), other than securities offered
only in connection with dividend or interest reinvestment plans, check the
following box. |X|

If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_|

If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|

If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. |_|

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CALCULATION OF FEE

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Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered(1) Per Share(1)(2) Price(2) Fee(1)(2)
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common stock, $0.001 par value 20,484,217 1.61 32,979,589.37 4,178.51
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(1) The Company has outstanding 14 unit purchase options. Upon full
exercise of such unit purchase options, the Company shall issue 1,330,296 shares
of its common stock and warrants to purchase 399,082 shares of its common stock.
This figure set forth above includes the shares issuable upon the exercise of
the unit purchase options and the exercise of the warrants to be contained
therein, as well as the exercise of other outstanding warrants of the Company to
purchase an aggregate of 5,779,335 shares of its common stock. Also registered
hereby are such additional and indeterminable number of shares as may be
issuable due to adjustments for changes resulting from stock dividends, stock
splits and similar changes.

(2) Pursuant to paragraphs (c) and (h) of Rule 457 of the Securities Act,
the proposed per share maximum offering price of such shares of common stock is
estimated solely for the purpose of determining the registration fee. The actual
per share offering price of the common stock being registered will be determined
from time to time by the registrant in connection with the issuance by the
registrant of the shares registered hereunder. The aggregate amount of the
registrant's common stock registered hereunder that may be sold in an "at the
market" offering for the account of the registrant may not exceed 10% of the
aggregate market value of our common stock held by non-affiliates that which is
permissible under Rule 415(a)(4) promulgated under the Securities Act.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

The information in this prospectus is not complete and may be changed or
amended. The selling stockholders may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.

Subject to Completion
Preliminary Prospectus dated February 13, 2004

20,484,217 Shares of common stock

NovaDel Pharma Inc.

This prospectus relates to the public offering, which is not being
underwritten, of up to 20,484,217 shares of our common stock, par value $0.001
per share, for sale by certain of our stockholders identified in this prospectus
for their own account. Such stockholders are referred to throughout this
prospectus as "selling security holders." These shares include 5,779,335 shares
that are issuable upon exercise of certain warrants and other derivative
securities.

In this prospectus and any amendment or supplement hereto, unless
otherwise indicated, the terms "NovaDel", the "Company", "we", "us", and "our"
refer and relate to NovaDel Pharma Inc. The selling security holders who wish to
sell their shares of our common stock may offer and sell such shares on a
continuous or delayed basis in the future. These sales may be conducted in the
open market or in privately negotiated transactions and at market prices, fixed
prices or negotiated prices. We will not receive any of the proceeds from the
sale of the shares of common stock owned by the selling security holders but we
will receive funds from the exercise of their warrants, if at all. Any such
proceeds will be used for working capital and general corporate purposes. One
should read this prospectus and any amendment or supplement hereto together with
additional information described under the heading "Available Information".

Our common stock is traded on the OTC Bulletin Board(R) under the symbol
"NVDL.OB". On February 6, 2004, the closing sales price for the common stock on
the OTCBB was $1.75 per share.

Our principal executive offices are located at 25 Minneakoning Road,
Flemington, NJ 08822. Our telephone number is (908) 782-3431.

OUR COMMON STOCK BEING OFFERED BY THIS PROSPECTUS INVOLVES A HIGH DEGREE
OF RISK. YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 2 BEFORE
YOU DECIDE TO PURCHASE ANY SHARES OF OUR COMMON STOCK.

-----------------------------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.

The date of this Prospectus is February 13, 2004

TABLE OF CONTENTS

About this Prospectus......................................................................1
Risk Factors...............................................................................2
Forward-Looking Statements.................................................................20
Use of Proceeds............................................................................21
Selling Security Holders...................................................................21
Plan of Distribution.......................................................................25
Legal Proceedings..........................................................................26
Directors, Executive Officers, Promoters and Control Persons...............................26
Security Ownership Of Certain Beneficial Owners And Management.............................30
Description of Securities..................................................................32
Disclosure Of Commission Position On Indemnification For Securities Act Liabilities........34
Management's Discussion And Analysis Of Financial Condition And Results Of Operations......47
Description of Property....................................................................51
Certain Relationships And Related Transactions.............................................51
Market For Common Equity And Related Stockholders Matters..................................53
Executive Compensation.....................................................................54
Legal Matters..............................................................................59
Experts....................................................................................59
Available Information......................................................................59

Any prospective investor should not rely on any information not contained in
this document. We have not authorized anyone to provide any other information to
the contrary. This document may only be used where it is legal to sell these
securities. The information in this document may only be accurate as of and on
the date of this document.

About this Prospectus

This summary highlights certain information contained elsewhere in this
prospectus. One should read the following summary together with the more
detailed information regarding NovaDel and our financial statements and the
related notes appearing elsewhere in this prospectus.

Company Summary

We are engaged in the development of novel application drug delivery systems for
presently marketed prescription and over-the-counter ("OTC") drugs. Our patented
and patent-pending delivery systems are lingual sprays enabling drug absorption
through the oral mucosa and more rapid absorption into the bloodstream than
presently available oral delivery systems. Our proprietary, novel delivery
system is designed to provide patients with the therapeutic effects of a given
drug within minutes of such drug's administration to the patient thereby
enhancing and greatly accelerating the onset of the intended therapeutic
benefits of the drug. Our development efforts for our novel drug delivery system
are concentrated on making it available for drugs that are already available and
proven in the marketplace. In addition to increasing the bioavailability of a
drug by avoiding metabolism by the liver before entry into the bloodstream, we
believe that our proprietary drug delivery system offers the following
significant advantages: (i) more rapid delivery of drugs to the bloodstream
allowing for quicker onset of therapeutic effects compared to conventional oral
dosage forms; (ii) improved drug safety profile by reducing the required dosage,
including possible reduction of side-effects; (iii) improved dosage reliability;
(iv) allowing medication to be taken without water; and (v) improved patient
convenience and compliance.

In light of the material expense and delays associated with independently
developing and obtaining approval of pharmaceutical products, we intend to
develop drug products through collaborative arrangements with major
pharmaceutical companies, such pharmaceutical companies providing the funding
for the development of specified drug products. To date, other than license
agreements with Manhattan Pharmaceuticals, Inc., in connection with propofol,
and the Veterinary Company, Inc., in connection with veterinary applications for
carprofen, levothyroxine sodium and methimazole, we have not entered into any
material development arrangements with any pharmaceutical companies. The lack of
any such arrangements and our limited revenues and low level of working capital
has restricted our ability to aggressively pursue our product development
strategy. We will require significant additional financing and/or a strategic
alliance with a well-funded development partner to undertake and maintain our
business plan.

At our inception in 1982, we engaged in the business of consulting to the
pharmaceutical industry, focusing on product development activities of various
European pharmaceutical companies. Since 1992, we have used our consulting
revenues and the funds generated from financings to fund our own product
development activities. Our focus on developing our own products evolved
naturally out of our consulting experience on behalf of other pharmaceutical
companies. Substantially all of our revenues previously were derived from our
consulting activities. Effective October 1, 2002, we changed our corporate name
from Flemington Pharmaceutical Corporation to NovaDel Pharma Inc.

Risk Factors

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

WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE A LIMITED OPERATING HISTORY AND HAVE
NOT GENERATED ANY REVENUES FROM THE SALE OF PRODUCTS TO DATE. OUR AUDITORS HAVE
QUALIFIED THEIR AUDIT OPINION WITH REGARD TO OUR ABILITY TO CONTINUE AS A GOING
CONCERN.

We are a developmental stage biopharmaceutical company. Therefore, you must
evaluate us in light of the uncertainties and complexities present in such
companies. We have not generated any revenue from the commercial sale of our
proposed products and do not expect to receive such revenue in the near future.
We have no material licensing or royalty revenue or products ready for use or
licensing in the marketplace. This limited history may not be adequate to enable
one to fully assess our ability to develop our technologies and proposed
products, obtain FDA approval and achieve market acceptance of our proposed
products and respond to competition. We cannot be certain as to when to
anticipate commercializing and marketing any of our proposed products in
development, if at all, and do not expect to generate sufficient revenues from
proposed product sales to cover our expenses or achieve profitability in the
near future.

We had an accumulated deficit as of October 31, 2003, of approximately
$17,355,000. We incurred operating losses in each of our the last eight fiscal
years, including a net loss of approximately $5,815,000 for the fiscal year
ended July 31, 2003. Because we increased our product development activities, we
anticipate that we will incur substantial operating expenses in connection with
continued research and development, clinical trials, testing and approval of our
proposed products, and expect these expenses will result in continuing and,
perhaps, significant operating losses until such time, if ever, that we are able
to achieve adequate product sales levels. Our ability to generate revenue and
achieve profitability depends upon our ability, alone or with others, to
complete the development of our proposed products, obtain the required
regulatory approvals and manufacture, market and sell our proposed products.

Because our rate of expenses is high, and due to our very limited resources, our
auditors have included and explanatory paragraph in their audit opinion with
regard to our ability to continue as a going concern.

WE WILL REQUIRE SIGNIFICANT CAPITAL REQUIREMENTS FOR PRODUCT DEVELOPMENT AND
COMMERCIALIZATION.

The research, development, testing and approval of our proposed products involve
significant expenditures and accordingly we require significant capital to fund
such expenditures. We anticipate, based on our current proposed plans and
assumptions relating to our operations (including the timetable of, and costs
associated with, new product development), that the proceeds of the private
placements we completed during the year 2003 will be sufficient to satisfy our
contemplated cash requirements through the second quarter of our fiscal year
2005. Due to our small revenue base, low level of working capital and inability
to increase the number of development agreements with pharmaceutical companies,
we have been unable to aggressively pursue our product development strategy. We
will require significant additional financing and/or a strategic alliance with a
well-funded development partner to aggressively pursue our business plan. We
have no current arrangements with respect to, or sources of, additional
financing, and additional financing may not be available to us on acceptable
terms, if at all. Unless we raise additional financing, we may not have
sufficient funds and we may not be able to complete development and
commercialization of our proposed products or continue operating. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

OUR ADDITIONAL FINANCING REQUIREMENTS COULD RESULT IN DILUTION TO EXISTING
STOCKHOLDERS.

The additional financings we require may be obtained through one or more
transactions which effectively dilute the ownership interests of our
stockholders. Further, we may not be able to secure such additional financing on
terms acceptable to us, if at all. We have the authority to issue additional
shares of common stock, as well as additional classes or series of ownership
interests or debt obligations which may be convertible into any one or more
classes or series of ownership interests. We are authorized to issue 50,000,000
shares of common stock and 1,000,000 shares of preferred stock. Such securities
may be issued without the approval or other consent of our stockholders. In
addition, certain of our stockholders who purchased shares of common stock in a
private placement completed by us in April and May 2003 are entitled to a reset
of the pricing of their original investment in us. According to such reset, if,
prior to the first anniversary of the closing of each such stockholder's
purchase of common stock, we sell shares of common stock in any subsequent
financing at a purchase price that is lower than $1.50 per share of common
stock, we shall be obligated to issue to such stockholder, for no additional
consideration, a number of additional shares of common stock equal to the
difference between (a) the amount of shares of common stock purchasable for the
total purchase price paid by such stockholder in connection with its original
investment at the per share purchase price of the subsequent offering and (b)
the number of shares of common stock actually purchased by such stockholder in
connection with its original investment. Further, until the second anniversary
of the closing of such a stockholder's purchase of common stock, such
stockholders are entitled to purchase additional shares of common stock in
connection with subsequent offerings by us so as to maintain their prior
ownership percentages. As our recently consummated private placement triggered
this reset obligation, the Company duly issued such stockholders a total of
1,371,549 shares of common stock. See "Risk Factors--Additional authorized
shares of common stock and preferred stock available for issuance may adversely
affect the market."

OUR TECHNOLOGY PLATFORM IS BASED SOLELY ON OUR PROPRIETARY DRUG DELIVERY
TECHNOLOGY. OUR ONGOING CLINICAL TRIALS FOR CERTAIN OF OUR PRODUCT CANDIDATES
MAY BE DELAYED, OR FAIL, WHICH WILL HARM OUR BUSINESS.

Our strategy is to concentrate our product development activities primarily on
pharmaceutical products for which there already are significant prescription
sales, where the use of our proprietary, novel drug delivery technology will
greatly enhance speed of onset of therapeutic effect, reduce side effects
through a reduction of the amount of active drug substance required to produce a
given therapeutic effect and improve patient convenience or compliance. We have
completed pilot pharmacokinetic studies for two antihistamine lingual sprays
(loratadine and clemastine), an estradiol lingual spray, a progesterone lingual
spray and a nitroglycerin lingual spray. In addition, a phase 2 clinical trial
was completed for the nitroglycerin lingual spray. Additional development work
on loratadine, clemastine, estradiol and progesterone has been put on hold due
to changes in the marketplace which have significantly reduced the market
potential for these compounds. We plan to file an NDA for the nitroglycerin
lingual spray in 2004. We plan to initiate pilot pharmacokinetic studies on our
Tier I priority products during the first half of calendar year 2004. These
products are lingual spray formulations of sumatriptan, alprazolam, propofol,
ondansetron and zolpidem. The goal of these pilot pharmacokinetic studies is to
determine whether or not a specific lingual spray can achieve blood levels of an
active ingredient via administration through the oral mucosa. If blood levels
are not achieved, it could result in the need to reformulate the lingual spray
and/or to terminate work on a specific compound which would have a material
adverse effect on our operations.

Companies in the pharmaceutical and biotechnology industries have suffered
significant setbacks in advanced clinical trials, even after obtaining promising
results in earlier trials. Data obtained from tests are susceptible to varying
interpretations which may delay, limit or prevent regulatory approval. In
addition, companies may be unable to enroll patients quickly enough to meet
expectations for completing clinical trials. The timing and completion of
current and planned clinical trials of our product candidates depend on, among
other factors, the rate at which patients are enrolled, which is a function of
many factors, including:

--the number of clinical sites;
--the size of the patient population;
--the proximity of patients to the clinical sites;
--the eligibility criteria for the study;
--the existence of competing clinical trials; and
--the existence of alternative available products.

Delays in patient enrollment in clinical trials may occur, which would likely
result in increased costs, program delays or both.

THERE ARE CERTAIN INTERLOCKING RELATIONSHIPS AND POTENTIAL CONFLICTS OF
INTEREST.

Lindsay A. Rosenwald, M.D., a significant stockholder of NovaDel, is the
Chairman of the Paramount, the placement agent for the private placements we
completed during calendar year 2003, and the Managing Member of BioMedical
Investment Group, LLC, also a major stockholder of NovaDel. In the regular
course of its business and the business of its affiliates, and outside of its
arrangement with us, Paramount and/or its affiliates identify, evaluate and
pursue investment opportunities in biomedical and pharmaceutical products,
technologies and companies. In addition, Dr. Rosenwald may be deemed to
beneficially own approximately 34.73% of our outstanding common stock (assuming
exercise of certain warrants beneficially owned by Dr. Rosenwald) and 20.13% of
our voting stock (assuming no exercise of such warrants). As such, Dr. Rosenwald
and Paramount may be deemed to be our affiliates. Generally, Delaware corporate
law requires that any transactions between us and any of our affiliates be on
terms that, when taken as a whole, are substantially as favorable to us as those
then reasonably obtainable in an arms-length transaction from a person who is
not an affiliate. Nevertheless, neither such affiliates nor Paramount are
obligated pursuant to any agreement or understanding with us to make any
additional products or technologies available to us, nor can there be any
assurance, and we do not expect and our stockholders should not expect, that any
biomedical or pharmaceutical product or technology identified by such affiliates
or Paramount in the future will be made available to us. In addition, certain of
our current officers and directors or any officers or directors hereafter
appointed by us may from time to time serve as officers or directors of other
biopharmaceutical or biotechnology companies. Such other companies may have
interests in conflict with our interests.

OUR BUSINESS AND REVENUE IS DEPENDENT ON THE SUCCESSFUL DEVELOPMENT OF OUR
PRODUCTS

Revenue received from our product development efforts consists of payments by
pharmaceutical companies for research and bioavailability studies, pilot
clinical trials and similar milestone-related payments. Our future growth and
profitability will be dependent upon our ability successfully to raise
additional funds to complete the development of, obtain regulatory approvals for
and license out or market our proposed products. Accordingly, our prospects must
be considered in light of the risks, expenses and difficulties frequently
encountered in connection with the establishment of a new business in a highly
competitive industry, characterized by frequent new product introductions. We
anticipate that we will incur substantial operating expenses in connection with
the development, testing and approval of our proposed products and expect these
expenses to result in continuing and significant operating losses until such
time, if ever, that we are able to achieve adequate levels of sales or license
revenues. We may not be able to raise additional financing, increase revenues
significantly, or achieve profitable operations. See "Risk Factors - We will
require significant capital requirements for product development and
commercialization."

WE DO NOT HAVE COMMERCIALLY AVAILABLE PRODUCTS

Our principal efforts are the development of, and obtaining regulatory approvals
for, our proposed products. We anticipate that marketing activities for our
proprietary products, whether by us or one or more of our licensees, if any,
will not begin until 2005 at the earliest. Accordingly, it is not anticipated
that we will generate any revenues from royalties or sales of proprietary
products until regulatory approvals are obtained and marketing activities begin.
Any one or more of our proposed proprietary products may not prove to be
commercially viable, or if viable, may not reach the marketplace on a basis
consistent with our desired timetables. The failure or the delay of any one or
more of our proposed products to achieve commercial viability would have a
material adverse effect on us. See "Description of Business - Proposed Products"
and "Description of Business - Government Regulation."

WE HAVE NOT COMPLETED PRODUCT DEVELOPMENT

We have not completed the development of our proposed products and we will be
required to devote considerable effort and expenditures to complete such
development. In addition to obtaining adequate financing, satisfactory
completion of development, testing, government approval and sufficient
production levels of such products must be obtained before the proposed products
will become available for commercial sale. We do not anticipate generating
material revenue from product sales until perhaps 2005 or thereafter. Other
potential products remain in the conceptual or very early development stage and
remain subject to all the risks inherent in the development of pharmaceutical
products, including unanticipated development problems and possible lack of
funds to undertake or continue development. These factors could result in
abandonment or substantial change in the development of a specific formulated
product. We may not be able to successfully develop any one or more of our
proposed products or develop such proposed products on a timely basis. Further,
such proposed products may not be commercially accepted if developed. The
inability to successfully complete development, or a determination by us, for
financial or other reasons, not to undertake to complete development of any
proposed product, particularly in instances in which we have made significant
capital expenditures, could have a material adverse effect on us.

WE DO NOT HAVE DIRECT CONSUMER MARKETING EXPERIENCE

We have no experience in marketing or distribution at the consumer level of our
proposed products. Moreover, we do not have the financial or other resources to
undertake extensive marketing and advertising activities. Accordingly, we intend
generally to rely on marketing arrangements, including possible joint ventures
or license or distribution arrangements with third parties. We have not entered
into any significant agreements or arrangements with respect to the marketing of
our proposed products, and there can be no assurance that we will do so in the
future or that any such products can be successfully marketed. If we fail to
enter into these agreements or if we or the third parties do not perform under
such agreements, it could impair our ability to commercialize our products. If
we do not develop a marketing force of our own, then we will depend on
arrangements with corporate partners or other entities for the marketing and
sale of our remaining products. Our strategy to rely on third party marketing
arrangements could adversely affect our profit margins. See "Description of
Business - Marketing and Distribution."

WE MUST COMPLY WITH GOOD MANUFACTURING PRACTICES

The manufacture of our pharmaceutical products will be subject to current Good
Manufacturing Practices (cGMP) prescribed by the FDA, pre-approval inspections
by the FDA or comparable foreign authorities, or both, before commercial
manufacture of any such products and periodic cGMP compliance inspections
thereafter by the FDA. We, or any of our third party manufacturers, may not be
able to comply with cGMP or satisfy pre- or post-approval inspections by the FDA
or comparable Foreign authorities in connection with the manufacture of our
proposed products. Failure or delay by us or any such manufacturer to comply
with cGMP or satisfy pre- or post-approval inspections would have a material
adverse effect on us. See "Description of Business - Manufacturing."

WE ARE DEPENDENT ON OUR SUPPLIERS

We believe that certain raw materials, including inactive ingredients, are
available from a limited number of suppliers and that certain packaging
materials intended for use in connection with our spray products currently are
available only from sole source suppliers. Although we do not believe we will
encounter difficulties in obtaining the inactive ingredients or packaging
materials necessary for the manufacture of our proposed products, we may not be
able to enter into satisfactory agreements or arrangements for the purchase of
commercial quantities of such materials. We have a written supply agreement with
Dynamit Nobel for certain raw materials for our nitroglycerin lingual spray
product. With respect to other suppliers, we operate primarily on a purchase
order basis beyond which there is no contract memorializing our purchasing
arrangements. The inability to enter into agreements or otherwise arrange for
adequate or timely supplies of principal raw materials and the possible
inability to secure alternative sources of raw material supplies, or the failure
of Dynamit Nobel to comply with its supply obligations to us, could have a
material adverse effect on our ability to arrange for the manufacture of
formulated products. In addition, development and regulatory approval of our
products are dependent upon our ability to procure active ingredients and
certain packaging materials from FDA-approved sources. Since the FDA approval
process requires manufacturers to specify their proposed suppliers of active
ingredients and certain packaging materials in their applications, FDA approval
of a supplemental application to use a new supplier would be required if active
ingredients or such packaging materials were no longer available from the
originally specified supplier, which may result in manufacturing delays. If we
do not maintain important manufacturing relationships, we may fail to find a
replacement manufacturer or to develop our own manufacturing capabilities. If we
cannot do so, it could delay or impair our ability to obtain regulatory approval
for our products and substantially increase our costs or deplete any profit
margins. If we do find replacement manufacturers, we may not be able to enter
into agreements with them on terms and conditions favorable to us and, there
could be a substantial delay before a new facility could be qualified and
registered with the FDA and foreign regulatory authorities. See "Description of
Business - Raw Materials and Suppliers."

WE FACE INTENSE COMPETITION

The markets which we intend to enter are characterized by intense competition.
We or our licensees may be competing against established pharmaceutical
companies which currently market products which are equivalent or functionally
similar to those we intend to market. Prices of drug products are significantly
affected by competitive factors and tend to decline as competition increases. In
addition, numerous companies are developing or may, in the future, engage in the
development of products competitive with our proposed products. We expect that
technological developments will occur at a rapid rate and that competition is
likely to intensify as enhanced dosage from technologies gain greater
acceptance. Additionally, the markets for formulated products which we have
targeted for development are intensely competitive, involving numerous
competitors and products. Most of our prospective competitors possess
substantially greater financial, technical and other resources than we do.
Moreover, many of these companies possess greater marketing capabilities than we
do, including the resources necessary to enable them to implement extensive
advertising campaigns. We may not be able to compete successfully with such
competitors. See "Description of Business - Competition."

Accordingly, our competitors may succeed in obtaining patent protection,
receiving FDA or comparable foreign approval or commercializing products before
us. If we commence commercial product sales, we will compete against companies
with greater marketing and manufacturing capabilities who may successfully
develop and commercialize products that are more effective or less expensive
than ours. These are areas in which, as yet, we have limited or no experience.
In addition, developments by our competitors may render our product candidates
obsolete or noncompetitive.

We are aware of several companies that are selling or developing lingual spray
products. First Horizon Pharmaceutical Corporation, headquartered in Alpharetta,
Georgia, currently markets Nitrolingual(R) Pumpspray, a nitroglycerin lingual
spray which is in an "air" propelled dispensing system (our nitroglycerin
lingual spray is in a "propellant" based dispensing system). Generex
Biotechnology Corporation, based in Toronto, Canada, is developing an insulin
formulation that is delivered directly into the mouth via their RapidMist(TM)
device. They also state that they have begun research on four specific target
molecules for their RapidMist delivery system: morphine, fentanyl, heparin and
flu vaccine. Sirus Pharmaceuticals Ltd., based in the United Kingdom, also
claims to be developing drugs to be delivered sublingually via an aerosol spray.
Sirus is working in the areas of pain and emesis. There are several other
companies that we are aware of that market lingual spray products containing
vitamins and homeopathic ingredients.

We also face, and will continue to face, competition from colleges,
universities, governmental agencies and other public and private research
organizations. These competitors are becoming more active in seeking patent
protection and licensing arrangements to collect royalties for use of technology
that they have developed. Some of these technologies may compete directly with
the technologies that we are developing. These institutions will also compete
with us in recruiting highly qualified scientific personnel. We expect that
developments in the areas in which we are active may occur at a rapid rate and
that competition will intensify as advances in this field are made. As a result,
we need to continue to devote substantial resources and efforts to research and
development activities.

THE ABSENCE OF PRODUCT LIABILITY INSURANCE COVERAGE MAY AFFECT OUR BUSINESS

We may be exposed to potential product liability claims by consumers. We
presently do not maintain product liability insurance coverage. Although we will
seek to obtain product liability insurance before the commercialization of any
of our proposed products, there can be no assurance that we will be able to
obtain such insurance or, if obtained, that any such insurance will be
sufficient to cover all possible liabilities to which we may be exposed. Any
product liability claim, even one that was not in excess of our insurance
coverage or one that is meritless and/or unsuccessful, could adversely affect
our cash available for other purposes, such as research and development. In
addition, the existence of a product liability claim could affect the market
price of our common stock. In addition, certain food and drug retailers require
minimum product liability insurance coverage as a condition precedent to
purchasing or accepting products for retail distribution. Product liability
insurance coverage includes various deductibles, limitations and exclusions from
coverage, and in any event might not fully cover any potential claims. Failure
to satisfy such insurance requirements could impede the ability of us or our
distributors to achieve broad retail distribution of our proposed products,
which could have a material adverse effect on us. See "Description of Business -
Product Liability."

EXTENSIVE GOVERNMENT REGULATION MAY AFFECT OUR BUSINESS

The development, manufacture and commercialization of pharmaceutical products is
generally subject to extensive regulation by various federal and state
governmental entities. The FDA, which is the principal United States regulatory
authority over pharmaceutical products, has the power to seize adulterated or
misbranded products and unapproved new drugs, to request their recall from the
market, to enjoin further manufacture or sale, to publicize certain facts
concerning a product and to initiate criminal proceedings. As a result of
federal statutes and FDA regulations pursuant to which new pharmaceuticals are
required to undergo extensive and rigorous testing, obtaining pre-market
regulatory approval requires extensive time and expenditures. Under the United
States Federal Food, Drug, and Cosmetic (FDC) Act, as amended (21 U.S.C. 301 et.
seq.), a new drug may not be commercialized or otherwise distributed in the
United States without the prior approval of the FDA. The FDA approval processes
relating to new drugs differ, depending on the nature of the particular drug for
which approval is sought. With respect to any drug product with active
ingredients not previously approved by the FDA, a prospective drug manufacturer
is required to submit a new drug application an NDA, which includes complete
reports of pre-clinical, clinical and laboratory studies to prove such product's
safety and efficacy. The NDA process generally requires, before the submission
of the NDA, submission of an investigative new drug application, an IND,
pursuant to which permission is sought to begin preliminary clinical testing of
the new drug. An NDA, based on published safety and efficacy studies conducted
by others, may also be required to be submitted for a drug product with a
previously approved active ingredient if the method of delivery, strength or

dosage form is changed. Alternatively, a drug having the same active ingredients
as a drug previously approved by the FDA may be eligible to be submitted under
an ANDA, which is significantly less stringent than the NDA approval process.
While the ANDA process requires a manufacturer to establish bioequivalence to
the previously approved drug, it permits the manufacturer to rely on the safety
and efficacy studies contained in the NDA for the previously approved drug. We
believe that the products we develop in spray dosage form will require
submission of an NDA. We estimate that the development of new formulations of
pharmaceutical products, including formulation, testing and obtaining FDA
approval, generally takes four to seven years for the NDA process. Our
determinations may prove to be inaccurate or pre-marketing approval relating to
our proposed products may not be obtained on a timely basis, if at all. The
failure by us to obtain necessary regulatory approvals, whether on a timely
basis, or at all, would have a material adverse effect on our business.

THE CLINICAL TRIAL AND REGULATORY APPROVAL PROCESS FOR OUR PRODUCTS IS EXPENSIVE
AND TIME CONSUMING, AND THE OUTCOME IS UNCERTAIN.

In order to sell our proposed products, we must receive regulatory approvals for
each product. The FDA and comparable agencies in foreign countries extensively
and rigorously regulate the testing, manufacture, distribution, advertising,
pricing and marketing of drug products like our products. This approval process
includes preclinical studies and clinical trials of each pharmaceutical compound
to establish its safety and effectiveness and confirmation by the FDA and
comparable agencies in foreign countries that the manufacturer maintains good
laboratory and manufacturing practices during testing and manufacturing.
Clinical trials generally take two to five years or more to complete. Even if
favorable testing data is generated by clinical trials of drug products, the FDA
may not approve an NDA filed by a pharmaceutical or biotechnology company for
such drug product.

The approval process is lengthy, expensive and uncertain. It is also possible
that the FDA or comparable foreign regulatory authorities could interrupt, delay
or halt any one or more of our clinical trials. If we, or any regulatory
authorities, believe that trial participants face unacceptable health risks, any
one or more of our trials could be suspended or terminated. We also may not
reach agreement with the FDA and/or comparable foreign agencies on the design of
any one or more of the clinical studies necessary for approval. Conditions
imposed by the FDA and comparable agencies in foreign countries on our clinical
trials could significantly increase the time required for completion of such
clinical trials and the costs of conducting the clinical trials. Data obtained
from clinical trials are susceptible to varying interpretations which may delay,
limit or prevent regulatory approval.

Delays and terminations of the clinical trials we conduct could result from
insufficient patient enrollment. Patient enrollment is a function of several
factors, including the size of the patient population, stringent enrollment
criteria, the proximity of the patients to the trial sites, having to compete
with other clinical trials for eligible patients, geographical and geopolitical
considerations and others. Delays in patient enrollment can result in greater
costs and longer trial timeframes. Patients may also suffer adverse medical
events or side effects.

The FDA and comparable foreign agencies could withdraw any approvals we obtain.
Further, if there is a later discovery of unknown problems or if we fail to
comply with other applicable regulatory requirements at any stage in the
regulatory process, the FDA may restrict or delay our marketing of a product or
force us to make product recalls. In addition, the FDA could impose other
sanctions such as fines, injunctions, civil penalties or criminal prosecutions.
To market our products outside the United States, we also need to comply with
foreign regulatory requirements governing human clinical trials and marketing
approval for pharmaceutical products. The FDA and foreign regulators have not
yet approved any of our products under development for marketing in the United
States or elsewhere. If the FDA and other regulators do not approve our
products, we will not be able to market our products.

WE EXPECT TO FACE UNCERTAINTY OVER REIMBURSEMENT AND HEALTHCARE REFORM.

In both the United States and other countries, sales of our proposed products
will depend in part upon the availability of reimbursement from third party
payors, which include government health administration authorities, managed care
providers and private health insurers. Third party payors are increasingly
challenging the price and examining the cost effectiveness of medical products
and services.

OUR STRATEGY, IN MANY CASES, IS TO ENTER INTO COLLABORATION AGREEMENTS WITH
THIRD PARTIES AND WE MAY REQUIRE ADDITIONAL COLLABORATION AGREEMENTS. IF WE FAIL
TO ENTER INTO THESE AGREEMENTS OR IF WE OR THE THIRD PARTIES DO NOT PERFORM
UNDER SUCH AGREEMENTS, IT COULD IMPAIR OUR ABILITY TO COMMERCIALIZE OUR PROPOSED
PRODUCTS.

Our strategy for the completion of the required development and clinical testing
of our proposed products and for the manufacturing, marketing and
commercialization of such products, in many cases, depends upon entering into
collaboration arrangements with pharmaceutical companies to market,
commercialize and distribute the products. Our success depends upon obtaining
collaboration partners. In addition, we may depend on our partners' expertise
and dedication of sufficient resources to develop and commercialize our proposed
products. We may, in the future, grant to collaboration partners rights to
license and commercialize pharmaceutical products developed under collaboration
agreements. Under these arrangements, our collaboration partners may control key
decisions relating to the development of the products. The rights of our
collaboration partners would limit our flexibility in considering alternatives
for the commercialization of the products. If we fail to successfully develop
these relationships or if our collaboration partners fail to successfully
develop or commercialize any of our products, it may delay or prevent us from
developing or commercializing our proposed products in a competitive and timely
manner and would have a material adverse effect on our business.

IF WE CANNOT PROTECT OUR INTELLECTUAL PROPERTY, OTHER COMPANIES COULD USE OUR
TECHNOLOGY IN COMPETITIVE PRODUCTS. IF WE INFRINGE THE INTELLECTUAL PROPERTY
RIGHTS OF OTHERS, OTHER COMPANIES COULD PREVENT US FROM DEVELOPING OR MARKETING
OUR PRODUCTS.

We seek patent protection for our technology so as to prevent others from
commercializing equivalent products in substantially less time and at
substantially lower expense. The pharmaceutical industry places considerable
importance on obtaining patent and trade secret protection for new technologies,
products and processes. Our success will depend in part on our ability and that
of parties from whom we license technology to:

-defend our patents and otherwise prevent others from infringing on our
proprietary rights;
-protect trade secrets; and
-operate without infringing upon the proprietary rights of others, both in
the United States and in other countries.

The patent position of firms relying upon biotechnology is highly uncertain and
involves complex legal and factual questions for which important legal
principles are unresolved. To date, the United States Patent and Trademark
Office has not adopted a consistent policy regarding the breadth of claims that
the United States Patent and Trademark Office allows in biotechnology patents or
the degree of protection that these types of patents afford. As a result, there
are risks that we may not develop or obtain rights to products or processes that
are or may seem to be patentable.

EVEN IF WE OBTAIN PATENTS TO PROTECT OUR PRODUCTS, THOSE PATENTS MAY NOT BE
SUFFICIENTLY BROAD AND OTHERS COULD COMPETE WITH US.

We, and the parties licensing technologies to us, have filed various United
States and foreign patent applications with respect to the products and
technologies under our development, and the United States Patent and Trademark
Office and foreign patent offices have issued patents with respect to our
products and technologies. These patent applications include international
applications filed under the Patent Cooperation Treaty. Our pending patent
applications, those we may file in the future or those we may license from third
parties may not result in the United States Patent and Trademark Office or
foreign patent office issuing patents. Also, if patent rights covering our
products are not sufficiently broad, they may not provide us with sufficient
proprietary protection or competitive advantages against competitors with
similar products and technologies. Furthermore, if the United States Patent and
Trademark Office or foreign patent offices issue patents to us or our licensors,
others may challenge the patents or circumvent the patents, or the patent office
or the courts may invalidate the patents. Thus, any patents we own or license
from or to third parties may not provide any protection against competitors.

Furthermore, the life of our patents is limited. Such patents, which include
relevant foreign patents, expire on various dates. We have filed, and when
possible and appropriate, will file, other patent applications with respect to
our products and processes in the United States and in foreign countries. We may
not be able to develop additional products or processes that will be patentable
or additional patents may not be issued to us. See also "Risk Factors - If we
cannot meet requirements under our license agreements, we could lose the rights
to our products."

INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES COULD LIMIT OUR ABILITY TO MARKET
OUR PRODUCTS.

Our commercial success also significantly depends on our ability to operate
without infringing the patents or violating the proprietary rights of others.
The United States Patent and Trademark Office keeps United States patent
applications confidential while the applications are pending. As a result, we
cannot determine which inventions third parties claim in pending patent
applications that they have filed. We may need to engage in litigation to defend
or enforce our patent and license rights or to determine the scope and validity
of the proprietary rights of others. It will be expensive and time consuming to
defend and enforce patent claims. Thus, even in those instances in which the
outcome is favorable to us, the proceedings can result in the diversion of
substantial resources from our other activities. An adverse determination may
subject us to significant liabilities or require us to seek licenses that third
parties may not grant to us or may only grant at rates that diminish or deplete
the profitability of the products to us. An adverse determination could also
require us to alter our products or processes or cease altogether any related
research and development activities or product sales.

IF WE CANNOT MEET REQUIREMENTS UNDER OUR LICENSE AGREEMENTS, WE COULD LOSE THE
RIGHTS TO OUR PRODUCTS.

We depend on licensing arrangements with third parties to maintain the
intellectual property rights to our products under development. These agreements
require us to make payments and satisfy performance obligations in order to
maintain our rights under these licensing arrangements. All of these agreements
last either throughout the life of the patents, or with respect to other
licensed technology, for a number of years after the first commercial sale of
the relevant product.

In addition, we are responsible for the cost of filing and prosecuting certain
patent applications and maintaining certain issued patents licensed to us. If we
do not meet our obligations under our license agreements in a timely manner, we
could lose the rights to our proprietary technology.

In addition, we may be required to obtain licenses to patents or other
proprietary rights of third parties in connection with the development and use
of our products and technologies. Licenses required under any such patents or
proprietary rights might not be made available on terms acceptable to us, if at
all.

WE RELY ON CONFIDENTIALITY AGREEMENTS THAT COULD BE BREACHED AND MAY BE
DIFFICULT TO ENFORCE.

Although we believe that we take reasonable steps to protect our intellectual
property, including the use of agreements relating to the non-disclosure of
confidential information to third parties, as well as agreements that purport to
require the disclosure and assignment to us of the rights to the ideas,

developments, discoveries and inventions of our employees and consultants while
we employ them, the agreements can be difficult and costly to enforce. Although
we seek to obtain these types of agreements from our consultants, advisors and
research collaborators, to the extent that they apply or independently develop
intellectual property in connection with any of our projects, disputes may arise
as to the proprietary rights to this type of information. If a dispute arises, a
court may determine that the right belongs to a third party, and enforcement of
our rights can be costly and unpredictable. In addition, we will rely on trade
secrets and proprietary know-how that we will seek to protect in part by
confidentiality agreements with our employees, consultants, advisors or others.
Despite the protective measures we employ, we still face the risk that:

--they will breach these agreements;
--any agreements we obtain will not provide adequate remedies for this type of
breach or that our trade secrets or proprietary know-how will otherwise become
known or competitors will independently develop similar technology; and
--our competitors will independently discover our proprietary information and
trade secrets.

WE ARE DEPENDENT ON EXISTING MANAGEMENT

Our success is substantially dependent on the efforts and abilities of our
President and Chief Executive Officer, Gary A. Shangold, M.D., our founder and
Chief Scientific Officer, Harry A. Dugger, III, Ph.D. Decisions concerning our
business and our management are and will continue to be made or significantly
influenced by these individuals. The loss or interruption of their continued
services would have a materially adverse effect on our business operations and
prospects. Although our employment agreements with such members of management
generally provide for severance payments that are contingent upon the applicable
officer's refraining from competition with us, the loss of any of these persons'
services would adversely affect our ability to develop and market our products
and obtain necessary regulatory approvals, and the applicable noncompetition
provisions can be difficult and costly to monitor and enforce. Further, we do
not maintain key-man life insurance.

Our future success also will depend in part on the continued service of our key
scientific and management personnel and our ability to identify, hire and retain
additional personnel, including marketing and sales staff. We experience intense
competition for qualified personnel, and the existence of non-competition
agreements between prospective employees and their former employers may prevent
us from hiring those individuals or subject us to suit from their former
employers.

While we attempt to provide competitive compensation packages to attract and
retain key personnel, some of our competitors are likely to have greater
resources and more experience than we have, making it difficult for us to
compete successfully for key personnel.

WE ARE CONTROLLED BY CURRENT STOCKHOLDERS, OFFICERS AND DIRECTORS

Our directors, executive officers and principal stockholders and certain of our
affiliates have the ability to influence the election of our directors and most
other stockholder actions. Management and our affiliates currently beneficially
own (including shares they have the right to acquire) approximately 42.93% of
our common stock. Specifically, Dr. Rosenwald has the ability to exert
significant influence over the election of the Board and other matters submitted
to our stockholders for approval. Such positions may discourage or prevent any
proposed takeover of NovaDel, including transactions in which our stockholders
might otherwise receive a premium for their shares over the then current market
prices. Our directors, executive officers and principal stockholders may
influence corporate actions, including influencing elections of directors and
significant corporate events.

THE LIMITED PRIOR PUBLIC MARKET AND TRADING MARKET MAY CAUSE POSSIBLE VOLATILITY
IN OUR STOCK PRICE.

There has only been a limited public market for our securities and there can be
no assurance that an active trading market in our securities will be maintained.
The OTCBB is an unorganized, inter-dealer, over-the-counter market which
provides significantly less liquidity than Nasdaq and the national securities
exchange, and quotes for securities quoted on the OTCBB are not listed in the
financial sections of newspapers as are those for Nasdaq and the national
securities exchange. In addition, the overall market for securities in recent
years has experienced extreme price and volume fluctuations that have
particularly affected the market prices of many smaller companies. The trading
price of our common stock is expected to be subject to significant fluctuations
in response to variations in quarterly operating results, changes in analysts'
earnings estimates, announcements of innovations by us or our competitors,
general conditions in the industry in which we operate and other factors. These
fluctuations, as well as general economic and market conditions, may have a
material or adverse effect on the market price of our common stock.

LIMITATIONS IN CONNECTION WITH THE AVAILABILITY OF QUOTES AND ORDER INFORMATION
ON THE OTCBB

Trades and quotations on the OTCBB involve a manual process and the market
information for such securities cannot be guaranteed. In addition, quote
information, or even firm quotes, may not be available. The manual execution
process may delay order processing and intervening price fluctuations may result
in the failure of a limit order to execute or the execution of a market order at
a significantly different price. Execution of trades, execution reporting and
the delivery of legal trade confirmation may be delayed significantly.
Consequently, one may not able to sell shares of our common stock at the optimum
trading prices.

DELAYS IN ORDER COMMUNICATION IN THE OTCBB

Electronic processing of orders is not available for securities traded on the
OTCBB and high order volume and communication risks may prevent or delay the
execution of one's OTCBB trading orders. This lack of automated order processing
may affect the timeliness of order execution reporting and the availability of
firm quotes for shares of our common stock. Heavy market volume may lead to a
delay in the processing of OTCBB security orders for shares of our common stock,
due to the manual nature of the market. Consequently, one may not able to sell
shares of our common stock at the optimum trading prices.

PENNY STOCK REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF OUR
SECURITIES.

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

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

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

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

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

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

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

Our management is aware of the abuses that have occurred historically in the
penny stock market.

RISK OF MARKET FRAUD

OTCBB securities are frequent targets of fraud or market manipulation. Not only
because of their generally low price, but also because the OTCBB reporting
requirements for these securities are less stringent than for listed or NASDAQ
traded securities, and no exchange requirements are imposed. Dealers may
dominate the market and set prices that are not based on competitive forces.
Individuals or groups may create fraudulent markets and control the sudden,
sharp increase of price and trading volume and the equally sudden collapse of
the market price for shares of our common stock.

LIMITED LIQUIDITY ON THE OTCBB

When fewer shares of a security are being traded on the OTCBB, volatility of
prices may increase and price movement may outpace the ability to deliver
accurate quote information. Due to lower trading volumes in shares of our common
stock, there may be a lower likelihood of one's orders for shares of our common
stock being executed, and current prices may differ significantly from the price
one was quoted by the OTCBB at the time of one's order entry.

LIMITATION IN CONNECTION WITH THE EDITING AND CANCELING OF ORDERS ON THE OTCBB

Orders for OTCBB securities may be canceled or edited like orders for other
securities. All requests to change or cancel an order must be submitted to,
received and processed by the OTCBB. Due to the manual order processing involved
in handling OTCBB trades, order processing and reporting may be delayed, and one
may not be able to cancel or edit one's order. Consequently, one may not able to
sell shares of our common stock at the optimum trading prices.

INCREASED DEALER COMPENSATION

The dealer's spread (the difference between the bid and ask prices) may be large
and may result in substantial losses to the seller of shares of our common stock
on the OTCBB if the stock must be sold immediately. Further, purchasers of
shares of our common stock may incur an immediate "paper" loss due to the price
spread. Moreover, dealers trading on the OTCBB may not have a bid price for
shares of our common stock on the OTCBB. Due to the foregoing, demand for shares
of our common stock on the OTCBB may be decreased or eliminated.

ADDITIONAL AUTHORIZED SHARES OF OUR COMMON STOCK AND PREFERRED STOCK AVAILABLE
FOR ISSUANCE MAY ADVERSELY AFFECT THE MARKET.

We are authorized to issue 50,000,000 shares of our common stock. As of February
6, 2004, there were 32,877,642 shares of common stock issued and outstanding.
However, the total number of shares of our common stock issued and outstanding
does not include shares reserved in anticipation of the exercise of options or
warrants. As of February 6, 2004, we had outstanding stock options and warrants
to purchase approximately 20,814,196 shares of our common stock, the exercise
price of which range between $0.63 per share to $3.18 per share, and we have
reserved shares of our common stock for issuance in connection with the
potential exercise thereof. Of the reserved shares, a total of 2,145,000 shares
are currently reserved for issuance in connection with our 1992, 1997 and 1998
Stock Option Plans, of which options to purchase an aggregate of 500,000,
500,000 and 1,238,500 shares have been issued under the respective stock option
plans. Another 3,800,000 shares are reserved for issuance and available for the
options granted pursuant to the terms of the employment agreements of various of
our current and former officers. A significant number of such options and
warrants contain provisions for cashless exercise. To the extent such options or
warrants are exercised, the holders of our common stock will experience further
dilution. In addition, in the event that any future financing should be in the
form of, be convertible into or exchangeable for, equity securities, and upon
the exercise of options and warrants, investors may experience additional
dilution. See "Risk Factors - Our additional financing requirements could result
in dilution to existing stockholders."

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

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

WE DO NOT HAVE A SUFFICIENT NUMBER OF UNRESERVED AUTHORIZED COMMON STOCK TO
ISSUE ALL OF THE SHARES OF COMMON STOCK REQUIRED TO BE ISSUED IN CONNECTION WITH
OUTSTANDING WARRANTS AND OPTIONS.

We are required to hold a meeting of stockholders to, among other things, seek
the authorization of its stockholders to amend our Certificate of Incorporation
to, among other things, provide for the issuance of a number of additional
shares of common stock to allow us to issue shares of common stock issuable upon
the exercise of all our outstanding derivative securities. We intends to hold
our annual stockholders meeting during the first half of calendar year 2004 and
to request that the stockholders approve an amendment to the Certificate of
Incorporation as set forth above. The stockholders may not approve such
amendment. Further, we may not be able to hold our annual meeting of
stockholders in a timely manner, if at all. In the event that the holders of our
outstanding derivative securities exercise such securities at a time that we do
not have a sufficient number of shares of common stock authorized for issuance,
we will be forced not to honor the exercise of such securities. In such an
event, any related liability incurred by us may have a material adverse effect
on our business.

SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET.

From time to time, certain of our stockholders may be eligible to sell all or
some of their shares of common stock by means of ordinary brokerage transactions
in the open market pursuant to Rule 144, promulgated under the Securities Act,
subject to certain limitations. In general, pursuant to Rule 144, a stockholder
(or stockholders whose shares are aggregated) who has satisfied a one-year
holding period may, under certain circumstances, sell within any three-month
period a number of securities which does not exceed the greater of 1% of the
then outstanding shares of common stock or the average weekly trading volume of
the class during the four calendar weeks prior to such sale. Rule 144 also
permits, under certain circumstances, the sale of securities, without any
limitation, by our stockholders that are non-affiliates that have satisfied a
two-year holding period. Any substantial sale of our common stock pursuant to
Rule 144 or pursuant to any resale prospectus may have material adverse effect
on the market price of our securities.

LIMITATION ON DIRECTOR/OFFICER LIABILITY.

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

WE HAVE NO HISTORY OF PAYING DIVIDENDS ON OUR COMMON STOCK.

We have never paid any cash dividends on our common stock and do not anticipate
paying any cash dividends on our common stock in the foreseeable future. We plan
to retain any future earnings to finance growth. If we decide to pay dividends
to the holders of our common stock, such dividends may not be paid on a timely
basis.

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND DELAWARE LAW COULD DEFER A
CHANGE OF OUR MANAGEMENT WHICH COULD DISCOURAGE OR DELAY OFFERS TO ACQUIRE US.

Provisions of our Certificate of Incorporation and Delaware law may make it more
difficult for someone to acquire control of us or for our stockholders to remove
existing management, and might discourage a third party from offering to acquire
us, even if a change in control or in management would be beneficial to our
stockholders. For example, our Certificate of Incorporation allows us to issue
shares of preferred stock without any vote or further action by our
stockholders. Our Board has the authority to fix and determine the relative
rights and preferences of preferred stock. Our Board also has the authority to
issue preferred stock without further stockholder approval, including large
blocks of preferred stock. As a result, our Board could authorize the issuance
of a series of preferred stock that would grant to holders the preferred right
to our assets upon liquidation, the right to receive dividend payments before
dividends are distributed to the holders of common stock and the right to the
redemption of the shares, together with a premium, prior to the redemption of
our common stock.

Forward-Looking Statements

The statements set forth under the captions "Company Summary" and elsewhere in
this prospectus, including under "Risk Factors," and those incorporated by
reference herein which are not historical constitute "Forward Looking
Statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, including statements regarding the
expectations, beliefs, intentions or strategies for the future. We intend that
all forward-looking statements be subject to the safe-harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are only predictions and reflect our views as of the date they are
made with respect to future events and financial performance. Forward-looking
statements are subject to many risks and uncertainties which could cause our
actual results to differ materially from any future results expressed or implied
by the forward-looking statements.

Examples of the risks and uncertainties include, but are not limited to: the
inherent risks and uncertainties in developing products of the type we are
developing; possible changes in our financial condition; the progress of our
research and development; clinical trials require adequate supplies of drug
substance and drug product, which may be difficult or uneconomical to procure or
manufacture; timely obtaining sufficient patient enrollment in our clinical
trials; the impact of development of competing therapies and/or technologies by
other companies; our ability to obtain additional required financing to fund our
research programs; our ability to enter into agreements with collaborators and
the failure of collaborators to perform under their agreements with us; the
progress of the FDA approvals in connection with the conduct of our clinical
trials and the marketing of our products; the additional costs and delays which
may result from requirements imposed by the FDA in connection with obtaining the
required approvals.

Except to the extent required by applicable laws or rules, we do not undertake
any obligation or duty to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

Use of Proceeds

We will not receive any of the proceeds from the sale of the shares owned by the
selling security holders. However, we will receive funds from the exercise of
outstanding warrants and unit purchase options, if such warrants and unit
purchase options are exercised. Some of the outstanding warrants and unit
purchase options contain provisions for cashless exercise. We intend to use all
of such proceeds for working capital and general corporate purposes.

Selling Security Holders

The following table sets forth the stockholders who are offering their shares of
our common stock for sale under this prospectus, the amount of shares owned by
such stockholder prior to this offering, the amount to be offered by such
stockholder and the amount to be owned by such stockholders following completion
of the offering. The prior-to-offering figures are as of February 6, 2004. All
share numbers are based on information that these stockholders supplied to us.
This table assumes that each stockholder will sell all of its shares available
for sale during the effectiveness of the registration statement that includes
this prospectus. Stockholders are not required to sell their shares. Beneficial
ownership is determined in accordance with Commission rules and regulations and
includes voting or investment power with respect to the securities.

The percentage interest of each selling security holder is based on the
beneficial ownership of such selling security holder divided by the sum of the
current outstanding shares of common stock plus the additional shares, if any,
which would be issued to such selling security holder (but not any other selling
stockholder) when exercising warrants, unit purchase options or other rights in
the future.

Number of
Shares of Number of Total Percentage
Common Shares Number of Number of to be
Stock, not Represented Shares of Percentage Shares to Benefi-
including by Common Benefi- be Offered Number of cially
Warrants, Warrants Stock cially for the Shares to Owned
Benefi- Benefi- Benefi- Owned Account of be Owned after
cially cially cially Before the Selling after this this
Name Owned Owned Owned Offering Stockholder Offering Offering

Atlas Fund, LLC. 808,179 242,453 1,050,632 3.17% 1,050,632 0 *
The Bahr Family Limited Partnership 40,409 12,122 52,531 * 52,531 0 *
Barry J. Lind revoc trust Dtd 12/19/89 161,636 48,490 210,126 * 210,126 0 *
Beechwood Ventures LLC 310,022 30,306 340,328 1.03% 131,328 209,000 *
Brino Investment Ltd. 108,232 26,517 134,749 * 78,796 55,953 *
Bristol Investment Fund, Ltd. 285,714 85,714 371,428 1.13% 371,428 0 *
CC LifeScience Ltd. 285,714 85,714 371,428 1.13% 371,428 0 *
Chicago Private Investments Inc. 50,511 15,153 65,664 * 65,664 0 *
Clearwater Fund I, LP 404,090 121,227 525,317 1.59% 525,317 0 *
Clearwater Offshore Fund, Ltd. 404,090 121,227 525,317 1.59% 525,317 0 *
Coqui Capital Partners, LP 80,818 24,245 105,063 * 105,063 0 *
Domaco Venture Capital Fund 20,204 6,061 26,265 * 26,265 0 *

Dov Perlysky Grantor Retained Annuity
Trust DTD 1/5/01 101,022 30,306 131,328 * 131,328 0 *
E&M RP Trust 164,084 36,368 200,452 * 200,452 0 *
Ellis International Ltd. 40,409 12,122 52,531 * 52,531 0 *
The Esther Stahler Grantor Retained
Annuity Trust DTD 1/5/01 121,227 36,368 157,595 * 157,595 0 *
Gitel Family Partnership, LP 121,227 36,368 157,595 * 157,595 0 *
Moise E. Hendeles Trustee for the
Hendeles Grandchildren Trust #2 20,204 6,061 26,265 * 26,265 0 *
Moise Hendeles Trustee for the Hendeles
Grandchildren Trust 20,204 6,061 26,265 * 26,265 0 *
Hyman Lezell Revocable Trust 20,204 6,061 26,265 * 26,265 0 *
Kanter Family Foundation 50,511 15,153 65,664 * 65,664 0 *
Keys Foundation 1,047,619 254,762 1,302,381 3.93% 885,713 416,668 1.27%
Lind Family Investments LP DTD 8/15/01 20,204 6,061 26,265 * 26,265 0 *
MEH Revocable Trust 40,409 12,122 52,531 * 52,531 0 *
Michael H. Schwartz Profit Sharing Plan 40,409 12,122 52,531 * 52,531 0 *
Milstein Family Ltd Partnership 40,409 12,122 52,531 * 52,531 0 *
PCG Tagi (Series L), LLC 848,588 254,576 1,103,164 * 1,103,164 0 *
Perceptive Life Sciences Master Fund, Ltd. 1,648,696 494,609 2,143,305 6.42% 2,143,305 0 *
Quogue Capital LLC 422,274 126,682 548,956 1.66% 548,956 0 *
Rachel Family Partnership 101,022 30,306 131,328 * 131,328 0 *
Rawls Family L.P. 202,045 60,613 262,658 * 262,658 0 *
RL Capital Partners, L.P. 60,613 18,183 78,796 * 78,796 0 *
Smithfield Fiduciary LLC 344,902 85,613 430,515 1.31% 305,515 125,000 *
Stephan P. Vermut & Barbara T. Vermut
2000 Trust 169,718 50,915 220,633 * 220,633 0 *
Steven M. Oliveira 1998 Charitable
Remainder Unitrust 242,454 72,736 315,190 * 315,190 0 *
Symmetry Capital Offshore Fund Ltd. 44,018 13,205 57,223 * 57,223 0 *
Symmetry Capital Partners, L.P. 114,140 34,242 148,382 * 148,382 0 *
Symmetry Capital Qualified Partners, L.P. 153,306 45,991 199,297 * 199,297 0 *
Symmetry Parallax Partners, L.P. 92,625 27,787 120,412 * 120,412 0 *
Tisu Investment Ltd. 108,231 18,183 126,414 * 78,796 55,953 *
Vertical Ventures, LLC 202,045 60,613 262,658 * 262,658 0 *
Weiss Peck & Greer Investments, a
division of Robeco USA, L.L.C. 476,190 142,857 619,047 1.87% 619,047 0 *
Alan Bresler and Hanna Bresler JTWROS 60,613 18,183 78,796 * 78,796 0 *
Alan Jay Young 80,818 24,245 105,063 * 105,063 0 *
Albert Bruno 8,082 2,424 10,506 * 10,506 0 *
Albert Fried, Jr. 484,908 145,472 630,380 1.91% 630,380 0 *
Albert Milstein 40,409 12,122 52,531 * 52,531 0 *
Alexander Pomper 202,045 60,613 262,658 * 262,658 0 *
Anthony G. Polak "S" 20,204 6,061 26,265 * 26,265 0 *
Fiserv Securities Inc. A/C/F Anthony G.
Polak Std IRA 20,204 6,061 26,265 * 26,265 0 *
Clark Schubach 88,644 19,093 107,737 * 82,737 25,000 *
Dr. Daniel Kessel 30,204 6,061 36,265 * 26,265 10,000 *
Daniel Lenchner 12,123 3,636 15,759 * 15,759 0 *
David and Nancy Pudelsky JTWROS 20,204 6,061 26,265 * 26,265 0 *
David J. Bershad 42,429 12,728 55,157 * 55,157 0 *
David Jaroslawicz 155,818 24,245 180,063 * 105,063 75,000 *
David Moss 20,204 6,061 26,265 * 26,265 0 *
David Saks 80,818 24,245 105,063 * 105,063 0 *

David W. Ruttenberg 52,381 12,143 64,524 * 39,524 25,000 *
Dean Glasser 12,123 3,636 15,759 * 15,759 0 *
Edmund A. Debler 80,818 24,245 105,063 * 105,063 0 *
Gary J. Strauss 74,857 16,505 91,362 * 49,694 41,668 *
Gregg Dovolis 20,204 6,061 26,265 * 26,265 0 *
Gregory & Donna Lenchner JTWROS 20,204 6,061 26,265 * 26,265 0 *
Hans F. Heye 404,090 121,227 525,317 1.59% 525,317 0 *
Susan and Harry Newton JTWROS 58,409 12,122 70,531 * 52,531 18,000 *
Harvey Lenchner 16,164 4,849 21,013 * 21,013 0 *
Harvey & Ronnie Lustig JTWROS 20,204 6,061 26,265 * 26,265 0 *
Hillel Weinberger 142,857 30,000 172,857 * 172,857 0 *
Howard Gittis 309,524 63,095 372,619 1.13% 164,285 208,334 *
Delaware Charter Guarantee & Tr. Co.
F/B/O Howard M. Tanning IRA 121,227 36,368 157,595 * 157,595 0 *
Isaac R. Dweck 142,857 30,000 172,857 * 172,857 0 *
Ivan Kaufman 142,857 30,952 173,809 * 90,475 83,334 *
J. Jay Lobell 80,818 24,245 105,063 * 105,063 0 *
J. William Doyle 80,818 24,245 105,063 * 105,063 0 *
Fiserv Securities A/C/F Jack Polak IRA 20,204 6,061 26,265 * 26,265 0 *
Jacob Gottlieb 161,636 48,490 210,126 * 210,126 0 *
Jay Kestenbaum 40,409 12,122 52,531 * 52,531 0 *
Jedd Wider 84,859 25,457 110,316 * 110,316 0 *
John O. Dunkin 40,409 12,122 52,531 * 52,531 0 *
Joseph J. Vale 80,818 24,245 105,063 * 105,063 0 *
Larry & Shirley Kessel JTWROS (1) 20,204 6,061 26,265 * 26,265 0 *
Mark Berg IRA 510,714 167,500 678,214 1.90% 428,214 250,000 *
Mark Mazzer 43,333 9,964 53,297 * 32,047 21,250 *
Naomi Waldman 20,204 6,061 26,265 * 26,265 0 *
Nathan Eisen 40,409 12,122 52,531 * 52,531 0 *
Neel B & Martha N. Ackerman JTWROS 202,045 60,613 262,658 * 262,658 0 *
Paul F. Berlin 40,409 12,122 52,531 * 52,531 0 *
Phil Lifschitz 40,409 12,122 52,531 * 52,531 0 *
Philip Schiller 40,409 12,122 52,531 * 52,531 0 *
Praful Desai 20,204 6,061 26,265 * 26,265 0 *
Richard Pashayan 12,931 3,879 16,810 * 16,810 0 *
Robert J. Leaf 20,204 6,061 26,265 * 26,265 0 *
Robert L. McEntire 121,227 36,368 157,595 * 157,595 0 *
Robert S. Waldman 20,204 6,061 26,265 * 26,265 0 *
Ronald M. Lazar IRA 40,409 12,122 52,531 * 52,531 0 *
S. Edmond Farber 20,204 6,061 26,265 * 26,265 0 *
Lucile A. Slocum and Stanley Slocum JTWROS 40,409 12,122 52,531 * 52,531 0 *
Scott & Amy Koppelman JTWROS 40,409 12,122 52,531 * 52,531 0 *
S. Alan Lisenby 121,227 36,368 157,595 * 157,595 0 *
Steven Lisi 80,818 24,245 105,063 * 105,063 0 *
Wayne Saker 40,409 12,122 52,531 * 52,531 0 *
William S. Tyrrell 40,409 12,122 52,531 * 52,531 0 *
William S. Silver MD 20,204 6,061 26,265 * 26,265 0 *
William Weinstein & Mary Sandell JTWROS 20,204 6,061 26,265 * 26,265 0 *
Glennen, Thomas J. 190,476 33,334 223,810 * 57,142 166,668 *

Lipton, Eva 23,809 4,167 27,976 * 7,142 20,834 *
Sanzo, Carmine 47,619 8,334 55,953 * 14,285 41,668 *
Colby, Trevor 47,619 8,334 55,953 * 14,285 41,668 *
Falk, Robert 142,857 25,000 167,857 * 42,857 125,000 *
Kash Family Trust 23,809 4,167 27,976 * 7,142 20,834 *
Levitin, Eli 23,809 4,167 27,976 * 7,142 20,834 *
Schain, Howard 14,285 2,500 16,785 * 4,285 12,500 *
Wolfson, Aaron 38,095 6,667 44,762 * 11,428 33,334 *
South Ferry #2, LP 476,190 83,334 559,524 1.70% 142,856 416,668 1.27%
Cornell Capital Partners, LP- 95,238 16,667 111,905 * 28,571 83,334 *
Ivette's Isaac Dabah 2002 Trust 280,952 49,167 330,119 1.00% 84,285 245,834 *
Grunstein, Leonard 23,809 4,167 27,976 * 7,142 20,834 *
The Mataponi Trust 23,809 4,167 27,976 * 7,142 20,834 *
Riverside Contracting, LLC 47,619 8,334 55,953 * 14,285 41,668 *
Lydon, Harris R.L. Jr. 23,809 4,167 27,976 * 7,142 20,834 *
Kazam, Bonnie B. 95,238 16,667 111,905 * 28,571 83,334 *
Koffman, Burton I. 23,809 4,167 27,976 * 7,142 20,834 *
MHR Capital Partnership, LP 952,380 166,667 1,119,047 3.39% 285,713 833,334 2.53%
Mullen, Michael A. 23,809 4,167 27,976 * 7,142 20,834 *
The Osterweis Revocable Trust 47,619 8,334 55,953 * 14,285 41,668 *
Wolcot Capital, Inc 42,857 7,500 50,357 * 12,857 37,500 *
Prager, Dr. Tis 108,232 27,147 135,379 * 14,285 121,094 *
Bruno Widmer 108,232 27,147 135,379 * 14,285 121,094 *
Lindsay A. Rosenwald, M.D. 6,616,666 7,355,243 13,971,909 34.72% 738,577 13,232,332 *
William Corcoran 11,303 3,390 14,693 * 14,693 0 *
Timothy McInerney 220,794 89,772 310,566 * 287,032 23,534 *
Scott Katzmann 69,569 55,108 124,677 * 90,439 34,238 *
Peter Kash 54,450 68,923 123,373 * 70,785 52,588 *
Joshua Kazam 54,450 65,829 120,279 * 70,785 49,494 *
Michael Weiser 62,007 18,602 80,609 * 80,609 0 *
John Knox 11,303 3,391 14,694 * 14,694 0 *
Stephen Rocamboli 17,333 5,200 22,533 * 22,533 0 *
Basil Christakos 14,333 4,300 18,633 * 18,633 0 *
John Papadimitropoulos 6,432 1,929 8,361 * 8,361 0 *
Michael Rosenman 33,215 9,964 43,179 * 43,179 0 *
Benjamin Bernstein 5,000 1,500 6,500 * 6,500 0 *
Bernard Gross 2,000 600 2,600 * 2,600 0 *
Michael A. Mullen 76,127 19,862 95,989 * 68,012 27,977 *
Vito Balsamo 10,102 3,030 13,132 * 13,132 0 *
Charles M. Raspa 2,500 750 3,250 * 3,250 0 *
Steven Markowitz 26,159 7,847 34,006 * 34,006 0 *
Robert P. Petrozzo 25,255 7,576 32,831 * 32,831 0 *
Joseph Sorbara 26,159 7,847 34,006 * 34,006 0 *
Fabio Migliaccio 10,000 3,000 13,000 * 13,000 0 *
Robert D. Millstone 28,488 8,546 37,034 * 37,034 0 *
Steven A. Sherman 16,243 4,273 20,516 * 18,516 2,000 *
Sandgrain Securities, Inc. 4,747 1,424 6,171 * 6,171 0 *

* Less than 1%.
(1) Lawrence J. Kessel serves on our Board of Directors.

The information contained in this table reflects "beneficial" ownership of
common stock within the meaning of Rule 13d-3 under the Exchange Act. As of
February 6, 2004, the Company had 32,877,642 shares of common stock outstanding.
Beneficial ownership information reflected in the table includes shares issuable
upon the exercise of outstanding warrants issued by the Company at their initial
exercise prices. Except as set forth above, none of the selling stockholders
named in the preceding table has had any position, office or other material
relationship with us or any of our affiliates within the past three years.

Plan of Distribution

In this section of the prospectus, the term "selling security holder" means and
includes: (1) the persons identified in the tables above as the selling security
holders; and (2) any of their donees, pledgees, distributees, transferees or
other successors in interest who may (a) receive any of the shares of our common
stock offered hereby after the date of this prospectus and (b) offer or sell
those shares hereunder.

The shares of our common stock offered by this prospectus may be sold from time
to time directly by the selling security holders. Alternatively, the selling
security holders may from time to time offer such shares through underwriters,
brokers, dealers, agents or other intermediaries. The selling security holders
as of the date of this prospectus have advised us that there were no
underwriting or distribution arrangements entered into with respect to the
common stock offered hereby. The distribution of the common stock by the selling
security holders may be effected: in one or more transactions that may take
place on the OTCBB (including one or more block transaction) through customary
brokerage channels, either through brokers acting as agents for the selling
security holders, or through market makers, dealers or underwriters acting as
principals who may resell these shares on the OTCBB; in privately-negotiated
sales; by a combination of such methods; or by other means. These transactions
may be effected at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at other negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the selling security holders in connection with sales of our common
stock.

The selling security holders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares of our
common stock in the course of hedging the positions they assume with the selling
security holders. The selling security holders also may sell shares short and
redeliver the shares to close out such short positions. The selling security
holders may enter into option or other transactions with broker-dealers which
require the delivery to the broker-dealer of shares of our common stock. The
broker-dealer may then resell or otherwise transfer such shares of common stock
pursuant to this prospectus.

The selling security holders also may lend or pledge shares of our common stock
to a broker-dealer. The broker-dealer may sell the shares of common stock so
lent, or upon a default the broker-dealer may sell the pledged shares of common
stock pursuant to this prospectus. Any securities covered by this prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this prospectus. The selling security holders have advised us
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their securities.
There is no underwriter or coordinating broker acting in connection with the
proposed sale of shares of common stock the selling security holders.

Although the shares of common stock covered by this prospectus are not currently
being underwritten, the selling security holders or their underwriters, brokers,
dealers or other agents or other intermediaries, if any, that may participate
with the selling security holders in any offering or distribution of common
stock may be deemed "underwriters" within the meaning of the Securities Act and
any profits realized or commissions received by them may be deemed underwriting
compensation thereunder.

Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of shares of the common stock offered hereby may not
simultaneously engage in market making activities with respect to the common
stock for a period of up to five days preceding such distribution. The selling
security holders will be subject to the applicable provisions of the Exchange
Act and the rules and regulations promulgated thereunder, including without
limitation Regulation M, which provisions may limit the timing of purchases and
sales by the selling security holders.

In order to comply with certain state securities or blue sky laws and
regulations, if applicable, the common stock offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In certain
states, the common stock may not be sold unless they are registered or qualified
for sale in such state, or unless an exemption from registration or
qualification is available and is obtained.

We will bear all costs, expenses and fees in connection with the registration of
the common stock offered hereby. However, the selling security holders will bear
any brokerage or underwriting commissions and similar selling expenses, if any,
attributable to the sale of the shares of common stock offered pursuant to this
prospectus.

We have agreed to indemnify certain of the selling security holders against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments to which any of those security holders may be required to
make in respect thereof.

Legal Proceedings

There are no legal proceedings pending to which we are a party and we are
unaware of any contemplated material legal actions against us.

Directors, Executive Officers, Promoters and Control Persons

The names and ages of our directors and executive officers are set forth below.
All directors are elected annually by the stockholders to serve until the next
annual meeting of the stockholders and until their successors are duly elected
and qualified. Officers are elected annually by the Board to serve at the
Board's pleasure.

Name Age Position with the Company
Gary A. Shangold, M.D. 50 President, Chief Executive Officer and
Director
Harry A. Dugger, III, Ph.D. 67 Chief Scientific Officer

John H. Klein 57 Chairman

Robert F. Schaul, Esq. 64 Secretary and Director
Donald J. Deitman 61 Chief Financial Officer
Mohammed Abd El-Shafy 50 Vice President,
Formulation Development
William F. Hamilton, Ph.D. 64 Director
Lawrence J. Kessel, M.D., FACP 50 Director
Mark H. Rachesky, M.D. 44 Director
Charles Nemeroff, M.D., Ph.D. 54 Director
Barry Cohen 41 Vice President - New Business and
Product Development

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

Harry A. Dugger, III, Ph.D., Chief Scientific Officer. Dr. Dugger is the founder
of NovaDel and served as its President and a Director from its inception in May
1982 until December 2002. Prior to founding NovaDel, from June 1980 to November
1982, Dr. Dugger was employed as Vice President of Research and Development by
Bauers-Kray Associates, a company engaged in the development of pharmaceutical
products. From 1964 to 1980, Dr. Dugger was Associate Section Head for Research
and Development at Sandoz Pharmaceuticals Corporation. Dr. Dugger received an MS
in Chemistry from the University of Michigan in 1960 and received a Ph.D. in
Chemistry from the University of Michigan in 1962.

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

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

Robert F. Schaul, Esq., Secretary and Director. Mr. Schaul has been a Director
of NovaDel since November 1991 and was Vice President, Secretary and General
Counsel of NovaDel from November 1991 to February 1995. He has advised NovaDel
since its formation. Mr. Schaul is also a part-time Municipal Court Judge for a
number of New Jersey municipalities. From 1995 to 1998, Mr. Schaul was Vice
President and General Counsel of Landmark Financial Corp. From 1989 to 1991, Mr.
Schaul was a partner with the law firm of Glynn, Byrnes and Schaul, and for 20
years prior thereto was an attorney and partner with the law firm Kerby, Cooper,
English, Schaul & Garvin, specializing in business law and business related
litigation. Mr. Schaul received a BA from New York University in 1961 and a JD
from Harvard University in 1964.

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

Lawrence J. Kessel, M.D., FACP, Director. Dr. Kessel was elected to the Board in
March 2003. He is President of Lawrence J. Kessel, MD & Associates, PC. Dr.
Kessel is president of a five physician practice specializing in Internal
Medicine and Geriatrics since 1984. He graduated Magna Cum Laude with a B.S.
degree from the University of Pittsburgh as an honors major in Biology and
subsequently graduated with an MD degree from Temple Medical School. He
completed a formal residency in Internal Medicine at Abington Memorial Hospital
and is Board Certified in Internal Medicine with added qualification as a
diplomat in Geriatric Medicine. He is an active staff attending and Clinical
Instructor at Chestnut Hill Hospital (University of Pennsylvania affiliate) and
Roxborough Memorial Hospital in Philadelphia, Pennsylvania. Dr. Kessel is a
Board Reviewer for the American Board of Internal Medicine, as well as a Fellow
of the American College of Physicians. He also serves on the advisory board of
Independence Blue Cross and is a Clinical Assistant Professor in the Department
of Medicine at Temple University Medical School. Dr. Kessel presently serves as
a director to Cypress Biosciences, Inc., of San Diego, California, Keryx
Biopharmaceuticals, Inc., of New York, New York, and Dor BioPharma, Inc., of
Lake Forest, Illinois. He previously served on the Board of Directors of Genta
Incorporated.

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

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

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

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

Audit Committee Expert

Our Board of Directors believes that Mr. Rachesky is an audit committee
financial expert as defined in the regulations promulgated by the Commission.

Director Compensation

Our directors are elected annually and serve until the next annual meeting of
stockholders and until a successor shall have been duly elected and qualified.
Effective July 2003, our directors, who are not employees or consultants,
receive for each Board meeting attended fees equal to $2,000 (telephone meetings
are compensated at the rate of $1,000 per meeting). Such directors are also
reimbursed for expenses incurred in connection with their attendance at meetings
of the Board. Directors may be removed with or without cause by a vote of the
majority of the stockholders then entitled to vote for the election of
directors. There were no other arrangements pursuant to which any director was
compensated during the fiscal year ended July 31, 2003, for any services
provided as a director. The Chairman of each of the Audit and Compensation
Committees receives an annual fee equal to $5,000 for serving as such; other
members of the Committees receive an annual fee equal to $3,000.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information, as of February 6, 2004, with respect
to the beneficial ownership of the outstanding shares of our common stock as of
such date plus, where relevant for particular beneficial owners, shares which
such beneficial owner has the right to acquire within 60 days), by (i) any
holder known to us owning more than five percent (5%) of the outstanding shares
of our common stock; (ii) our officers and directors; and (iii) our officers and
directors as a group:

Title of Name and Address of Amount and Nature of Percentage of
Class Beneficial Owner(1) Beneficial Ownership Class
----- ------------------- -------------------- -----

Common Stock Harry A. Dugger, III, Ph.D. 2,104,003(2) 6.17%

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

Common Stock John H. Klein 333,333(4) *

Common Stock Donald J. Deitman 0 *

Common Stock Robert F. Schaul, Esq. 274,286(5) *

Common Stock Mohammed Abd El-Shafy 150,000(6) *

Common Stock William F. Hamilton, Ph.D. 33,333(7) *

Common Stock Lawrence J. Kessel, M.D., FACP 59,598(8) *

Common Stock Barry Cohen 0(9) *

Common Stock Mark H. Rachesky 1,119,047(10) 3.60%

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

Common Stock Lindsay A. Rosenwald, M.D. 13,971,909(12) 34.73%

Common Stock Biomedical Investment Group, LLC 5,333,332(12)(13) 15.00%

Common Stock All Executive Officers and Directors as 4,406,933(2)(3)(4)(6)(7)(8)(9) 12.43%
a group (11 persons) (10)(11)

* Less than 1%.

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

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

(3) Represents 333,333 Non-Plan options, issued in December 2002, exercisable at
$1.93 per share. Does not include additional Non-Plan options to purchase
666,667 shares of common stock at an exercise price of $1.93 per share. These
additional options vest in two equal annual installments, beginning in December
2004. All of such options expire in December 2007.

(4) Represents 333,333 Non-Plan Options exercisable at $2.40 per share. The
options expire in March 2004.

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

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

(7) Represents 33,333 Non-Plan Options exercisable at $1.51 per share which vest
in March 2004. Does not include additional Non-Plan options to purchase 66,667
shares of common stock at an exercise price of $1.51 per share, which shall vest
in two annual installments beginning in March of 2004. All of such options
expire in 2008.

(8) Represents 20,204 shares of common stock, warrants to purchase 6,061 shares
of common stock at an exercise price of $1.40 per share which expire in January
2009 and 33,333 Non-Plan options exercisable at $1.51 per share which vest in
March 2004. Does not include additional Non-Plan options to purchase 66,667
shares of common stock at an exercise price of $1.51 per share, which shall vest
in two annual installments beginning in March of 2004. All of such options
expire in 2008.

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

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

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

(12) Includes 3,950,000 shares of common stock and warrants to purchase
3,950,000 shares of common stock at an exercise price of $.75 per share which
expire in December 2008. Also includes 2,666,666 shares of common stock and
warrants to purchase 2,666,666 shares of common stock, which expire in March
2009, owned by Biomedical Investment Group, LLC, which is an affiliate of
Lindsay A. Rosenwald. Also includes unit purchase options entitling Dr.
Rosenwald to purchase 568,136 shares of common stock and warrants to purchase an
additional 170,441 shares of common stock, each at a purchase price equal to
$1.40 per share. Such options and warrants expire on December 30, 2008.

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

Description of Securities

General

The following description of our capital stock does not purport to be complete
and is subject to and qualified in its entirety by our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus forms a part, and by the applicable
provisions of Delaware law.

We are authorized to issue up to 50,000,000 shares of common stock, $.001 par
value per share, of which 32,877,642 shares were issued and outstanding as of
February 6, 2004. Our certificate of incorporation authorizes 1,000,000 shares
of "blank check" preferred stock, none of which are outstanding.

Common Stock

Subject to the rights of holders of preferred stock, if any, holders of shares
of our common stock are entitled to share equally on a per share basis in such
dividends as may be declared by our Board out of funds legally available
therefore, if at all. There are presently no plans to pay dividends with respect
to the shares of our common stock. Upon our liquidation, dissolution or winding
up, after payment of creditors and the holders of any of our senior securities,
including preferred stock, if any, our assets will be divided pro rata on a per
share basis among the holders of the shares of our common stock. Our common
stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to our common stock. The stockholders that purchased shares of our common stock
in connection with the private placement consummated in April and May of 2003
are entitled to participate in further offerings, for a two-year period, so as
to maintain their percentage ownership in NovaDel. Subject to the foregoing, the
holders of our common stock do not have any pre-emptive or other subscription
rights.

Holders of shares of our common stock are entitled to cast one vote for each
share held at all stockholders' meetings for all purposes, including the
election of directors. The common stock does not have cumulative voting rights.

All of the issued and outstanding shares of our common stock are fully paid,
validly issued and non-assessable.

Preferred Stock

None of our 1,000,000 "blank check" authorized preferred shares are currently
outstanding. Our Board has the authority, without further action by the holders
of our outstanding common stock, to issue shares of preferred stock from time to
time in one or more classes or series, to fix the number of shares constituting
any class or series and the stated value thereof, if different from the par
value, and to fix the terms of any such series or class, including dividend
rights, dividend rates, conversion or exchange rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price
and the liquidation preference of such class or series.

Warrants

As of February 6, 2004, we had 14,215,288 warrants or other derivative
securities (but not including stock options) to purchase shares of our common
stock outstanding as follows: 200,000 warrants exercisable at $1.00 per share;
100,007 warrants exercisable at $2.00 per share; 840,102 warrants exercisable at
$2.00 per share; 160,016 warrants exercisable at $1.65 per share; 50,000
warrants exercisable at $1.50 per share; 3,999,957 warrants exercisable at $1.40
per share; and the balance at $.75 per share. All of such warrants, except the
warrants issued to the investors in the April, May and December 2003 private
placements, contain provisions for cashless exercise. The exercise price of the
warrants and the number of shares issuable upon exercise of the warrants are
subject to adjustment to protect against dilution in certain events such as
stock splits, combinations, subdivisions and reclassifications.

Class B Warrants

We have 840,102 outstanding Class B Warrants with an exercise price equal to
$2.00 per share. The Class B Warrants expire in April and May of 2008, and
contain certain demand and piggyback registration rights. The Class B Warrants
are exercisable in whole or in part and may be exercised on a cashless basis,
subject to any applicable law, rule or regulation. The exercise price of the
Class B Warrants and the number of shares issuable upon exercise of the Class B
Warrants are subject to adjustment for certain dilution events.

Class C Warrants

We have 3,999,957 outstanding Class C Warrants with an exercise price equal to
$1.40 per share. Further, Paramount and/or its designees hold unit purchase
options exercisable for, among other securities, an additional 399,994 Class C
Warrants. The Class C Warrants expire on December 30, 2008, and contain certain
demand and piggyback registration rights. The Class C Warrants will be
exercisable in whole or in part and may be exercised on a cashless basis,
subject to any applicable law, rule or regulation. The exercise price of the
Class C Warrants and the number of shares issuable upon exercise of the Class C
Warrants are subject to adjustment for certain dilution events.

Transfer agent and registrar

The transfer agent and registrar for our common stock is American Stock Transfer
& Trust Company, 59 Maiden Lane, New York, NY 10038.

Disclosure of Commission Position on Indemnification for Securities Act
Liabilities

Our bylaws provide that we will indemnify our officers and directors and for all
costs and expenses incurred by them on account of their being or having served
as our directors or officers.

Section 145 of the Delaware General Corporation Law, the DGCL, empowers a
corporation to indemnify its directors and officers and to purchase insurance
with respect to liability arising out of the performance of their duties as
directors and officers. The DGCL provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's by-laws, any
agreement, vote of stockholders or otherwise.

Article Ninth of our Certificate of Incorporation eliminates the personal
liability of our directors to the fullest extent permitted by Section 102 of the
DGCL. Article Tenth provides for indemnification of all persons whom we have the
power to indemnify pursuant to Section 145 of the DGCL.

The effect of the foregoing is to require us, to the extent permitted by law, to
indemnify our officers and directors for any claim arising against such persons
in their official capacities if such persons acted in good faith and in a manner
that they reasonably believed to be in or not opposed to our best interests,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe their conduct was unlawful. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling NovaDel pursuant to the foregoing provisions, we
have been informed that in the opinion of the Commission, such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.

Description of Business

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

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

At its inception in 1982, Novadel, then known as Pharmaconsult, was a consultant
to the pharmaceutical industry, focusing on product development activities of
various European pharmaceutical companies. Since 1992, we have used our
consulting revenues to fund our product development activities. Our focus on
developing our own products evolved naturally out of our consulting experience
for other pharmaceutical companies. Substantially all of our revenues previously
were derived from our consulting activities. Consulting activities are no longer
a material part of our business. In 1991, we changed our name to Flemington
Pharmaceutical Corporation. Effective October 1, 2002, we changed our name to
NovaDel Pharma Inc.

Business Strategy

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

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

Patented and Patent Pending Delivery Systems

We have certain patents and pending patent applications for our Lingual (Oral)
Spray delivery system. Our Lingual (Oral) Spray delivery system is available in
both aerosol and pump spray formulations. The system, in either form, releases
the drug in the form of a fine mist into the mouth for immediate absorption into
the bloodstream via the mucosal membranes. We believe that this delivery system
offers certain advantages, including more rapid delivery of drugs to the
bloodstream allowing for quicker onset of therapeutic effects compared to
conventional oral dosage forms, improved drug safety profile by reducing the
required dosage, including possible reduction of side-effects, improved dosage
reliability, allowing medication to be taken without water and improved patient
convenience and compliance. Drug absorption through the mucosal membranes of the
mouth is rapid and minimizes the first-pass metabolism effect (i.e., total or
partial inactivation of a drug as it passes through the gastrointestinal tract
and liver).

FDA approval is not a prerequisite for patent approval. The expected year of
marketability of a given product will vary depending upon the specific drug
product with which the delivery system will be utilized. Each individual use of
our proprietary delivery system will require registration with and/or approval
by the FDA prior to marketability, and the amount of regulatory oversight
required by the FDA will also depend on the specific type of drug product for
which the delivery system is implemented.

Proposed Products

Our proposed products described below are subjected to laboratory testing and
stability studies and tested for therapeutic comparison to the originators'
products by qualified laboratories and clinics. To the extent that two drug
products with the same active ingredients are substantially identical in terms
of their rate and extent of absorption in the human body (bioavailability), they
are considered bioequivalent. If the accumulated data demonstrates
bioequivalency, submission is then made to the FDA (through the filing of an
ANDA) for its review and approval to manufacture and market. If the accumulated
data demonstrates that there are differences in the two drugs' bioavailability,
or if it is intended to make additional or different claims regarding
therapeutic effect for the newly developed product, submission is made to the
FDA via an NDA for its review and approval under Section 505(b)(1) or Section
505(b)(2) of the FDC Act. An NDA submitted under section 505(b)(2) of the FDC
Act is generally less complex than an ordinary NDA. We expect that the majority
of our products in development will require the filing of these shorter versions
of an NDA because the products are known chemical entities, but we or our
licensees will be making new claims as to therapeutic effects, lessened side
effects or both of such products.

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

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

Cardiovascular (Nitroglycerin) Lingual Spray

Our Nitroglycerin product has been formulated and stability testing has been
completed. A United States patent was issued in 1999. An IND was filed with the
FDA in early 2002 and clinical trials began in July 2002 and were completed in
December 2002. We anticipate filing an NDA in 2004.

Antihistamine Lingual Sprays (Clemastine and Loratadine)

These projects have been put on hold as the commercial opportunity for this
active has been greatly diminished by the entry of generic versions of
clemastine into the marketplace and the switch of clemastine from prescription
to over-the-counter status.

Estradiol and Progesterone Lingual Sprays

We have formulated a lingual spray version of estradiol and have opened two
INDs. We have also formulated a lingual spray version of progesterone. We have
performed pharmacokinetic studies in connection with both of these therapies.
This project has been put on hold due to questions that recently have been
raised about estrogen therapy.

Migraine (Sumatriptan) Lingual Spray

A sumatriptan lingual spray has been formulated and is currently undergoing
stability testing. A pilot pharmacokinetic study is planned for the First half
of 2004.

Anxiolytic (Alprazolam) Lingual Spray

An alprazolam lingual spray has been formulated and is currently undergoing
stability testing. A pilot pharmacokinetic study is planned for the First half
of 2004.

Anti-emetic (Ondansetron) Lingual Spray

An ondansetron lingual spray has been formulated and is currently undergoing
stability testing. A pilot pharmacokinetic study is planned for the First half
of 2004.

Hypnotic (Zolpidem) Lingual Spray

A zolpidem lingual spray has been formulated and is currently undergoing
stability testing. A pilot pharmacokinetic study is planned for the First half
of 2004.

Anesthetic (Propofol) Lingual Spray

A propofol lingual spray has been formulated and is currently undergoing
stability testing. A pilot pharmacokinetic study is planned for the First half
of 2004. This product has been licensed to Manhattan Pharmaceuticals.

Agreement with Manhattan Pharmaceuticals

In April 2003, we entered into a license and development agreement with
Manhattan Pharmaceuticals, Inc., for the worldwide, exclusive rights to our
lingual spray technology to deliver Propofol for pre-procedural sedation. The
terms of the agreement call for certain milestones and other payments, the first
of which was received during June 2003. Our affiliate, Dr. Rosenwald is also an
affiliate of Manhattan Pharmaceuticals. Manhattan Pharmaceuticals is a
development stage company and has no revenues to date. The agreement provides
that Manhattan Pharmaceuticals must raise certain funds before we receive the
remaining license fee. Manhattan Pharmaceuticals has raised these funds and the
license fee has been paid to NovaDel. If Manhattan Pharmaceuticals is unable to
raise additional funds, there is significant doubt it will be able to fulfill
its remaining commitments to us. See also Notes 6 and 7 to the Financial
Statements to the Audited Annual Financial Statements attached below.

Marketing and Distribution

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

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

We believe that such third-party arrangements will permit us to maximize the
promotion and distribution of our products while minimizing our direct marketing
and distribution costs. Except for our license with Manhattan Pharmaceuticals,
we have not entered into any agreements or arrangements with respect to the
marketing of our proposed products and there can be no assurance that we will do
so in the future. See "Description of Business - Agreement with Manhattan
Pharmaceuticals." See also see Notes 6 and 7 to the Financial Statements to the
Audited Annual Financial Statements attached below. We may not be able to
successfully market our proposed products.

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

Manufacturing

We intend to internalize the manufacturing of our proposed products. Presently,
we have established a pilot manufacturing facility at one of our present
locations, which we believe is adequate for our needs with respect to our
requirements for formulation development, stability testing and clinical
supplies. We have also leased a new, larger facility which will have adequate
space for our future foreseeable requirements for production, manufacturing and
warehouse space. We began to occupy this new space during the third quarter of
2003. The manufacture of our pharmaceutical products will be subject to current
Good Manufacturing Processes (cGMP) prescribed by the FDA and pre-approval
inspections by the FDA and foreign authorities prior to the commercial
manufacture of any such products. See "Description of Business - Government
Regulation" and "Description of Business - Raw Materials and Suppliers." We may
not be successful in constructing and maintaining such a manufacturing and
warehousing facility in compliance with cGMP. If we are unable to do so, it will
become necessary for us to make arrangements with a third party contract
manufacturer to satisfy our requirements. We may not be able to enter into
arrangements with third party manufacturers, or be able to do so on terms
favorable to us. Failure by us to complete successfully the internalization of
our manufacturing requirements or to conclude an alternative contract
manufacturing arrangement could have an adverse effect our efforts to obtain
regulatory approval for or to commercialize our products.

Raw Materials and Suppliers

We believe that the active ingredients used in the manufacture of our proposed
pharmaceutical products are presently available from numerous suppliers located
in the United States, Europe and Japan. We intend to enter into arrangements
with third-party suppliers n the United States, Europe and Japan for supplies of
active and inactive pharmaceutical ingredients and packaging materials used in
the manufacture of our proposed products. Accordingly, we may be subject to
various import duties applicable to both finished products and raw materials and
may be affected by various other import and export restrictions as well as other
developments impacting upon international trade. These international trade
factors will, under certain circumstances, have an impact on the manufacturing
cost (which will, in turn, have an impact on the cost of our proposed products).
To the extent that transactions relating to the purchase of raw materials
involve currencies other than United States dollars (e.g., Swiss francs and
Euros), our operating results will be affected by fluctuations in foreign
currency exchange rates.

Generally, certain raw materials, including inactive ingredients, are available
from a limited number of suppliers and certain packaging materials intended for
use in connection with our lingual spray products may be only available from
sole source suppliers. Although we believe that we will not encounter
difficulties in obtaining the inactive ingredients or packaging materials
necessary for the manufacture of our products, we may not be able to enter into
satisfactory agreements or arrangements for the purchase of commercial
quantities of such materials. The failure to enter into agreements or otherwise
arrange for adequate or timely supplies of principal raw materials and the
possible inability to secure alternative sources of raw material supplies could
have a material adverse effect on our ability to manufacture formulated
products.

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

Government Regulation

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

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

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

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

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

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

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

Competition

The markets which we intend to enter are characterized by intense competition.
We will be competing against established pharmaceutical companies which
currently market products which are equivalent or functionally similar to those
we intend to market. Prices of drug products are significantly affected by
competitive factors and tend to decline as competition increases. In addition,

numerous companies are developing or may, in the future, engage in the
development of products competitive with our proposed products. We expect that
technological developments will occur at a rapid rate and that competition is
likely to intensify as enhanced delivery system technologies gain greater
acceptance. Additionally, the markets for formulated products which we have
targeted for development are intensely competitive, involving numerous
competitors and products. We intend to enhance our competitive position by
focusing our efforts on our novel dosage forms.

There are several other companies that we are aware of that market lingual spray
products containing vitamins and homeopathic ingredients.

Patents and Protection of Proprietary Information

We have applied for United States and foreign patent protection for the buccal
spray delivery systems which are the primary focus of our development activities
as well as for our delayed contact allergy topical formulations. Five United
States patents have been issued and other applications are pending. Additional
patent applications may not be granted, or, if granted, may not provide adequate
protection to us. We also intend to rely on whatever protection the law affords
to trade secrets, including unpatented know-how. Other companies, however, may
independently develop equivalent or superior technologies or processes and may
obtain patents or similar rights with respect thereto.

Although we believe that our technology has been developed independently and
does not infringe on the patents of others, our technology may, however,
infringe on the patents of others. In the event of infringement, we could, under
certain circumstances, be required to modify our infringing product or process
or obtain a license. We may not be able to do either of those things in a timely
manner or at all, and failure to do so could have a material adverse effect on
our business. In addition, we may not have the financial or other resources
necessary to enforce a patent infringement or proprietary rights violation
action or to defend ourselves against such actions brought by others. If any of
the products we develop infringe upon the patent or proprietary rights of
others, we could, under certain circumstances, be enjoined or become liable for
damages, which would have a material adverse effect on our business.

We also rely on confidentiality and nondisclosure arrangements with our
licensees and potential development candidates. Our competitors may acquire
information which we consider to be proprietary. Moreover, our competitors may
independently develop know-how comparable to or superior to our know-how.

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

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

With respect to the above PCT application, in October and November 1998, we
entered the national phase in Canada and Europe, respectively, with claims
directed to the above subject matter. On April 16, 2003, European patent no. EP
0 904 055 was granted to us with claims directed to propellant containing buccal
non-polar spray compositions containing similar drugs to those in the
corresponding issued U.S. patent. We have filed a divisional application based
on this European patent with claims directed to a buccal spray composition
containing a propellant, a non-polar solvent and an active compound selected
from alkaloids and analgesics. With respect to the Canadian application, we
filed a request for examination with the Canadian Patent Office on February 7,
2002. An office action has not yet been received from the Canadian Patent
Office.

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

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

With respect to the above PCT application, in October and November 1998, we
entered the national phase in Canada and Europe, respectively. We filed a
request for examination in Canada on February 7, 2002. An office action has not
yet been received from the Canadian Patent Office. In Europe, claims directed to
using specific drugs to prepare a medicament that can be used as a buccal polar
pump spray composition containing the various classes of drugs are currently
being prosecuted.

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

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

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

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

Buccal Polar/Nonpolar Sprays or Capsules. On October 1, 1997, we filed a PCT
application designating a large number of countries including the United States,
directed to the buccal sprays and capsules. The application included claims
directed to (A) a buccal spray composition containing either (1) a polar solvent
with certain classes of drugs, as well as specific drugs in those classes with
or without a propellant or (2) a non-polar solvent and a propellant with certain
classes of drugs, as well as specific drugs in those classes; (B) buccal spray
composition containing a non-polar solvent, a flavoring agent and certain
classes of drugs; and (C) methods of administering these drugs using the buccal
spray compositions. The application also contained claims to soft-bite gelatin
capsules containing such drugs. This application differs from the first three
applications, discussed above, in that the claimed compositions include
different classes of drugs from those described in the first three applications.
The International Preliminary Examination Authority issued an International
Preliminary Examination Report alleging that the subject matter of the invention
lacked novelty and/or lacked an inventive step. This opinion, with which we
disagree, is not dispositive. The opinion, however, may be persuasive to
individual national patent offices in countries where we enter the national
phase.

On March 29, 2000, we entered the national phase in the United States by filing
a CIP of the above-identified PCT application with the USPTO. The CIP
application included claims directed to propellant free buccal spray
compositions containing certain amounts of polar or non-polar solvents, and
certain classes of drugs, as well as specific drugs in those classes; buccal
spray compositions containing certain amounts of a propellant, a polar or
non-polar solvent and certain classes of drugs, as well as specific drugs in
those classes; and methods of administering said drugs using these types of
buccal spray compositions. The application is currently being prosecuted with
claims directed to the propellant free buccal spray compositions and methods of
administering said drugs using these types of buccal spray compositions.
Subsequently, we filed two divisional applications claiming priority to the CIP.
The first divisional application is currently being prosecuted with claims
directed to the buccal spray compositions containing certain amounts of a
propellant, a polar or non-polar solvent, and certain classes of drugs, as well
as specific drugs in those classes and methods of administering said drugs using
these types of buccal spray compositions. The second divisional application has
issued as U.S. patent No. 6,671,931. The claims of this patent are directed to a
propellant free pump spray composition containing certain amounts of a polar
solvent, certain amounts of a flavoring agent and certain amounts of cyclosporin
or ondansetron hydrochloride. Another application has been filed directed to the
additional classes of drugs and specific drugs that were not included in the
claims of the `931 patent.

Based on the above-identified PCT application, we entered the national phase in
Canada on March 29, 2000. We filed a request for examination in Canada on August
29, 2002. An office action has not been received from the Canadian Patent
Office. Based on the above-identified PCT application, we also entered the
national phase in Japan on April 3, 2000. We have not yet filed a request for
examination. A request for examination must be filed before October 1, 2004, to
pursue patent protection in Japan.

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

Furthermore, we filed a number of U.S. patent applications directed to buccal
spray compositions containing certain classes of drugs as well as specific drugs
for treating particular types of disorders. We are currently prosecuting these
applications.

Antihistamine Syrup and Ointment. On November 10, 1997, we filed an application
with the USPTO with claims directed to a spray composition for topical
administration containing an antihistamine and a polar solvent or an
antihistamine, a non-polar solvent and a propellant. In October 1998, the PTO
rejected the claims. The claims were deleted and replaced with a claim directed
to a method of controlling the occurrence of delayed contact dermatitis by
applying a lotion composition containing certain amounts of certain
antihistamines in certain amounts of a polar or non-polar solvent. On May 21,
2002, U.S. Patent No. 6,391,282 was issued to us for the above-described method.

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

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

Product Liability

We may be exposed to potential product liability claims by consumers. We do not
presently maintain product liability insurance coverage. Although we intend to
obtain product liability insurance prior to the commercialization of any
products, we may not be able to obtain such insurance or, if obtained, such
insurance may not be sufficient to cover all possible liabilities. In the event
of a successful suit against us, insufficiency of insurance coverage could have
a material adverse effect on us. In addition, certain food and drug retailers
require minimum product liability insurance coverage as a condition precedent to
purchasing or accepting products for retail distribution. Failure to satisfy
such insurance requirements could impede our ability and that of our
distributors to achieve broad retail distribution of its proposed products which
would have a material adverse effect upon our business and financial condition.

Employees

We currently have 23 full-time employees, five of whom are executive officers of
the Company, 12 of whom are laboratory or support personnel and six of whom are
engaged in administrative functions. Our success will be dependent, in part,
upon our ability to hire and retain additional qualified sales, manufacturing
and distribution personnel, however, we may not be able to hire or retain such
necessary personnel.

Recent Private Offering

On December 30, 2003, we accepted binding subscriptions from accredited
investors for units consisting of an aggregate of 13,333,333 shares of common
stock and warrants to purchase 3,999,957 shares of common stock. The warrants
are exercisable for five years, at an exercise price equal to $1.40 per share.
The units were sold through Paramount. The gross proceeds of the private

offering were approximately $14 million. For its services as placement agent, we
paid Paramount a 7% commission on the aggregate amount raised (approximately
$1,000,000 including an accountable expense allowance equal to $25,000) and also
issued to Paramount or its designees unit purchase options to purchase 14 units
at an exercise price equal to $110,000 per unit. In connection with the
offering, we agreed to file a registration statement with the Commission to
register the resale of the shares of common stock and the shares of common stock
underlying the warrants (as well as the shares underlying the warrants issuable
to Paramount or its designees upon the exercise of the unit purchase options).

Management's Discussion and Analysis of Financial Condition and Results of
Operations

General

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

Since its inception, substantially all of the Company's revenues have been
derived from consulting activities, primarily in connection with product
development for various pharmaceutical companies. The Company has had a history
of recurring losses from operations, giving rise to an accumulated deficit at
October 31, 2003, of approximately $17,355,000. Although substantially all of
the Company's revenues to date have been derived from its consulting business,
the future growth and profitability of the Company will be dependent upon its
ability to successfully develop its products and to enter into license
agreements with drug companies who will market and distribute the final
products.

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

The Company's continued existence is dependent upon its ability to achieve
profitable operations or obtain additional financing. The Company is currently
seeking collaborative arrangements with pharmaceutical companies for joint
development of delivery systems and the successful marketing of these delivery
systems. In order to pursue this strategy, the Company will be required to
obtain financing and/or consummate a strategic alliance with a well-funded
business partner in the near future. In view of the Company's very limited
resources, its anticipated expenses (resulting in significant operating losses)
and the competitive environment in which the Company operates, there can be no
assurance that the Company's operations will be sustained for the duration of
its next fiscal year.

Results of Operations

Fiscal Year 2003 Compared to Fiscal Year 2002

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

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

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

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

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

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

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

First Quarter Fiscal Year 2004 Compared to First Quarter Fiscal Year 2003

Total costs and expenses for the fiscal quarter ended October 31, 2003,
increased approximately $4,000 to $1,733,000 from $1,729,000 for the fiscal
quarter ended October 31, 2002. Costs and expenses increases for the fiscal
quarter ended October 31, 2003, as compared to the fiscal quarter ended October
31, 2002, includes approximately: $426,000 in payroll expense primarily due to
the hiring of additional employees; $91,000 in employee recruiting expense;
$57,000 in rent expense due to the Company's leasing of new facilities; $31,000
in outside services; $25,000 in insurance costs due primarily to employee health
insurance, $23,000 in legal and professional fees and $21,000 in travel expense.
Decreases include approximately: $497,000 in outside consultants fees due
primarily to a reduction in the options issued to consultants; $151,000 in
laboratory testing and clinical studies expenses due to no clinical studies
being conducted during the fiscal quarter ended October 31, 2003 and $17,000 in
trade shows and conferences.

Interest income decreased during the fiscal quarter ended October 31, 2003 by
approximately $9,000 or 60% to $6,000 for the fiscal quarter ended October 31,
2003 from $15,000 for the fiscal quarter ended October 31, 2002 due to a
decreased average cash balance.

The resulting net loss for the fiscal quarter ended October 31, 2003 was
$1,727,000 compared to a net loss of $1,714,000 for the fiscal quarter ended
October 31, 2002.

Liquidity and Capital Resources

From its inception, the Company's principal sources of capital have been
provided by consulting revenues, private placements and a public offering of its
warrants, as well as loans and capital contributions from the Company's
principal stockholders. At October 31, 2003, we had working capital of
approximately $790,000 as compared to working capital at July 31, 2002, of
approximately $2,799,000 representing a net decrease in working capital of
approximately $2,009,000. During fiscal year 2003, we successfully closed a
private offering of our securities. The offering provided for the sale of
approximately 3,200,000 shares of common stock, par value $.001 per share. We
received proceeds, net of offering costs, of approximately $4,336,000 in
connection with that offering. During the second quarter of fiscal year 2004, we
successfully closed a second offering of approximately 13,333,330 shares of
common stock, par value $0.001 per share. We received proceeds, net of offering
costs, of approximately $13 million.

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

Net cash used in operating activities approximated $1,462,000 for the fiscal
quarter ended October 31, 2003 compared to net cash used in operating activities
of approximately $993,000 for the fiscal quarter ended October 31, 2002. Net
cash used in operating activities for both periods was primarily attributable to
the net loss of $1,727,000 and $1,714,000, respectively. For the fiscal quarter
ended October 31, 2003, $308,000 was used for investing activities compared to
$110,000 for the fiscal quarter ended October 31, 2002. Total cash for the
fiscal quarter ended October 31, 2003 decreased approximately $1,770,000 as
compared to a $1,103,000 decrease for the fiscal quarter ended October 31, 2002.

The Company believes that its current cash levels together with revenues from
operations, will be sufficient to satisfy its cash requirements through the
second quarter of our fiscal year 2005. However, beyond this point there is
substantial doubt about our ability to continue operations without obtaining
additional financing and/or consummating a strategic alliance with a well-funded
business partner. Although the Company is actively seeking additional financing
and strategic alliances, there are a number of risks and uncertainties related
to our attempt to complete a financing or strategic partnering arrangement that
are outside its control. We may not be able to successfully obtain additional
financing on terms acceptable to us, or at all. These uncertainties raise
substantial doubt as to the Company's ability to continue as a going concern.
The Company's auditors have included an explanatory paragraph in their audit
opinion with regard to the Company's ability to continue as a going concern.

Critical Accounting Policies

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

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

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

Capital Expenditures - The Company anticipates that it will take 12 to 18 months
to complete the remaining build-out of its recently occupied leased facilities
for laboratory and manufacturing purposes. The Company estimates the costs of
the build-out and necessary equipment to be up to $3,500,000.

Off-Balance Sheet Arrangements

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

Inflation

The Company does not believe that inflation has had a material effect on its
results of operations during the past three fiscal years. There can be no
assurance that the Company's business will not be affected by inflation in the
future.

Description of Property

Our executive offices are located at 25 Minneakoning Road, Flemington, New
Jersey. In March 2003, we entered into a 10 year lease for approximately 31,800
sq. feet of office, laboratory, manufacturing and warehouse space at that
location. Partial occupancy began in September 2003 and will continue in stages.
In addition, the Company leases laboratory space at 32 Route 12 West,
Flemington, New Jersey, which laboratory will eventually be transferred to the
Company's new, main facility.

Certain Relationships and Related Transactions

To the best of our knowledge, other than as set forth below, there were no
material transactions, or series of similar transactions, or any currently
proposed transactions, or series of similar transactions, to which we were or
are to be a party, in which the amount involved exceeds $60,000, and in which
any director or executive officer, or any security holder who is known by us to
own of record or beneficially more than 5% of any class of our common stock, or
any member of the immediate family of any of the foregoing persons, has an
interest.

In February 2002, we entered into a consulting agreement with John H. Klein, who
was simultaneously elected as our chairman of the Board. In February 2003 the
agreement was renewed for an additional one year term. Under the agreement, Mr.
Klein was granted non-plan options to purchase 1,000,000 shares of our common
stock at an exercise price equal to $2.40 per share. The options have a term of
10 years and vest in three equal annual installments, beginning in February
2003. Mr. Klein was also entitled to certain bonuses, in the form of stock,
stock options or other rights or property, as determined by the Board. In
addition, Mr. Klein was entitled to receive certain success fees (based upon a
percentage of net revenues) upon completion of certain types of corporate
transactions (i.e., strategic partnerships, licensing arrangements and the like)
which are introduced to us by Mr. Klein. The percentage of net revenue (which is
between 4% and 10%) depends upon the share of profits to which we are entitled
in such transactions. In December 2003, the Company elected not to renew Mr.
Klein's consulting agreement, which then expired at the end of January 2004. The
one third of Mr. Klein's options which are vested are due to expire on March 1,
2004.

In April 2003, we entered into a license and development agreement with
Manhattan Pharmaceuticals for the worldwide, exclusive rights to our lingual
spray technology to deliver Propofol for pre-procedural sedation. The terms of
the agreement call for certain milestones and other payments, the first of which
was received during June 2003. Our affiliate, Dr. Rosenwald, is also an
affiliate of Manhattan Pharmaceuticals. See "Description of Business - Agreement
with Manhattan Pharmaceuticals."

In April and May 2003, we engaged Paramount to assist us in the placement of
units on a "best efforts" basis in connection with a private placement. Dr.
Rosenwald is Chairman and Chief Executive Officer of Paramount. In connection
with this offering, we entered into a non-exclusive Placement Agent Agreement
dated as of January 15, 2003, with Paramount, pursuant to which we paid to
Paramount for its services, a cash payment equal to approximately $360,000 and
issued to Paramount or its designees 160,017 warrants with an exercise price
equal to $1.65 per share and warrants to purchase 40,004 shares of common stock
at an exercise price equal to $2.00 per share. We also agreed to pay to
Paramount a non-accountable expense allowance equal to $25,000 to reimburse
Paramount for its out-of-pocket expenses. Lastly, we agreed to indemnify
Paramount against certain liabilities, including liabilities under the
Securities Act.

In November 2003, we engaged Paramount to assist us in the placement of units on
a "best efforts" basis in connection with a private placement. In connection
with this offering, we entered into a non-exclusive Placement Agent Agreement
dated as of November 14, 2003, with Paramount, pursuant to which we paid to
Paramount for its services, a cash payment equal to approximately $1,000,000 and
issued to Paramount or its designees 14 unit purchase options with a per unit
exercise price equal to $110,000. Upon full exercise of such unit purchase
options, we shall issue to Paramount or its designees 1,330,296 shares of our
common stock and warrants to purchase 399,082 shares of our common stock for a
purchase price equal to $1.40 per share. We also agreed to pay to Paramount a
non-accountable expense allowance equal to $25,000 to reimburse Paramount for
its out-of-pocket expenses. Lastly, we agreed to indemnify Paramount against
certain liabilities, including liabilities under the Securities Act.

We paid Mr. Schaul approximately $125,000 and $160,000, respectively, for legal
services performed on our behalf and during fiscal years 2002 and 2003,
respectively.

We have agreed pursuant to our charter documents to indemnify our directors to
the maximum extent permissible under the General Corporation Law of the State of
Delaware.

Market for Common Equity and Related Stockholders Matters

Market Information

Since the November 1997 closing of our public offering, our common stock has
traded in the over-the-counter market on the OTCBB. Since October 1, 2002, the
symbol has been "NVDL.OB". Prior thereto, our common stock traded under the
symbol "FLEM". The following table sets forth the range of high and low closing
bid quotations of our common stock as reported by the OTCBB for each fiscal
quarter for the past three fiscal years. High and low bid quotations represent
prices between dealers without adjustment for retail mark-ups, mark-downs or
commissions and may not necessarily represent actual transactions.

Bid Prices
----------
High Low
---- ---

FISCAL YEAR 2004
First Quarter (August 1, 2003 through October 31, 2003)
Second Quarter (November 1, 2003 through January 31, 2004)

FISCAL YEAR 2003
First Quarter (August 1, 2002 through October 31, 2002) $1.90 $1.13
Second Quarter (November 1, 2002 through January 31, 2003) $2.80 $1.44
Third Quarter (February 1, 2003 through April 30, 2003) $2.43 $1.50
Fourth Quarter (May 1, 2003 through July 31, 2003) $2.20 $1.50

FISCAL YEAR 2002
First Quarter (August 1, 2001 through October 31, 2001) $0.60 $0.43
Second Quarter (November 1, 2001 through January 31, 2002) $2.30 $0.63
Third Quarter (February 1, 2002 through April 30, 2002) $3.79 $2.40
Fourth Quarter (May 1, 2002 through July 31, 2002) $3.62 $1.65

The closing bid price of our common stock as reported by the OTCBB on February
6, 2004, was $1.75. As of February 6, 2004, there were approximately 65 record
holders of our common stock.

We have never declared or paid a dividend on our common stock, and management
expects that all or a substantial portion of our future earnings will be
retained for expansion or development of our business. The decision to pay
dividends, if any, in the future is within the discretion of the Board and will
depend upon our earnings, capital requirements, financial condition and other
relevant factors such as contractual obligations. Management does not anticipate
that we will pay dividends on our common stock in the foreseeable future, if at
all.

Securities Authorized for Issuance Under Equity Compensation Plans

Equity Compensation Plan Information

------------------------------------------------------------------------------------------------------------------
Number of securities Number of securities
to be issued upon Weighted-average remaining available
exercise of exercise price of for future issuance
outstanding options, outstanding options, under equity
Plan Category warrants and rights warrants and rights compensation plans
------------------------------------------------------------------------------------------------------------------

Equity compensation plans approved by 1,623,500 $1.24 561,500
security holders (1)
------------------------------------------------------------------------------------------------------------------
Equity compensation plans not approved by 3,983,333 $1.72 --
security holders
------------------------------------------------------------------------------------------------------------------
Total 5,606,833 $1.58 561,500
------------------------------------------------------------------------------------------------------------------

Executive Compensation

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

SUMMARY COMPENSATION TABLE

-----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-----------------------------------------------------------------------------------
Awards Payouts
----------------------------------
Securities
Restricted Underlying
Other Annual Stock Options/ LTIP All Other
Name and Fiscal Salary Bonus Compensation Award(s) SAR (1) Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
-----------------------------------------------------------------------------------------------------------------------------------

Gary A. Shangold, M.D. President and 2003 210,900 200,000 0 0 1,000,000 0 0
CEO
-----------------------------------------------------------------------------------------------------------------------------------
Harry A. Dugger, III, Ph.D. 2003 246,900 0 0 0 275,000 0 12,000
Chief Scientific Officer, formerly
President and CEO
-----------------------------------------------------------------------------------------------------------------------------------
2002 347,000 0 0 0 0 0 10,000
-----------------------------------------------------------------------------------------------------------------------------------
2001 182,974 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------------------
John H. Klein 2003 300,000 0 0 0 0 0 72,000
Chairman
-----------------------------------------------------------------------------------------------------------------------------------
2002 150,000 0 0 0 1,000,000 0 36,000
-----------------------------------------------------------------------------------------------------------------------------------
Donald J. Deitman 2003 124,200 0 0 0 0 0 7,200
Chief Financial Officer
-----------------------------------------------------------------------------------------------------------------------------------
2002 104,400 0 0 0 0 0 4,200
-----------------------------------------------------------------------------------------------------------------------------------
2001 70,800 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------------------
Robert C. Galler 2003 186,900 0 0 0 350,000 0 0
Vice President
Corporate Development
-----------------------------------------------------------------------------------------------------------------------------------
2002 143,600 0 0 0 700,000 0 6,600
-----------------------------------------------------------------------------------------------------------------------------------
Mohammed Abd El-Shafy, Ph.D., Vice 2003 144,000 0 0 0 100,000 0 5,400
President - Formulation Development
-----------------------------------------------------------------------------------------------------------------------------------
2002 24,000 0 0 0 150,000 0 0
-----------------------------------------------------------------------------------------------------------------------------------

(1) No stock appreciation rights have been issued.

OPTION GRANTS IN LAST FISCAL YEAR
(individual grants)

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

-----------------------------------------------------------------------------------------------------------------------------------
Option/SAR Grants in Last Fiscal Year
-----------------------------------------------------------------------------------------------------------------------------------
Individual Grants
-----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
-----------------------------------------------------------------------------------------------------------------------------------
Name Number of Securities % of Total Options/SARs Exercise or Base Expiration
Underlying Options/SARs Granted to Employees in Price ($/Sh) Date
Granted (#) Fiscal Year
-----------------------------------------------------------------------------------------------------------------------------------

Gary A. Shangold, M.D. 1,000,000 54% $1.93 2 Dec 2007
-----------------------------------------------------------------------------------------------------------------------------------
Harry A Dugger III, Ph.D 275,000 15% $0.70 14 Nov. 2011
-----------------------------------------------------------------------------------------------------------------------------------
John H. Klein 0 N/A $2.40 31 Jan. 2012
-----------------------------------------------------------------------------------------------------------------------------------
Donald J. Deitman 0 N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------------------
Robert Galler 350,000 19% $0.75 11 Dec. 2011
-----------------------------------------------------------------------------------------------------------------------------------
Mohammed Abd El-Shafy, Ph.D. 50,000 3% $1.51 27 Mar 2008
-----------------------------------------------------------------------------------------------------------------------------------
Barry Cohen 75,000 4% $2.04 13 May 2013
-----------------------------------------------------------------------------------------------------------------------------------

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

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

---------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Number of Shares at Fiscal Year End; at Fiscal Year End
Name of Executive Acquired on (Exercisable/ ($); (Exercisable/
Officer Exercise Value Realized ($) Unexercisable) Unexercisable)

---------------------------------------------------------------------------------------------------------------------

Harry A. Dugger, III, Ph.D. 0 -- 920,000/0 716,600/0
---------------------------------------------------------------------------------------------------------------------
John H. Klein 0 -- 333,333/666,667 0/0
---------------------------------------------------------------------------------------------------------------------
Gary A. Shangold, M.D. 0 -- 0/1,000,000 0/0
---------------------------------------------------------------------------------------------------------------------
Donald J. Deitman 0 -- -- --
---------------------------------------------------------------------------------------------------------------------
Mohammed Abd El-Shafy, Ph.D. 0 -- 150,000/50,000 26,000/0
---------------------------------------------------------------------------------------------------------------------
Robert Galler 0 -- 1,050,000/0 1,344,000/0
---------------------------------------------------------------------------------------------------------------------
Barry Cohen 0 -- 0/75,000 0/0
---------------------------------------------------------------------------------------------------------------------

Stock Option Plans

We have three stock option plans, adopted in 1992, 1997 and 1998, respectively.
The 1992 and 1997 Plans provide for the issuance of options to purchase 500,000
shares of common stock, and the 1998 Plan provides for the issuance of options
to purchase 1,800,000 shares of common stock, for a total of 2,800,000 shares.
The 1997 Stock Option Plan is administered by Messrs. Hamilton and Kessel, who
constitute the Compensation Committee of the Board, and the 1992 Stock Option
Plan and 1998 Stock Option Plan are administered by the entire Board. The
Compensation Committee has sole discretion and authority, consistent with the
provisions of the Plans, to select the eligible participants to whom options
will be granted under the Plans, the number of shares which will be covered by
each option and the form and terms of the agreement to be used. All of our
employees and officers are eligible to participate in the Plans.

At February 6, 2004, 300,000, 250,000 and 1,595,000 shares of our common stock
were reserved for issuance pursuant to the 1992, 1997 and 1998 Plans,
respectively. The exercise prices for the outstanding options reserved under the
1992 Plan range between $.63 and $2.00 per share; the exercise prices for the
outstanding options reserved under the 1997 Plan range between $.63 and $2.00
per share; and the exercise prices for the outstanding options reserved under
the 1998 Plan range between $.63 and $2.69 per share.

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

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

Non-Plan Options

As of February 6, 2004, we had 3,983,333 non-plan options outstanding as
follows: 1,000,000 options exercisable at $1.93 per share; 600,000 options
exercisable at $1.84 per share; 1,050,000 options exercisable at $.75 per share;
333,333 options exercisable at $2.40 per share; 250,000 options exercisable at
$3.18 per share; 150,000 options exercisable at $3.02 per share; 200,000 options
exercisable at $1.30 per share; 200,000 options at $1.51 per share; 100,000
options at $2.15 per share; and 100,000 options at $1.85 per share.

Compensation Committee Interlocks and Insider Participation

Messrs. Hamilton and Kessel serve as the members of our Board's Compensation
Committee, which reviews and makes recommendations with respect to compensation
of officers, employees and consultants, including the granting of options under
our 1997 Stock Option Plan. The 1992 and 1998 Plans are administered by the
entire Board.

Compensation Committee Report on Executive Compensation

Compensation of our executives is intended to attract, retain and award persons
who are essential to the enterprise. The fundamental policy of our executive
compensation program is to offer competitive compensation to executives that
appropriately rewards the individual executive's contribution to corporate
performance. The Board utilizes subjective criteria for evaluation of individual
performance. The Board focuses on two primary components of our executive
compensation program, each of which is intended to reflect individual and
corporate performance: base salary compensation and long-term incentive
compensation. We have not paid cash incentive bonuses during fiscal year 2003.

Except as set forth herein, we do not have any annuity, retirement, pension,
deferred or incentive compensation plan or arrangement under which any executive
officer is entitled to benefits, nor do we have any long-term incentive plan
pursuant to which performance units or other forms of compensation are paid.
Executive officers who qualify will be permitted to participate in our 1992,
1997 and 1998 Plans which were adopted in May 1992, February 1997 and June 1998,
respectively. In December 2003 the Board adopted a 401(k) plan in which all of
our employees are eligible to participate. Executive officers may participate in
group life, health and hospitalization plans, if and when such plans are
available generally to all of our employees. Our Compensation Committee is
satisfied that the compensation and stock option plans provided to our officers
are structured and operated to create strong alignment with our long-term best
interests and the best interests of our stockholders.

The compensation of our Chief Scientific Officer, Dr. Dugger (who served as our
President and Chief Executive Officer for fiscal year 2002), for fiscal year
2002 consisted of base salary of $248,500. Because of an inadequacy of cash flow
during the first and second quarters of fiscal year 2001, Dr. Dugger agreed to
accrue all of his salary until the cash flow situation resolved itself. In May
2001, Dr. Dugger's salary was resumed and one-half of his accrued salary was
paid out. The remaining half was paid out in January 2002. In October 2002, Dr.
Dugger was granted options to purchase 275,000 shares of our common stock at an
exercise price equal to $1.30 per share.

The compensation of our Chief Executive Officer, Dr. Shangold, consists of a
base annual salary equal to $350,000 and a guaranteed bonus equal to $150,000.
In addition, Dr. Shangold's employment agreement provides for: (i) an annual
discretionary bonus of up to $262,500, which shall be determined at the sole
discretion of the Board; and (ii) an investment and fee bonus equal to 5% of all
amounts up to an aggregate of $7,500,000 (i.e., $375,000) invested in, or earned
by, us during his term. We paid Dr. Shangold his guaranteed bonus, plus a
portion of the investment and fee bonus (a total of $200,000) during the fourth
quarter of fiscal year 2003; the remainder of the investment and fee bonus
(approximately $50,000) was paid during December 2003. The investment and fee
bonus was reduced by certain proceeds received by Dr. Shangold from his former
employer. Upon execution of his employment agreement, Dr. Shangold was also
granted non-plan options to purchase 1,000,000 shares of our common stock (at an
exercise price equal to $1.93 per share) which vest over a three year period
beginning in December 2003.

The determination by the Compensation Committee of executive compensation is
based upon methods consistent with those used for other senior executives. The
Compensation Committee considers certain quantitative factors, including our
financial, strategic and operating performance for the fiscal year. The
qualitative criteria include the executive's leadership qualities and management
skills, as exhibited by his innovations, time and effort devoted to us, and
other general considerations. The Compensation Committee also takes note of
comparable remuneration of other similar executive positions at similar
companies. Based on our performance, the Compensation Committee believes that
the compensation paid to these executives was appropriate.

Employment Agreements and Change in Control Arrangements

Gary A. Shangold, M.D. In December 2002, we entered into a three-year employment
agreement with Dr. Shangold pursuant to which he agreed to serve as our
President and Chief Executive Officer. We agreed to pay Dr. Shangold an annual
base salary of $350,000 and a guaranteed bonus of $150,000. In addition, Dr.
Shangold is eligible to receive: (i) an annual discretionary bonus of up to
$262,500, which shall be determined at the sole discretion of the Board; and
(ii) an investment and fee bonus equal to 5% of all amounts up to an aggregate
of $7,500,000 (i.e., $375,000) invested in, or earned by, us during the term of
his employment. Pursuant to the agreement, Dr. Shangold was also granted
non-plan options to purchase 1,000,000 shares of our common stock (at an
exercise price equal to $1.93 per share) which vest over a three year period.

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

John H. Klein. In February 2002, we entered into a one-year consulting agreement
with Mr. Klein (which was renewed in February 2003 for an additional one year)
at a base compensation of $300,000, plus certain fringe benefits of
approximately $72,000 per year. Pursuant to the agreement, we granted 1,000,000
non-plan options to Mr. Klein with an exercise price equal to $2.40 per share.
See "Certain Relationships and Related Transactions." Mr. Klein is also entitled
to certain bonuses, in the form of stock, stock options or other rights or
property, as determined by the Board. In addition, Mr. Klein is entitled to
receive certain success fees (based upon a percentage of net revenues) upon
completion of certain types of corporate transactions (i.e., strategic
partnerships, licensing arrangements and the like) which are introduced us by
Mr. Klein. The percentage of net revenue (which is between 4% - 10%) depends
upon the share of profits that we are entitled to in such transactions. In
December 2003, the Company determined not to renew Mr. Klein's agreement for an
additional term. Therefore, it expired at the end of January 2004.

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

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

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

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

Legal Matters

The validity of the common stock offered hereby will be passed upon for us by
Dickstein Shapiro Morin & Oshinsky LLP, New York, New York.

Experts

Certain of the financial statements of NovaDel included in this prospectus and
elsewhere in the registration statement, to the extent and for the periods
indicated in their reports, have been audited by Wiss & Company, LLP,
independent certified public accountants, whose reports thereon appear elsewhere
herein and in the registration statement.

Available Information

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Commission's public reference rooms at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. Many of
our Commission filings are also available to the public from the Commission's
Website at "http://www.sec.gov." We make available free of charge our annual,
quarterly and current reports, proxy statements and other information upon
request. To request such materials, please send an e-mail to bwrubel@Novadel.com
or contact Bernadine Wrubel, at our address as set forth above. We maintain a
Website at "http://www.NovaDel.com" (this is not a hyperlink, you must visit
this website through an Internet browser). Our Website and the information
contained therein or connected thereto are not incorporated into this
prospectus.

We have filed with the Commission a registration statement (which contains this
prospectus) on Form SB-2 under the Securities Act relating to the common stock
we are offering by this prospectus. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedules to the registration statement. Please refer to the registration
statement and its exhibits and schedules for further information with respect to
us and the common stock. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete and, in
each instance, we refer you to the copy of that contract or document filed as an
exhibit to the registration statement. You may read and obtain a copy of the
registration statement and its exhibits and schedules from the Commission, as
described in the preceding paragraph.

INDEPENDENT AUDITOR'S REPORT

To the Audit Committee of
NOVADEL PHARMA INC.

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

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

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

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

/s/ Wiss & Company LLP
----------------------
WISS & COMPANY, LLP
Livingston, New Jersey
September 8, 2003

F-1

NOVADEL PHARMA INC.

BALANCE SHEET
JULY 31, 2003

ASSETS
CURRENT ASSETS:
Cash and equivalents ................................................ $ 3,086,000
Accounts receivable - trade ......................................... 2,000
Prepaid expenses and other current assets ........................... 168,000
-----------
Total Current Assets ...................................... $ 3,256,000

FURNITURE, FIXTURES, EQUIPMENT

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

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

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

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY :
Preferred stock, $.01 per value:
Authorized 1,000,000 shares, none issued
Common stock $.001 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 17,972,760 shares ................. 18,000
Additional paid-in capital ......................................... 19,480,000
Accumulated Deficit ................................................ (15,628,00)
-----------
Total Stockholders' Equity ................................. 3,870,000
----------
$4,327,000
==========

See accompanying notes to financial statements.

F-2

NOVADEL PHARMA INC.
STATEMENT OF OPERATIONS

Year Ended
July 31,
-----------------------------
2003 2002
------------ ------------

CONSULTING REVENUES ................................ $ 2,000 $ 339,000

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

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

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

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

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

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

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

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

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

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 15,419,000 11,361,000
============ ============

See accompanying notes to financial statements.

F-3

NOVADEL PHARMA INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

Common Stock
----------------------------
Additional
Par Paid-in Accumulated Stockholders'
Shares Value Capital Deficit Equity
------------ ------------ ------------ ------------ -------------

BALANCE, JULY 31, 2002 14,448,817 $ 14,000 $ 13,322,000 $ (9,813,000) $ 3,523,000
------------ ------------ ------------ ------------ ------------

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

See accompanying notes to financial statements.

F-4

NOVADEL PHARMA INC
STATEMENT OF CASH FLOWS

July 31
Year Ended
-----------------------------
2003 2002
----------- -----------

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

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

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

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ -- $ --
=========== ===========
Income taxes paid $ -- $ --
=========== ===========

See accompanying notes to financial statements.

F-5

NOVADEL PHARMA INC.

NOTES TO FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

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

F-6

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

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

Risk Concentrations:

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

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

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

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

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

F-7

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

Year ended July 31
-----------------------------
2003 2002
----------- -----------

Numerator:
Net loss applicable to common shareholders - basic and diluted (5,815,000) (4,290,000)
=========== ===========

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

Effect of dilutive securities -- --
----------- -----------

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

Earnings (loss) per common share:
Basic and Diluted (.38) (.38)

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

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

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

F-8

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

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

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

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

F-9

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

Note 3 - Other assets and Accrued expenses:

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

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

Note 4 - Furniture, Fixtures and Equipment and Leasehold Improvements

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

July 31,
2003
--------
Equipment $713,000
Furniture and fixtures 122,000
Leasehold improvements 131,000
--------
966,000

Less: Accumulated depreciation 252,000
========
$714,000
========

Note 5 - Stockholders' equity:

Private Placement - In May 2003, the Company completed a private
placement and received net proceeds of approximately $4,336,000 from
the placement of a total of 48.01 Units of the Company's securities.
Each Unit consisted of sixty six thousand, six hundred, sixty six
and two thirds (66,666?) common shares, par value $.001, and sixteen
thousand, six hundred, sixty six and two thirds (16,666?) warrants.
Each warrant entitles the holder to purchase an additional share of
the Company's common stock at an exercise price of $2.00 within five
(5) years. The sale price of each Unit was $100,000 ($1.50 per
share).

F-10

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

Note 6 - Related Party Transactions:

License & Development Agreement - In April 2003, the Company entered
into a license and development agreement with Manhattan
Pharmaceuticals, Inc. for the worldwide, exclusive rights to the
Company's proprietary lingual spray technology (see Note 7). One of
the Company's major shareholders is also a significant shareholder
in Manhattan Pharmaceuticals, Inc.

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

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

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

Note 7 - Commitments and Contingencies:

Employment Agreements - In December 2002, Dr. Shangold entered into
a three-year employment agreement with NovaDel pursuant to which he
agreed to serve as its President and Chief Executive Officer. We
agreed to pay Dr. Shangold an annual base salary of $350,000 and a
guaranteed bonus of $150,000. In addition, Dr. Shangold is eligible
to receive: (i) an annual discretionary bonus of up to $262,500,
which shall be determined at the sole discretion of the Board; and

F-11

(ii) an investment and fee bonus equal to 5% of all amounts up to an
aggregate of $7,500,000 (i.e., $375,000) invested in, or earned by,
NovaDel during his term. We paid Dr. Shangold a contractual bonus of
$200,000 during the fourth quarter. The investment bonus shall be
reduced by certain proceeds received by Dr. Shangold from his former
employer. Pursuant to the agreement, Dr. Shangold was also granted
non-plan options to purchase 1,000,000 shares of our common stock
(at an exercise price of $1.93 per share) which vest over a three
year period.

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

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

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

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

F-12

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

In May 2003, the Company entered into a three-year employment
agreement with Barry Cohen pursuant to which he agreed to serve as
the Company's Vice President, New Business & New Product
Development. The Company agreed to pay Mr. Cohen an annual base
salary of $185,000. Pursuant to the agreement, Mr. Cohen was also
granted Plan options to purchase up to 75,000 shares of the
Company's common stock at an exercise price of $2.20 per share (110%
of the fair market value on the grant date) which vest, subject to
conditions, over a three year period. Such options have a term of
ten (10) years.

License and Development Agreement - In April 2003, the Company
entered into a license and development agreement with Manhattan
Pharmaceuticals, Inc. for the worldwide, exclusive rights to the
Company's proprietary lingual spray technology to deliver Propofol
for pre-procedural sedation. The terms of the agreement calls for
certain milestone and other payments, the first of which was
partially received during June 2003 (See Note 6).

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

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

F-13

Future minimum rental payments as follows:

Year Ending July 31,

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

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

Note 8 - Income Taxes:

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

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

July 31
------------------------
2003 2002
---------- ----------

Net operating loss carryforwards $5,300,000 $2,890,000
---------- ----------

5,300,000 2,890,000

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

F-14

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

---------------------------
2003 2002
----------- -----------

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

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

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

Deferred income tax benefit - During December 2002, the Company
received approximately $84,000 as consideration for transferring
approximately $1,116,000 of New Jersey net operating loss tax
benefit to a third party corporation buyer. The Technology Tax
Certificate Transfer Program for transferring net operating loss and
R & D tax benefits is the responsibility of New Jersey Economic
Development Authority. During December 2001, the Company received
approximately $88,000 from this program.

Note 9 - Stock Options:

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

F-15

The Company follows the intrinsic method of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related interpretations in accounting for its employee
stock options because, as discussed below, Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based
Compensation" (FAS 123) requires use of option valuation models that
were not developed for use in valuing employee stock options. FAS
123 permits a company to elect to follow the intrinsic method of APR
25 rather than the alternative fair value accounting provided under
FAS 123, but requires pro forma net income and earnings per share
disclosures as well as various other disclosures not required under
FAS 123 for companies following APB 25. The Company has adopted the
disclosure provisions required under Financial Accounting Standards
Board Statement No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" (FAS 148). Under APB 25, because the
exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant, no compensation
expense was recognized.

Pro forma information regarding net income and earnings per share is
required by FAS 123 and FAS 148, and has been determined as if the
Company had accounted for its employee stock options under the fair
value method of that Statement.

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

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective input
assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable measure of the fair
value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of
options is amortized to expense over the options' vesting period.
The Company's pro forma information follows:

F-16

Fiscal Year Ended
June 30 June 30
---------------------------
2003 2002
----------- -----------

Net income (loss) as reported $(5,815,000) $(4,290,000)

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

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

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

Outstanding Options
-----------------------------------
Options Available Number of Weighted Average
For Grant Options Exercise Price
--------------- --------------- ---------------

Balance at August 1, 2001 -- 2,300 $ 1.53
Additional Shares reserved 2,475 -- --
Grants ................... 3,378 3,378 1.60
Exercises ................ -- 10 .63
Cancellations ............ 1,190 1,190 1.42

--------------- --------------- ---------------
Balance at July 31, 2002 . 287 4,478 1.61
Additional Shares Reserved 2,575 -- --
Grants ................... 2,159 2,159 1.60

Exercises ................ -- 445 .94
Cancellations ............ -- -- --
--------------- --------------- ---------------
Balances at July 31, 2003 703 6,192 $ 1.66
=============== =============== ===============

Option price per share: $.63 - $3,18
Options exercisable: 4,100,000

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

Outstanding Options Options Exercisable

--------------------------------------- ------------------------
Weighted Weighted
Average Average Weighted
Remaining Exercise Average
Range of Exercise Prices Options Life in Years Price Options Exercise Price
------------------------ ------- ------------- ---------- ------- --------------

$0.01 - $1.00 ......... 2,035 6.9 $ .75 2,035 $ .75
$1.01 - $2.00 ......... 2,395 4.1 1.77 1,195 1.68
$2.01 - $3.00 ......... 1,362 8.3 2.40 520 2.51
$3.01 - $4.00 ......... 400 8.7 3.12 350 3.13
6,192 6.2 $ 1.66 4,100 $ 1.45

F-17

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

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

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

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

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

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

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

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

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

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

F-18

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

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

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

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

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

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

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

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

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

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

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

F-19

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

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

Note 10 - Subsequent Events:

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

F-20

NOVADEL PHARMA INC.

CONDENSED BALANCE SHEETS

October 31, July 31,
2003 2003
------------ ------------
(Unaudited) (Note 1)

ASSETS
CURRENT ASSETS:
Cash $ 1,316,000 $ 3,086,000
Accounts receivable - trade -- 2,000
Prepaid expenses and other current assets 268,000 168,000
------------ ------------
Total Current Assets 1,584,000 3,256,000
------------ ------------

FURNITURE, FIXTURES, AND EQUIPMENT, LESS
ACCUMULATED DEPRECIATION 1,054,000 714,000

OTHER ASSETS 355,000 357,000
------------ ------------
$ 2,993,000 $ 4,327,000
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable-trade $ 365,000 $ 139,000
Accrued expenses and other current liabilities 404,000 318,000
Current portion of capitalized lease obligation 25,000 --
------------ ------------
Total Current Liabilities 794,000 457,000
------------ ------------

Non current portion of capitalized lease obligation 56,000 --
------------ ------------
Total Liabilities 850,000 457,000
------------ ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
Authorized 1,000,000 shares, none issued
Common stock, $.001 par value:
Authorized - 50,000,000 shares
Issued and outstanding 17,972,760 18,000 18,000
Additional paid-in capital 19,480,000 19,480,000
Accumulated deficit (17,355,000) (15,628,000)
------------ ------------
Total Stockholders' Equity 2,143,000 3,870,000
------------ ------------
$ 2,993,000 $ 4,327,000
============ ============

See accompanying notes to condensed financial statements.

F-21

NOVADEL PHARMA INC.

CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended
October 31

-------------------------------
2003 2002
------------ ------------

CONSULTING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES AND LOSS
FROM OPERATIONS $ 1,733,000 $ 1,729,000

INTEREST INCOME 6,000 15,000
------------ ------------

NET LOSS $ (1,727,000) $ (1,714,000)
============ ============

BASIC AND DILUTED LOSS PER SHARE $ (.10) $ (.12)
============ ============

SHARES USED IN COMPUTATION OF BASIC
AND DILUTED LOSS PER SHARE 17,972,760 14,509,523
============ ============

See accompanying notes to condensed financial statements.

F-22

NOVADEL PHARMA INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)

Common Stock
----------------------------

Par Paid-in Accumulated Stockholders'
Shares Value Capital Deficit Equity

------------ ------------ ------------ ------------ ------------

BALANCE, August 1, 2003 17,972,760 $ 18,000 $ 19,480,000 $(15,628,000) $ 3,870,000

Net Loss -- -- -- (1,727,000) (1,727,000)
------------ ------------ ------------ ------------ ------------
BALANCE, October 31, 2003 17,972,760 $ 18,000 $ 19,480,000 $(17,355,000) $ 2,143,000
============ ============ ============ ============ ============

See accompanying notes to condensed financial statements.

F-23

NOVADEL PHARMA INC.

CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)

Three Months Ended
October 31
---------------------------
2003 2002
----------- -----------

CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(1,727,000) $(1,714,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Options issued for services -- 573,000
Warrants issued for services -- 7,000
Depreciation and amortization 49,000 37,000
Changes in operating assets and liabilities:
Accounts receivable 2,000 1,000
Prepaid expenses and other current assets (100,000) (15,000)
Other assets 2,000 --
Accounts payable - trade 226,000 58,000
Accrued expenses and other current liabilities 86,000 60,000
----------- -----------
Net cash used in operating activities (1,462,000) (993,000)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of property and equipment (308,000) (110,000)
----------- -----------

NET DECREASE IN CASH (1,770,000) (1,103,000)
CASH, BEGINNING OF PERIOD 3,086,000 3,314,000
----------- -----------
CASH, END OF PERIOD $ 1,316,000 2,211,000
=========== ===========

SUPPLEMENTAL DISCLOSURE OF INVESTING AND
FINANCING ACTIVITIES:
Equipment acquired under capitalized lease obligation $ 81,000 $ --
=========== ===========

See accompanying notes to condensed financial statements.

F-24

NOVADEL PHARMA INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation:

The balance sheet at the end of the preceding fiscal year has been
derived from the audited balance sheet contained in the previously
filed Form 10-KSB of NovaDel Pharma Inc. (The Company) for the year
ended July 31, 2003 and is presented for comparative purposes. All
other financial statements are unaudited. In the opinion of
management, all adjustments, which include only normal recurring
adjustments necessary to present fairly the financial position,
results of operations and cash flows for all periods presented, have
been made in the interim statements. Results of operations for
interim periods are not necessarily indicative of the operating
results to be expected for a full year.

The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. Before December
31, 2003, it will be necessary for the Company to obtain additional
financing and/or consummate a strategic alliance with a well-funded
business partner. There are a number of risks and uncertainties
related to the Company's attempt to complete a financing or
strategic partnering arrangement that are outside the control of the
Company. The Company may not be able to successfully obtain
additional financing on terms acceptable to the Company, or at all.
These uncertainties raise substantial doubt as to the Company's
ability to continue as a going concern.

Certain footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the published rules
and regulations of the Securities and Exchange Commission. The
financial statements in this report should be read in conjunction
with the financial statements and notes thereto included in the Form
10-KSB for the year ended July 31, 2003.

Loss per common share is computed pursuant to SFAS No. 128,
"Earnings Per Share." Basic loss per share is computed as net income
(loss) available to common shareholders divided by the weighted
average number of common shares outstanding for the period. Diluted
loss per share reflects the potential dilution that could occur from
common shares issuable through stock options, warrants and
convertible dept. As of October 31, 2003, 15,506,755 of options and
warrants were excluded from the diluted loss per share computation,
as their effect would be anti-dilutive.

Note 2 - Capitalized Lease Obligation:

In October 2003, the Company entered into a capital lease for
laboratory equipment. This lease requires 36 monthly payments of
$2,827 each.

Note 3 - Contracts:

In August 2003, Mr. Robert C. Galler agreed to change from an
employee of the Company as Vice President - Corporate Development to
a consultant and entered into a consulting agreement with the
Company at a base compensation of $180,000 per year. The consulting
agreement terminates in February 2005.

F-25

Note 4 - Stock Options:

The Company follows the intrinsic value method of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and related interpretations in accounting for
its employee stock options because, in the opinion of management, as
discussed below, Financial Accounting Standards Board Statement No.
123, "Accounting for Stock-Based Compensation" (FAS 123) requires
use of option valuation models that were not developed for use in
valuing employee stock options. FAS 123 permits a company to elect
to follow the intrinsic value method of APB 25 rather than the
alternative fair value accounting provided under FAS 123, but
requires pro forma net income (loss) and earnings (loss) per share
disclosures as well as various other disclosures. The Company has
adopted the disclosure provisions required under Financial
Accounting standards Board Statement No. 148, "Accounting for
Stock-Based Compensation Transition and Disclosure" (FAS 148). Under
APB 25, because the exercise price of the Company's stock options
has equaled the market price of the underlying stock on the date of
grant, no compensation expense was recognized.

Pro forma information regarding net loss and loss per share is
required by FAS 123 and FAS 148, and has been determined as if the
Company had accounted for its employee stock options under the fair
value method of Statement 123.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, options
valuation models require the input of highly subjective input
assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable measure of the fair
value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of
options is amortized to expense over the options' vesting period.
The Company's pro forma information follows:

F-26

3 Months Ended
October 31,
-----------------------------
2003 2002
----------- -------------

Net Loss, as reported $(1,727,000) $ (1,714,000)

Stock-based employee compensation expense (10,000) --
under fair value method, net of related tax effects
----------- -------------
Pro forma net loss $(1,737,000) $ (1,714,000)
=========== =============

Loss per share:
Basic and diluted, as reported $ (.10) $ (.12)
=========== =============
Basic and diluted, pro forma $ (.10) $ (.12)
=========== =============

In August 2003, the Company issued 75,000 options under the 1998
Option Plan to a new employee. These options vest equally over 3
years, beginning August 1, 2004, have an exercise price of $2.23 and
expire during July 2013.

In August 2003, the Company issued 6,000 options under the 1998
Option Plan to a new employee. These options vest equally over 3
years, beginning September 1, 2004, have an exercise price of $1.99
and expire during August 2013.

Note 5 - Related Party Transactions:

In April 2003, the Company entered into a license and development
agreement with Manhattan Pharmaceuticals, Inc. for the worldwide,
exclusive rights to the Company's proprietary lingual spray
technology. One of the Company's major shareholders is also a
significant shareholder of Manhattan Pharmaceuticals, Inc.

During the Company's first fiscal quarter ended October 31, 2003,
the Company invoiced Manhattan Pharmaceuticals, Inc. approximately
$93,000 for the Company's reimbursable expenses. In November 2003,
the Company received $375,000, from Manhattan Pharmaceuticals, Inc.,
for license fees. The Company expects to recognize these license
fees over the 20 year term of the license.

F-27

Note 6 - Subsequent Events:

On November 18, 2003, the Company's publicly traded warrants
expired.

On November 14, 2003, the Company engaged Paramount Capital, a
related party, to assist the Company in the private placement of
common stock and warrants. In January 2004, the Company issued
13,333,330 shares of common stock pursuant to the private placement
and received net proceeds of approximately $13,000,000. In
connection with the private placement, the Company paid Paramount
Capital and/or its designees, approximately $1,000,000, and other
consideration for its services.

F-28

--------------------------------------------------------------------------------

You should rely only on the information contained in this document. We
have not authorized anyone to provide you with information that is different.
This document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.

Additional risks and uncertainties not presently known or that are
currently deemed immaterial may also impair our business operations. The risks
and uncertainties described in this document and other risks and uncertainties
which we may face in the future will have a greater impact on those who purchase
our common stock. These purchasers will purchase our common stock at the market
price or at a privately negotiated price and will run the risk of losing their
entire investment.

--------------------------------------------------------------------------------

NovaDel Pharma Inc.

20,484,217
shares of
common stock

----------------

PROSPECTUS

----------------

February 13, 2004

--------------------------------------------------------------------------------

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
corporation to indemnify its directors and officers and to purchase insurance
with respect to liability arising out of the performance of their duties as
directors and officers. The DGCL provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's by-laws, any
agreement, vote of stockholders or otherwise.

Article Ninth of our Certificate of Incorporation eliminates the personal
liability of directors to the fullest extent permitted by Section 102 of the
DGCL. Article Tenth provides for indemnification of all persons whom we shall
have the power to indemnify pursuant to Section 145 of the DGCL.

The effect of the foregoing is to require us, to the extent permitted by law, to
indemnify our officers and directors for any claims arising against such persons
in their official capacities if such persons acted in good faith and in a manner
that they reasonably believed to be in or not opposed to our best interests,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe their conduct was unlawful. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling us pursuant to the foregoing provisions, we have
been informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

We currently have liability insurance coverage for our officers and directors.

Item 25. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses payable by the registrant
in connection with the sale of the securities being registered. All amounts are
estimates except the SEC registration fee:

SEC registration fee ............................ $ 4,817.51
Printing and engraving expenses ................. $ 10,000.00
Accounting fees and expenses .................... $ 7,500.00
Attorneys' fees and expenses .................... $ 90,000.00
Transfer agent's fees and expenses .............. $ 7,500.00
Miscellaneous ................................... $ 5,182.49

Total .................................. $125,000.00

II-1

Item 26. Recent Sales of Unregistered Securities.

Set forth below is information regarding the issuance and sales of our
securities without registration during the last three years. Other than as set
forth below, no such sales involved the use of an underwriter and no commissions
were paid in connection with the sale of any securities.

In December 2003, we sold units (consisting of common stock and warrants) to
accredited investors. The units contained 95,238 shares of common stock and
warrants to purchase 28,571 shares of common stock. The warrants are exercisable
for five years, at an exercise price of $1.40 per share. The units were sold
through Paramount. We paid Paramount approximately $1,000,000 in commissions and
issued to Paramount or its designees 14 unit purchase options. Upon full
exercise of such unit purchase options, we shall issue 1,333,332 shares of our
common stock and warrants to purchase 399,994 shares of our common stock for a
purchase price equal to $1.40 per share. Upon the closing of the transaction, we
issued 1,371,549 shares of Common Stock to investors in the offerings
consummated by us in April and May of 2003 in connection with certain preemption
rights extended to such investors. These sales were made in reliance on Section
4(2) and on Regulation D of the Securities Act.

In June 2003, we issued 206,206 shares to a former employee upon cashless
exercise of outstanding options. The sale was made in reliance on Section
3(a)(9) of the Securities Act.

In April and May 2003, we sold units consisting of four shares of common stock
and warrants to purchase one share of common stock to accredited investors. We
issued a total of 3,200,345 shares (at $1.50 per share) and 800,095 warrants
exercisable at $2.00 per share. The securities were sold through Paramount. We
paid Paramount approximately $360,000 in fees and issued to Paramount or its
designees 160,017 warrants exercisable at $1.65 per share and 40,004 warrants
exercisable at $2.00 per share. These sales were made in reliance on Section
4(2) and on Regulation D of the Securities Act.

In May 2003, we issued 13,329 shares of our common stock to First Montauk
Securities Corp., upon exercise of warrants held by it. The sale was made in
reliance on Section 4(2) of the Securities Act.

In December 2002, we issued 13,770 shares of our common stock to employees
and/or principals of First Montauk, upon exercise of warrants held by them. The
sales were made in reliance of Section 4(2) of the Securities Act.

In August 2002, we issued 85,922 shares of our common stock to employees and/or
principals of Shipley Raidy Capital Partners LLC (via cashless exercise of
warrants to purchase 136,482 shares). The issuance was made in reliance on
Section 3(a)(9) of the Securities Act.

In July 2002, we issued 7,765 shares of our common stock to a former employee
upon cashless exercise of outstanding options. The issuance was made in reliance
on Section 3(a)(9) of the Securities Act.

II-2

During July 2002, we issued 35,106 shares of our common stock to employees
and/or principals of Adolph Komorsky Investments (via cashless exercise of
warrants to purchase 48,142 shares). The issuance were made in reliance on
Section 3(a)(9) of the Securities Act.

During June 2002, we issued 14,379 shares of our common stock to employees
and/or principals of Adolph Komorsky (via cashless exercise of warrants to
purchase 19,216 shares). The issuance was made in reliance on Section 3(a)(9) of
the Securities Act.

During March 2002, we issued 2,666,667 units (each consisting of one share of
common stock and one warrant to purchase a share of our common stock at $.75 per
share) at $.75 per unit, to an accredited investor pursuant to Section 4(2) of
the Securities Act.

During December 2001, we issued 4,000,000 units (each consisting of one share of
common stock and one warrant to purchase a share of our common stock at $.75 per
share) at $.75 per unit, to an accredited investor pursuant to Section 4(2) of
the Securities Act.

In May 2001, we issued 1,843,663 shares of our common stock, at $.75 per share,
to accredited investors. The sales were made in reliance of Section 4(2) of the
Securities Act. We paid $138,275 in commissions in connection with that
transaction.

Item 27. Exhibits

Exhibits are listed on the Exhibit Index at the end of this Registration
Statement. The exhibits required by Item 601 of Regulation S-B, listed on such
Exhibit Index in response to this Item, are incorporated herein by reference.

Item 28. Undertakings.

The undersigned registrant hereby undertakes to:

(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

(i) Include any prospectus required by section 10(a)(3) of
Securities Act;

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(B) if, in the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and

(iii) Include any additional or changed material information on the
plan of distribution.

II-3

(2) For determining liability under the Securities Act treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advise that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore unenforceable.

II-4

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Flemington, State of New Jersey, on February 13, 2004.

NOVADEL PHARMA INC.

By: /s/ Gary A. Shangold
------------------------------------
Gary A. Shangold, M.D.
President and
Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated.

Name Title Date
---- ----- ----

/s/ Gary A. Shangold President, Chief Executive Officer (Principal February 13, 2004
------------------------- Executive Officer) and Director
Gary A. Shangold, M.D.

/s/ Donald J. Deitman Chief Financial Officer February 13, 2004
------------------------- (Principal Financial Officer)
Donald J. Deitman

/s/ John H. Klein Chairman of the Board February 13, 2004
-------------------------
John H. Klein

/s/ Robert F. Schaul Secretary and Director February 13, 2004
-------------------------
Robert F. Schaul

/s/ William F. Hamilton Director February 13, 2004
-------------------------
William F. Hamilton

/s/ Lawrence J. Kessel Director February 13, 2004
-------------------------
Lawrence J. Kessel

/s/ Mark H. Rachesky Director February 13, 2004
-------------------------
Mark H. Rachesky

/s/ Charles Nemeroff Director February 13, 2004
-------------------------
Charles Nemeroff, M.D., Ph.D.

II-5

EXHIBIT INDEX

Exhibit No. Description
----------- -----------

2.1 (4) Agreement of Merger dated as of October 29, 1998

3.1 (4) Certificate of Incorporation of the Registrant, as amended

3.2 (4) Bylaws of the Registrant, as amended

4.1 (3) Form of Warrant Agreement relating to Public Warrants

4.3 (3) Form of Class A Warrant Certificate

4.4 (3) Form of Underwriters' Option Agreement

4.5(14) Form of Class C Warrant Certificate

5.1* Opinion of Dickstein Shapiro Morin & Oshinsky LLP

10.1 (8) Employment Agreement with Harry A. Dugger, III, Ph.D.

10.2 (2) Employment Agreement with John J. Moroney

10.3 (1) Agreement dated December 7, 1996 between the Registrant and
Altana, Inc.

10.4 (1) Registrant's 1992 Stock Option Plan

10.5 (2) Form of Option Agreement under the 1992 Stock Option Plan

10.6 (1) Registrant's 1997 Stock Option Plan

10.7 (2) Form of Option Agreement under the 1997 Stock Option Plan

10.8 (1) Agreement with Rapid Spray (Clemastine) dated June 2, 1992

10.9 (1) Agreement with Rapid Spray (Nitroglycerin) dated June 2, 1992

II-6

Exhibit No. Description
----------- -----------

10.10 (2) Agreement with Creative Technologies, Inc. dated December 26,
1996

10.11 (4) Registrant's 1998 Stock Option Plan

10.12 (5) Employment Agreement with Donald P. Cox, Ph.D.

10.13 (5) Employment Agreement with Kenneth Cleaver, Ph.D.

10.14 (5) Amendment to Consulting Agreement with Saggi Capital Corp.
dated March 25, 1998

10.15 (6) Agreement with Altana, Inc., dated December 7, 1996

10.16 (6) Agreement with CLL Pharma dated February 12, 1998

10.17 (6) Agreement with Nace Resources, Inc., dated December 29, 1997,
together with Amendment Number 1 dated February 9, 1998;
Amendment Number 2 dated November 29, 1999; and, Amendment
Number 3, dated May 5, 2000

10.18 (6) Agreement with PolyMASC Pharmaceuticals plc, dated July 25,
2000

10.19 (6) Authorization to proceed with Innovex, Inc. and Novartis
Pharmaceuticals Corp., dated June 15, 2000

10.20 (8) Consulting Agreement with John Klein

10.21 (8) Employment Agreement with Robert Galler

10.22 (8) Employment Agreement Amendment No. 1 with Robert Galler

10.23 (8) Employment Agreement with Donald Deitman

10.24 (7) Common Stock and Warrant Purchase Agreement dated December 12,
2001

10.25 (8) Amendment No. 1 Common Stock and Warrant Purchase Agreement

10.26 (9) Employment Agreement with Mohammed Abd El-Shafy, Ph.D.

10.27 (10) Employment Agreement with Gary A. Shangold, M.D.

10.28 (10) Amendment No. 1 to Employment Agreement with Gary A. Shangold,
M.D.

10.29 (11) Lease Agreement with Macedo Business Park, II, LLC

II-7

10.30 (11) Amendment No. 1 to Lease Agreement with Macedo Business Park,
II, LLC

10.31 (11) Employment Agreement with Barry C. Cohen

10.32(13) Agreement with Manhattan Pharmaceuticals, Inc. dated April 4,
2003

11.1 (12) Computation of earnings per share

23.1* Consent of Wiss & Company LLP

* Filed herewith

(1) As filed with the Registrant's Form SB-2, on August 8, 1997, File No.
333-33201.

(2) As filed with the Registrant's Form SB-2, on October 3, 1997, File No.
333-33201.

(3) As filed with the Registrant's Form SB-2, on October 31, 1997, File No.
333-33201.

(4) As filed with the Registrant's Preliminary Proxy Statement on October 20,
1998, File No. 000-23399.

(5) As filed with the Registrant's Form 10-KSB for the fiscal year ended July
31, 1999.

(6) As filed with the Registrant's Form 10-KSB/A for the fiscal year ended
July 31, 2001.

(7) Incorporated by Reference to Schedule 13D filed on December 21, 2001 by
Lindsay A. Rosenwald, M.D.

(8) As filed with the Registrant's Form SB-2 on April 15, 2002, File No.
333-86262.

(9) As filed with the Registrant's Form SB-2 on September 3, 2002, File No.
333-86262.

(10) As filed with the Registrant's Quarterly Report of Form 10-QSB for the
fiscal quarter ended January 31, 2003.

(11) As filed with the Registrant's Quarterly Report on Form 10-QSB for the
fiscal quarter ended April 30, 2003.

(12) As filed with the Registrant's Form SB-2, on July 17, 2003, File No.
333-107122.

(13) As filed with the Registrant's Form 10-KSB for the fiscal year ended July
31, 2003.

(14) As filed with the Registrant's Form 8-K on January 12, 2004.

II-8