U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-Q







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





For the
quarterly period ended   December
31,
2010





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 incorporation or organization)
              
              (I.R.S.
      Employer 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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).


Yes x No
 ̈  The
registrant is not yet subject to this requirement.





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   ̈
              Smaller
      Reporting Company  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





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.  As of February 11, 2011 the
issuer had outstanding 106,129,258 shares of common stock, $0.001 par value
(exclusive of 100,000 shares held in treasury).





ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARIES





INDEX





Page
      No.PART
      I – FINANCIAL INFORMATIONItem
      1.
                        Financial
      StatementsCondensed
      Consolidated Balance Sheets as of December 31, 2010 (unaudited) and March
      31, 2010 (audited)
                        
                        F-1
                          F-2Condensed
      Consolidated Statements of Operations for the three and nine months ended
      December 31, 2010 (unaudited) and December 31, 2009
      (unaudited)
                        
                        F-3Condensed
      Consolidated Statement of Changes in Stockholders’ Deficit for the nine
      months ended December 31, 2010 (unaudited)
                        
                        F-4Condensed
      Consolidated Statements of Cash Flows for the nine months ended December
      31, 2010 (unaudited) and December 31, 2009 (unaudited)
                        
                        F-5Notes
      to Condensed Consolidated Financial Statements
                        
                        F-6Item
      2.
                        Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                        
                        1Item
      3.
                        Quantitative
      and Qualitative Disclosures about Market Risk
                        
                        9Item
      4.
                        Controls
      and Procedures
                        
                        9PART
      II – OTHER INFORMATIONItem
      1.
                        Legal
      Proceedings
                        
                        10Item
      1A.
                        Risk
      Factors
                        
                        10Item
      2.
                        Unregistered
      Sales of Equity Securities and Use of Proceeds
                        
                        11Item
      3.
                        Defaults
      upon Senior Securities
                        
                        11Item
      4.
                        Removed
      and Reserved
                        
                        11Item
      5.
                        Other
      Information
                        
                        11Item
      6.
                        Exhibits
                        
                        11SIGNATURES
                        
                        15







ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED BALANCE SHEETS





December 31,
                                  2010
                                  (Unaudited)
                                
                                
                                March 31,
                                  2010
                                  (Audited)ASSETSCURRENT ASSETSCash
      and cash equivalents
                                
                                $
                                415,194
                                
                                
                                $
                                578,187Accounts
      receivable (net of allowance for doubtful accounts of -0-)
                                
                                
                                626,242
                                
                                
                                
                                404,961Inventories
      (net of reserve of $494,425 and $494,425, respectively)
                                
                                
                                1,302,142
                                
                                
                                
                                1,371,292Prepaid
      expenses and other current assets
                                
                                
                                55,268
                                
                                
                                
                                131,507Total
      Current Assets
                                
                                
                                2,398,846
                                
                                
                                
                                2,485,947PROPERTY AND
      EQUIPMENT, net of accumulated depreciation of $4,072,064 and
      $3,840,279, respectively
                                
                                
                                3,945,845
                                
                                
                                
                                4,095,814INTANGIBLE
      ASSETS – net of accumulated amortization of $-0- and $76,434,
      respectively
                                
                                
                                562,681
                                
                                
                                
                                96,407OTHER ASSETSInvestment
      in Novel Laboratories, Inc.
                                
                                
                                3,329,322
                                
                                
                                
                                3,329,322Security
      deposits
                                
                                
                                28,377
                                
                                
                                
                                14,652Restricted
      cash – debt service for EDA bonds
                                
                                
                                346,300
                                
                                
                                
                                294,836EDA
      bond offering costs, net of accumulated amortization of $74,365 and
      $64,767, respectively
                                
                                
                                279,086
                                
                                
                                
                                289,685Total
      Other Assets
                                
                                
                                3,983,085
                                
                                
                                
                                3,928,495TOTAL
      ASSETS
                                
                                $
                                10,890,457
                                
                                
                                $
                                10,606,663





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


F-1




ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED BALANCE SHEETS





December 31,
                                2010
                                (Unaudited)
                              
                              
                              March 31,
                                2010
                                (Audited)LIABILITIES
      AND STOCKHOLDERS’ DEFICITCURRENT LIABILITIESEDA
      bonds payable
                              
                              $
                              3,385,000
                              
                              
                              $
                              3,385,000Short
      term loans and current portion of long-term debt
                              
                              
                              12,614
                              
                              
                              
                              82,302Accounts
      payable and accrued expenses
                              
                              
                              1,215,169
                              
                              
                              
                              986,777Customer
      Deposits
                              
                              
                              39,400
                              
                              
                              
                              —Deferred
      revenues - current
                              
                              
                              13,333
                              
                              
                              
                              —Preferred
      share derivative interest payable
                              
                              
                              385,559
                              
                              
                              
                              306,440Total
      Current Liabilities
                              
                              
                              5,051,075
                              
                              
                              
                              4,760,519LONG TERM LIABILITIESDeferred
      revenues
                              
                              
                              182,223
                              
                              
                              
                              —Long
      term debt, less current portion
                              
                              
                              75,801
                              
                              
                              
                              19,823Derivative
      liability – preferred shares
                              
                              
                              8,439,304
                              
                              
                              
                              7,924,763Derivative
      liability – warrants
                              
                              
                              3,710,930
                              
                              
                              
                              8,499,423Total
      Long Term Liabilities
                              
                              
                              12,408,258
                              
                              
                              
                              16,444,009TOTAL
      LIABILITIES
                              
                              
                              17,459,333
                              
                              
                              
                              21,204,528STOCKHOLDERS’ DEFICITCommon
      stock – par value $0.001, Authorized 355,516,558 shares Issued and
      outstanding – 97,520,813 shares and 83,950,168 shares,
      respectively
                              
                              
                              97,521
                              
                              
                              
                              83,950Additional
      paid-in-capital
                              
                              
                              91,896,273
                              
                              
                              
                              90,903,896Accumulated
      deficit
                              
                              
                              (98,255,829
                              )
                              
                              
                              (101,278,870
                              )Treasury
      stock at cost (100,000 common shares)
                              
                              
                              (306,841
                              )
                              
                              
                              (306,841
                              )TOTAL
      STOCKHOLDERS’ DEFICIT
                              
                              
                              (6,568,876
                              )
                              
                              
                              (10,597,865
                              )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIT
                              
                              $
                              10,890,457
                              
                              
                              $
                              10,606,663





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


F-2




ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





THREE
      MONTHS ENDED
                              DECEMBER
      31,
                            
                            
                            NINE
      MONTHS ENDED
                              DECEMBER
      31,2010
                            
                            
                            2009
                            
                            
                            2010
                            
                            
                            2009REVENUESManufacturing
      Fees
                            
                            $
                            901,653
                            
                            
                            $
                            744,948
                            
                            
                            $
                            2,236,064
                            
                            
                            $
                            1,948,952Royalties
                            
                            
                            231,742
                            
                            
                            
                            172,435
                            
                            
                            
                            582,677
                            
                            
                            
                            558,522Lab
      Fee Revenues
                            
                            
                            92,902
                            
                            
                            
                            —
                            
                            
                            
                            234,123
                            
                            
                            
                            —Total
      Revenues
                            
                            
                            1,226,297
                            
                            
                            
                            917,383
                            
                            
                            
                            3,052,864
                            
                            
                            
                            2,507,474COSTS
      OF REVENUES
                            
                            
                            641,524
                            
                            
                            
                            609,416
                            
                            
                            
                            1,618,820
                            
                            
                            
                            1,924,445Gross
      Profit
                            
                            
                            584,773
                            
                            
                            
                            307,967
                            
                            
                            
                            1,434,044
                            
                            
                            
                            583,029OPERATING
      EXPENSESResearch
      and Development
                            
                            
                            179,525
                            
                            
                            
                            247,773
                            
                            
                            
                            494,968
                            
                            
                            
                            758,190General
      and Administrative
                            
                            
                            315,537
                            
                            
                            
                            498,884
                            
                            
                            
                            947,761
                            
                            
                            
                            1,288,565Non-cash
      compensation through issuance of stock options
                            
                            
                            7,580
                            
                            
                            
                            28,488
                            
                            
                            
                            33,268
                            
                            
                            
                            113,041Depreciation
      and Amortization
                            
                            
                            9,200
                            
                            
                            
                            39,715
                            
                            
                            
                            113,490
                            
                            
                            
                            214,487Total
      Operating Expenses
                            
                            
                            511,842
                            
                            
                            
                            814,860
                            
                            
                            
                            1,589,487
                            
                            
                            
                            2,374,283INCOME
      / (LOSS) FROM OPERATIONS
                            
                            
                            72,931
                            
                            
                            
                            (506,893
                            )
                            
                            
                            (155,443
                            )
                            
                            
                            (1,791,254
                            )OTHER
      INCOME / (EXPENSES)Interest
      expense, net
                            
                            
                            (58,059
                            )
                            
                            
                            (67,342
                            )
                            
                            
                            (173,867
                            )
                            
                            
                            (198,529
                            )Change
      in fair value of warrant derivatives
                            
                            
                            2,064,745
                            
                            
                            
                            (5,086,610
                            )
                            
                            
                            4,788,493
                            
                            
                            
                            (6,453,107
                            )Change
      in fair value of preferred share derivatives
                            
                            
                            4,156,097
                            
                            
                            
                            (3,325,418
                            )
                            
                            
                            (412,908
                            )
                            
                            
                            (2,147,122
                            )Interest
      expense attributable to preferred share derivatives
                            
                            
                            (306,440
                            )
                            
                            
                            (350,010
                            )
                            
                            
                            (976,799
                            )
                            
                            
                            (1,008,383
                            )Discount
      in Series E issuance attributable to beneficial conversion
      features
                            
                            
                            —
                            
                            
                            
                            (254,212
                            )
                            
                            
                            (39,132
                            )
                            
                            
                            (512,912
                            )Total
      Other Income / (Expense)
                            
                            
                            5,856,343
                            
                            
                            
                            (9,083,592
                            )
                            
                            
                            3,185,787
                            
                            
                            
                            (10,320,053
                            )INCOME
      (LOSS) BEFORE PROVISION FOR INCOME TAXES
                            
                            
                            5,929,274
                            
                            
                            
                            (9,590,485
                            )
                            
                            
                            3,030,344
                            
                            
                            
                            (12,111,307
                            )PROVISION
      FOR INCOME TAXES
                            
                            
                            1,062
                            
                            
                            
                            —
                            
                            
                            
                            7,302
                            
                            
                            
                            —NET
      INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
                            
                            $
                            5,928,212
                            
                            
                            $
                            (9,590,485
                            )
                            
                            $
                            3,023,043
                            
                            
                            $
                            (12,111,307
                            )NET
      INCOME (LOSS) PER SHAREBasic
                            
                            $
                            0.06
                            
                            
                            $
                            (0.12
                            )
                            
                            $
                            0.03
                            
                            
                            $
                            (0.17
                            )Diluted
                            
                            $
                            0.02
                            
                            
                            $
                            (0.12
                            )
                            
                            $
                            0.01
                            
                            
                            $
                            (0.17
                            )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGBasic
                            
                            
                            96,873,523
                            
                            
                            
                            78,620,207
                            
                            
                            
                            92,196,433
                            
                            
                            
                            73,018,708Diluted
                            
                            
                            307,839,425
                            
                            
                            
                            78,620,207
                            
                            
                            
                            264,110,230
                            
                            
                            
                            73,018,708





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


F-3




ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT


(Unaudited)





Common
      Stock
                    
                    
                    
                    
                    
                    Treasury
      StockShares
                    
                    
                    Amount
                    
                    
                    Additional
                      Paid-In
                      Capital
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    Accumulated
                      Deficit
                    
                    
                    Stockholders’
                      DeficitBalance
      at Mar 31, 2010
                    
                    
                    83,950,168
                    
                    
                    $
                    83,950
                    
                    
                    $
                    90,903,896
                    
                    
                    
                    100,000
                    
                    
                    $
                    (306,841
                    )
                    
                    $
                    (101,278,868
                    )
                    
                    $
                    (10,597,863
                    )Net
      Income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    3,023,043
                    
                    
                    
                    3,023,043Common
      shares issued in lieu of cash in payment of preferred share derivative
      interest expense
                    
                    
                    12,633,145
                    
                    
                    
                    12,633
                    
                    
                    
                    885,047
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    897,680Non-cash
      compensation through the issuance of stock options
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    33,268
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    33,268Common
      shares issued pursuant to ANDA purchase agreement dated
      5/18/2010
                    
                    
                    937,500
                    
                    
                    
                    938
                    
                    
                    
                    74,062
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    75,000Balance
      at Dec 31, 2010
                    
                    
                    97,520,813
                    
                    
                    $
                    97,521
                    
                    
                    $
                    91,896,273
                    
                    
                    
                    100,000
                    
                    
                    $
                    (306,841
                    )
                    
                    $
                    (98,255,829
                    )
                    
                    $
                    (6,568,876
                    )





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


F-4





ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




NINE MONTHS ENDED DECEMBER
    31,2010
                    
                    
                    2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income / (Loss)
                    
                    $
                    3,023,043
                    
                    
                    $
                    (12,111,307
                    )Adjustments
      to reconcile net loss to cash used in operating
activities:Depreciation
      and amortization
                    
                    
                    362,381
                    
                    
                    
                    377,196Inventory
      adjustment
                    
                    
                    —
                    
                    
                    
                    311,986Change
      in fair value of warrant derivative liability
                    
                    
                    (4,788,493
                    )
                    
                    
                    6,453,107Change
      in fair value of preferred share derivative liability
                    
                    
                    412,908
                    
                    
                    
                    2,147,122Discount
      in Series E issuance attributed to embedded beneficial conversion
      feature
                    
                    
                    39,132
                    
                    
                    
                    512,912Preferred
      share derivative interest satisfied by the issuance of common
      stock
                    
                    
                    897,680
                    
                    
                    
                    1,008,383Legal
      expenses satisfied by the issuance of common stock
                    
                    
                    —
                    
                    
                    
                    100,000Non-cash
      compensation satisfied by the issuance of common stock and
      options
                    
                    
                    33,268
                    
                    
                    
                    113,041Non-cash
      rent expense
                    
                    
                    22,584
                    
                    
                    
                    —Non-cash
      lease accretion
                    
                    
                    601
                    
                    
                    
                    —Changes
      in Assets and LiabilitiesAccounts
      receivable
                    
                    
                    (221,280
                    )
                    
                    
                    (413,503
                    )Inventories
                    
                    
                    69,151
                    
                    
                    
                    (4,015
                    )Prepaid
      and other current assets
                    
                    
                    76,239
                    
                    
                    
                    72,374Security
      deposits
                    
                    
                    (13,725
                    )
                    
                    
                    12,909Accounts
      payable, accrued expenses and other current liabilities
                    
                    
                    90,892
                    
                    
                    
                    275,643Deferred
      revenues and Customer deposits
                    
                    
                    234,956
                    
                    
                    
                    —Derivative
      interest payable
                    
                    
                    79,120
                    
                    
                    
                    —.NET
      CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES
                    
                    
                    318,457
                    
                    
                    
                    (1,144,152
                    )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchases
      of property and equipment
                    
                    
                    (35,398
                    )
                    
                    
                    —Cost
      of leasehold improvements
                    
                    
                    (176,645
                    )
                    
                    
                    —Costs
      incurred for intellectual property assets
                    
                    
                    (191,274
                    )
                    
                    
                    —Proceeds
      from sale of retired equipment
                    
                    
                    30,000
                    
                    
                    
                    —(Deposits
      to) / Withdrawals from restricted cash, net
                    
                    
                    (51,464
                    )
                    
                    
                    48,623NET
      CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES
                    
                    
                    (424,781
                    )
                    
                    
                    48,623CASH
      FLOWS FROM FINANCING ACTIVITIESOther
      loan payments
                    
                    
                    (56,669
                    )
                    
                    
                    (109,661
                    )NJEDA
      bond principal payments
                    
                    
                    —
                    
                    
                    
                    (210,000
                    )Proceeds
      from issuance of Series E Convertible Preferred Stock and
      Warrants
                    
                    
                    —
                    
                    
                    
                    2,000,000NET
      CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES
                    
                    
                    (56,669
                    )
                    
                    
                    1,680,339NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                    
                    
                    (162,993
                    )
                    
                    
                    584,810CASH
      AND CASH EQUIVALENTS – beginning of period
                    
                    
                    578,187
                    
                    
                    
                    282,578CASH
      AND CASH EQUIVALENTS – end of period
                    
                    $
                    415,194
                    
                    
                    $
                    867,388SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCash
      paid for interest
                    
                    
                    114,950
                    
                    
                    
                    145,287Cash
      paid for taxes
                    
                    
                    4,182
                    
                    
                    
                    —SCHEDULE
      OF NON-CASH INVESTING AND FINANCING ACTIVITIESNon-Cash
      acquisition of Intangible Assets
                    
                    
                    275,000
                    
                    
                    
                    —





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


F-5





ELITE
PHARMACEUTICALS, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


THREE
AND NINE MONTHS ENDED DECEMBER 31, 2010 AND 2009


(UNAUDITED)





NOTE
      1    -
            BASIS OF PRESENTATION
      AND LIQUIDITY


The
information in this quarterly report on Form 10-Q includes the results of
operations of Elite Pharmaceuticals, Inc. and its consolidated subsidiaries
(collectively the “Company”) for the three and nine months ended December 31,
2010 and 2009.  The accompanying unaudited condensed consolidated financial
statements have been prepared pursuant to rules and regulations of the
Securities and Exchange Commission in accordance with accounting principles
generally accepted for interim financial statement presentation. 
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America
(“GAAP”) for complete financial statements.  In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the condensed 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 unaudited condensed consolidated financial statements 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, 2010.  There have been no changes in significant accounting policies
since March 31, 2010.




The
Company does not anticipate being profitable for the fiscal year ending March
31, 2011; therefore a current provision for income tax was not established for
the three and nine months ended December 31, 2010. Only the minimum liability
required for state corporation taxes was considered.





The
accompanying unaudited condensed consolidated financial statements were prepared
on the assumption that the Company will continue as a going concern.  As of
December 31, 2010, the Company had a working capital deficit of $2.6 million,
losses from operations totaling $0.2 million for the nine months ended December
31, 2010, other incomes totaling $3.2 million for the nine months ended December
31, 2010 and net income of $3.0 million for the nine months ended December 31,
2010.





In
addition, the Company has received Notice of Default from the Trustee of the
NJED Bonds as a result of the utilization of the debt service reserve being used
to pay interest payments due on September 1, 2009, March 1, 2010 and September
1, 2010 totaling $121k, $113k and $113k, respectively, and principal payments
due on September 1, 2009 totaling $210k.  The debt service reserve was
utilized to make such payments as a result of the Company’s not having
sufficient funds available to make such payments when due.





The
Company did not have sufficient funds available to make the principal payments
due on September 1, 2010, totaling $200k and requested that the Trustee withdraw
such funds from the debt service reserve.  The Company’s request was denied
and accordingly the principal payment due on September 1, 2010, totaling $200k
was not made.





The
Company has requested a postponement of principal payments due on September 1,
2010, 2011 and 2012, with an aggregate of all such postponed principal payments
being added to the principal payments due on September 1, 2013.  Resolution
of the Company’s default on the NJEDA Bonds and our request for postponement of
principal payments will have a significant effect on our ability to operate in
the future.


F-6


Please
refer to Note 5 to our financial statements for a more detailed discussion of
the NJEDA Bonds and Notice of Default.  Please also note that the working
capital deficit of $2.6 million as of December 31, 2010, includes the entire
principal amount due in relation to the NJEDA Bonds.  This amount, totaling
$3.4 million was first classified as a current liability as of March 31, 2010,
due to the Notice of Default received from the Trustee in relation to the NJEDA
Bonds.




As of
December 31, 2010, we had cash reserves of $415,194.  The completion of all
transactions contemplated by the Epic Strategic Alliance Agreement, including
the consummation of the third closing thereof, is expected to provide additional
funds to permit us to continue development of our product pipeline for more than
two years.  Beyond two years, we anticipate that, with growth of Lodrane
and the launch of the generic Hydromorphone 8mg and Naltrexone 50mg recently
acquired pursuant to asset purchase agreements with Mikah Pharma LLC, Elite
could be profitable.In addition, the
commercialization of the products developed at the Facility under the Epic
Strategic Alliance Agreement is expected to add a new revenue source for Elite.
However, there can be no assurances as to the growth, success of development or
commercialization of these products.





Despite
the successful completion of the initial and second closings of the Epic
Strategic Alliance Agreement, there can be no assurances that we will be able to
consummate the third closing pursuant to the terms and conditions of the Epic
Strategic Alliance Agreement.  If such transactions are consummated, we
will receive additional cash proceeds of $1.6875 million (which will include
quarterly payments of $62,500 for a period of 11 quarters).  Even if we
were able to successfully complete the third closing of the Epic Strategic
Alliance Agreement, we still may be required to seek additional capital in the
future and there can be no assurances that we will be able to obtain such
additional capital on favorable terms, if at all. For additional information
regarding the Epic Strategic Alliance Agreement, please see our disclosures
under “Epic Strategic Alliance Agreement” in Item 7 of Part II of our Annual
Report on Form 10-K, and in our Current Reports on Form 8-K, filed with the SEC
on March 23, 2009, May 6, 2009, June 5, 2009 and July 1, 2010, which disclosures
are incorporated herein by reference.





NOTE
      2    -
            CASH AND CASH
      EQUIVALENTS





The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents consist
of cash on deposit with banks and money market instruments. The Company places
its cash and cash equivalents with high-quality, U.S. financial institutions
and, to date, has not experienced losses on any of its balances.





NOTE
      3    -
              INVENTORIES





Inventories
are stated at the lower of cost (first-in, first-out basis) or market (net
realizable value).


F-7




NOTE
      4    -
              INTANGIBLE
      ASSETS





Costs to
acquire intangible assets, such as asset purchases of Abbreviated New Drug
Applications (“ANDA’s”) which are approved by the FDA or costs incurred in the
application of patents are capitalized and amortized on the straight-line
method, based on their estimated useful lives ranging from five to fifteen
years, commencing upon approval of the patent or site transfers required for
commercialization of an acquired ANDA.  Such costs are charged to expense
if the patent application or ANDA site transfer is unsuccessful.





As of
December 31, 2010, the following costs were recorded as intangible assets on the
Company’s balance sheet:





Intangible assets at March 31, 2010
      (audited)Patent
      application costs
                            
                            
                            96,407ANDA
      acquisitions
                            
                            
                            —Intangible asset costs capitalized during the nine
      months ended December 31, 2010Patent
      application costs
                            
                            
                            41,274ANDA
      acquisition costs
                            
                            
                            425,000Amortization of intangible assets during the nine
      months ended December 31, 2010Patent
      application costs
                            
                            
                            —ANDA
      acquisition costs
                            
                            
                            —Intangible assets at December 31, 2010
      (unaudited)Patent
      application costs
                            
                            
                            137,681ANDA
      acquisition costs
                            
                            
                            425,000Total
                            
                            $
                            562,681





The costs
incurred in patent applications totaling $7,850 and $41,274 for the three and
nine months ended December 31, 2010, respectively, were all related to our abuse
resistant and extended release opioid product lines.  The Company is
continuing its efforts to achieve approval of such patents.  Additional
costs incurred in relation to such patent applications will be capitalized as
intangible assets, with amortization of such costs to commence upon approval of
the patents.





The ANDA
acquisition costs of $425,000 incurred during the nine months ended December 31,
2010, are related to our acquisition of the ANDA’s for Hydromorphone 8mg and
Naltrexone 50mg.  Please refer to the current reports on Form 8-K filed
with the SEC on May 24, 2010 for the Hydromorphone ANDA acquisition and
September 1, 2010 for the Naltrexone ANDA acquisition, such filings being herein
incorporated by this reference for further details on this acquisition.  In
addition, please refer to exhibits 10.4 and 10.5 of the quarterly report on Form
10-Q filed with the SEC on November 15, 2010 for the purchase agreements for
Hydromorphone and Naltrexone, respectively, such filings being herein
incorporated by this reference.  The Company is in the process of complying
with all FDA and DEA requirements which are a prerequisite to achieving our
manufacture and commercialization of the Hydromorphone 8mg ANDA. 
Amortization of the costs incurred to acquire the ANDA is to commence upon the
Company’s commercialization of such.


F-8




NOTE
      5    -
              NJEDA
      BONDS





On August
31, 2005, the Company successfully completed a refinancing of a prior 1999 bond
issue through the issuance of new tax-exempt bonds (the “Bonds”). The
refinancing involved borrowing $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 used (i) to redeem the
outstanding tax-exempt Bonds originally issued by the Authority on September 2,
1999, (ii) refinance other 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 Notes proceeds and $49,500 from the Series B Notes
proceeds. The Debt Service Reserve is maintained in restricted cash accounts
that are classified in Other Assets. $1,274,311 of the proceeds had been
deposited in a short-term restricted cash account to fund the purchase of
manufacturing equipment and development of the Company’s facility. As of
September 30, 2010, all of these proceeds were utilized to upgrade the Company’s
manufacturing facilities and for the purchase of manufacturing and laboratory
equipment.




Bond
issue costs of $354,000 were paid from the bond proceeds and are being amortized
over the life of the bonds. Amortization of bond issuance costs amounted to
$3,533 and $10,598 for the three and nine months ended December 31, 2010,
respectively.




The NJEDA
Bonds require the Company to make an annual principal payment on September
1st
of varying amounts as specified in the loan documents and semi-annual interest
payments on March 1st and
September 1st, equal
to interest due on the outstanding principal at the applicable rate for the
semi-annual period just ended.





The
interest payments due on September 1, 2009, March 31, 2010 and September 1,
2010, totaling $120,775, $113,075 and $113,075, respectively were paid from the
debt service reserve held in the restricted cash account, due to the Company not
having sufficient funds to make such payments when due.





The
principal payment due on September 1, 2009, totaling $210,000 was paid from the
debt service reserve held in the restricted cash account, due to the Company not
having sufficient funds to make the payment when due.





The
Company did not have sufficient funds available to make the principal payments
due on September 1, 2010 totaling $200,000, and requested the Trustee to
withdraw the funds from debt service reserve held in the restricted cash account
and to utilize such funds to make the principal payment due.  The Company’s
request was denied by the Trustee.  Accordingly, the principal payment due
on September 1, 2010, totaling $200,000 was not made.





Pursuant
to the terms of the NJEDA Bonds, the Company is required to replenish any
amounts withdrawn from the debt service reserve and used to make principal or
interest payments in six monthly installments, each being equal to one-sixth of
the amount withdrawn and with the first installment due on the 15th of the
month in which the withdrawal from debt service reserve occurred and the
remaining five monthly payments being due on the 15th of the
five immediately subsequent months. The Company has, to date, made all payments
required in relation to the withdrawals made from the debt service reserve on
September 1, 2009, March 1, 2010 and September 1, 2010.  The Company is
required to one additional monthly payment of $19,330 during the period November
15, 2010 through February 15, 2011, in order to fully replenish the September 1,
2010 withdrawal from the debt service reserve.


F-9


The
Company does not expect to have sufficient available funds to make the interest
payment of $113,075 due on March 1, 2011 as well as the principal payment of
$200,000 which was due, but not paid, on September 1, 2010





The
Company has received Notice of Default from the Trustee of the NJEDA Bonds in
relation to the withdrawals from the debt service reserve, and has requested a
postponement of principal payments due on September 1st of
2010, 2011 and 2012, with an aggregate of all such postponed principal payments
being added to the principal payments due on September 1, 2013.  Resolution
of the Company’s default under the NJED Bonds and our request for postponement
of principal payments will have a significant effect on our ability to operate
in the future.





Due to
issuance of a Notice of Default being received from the Trustee of the NJEDA
Bonds, and until the event of default is waived or rescinded, the Company has
classified the entire principal due, an amount aggregating $3.385 million, as a
current liability.


F-10





NOTE
      6    -
            DERIVATIVE
      LIABILITIES





Accounting
Standard Codification “ASC” 815 – Derivatives and Hedging,
which provides guidance on determining what types of instruments or embedded
features in an instrument issued by a reporting entity can be considered indexed
to its own stock for the purpose of evaluating the first criteria of the scope
exception in the pronouncement on accounting for derivatives.  These
requirements can affect the accounting for warrants and convertible preferred
instruments issued by the Company.  As the conversion features within, and
the detachable warrants issued with the Company’s Series B, Series C, Series D
and Series E Preferred Stock, do not have fixed settlement provisions because
their conversion and exercise prices may be lowered if the Company issues
securities at lower prices in the future, we have concluded that the instruments
are not indexed to the Company’s stock and are to be treated as derivative
liabilities.




Preferred Stock Derivative
Liabilities




Series B
                    
                    
                    Series C
                    
                    
                    Series D
                    
                    
                    Series E
                    
                    
                    TotalPreferred
      shares Outstanding
                    
                    
                    896
                    
                    
                    
                    5,418
                    
                    
                    
                    9,008
                    
                    
                    
                    2,062.5
                    
                    
                    
                    17,384.5Underlying
      common shares into which Preferred may convert
                    
                    
                    574,076
                    
                    
                    
                    3,365,217
                    
                    
                    
                    128,692,014
                    
                    
                    
                    78,351,302
                    
                    
                    
                    210,982,610Closing
      price on valuation date
                    
                    $
                    0.04
                    
                    
                    $
                    0.04
                    
                    
                    $
                    0.04
                    
                    
                    $
                    0.04
                    
                    
                    $
                    0.04Preferred
      stock derivative liability at December 31, 2010
                    
                    $
                    22,963
                    
                    
                    $
                    134,609
                    
                    
                    $
                    5,147,680
                    
                    
                    $
                    3,134,052
                    
                    
                    $
                    8,439,304Preferred
      stock derivative liability at September 30, 2010
                    
                    $
                    34,445
                    
                    
                    $
                    201,913
                    
                    
                    $
                    7,721,521
                    
                    
                    $
                    4,637,523
                    
                    
                    $
                    12,595,401Preferred
      stock derivative liability at March 31, 2010
                    
                    $
                    48,796
                    
                    
                    $
                    286,043
                    
                    
                    $
                    3,828,163
                    
                    
                    $
                    3,761,761
                    
                    
                    $
                    7,924,763Change
      in preferred stock derivative liability for the three months ended
      December 31, 2010
                    
                    
                    $
                    (4,156,097
                    )Change
      in preferred stock derivative liability for the nine months ended December
      31, 2010
                    
                    
                    $
                    412,908


F-11





Warrant Derivative
Liabilities


The
portion of derivative liabilities related to outstanding warrants was valued
using the Black-Scholes option valuation model and the following assumptions on
the following dates:





March 31
                      2010
                    
                    
                    September 30
                      2010
                    
                    
                    December 31
                      2010Risk-Free
      interest rate
                    
                    
                    2.4%
      - 3.3
                    %
                    
                    
                    0.3%
      - 1.6
                    %
                    
                    
                    0.3%
      - 2.4
                    %Expected
      volatility
                    
                    
                    126%
      - 214
                    %
                    
                    
                    135%
      - 194
                    %
                    
                    
                    141%
      - 202
                    %Expected
      life (in years)
                    
                    
                    0.5
      – 6.6
                    
                    
                    
                    0.0
      – 6.1
                    
                    
                    
                    0.0
      – 5.8Expected
      dividend yield
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Number
      of warrants
                    
                    
                    125,299,740
                    
                    
                    
                    125,116,392
                    
                    
                    
                    119,566,601Fair
      value – Warrant Derivative Liability
                    
                    $
                    8,499,423
                    
                    
                    $
                    5,775,676
                    
                    
                    $
                    3,710,930Change
      in warrant derivative liability for the three months ended
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    (2,064,745
                    )Change
      in warrant derivative liability for the nine months ended
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    (4,788,493
                    )





The risk
free interest rate was based on rates established by the US Treasury
Department.  The expected volatility was based on the historical volatility
of the Company’s share price for periods equal to the expected life of the
outstanding warrants at each valuation date.  The expected dividend rate
was based on the fact that the Company has not historically paid dividends on
common stock and does not expect to pay dividends on common stock in the
future.





NOTE 7 -
            PREFERRED
      SHARE DERIVATIVE INTEREST
PAYABLE





Preferred
share derivative interest payable as of December 31, 2010 consisted of $385,559
in derivative interest accrued and owing as of December 31, 2010.  The full
amount of derivative interest payable as of December 31, 2010 was paid via the
issuance of 8,608,445 shares of common stock in January 2011.





NOTE
      8 -
            OPERATING
      LEASES





The
Company entered into a lease for a portion of a one-story warehouse, located at
135 Ludlow Avenue, Northvale, New Jersey, consisting of approximately 15,000
square feet of floor space. The lease term began on July 1, 2010 and is
classified as an operating lease. The lease includes an initial term of 5 years
and 6 months and we have the option to renew the lease for two additional terms,
each of 5 years. The property related to this lease will be used for the storage
of pharmaceutical finished goods, raw materials, equipment and documents as well
as engaging in manufacturing, packaging and distribution
activities.





This
property requires significant leasehold improvements and qualification as a
prerequisite to achieving suitability for such intended future use. It is
expected that approximately 3,500 square feet of this property will be
constructed and qualified as suitable for use for storage of pharmaceutical
finished goods, raw materials, equipment and documents on or before the
expiration of the lease for the current warehouse at 80 Oak
Street.


F-12


Leasehold
improvements and qualification as suitable for manufacturing, packaging and
distribution operations are expected to be achieved within two years from the
beginning of the lease term. These are estimates based on current project plans,
which are subject to change. There can be no assurance that the construction and
qualification will be accomplished during the estimated time frames, or that the
property located at 135 Ludlow Avenue, Northvale, New Jersey will ever achieve
qualification for intended future utilization.





Minimum 5
year payments* for the leasing of 15,000 square feet at 135 Ludlow are as
follows:





Fiscal
      year ended March 31, 2011
                        
                        $
                        19,689Fiscal
      year ended March 31, 2012
                        
                        
                        79,248Fiscal
      year ended March 31, 2013
                        
                        
                        81,228Fiscal
      year ended March 31, 2014
                        
                        
                        83,259Fiscal
      year ended March 31, 2015
                        
                        
                        85,344Total
      Minimum 5 year lease payments
                        
                        $
                        348,768





* Minimum
lease payments are exclusive of additional expenses related to certain expenses
incurred in the operation and maintenance of the premises, including, without
limitation, real estate taxes and common area charges which may be due under the
terms and conditions of the lease, but which are not quantifiable at the time of
filing of this quarterly report on Form 10-Q.





Rent
expense relating to the operating lease is recorded using the straight line
method, and is summarized as follows:





Three Months
                    Ended
                    Dec 31, 2010
                  
                  
                  Nine Months
                    Ended
                    Dec 31, 2010Rent
      Expense
                  
                  $
                  22,584
                  
                  
                  $
                  45,169Change
      in deferred rent liability
                  
                  
                  22,584
                  
                  
                  
                  45,169Balance
      of deferred rent liability (long-term liability)
                  
                  
                  45,169
                  
                  
                  
                  45,169





NOTE
      9   -
            DEFERRED
      REVENUES


Deferred
revenue in the amount of $234,956 represents the unamortized amount of a
$200,000 advance payment received for a licensing agreement with a fifteen year
term beginning in September 2010 and ending in August 2025 plus a sales deposit
of $39,400.  The advance payment was recorded as deferred revenue when
received and is earned, on a straight line basis over the fifteen year life of
the license.  The sales deposit will be offset against future sales of a
product specified in the Manufacturing and Sales Agreement between Precision
Dose Inc. and the Company, dated September 10, 2010 (the “Precision Dose
Manufacturing and Sales Agreement”).  Please refer to exhibit 10.9 of the
quarterly report on form 10-Q filed on November 15, 2010 for further
details  on the Precision Dose Manufacturing Agreement, with such
exhibit being herein incorporated by this reference.





NOTE
      10   -
            STOCKHOLDERS’
      EQUITY





Common
Stock





During
the three months ended December 31, 2010, the Company issued 3,926,568 shares of
common stock in lieu of cash in payment of interest expense, totaling $227,320
due and owing as of September 30, 2010 to holders of the Company’s Series B,
Series C and Series D Preferred Share derivative instruments plus 937,500 shares
of common stock, in accordance with the terms and conditions of the Asset
Purchase Agreement between Mikah Pharma and the Company, dated May 18, 2010 (the
“Hydromorphone Agreement”).  Please refer to Exhibit 10.4 of the Quarterly
Report on Form 10-Q filed with the SEC on November 15, 2010 for further details
on the Hydromorphone Agreement, with such Exhibit being herein incorporated by
this reference.


F-13


During
the nine months ended December 31, 2010, the Company issued 12,633,145 shares of
common stock in lieu of cash in payment of derivative interest expense, totaling
$897,680, to holders of the Company’s Series B, Series C and Series D Preferred
Share derivative instruments plus 937,500 shares of common stock pursuant to
terms of the Hydromorphone Agreement.





Options





At
December 31, 2010, the Company had 1,697,938 options fully vested and
outstanding with exercise prices ranging from $0.06 to $3.00 per share; each
option representing the right to purchase one share of common stock.  In
addition, there are 1,359,062 options issued pursuant to the Company’s 2004
Stock Option Plan which are outstanding and not vested, with exercise prices
ranging from $0.06 to $2.50 per share.  These options are scheduled to vest
in equal annual increments on January 18, 2011, 2012 and 2013 or upon the
occurrence of certain defined events and require that employees awarded such
options be employed by the Company on  the vesting date.





NOTE
      11   -
            PER
      SHARE INFORMATION





Basic
earnings per share of common stock (“Basic EPS”) is computed by dividing the net
(loss) income by the weighted-average number of shares of common stock
outstanding.  Diluted earnings per share of common stock (“Diluted EPS”) is
computed by dividing the net (loss) income by the weighted-average number of
shares of common stock, and dilutive common stock equivalents and convertible
securities then outstanding.  GAAP requires the presentation of both Basic
and Diluted EPS, if such Diluted EPS is not anti-dilutive, on the face of
Company’s Condensed Statements of Operations.





For the
                          Three Months
                          Ended
                          Dec 31, 2010
                        
                        
                        For the
                          Nine Months
                          Ended
                          Dec 31, 2010NumeratorNet
      Income attributable to common shareholders
                        
                        $
                        5,928,211
                        
                        
                        $
                        3,023,042DenominatorWeighted-average
      shares of common stock outstanding - basic
                        
                        
                        96,873,523
                        
                        
                        
                        92,196,433Dilutive
      effect of stock options, warrants and convertible
    securities
                        
                        
                        210,956,902
                        
                        
                        
                        171,913,797Weighted-average
      shares of common stock outstanding - diluted
                        
                        
                        307,839,425
                        
                        
                        
                        264,110,230Net income per shareBasic
                        
                        $
                        0.06
                        
                        
                        $
                        0.03Diluted
                        
                        $
                        0.02
                        
                        
                        $
                        0.01





NOTE
      12 -
            SUBSEQUENT
      EVENTS





The
Company has evaluated subsequent events from the balance sheet date through
February 14, 2010, the date the accompanying financial statements were
issued.  The following are material subsequent events:


F-14


Common shares issued in lieu
of cash in payment of derivative interest expense


Derivative
interest expense related to the Preferred Share derivatives due and payable as
of December 31, 2010 were paid during January 2011 through the issuance of
8,608,445 shares of common stock.





Sale of New Jersey Net
Operating Losses


In
January 2011, the Company received final approval from the NJEDA for the sale of
New Jersey net-operating losses with net tax benefits equal to $338,951, under
the Technology Business Tax Certificate Transfer Program.   The
Company sold the net operating loss approved for sale at a transfer price equal
to ninety two cents of each net benefit dollar.  The proceeds of such sale,
totaling $311,835 were received by the Company during January 2011.





Development agreement with
Hi-Tech Pharmacal Co., Inc.


On
January 10, 2011, Elite and Hi-Tech Pharmacal Co., Inc. (“Hi-Tech”) announced
that they have entered into an agreement for Elite to develop for Hi-Tech an
intermediate product for a generic version of a prescription product for
which the branded product had sales in 2010 of over $100 million.




Under the
terms of the agreement, Elite will undertake a developmental program for an
intermediate product that Hi-Tech shall then incorporate into a final product.
Hi-Tech, or its designees, shall be responsible for the filing of the
Abbreviated New Drug Application ("ANDA") for the finished product and the ANDA
will be filed under the Hi-Tech name. Upon approval of the ANDA, Elite will
manufacture the intermediate product. Hi-Tech will manufacture the final product
and will be responsible for the marketing and sales of the final
product. Hi-Tech will pay Elite milestone payments for the development
work. Upon commercialization, Elite will receive payment for the manufacturing
of the intermediate product and a percentage of the profits generated from the
sale of the product.




For
further details, please refer to the Current Report on Form 8-K filed with the
SEC on January 10, 2011, such filing being herein incorporated by this
reference.




Delay in third closing of
the Strategic Alliance Agreement





Pursuant
to that certain Strategic Alliance Agreement, dated as of March 18, 2009, by and
among Elite Pharmaceuticals, Inc., a Delaware corporation (the “ Registrant”), on the
one hand, and Epic Pharma, LLC, a Delaware limited liability company (the
“ Parent”), and Epic Investments, LLC, a Delaware limited liability company (the
“ Subsidiary”, and together with the Parent, “ Epic”), on the other
hand, as amended by that certain Amendment, dated as of April 30, 2009, by and
among, the Registrant, the Parent and the Subsidiary, as further amended by that
certain Second Amendment, dated as of June 1, 2009, by and among the Registrant,
and the Parent, the Subsidiary, Ashok G. Nigalaye and Jeenarine Narine, as
further amended by that certain Amendment Agreement, dated as of June 25, 2010,
by and among the Registrant, the Parent and the Subsidiary (as amended, the
“ Strategic
Alliance Agreement”), the Registrant agreed to issue to the Subsidiary,
and the Subsidiary agreed to purchase from the Registrant, 1,000 additional
shares of the Company’s Series E Convertible Voting Preferred Stock, par value
$0.01 per share (the “ Series E Preferred Stock”), and a warrant (the “ Warrant”) to
purchase 40,000,000 shares of its Common Stock, par value $0.01 per share, at an
exercise price of $0.025 per share, on or before December 31, 2010 (the
“ Closing Date”), for aggregate cash consideration of $1,000,000 (such payment, the
“ Consideration”).





The
Subsidiary did not pay the Consideration to the Registrant on or before the
Closing Date. On January 4, 2011, the Registrant sent a written request to
Epic for payment of the Consideration in accordance with its obligations under
the Strategic Alliance Agreement.


F-15


On
January 6, 2011, Epic responded to such request stating that, as a result of the
complaint filed against the Registrant by The PharmaNetwork, LLC (“ TPN”) on or about
September 3, 2010 in the Superior Court of New Jersey Chancery Division: Bergen
County (Docket No. C-272-10), with an amendment of such complaint being filed on
or about September 24, 2010 (the “ TPN Complaint”), one
or more of the conditions to the Subsidiary’s performance under the Strategic
Alliance Agreement may not have been satisfied.  As a result of the
filing of the TPN Complaint and the pending litigation related thereto (the
“ TPN Litigation”), Epic stated that it does not have the requisite information regarding
the status of the TPN Litigation to evaluate the impact that the TPN Litigation
may have on the closing of the payment of the Consideration by the Subsidiary to
the Registrant. Epic requested the Registrant to provide it with further details
regarding the TPN Litigation and any other pending litigations or proceedings
before it will pay the Consideration to the Registrant under the Strategic
Alliance Agreement.





On
January 11, 2011, the Registrant informed Epic in writing that it does not
believe pendency of the TPN Litigation results in the condition set forth in
Section 2.11(b)(ix) of the Strategic Alliance Agreement failing to be satisfied.
The Registrant intends to continue discussions with the Parent and the
Subsidiary and provide such information as may be necessary to establish that
all conditions to the Subsidiary’s purchase of the additional 1,000 shares of
Series E Preferred Stock and the Warrant under the Strategic Alliance Agreement
have been satisfied.





In
addition, pursuant to the Strategic Alliance Agreement, within 10 business days
following the last day of each calendar quarter, the Subsidiary agreed to
purchase from the Registrant 62.5 shares of Series E Preferred Stock (such
shares, the “ Additional Shares”,
and closings of such purchase, “ Additional Closing”) for
$62,500 (such amount, the “ Additional Consideration”). As of the date hereof, Additional Closings have not been conducted
for, and the Subsidiary has not paid Additional Consideration for Additional
Shares in connection with, the calendar quarters ending September 30, 2010 or
December 31, 2010.





The
Registrant disputes the claims set forth in the TPN Complaint and it believes
the lawsuit is without merit and intends to vigorously defend against
them. On or about October 14, 2010, the Registrant filed its response to
the TPN Complaint and two counterclaims. The first counterclaim asserts
TPN’s breach of contract and seeks monetary damages in the sum of an amount no
less than $1.125 million, plus interest. The second counterclaim asserts
TPN’s breach of its obligation of good faith and fair dealing to the Registrant
and seeks monetary damages in the sum of an amount no less than $1.125 million,
plus interest. The case is presently in the discovery stage.





Please
also refer to the Current Report on Form 8-K filed with the SEC on January 13,
2011, with such filing being herein incorporated by reference.





Approval of Phentermine
Tablets 37.5mg


On
February 4, 2011, the Company announced the approval of an Abbreviated New Drug
Application (ANDA) for phentermine HCl 37.5 mg tablets by the U.S. Food and Drug
Administration (FDA).  The phentermine HCl tablets are the generic
equivalent of the Adipex-P®37.5mg tablets.  The product and its equivalents had annual sales
of approximately $40 million in 2010 and there are currently six other approved
generic manufacturers plus the innovator.  On September 16, 2010, Elite had
previously announced the acquisition of the ANDA for this generic product from
Epic Pharma LLC (“Epic”).  The ANDA approval was granted under Epic
Pharma’s name and transfer of the ANDA into Elite’s name will begin
immediately.





Also
previously disclosed on September 16, 2010, this product was part of a license
agreement and a manufacturing and supply agreement (together the “Agreements”)
with Precision Dose, Inc. (Precision Dose) which has a wholly owned subsidiary,
TAGI Pharma, Inc. (“TAGI Pharma”) which will distribute the product. 
Pursuant to the previously disclosed Agreements, TAGI Pharma will market and
sell this product and Elite will manufacture the product.  Elite will
receive a milestone payment upon shipment of the first product to Precision Dose
and Elite will receive a percentage of the gross profit, as defined in the
License Agreement, and earned by TAGI Pharma as a result of sales of the
products.  The license fee is payable monthly for the term of the
License Agreement.





Please
also refer to the Current Reports on Form 8-K filed with the SEC on February 4,
2011 and September 16, 2011, with such filings being herein incorporated by this
reference.


F-16




ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS
 
 THREE
AND NINE MONTH PERIODS ENDED DECEMBER 31, 2010
 COMPARED
TO THE
 THREE
AND NINE MONTH PERIOD ENDED DECEMBER 31, 2009
 (UNAUDITED)
 
 The
following discussion and analysis should be read with the financial statements
and accompanying notes included elsewhere in this Form 10-Q and in the Annual
Report. It is intended to assist the reader in understanding and evaluating our
financial position.
 
 This
Quarterly Report on Form 10-Q and the documents incorporated herein contain
“forward-looking statements”.   Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. When used
in this Form 10-Q, statements that are not statements of current or historical
fact may be deemed to be forward-looking statements.  Without limiting
the foregoing, the words “plan”, “intend”, “may,” “will,” “expect,” “believe”,
“could,” “anticipate,” “estimate,” or “continue” or similar expressions or other
variations or comparable terminology are intended to identify such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
hereof.  Except as required by law, the Company undertakes no
obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise.
 
 Any
reference to “Elite”, the “Company”, “we”, “us”, “our” or the “Registrant”
refers to Elite Pharmaceuticals Inc. and its subsidiaries.
 
 Overview
 We are a
specialty pharmaceutical company principally engaged in the development and
manufacture of oral, controlled-release products, using proprietary technology
and generic pharmaceuticals. Our strategy includes improving off-patent drug
products for life cycle management and developing generic versions of
controlled-release drug products with high barriers to entry. Our technology is
applicable to the development of delayed-, sustained- or targeted-release
pellets, capsules, tablets, granules and powders.
 
 We have
two products, Lodrane 24® and Lodrane 24D®, currently being sold
commercially.  We also have an approved generic methadone product
developed with our partner, The PharmaNetwork.  We are pursuing a
sales and distribution agreement for this product.  A sales and
distribution agreement is a prerequisite for the launch of this product and must
be mutually agreed upon by Elite and our development partner.  Elite
has purchased three approved generic products: a generic hydromorphone product,
a generic naltrexone product and a generic phentermine product.  The
manufacturing process for all three recently acquired products from the previous
ANDA holders  to our facilities in Northvale, New Jersey, is currently
on-going.  Elite also executed a License Agreement with Precision
Dose, Inc. (“Precision Dose”) to market and sell the Elite products in the
United States, Puerto Rico, and Canada through its wholly-owned subsidiary, TAGI
Pharma Inc. (“TAGI”).  TAGI will market the two approved and on
approval-pending product recently purchased by the Company as well as additional
products and dosage strengths that have or will be filed for approval with the
FDA.  The Company also has a pipeline of additional generic drug
candidates under active development.  Additionally, the Company is
developing ELI-216, an abuse resistant oxycodone product, and ELI-154, a
once-daily oxycodone product.  Elite’s facility in Northvale, New
Jersey operates under Current Good Manufacturing Practice (“cGMP”) and is a
United States Drug Enforcement Agency (“DEA”) registered facility for research,
development and manufacturing.
  1
  Strategy
 Elite is
focusing its efforts on the following areas: (i) development of Elite’s pain
management products, (ii) manufacturing of Lodrane 24® and Lodrane 24D®
products; (iii) set up and launch of approved generic products; (iv) the
development of the other products in our pipeline including the eight products
pursuant to the Epic Strategic Alliance Agreement; (v) commercial exploitation
of our products either by license and the collection of royalties, or through
the manufacture of our formulations, and (vi) development of new products and
the expansion of our licensing agreements with other pharmaceutical companies,
including co-development projects, joint ventures and other
collaborations.
 
 Elite is
focusing on the development of various types of drug products, including branded
drug products which require new drug applications (“NDAs”) under Section
505(b)(1) or 505(b)(2) of the Drug Price Competition and Patent Term Restoration
Act of 1984 (the “Drug Price Competition Act”) as well as generic drug products
which require abbreviated new drug applications (“ANDAs”).
 
 Elite
believes that its business strategy enables it to reduce risk by having a
diverse product portfolio that includes both branded and generic products in
various therapeutic categories and to build collaborations and establish
licensing agreements with companies with greater resources thereby allowing us
to share costs of development and improve cash-flow.
 
 Commercial
Products
 Elite
manufactures two once-daily allergy products, Lodrane 24® and Lodrane 24D®, that
were co-developed with our partner, ECR Pharmaceuticals (“ECR”).  Elite
entered into development agreements for these two products with ECR in June 2001
whereby Elite agreed to commercially develop two products in exchange for
development fees, certain payments, royalties and manufacturing rights. The
products are being marketed by ECR which also has the responsibility for
regulatory matters.  In addition to receiving revenues for the
manufacture of these products, Elite receives a royalty on in-market
sales.
 
 Lodrane
24®, was first commercially offered in November 2004 and Lodrane 24D® was first
commercially offered in December 2006.  Elite’s revenues for
manufacturing these products and a royalty on sales for the quarters ended
December, 2010 and 2009 aggregated $1,104,986 and, $917,383,
respectively.  Elite’s revenues for manufacturing these products and a
royalty on sales for the nine month periods ended December, 2010 and 2009
aggregated $2,790,332 and, $2,507,474, respectively.
 
 Since
January, 2010, the Company has performed laboratory stability studies of Lodrane
and Lodrane 24D, for ECR, on a contract basis.  Elite’s revenues from
such contract laboratory services for the nine months ended December 31, 2010
were $234,123.
 
 Approved
Products
 On
November 25, 2009, the Company and ThePharmaNetwork, LLC (“TPN”) were notified
of the approval of an Abbreviated New Drug Application for methadone
hydrochloride 10mg tablets by the U.S. Food and Drug Administration
(“FDA”).  Elite and TPN co-developed the product and the ANDA was
filed under the TPN name.  A current report on form 8-K was filed on
December 2, 2009 in relation to this announcement, such filing being
incorporated herein by this reference.
 
 On May
18, 2010, Elite executed an asset purchase agreement with Mikah Pharma LLC (the
“Hydromorphone Agreement”). Pursuant to the Hydromorphone Agreement,
the  Company acquired from Mikah an Abbreviated New Drug Application
for Hydromorphone Hydrochloride Tablets USP, 8 mg, for aggregate consideration
of $225,000, comprised of an initial payment of $150,000, which was made on May
18, 2010.  A second payment of $75,000 was due to be paid to Mikah on
June 15, 2010, with the Company having the option to make this payment in cash
or by issuing to Mikah 937,500 shares of the Company’s common
stock.  The Company elected and did issue 937,500 shares of Common
Stock during the quarter ended December 31, 2010, in full payment of the $75,000
due to Mikah pursuant to the asset purchase agreement dated May 18, 2010.
 Elite is transferring the process to the Facility in Northvale, NJ where
it intends to manufacture the product.  A current report on form 8-K
was filed on May 24, 2010 in relation to this announcement, such filing being
incorporated herein by this reference.   For further details on
the Hydromorphone Agreement, please refer to Exhibit 10.4 to the Quarterly
Report on Form 10-Q, filed with the SEC on November 15, 2010, and incorporated
herein by reference.
  2
  On August
27, 2010, Elite executed the Naltrexone Asset Purchase Agreement with Mikah
Pharma LLC (“Mikah”) pursuant to which Elite acquired from Mikah the Abbreviated
New Drug Application number 75-274 (Naltrexone Hydrochloride Tablets USP, 50
mg), and all amendments thereto (the “ANDA”), that have to date been filed with
the FDA seeking authorization and approval to manufacture, package, ship and
sell the products described in the ANDA within the United States and its
territories (including Puerto Rico) for aggregate consideration of
$200,000.  In lieu of cash, Mikah agreed to accept from Elite product
development services to be performed by Elite, as described below under Product
Development Agreement heading.  A current report on form 8-K was filed
on August 27, 2010 in relation to this announcement, such filing being
incorporated herein by this reference.  Please also refer to exhibit
10.5 of the Quarterly Report on Form 10-Q filed with SEC on November 15, 2010,
such filing being incorporated herein by this reference.
 
 On
September 10, 2010, Elite, together with its subsidiary, Elite Laboratories,
Inc., executed a Purchase Agreement (the “Phentermine Purchase Agreement”) with
Epic Pharma LLC (the “Seller”) for the purpose of acquiring from the seller an
Abbreviated New Drug Application for a generic phentermine product (the
“Phentermine ANDA”), with such being filed with, but not yet approved by the
FDA.  On February 4, 2011, the Company announced the approval by the
FDA of the Phentermine ANDA.  As per the terms and conditions of the
Phentermine Purchase Agreement, the acquisition of the Phentermine ANDA will
close on the later of 60 days from the date of the Purchase Agreement or upon
receipt of FDA approval of the Phentermine ANDA.  Upon the closing,
Elite will pay a portion of the purchase price.  The remainder of the
purchase price will be paid in quarterly installments over a period of three
years, beginning at the end of the first full quarter following the
closing.  Current reports on form 8-K were filed on September 10, 2010
and February 4, 2011 in relation to the Phentermine Purchase Agreement and the
Phentermine ANDA, with such filings being incorporated herein by this
reference.  Please also refer to exhibit 10.7 of the Quarterly Report
on Form 10-Q filed with SEC on November 15, 2010, such filing being incorporated
herein by this reference.
 
 Licensing
Agreement
 On
September 10, 2010, Elite Pharmaceuticals Inc. (“Elite”) executed a License
Agreement with Precision Dose, Inc. (“Precision Dose”) to market and sell four
Elite generic products, consisting of Hydromorphone, Naltrexone, and two generic
products for which ANDA’s have been filed but not yet approved by the FDA.,
through its wholly-owned subsidiary, TAGI Pharma, Inc. in the United States,
Puerto Rico and Canada.  Precision Dose will have the exclusive right
to market the products in the United States and Puerto Rico and a non-exclusive
right to market the products in Canada.  Pursuant to the License
Agreement, Elite will receive a license fee and milestone
payments.  The license fee will be computed as a percentage of the
gross profit, as defined in the License Agreement, earned by Precision Dose as a
result of sales of the products.  The license fee is payable monthly
for the term of the License Agreement.  The milestone payments will be
paid in 6 installments.  The first installment was paid upon execution
of the License Agreement.  The remaining installments are to be paid
upon FDA approval and initial shipment of the products to Precision
Dose.  The term of the License Agreement is 15 years and may be
extended for 3 successive terms, each of 5 years.  A current report on
form 8-K was filed on September 10, 2010 in relation to this announcement, such
filing being incorporated herein by this reference.  Please also refer
to exhibits 10.8 and 10.9 of the Quarterly Report on Form 10-Q filed with SEC on
November 15, 2010, such filings being incorporated herein by this
reference.
 
 Products
Under Development
 It is our
general policy not to disclose products in our development pipeline or the
status of such products until a product reaches a stage that we determine, for
competitive reasons, in our discretion, to be appropriate for disclosure and
because the disclosure of such information might suggest the occurrence of
future matters or events that may not occur.
 
 ELI-154
and ELI-216
 For
ELI-154, Elite has developed a once-daily oxycodone formulation using its
proprietary technology. An investigational new drug application, or IND, has
been filed and Elite has completed two pharmacokinetic studies in healthy
subjects that compared blood levels of oxycodone from dosing ELI-154 and the
twice-a-day product that is on the market currently, OxyContin® marketed in the
U.S. by Purdue Pharma LP.  These studies confirmed that ELI-154, when
compared to twice-daily delivery, demonstrated an equivalent onset, more
constant blood levels of the drug over the 24 hour period and equivalent blood
levels to the twice-a-day product at the end of 24 hours.  Elite has
successfully manufactured multiple batches on commercial scale equipment and we
have discussions ongoing in Europe for this product.  We are looking
for a partner who can complete the clinical studies required for Europe and who
can sell and distribute the product in key European
territories.
  3
  ELI-216
utilizes our patent-pending abuse-deterrent technology that is based on a
pharmacological approach. ELI-216 is a combination of a narcotic agonist,
oxycodone hydrochloride, in a sustained-release formulation intended for use in
patients with moderate to severe chronic pain, and an antagonist, naltrexone
hydrochloride, formulated to deter abuse of the drug.  Both of these
compounds, oxycodone hydrochloride and naltrexone hydrochloride, have been on
the market for a number of years and sold separately in various dose
strengths.  Elite has filed an IND for the product and has tested the
product in a series of pharmacokinetic studies.  In single-dose
studies for ELI-216, it was demonstrated that no quantifiable blood levels of
naltrexone hydrochloride were released at a limit of quantification (“LOQ”) of 7.5
pg/ml.  As described below, when crushed, naltrexone hydrochloride was
released at levels that would be expected to eliminate the euphoria from the
crushed oxycodone hydrochloride.  This data is consistent with the
premise of Elite’s abuse resistant technology, or ART, that essentially no
naltrexone is released and absorbed when administered as
intended.  Products utilizing the pharmacological approach to deter
abuse such as Suboxone®, a product marketed in the United States by Reckitt
Benckiser Pharmaceuticals, Inc., and Embeda®, a product marketed in the United
States by King Pharmaceuticals, have been approved by the FDA and are being
marketed in the United States.
 
 ELI-216
demonstrates a euphoria-blocking effect when the product is
crushed.   A study completed in 2007 was designed to determine
the optimal ratio of oxycodone hydrochloride and the opioid antagonist,
naltrexone hydrochloride, to significantly block the euphoric effect of the
opioid if the product is abused by physically altering it (i.e., crushing).
 The study also helped determine the appropriate levels of naltrexone
hydrochloride required to reduce or eliminate the euphoria experienced by
subjects who might take crushed product to achieve a “high”.
 
 Elite met
with the FDA for a Type C clinical guidance meeting regarding the NDA
development program for ELI-216.  Elite has incorporated the FDA’s guidance
into its developmental plan.  Elite has obtained a special protocol
assessment, or SPA, with the FDA for the ELI-216 Phase III protocol. Elite will
conduct additional Phase I studies including, but not limited to, food effect,
ascending dose and multi-dose studies.
  Elite has
developed ELI-154 and ELI-216 and retains the rights to these
products.  Elite has currently chosen to develop these products itself
but expects to license these products at a later date to a third party who could
provide funding for the remaining clinical studies, including a Phase III study,
and who could provide sales and distribution for the product. The drug delivery
technology underlying ELI-154 was originally developed under a joint venture
with Elan which terminated in 2002.
  According
to the Elan Termination Agreement, Elite acquired all proprietary, development
and commercial rights for the worldwide markets for the products developed by
the joint venture, including ELI-154. Upon licensing or commercialization of
ELI-154, Elite will pay a royalty to Elan pursuant to the Termination
Agreement.  If Elite were to sell the product itself, Elite will pay a
1% royalty to Elan based on the product’s net sales, and if Elite enters into an
agreement with another party to sell the product, Elite will pay a 9% royalty to
Elan based on Elite’s net revenues from this product. (Elite’s net product
revenues would include license fees, royalties, manufacturing profits and
milestones) Elite is allowed to recoup all development costs including research,
process development, analytical development, clinical development and regulatory
costs before payment of any royalties to Elan.
 
 Epic
Strategic Alliance Agreement
 On March
18, 2009, Elite and Epic Pharma, LLC and Epic Investments, LLC, a subsidiary of
Epic Pharma LLC (collectively, “Epic”) entered into the Epic Strategic Alliance
Agreement (amended on April 30, 2009, June 1, 2009 and July 28, 2009). Epic is a
pharmaceutical company that operates a business synergistic to that of Elite in
the research and development, manufacturing and sales and marketing of oral
immediate release and controlled-release drug products.
 
 Under the
Epic Strategic Alliance Agreement (i) at least eight additional generic drug
products will be developed by Epic at the Facility with the intent of filing
abbreviated new drug applications for obtaining FDA approval of such generic
drugs, (ii) Elite will be entitled to 15% of the profits generated from the
sales of such additional generic drug products upon approval by the FDA, and
(iii) Epic and Elite will share certain resources, technology and know-how in
the development of drug products, which Elite believes will benefit the
continued development of its current drug products.
  4
  For
additional information regarding the Epic Strategic Alliance Agreement, please
see our disclosures under “Epic Strategic Alliance Agreement” in Item 7 of Part
II of this Annual Report on Form 10-K, and in our Current Reports on Form 8-K,
filed with the SEC on March 23, 2009, May 6, 2009 and June 5, 2009, which are
incorporated herein by reference.
 
 Product
Development Agreement
 On August
27, 2010, Elite Pharmaceuticals Inc. (“Elite”) executed an agreement with Mikah
Pharma, LLC (“Mikah”) to undertake and perform development work to facilitate
the preparation of a regulatory filing for a product under development (the
“Product Development Agreement”).  The product will be formulated with
a previously approved drug substance and will be designed to be delivered in a
unique delivery profile.  Among other responsibilities, Elite will
provide formulation, analytical development, clinical batch manufacture and
validation work for the product.  The parties agreed that, in lieu of
cash, the transfer to Elite of the Naltrexone product in accordance with the
terms of the Naltrexone Asset Purchase Agreement (see discussion at Item 2.01
below), which they valued at $200,000, constituted the consideration for the
development services being performed by Elite under the Product Development
Agreement.  Mikah will also pay to Elite, on a quarterly basis, a
royalty in the amount of 5% of net sales of the product.  The royalty
will be due and payable for the duration of the period beginning on the date
that the product is approved by the United States Food and Drug Administration
(the “FDA”) and ending on the date of the introduction into the market of an
equivalent generic product.  Upon approval of the new drug application
by the FDA, Elite will manufacture the product and the parties will negotiate in
good faith a manufacturing and supply agreement for the product. The Product
Development Agreement has a term of 10 years.  There is no guarantee
that the product will receive approval from the FDA.  A current report
on form 8-K was filed on September 1, 2010 in relation to this announcement,
such filing being incorporated herein by this reference.  Please also
refer to exhibit 10.6 of the Quarterly Report on Form 10-Q filed with the SEC on
November 15, 2010, such filing being herein incorporated by this
reference.
 
 Novel
Labs Investment
 At the
end of 2006, Elite entered into an agreement with VGS Pharma, LLC (“VGS”) and created Novel
Laboratories, Inc. (“Novel”), a privately-held
company specializing in pharmaceutical research, development, manufacturing,
licensing, acquisition and marketing of specialty generic pharmaceuticals.
Novel's business strategy is to focus on its core strength in identifying and
timely executing niche business opportunities in the generic pharmaceutical
area. Elite owns approximately 10% of the outstanding shares of Class A Voting
Common Stock of Novel.  To date, Elite has received no distributions
or dividends from this investment.
 
 Critical
Accounting Policies and Estimates
 Management’s
discussion addresses our Consolidated Financial Statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of financial statements and the reported amounts of revenues and
expenses during the reporting period. On an ongoing basis, management evaluates
its estimates and judgment, including those related to bad debts, intangible
assets, income taxes, workers 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. Our most critical accounting policies include
the recognition of revenue upon completion of certain phases of projects under
research and development contracts. We also assess a need for an allowance to
reduce our deferred tax assets to the amount that we believe is more likely than
not to be realized. We assess the recoverability of long-lived assets and
intangible assets whenever events or changes in circumstances indicate that the
carrying value of the asset may not be recoverable. We assess our exposure to
current commitments and contingencies. It should be noted that actual results
may differ from these estimates under different assumptions or
conditions.
  5
  Results
of Consolidated Operations
 
 Three
Months Ended December 31, 2010 Compared to Three Months Ended December 31,
2009
 Our
revenues for the three months ended December 31, 2010 were $1,226,297 an
increase of $308,914 or approximately 34% over revenues for the comparable
period of the prior year, and consisted of $901,653 in manufacturing fees,
$92,902 in lab fees and $231,742 in royalties. Revenues for the three months
ended December 31, 2009, consisted of $744,948 in manufacturing fees and
$172,435 in royalties.  Manufacturing fees increased by approximately
21% due to timing of orders and shipments and growing demand for the Lodrane
products. Royalty revenues for the quarter ended December 31, 2010 increased by
$59,307, when compared to royalty revenues for the same quarter of the prior
year.  This increase is due to the timing of end-user sales in the
market and a growing demand for the Lodrane products.
  Research
and development costs for the three months ended December 31, 2010 were
$179,525, a decrease of $68,248 or approximately 28% from $247,773 of such costs
for the comparable period of the prior year.  Decreases were
attributed to decreases in employee costs and consulting fees associated with
the development of products and lower active pharmaceutical ingredient costs for
product development.
  General
and administrative expenses for the three months ended December 31, 2010, were
$315,537, a decrease of $183,347, or approximately 37% from $498,884 of general
and administrative expenses for the comparable period of the prior
year.  The decrease was primarily due to the December 2010 quarter not
having the unusually high legal fees incurred during the December 2009 quarter
in relation to litigation existing during that period that has since been
settled, plus continued cost reduction initiatives throughout all aspects of our
operations, offset by increased rent expense related to the operating lease
entered into as of July 1, 2010.
  Depreciation
and amortization for the three months ended December 31, 2010 was $9,200, a
decrease of $30,515, or approximately 77%, from $39,715 for the comparable
period of the prior year. The decrease was due to the implementation of improved
manufacturing cost accounting systems which more accurately allocate
depreciation expense among manufacturing and other operations, increased
manufacturing volumes reducing excess capacity, as well as non-essential
machinery and equipment not being replaced upon reaching retirement, full
depreciation.
  Non-cash
compensation through the issuance of stock options and warrants for the three
months ended December 31, 2010 was $7,580, a decrease of $20,908, or
approximately 73% from $28,488 for the comparable period of the prior
year.  The decrease was due to the timing of the amortization schedule
established at the time of issuance of the related stock options and
warrants.
  Other
income/(expenses) for the three months ended December 31, 2010 were $5,856,343,
an increase in other income of $14,939,935 from the net other income/(expense)
of $(9,083,592) for the comparable period of the prior year.  The
increase in other income/(expenses) was due to derivative income relating to
changes in the fair value of our preferred shares and outstanding warrants
during the quarter ended December 31, 2010 totaling $6.2 million, as compared to
a derivative expense of $8.4 million for the comparable period of the prior
year.
  As
a result of the foregoing, our net income for the three months ended December
31, 2010 was $5,928,212 compared to a net loss of $(9,590,485) for the three
months ended December 31, 2009.
  Nine
Months Ended December 31, 2010 Compared to Nine Months Ended December 31,
2009
 Our
revenues for the nine months ended December 31, 2010 were $3,052,864 an increase
of $545,390 or approximately 22% over revenues for the comparable period of the
prior year, and consisted of $2,236,064 in manufacturing fees, $234,123 in lab
fees and $582,677 in royalties. Revenues for the nine months ended December 31,
2009, consisted of $1,948,952 in manufacturing fees and $558,522 in royalty
fees.  Manufacturing fees increased by approximately 15% due to
growing demand for the Lodrane products. Royalty revenues for the nine months
ended December 31, 2010 increased by $24,155, when compared to royalty revenues
for the same period of the prior year.
  This
increase is due to the timing of end-user sales in the market and a growing
demand for the Lodrane products.
  6
  Research
and development costs for the nine months ended December 31, 2010 were $494,968,
a decrease of $263,222 or approximately 35% from $758,190 of such costs for the
comparable period of the prior year.  Decreases were attributed to
decreases in employee costs and consulting fees associated with the development
of products and lower active pharmaceutical ingredient costs for product
development.
  General
and administrative expenses for the nine months ended December 31, 2010, were
$947,761, a decrease of $340,804, or approximately 26% from $1,288,565 of
general and administrative expenses for the comparable period of the prior
year.  The decrease was primarily due to not having the unusually high
legal fees incurred in the prior year in relation to litigation existing during
that period that has since been settled, plus continued cost reduction
initiatives throughout all aspects of our operations, offset by increased rent
expense related to the operating lease entered into as of July 1,
2010.
  Depreciation
and amortization for the nine months ended December 31, 2010 was $113,490, a
decrease of $100,997, or approximately 47%, from $214,487 for the comparable
period of the prior year. The decrease was due to the implementation of improved
manufacturing cost accounting systems which more accurately allocate
depreciation expense among manufacturing and other operations, increased
manufacturing volumes which reduced excess capacity, as well as non-essential
machinery and equipment not being replaced upon reaching retirement, full
depreciation.
  Non-cash
compensation through the issuance of stock options and warrants for the nine
months ended December 31, 2010 was $33,268, a decrease of $79,773, or
approximately 71% from $113,041 for the comparable period of the prior
year.  The decrease was due to the timing of the amortization schedule
established at the time of issuance of the related stock options and
warrants.
  Other
income/(expenses) for the nine months ended December 31, 2010 were $3,185,787,
an increase in other income of $13,505,840 from the net other income/(expense)
of $(10,320,053) for the comparable period of the prior year.  The
increase in other income/(expenses) was due to derivative expense related to
changes in the fair value of our preferred shares and outstanding warrants
during the nine months ended December 31, 2010 totaling $4.4 million, as
compared to $(8.6) million for the comparable period of the prior
year.
  As a
result of the foregoing, our net income for the nine months ended December 31,
2010 was $3,023,043 compared to a net loss of $(12,111,307) for the nine months
ended December 31, 2009.
  Material
Changes in Financial Condition
  Our
working capital (total current assets less total current liabilities), decreased
to a deficit of $2.7 million as of December 31, 2010 from a working capital
deficit of $2.3 million as of March 31, 2010, primarily due to our net loss from
operations, exclusive of non-cash charges.  In addition, it should be
noted that current liabilities includes the entire principal amount due on the
Company’s NJEDA Bonds Payable.  This amount, totaling $3.4 million has
been classified as a current liability as a result of the Company receiving a
notice of default from the Trustee of the NJ-EDA Bonds.  Please refer
to Note 5 to our financial statements and Item 3 of this current report on Form
10-Q for further details.
  We
achieved a positive cash flow from operations of $318,457 for the nine months
ended December 31, 2010, primarily due to deferred revenues relating to
milestone payments, totaling $234,956, received from marketing contracts signed
during the period and our net income from continuing operations
of  $3,005,004,  decreased by non cash charges totaling
$3,019,933, which included depreciation and amortization of
$362,381,  change in fair value of warrant derivative liabilities of
$(4,788,493), change in fair value of preferred share derivative liabilities of
$412,908, derivative interest payments satisfied through the issuance of common
shares in lieu of cash of $897,680 and non cash compensation satisfied by the
issuance of common stock and options of $33,268.
  LIQUIDITY
AND CAPITAL RESOURCES
  Going
concern considerations
  As of
December 31, 2010, the Company had a working capital deficit of $2.7 million,
losses from operations totaling $0.2 million for the nine months ended December
31, 2010, other income totaling $3.2 million for the nine months ended and a net
income of $3.0 million for the nine months ended December 31,
2010.  Please note that the Company’s other income/(expenses) are
significantly influenced by the fluctuations in the fair value of outstanding
preferred share and warrant derivatives, and that such fair values strongly
correlate to and vary inversely with the market share price of the Company’s
Common Stock.
  7
  In
addition, the Company has received Notice of Default from the Trustee of the
NJEDA Bonds as a result of the utilization of the debt service reserve being
used to pay interest payments due on September 1, 2009, March 1, 2010 and
September 1, 2010 totaling $121k, $113k and $113k, respectively, and principal
payments due on September 1, 2009 totaling $210k.  The debt service
reserve was utilized to make such payments as a result of the Company’s not
having sufficient funds available to make such payments when due.
 
 The
Company did not have sufficient funds available to make the principal payments
due on September 1, 2010, totaling $200k and requested that the Trustee withdraw
such funds from the debt service reserve.  The Company’s request was
denied and accordingly the principal payment due on September 1, 2010, totaling
$200k was not made.
 
 The
Company has requested a postponement of principal payments due on September 1,
2010, 2011 and 2012, with an aggregate of all such postponed principal payments
being added to the principal payments due on September 1,
2013.  Resolution of the Company’s default on the NJEDA Bonds and our
request for postponement of principal payments will have a significant effect on
our ability to operate in the future.
 
 Please
refer to Note 5 to our financial statements and Item 3 of this current report on
Form 10-Q for a more detailed discussion of the NJEDA Bonds and Notice of
Default.
  As of
December 31, 2010, we had cash reserves of $415,194.  The completion
of all transactions contemplated by the Epic Strategic Alliance Agreement,
including the consummation of the third closing thereof, is expected to provide
additional funds to permit us to continue development of our product pipeline
for more than two years.  Beyond two years, we anticipate that, with
growth of Lodrane and the launch of the generic Hydromorphone 8mg and Naltrexone
50mg recently acquired pursuant to asset purchase agreements with Mikah Pharma
LLC, Elite could be profitable.In addition, the
commercialization of the products developed at the Facility under the Epic
Strategic Alliance Agreement is expected to add a new revenue source for Elite.
However, there can be no assurances as to the growth, success of development or
commercialization of these products.
 
 Despite
the successful completion of the initial and second closings of the Epic
Strategic Alliance Agreement, there can be no assurances that we will be able to
consummate the third closing pursuant to the terms and conditions of the Epic
Strategic Alliance Agreement.  If such transactions are consummated,
we will receive additional cash proceeds of $1.6875 million (which will include
quarterly payments of $62,500 for a period of 11 quarters).  Even if
we were able to successfully complete the third closing of the Epic Strategic
Alliance Agreement, we still may be required to seek additional capital in the
future and there can be no assurances that we will be able to obtain such
additional capital on favorable terms, if at all. For additional information
regarding the Epic Strategic Alliance Agreement, please see our disclosures
under “Epic Strategic Alliance Agreement” in Item 7 of Part II of our Annual
Report on Form 10-K, and in our Current Reports on Form 8-K, filed with the SEC
on March 23, 2009, May 6, 2009, June 5, 2009, July 1, 2010 and January 13, 2011,
which disclosures are incorporated herein by reference.
 
 Based
upon our current cash position, management has undertaken a review of our
operations and implemented cost-cutting measures in an effort to eliminate any
expenses which are not deemed critical to our current strategic
objectives.  We will continue this process without impeding our
ability to proceed with our critical strategic goals, which, as noted above,
include developing our pain management and other products and manufacturing our
current products.
  For the
nine months ended December 31, 2010, we realized approximately $0.3 million
positive cash flow from operating activities.  Our working capital
deficit at December 31, 2010 was approximately $2.7 million compared with
working capital surplus of approximately $0.5 million at December 31,
2009.  Please note that the working capital deficit of $2.6 million as
of December 31, 2010, includes the entire principal amount due in relation to
the NJEDA Bonds.  This amount, totaling $3.4 million was first
classified as a current liability as of March 31, 2010, due to the Notice of
Default received from the Trustee in relation to the NJEDA Bonds.  The
working capital surplus of $0.5 million as of December 31, 2009, does not
include classification of such entire principal amount due on the NJEDA Bonds as
a current liability.  Please refer to Note 5 to our financial
statements and Item 3 of this current report on Form 10-Q for a more detailed
discussion of the NJEDA Bonds and Notice of Default.
  8
  Cash and
cash equivalents at December 31, 2010, were approximately $0.4 million, a
decrease of approximately $0.5 million from the approximately $0.9 million at
December 31, 2009.
 
 As of
December 31, 2010, our principal source of liquidity was approximately $0.4 of
cash and cash equivalents.   Additionally, we may have access to
funds through the exercise of outstanding stock options and warrants. There can
be no assurance that the exercise of outstanding warrants or options will
generate or provide sufficient cash.
 
 Off-Balance Sheet Arrangements
 
 We have not entered into any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures, or capital
resources that would be considered material to investors.
 
 Effects of Inflation
 
 We are subject to price risks arising from price
fluctuations in the market prices of the products that we
sell.  Management does not believe that inflation risk is material to
our business or our consolidated financial position, results of operations, or
cash flows.
 
 ITEM
3.             QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 Not
applicable
 
 ITEM
4              CONTROLS
AND PROCEDURES
  Evaluation
of Disclosure Controls and Procedures
  Under the
supervision and with the participation of our management, including the Chief
Executive and Chief Financial Officers, we evaluated the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in
Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the
“Exchange Act”), as of the end of the period covered by this Quarterly Report on
Form 10-Q.  Based upon that evaluation, our Chief Executive and Chief
Financial Officers concluded that our disclosure controls and procedures as of
the end of the period covered by this report were not effective so that that the
information required to be disclosed by us in reports filed under the Exchange
Act is (i) recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms and (ii) accumulated and communicated to
our management in order to allow for timely decisions regarding
disclosure.  A controls system cannot provide absolute assurance,
however, that the objectives of the controls system are met, and no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected.
  Management
has determined that, as of December 31, 2010, there were material weaknesses in
both the design and effectiveness of our internal control over financial
reporting.  A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of our annual or interim
financial statements will not be prevented or detected on a timely
basis.
  The
deficiencies in our internal controls over financial reporting and disclosure
controls and procedures are related to the lack of segregation of duties due to
the size of our accounting department, which replaced an outside accounting firm
and non-employee Chief Financial Officer on July 1, 2009, and limited enterprise
resource planning systems.  When our financial position improves, we
intend to hire additional personnel and implement enterprise resource planning
systems required to remedy such deficiencies.
  9
  Changes
in Internal Controls
  There
have been no changes in our internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15 (f) under the Exchange Act) during
the quarter ended December 31, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
  PART
II.   OTHER INFORMATION
 
 ITEM 1.     LEGAL PROCEEDINGS
 
 In the ordinary course of business we may be subject to
litigation from time to time. Except as follows, there is no past, pending or,
to our knowledge, threatened litigation or administrative action to which we are
a party or of which our property is the subject (including litigation or actions
involving our officers, directors, affiliates, or other key personnel, or
holders of record or beneficially of more than 5% of any class of our voting
securities, or any associate of any such party) which in our opinion has, or is
expected to have, a material adverse effect upon our business, prospects,
financial condition or operations.
 
 The PharmaNetwork, LLC v. Elite
Pharmaceuticals, Inc. – On or about September 3, 2010, The PharmaNetwork,
LLC (“Plaintiffs”) filed a complaint against the Company in the Superior Court
of New Jersey Chancery Division: Bergen County (Docket No. C-272-10), with an
amendment of this complaint being filed on or about September 24, 2010 (the “TPN
Complaint”). The TPN Complaint consists of two counts.  The first
count is for breach of contract and specific performance & injunctive relief
and seeks judgment against the Company for (a) specific performance of the
Product Collaboration Agreement made on or about November 26, 2006 (the
“Agreement”) ; (b) injunctive relief enjoining the Company from using its assets
for any purpose other than its obligations under the Agreement and the payment
of the Company’s existing and continuing costs and expenses incurred in the
ordinary course of business ; and (c) such other relief as the Court deems
equitable and just.  The second count is for breach of the implied
covenant of good faith and fair dealing and seeks judgment against the Company
for (a) specific performance of the Product Collaboration Agreement made on or
about November 26, 2006 (the “Agreement”) ; (b) injunctive relief enjoining the
Company from using its assets for any purpose other than its obligations under
the Agreement and the payment of the Company’s existing and continuing costs and
expenses incurred in the ordinary course of business ; and (c) such other relief
as the Court deems equitable and just.
 
 Plaintiffs
requests for injunctive relief have been denied pursuant to order of the
court.
 
 The
Company disputes the claims, believes the lawsuit is without merit and intends
to vigorously defend against them.
 
 On or
about October 14, 2010, the Company filed its response to the TPN complaint and
two counterclaims.  The first counterclaim asserts TPN’s breach of
contract and seeks monetary damages in the sum of an amount no less than $1.125
million, plus interest.  The second counterclaim asserts TPN’s breach
of its obligation of good faith and fair dealing to the Company and seeks
monetary damages in the sum of an amount no less than $1.125 million, plus
interest.
 
 The case
is presently in discovery stage.
 
 ITEM
1A.          RISK
FACTORS
 
 There
have been no material changes from the Risk Factors described in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2010.
  10
  ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
 
 During
the quarter ended December 31, 2010, we issued 3,926,568 shares of our common
stock to the holders of our Series B, C and D Preferred Stock.  The
shares were issued in satisfaction of our obligation to pay $227,320 in
dividends earned and/or owing during the quarter ended September 30,
2010.  We did not receive any proceeds in exchange for the issuance of
these securities.  We relied on the exemption provided by Section 4(2)
of the Securities Act of 1933 to issue the common stock   The
securities were offered and sold without any form of general solicitation or
general advertising and the offerees made representations that they were
accredited investors.
 
 ITEM
3.            DEFAULTS UPON SENIOR SECURITIES
 
 Please see the discussion in Note 5 to our financial
statements titled “NJEDA Bonds” which is incorporated herein by this
reference.
 
 ITEM
4.            REMOVED AND RESERVED
 
 ITEM
5.            OTHER
INFORMATION
 
 None.
  ITEM
6.            EXHIBITS
 
 The
exhibits listed in the index below are filed as part of this
report.
 
 Exhibit
                      Number
                    
                    Description3.1(a)
                    
                    Certificate
      of Incorporation of the Company, together with all other amendments
      thereto, as filed with the Secretary of State of the State of Delaware,
      incorporated by reference to (a) Exhibit 4.1 to the Registration Statement
      on Form S-4 (Reg. No. 333-101686), filed with the SEC on December 6, 2002
      (the “Form S-4”), (b) Exhibit 3.1 to the Company’s Current Report on Form
      8-K dated July 28, 2004 and filed with the SEC on July 29, 2004, (c)
      Exhibit 3.1 to the Company’s Current Report on Form 8-K dated June 26,
      2008 and filed with the SEC on July 2, 2008, and (d) Exhibit 3.1 to the
      Company’s Current Report on Form 8-K dated December 19, 2008 and filed
      with the SEC on December 23, 2008.3.1(b)
                    
                    Certificate
      of Designations, Preferences and Rights of Series A Preferred Stock, as
      filed with the Secretary of the State of Delaware, incorporated by
      reference to Exhibit 4.5 to the Current Report on Form 8-K dated October
      6, 2004, and filed with the SEC on October 12, 2004.3.1(c)
                    
                    Certificate
      of Retirement with the Secretary of the State of the Delaware to retire
      516,558 shares of the Series A Preferred Stock, as filed with the
      Secretary of State of Delaware, incorporated by reference to Exhibit 3.1
      to the Current Report on Form 8-K dated March 10, 2006, and filed with the
      SEC on March 14, 2006.3.1(d)
                    
                    Certificate
      of Designations, Preferences and Rights of Series B 8% Convertible
      Preferred Stock, as filed with the Secretary of the State of Delaware,
      incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K
      dated March 15, 2006, and filed with the SEC on March 16,
      2006.3.1(e)
                    
                    Amended
      Certificate of Designations of Preferences, Rights and Limitations of
      Series B 8% Convertible Preferred Stock, as filed with the Secretary of
      State of the State of Delaware, incorporated by reference to Exhibit 3.1
      to the Current Report on Form 8-K dated April 24, 2007, and filed with the
      SEC on April 25, 2007.3.1(f)
                    
                    Certificate
      of Designations, Preferences and Rights of Series C 8% Convertible
      Preferred Stock, as filed with the Secretary of the State of Delaware,
      incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K
      dated April 24, 2007, and filed with the SEC on April 25,
      2007.
  11
 
 3.1(g)
                
                Amended
      Certificate of Designations, Preferences and Rights of Series C 8%
      Convertible Preferred Stock, as filed with the Secretary of the State of
      Delaware, incorporated by reference to Exhibit 3.1 to the Current Report
      on Form 8-K dated April 24, 2007, and filed with the SEC on April 25,
      20073.1(h)
                
                Amended
      Certificate of Designations of Preferences, Rights and Limitations of
      Series B 8% Convertible Preferred Stock, as filed with the Secretary of
      State of the State of Delaware, incorporated by reference to Exhibit 3.1
      to the Current Report on Form 8-K dated September 15, 2008, and filed with
      the SEC on September 16, 2008.3.1(i)
                
                Amended
      Certificate of Designations, Preferences and Rights of Series C 8%
      Convertible Preferred Stock, as filed with the Secretary of the State of
      Delaware, incorporated by reference to Exhibit 3.2 to the Current Report
      on Form 8-K dated September 15, 2008, and filed with the SEC on September
      16, 2008.3.1(j)
                
                Amended
      Certificate of Designations of Preferences, Rights and Limitations of
      Series D 8% Convertible Preferred Stock, as filed with the Secretary of
      State of the State of Delaware, incorporated by reference to Exhibit 3.3
      to the Current Report on Form 8-K dated September 15, 2008, and filed with
      the SEC on September 16, 2008.3.1(k)
                
                Certificate
      of Designation of Preferences, Rights and Limitations of Series E
      Convertible Preferred Stock, as filed with the Secretary of State of the
      State of Delaware, incorporated by reference to Exhibit 3.1 to the Current
      Report on Form 8-K dated June 1, 2009, and filed with the SEC on June 5,
      2009.3.1(l)
                
                Amended
      Certificate of Designations of the Series D 8% Convertible Preferred Stock
      as filed with the Secretary of State of the State of Delaware on June 29,
      2010, incorporated by reference to Exhibit 3.1 to the Current Report on
      Form 8-K, dated July 1, 2010 and filed with the SEC on July 1,
      20103.1(m)
                
                Amended
      Certificate of Designations of the Series E Convertible Preferred Stock as
      filed with the Secretary of State of the State of Delaware on June 29,
      2010, incorporated by reference to Exhibit 3.2 to the Current Report on
      Form 8-K, dated July 1, 2010 and filed with the SEC on July1,
      20103.2
                
                By-Laws
      of the Company, as amended, incorporated by reference to Exhibit 3.2 to
      the Company’s Registration Statement on Form SB-2 (Reg. No. 333-90633)
      made effective on February 28, 2000 (the “Form SB-2”).4.1
                
                Form
      of specimen certificate for Common Stock of the Company, incorporated by
      reference to Exhibit 4.1 to the Form SB-2.4.2
                
                Form
      of specimen certificate for Series A 8% Convertible Preferred Stock of the
      Company, incorporated by reference to Exhibit 4.5 to the Current Report on
      Form 8-K, dated October 6, 2004, and filed with the SEC on October 12,
      2004.4.3
                
                Form
      of specimen certificate for Series B 8% Convertible Preferred Stock of the
      Company, incorporated by reference to Exhibit 4.1 to the Current Report on
      Form 8-K, dated March 15, 2006 and filed with the SEC on March 16,
      2006.4.4
                
                Form
      of specimen certificate for Series C 8% Convertible Preferred Stock of the
      Company, incorporated by reference to Exhibit 4.1 to the Current Report on
      Form 8-K, dated April 24, 2007 and filed with the SEC on April 25,
      2007.4.5
                
                Warrant
      to purchase 100,000 shares of Common Stock issued to DH Blair Investment
      Banking Corp., incorporated by reference to Exhibit 10.2 to the Quarterly
      Report on Form 10-Q for the period ended September 30,
    2004.
  12
 
 4.6
                  
                  Warrant
      to purchase 50,000 shares of Common Stock issued to Jason Lyons
      incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form
      10-Q for the period ended June 30, 2004.4.7
                  
                  Form
      of Warrant to purchase shares of Common Stock issued to designees of
      lender with respect to financing of an equipment loan incorporated by
      reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the
      period ended June 30, 2004.4.8
                  
                  Form
      of Short Term Warrant to purchase shares of Common Stock issued to
      purchasers in the private placement which initially closed on October 6,
      2004 (the “Series A Financing”), incorporated by reference to Exhibit 4.6
      to the Current Report on Form 8-K, dated October 6, 2004, and filed with
      the SEC on October 12, 20044.9
                  
                  Form
      of Long Term Warrant to purchase shares of Common Stock issued to
      purchasers in the Series A Financing, incorporated by reference to Exhibit
      4.7 to the Current Report on Form 8-K, dated October 6, 2004, and filed
      with the SEC on October 12, 2004.4.10
                  
                  Form
      of Warrant to purchase shares of Common Stock issued to the Placement
      Agent, in connection with the Series A Financing, incorporated by
      reference to Exhibit 4.8 to the Current Report on Form 8-K, dated October
      6, 2004, and filed with the SEC on October 12, 2004.4.11
                  
                  Form
      of Replacement Warrant to purchase shares of Common Stock in connection
      with the offer to holders of Warrants in the Series A Financing (the
      “Warrant Exchange”), incorporated by reference to Exhibit 4.1 to the
      Current Report on Form 8-K, dated December 14, 2005, and filed with the
      SEC on December 20, 2005.4.12
                  
                  Form
      of Warrant to purchase shares of Common Stock to the Placement Agent, in
      connection with the Warrant Exchange, incorporated by reference to Exhibit
      4.2 to the Current Report on Form 8-K, dated December 14, 2005, and filed
      with the SEC on December 20, 2005.4.13
                  
                  Form
      of Warrant to purchase shares of Common Stock issued to purchasers in the
      private placement which closed on March 15, 2006 (the “Series B
      Financing”), incorporated by reference to Exhibit 4.2 to the Current
      Report on Form 8-K, dated March 15, 2006 and filed with the SEC on March
      16, 2006.4.14
                  
                  Form
      of Warrant to purchase shares of Common Stock issued to purchasers in the
      Series B Financing, incorporated by reference to Exhibit 4.3 to the
      Current Report on Form 8-K, dated March 15, 2006 and filed with the SEC on
      March 16, 2006.4.15
                  
                  Form
      of Warrant to purchase shares of Common Stock issued to the Placement
      Agent, in connection with the Series B Financing, incorporated by
      reference to Exhibit 4.4 to the Current Report on Form 8-K, dated March
      15, 2006 and filed with the SEC on March 16, 2006.4.16
                  
                  Form
      of Warrant to purchase 600,000 shares of Common Stock issued to Indigo
      Ventures, LLC, incorporated by reference to Exhibit 4.1 to the Current
      Report on Form 8-K, dated July 12, 2006 and filed with the SEC on July 18,
      2006.4.17
                  
                  Form
      of Warrant to purchase up to 478,698 shares of Common Stock issued to
      VGS  PHARMA,  LLC, incorporated by reference to
      Exhibit 3(a) to the Current Report on Form 8-K, dated December 6, 2006 and
      filed with the SEC on December 12, 2006.4.18
                  
                  Form
      of Non-Qualified Stock Option Agreement for 1,750,000 shares of Common
      Stock granted to Veerappan Subramanian, incorporated by reference to
      Exhibit 3(b) to the Current Report on Form 8-K, dated December 6, 2006 and
      filed with the SEC on December 12,
2006.
  13
 
 4.19
                          
                          Form
      of Warrant to purchase shares of Common Stock issued to purchasers in the
      private placement which closed on April 24, 2007 (the “Series C
      Financing”), incorporated by reference to Exhibit 4.2 to the Current
      Report on Form 8-K, dated April 24, 2007 and filed with the SEC on April
      25, 2007.4.20
                          
                          Form
      of Warrant to purchase shares of Common Stock issued to the placement
      agent in the Series C Financing, incorporated by reference to Exhibit 4.3
      to the Current Report on Form 8-K, dated April 24, 2007 and filed with the
      SEC on April 25, 2007.4.21
                          
                          Form
      of specimen certificate for Series D 8% Convertible Preferred Stock of the
      Company, incorporated by reference to Exhibit 4.1 to the Current Report on
      Form 8-K, dated September 15, 2008 and filed with the SEC on September 16,
      2008.4.22
                          
                          Form
      of Warrant to purchase shares of Common Stock issued to purchasers in the
      private placement which closed on September 15, 2008 (the “Series D
      Financing”), incorporated by reference to Exhibit 4.2 to the Current
      Report on Form 8-K, dated September 15, 2008 and filed with the SEC on
      September 16, 2008.4.23
                          
                          Form
      of Warrant to purchase shares of Common Stock issued to the placement
      agent in the Series D Financing, incorporated by reference to Exhibit 4.3
      to the Current Report on Form 8-K, dated September 15, 2008 and filed with
      the SEC on September 16, 2008.4.24
                          
                          Form
      of specimen certificate for Series E Convertible Preferred Stock of the
      Company, incorporated by reference to Exhibit 4.1 to the Current Report on
      Form 8-K, dated June 1, 2009, and filed with the SEC on June 5,
      2009.4.25
                          
                          Warrant
      to purchase shares of Common Stock issued to Epic Investments, LLC in the
      initial closing of the Strategic Alliance Agreement, dated as of March 18,
      2009, by and among the Company, Epic Pharma, LLC and Epic Investments,
      LLC, incorporated by reference to Exhibit 4.2 to the Current Report on
      Form 8-K, dated June 1, 2009, and filed with the SEC on June 5,
      2009.31.1
                          
                          Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
                          
                          Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232.1
                          
                          Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 200232.2
                          
                          Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of
2002
  14




SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 ELITE
      PHARMACEUTICALS, INC.Date:
                            February
      14, 2011
                            
                            /s/
      Jerry TreppelJerry
      TreppelChief
      Executive Officer(Principal
      Executive Officer)Date:
                            February
      14, 2011
                            
                            /s/
      Carter J. WardCarter
      J. WardChief
      Financial Officer(Principal
      Financial and Accounting
Officer)
  15