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                SEPTEMBER 30, 2006
                                -----------------------------------------------

                                       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 [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):

Large accelerated filer [ ]   Accelerated filer [ ]    Non-accelerated filer [x]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [x]


                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  November  10,  2006:  19,499,325  (exclusive  of 100,000  shares  held in
treasury).



<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES



                                      INDEX


                                                                        Page No.

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets as of September 30, 2006
         (unaudited) and March 31, 2006 (audited)                          1 - 2

         Consolidated Statements of Operations for the three
         and six months ended September 30, 2006 and
         September 30, 2005 (unaudited)                                        3

         Consolidated Statement of Changes in Stockholders' Equity
         for the six months ended September 30, 2006 (unaudited)               4

         Consolidated Statements of Cash Flows for the six months
         ended September 30, 2006 and September 30, 2005 (unaudited)           5

         Notes to Consolidated Financial Statements                       6 - 12

Item 2.  Management's Discussion And Analysis of Financial
         Condition And Results Of Operations                               13-17

Item 3.  Quantitative And Qualitative Disclosures
         About Market Risk                                                    18

Item 4.  Controls and Procedures                                              18


PART II  OTHER INFORMATION

Item 5.  Other Information                                                    19

Item 6.  Exhibits                                                             22


SIGNATURES                                                                    23




<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS



                                     ASSETS

                                                   SEPTEMBER 30,       MARCH 31,
                                                       2006               2006
                                                    (Unaudited)        (Audited)

CURRENT ASSETS:
   Cash and cash equivalents                        $ 4,895,866      $ 8,919,354
   Accounts receivable, net of allowance
     for doubtful accounts of $0 and $153,250,
     respectively                                       135,559              ---
   Current portion of restricted cash -
     capital project fund                               745,001        1,173,896

   Prepaid expenses and other current assets            648,873          470,633
                                                    -----------      -----------
     Total current assets                             6,425,299       10,563,883
                                                    -----------      -----------
PROPERTY AND EQUIPMENT, net of accumulated
     depreciation and amortization                    4,281,361        4,308,969
                                                    -----------      -----------

INTANGIBLE ASSETS - net of accumulated
     amortization                                        53,857           59,457
                                                    -----------      -----------

OTHER ASSETS:
     Security deposit                                     6,980            6,980
     Restricted cash - debt service                     415,500          415,500
     EDA bond offering costs, net of
       accumulated amortization of  $13,000
       and $7,000, respectively                         341,452          347,452
                                                    -----------      -----------

     Total other assets                                 763,932          769,932
                                                    -----------      -----------

     Total assets                                   $11,524,449      $15,702,241
                                                    ===========      ===========



    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

                                                   SEPTEMBER 30,      MARCH 31,
                                                       2006             2006
                                                    (Unaudited)       (Audited)

CURRENT LIABILITIES:
   Current portion of EDA bonds                     $   185,000      $  175,000
   Accounts payable and accrued expenses              1,367,503       1,740,263
   Dividends payable
                                                            ---          33,333
                                                    -----------     -----------
     Total current liabilities                        1,552,503       1,948,596
                                                    -----------     -----------

LONG TERM LIABILITIES:
     EDA bonds - net of current portion               3,795,000       3,980,000
                                                    -----------     -----------
       Total liabilities                              5,347,503       5,928,596
                                                    -----------     -----------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred Stock -- $.01 par value;
     Authorized 4,483,442 shares (originally
     5,000,000 shares of which 516,558 shares
     of Series A Convertible Preferred Stock
     retired) and 0 shares outstanding as of
     September 30, 2006 and March 31, 2006
     respectively Authorized 10,000 Series B
     Convertible Preferred Stock - issued and
     outstanding - 9,695 and 10,000 shares,
     respectively                                            97             100

     Common Stock - $.01 par value;
     Authorized - 65,000,000 shares
     Issued and outstanding - 19,599,325 shares
     and 19,190,159 shares respectively                 195,993         191,902
   Additional paid-in capital                        61,088,596      57,983,190
   Accumulated deficit                              (54,800,899)    (48,094,706)
                                                    -----------     -----------
                                                      6,483,787      10,080,486
   Treasury stock, at cost (100,000 shares)
     Total stockholders' equity                        (306,841)       (306,841)
                                                    -----------     -----------
                                                      6,176,946       9,773,645
                                                    -----------     -----------
     Total liabilities and stockholders' equity     $11,524,449     $15,702,241
                                                    ===========     ===========


         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               SIX MONTHS ENDED
                                                     SEPTEMBER 30,                    SEPTEMBER 30,
                                                  2006           2005              2006          2005
                                               (Unaudited)     (Unaudited)      (Unaudited)   (Unaudited)
<S>                                            <C>             <C>             <C>             <C>
REVENUES
      Manufacturing Fees                       $    135,559    $    254,392    $    267,459    $    369,173
      Royalties                                      23,517          17,770          44,644          17,770
                                               ------------    ------------    ------------    ------------

TOTAL REVENUES                                      159,076         272,162         312,103         386,943
                                               ------------    ------------    ------------    ------------

COST OF OPERATIONS:
      Research and development                    1,308,882         999,340       2,625,290       1,738,327
      General and administrative                    542,805         434,685       1,089,718         861,215
      Depreciation and amortization                 119,535         215,362         239,070         309,112
                                               ------------    ------------    ------------    ------------
                                                  1,971,222       1,649,387       3,954,078       2,908,654
                                               ------------    ------------    ------------    ------------

LOSS FROM OPERATIONS                             (1,812,146)     (1,377,225)     (3,641,975)     (2,521,711)
                                               ------------    ------------    ------------    ------------

OTHER INCOME (EXPENSES):
      Interest income                                86,759          16,636         187,265          36,466
      Interest expense                              (69,550)        (73,381)       (140,181)       (129,506)
      Non-cash compensation through issuance
          of stock options and warrants            (289,312)       (286,727)       (589,312)       (331,277)
                                               ------------    ------------    ------------    ------------
                                                   (272,103)       (343,472)       (542,228)       (424,317)
                                               ------------    ------------    ------------    ------------

LOSS BEFORE PROVISION FOR INCOME TAXES           (2,084,249)     (1,720,697)     (4,184,203)     (2,946,028)
                                               ------------    ------------    ------------    ------------

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

NET LOSS                                       $ (2,084,249)   $ (1,720,697)   $ (4,185,203)   $ (2,947,028)
                                               ============    ============    ============    ============

BASIC AND DILUTED LOSS PER COMMON SHARE        $       (.11)   $       (.09)   $       (.22)   $       (.16)
                                               ============    ============    ============    ============

WEIGHTED AVERAGE NUMBER OF
      COMMON SHARES OUTSTANDING                  19,437,516      18,179,080      19,339,501      18,130,468
                                               ============    ============    ============    ============
</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
                                                                                                    ----------
                                              PREFERRED STOCK                COMMON STOCK             PAID-IN
                                              ---------------                 ------------            -------
                                            SHARES       AMOUNT           SHARES        AMOUNT        CAPITAL
                                            ------       ------           ------        ------        -------
<S>                                         <C>       <C>               <C>          <C>            <C>
BALANCE AT MARCH 31, 2006 (AUDITED)         10,000    $        100      19,190,159   $    191,902   $ 60,105,107


Six Months ended September 30,
2006: (Unaudited)

Conversion of Preferred to Common             (305)             (3)        135,555          1,356         (1,353)

Conversion of Warrants to Common                --              --          84,430            844           (844)

Non-cash compensation through issuance
     of stock options and warrants              --              --              --             --        589,312

Net loss for six months ended                   --              --              --             --             --
September 30, 2006

Dividends
                                                --              --         189,181          1,891        396,374
                                      ------------    ------------    ------------   ------------   ------------
BALANCE AT SEPTEMBER 30, 2006
(UNAUDITED)                                  9,695    $        (97)     19,599,325   $    195,993   $ 61,088,596
                                      ============    ============    ============   ============   ============
</TABLE>


<TABLE>
<CAPTION>


                                              TREASURY STOCK           ACCUMULATED   STOCKHOLDERS'
                                              --------------           -----------   -------------
                                           SHARES        AMOUNT          DEFICIT         EQUITY
                                           ------        ------          -------         ------
<S>                                       <C>         <C>             <C>             <C>
BALANCE AT MARCH 31, 2006 (AUDITED)       (100,000)   $   (306,841)   $(50,216,623)   $  9,773,645


Six Months ended September 30,
2006: (Unaudited)

Conversion Preferred to Common                  --              --              --              --

Conversion of Warrants to Common                --              --              --              --

Non-cash compensation through issuance
     of stock options and warrants              --              --              --         589,312

Net loss for six months ended                   --              --      (4,185,203)     (4,185,203)
September 30, 2006

Dividends
                                                --              --        (399,073)           (808)
                                      ------------    ------------    ------------    ------------
BALANCE AT SEPTEMBER 30, 2006
(UNAUDITED)                               (100,000)   $   (306,841)   $(54,800,899)   $  6,176,946
                                      ============    ============    ============    ============
</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>
                                                                                                           SIX MONTHS ENDED
                                                                                                             SEPTEMBER 30,
                                                                                                       2006                2005
                                                                                                    (UNAUDITED)         (UNAUDITED)
<S>                                                                                                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                                       $(4,185,203)        $(2,947,028)
     Adjustments to reconcile net loss to cash used in operating activities:
        Depreciation and amortization                                                                   239,070             309,112
        Non-cash compensation satisfied by issuance of common stock, options                            589,312             331,277
          and warrants
        Changes in assets and liabilities:
           Accounts receivable                                                                         (135,559)            142,113
           Prepaid expenses and other current assets                                                   (178,240)            (33,687)
           Security deposit                                                                                  --              (6,980)
           Accounts payable, accrued expenses and other current liabilities                            (372,760)            160,386
                                                                                                    -----------         -----------
NET CASH USED IN OPERATING ACTIVITIES                                                                (4,043,380)         (2,044,807)
                                                                                                    -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment                                                               (194,392)           (117,613)
     (Increase) in restricted cash                                                                           --          (1,674,735)
     Release of restricted cash                                                                         428,895
                                                                                                                            413,425
     Increase in intangible assets due to patent costs                                                   (5,470)                 --
                                                                                                    -----------         -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                                     229,033          (1,378,923)
                                                                                                    -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Dividends                                                                                          (34,141)                 --
     Proceeds - NJEDA tax exempt bonds                                                                       --           4,155,000
     Payment - EDA bond offering costs                                                                       --            (354,452)
     Principal repayments NJEDA bonds                                                                  (175,000)         (2,345,000)
     Principal equipment note payments                                                                       --            (274,061)
     Proceeds from exercise of stock options                                                                 --              40,000
     Proceeds from exercise of stock warrants                                                                --             156,502
                                                                                                    -----------         -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                                                    (209,141)          1,377,989
                                                                                                    -----------         -----------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                                              (4,023,488)         (2,045,741)

CASH AND CASH EQUIVALENTS - beginning of period                                                       8,919,354           3,902,003
                                                                                                    -----------         -----------

CASH AND CASH EQUIVALENTS - end of period                                                           $ 4,895,866         $ 1,856,262
                                                                                                    ===========         ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid for interest                                                                             141,243              92,937
     Cash paid for income taxes                                                                           1,000               1,000

SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
     Preferred stock dividends of $398,265 paid by issuance of 189,181
        shares of common stock
</TABLE>

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

                                       5
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
                                   (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 six  months
             ended  September  30, 2006 and  September 30, 2005. As of September
             30, 2006, 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,  2006.  There have been no
             changes in significant accounting policies since March 31, 2006.

             The Company does not  anticipate  being  profitable for fiscal year
             2007;  therefore  a  current  provision  for  income  tax  was  not
             established  for the three or six months ended  September 30, 2006.
             Only the  minimum  corporation  tax  liability  required  for state
             purposes is reflected.

             On August 16, 2006,  the Company  announced that the American Stock
             Exchange  ("AMEX")  confirmed  the Company has regained  compliance
             with continued listing standards of AMEX.

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 had been deposited in
             a short-term restricted cash account to fund the future purchase of
             manufacturing  equipment and development of the Company's facility.
             As of  September  30,  2006,  there is  $745,001  remaining  in the
             short-term restricted cash account.



                                       6


<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STAT EMENTS
             THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
                                   (UNAUDITED)

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

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

             During the six  months  ended  September  30,  2006,  305 shares of
             Series B Preferred  Stock were  converted  into  135,555  shares of
             Common Stock.

             Dividends  accrued on Series B Preferred  Stock through  conversion
             date or September 30, 2006 were  satisfied by the issuance of 1,318
             and 187,863 shares of Common Stock, respectively.

             During the six months  ended  September  30,  2006,  3,750  options
             expired and 65,500 were forfeited.

             During the six months ended September 30, 2006, there were cashless
             exercises of 217,452  warrants issued in our October,  2004 Private
             Placement,  which  resulted  in the  issuance  of 84,430  shares of
             Common Stock.

             The  following  grants  were made  under the  Company's  2004 Stock
             Option Plan in the current fiscal year.

             On June 1, 2006,  the Company  entered  into a one year  consulting
             agreement  with  David  Filer,  whereby  Dr.  Filer  is to  provide
             financial  advisory  services to the Company.  In consideration for
             his services,  Dr. Filer received options to purchase 10,000 shares
             of Common Stock exercisable from June 1, 2006 to June 1, 2009, with
             an exercise price of $3.00 per share.

             On May 3, 2006,  the Company  granted  options to  purchase  70,000
             shares of Common Stock with an exercise price of $2.26 per share to
             its chief financial  officer.  One-third of the options vest on May
             3, 2007,  a second  third  vest on May 3, 2008 and the final  third
             vest on May 3, 2009.

             Additionally,  in May,  2006,  54,000  ten (10) year  options  were
             granted to six (6) employees  which vest over a period of three (3)
             years from grant date.

             The per share weighted average of the above mentioned stock options
             ranged from $1.55 to $1.69 using the Black-Scholes  options pricing
             model with the following weighted average assumptions:  no dividend
             yield;  expected  volatility of 59.52%;  risk free interest rate of
             5.00% and expected lives of ten (10) years.

             The  following  grants  were made  under the  Company's  2004 Stock
             Option Plan in the previous fiscal year.

             On July 14, 2005,  the Company  granted under its 2004 Stock Option
             Plan,  ten (10) year  options to  purchase  at a price of $2.80 per
             share an aggregate  of 152,200  shares of Common Stock to employees
             of the Company. Vesting periods range from immediate to a period of
             five years from date to grant.

             On the same,  date,  the Company  granted ten (10) year  options to
             purchase  20,000  shares  of  Common  stock at a price of $2.80 per
             share to its Chief Financial  Officer.  The option will vest over a
             three-year period.

             On August 24, 2005,  the Company  granted ten (10) year  options to
             purchase  in  the  aggregate  2,000 shares at a  price of $2.81 per
             share to employees of the Company under the 2004 Stock Option Plan
             vesting over a three year period.



                                       7
<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STAT EMENTS
             THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
                                   (UNAUDITED)

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

             On August 30, 2005, the Company granted under its 2004 Stock Option
             Plan options to purchase an  aggregate of 120,000  shares of Common
             Stock to the Directors.  The 120,000 options granted under the 2004
             Plan to the  Directors  expire ten years from the issuance  have an
             exercise  price of $2,75  per  share  and  vest  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 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.

             On  September  2, 2005,  the Company  granted  under its 2004 Stock
             Option Plan to the Chief Executive Officer ten (10) year options to
             purchase an additional 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 as follows:

             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.

             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  $589,312  and  $331,277  for the six
             months  ended  September  30,  2006 and 2005,  respectively,  which
             represents  the fair value of the  vested  options,  utilizing  the
             Black-Scholes  options  pricing  model on the grant  date.  For the
             three months ended September 30, 2006 and 2005, charges of $289,312
             and $286,727, respectively were taken by the Company.

             At September 30, 2006,  Elite  had  outstanding  3,036,000  options
             with  exercise  prices  ranging  from $1.50 to $3.00 and  6,461,747
             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.


                                        8

<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
                                   (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 another 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.

             The aforementioned agreements are in their infancy stages.

             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.

             On June 19, 2006, the Company  received  written notice from Harris
             of  Harris'   intent  to   terminate   the   Product   Development,
             Manufacturing  and  Distribution  Agreement,  dated as of March 30,
             2005.  As the date  hereof,  there have been no  material  revenues
             earned under the Agreement.

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

             On June 1, 2006,  the Company  entered  into a one year  consulting
             agreement  with  David  Filer,  whereby  Dr.  Filer  is to  provide
             financial  advisory  services to the Company.  In consideration for
             his services,  Dr. Filer received options to purchase 10,000 shares
             of Common Stock exercisable from June 1, 2006 to June 1, 2009, with
             an exercise price of $3.00 per share.

             On May 23, 2006,  the Company  entered into a consulting  agreement
             with  Oppenheimer & Co., Inc.  ("Oppenheimer")  to render financial
             advisory  services  to the  Company in  connection  with  potential
             acquisitions  by  the  Company,   strategic  alliances  with  other
             pharmaceutical companies,  advice with respect to future financings
             to be undertaken by the Company and introductions to key parties in
             the capital markets. In consideration for its services, Oppenheimer
             received from the Company a cash fee of $60,000.


                                       9

<PAGE>


                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
                                   (UNAUDITED)

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

             CONSULTING AGREEMENTS (Continued)
             ---------------------
             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 nine 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.

             On July 12, 2006,  the Company  entered  into a Financial  Advisory
             Agreement   (the   "Agreement")   with  Indigo   Ventures,   L.L.C.
             ("Indigo"),  of which one of the Company's nonemployee Directors is
             an officer . The term of the Agreement is for three years effective
             as of July 1, 2006;  provided,  that either party can terminate the
             Agreement, for any reason, at any time upon 30 days written notice.
             Pursuant to the Agreement, Indigo, on a non-exclusive basis, agrees
             to advise,  consult with, and assist the Company in various matters
             as  requested  (and only to the extent  requested)  by the  Company
             which may include, without limitation (i) a review of the Company's
             business, operations and financial condition, including advising on
             capitalization structures;  (ii) advice relating to general capital
             raising  matters;   (iii)  recommendations   relating  to  specific
             business operations, strategic transactions and joint ventures (iv)
             advice  regarding  future  financings   involving  debt  or  equity
             securities  of the Company or any  affiliate of the Company and (v)
             assistance with interaction between the Company and its current and
             future  investors.  The Company  initially  paid Indigo $45,000 and
             will pay Indigo $15,000 per month on an ongoing basis.

             Additionally,  Indigo  acquired a warrant to purchase up to 600,000
             shares of Common Stock,  par value $0.01 per share,  of the Company
             (the "Common  Stock") for an aggregate  purchase price of $150,000.
             The  warrant (i) shall vest as follows:  50,000  shares  shall vest
             quarterly  beginning on the three (3) month  anniversary of July 1,
             2006, (ii) shall expire on July 1, 2011, and (iii) shall terminate,
             to the  extent  unvested,  as of the  date  of  termination  of the
             Agreement,  (iv) shall  fully vest upon a change of control and (v)
             shall  have an  exercise  price of $3.00 per  shares of the  Common
             Stock.

             For the three and six months ended  September 30, 2006,  consulting
             expenses under these agreements amounted to an aggregate of $68,500
             and $203,500, 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.



                                       10
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
                                   (UNAUDITED)


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

             EMPLOYMENT AGREEMENT (Continued)
             --------------------

             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  accrued but was not 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  September 30,
             are:

                                      2007              $26,526



NOTE 5   -   SUBSEQUENT EVENTS

             On November 13, 2006, the Company entered into a Second Amended and
             Restated Employment  Agreement with Bernard Berk as Chief Executive
             Officer and employment  agreements  with each of Dr. Charan Behl as
             Executive  Vice  President and Chief  Scientific  Officer and Chris
             Dick as Executive  Vice  President of Corporate  Development.  Each
             agreement is for an initial  term of three years  subject to annual
             extensions,  unless  terminated  by notice by either the Company or
             the executive at least 60 days before the period of extension.

             Mr. Berk's agreement  continues his annual salary of $330,140.  Dr.
             Behl's and Mr. Dick's agreement  provides for an annual base salary
             of $250,000 and $200,000 respectively, plus an annual bonus each of
             $25,000. The Compensation Committee as to Mr. Berk and the Board of
             Directors or Compensation Committee as to Dr. Behl and Mr. Dick may
             authorize the payment to the executive of a discretionary  bonus of
             up to 50% of his then annual base salary, based on various factors.
             Each  agreement   provides  for  severance  pay  in  the  event  of
             termination by the Company  without cause,  due to disability or by
             the executive for good reason.


                                       11
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
                                   (UNAUDITED)


NOTE 5 -     SUBSEQUENT EVENTS (continued)
             ------------------

             Dr. Behl and Mr. Dick are each  granted  under the  Company's  2004
             Stock Option Plan (the "Plan")  incentive stock options to purchase
             250,000  shares of the  Company's  Common Stock at $2.25 per share,
             the  market  price on the date of  grant.  Based on the  occurrence
             within the initial term of employment of a specified transaction or
             event  (including  a market  product  license  or  product  sale or
             completion  of the first  Phase III  clinical  trial of a specified
             drug under  development or the filing or granting of an ANDA or NDA
             or U.S. patent  application not previously  filed or granted) up to
             700,000 options including 400,000  previously  granted to Berk will
             vest, and up to 500,000  incentive stock options granted to each of
             Dr. Behl and Mr. Dick will vest.  As to each  executive and subject
             to the full vesting during the initial term of his agreement of the
             foregoing  options,  each  executive  will  be  granted  additional
             incentive  stock  options  under  the Plan at the end of the  first
             fiscal year in which the event or transaction  occurs at the market
             price on the date of grant.

             See "Item 5. Other Information" for a more detailed  description of
             the agreements and options.





                                       12
<PAGE>


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

        THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 2006 COMPARED TO
      THE THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 2005 (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,  2006  (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  manufacturing  of oral  controlled-release  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.  Elite's
technology  is  applicable  to develop  delayed,  sustained or targeted  release
capsules or tablets. Elite has one product currently being sold commercially and
a pipeline of eight drug products  under  development in the  therapeutic  areas
that  include  pain  management,  cardiovascular,  allergy  and  infection.  The
addressable  market for the Elite's current  products  exceeds $6 billion in the
aggregate.  Elite  also  has a GMP and DEA  registered  facility  for  research,
development, and manufacturing located in Northvale, New Jersey.

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

                                       13
<PAGE>

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.

        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.

RESULTS OF CONSOLIDATED OPERATIONS

THREE  MONTHS  ENDED  SEPTEMBER  30, 2006  COMPARED  TO  THREE  MONTHS  ENDED
SEPTEMBER 30, 2005

        Revenues of $159,076  consisted of  manufacturing  fees and royalties of
$135,559 and $23,517,  respectively,  for the three months ended  September  30,
2006.  Revenues of $272,162  consisted  of  $254,392 in  manufacturing  fees and
$17,770 in royalties for the three months ended September 30, 2005.

        General and  administrative  expenses  (G&A) for the three  months ended
September  30, 2006 were  $542,805,  an increase of $108,120,  or  approximately
24.9%,  from G&A for the  comparable  period of the prior year. The increase was
substantially  due to  increases  in  consulting  fees,  partially  offset  by a
decrease in legal and accounting fees.

        Research and development  costs for the three months ended September 30,
2006 were  $1,308,882,  an increase of  $309,542,  or  approximately  31.0% from
$999,340 for the  comparable  period of the prior year,  primarily the result of
increases in wages and related payroll taxes and fringe benefits, raw materials,
and laboratory and  manufacturing  supplies.  Contributing to this increase also
includes the costs associated with the manufacturing of batches of Lodrane 24(R)
and Lodrane 24D(R), the work completed on newly signed  development  agreements,
the advance of our abuse  resistant  oxycodone into Phase II and completion of a
Phase I study as to the ELI 154 once daily oxycodone drug.

        We are in the process of implementing a cost accounting  system to allow
for the  capturing  and  reporting  of  costs of goods  sold  and  research  and
development costs by product.  However, since the cost accounting system has not
been fully  implemented, we are unable to provide a  break-down  of the specific
costs associated with the research and development of each product.  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.

        Depreciation  and  amortization for the three months ended September 30,
2006  decreased  by $95,827

                                       14
<PAGE>

to $119,535 from $215,362 for the year earlier comparable period. A reduction in
amortization   of  financing   costs  was  partially   offset  by  increases  in
depreciation  and  amortization  on acquired new  machinery  and  equipment  and
upgrading of the corporate and warehouse facilities.

        Other  expenses,  net for the three months ended September 30, 2006 were
$272,103,  a decrease of $71,369,  or approximately  20.7%,  from the comparable
period of the prior  year.  The  decrease  was  primarily  due to an increase of
$70,123 in interest  income due to higher  compensating  balances as a result of
the private placement and NJEDA refinancing.

        As a result  of the  foregoing,  the  Company's  net loss for the  three
months ended  September 30, 2006  increased to  $2,084,429  from the net loss of
$1,720,697 for the comparable period of the prior year.

SIX MONTHS ENDED  SEPTEMBER 30, 2006 COMPARED TO SIX MONTHS ENDED  SEPTEMBER 30,
2005

        The Company's  revenues for the six months ended September 30, 2006 were
$312,103, consisting of manufacturing fees of $267,459 and royalties of $44,644.
Revenues for the six months ended  September 30, 2005 were $386,943,  consisting
of manufacturing fees of 369,173 and royalties of $17,770.

        General and  administrative  expenses for the six months ended September
30, 2006 were $1,089,718, an increase of $228,503 or 26.5% from $861,215 for the
comparable  period  of  the  prior  year,  substantially  due  to  increases  in
consulting fees, hiring expenses and temporary help.

        Research and  development  costs for the six months ended  September 30,
2006 were  $2,625,290,  an increase of  $886,963,  or  approximately  51.0% from
$1,738,327 for the comparable period of the prior year,  primarily the result of
increased wages and related payroll taxes and fringe benefits, testing fees, lab
and manufacturing supplies and raw materials,  largely due to the manufacture of
commercial  batches of Lodrane  24(R) and Lodrane  24D(R) and work  completed on
newly signed development  agreements.  Contributing to this increase is also the
advance of our abuse resistant oxycodone into Phase II and completion of a Phase
I study as to the ELI 154 once daily oxycodone drug.

        Depreciation  and  amortization  for the six months ended  September 30,
2006 was $239,070,  a decrease of $70,042 or  approximately  22.7% from $309,112
for the comparable  period of the prior year. This was the result of the Company
taking  in 2005  the full  write-off  of  financing  costs  associated  with the
redemption of tax exempt Bonds,  originally issued by the Authority on September
2, 1999,  partially  offset by increases in depreciation in 2006 due to acquired
new  machinery  and  equipment  and  upgrading of the  corporate  and  warehouse
facilities.

        Other  expenses,  net for the six months ended  September  30, 2006 were
$542,228,  an increase of $117,911 or approximately  27.8% from $424,317 for the
comparable  period of the prior  year.  The  increase  was  primarily  due to an
increase of $258,035 in charges  related to issuance of stock options  partially
offset by additional  interest income due to higher  compensating  balances as a
result of the private placement and NJEDA refinancing.

        As a result of the foregoing,  the Company's net loss for the six months
ended September 30, 2006 increased to $4,185,203 from the net loss of $2,947,028
for the comparable period of the prior year.



                                       15
<PAGE>

MATERIAL CHANGES IN FINANCIAL CONDITION

        The Company's  working  capital (total current assets less total current
liabilities),  decreased to $4,872,796 as of September 30, 2006 from  $8,615,287
as of March 31,  2006,  primarily  due to the use of cash in funding net loss of
$3,641,975 from operations.

        The Company experienced negative cash flow from operations of $4,043,380
for the six  months  ended  September  30,  2006,  primarily  the  result of the
Company's  net  loss  from  operations  due  to  an  increase  in  research  and
development activities for 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 six
months ended  September 30, 2006 was $44,644.  The Company  expects  future cash
flows from royalties to provide additional cash to help to fund its operations.

        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.  The  agreement  was  amended  on
December  12,  2005,   whereby  IPC  and  another  company  with  marketing  and
distribution  capabilities  in  Canada,  have  agreed  to  the  development  and
commercialization  of the  product  for  Canada.  Elite and IPC are to share the
proceeds of commercialization in Canada.

        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 and
the profits are to be shared.

        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.

LIQUIDITY AND CAPITAL RESOURCES

        For the six months ended  September  30, 2006,  the Company  experienced
negative cash flow and financed its operations  primarily through utilization of
its existing cash. As of September 30, 2006, the Company had approximately  $4.9
million of cash and cash equivalents,  a decrease of approximately  $4.0 million
from $8.9  million at March 31,  2006 and had working  capital of  approximately
$4.9 million.

        Net cash used in  operating  activities  was  $4,043,380  during the six
months ended September 30, 2006, compared to $2,044,807 for the six months ended
September 30, 2005. Net cash used in operating  activities during the six months
ended  September 30, 2006  included the  Company's  net loss of  $4,185,203  and
increases  in  prepaid  expenses  and other  current  assets,  offset in part by
non-cash   charges  of  $589,312  in  stock  option   charges  and  $239,070  in
depreciation and  amortization  expense.  Net cash used in operating  activities
during the six months ended  September  30, 2005 included the Company's net loss
of $2,947,028 offset in part by non-cash charges of $331,277 in stock option and
warrant charges and $309,112 in depreciation and amortization expense.

        Investing activities provided net cash of $229,033 during the six months
ended  September  30,  2006,  which  resulted  primarily  from  the  release  of
restricted  cash of  $428,395,  offset  in  part by  $194,392  in  property  and
equipment purchases.


                                       16
<PAGE>

        During the six months ended  September  30, 2006,  financing  activities
used net  cash of  $34,141  to pay  dividends  and  $175,000  to make  principal
payments on the NJEDA  Bonds.  During the six months ended  September  30, 2005,
financing  activities  provided net cash of $1,377,989 derived from the exercise
of stock options and warrants  totaling  $196,502 and net proceeds  derived from
refinancing NJEDA Bonds totaling  $3,800,548,  partially offset by $2,619,061 in
principal note payments.

        The  Company   anticipates  that  such  cash  and  cash  equivalents  of
approximately $4.9 million as of September 30, 2006, are adequate to finance its
operations  through June 30, 2007 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
continue  to meet its  business  objectives.  Other  possible  sources  for such
additional financings are cash exercises of the Long Term Warrants issued in the
October 2004 private placement,  the Replacement Warrants issued in the December
2005 private placement, a warrant issued in the March 2006 private placement and
other warrants and options that are currently outstanding.

        The Company had  outstanding,  as of September  30,  2006,  bonds in the
aggregate  principal amount of $3,980,000,  consisting of $3,540,000 of 6.5% tax
exempt  Bonds with an outside  maturity of  September 1, 2030 and $440,000 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 the six months  ended March 31, 2007 and is  therefore  categorized  as a
current  asset on the Company's  consolidated  balance sheet as of September 30,
2006. 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 and the maintenance
of certain  financial  covenants.  As of September 30, 2006,  the Company was in
compliance with the bond covenants.

        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 September 30, 2006,  the Company's  principal  source of liquidity
was approximately $4,895,866 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.


                                       17
<PAGE>



ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company had no investments in marketable  securities as of September
30, 2006 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 September 30, 2006 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 5. OTHER INFORMATION.

        The Company on November 13, 2006 entered into (i) the Second Amended and
Restated  Employment  Agreement  with  Mr.  Bernard  Berk  ("BERK"),  its  Chief
Executive Officer and Chairman of the Board of Directors (the "BERK AGREEMENT");
(ii) an employment  agreement  with Dr.  Charan Behl ("BEHl") as Executive  Vice
President and Chief Scientific Officer;  and (iii) an employment  agreement with
Mr. Chris Dick ("Dick") as Executive Vice President of Corporate Development.

        The Berk  Agreement  provides for a base annual  salary of $330,140 (his
current  salary)  which  may at the  discretion  of the  Board of  Directors  be
increased in light of factors including the existing financial  condition of the
Company  and his  success  in  implementing  the  Company's  business  plan  and
achieving its strategic alternatives. He is to continue to receive an automobile
allowance of $800 per month. The Behl and Dick Agreements provide for an initial
base annual salary of $250,000 and $200,000, respectively, a guaranteed bonus of
$25,000  payable  within 30 calendar  days of the end of each fiscal year during
the  term and  commencing  January  1,  2007  and a $700  per  month  automobile
allowance.

        Each of the three  agreements  provides  for payment of a  discretionary
bonus following the end of each fiscal year of up to 50% of the executive's then
annual base  salary.  The amount,  if any,  of the  discretionary  bonus will be
determined  by the  Compensation  Committee  as to  Berk  and by  the  Board  of
Directors or a Compensation Committee as to Behl and Dick. Berk's bonus is to be
based on any  commercialization  of products,  merger or  acquisition,  business
combination  or  collaborations,  growth in revenues  and  earnings,  additional
financings or other strategic business  transaction that inure to the benefit of
the Company's stockholders.  The bonus, if any, may be paid in cash or shares of
Common Stock, valued at the closing price of the Common Stock on the immediately
preceding trading day. The discretionary bonus which may be paid to Behl or Dick
is to be based on the  achievement of goals discussed with the executive in good
faith and within a reasonable  time  following the  commencement  of each fiscal
year and may be paid in cash or shares of the  Company's  Common Stock valued at
the  average  of the  closing  price  per share  during  the five  trading  days
immediately preceding the date of issuance of the shares.

        Each of Behl's and Dick's  agreement  provides  for the grant  under the
2004 Stock Option Plan (the "2004 PLAN") to the  executive at an exercise  price
of  $2.25 of  options  to  purchase  250,000  shares.  The  Berk,  Behl and Dick
Agreements  each  provide  for the  grant to the  executive  of  options  at the
foregoing  exercise price to purchase up to 300,000 shares (the "OPIOID  PRODUCT
OPTIONS") which are to vest in two 150,000 share tranches upon the closing of an
exclusive  product  license for the United States  national  market,  the entire
European  Union Market or the Japan market or a product sale  transaction of all
the Company's ownership rights in the United States (only once for each product)
for the  Company's  first drug  developed  by the Company for which FDA approval
will be sought under a NDA (including a 505(b) (2)  application)  for oxycodone,
hydrocone,   hydromorphone,   oxymorphone,   or  morphine  ("Non-Generic  Opioid
Product") as to the first  tranche and as to the  Company's  second  Non-Generic
Opioid  Drug  for the  second  tranche.  The  Berk  Agreement  provides  for the
amendment of options as to 400,000 shares which had been granted on September 2,
2005 to Berk at an exercise price of $2.69 per share ("BERK'S PREVIOUS MILESTONE
OPTIONS") and the Behl and Dick Agreements  provides for the grant of options at
the  exercise  price of $2.25 per share for each of Behl and Dick as to  200,000
shares   (collectively  along  with  Berk's  Previous  Milestone  Options,   the
"MILESTONE  OPTIONS") with the Milestone Options of each of the three executives
to vest (A) as to not more than 125,000 shares and 75,000 shares,  respectively,
upon the  commencement  of the first Phase III  clinical  trial  relating to the
first and then the second Non-Generic Opioid Drug developed by the Company;  (B)
50,000  shares  upon  the  closing  of each  product  license  or  product  sale
transaction (on a product by product basis and only once for each product) other
than  Non-Generic  Opioid Drugs for which options are granted above;  (C) 10,000
shares upon the filing by the Company  (in the  Company's  name) with the United
Sates Food and Drug Administration (the "FDA") of either an abbreviated new drug
application  (an "ANDA") or a new drug  application  (including  an  application
filed

                                       19
<PAGE>

with the FDA under Section  505(b)(2) of the Federal,  Food,  Drug, and Cosmetic
Act, 21 U.S.C. Section 301 et seq.)  (collectively,  a "NDA"), for a product not
covered by a previous FDA  application;  (D) 40,000  shares upon the approval by
the FDA of any ANDA or NDA  (filed in the  Company's  name)  for a  product  not
previously  approved  by the  FDA;  (E)  25,000  shares  upon the  filing  of an
application  for a U.S. patent by the Company (in the Company's  name);  and (F)
25,000  shares upon the granting by the U.S.  Patent and  Trademark  Office (the
"PTO") of a patent to the Company filed in the Company's  name or an approval of
an ANDA or NDA;  provided,  however the  foregoing  options  terminate  upon the
executive's  termination  of  employment  except that options  under (D) and (F)
nevertheless  vest if the filing was made during the  initial  term but prior to
termination of the  executive's  employment by the Company  without  cause,  the
approval  was made  within  540 days of the  filing of the  ANDA,  NDD or patent
application.

        The  Company  also  agreed  that in the event that all of the options to
purchase the full 400,000 Berk's Previous Milestone Options as to Berk has fully
vested  during the initial term of the agreement and as to each of Behl and Dick
all 200,000  Milestone  Options have fully vested during the initial term of his
agreement, the Company will grant under the Plan to each executive at the end of
the first current  fiscal year in which the following  event occurs fully vested
additional  options to purchase the following shares at the fair market value on
the date of grant (the "Additional  Milestone  Options"):  (a) to the extent not
previously vested with respect to his comparable  Milestone  Options:  (i) up to
125,000  shares  upon the  commencement  of the first Phase III  clinical  trial
relating to the first Non-Generic  Opioid Drug developed by the Company and (ii)
up to an  additional  125,000  shares as to such  trial  relating  to the second
Non-Generic  Opioid Drug  developed by the Company,  (b) 50,000  shares upon the
closing of each product license for the United States national market or product
sale transaction of all ownership rights (on a product by product basis and only
once for each product); (c) 10,000 shares upon the filing by the Company (in the
Company's  name) with the FDA of either an ANDA or NDA for a product not covered
by a previous FDA  application  for each company  drug  product,  other than the
Non-Generic  Opioid  Drugs for which any  Opioid  Option was  granted  under the
Agreement;  (d) 40,000  shares upon the approval by the FDA of any ANDA,  NDA or
505(b)(2)  application  filed in the Company's name for a product not previously
approved  by the  FDA;  (e)  25,000  shares  in the  event of the  filing  of an
application of an additional  U.S. patent by the Company (filed in the Company's
name);  and (f)  25,000  shares in the event of the  granting  by the PTO of the
foregoing  additional patent applications to the Company (filed in the Company's
name).

        The Berk Agreement acknowledges that Berk holds previously granted fully
vested  incentive  stock options to purchase  725,000  shares,  of which 300,000
vested  options  are  exercisable  at  $2.01  per  share,  225,000  options  are
exercisable  at $2.15 per share,  100,000  options are  exercisable at $2.69 per
share, and 100,000 options are exercisable at $2.69 per share.

        Each employment  agreement allows the Company at its discretion to grant
to the  executive  additional  options  under  the 2004 Plan and  provides  each
executive the right to register at the Company's  expense for reoffering  shares
issued  upon  exercise  of the  options  under the  Securities  Act of 1933,  as
amended, in certain registration statements filed by the Company with respect to
offerings of securities by the Company.

        Berk's  Agreement,  as his Amended and  Restated  Employment  Agreement,
provide  that if the Company  terminates  his  employment  due to his  permanent
disability,  without cause or he terminates his employment for good reason, Berk
shall be entitled  to the  following  severance:  (i) any earned but unpaid base
salary  plus  any  unpaid  reimbursable  expenses  as of the  effective  date of
termination  of  his  employment,   (ii)  the   then-current   base  salary  and
reimbursement of the cost to replace the life and disability insurance coverages
afforded to Berk under the Company's  benefit plans with  substantially  similar
coverages,  following the effective date of termination of his employment, for a
period equal to the greater of (x) the  remainder of the  then-current  term, or
(y) two years  following the effective date of termination  and (iii) payment by
the Company of premiums for health insurance for the period during which Berk is
entitled  to   continued   health   insurance   coverage  as  specified  in  the
Comprehensive  Omnibus Budget  Reconciliation Act. In the event that the Company
terminates Berk's employment because of his permanent disability,  Berk is to be
entitled to the severance specified above, less any amounts actually received by
him  under  any  disability  insurance  coverage  provided  for and  paid by the
Company. In the event that the Company terminates Berk's employment for cause or
Berk terminates his employment with the Company without good reason,  Berk shall
be entitled  to any earned but unpaid  base salary plus any unpaid  reimbursable
expenses as of the effective date of termination of his employment.


                                       20
<PAGE>

        Berk's Agreement, as did his prior agreement, provides that in the event
of a change of control in lieu of any severance that may otherwise be payable to
him if Berk elects to terminate  his  employment  for any reason  within 90 days
thereof,  or the Company  elects to  terminate  his  employment  within 180 days
thereof,  other than for cause,  he is to be entitled to the following:  (i) any
earned but unpaid base salary  plus any unpaid  reimbursable  expenses as of the
effective date of  termination of his  employment,  (ii)  $1,000,000,  (iii) the
then-current  base salary for a period of 12 months following the effective date
of termination,  (iv) reimbursement of the cost, for a period equal to 12 months
following  the  effective  date  of  termination,  of  replacing  the  life  and
disability insurance coverage afforded to Berk under the Company's benefit plans
with  substantially  similar coverage and (v) payment by the Company of premiums
for health  insurance  for the period during which Berk is entitled to continued
health  insurance  coverage as specified  in the  Comprehensive  Omnibus  Budget
Reconciliation Act.

        Behl's  and  Dick's  Agreements  provide  that in the event the  Company
terminates  his  employment  for  "Cause"  as defined  in the  agreement  or the
executive  terminates  employment  without good reason,  he is to receive salary
through  date of  termination,  reimbursement  for  expenses  incurred  prior to
termination,  all unvested  options will terminate as of the date of termination
and  vested  options  will be  governed  by the  terms of the 2004  Plan and the
related option agreement.

        In the event of a termination due to death, disability or by the Company
without  cause or by Behl or Dick for good reason,  the Company is to pay him or
his  estate  subject  to  his  compliance  with  certain  covenants,   including
non-competition,    non-solicitation,    confidentiality   and   assignment   of
intellectual  property,  his base  salary for the  longer of the  balance of the
initial term or one year from date of  termination,  continue  health  insurance
coverage  for 12  months  from  termination  and his  vested  options  are to be
exercisable for 90 days from date of termination.

        In the event the employment of Behl or Dick is terminated by the Company
following  a "Change of  Control"  of the  Company,  he will be  entitled to the
amounts  payable as a result of termination by the Company  without cause plus a
lump sum payment of $500,000 and all unvested options shall immediately vest and
along with  unexercised  vested options be  exercisable  within 90 days from the
date of termination.  "Change of Control" is defined in each of their agreements
as the acquisition of the Company  pursuant to a merger or  consolidation  which
results  in the  reduction  to less  than  50% of the  outstanding  stock of the
holders  of  its  outstanding  shares  immediately  prior  thereto  or  sale  of
substantially  all the assets or capital stock of the Company to another person,
or the  acquisition by a person or a related group in a single  transaction or a
series of related  transaction of more than 50% of the combined  voting power of
the Company's outstanding voting securities.

        Berk's Agreement contains Berk's non-solicitation  covenant for a period
of one year from  termination.  Each of Behl and Dick have  agreed to a one-year
from  termination  non-competition  covenant  and  two  years  from  termination
non-solicitation covenant.

        The executives are to be reimbursed  for expenses  (including  business,
travel and entertainment)  reasonably incurred in the performance of the duties,
with Behl's and Dick's  Agreements  providing that  reimbursement of expenses in
excess of $2,000 per month are subject to the  approval of the  Company's  Chief
Executive  Officer.  Each of the  executives is entitled to  participate in such
employee benefit and welfare plans and programs,  which may be offered to senior
executives of the Company including life insurance, health and accident, medical
plans and programs and profit sharing and retirement plans.

        Each  employment  agreement is for an initial  term ending  November 13,
2009,  subject to automatic one-year renewals unless terminated by the executive
or the  Company  upon at  least  60 days  notice  prior  to the end of the  then
scheduled  expiration  date.  The  Company  has the  right to  terminate  Berk's
employment  in the event of his  inability  to perform  work due to  physical or
mental  illness  or  injury  for six  full  calendar  months  during  any  eight
consecutive  calendar  months.  It has the right to  terminate  Behl's or Dick's
employment  due to  disability  as defined in a long-term  disability  insurance
policy reasonably  satisfactory to him or, in the absence of such policy, due to
his inability for 120 days in any 12 month period to  substantially  perform his
duties as a result of a physical or mental illness.

                                       21
<PAGE>

ITEM 6.      EXHIBITS

             (a) Exhibits:

             10.1    Seconded  Amended and Restated  Employment  Agreement  with
                     Bernard Berk, dated November 13, 2006.

             10.2    Employment  Agreement with Charan Behl,  dated November 13,
                     2006.

             10.3    Employment  Agreement  with Chris Dick,  dated November 13,
                     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.

             (b)     Reports on Form 8-K:

              (1)    Form  8-K  filed  on  September  12,  2006   regarding  the
                     Company's announcement of the progress it has made.

              (2)    Form 8-K filed on September 8, 2006 regarding the Company's
                     announcement   that  it  has  received   approval  from  an
                     Independent  Review  Board  (IRB)  to  initiate  a Phase II
                     clinical  trial  of  its  abuse   resistant  drug  product,
                     ELI-216.  An IRB  approval is  necessary  before a clinical
                     trial can commence.

              (3)    Form  8-K  filed  on  August   21,   2006   regarding   the
                     announcement  of  the  American  Stock  Exchange   ("AMEX")
                     confirming  that the Company has regained  compliance  with
                     the continued listing standards of AMEX.

              (4)    Form 8-K filed on July 18, 2006 regarding the entering into
                     by the Company of the  Financial  Advisory  Agreement  with
                     Indigo  Ventures  LLC  ("Indigo")  on July 12, 2006 and the
                     acquisition  by  Indigo  of a  warrant  to  purchase  up to
                     600,000 shares of common stock,  par value $0.01 per share,
                     of the Company for an aggregate purchase price of $150,000.





                                       22
<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:   November 14, 2006          By: /s/ Bernard Berk
                                   ----------------------------
                                   Bernard Berk
                                   Chief Executive Officer
                                   (Principal Executive Officer)


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
















                                       23