U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q


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

For the quarterly period ended                          December 31, 2005
                                 -----------------------------------------------

                                       or

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

For the transition period ended                 to


              Commission File Number: 333-45241


              ELITE PHARMACEUTICALS, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


Delaware                                                        22-3542636
---------------------------------                            -----------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)


165 Ludlow Avenue, Northvale, New Jersey                             07647
----------------------------------------                     -------------------
(Address of principal executive offices)                         (Zip Code)



                                 (201) 750-2646
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

        (Former name, former address and former fiscal year, if changed
                               since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.
                                                                  Yes [x] No [_]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12, 13 or 15 (d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

                                                                  Yes [_] No [_]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding of the common stock,  $.01 par value,
as of  February  10,  2006:  19,258,141  (exclusive  of 100,000  shares  held in
treasury).



<PAGE>



                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES



                                      INDEX

<TABLE>
<CAPTION>

                                                                                                 Page No.
PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

<S>                                                                                                <C>
           Consolidated Balance Sheets as of December 31, 2005 (unaudited) and
           March 31, 2005                                                                          1 - 2

           Consolidated Statements of Operations for the three and nine months
           ended December 31, 2005 and December 31, 2004 (unaudited)                                 3

           Consolidated Statement of Changes in Stockholders' Equity
           for the nine months ended December 31, 2005 (unaudited)                                   4

           Consolidated Statements of Cash Flows for the nine months
           ended December 31, 2005 and December 31, 2004 (unaudited)                                 5

           Notes to Consolidated Financial Statements                                              6 - 12

Item 2.  Management's Discussion And Analysis of Financial
         Condition And Results Of Operations                                                      13 - 18

Item 3.  Quantitative And Qualitative Disclosures
         About Market Risk                                                                          18

Item 4.  Controls and Procedures                                                                    18


PART II  OTHER INFORMATION

Item 1A. Risk Factors                                                                               19

Item 2.  Unregistered Sales of Equity Securities.                                                   19

Item 6.  Exhibits                                                                                   20


SIGNATURES                                                                                          21
</TABLE>




<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                                    DECEMBER 31,          MARCH 31,
                                                                                                       2005                 2005
                                                                                                    (Unaudited)

<S>                                                                                                  <C>                  <C>
CURRENT ASSETS:
       Cash and cash equivalents                                                                     $1,648,191           $3,902,003
       Accounts receivable, net of allowance for doubtful accounts of
           $153,250 and $153,250, respectively                                                               --              142,113
       Current portion of restricted cash - capital project fund                                      1,274,311              113,425
       Prepaid expenses and other current assets                                                        424,432              346,905
                                                                                                     ----------           ----------

           Total current assets                                                                       3,346,934            4,504,446
                                                                                                     ----------           ----------


PROPERTY AND EQUIPMENT, net of accumulated
       depreciation and amortization                                                                  4,139,002            4,194,437
                                                                                                     ----------           ----------



INTANGIBLE ASSETS - net of accumulated amortization                                                      64,894               81,184
                                                                                                     ----------           ----------


OTHER ASSETS:
       Deferred charges                                                                                      --               41,013
       Security deposit                                                                                   6,980                   --
       Restricted cash - debt service                                                                   415,500              300,000
       EDA bond offering costs, net of accumulated amortization
           of  $4,000 and $73,648, respectively                                                         350,452              124,212
                                                                                                     ----------           ----------

           Total other assets                                                                           772,932              465,225
                                                                                                     ----------           ----------

           Total assets                                                                              $8,323,762           $9,245,292
                                                                                                     ==========           ==========
</TABLE>



               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                       1
<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                   DECEMBER 31,           MARCH 31,
                                                                                                      2005                  2005
                                                                                                   (Unaudited)

<S>                                                                                                   <C>                    <C>
CURRENT LIABILITIES:
       Current portion - note payable                                                              $       --          $  127,946
       Current portion of EDA bonds                                                                   175,000             165,000
       Accounts payable and accrued expenses                                                        1,203,435             882,917
                                                                                                  -----------         -----------
           Total current liabilities                                                                1,378,435           1,175,863
                                                                                                  -----------         -----------


LONG TERM LIABILITIES:
       Note payable - net of current portion                                                               --             187,128
       EDA bonds - net of current portion                                                           3,980,000           2,180,000
                                                                                                  -----------         -----------

           Total long-term liabilities                                                              3,980,000           2,367,128
                                                                                                  -----------         -----------


           Total liabilities                                                                        5,358,435           3,542,991
                                                                                                  -----------         -----------


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
       Preferred Stock -- $.01 par value;
            Authorized 4,483,442 shares
            None issued and outstanding                                                                    --                  --
       Common Stock - $.01 par value;
           Authorized - 65,000,000 shares
           Issued and outstanding - 19,258,141 shares and 18,022,183
           shares respectively                                                                        192,581             180,222
       Additional paid-in capital                                                                  48,905,595          47,006,379

       Accumulated deficit                                                                        (45,826,008)        (41,177,459)
                                                                                                  -----------         -----------
                                                                                                    3,272,168           6,009,142
       Treasury stock, at cost (100,000 shares)                                                      (306,841)           (306,841)
                                                                                                  -----------         -----------
           Total stockholders' equity                                                               2,965,327           5,702,301
                                                                                                  -----------         -----------


           Total liabilities and stockholders' equity                                              $8,323,762          $9,245,292
                                                                                                  ===========         ===========
</TABLE>






               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       2
<PAGE>



                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                            DECEMBER 31,                      DECEMBER 31,
                                                                           -------------                      ------------
                                                                       2005              2004             2005             2004
                                                                       -----             -----            -----            ----
                                                                    (Unaudited)       (Unaudited)      (Unaudited)      (Unaudited)
<S>                                                                    <C>                <C>            <C>              <C>
REVENUES                                                            $     15,635     $         --     $    402,578     $    151,450
                                                                    ------------     ------------     ------------     ------------

COST OF OPERATIONS:
       Research and development                                        1,124,581          726,175        2,862,908        1,937,794
       General and administrative                                        379,893          625,323        1,241,108        1,675,041
       Depreciation and amortization                                      96,450           45,360          405,562          271,080
                                                                    ------------     ------------     ------------     ------------
                                                                       1,600,924        1,396,858        4,509,578        3,883,915
                                                                    ------------     ------------     ------------     ------------

LOSS FROM OPERATIONS                                                  (1,585,289)      (1,396,858)      (4,107,000)      (3,732,465)
                                                                    ------------     ------------     ------------     ------------

OTHER INCOME (EXPENSES):
       Interest income                                                    22,562           13,131           59,028           18,842
       Sale of New Jersey tax losses                                     219,121          205,792          219,121          205,792
       Interest expense                                                  (70,612)         (62,499)        (200,118)        (176,696)
       Non-cash compensation through issuance of stock
          options and stock warrants                                    (287,303)         (44,982)        (618,580)        (963,300)
                                                                    ------------     ------------     ------------     ------------
                                                                        (116,232)         111,442          (540,549)       (916,362)
                                                                    ------------     ------------     ------------     ------------

LOSS BEFORE PROVISION FOR INCOME TAXES                                (1,701,521)      (1,285,416)      (4,647,549)      (4,648,827)
                                                                    ------------     ------------     ------------     ------------

PROVISION FOR INCOME TAXES                                                    --               --            1,000            1,000
                                                                    ------------     ------------     ------------     ------------

NET LOSS                                                              (1,701,521)      (1,285,416)      (4,648,549)      (4,649,827)
                                                                    ============     ============     ============     ============

Preferred stock dividends                                                     --          (75,076)              --          (75,076)
                                                                    ============     ============     ============     ============

NET LOSS ATTRIBUTABLE TO COMMON
       SHAREHOLDERS                                                 $ (1,701,521)    $ (1,360,492)    $ (4,648,549)    $ (4,724,903)
                                                                    ============     ============     ============     ============

BASIC AND DILUTED LOSS PER COMMON SHARE                             $       (.09)    $       (.11)    $       (.25)    $       (.39)
                                                                    ============     ============     ============     ============

WEIGHTED AVERAGE NUMBER OF
       COMMON SHARES OUTSTANDING                                      18,426,960       12,258,569       18,229,658       12,231,405
                                                                    ============     ============     ============     ============
</TABLE>









               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       3
<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                       ADDITIONAL
                                                  COMMON STOCK           PAID-IN       TREASURY        ACCUMULATED    STOCKHOLDERS'
                                             SHARES          AMOUNT      CAPITAL         STOCK           DEFICIT         EQUITY
                                         -----------   ------------   ------------    ------------    ------------    ------------
<S>                                       <C>          <C>            <C>             <C>             <C>             <C>
BALANCE AT MARCH 31, 2005
 (Audited)                                18,022,183   $    180,222   $ 47,006,379    $   (306,841)   $(41,177,459)   $  5,702,301

Nine Months ended
  December 31, 2005: (unaudited)

Exercise of stock options                     20,000            200         39,800              --              --          40,000

Exercise of stock warrants                 1,215,958         12,159      1,240,836              --              --       1,252,995

Non-cash compensation through
  the issuance of
  stock options and warrants                      --             --        618,580              --              --         618,580

Net loss for nine months ended
  December 31, 2005                               --             --             --              --      (4,648,549)     (4,648,549)
                                         -----------   ------------   ------------    ------------    ------------    ------------

BALANCE AT DECEMBER 31, 2005
  (Unaudited)                             19,258,141   $    192,581   $ 48,905,595    $   (306,841)   $(45,826,008)   $  2,965,327
                                         ===========   ============   ============    ============    ============    ============
</TABLE>



               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       4
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                          NINE MONTHS ENDED
                                                                                                            DECEMBER 31,
                                                                                                            ---------------
                                                                                                      2005                2004
                                                                                                   (UNAUDITED)         (UNAUDITED)
                                                                                                  ----------           ----------
<S>                                                                                                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                                                                   $(4,648,549)         $(4,649,827)
      Adjustments to reconcile net loss to cash used in operating activities:
         Depreciation and amortization                                                               405,562              271,080
         Charges related to issuance of common stock                                                      --               58,300
         Non-cash compensation                                                                       618,580              964,300
         Changes in assets and liabilities:
            Accounts receivable                                                                      142,113              153,250
            Prepaid expenses and other current assets                                                (77,527)              83,059
            Security deposit                                                                          (6,980)                  --
            Accounts payable, accrued expenses and other current liabilities                         320,518             (490,228)
                                                                                                  ----------           ----------
NET CASH USED IN OPERATING ACTIVITIES                                                             (3,246,283)          (3,610,066)
                                                                                                  ----------           ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of property and equipment                                                           (205,625)             (27,843)
      Deposits to restricted cash                                                                 (1,689,811)                  --
      Release of restricted cash                                                                     413,425              312,350
                                                                                                  ----------           ----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                                               (1,482,011)             284,507
                                                                                                  ----------           ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Net proceeds from issuance of Series A 8% Convertible Preferred Stock
         and Warrants                                                                                     --            5,866,600
      Principal equipment note payments                                                             (274,061)             (64,989)
      Principal bank note payments                                                                        --             (225,000)
      Proceeds from equipment loan                                                                        --              400,000
      Principal repayments of NJEDA Bonds                                                         (2,345,000)            (150,000)
      Proceeds - NJEDA Tax Exempt Bonds                                                            4,155,000                   --
      Payment - NJEDA Bond Offering Costs                                                           (354,452)                  --
      Deferred lease payments                                                                             --              (41,013)
      Proceeds from exercise of stock options                                                         40,000                   --
      Proceeds from exercise of stock warrants                                                     1,252,995                   --
                                                                                                  ----------           ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                                          2,474,482            5,785,638
                                                                                                  ----------           ----------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                                           (2,253,812)           2,460,079

CASH AND CASH EQUIVALENTS - beginning of period                                                    3,902,003            2,104,869
                                                                                                  ----------           ----------

CASH AND CASH EQUIVALENTS - end of period                                                         $1,648,191           $4,564,948
                                                                                                  ==========           ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
      Cash paid for interest                                                                      $  121,113           $  132,231
      Cash paid for income taxes                                                                       1,000                1,000

SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
      Preferred Stock dividends of $75,076 paid by issuance of 26,961
         shares of Common Stock                                                                   $       --           $   75,076
</TABLE>



               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       5
<PAGE>


12

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 1     -    BASIS OF PRESENTATION
                ---------------------

                The information in this Form 10-Q Report includes the results of
                operations of Elite  Pharmaceuticals,  Inc. and its consolidated
                subsidiaries   (collectively   the   "Company")   including  its
                wholly-owned  subsidiaries,  Elite  Laboratories,  Inc.  ("Elite
                Labs") and Elite Research,  Inc. ("ERI"), for the three and nine
                months ended  December  31, 2005 and  December  31, 2004.  As of
                December 31, 2005, the financial  statements of all entities are
                consolidated  and  all  significant  intercompany  accounts  are
                eliminated  upon  consolidation.   The  accompanying   unaudited
                consolidated financial statements have been prepared pursuant to
                rules and regulations of the Securities and Exchange Commission.
                Accordingly,  they do not  include  all of the  information  and
                footnotes required by accounting  principles  generally accepted
                in  the  United   States  of  America  for  complete   financial
                statements.  In  the  opinion  of  management,  all  adjustments
                (consisting of normal recurring accruals)  considered  necessary
                for a fair presentation of the consolidated  financial position,
                results  of  operations  and cash flows of the  Company  for the
                periods presented have been included.

                The   financial   results  for  the  interim   periods  are  not
                necessarily  indicative  of the results to be  expected  for the
                full year or future interim periods.

                The  accompanying   consolidated  financial  statements  of  the
                Company  have  been  prepared  in  accordance   with  accounting
                principles  generally  accepted for interim financial  statement
                presentation   and  should  be  read  in  conjunction  with  the
                consolidated  financial  statements  and notes  included  in the
                Company's  Annual  Report on Form 10-K for the year ended  March
                31, 2005.  There have been no changes in significant  accounting
                policies since March 31, 2005.

                The Company does not anticipate being profitable for fiscal year
                2006;  therefore  a current  provision  for  income  tax was not
                established  for the three or nine  months  ended  December  31,
                2005. Only the minimum  corporation  tax liability  required for
                state purposes is reflected.

NOTE 2   -      NJEDA REFINANCING
                -----------------

                On  August  31,  2005,  the  Company  successfully  completed  a
                refinancing  through the issuance of the  tax-exempt  bonds (the
                "Bonds") by the New Jersey Economic Development Authority (the "
                Authority").   The   refinancing   involved  the   borrowing  of
                $4,155,000  evidenced  by a 6.5% Series A Note in the  principal
                amount of  $3,660,000  maturing  on  September  1, 2030 and a 9%
                Series B Note in the  principal  amount of $495,000  maturing on
                September 1, 2012.  The net proceeds,  after payment of issuance
                costs,  were  or  will be used  (i) to  redeem  the  outstanding
                tax-exempt Bonds originally issued by the Authority on September
                2, 1999,  (ii) refinance  other former  equipment  financing and
                (iii) for the  purchase of certain  equipment  to be used in the
                manufacture of pharmaceutical products.

                Interest is payable  semiannually  on March 1 and September 1 of
                each year. The Bonds are  collateralized  by a first lien on the
                Company's  facility and equipment  acquired with the proceeds of
                the  original  and  refinanced   Bonds.  The  related  Indenture
                requires the maintenance of a $415,500 Debt Service Reserve Fund
                consisting  of  $366,000  from the Series A Bonds  proceeds  and
                $49,500 from the Series B proceeds.  $1,274,311  of the proceeds
                has been  deposited in a short-term  restricted  cash account to
                fund  the  future  purchase  of   manufacturing   equipment  and
                development of the Company's facility.



                                       6
<PAGE>




                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)




NOTE 3   -      STOCKHOLDERS' EQUITY
                --------------------

                WARRANTS AND OPTIONS
                --------------------

                On November 8, 2005 the Company granted  pursuant to a six month
                service  agreement,  to an investor relations firm non-qualified
                options to purchase 75,000 shares of the Company's  Common Stock
                with an exercise price equal to $2.26 per share, the fair market
                value of a share  of  Common  Stock  at the  date of the  grant,
                vesting pro-rata daily over a six month period. If the agreement
                should be extended  beyond six  months,  the Company is to grant
                another  75,000  non-qualified  options  with an exercise  price
                equal to the then fair market value of a share of Common  Stock,
                which would vest over the service period.

                The per share weighted-average fair value of the above mentioned
                options was $1.70 using the Black-Scholes options pricing model.

                Pursuant to the terms of an Exchange Offer,  the Company sold on
                or before the expiration date of December 31, 2005, an aggregate
                of 735,674  shares of common stock upon the exercise for cash of
                Short Term Warrants for aggregate  gross  proceeds of $1,172,912
                and issued five year Replacement Warrants to purchase at a price
                of $3.00 per share an aggregate  220,705 shares of the Company's
                Common Stock.  The  Placement  Agent  received cash  commissions
                aggregating $76,418 and five-year placement warrants to purchase
                an  aggregate  of 25,473  shares  of common  stock at a price of
                $3.00 per share. The remaining  unexercised Short Term Warrants,
                issued as part of the Private Placement in October 2004, expired
                on December 31, 2005.

                The per share weighted  average of the above mentioned  warrants
                was $1.48 using the Black-Scholes options pricing model with the
                following  weighted  average  assumptions:  no  dividend  yield;
                expected  volatility of 97.84%; risk free interest rate of 4.18%
                and expected lives of 5 years.

                The  value  of  $364,343  on above  warrants  has no  effect  on
                Retained  Earnings or Additional  Paid in Capital  because it is
                reflected as a cost associated with raising capital.

                The Company's  Series B and Series C Stock Purchase  Warrants to
                purchase  2,402,181shares  of Common Stock expired  November 30,
                2005.

                The following  grants were made under the  Company's  2004 Stock
                Option Plan:

                      On July 14,  2005 ten (10) year  options to purchase at an
                      exercise  price of $2.80  per share  (i) to  employees  an
                      aggregate  of 152,200  shares of Common Stock with vesting
                      ranging from immediate to a period of five years from date
                      of grant;  and (ii) to the Chief Financial  Officer 20,000
                      shares of Common Stock vesting over a three-year period.

                      On August 24, 2005 to  employees  ten (10) year options to
                      purchase  in the  aggregate  2,000  shares at an  exercise
                      price of $2.81 vesting over a three year period.

                      The stock  options to  purchase  an  aggregate  of 174,200
                      shares of Common  Stock at prices  ranging  from  $2.80 to
                      $2.81 vest over periods from immediate to five years.  The
                      per share  weighted-average  value of the  options  ranged
                      from  $2.52  to  $2.53  using  the  Black-Scholes  options
                      pricing   model   with  the   following   weighted-average
                      assumptions:  no dividend  yield;  expected  volatility of
                      97.84%,  risk free interest of 4.18% and expected lives of
                      ten years.


                                       7
<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

    NOTE 3 -    STOCKHOLDERS' EQUITY (Continued)
                --------------------

                WARRANTS AND OPTIONS (continued)
                --------------------

                      On August 30, 2005 to the  Directors,  options to purchase
                      an  aggregate  of 120,000  shares at an exercise  price of
                      $2.75 per share vesting over a three-year  period. The per
                      share  weighted-average  fair value of the 120,000 options
                      amounted to $2.48 using the Black-Scholes  options pricing
                      model with the following weighted average assumptions:  no
                      dividend yield;  expected  volatility of 97.84%; risk free
                      interest rate of 4.18%; and expected lives of ten years.

                      On  September  2, 2005,  the Company  granted to the Chief
                      Executive  Officer  ten  (10)  year  options  to  purchase
                      600,000  shares  of  Common  Stock at a price of $2.69 per
                      share with  100,000  options to vest on September 2, 2006,
                      100,000  options  to vest on  September  2,  2007  and the
                      remaining   400,000   options  to  vest  subject  tot  the
                      following contingencies:

                (a)     50,000 options upon the closing of each product  license
                        or  product  sales  transaction  in  which  the  Company
                        receives  an  aggregate  of at least  $5,000,000  in net
                        cash;

                (b)     10,000  options  upon  filing  with  FDA  of  either  an
                        abbreviated new drug application (an "ANDA") or new drug
                        application (an "NDA"); and

                (c)     40,000  options upon  approval by the FDA of any ANDA or
                        NDA for a product not previously approved by the FDA.

                On September 2, 2005,  the Chief  Executive  Officer  waived his
                rights to 75,000 of 300,000  options  granted to him on July 23,
                2003. The Company  determined that the remaining 225,000 options
                are fully vested.

                The  Company,  in  May  2005,  revoked  180,000  of  outstanding
                unexercised  options  granted  prior to the adoption of the 2004
                Stock  Option  Plan  originally  earmarked  to  members  of  the
                abandoned Scientific Advisory Board.

                The Company  took a charge of $618,580 for the nine months ended
                December 31, 2005  ($287,303 for the three months ended December
                31,  2005),  which  represents  the  fair  value  of the  vested
                options,  utilizing the  Black-Scholes  options pricing model on
                the grant date.


                                       8
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

   NOTE 3   -  STOCKHOLDERS' EQUITY (Continued)
               --------------------

                WARRANTS AND OPTIONS  (continued)
                -------------------

                The following table  illustrates the effect on net loss and loss
                per  share  as  if  the  Company  had  applied  the  fair  value
                recognition  provisions of SFAS No. 123 to all  outstanding  and
                unvested awards in each period presented:

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED              NINE MONTHS ENDED
                                                              DECEMBER 31,                      DECEMBER 31,
                                                          ----------------------            ----------------------
                                                          2005              2004             2005            2004
                                                          ----              ----            ------           ----

<S>                                                   <C>              <C>              <C>              <C>
Net loss as reported                                  $ (1,701,521)    $ (1,285,416)    $ (4,648,549)    $ (4,649,827)

Add: Stock-based compensation
expense included in reported net loss,
net of related tax effects                                 287,303           44,982          618,580          964,300

Deduct: Total stock-based
compensation expense determined
under fair value method for all awards
net of related tax effects                                (296,639)         (58,739)        (646,587)      (1,005,571)
                                                      ------------     ------------     ------------     ------------

Pro-forma net loss                                    $ (1,710,857)    $ (1,299,173)    $ (4,676,556)    $ (4,691,098)
                                                      ============     ============     ============     ============

Loss per share as reported                                    (.09)            (.10)            (.25)            (.38)
Pro-forma loss per share                                      (.09)            (.10)            (.25)            (.38)
</TABLE>


                At December 31, 2005,  Elite had outstanding  2,896,250  options
                with exercise  prices  ranging from $1.50 to $2.81 and 3,424,797
                warrants with exercise prices ranging from $1.50 to $4.20;  each
                option and warrant  representing the right to purchase one share
                of Common Stock.


                                       9
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 4 -        COMMITMENTS AND CONTINGENCIES
                -----------------------------

                COLLABORATIVE AGREEMENTS
                ------------------------

                On June 21,  2005,  the Company and  IntelliPharmaCeutics  Corp.
                ("IPC"),  entered  into an  agreement  for the  development  and
                commercialization  of a  controlled  released  generic  drug for
                certain gastric diseases by the parties. The Company is to share
                in the  profits,  if any,  from  the  sales  of the  drug.  This
                agreement  was amended on December 12,  2005,  whereby IPC and a
                Canadian company with marketing and distribution capabilities in
                Canada, have agreed to develop and commercialize the product for
                Canada.   Elite   and  IPC  will   share   their   proceeds   of
                commercialization  in  Canada  on same  terms as in the June 21,
                2005 Agreement.

                On June 22, 2005, the Company and Pliva, Inc.  ("Pliva") entered
                into a Product Development and License Agreement,  providing for
                the  development  and license of a controlled  released  generic
                anti-infective drug formulated by the Company. The Company is to
                manufacture  and Pliva is to market  and sell the  product.  The
                development  costs are to be paid by Pliva and the  Company  and
                the profits are to be shared equally. Pliva is to make milestone
                payments to the Company.

                On  March  30,  2005,  the  Company   entered  into  a  product,
                development,   manufacturing  and  distribution  agreement  with
                Harris Pharmaceutical, Inc. ("Harris") and Tish Technologies LLC
                ("Tish")   with   respect  to  a  controlled   release   generic
                anti-infective  drug.  The product is a generic  equivalent to a
                branded  drug.   The   agreement   provides  for  (i)  the  drug
                development  by Elite with costs of  development to be shared by
                Elite and Harris,  (ii) the  manufacture of the product by Elite
                and its sale to Harris  for  distribution,  and (iii) Tish to be
                responsible for any requisite submissions to the FDA relating to
                the product. Elite is to share in the profits, if any, generated
                from the sale of the product.

                The aforementioned agreements are in their infancy stages.

                CONSULTING AGREEMENTS
                ---------------------

                The Company  entered into one year  consulting  agreements  with
                each of Saggi Capital Corp. and Bridge Ventures Inc. on November
                4, 2003 which were extended  through  November 4, 2005.  Each of
                the  consultant's  services  included  advice  with  respect  to
                overall strategic planning, financing opportunities, acquisition
                policy,  commercial and  investment  banking  relationships  and
                stockholder  matters.  The Company paid each consultant a fee of
                $75,000 per annum in monthly  installments  of $6,250 and issued
                to each  consultant a five (5) year warrant to purchase  100,000
                shares  of the  Company's  Common  Stock at a price of $2.00 per
                share.

                On November 8, 2005, the Company  entered into an agreement with
                an investor relations firm to provide investor relation services
                including,  but  not  limited  to,  overall  management  of  the
                Company's  corporate  communications  program,   securing  group
                appointments,  assistance with mass targeted mailings, compiling
                promotional materials, editing news releases and other corporate
                functions.   The  consultant  is  to  receive  $10,000  a  month
                beginning November 1, 2005 and was granted non-qualified options
                to purchase 75,000 shares of the Company's Common Stock, vesting
                pro-rata  over a six month period at a price of $2.26 per share,
                the fair market  value of a share of Common Stock on the date of
                the  grant.  The per share  weighted  average  fair value of the
                above mentioned options was $1.70 using the Black-Scholes option
                pricing model



                                       10
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 4 -        COMMITMENTS AND CONTINGENCIES (Continued)
                -----------------------------

                CONSULTING AGREEMENTS (Continued)
                ---------------------

                For  the  three  and  nine  months  ended   December  31,  2005,
                consulting  expenses  under  these  agreements  amounted  to  an
                aggregate  of $25,000 and $85,000,  respectively.  For the three
                and nine months ended  December 31,  2004,  consulting  expenses
                under these  agreements  amounted to an aggregate of $30,000 and
                $120,000, respectively.

                EMPLOYMENT AGREEMENT
                --------------------

                On  September 2, 2005,  the Company  entered into an amended and
                restated  Employment  Agreement with Bernard J. Berk,  providing
                for  Mr.  Berk to  continue  to  serve  as the  Company's  Chief
                Executive  Officer  through  August  31,  2009.  The  Employment
                Agreement also provides for an annual bonus as determined by the
                Compensation Committee of the Company's Board of Directors.

                Pursuant to the agreement:

                -   Mr.  Berk  waived his  rights to 75,000 of  300,000  options
                    granted to him on July 23, 2003. The Company determined that
                    the remaining 225,000 options are fully vested.

                -   Mr. Berk's  salary was increased to $330,140.  Such increase
                    became  effective  May 1,  2005 and will  accrue  but not be
                    payable until November 1, 2005.

                -   Mr. Berk was granted under the  Company's  2004 Stock Option
                    Plan,  ten-year options to purchase 600,000 shares of Common
                    Stock at $2.69,  the fair market value of Common Stock as of
                    the time of  grant.  See Note 3 as to the  vesting  of these
                    options.

                -   Mr. Berk will be entitled to receive severance in accordance
                    with the  employment  agreement if he is terminated  without
                    cause or because of his death or permanent  disability or if
                    he terminates  his employment for good reason or as a result
                    of a "change  of  control"  (as  defined  in the  employment
                    agreement). The severance will be payable in accordance with
                    the terms of his employment agreement.

                LEASE
                -----

                On July 15, 2005, the Company entered into a lease for two years
                commencing on July 1, 2005 for part of a one-story warehouse for
                the  storage of  finished  and raw  material  of  pharmaceutical
                products  and  equipment.  The lease has a renewal  option for a
                five-year period.

                Future minimum lease  payments for the periods  ending  December
                31, are:

                                2006                   $27,923
                                2007                   $20,942


                                       11
<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                                   (UNAUDITED)

NOTE 5 -        SUBSEQUENT EVENTS
                -----------------

                On January  4,  2006,  the  Company  received a letter  from the
                American  Stock  Exchange  ("AMEX")  notifying  the Company that
                based on the  Company's  unaudited  financial  statements  as of
                September 30, 2005,  the Company was not in compliance  with the
                continued  listing standards set forth in the AMEX Company Guide
                in that under one  standard  its  shareholders'  equity was less
                than $4,000,000, it had losses from continuing operations and/or
                net losses in three of its four most recent  fiscal  years,  and
                under another  standard its  shareholders'  equity was less than
                $6,000,0000 and it had losses from continuing  operations and/or
                net losses in its five most recent fiscal years.

                The Company  submitted  at AMEX's  request,  a plan  advising of
                action it plans to take to bring the Company in compliance  with
                the above  continued  listing  standards  within a maximum of 18
                months from January 4, 2006.  If the plan is not  accepted,  the
                Company may be subject to delisting  proceedings.  Additionally,
                if the plan is  accepted  but the  Company is not in  compliance
                with the continued  listing  standards or does not make progress
                consistent  with  such plan  during  the plan  period,  AMEX may
                initiate delisting proceedings.

                On  January  10,  2006,  the  Company  entered  into  a  Product
                Development   and   Commercialization    Agreement   with   Orit
                Laboratories  LLC ("ORIT")  providing  that the Company and Orit
                will  co-develop  and  commercialize  an extended  release  drug
                product  for  treatment  of  anxiety,  and  upon  completion  of
                development,  the  possibility  of  licensing  the  product  for
                manufacture  and sale.  The  parties  intend to develop all dose
                strengths  of  the  product.  The  Company  is to  share  in the
                profits,  if any from the  sales  of the  drug.  The term of the
                agreement  is for the  longer of (i) 15 years  from the date the
                product is first commercially sold to a third party, or (ii) the
                life of the  applicable  patent(s),  if any.  The  agreement  is
                automatically  renewable for 3-year periods unless terminated by
                either  party by  providing  the other  party with  twelve  (12)
                months written notice prior to any renewal period.

                In January 2006, the Food and Drug  Administration  accepted the
                Company's  investigational - new drug application for OxyQD(TM),
                its  once-a-day  oxycodone   painkiller.   Under  the  new  drug
                application, the Company will begin its development program with
                an early stage study to evaluate  OxyQD(TM)'s  sustained release
                formation. Currently there is no once-daily oxycodone available,
                however the U.S. market for sustained  release,  twice-daily was
                about $2 billion as of September, 2005.


                                       12
<PAGE>


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

        THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2005 COMPARED TO
      THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2004 (UNAUDITED)

         The following  discussion  and analysis  should be read in  conjunction
with the Consolidated  Financial  Statements,  the related Notes to Consolidated
Financial  Statements  and  Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations  included in the Company's  Annual Report on
Form 10-K for the  fiscal  year  ended  March  31,  2005  (the  "10-K")  and the
Unaudited  Consolidated  Financial  Statements and related Notes to Consolidated
Financial  Statements  included in Item 1 of Part I of this Quarterly  Report on
Form 10-Q.

         The   Company   has   included  in  this   Quarterly   Report   certain
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995 concerning the Company's business,  operations and
financial condition.  "Forward-looking statements" consist of all non-historical
information,   and  the  analysis  of  historical  information,   including  the
references in this  Quarterly  Report to future revenue  growth,  future expense
growth, future credit exposure,  earnings before interest,  taxes,  depreciation
and amortization, future profitability,  anticipated cash resources, anticipated
capital expenditures,  capital requirements,  and the Company's plans for future
periods. In addition, the words "could", "expects", "anticipates",  "objective",
"plan",  "may affect",  "may depend",  "believes",  "estimates",  "projects" and
similar  words and phrases are also  intended to identify  such  forward-looking
statements.

         Actual  results  could differ  materially  from those  projected in the
Company's forward-looking statements due to numerous known and unknown risks and
uncertainties,   including,  among  other  things,  unanticipated  technological
difficulties,  the  volatile  and  competitive  environment  for  drug  delivery
products,  changes in  domestic  and  foreign  economic,  market and  regulatory
conditions, the results of development agreements with pharmaceutical companies,
the  inherent   uncertainty  of  financial   estimates  and   projections,   the
uncertainties involved in certain legal proceedings,  instabilities arising from
terrorist actions and responses thereto, and other  considerations  described as
"Risk Factors" in other filings by the Company with the SEC including its Annual
Report on Form 10-K. Such factors may also cause  substantial  volatility in the
market price of the Company's Common Stock. All such forward-looking  statements
are current only as of the date on which such  statements were made. The Company
does not  undertake  any  obligation  to  publicly  update  any  forward-looking
statement to reflect  events or  circumstances  after the date on which any such
statement is made or to reflect the occurrence of unanticipated events.

OVERVIEW

         The Company is a specialty  pharmaceutical  company principally engaged
in the  development  and manufacture of oral  controlled-release  products.  The
Company develops  controlled  release products using proprietary  technology and
licenses these products.  The Company's  strategy  includes  developing  generic
versions of  controlled  release drug  products  with high barriers to entry and
assisting  partner companies in the life cycle management of products to improve
off-patent  drug  products.  The  Company's  technology is applicable to develop
delayed, sustained or targeted release pellets, capsules,  tablets, granules and
powders.  The Company has one product  currently being sold  commercially  and a
pipeline of eight drug products under  development in the therapeutic areas that
include cardiovascular,  pain management, allergy and infection. The addressable
market for the  Company's  pipeline  of  products  exceeds  $4.25  billion.  The
Company's  current  facility  in  Northvale,  New  Jersey  also is a GMP and DEA
registered facility for research, development, and manufacturing.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         Management's  discussion addresses the Company's consolidated financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the United States of America.  The  preparation  of these
financial  statements requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities,  the  disclosure  of
contingent  assets and  liabilities at the date of financial  statements and the
reported  amounts of revenues and expenses  during the reporting  period.  On an
ongoing basis, management evaluates its estimates and judgment,  including those
related to long-lived  assets,  intangible  assets,  income taxes,  equity-based
compensation,  and contingencies and litigation.  Management bases its estimates
and  judgments on  historical  experience  and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making  judgments  about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

                                       13
<PAGE>

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

        THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2005 COMPARED TO
      THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2004 (UNAUDITED)

CRITICAL ACCOUNTING POLICIES AND ESTIMATES (Continued)

         Management believes the following critical accounting  policies,  among
others,  affect  its  more  significant  judgments  and  estimates  used  in the
preparation of its consolidated financial statements.

         The Company's most critical accounting policies include the recognition
of revenue upon  completion  of certain  phases of projects  under  research and
development  contracts.  Revenues  from  these  contracts  are  recognized  when
management determines the Company has completed its obligation under each phase.
The Company  also  assesses a need for an  allowance  to reduce its deferred tax
assets to the amount that it believes  are more likely than not to be  realized.
Management  estimates its net operating  losses will probably not be utilized in
the near future,  and has not  recognized  a tax benefit from this  deferred tax
asset. If management anticipated being profitable,  a deferred tax benefit would
be  recognized  and such  estimate  would reduce net loss and net loss per share
accordingly.  The Company assesses the  recoverability  of long-lived assets and
intangible assets whenever events or changes in circumstances  indicate that the
carrying value of the assets may not be  recoverable.  Management  estimates the
Company's  patents and property and equipment are not impaired.  If these assets
were considered  impaired,  the Company would recognize an impairment loss which
would  increase the  Company's net loss and net loss per share  accordingly.  It
should be noted that  actual  results  may differ  from  these  estimates  under
different assumptions or conditions.

         During the fiscal year ended  March 31,  2003,  the Company  elected to
prospectively recognize the fair value of stock options granted to employees and
members of the Board of  Directors,  effective as of the beginning of the fiscal
year. The prospective method allowed by the Financial Accounting Standards Board
affects the Company's results of operations for the three and nine month periods
ended  December  31, 2005 and 2004 as options  were  granted or repriced  during
these periods which either vested  immediately or vest over three to five years.
The Company does not know the future effect of options and warrants which may be
granted to  employees  and  members  of the Board of  Directors.  The  Financial
Accounting   Standards  Board  provided  three   transition   alternatives   for
recognizing  stock-based  compensation  cost  using the fair  value  method.  If
management did not elect the prospective  method during the three and nine-month
periods ended  December 31, 2005 and 2004, net loss and net loss per share would
have been reduced.  However,  the two other  methods would have required  either
greater  compensation  cost  to be  recognized  as  an  expense  or  retroactive
restatement of previously reported net loss.

RESULTS OF CONSOLIDATED OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2005 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 2004

         Revenues consisted of royalties of $15,635,  for the three months ended
December  31, 2005.  There were no reported  revenues for the three months ended
December 31, 2004.

         General and administrative expenses for the three months ended December
31, 2005 were $379,893,  a decrease of $245,430,  or approximately  39.2%,  from
$625,323  for  the  comparable  period  of the  prior  year.  The  decrease  was
substantially  due to reductions in bad debt expense of $153,250 and  consulting
and  legal  fees  approximating  $90,000,  partially  offset by an  increase  of
allocated salaries of $10,000.

         Research and development  costs for the three months ended December 31,
2005 were  $1,124,581,  an increase of $398,406,  or approximately  54.9%,  from
$726,175 for the  comparable  period of the prior year,  primarily the result of
increases in wages, raw materials,  laboratory and manufacturing  supplies.  The
costs associated with the manufacturing of batches of Lodrane 24(R) and the work
completed  on newly  signed  development  agreements  have  contributed  to this
increase.



                                       14
<PAGE>




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

        THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2005 COMPARED TO
      THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2004 (UNAUDITED)

RESULTS OF CONSOLIDATED OPERATIONS (Continued)

THREE MONTHS ENDED DECEMBER 31, 2005 COMPARED TO THREE MONTHS
ENDED DECEMBER 31, 2004 (Continued)

         We are unable to provide a break-down of the specific costs  associated
with the research and development of each product on which we devoted  resources
because  a  significant  portion  of the  costs are  generally  associated  with
salaries,  laboratory supplies, laboratory and manufacturing expenses, utilities
and similar expenses.  We have not historically  allocated these expenses to any
particular  product.  In addition,  we cannot estimate the additional  costs and
expenses that may be incurred in order to potentially  complete the  development
of any product, nor can we estimate the amount of time that might be involved in
such development because of the uncertainties associated with the development of
controlled release drug delivery products as described in this report.

         Depreciation  and  amortization for the three months ended December 31,
2005  increased  by  $51,090  to  $96,450  from  $45,360  for the  year  earlier
comparable  period due to the full  write-off  of  financing  costs of  $124,212
associated with the redemption of the tax exempt Bonds (the "Bonds")  originally
issued by the  Authority  on  September  2,  1999,  offset by the  reduction  in
amortization and depreciation of certain assets which had been fully depreciated
and amortized.

         Other  expenses, net for the three months ended  December 31, 2005 were
$116,232,  an increase of $227,674,  or approximately 20.5%, from the comparable
period of the prior  year.  The  increase  was  primarily  due to an increase of
$242,321 in charges  related to issuance of stock options.  Additional  interest
income, due to higher compensating balances as a result of the private placement
and EDA refinancing, was somewhat offset by increased interest expense resulting
from the equipment financing.

         As a result  of the  foregoing,  the  Company's  net loss for the three
months ended December 31, 2005 increased  32.4% to $1,701,521  from the net loss
of $1,285,416 for the comparable period of the prior year.

NINE MONTHS ENDED DECEMBER 31, 2005 COMPARED TO NINE MONTHS ENDED
DECEMBER 31, 2004

         The Company's revenues for the nine months ended December 31, 2005 were
$402,578, consisting of manufacturing fees of $369,173 and royalties of $33,405.
Revenues for the nine months ended  December  31, 2004 were  $151,450,  of which
$150,000 was a non-refundable  payment received from Purdue Pharma L.P. granting
it the right to evaluate certain abuse resistance drug formulation technology of
the Company.

         General and administrative  expenses for the nine months ended December
31, 2005 were  $1,241,108,  a decrease  of  $433,933  or 25.9% as compared  with
$1,675,041  for  the  same  period  of  the  prior  year,  substantially  due to
reductions in amounts paid and accrued in settlements  of  litigation,  bad debt
write-offs and legal fees partially  offset by modest  increases in salaries and
accounting fees.

         Research and  development  costs for the nine months ended December 31,
2005  were  $2,862,908,  an  increase  of  $925,114,  or  47.7% as  compared  to
$1,937,794  for the same  period  of the prior  year,  primarily  the  result of
increased  wages,  laboratory  and  manufacturing  supplies  and raw  materials,
largely due to the manufacture of commercial batches of Lodrane 24(R).

         Other  expenses,  net for the nine months ended  December 31, 2005 were
$540,549, a decrease of $375,813,  or 41.0% as compared to $916,362 for the same
period of the prior year,  due primarily to a reduction  during the current year
of $344,720  in  non-cash  compensation  through  issuance of stock  options and
warrants,  and a charge of $397,732  during the nine months  ended  December 31,
2004 related to repricing of stock options.  Additional  interest income was due
to higher  compensating  balances  as a result of a  private  placement  and EDA
refinancing,  somewhat offset by an increase in interest expense  resulting from
the equipment financing.


                                       15
<PAGE>


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

        THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2005 COMPARED TO
      THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2004 (UNAUDITED)

RESULTS OF CONSOLIDATED OPERATIONS (Continued)

NINE MONTHS ENDED DECEMBER 31, 2005 COMPARED TO NINE MONTHS ENDED
DECEMBER 31, 2004 (Continued)

         The Company's net loss for the nine months ended  December 31, 2005 was
$4,648,549  compared to $4,649,827 for the comparable  period of the prior year.
Increases  in  revenues  and  decreases  in  general,  administrative  and other
expenses  net for the nine  months  ended  December  31,  2005  were  offset  by
increases in research and development.

MATERIAL CHANGES IN FINANCIAL CONDITION

         The Company's  working capital (total current assets less total current
liabilities),  decreased to $1,968,499  December 31, 2005 from  $3,328,583 as of
March  31,  2005,  primarily  due to the  use of  cash in  funding  net  loss of
$4,107,000 from operations.

         The  Company   experienced   negative  cash  flow  from  operations  of
$3,246,283  for the nine months ended  December 31, 2005,  primarily  due to the
Company's  net  loss  from  operations  due  to  an  increase  in  research  and
development activities as to the drug products in its pipeline

         On November 15, 2004,  Elite's  partner,  ECR,  launched Lodrane 24(R),
once a day allergy product,  utilizing  Elite's  extended release  technology to
provide for once daily dosing.  Under its agreement with ECR, Elite is currently
manufacturing  commercial batches of Lodrane 24(R) in exchange for manufacturing
margin and  royalties on product  revenues.  Royalty  income earned for the nine
months  ended  December 31, 2005 was $33,405.  The Company  expects  future cash
flows from royalties to provide additional cash to help fund its operations.

         On March 30, 2005,  the Company  entered  into a product,  development,
manufacturing  and  distribution  agreement  with  Harris  Pharmaceutical,  Inc.
("Harris")  and Tish  Technologies  LLC  ("Tish")  with  respect to a controlled
release generic  anti-infective  drug. The product is a generic  equivalent to a
branded drug which the Company  estimates  has  addressable  market  revenues of
approximately  $80  million  per  year.  The  agreement  provides  for  (1)  the
development of the drug by Elite with costs of development to be shared by Elite
and Harris, (2) the manufacture by Elite and its sale to Harris for distribution
and (3) Tish to be responsible for any requisite submissions to the FDA relating
to the product.  Elite is to share in the profits generated from the sale of the
product.

         On June 21, 2005, the Company and  IntelliPharmaCeutics  Corp. ("IPC"),
entered  into  an  agreement  for the  development  and  commercialization  of a
controlled  released  generic  drug for certain  anti-infective  diseases by the
parties. The Company estimates that the product had an addressable market in the
U.S.  of  approximately  $4  billion  in 2004.  The  Company  is to share in the
profits, if any, from the sales of the drug. On December 12, 2005, the agreement
was  amended  with  respect  to the  development  and  commercialization  of the
controlled  release drug product in Canada.  Since IPC intended to enter into an
agreement with a Canadian company with respect to the development,  distribution
and sale of the drug  product in Canada,  the  parties  agreed to suspend  their
obligations   under  the  agreement   with  respect  to  the   development   and
commercialization  of the controlled  release drug product in Canada. IPC agreed
to pay the Company a certain  percentage  of any  payments  received by IPC with
respect the  commercialization  of the  controlled  release drug product by such
Canadian company.

         On June 22, 2005, the Company and Pliva, Inc.  ("Pliva") entered into a
Product  Development  and License  Agreement  providing for the  development and
license of a controlled  released generic  anti-infective drug formulated by the
Company.  The  Company  is to  manufacture  and Pliva  will  market and sell the
product.  Under the agreement,  the partner is to make milestone payments to the
Company.  The  development  costs are to be paid both by Pliva and the  Company,
they have agreed to share the profits equally.

         No  assurance  can be given  that  any of the  above  products  will be
successfully  developed  or that  individually  or in the  aggregate  they  will
generate any material revenues for the Company.

                                       16
<PAGE>

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

        THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2005 COMPARED TO
      THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2004 (UNAUDITED)

LIQUIDITY AND CAPITAL RESOURCES

         For the nine months ended  December 31, 2005,  the Company  experienced
negative cash flow and financed its operations  primarily through utilization of
its existing cash. As of December 31, 2005, the Company had  approximately  $1.6
million of cash and cash equivalents,  a decrease of approximately  $3.0 million
from  the  $4.6  million  at  December  31,  2004  and had  working  capital  of
approximately  $2.0  million.  At December  31,  2004,  the Company had recently
consummated its private placement of Series A Preferred Stock,  raising net cash
of $5,866,000.

         Net cash used in operating  activities was  $3,246,283  during the nine
months ended December 31, 2005, compared to $3,610,066 for the nine months ended
December 31, 2004. Net cash used in operating  activities during the nine months
ended  December  31, 2005  included the  Company's  net loss of  $4,648,549  and
increases  in  prepaid  expenses  and other  current  assets,  offset in part by
non-cash   charges  of  $618,580  in  stock  option   charges  and  $405,562  in
depreciation and  amortization  expense.  Net cash used in operating  activities
during the nine months ended  December 31, 2004  included the Company's net loss
of $4,649,827 offset in part by non-cash charges of $964,300 in stock option and
warrant charges and $271,080 in depreciation and amortization expense.

         Investing activities used net cash of $1,482,011 during the nine months
ended December 31, 2005, which resulted primarily from an increase in restricted
cash requirements as a result of the EDA refinancing.

         During the nine months ended  December 31, 2005,  financing  activities
provided net cash of $2,474,482 derived from net proceeds of $1,292,995 from the
exercise of stock options and warrants and  $1,455,548  from the  refinancing of
Bonds , offset by $274,061  used to repay  indebtedness.  During the nine months
ended December 31, 2004,  financing  activities  provided net cash of $5,866,000
derived from private  placement of Series A Preferred Stock. For the nine months
ended December 31, 2004, $439,989 was used to repay indebtedness.

         The  Company's  capital  expenditures  were $205,625 in the nine months
ended  December  31, 2005 as  compared  to  $427,499  in the nine  months  ended
December 31, 2004, the latter financed through an equipment loan.

         As of December  31, 2005 the Company had cash and cash  equivalents  of
approximately  $1.6  million.  The  Company  anticipates  that such  position is
adequate  to  finance  its  operations  through  June 30,  2006  but  thereafter
additional  financing  may be required,  particularly  in view of the  Company's
expenditures  required for the further development and  commercialization of its
products.  The Company has no current  arrangements  with respect to  additional
financings.  The Company  intends to seek  additional  funds through the sale of
additional  debt or equity,  however no assurance  can be given that the Company
will be able to obtain the required additional  financing or if obtained it will
be on favorable terms. The Company's  inability to obtain  additional  financing
when needed  would  impair its ability to meet its  business  objectives.  Other
possible  sources for such  additional  financings are the cash exercises of the
Long Term Warrants issued in the October 2004 private placement, the Replacement
Warrants  issued in the December 2005 private  placement and other  warrants and
options that are currently outstanding.

         The Company had  outstanding,  as of December  31,  2005,  bonds in the
aggregate  amount of  $4,155,000,  consisting  of  $3,660,000 of 6.5% tax exempt
Bonds with an outside  maturing of  September  1, 2030 and  $495,000 of 9% Bonds
with an outside  maturity of September 1, 2012. The bonds are secured by a first
lien on the Company's facility in Northvale,  New Jersey.  Pursuant to the terms
of the bonds,  several  restricted  cash accounts have been  established for the
payment of bond  principal  and  interest.  Bond  proceeds were utilized for the
redemption  of  previously  issued tax exempt bonds  issued by the  Authority in
September  1999  and to  refinance  equipment  financing,  as  well  as  provide
approximately $1,000,000 of capital for the purchase of additional equipment for
the  manufacture  and  development at the Company's  facility of  pharmaceutical
products and the  maintenance  of a $415,500  debt service  reserve.  All of the
restricted cash, other than the debt service reserve, is expected to be expended
within twelve months ended  December 31, 2006 and is therefore  categorized as a
current  asset on the  Company's  consolidated  balance sheet as of December 31,
2005. Pursuant to the terms of the related bond indenture agreement, the Company
is required to observe certain  covenants,  including  covenants relating to the
incurrence of additional indebtedness, the granting of liens

                                       17
<PAGE>

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

        THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2005 COMPARED TO
      THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2004 (UNAUDITED)

LIQUIDITY AND CAPITAL RESOURCES (Continued)

and the maintenance of certain financial covenants. As of December 31, 2005, the
Company was in compliance with the bond covenants.

         On July 8, 2004, Elite Labs entered into a loan and financing agreement
to finance the purchase of certain machinery and equipment.  Elite Labs borrowed
$400,000 payable in 36 monthly installments of $13,671 each, including principal
and  interest  at 14% per annum.  The first  four and the last  three  months of
scheduled payments are held by the lender to be applied to the principal balance
when due. The loan is secured by two pieces of equipment and the guaranty of the
Company.  In addition,  the Company  issued to  designees  of the lender  50,000
warrants,  which vested immediately,  to purchase 50,000 shares of the Company's
Common  Stock at $4.20 per share.  The cost of $41,252  for these  warrants  was
charged  in  the  nine  months  ended  December  31,  2004.  Proceeds  from  the
refinancing of the Company's EDA Bonds were used to pay-off this loan.

         The  Company  from  time  to time  will  consider  potential  strategic
transactions  including  acquisitions,  strategic alliances,  joint ventures and
licensing arrangements with other pharmaceutical companies. The Company retained
an investment banking firm to assist with its efforts. There can be no assurance
that any such transaction will be available or consummated.

         As of December 31, 2005,  the Company's  principal  source of liquidity
was approximately $1,648,191 of cash and cash equivalents.  The Company also may
receive funds through the exercise of outstanding  stock options and warrants in
addition to funds that may be generated  from the  potential  sale of New Jersey
tax losses.  There can be no assurance that proceeds from the sale of tax losses
and from the  exercise,  if any,  of  outstanding  warrants  or options  will be
material.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company had no investments in marketable  securities as of December
31, 2005 or assets and  liabilities  which are  denominated  in a currency other
than U.S. dollars or involve commodity price risks.

ITEM 4.  CONTROLS AND PROCEDURES

         As of the  end of the  period  covered  by  this  report,  based  on an
evaluation of the Company's  disclosure  controls and  procedures (as defined in
Rules  13a-15(e) and 15d-15(e) under the Securities  Exchange Act of 1934),  the
Chief  Executive and Chief Financial  Officer of the Company  concluded that the
Company's  disclosure  controls  and  procedures  are  effective  to ensure that
information  required to be disclosed by the Company in its Exchange Act reports
is recorded,  processed,  summarized  and reported  within the  applicable  time
periods specified by the SEC's rules and forms.

         There was no change in the Company's  internal  controls over financial
reporting  that occurred  during the fiscal quarter ended December 31, 2005 that
materially  affected or is reasonably  likely to materially affect the Company's
internal controls over financial reporting.


                                       18
<PAGE>



PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to the Risk Factors set forth in the Company's Annual Report on Form
10-K for the year ended March 31,  2005,  stockholder  and  potential  investors
should  consider the following in evaluating an investment in the Company and in
analyzing the Company's forward looking statements:

THE FAILURE TO MAINTAIN THE AMERICAN STOCK EXCHANGE  LISTING OF THE COMMON STOCK
WOULD HAVE A MATERIAL  ADVERSE EFFECT ON THE MARKET FOR THE COMMON STOCK AND ITS
MARKET PRICE.

         On January 4, 2006,  the Company  received a letter  from the  American
Stock  Exchange  ("AMEX")  notifying  it that based on the  Company's  unaudited
financial  statements as of September 30, 2005, the Company is not in compliance
with the continued listing standards set forth in the AMEX Company Guide in that
under one listing standard its shareholders'  equity is less than $4,000,000 and
it had losses from continuing  operations and/or net losses in three of its four
most recent fiscal years and under another  listing  standard its  shareholders'
equity is less than  $6,000,000  and it had losses  from  continuing  operations
and/or net losses in its five most recent  fiscal  years.  The  Company,  at the
request of AMEX, submitted a plan on February 3, 2006 advising AMEX of action it
has taken,  and will take, to bring it in compliance with the continued  listing
standards within a maximum of 18 months from January 4, 2006.  However,  if AMEX
does not accept the plan,  the Company may be subject to delisting  proceedings.
Additionally,  if a plan is accepted but the Company is not in  compliance  with
the continued listing  standards or does not make progress  consistent with such
plan during the plan period, AMEX may then initiate delisting  proceedings.  The
failure to  maintain  listing  of the Common  Stock on AMEX will have an adverse
effect on the market and the market price for the Common Stock.

IF THE  COMPANY  IS  UNABLE  TO  OBTAIN  ADDITIONAL  FINANCING  NEEDED  FOR  THE
EXPENDITURES  FOR THE  DEVELOPMENT AND  COMMERCIALIZATION  OF THE COMPANY'S DRUG
PRODUCTS, IT WOULD IMPAIR THE COMPANY'S ABILITY TO MEET ITS BUSINESS OBJECTIVES.

         As of December  31,  2005,  the  Company had cash and cash  equivalents
aggregate approximately $1.6 million. The Company anticipates that such position
as of December 31, 2005 is adequate to finance its  operations  through June 30,
2006 but  thereafter,  the Company will require  additional  financing to insure
that  the  Company  will be  able  to  meet  the  expenditures  to  develop  and
commercialize  its products  for which the Company has no current  arrangements.
The Company intends to seek additional funds through the sale of additional debt
or equity. No representation can be made that the Company will be able to obtain
additional financing or if obtained it will be on favorable terms, or at all. No
assurance  can be given that any  offering if  undertaken  will be  successfully
concluded or that if  concluded  the proceeds  will be material.  The  Company's
inability to obtain additional financing when needed would impair its ability to
meet its business objectives. Other possible sources of the additional financing
are the cash  exercises  of the Long Term  Warrants  issued in the October  2004
private placement,  the Replacement Warrants issued in the December 2005 private
placement and other warrants and options that are currently outstanding.

         If any future  financing  involves  the further  sale of the  Company's
securities,   the  Company's   then-existing   stockholders'   equity  could  be
substantially  diluted.  On the other hand, if the Company  incurred  debt,  the
Company would be subject to risks  associated with  indebtedness,  including the
risk that interest rates might  fluctuate and cash flow would be insufficient to
pay principal and interest on such indebtedness.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

         On November 8, 2005,  the Company  entered  into a six month  agreement
with an investor relations firm to provide investor relation services including,
but not limited to, overall management of the Company's corporate communications
program,  securing group  appointments,  assistance with mass targeted mailings,
compiling  promotional  materials,  editing news  releases  and other  corporate
functions.  As part of the  compensation,  the Company  granted  the  consultant
non-qualified  options to purchase 75,000 shares of the Company's  Common Stock,
vesting  pro-rata  over a six  month  period at an  exercise  price of $2.26 per
share,  equal to the fair market value of a share of Common Stock on the date of
the grant. If the agreement should be extended beyond six months, the Company is
to grant another  75,000  non-qualified  options with an exercise price equal to
the then fair market value of a share of Common Stock, which would vest over the
service period.


                                       19
<PAGE>



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

                (a)     Exhibits:

                4.1     Form of Replacement Warrant to purchase shares of Common
                        Stock,  incorporated  by reference to exhibit 4.1 to the
                        Form 8-K filed December 20, 2005.

                4.2     Form of Placement  Agent  Warrant to purchase  shares of
                        Common Stock,  incorporated  by reference to exhibit 4.2
                        to the Form 8-K filed December 20, 2005.

                10.1    Product  Development,   Manufacturing  and  Distribution
                        Agreement,  dated as of March  30,  2005,  by and  among
                        Harris Pharmaceutical,  Inc., Tish Technologies, LLC and
                        Elite Labs, incorporated by reference to exhibit 10.1 to
                        the Form 8-K  filed  April 5,  2005 as  amended  by Form
                        8-K/A  filed  July 20,  2005,  as  amended by Form 8-K/A
                        filed  August 23,  2005,  as amended by Form 8-K/A filed
                        September  27, 2005,  as amended by the Form 8-K/A filed
                        December 7, 2005.

                10.2    Product  Development  and  Commercialization  Agreement,
                        dated   as   of   June   21,   2005,    by   and   among
                        Intellepharmaceutics  Corp., Elite Labs and the Company,
                        incorporate by reference to exhibit 10.1 to the Form 8-K
                        filed June 27,  2005,  as  amended  by Form 8-K/A  filed
                        September  7, 2005,  as amended by the Form 8-K/A  filed
                        December 7, 2005.

                10.3    Product  Development and License Agreement,  dated as of
                        June 22,  2005,  between  Pliva,  Inc.  and Elite  Labs,
                        incorporated  by  reference  to exhibit 10.1 to the Form
                        8-K filed June 28, 2005,  as amended by Form 8-K/A filed
                        September  6, 2005,  as amended by the Form 8-K/A  filed
                        December 7, 2005.

                10.4    Agreement,  dated  December 12,  2005,  by and among the
                        Registrant,     Elite     Laboratories,     Inc.,    and
                        IntelliPharmaCeutics Corp., incorporated by reference to
                        exhibit 10.1 to the Form 8-K filed December 16, 2005.*

                10.5    Form  of  Warrant   Exercise   Agreement   between   the
                        Registrant    and   holders   of   Existing    Warrants,
                        incorporated  by  reference  to exhibit 10.1 to the Form
                        8-K filed December 20, 2005.

                10.6    Form  of  Registration   Rights  Agreement  between  the
                        Registrant   and   holders  of   Replacement   Warrants,
                        incorporated  by  reference  to exhibit 10.2 to the Form
                        8-K filed December 20, 2005.

                10.7    Placement Agent Agreement  between Indigo Securities LLC
                        and the Registrant, incorporated by reference to exhibit
                        10.3 to the Form 8-K filed December 20, 2005.

                10.8    Product Development and Commercialization  Agreement, as
                        of January 10, 2006, by and among Orit Laboratories LLC,
                        Elite Laboratories, Inc. and Elite Pharmaceuticals, Inc.
                        incorporated  by reference to the Form 8-K filed January
                        17, 2006.*

                31.1    Certification  of Chief  Executive  Officer  pursuant to
                        Section 302 of the Sarbanes-Oxley Act of 2002.

                31.2    Certification  of Chief  Financial  Officer  pursuant to
                        Section 302 of the Sarbanes-Oxley Act of 2002.

                32.1    Certification  of Chief  Executive  Officer  pursuant to
                        Section 906 of the Sarbanes-Oxley Act of 2002.

                32.2    Certification  by Chief  Financial  Officer  pursuant to
                        Section 906 of the Sarbanes-Oxley Act of 2002..

                99.1    Letter from Listing Qualifications,  AMEX, dated January
                        4, 2006,  incorporated  by  reference to exhibit 99.1 to
                        the Form 8-K filed January 10, 2006.

* The  Registrant  has  requested  confidential  treatment  with  respect to the
referenced  exhibit.  In the event that the Securities  and Exchange  Commission
should deny such  request in whole or in part,  such  exhibit  thereof  shall be
filed by amendment to this Current Report on Form 8-K.


                                       20
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                   ELITE PHARMACEUTICALS, INC.


Date:    February 14, 2006         By: /s/ Bernard Berk
                                   ----------------------------
                                   Bernard Berk
                                   Chief Executive Officer
                                   (Principal Executive Officer)


Date:    February 14, 2006         By:  /s/ Mark I. Gittelman
                                   ----------------------------
                                   Mark I. Gittelman
                                   Chief Financial Officer and Treasurer
                                   (Principal Financial and Accounting Officer)


                                       21