UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K
(MARK ONE)

         |X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
               EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED - March 31, 2008

                                       OR

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

                 FOR THE TRANSITION PERIOD FROM ______ TO ______

                        Commission File Number: 001-15697

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

                 DELAWARE                                       22-3542636
                 --------                                       ----------

       (State or other jurisdiction                           (IRS Employer
             of incorporation)                             Identification No.)

                 165 LUDLOW AVENUE, NORTHVALE, NEW JERSEY 07647
                 ----------------------------------------------
                    (Address of principal executive offices)

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


<TABLE>
<S>                                                                      <C>
Securities registered pursuant to Section 12(b) of the Act:                Common Stock - $.01 par value
                                                                         The Common Stock is listed on The
                                                                              American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:                            None
</TABLE>

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.  Yes  [   ]        No  [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes  [   ]        No  [X]


<PAGE>

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 registrant was required
to file such reports) and (2) has been subject to such filing requirements for
at least the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [ ]

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

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<S>                               <C>                            <C>
Large accelerated filer  [  ]     Accelerated filer  [  ]        Non-accelerated filer  [X]
</TABLE>

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


The aggregate market value of the voting common equity held by non-affiliates of
the Registrant as of June 18, 2008 was approximately $9,297,948.50 based upon
the closing price of $0.50 of the Registrant's Common Stock on the American
Stock Exchange, as of June 18, 2008. (For purposes of determining this amount,
only directors, executive officers, and, based on Schedule 13(d) filings as of
June 18, 2008, 10% or greater stockholders and their respective affiliates have
been deemed affiliates).

Registrant had 23,232,207 shares of common stock, par value $0.01 per share,
outstanding as of June 18, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980). N/A


                                       ii

<PAGE>



                           FORWARD LOOKING STATEMENTS

THIS ANNUAL REPORT ON FORM 10-K AND THE DOCUMENTS INCORPORATED HEREIN CONTAIN
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. 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
ANNUAL REPORT, 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"
MEANS ELITE PHARMACEUTICALS INC. AND ITS SUBSIDIARIES.


                                      iii

<PAGE>


                                TABLE OF CONTENTS

                                 Form 10-K Index


<TABLE>
<CAPTION>
                                                                                                            PAGE
<S>          <C>                                                                                            <C>
PART  I

ITEM 1.       BUSINESS.......................................................................................1

ITEM 1A.      RISK FACTORS..................................................................................14

ITEM 1B.      UNRESOLVED STAFF COMMENTS.....................................................................24

ITEM 2.       PROPERTIES....................................................................................24

ITEM 3.       LEGAL PROCEEDINGS.............................................................................25

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................25

PART II

ITEM 5.       MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............................25

ITEM 6.       SELECTED FINANCIAL DATA.......................................................................30

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION..........30

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................40

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................40

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..........40

ITEM 9A.      CONTROLS AND PROCEDURES.......................................................................41

ITEM 9B.      OTHER INFORMATION.............................................................................41

PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY...............................................41

ITEM 11.      EXECUTIVE COMPENSATION........................................................................47

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
              STOCKHOLDER MATTERS...........................................................................66

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................68

ITEM 14.      PRINCIPAL ACCOUNTING FEES AND SERVICES........................................................70

PART IV

ITEM 15.      EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES..................................................71

SIGNATURES..................................................................................................79

CONSOLIDATED FINANCIAL STATEMENTS..........................................................................F-1
</TABLE>


                                       iv


<PAGE>


                                     PART I

ITEM 1.  BUSINESS

GENERAL

         Elite Pharmaceuticals, Inc. ("ELITE PHARMACEUTICALS") was incorporated
on October 1, 1997 under the laws of the State of Delaware, and our wholly-owned
subsidiaries, Elite Laboratories, Inc. ("ELITE LABS") and Elite Research, Inc.
("ELITE RESEARCH") were incorporated on August 23, 1990 and December 20, 2002,
respectively, under the laws of the State of Delaware. Elite Pharmaceuticals,
Elite Labs, Elite Research and Novel, a variable interest entity, are referred
to herein, collectively, as "ELITE", "WE", "US", "OUR" or the "COMPANY".

         On October 24, 1997, Elite Pharmaceuticals merged with and into our
predecessor company, Prologica International, Inc. ("PROLOGICA"), an inactive
publicly held Pennsylvania corporation. At the same time, Elite Labs merged with
a wholly-owned subsidiary of Prologica. Following these mergers, Elite
Pharmaceuticals survived as the parent to its wholly-owned subsidiary, Elite
Labs.

         On September 30, 2002, we acquired from Elan Corporation, plc and Elan
International Services, Ltd. (together "ELAN") Elan's 19.9% interest in Elite
Research, Ltd. ("ERL"), a joint venture formed between Elite and Elan in which
our initial interest was 80.1% of the outstanding capital stock (100% of the
outstanding Common Stock). As a result of the termination of the joint venture,
we owned 100% of ERL's capital stock. On December 31, 2002, ERL (a Bermuda
Corporation) was merged into Elite Research, our wholly-owned subsidiary.

         The address of our principal executive offices and our telephone and
facsimile numbers at that address are:

         Elite Pharmaceuticals, Inc., 165 Ludlow Avenue, Northvale, New Jersey
07647; Phone No.: (201) 750-2646; Facsimile No.: (201) 750-2755.

         We file registration statements, periodic and current reports, proxy
statements and other materials with the Securities and Exchange Commission (the
"SEC"). You may read and copy any materials we file with the SEC at the SEC's
Public Reference Room at 100 F Street, N.W., Washington, DC 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains a web site at www.sec.gov that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC, including our filings.

BUSINESS OVERVIEW AND STRATEGY

         We are a specialty pharmaceutical company principally engaged in the
development and manufacture of oral, controlled-release products. We develop
oral, controlled-release products using proprietary technology. 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 develop delayed, sustained or
targeted release pellets, capsules, tablets, granules and powders.

         We have two products, Lodrane 24(R) and Lodrane 24D(R), currently being
sold commercially, and


                                       1
<PAGE>

a pipeline of five drug candidates under development in the therapeutic areas
that include pain management, allergy and infection. Of the products under
development, ELI-216, an abuse deterrent oxycodone product, and ELI-154, a once
daily oxycodone product, are in clinical trials and we have completed pilot
studies on two of our generic product candidates. The addressable market for the
pipeline of products exceeds $6 billion. Our facility in Northvale, New Jersey
also is a Good Manufacturing Practice ("GMP") and DEA registered facility for
research, development and manufacturing.

STRATEGY

         We are focusing our efforts on the following areas: (i) development of
our pain management products, (ii) manufacturing of Lodrane 24(R) and Lodrane
24D(R) product; (ii) the development of the other products in our pipeline; and
(iii) commercial exploitation of our products either by license and the
collection of royalties, or through the manufacture of our formulations, and
(iv) development of new products and the expansion of our licensing agreements
with other pharmaceutical companies, including co-development projects, joint
ventures and other collaborations.

         We are focusing on the development of various types of drug products,
including branded drug products (which require new drug applications ("NDA")
under Section 505(b)(1) or 505(b)(2) of the Drug Price Competition and Patent
Term Restoration Act of 1984 (the "DRUG PRICE ACT")) as well as generic drug
products (which require abbreviated new drug applications ("ANDA")).

         We intend to continue to collaborate in the development of additional
products with our current partners. We also plan to seek additional
collaborations to develop more drug products.

         We believe that our business strategy enables us to reduce our risk by
having a diverse product portfolio that includes both branded and generic
products in various therapeutic categories and build collaborations and
establish licensing agreements with companies with greater resources thereby
allowing us to share costs of development and to improve cash-flow.

RESEARCH AND DEVELOPMENT

         During each of the last three fiscal years, we have focused on research
and development activities. We spent $5,795,779 for the fiscal year ended March
31, 2008, $5,777,865 for the fiscal year ended March 31, 2007 and $4,343,890 in
the fiscal year ended March 31, 2006 on research and development activities. Our
research and development spending has increased as we prepare for Phase III
clinical trials for ELI-216 and ELI-154 and spend more on development costs
including scale up and clinical studies.

         Of our five products in the pipeline, three are for treatment or
management of pain (ELI 216 is an abuse resistant oxycodone, ELI 154 is a once
daily oxycodone and a third is for an analgesic indication), one is for
anti-infective indications, and one is for gastrointestinal disorders

         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. In this instance, we
believe that disclosure of the information in the following table is helpful for
the description of the general nature, orientation and activity of the Company,
and the disclosures are made for such purpose. No inference should be made as


                                       2
<PAGE>

to the occurrence of matters or events not specifically described. We may or may
not disclose such information in the future based on competitive reasons and/or
contractual obligations. We believe that the information is helpful on a
one-time basis for the purpose described above.

         The following table provides information concerning the
controlled-release products that Elite is currently developing and to which we
are devoting substantial resources and attention. None of these products has
been approved by the United Stated Food and Drug Administration (the "FDA") and
all are in development.

<TABLE>
<CAPTION>
        PRODUCT                    APPROX. U.S.        NDA/              PARTNER               INDICATION
                                 SALES FOR BRAND      ANDA (B)
                                 AND/OR GENERIC
                                    PRODUCTS
                                  (2006) $MM(A)

<S>                                  <C>                <C>         <C>                      <C>
   ELI 154                           N/A(c)             NDA                 None              Pain Management
   Once Daily oxycodone

   ELI 216                           N/A(c)             NDA                 None              Pain Management
   Once daily oxycodone with
   abuse resistant technology
   (ART(TM))

   Generic                            $30               ANDA                None                 Infection

   Generic                           $3,300             ANDA        IntelliPharmaceutics     Gastrointestinal
                                                                     (Toronto, Canada)         disorders(d)

   Generic                            $39               ANDA       The PharmaNetwork, LLC     Pain Management
                                                                       (Montvale, NJ)
</TABLE>
---------------------

(a)      Indicates the approximate amount of sales of our competitor's product
         and any generics (if there are any). It does not represent the sales of
         any of our products.

(b)      "NDA" represents a new drug application which is filed with the FDA for
         new drug products and "ANDA" represents an abbreviated new drug
         application which is filed with the FDA for generic drug products.

(c)      N/A means not applicable because there is no branded product on the
         market. There is neither a once-daily oxycodone nor an abuse resistant
         oxycodone on the market. The market for sustained release oxycodone was
         approximately $2 billion in 2007.

(d)      This includes an agreement that grants to Elite a percentage of
         payments paid to its Canadian partner for commercial sale of a generic
         of this product.

         The table below presents information with respect to the development of
our five products under development. For some of the products, we intend to make
NDA filings under Sections 505(b)(1) or 505(b)(2) of the Drug Price Act.
Accordingly, we anticipate, as to which there is no assurance, that the
development timetable for the products for which such NDA filings are made would
be shorter and less expensive. Completion of development of products by us
depends on a number of factors, however, and there can be no assurance that
specific time frames will be met during the development process or that the
development of any particular products will be continued.

         In the table, Pilot Phase I studies for the NDA products are generally
preliminary studies done in healthy human subjects to assess the
tolerance/safety and pharmacokinetics of the product. The Phase II


                                       3
<PAGE>

study listed below was done in recreational drug users and a visual analog scale
for euphoria was measured in the study. Additional larger studies in humans will
be required prior to submission of the product to the FDA for review. Pilot
bioequivalence studies are initial studies done in humans for generic products
and are used to assess the likelihood of achieving bioequivalence for generic
products. Larger pivotal bioequivalence studies will be required prior to
submission of the product to the FDA for review.

        DEVELOPMENT STAGE           NUMBER OF PRODUCTS             NDA/ANDA
        -----------------           ------------------             --------
           Preclinical                      1                        ANDA
    Pilot bioequivalence study              2                        ANDA
       Pilot Phase I study                  1                         NDA
             Phase II                       1                         NDA

COMMERCIAL PRODUCTS

         Elite manufactures two once-daily allergy products, Lodrane 24(R) and
Lodrane 24D(R), that were co-developed with our partner, ECR Pharmaceuticals
("ECR"). Elite entered into development agreements on 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 manufacture of
these products, Elite also receives a royalty on in-market sales.

         Lodrane 24(R), was first commercially offered in November 2004, and
Elite's revenues for manufacturing the product and a royalty on sales for the
years ended March 31, 2008, 2007 and 2006 aggregated $1,413,119, $1,143,841 and
$550,697 respectively. Lodrane 24D(R) was first commercially offered in
December, 2006 and Elite's revenues for manufacturing the product and a royalty
on sales for the years ended March 31, 2008 and March 31, 2007 aggregated
$498,144 and $555,221 respectively.


                                       4
<PAGE>


PRODUCTS UNDER DEVELOPMENT

         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. ELI-154, when compared to
twice-daily delivery, demonstrated an equivalent onset, more constant blood
levels of the drug over the 24 hours and equivalent blood levels to the
twice-a-day product at the end of 24 hours. We are now scaling up that product
using commercial size equipment for manufacture of batches. Elite submitted a
proposed clinical plan and received guidance from the FDA for this product.
Elite has also requested a special protocol assessment ("SPA") for the ELI-154
Phase III protocol but has not yet received a final agreement for it. Elite is
also evaluating developing this product for markets outside the U.S.

         ELI-216 utilizes our patent-pending abuse deterrent technology that is
based on a pharmacological intervention 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.
When crushed, however, 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.

         In further studies, ELI-216 demonstrated the euphoria-blocking effect
of ELI-216 when the product is crushed. This study 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 intends to complete and submit to the FDA a
second stage of this study that will be a double blinded, cross-over pivotal
study.

         Elite met with the FDA in October 2006 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 begun
scale up of ELI-216 to commercial size batches and Elite has obtained an 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 a
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 for sales and
distribution. The drug delivery technology underlying ELI-154 was originally
developed under a joint venture with Elan which terminated in 2002.

         According to the 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


                                       5
<PAGE>

the termination agreement with Elan. If Elite were to sell the product itself,
Elite would 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 net revenues from this product
(Elite 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.

         MANUFACTURING, CO-DEVELOPMENT AND LICENSE AGREEMENTS

         On March 30, 2005, Elite entered into a three party agreement with Tish
Technologies, Inc. and Harris Pharmaceuticals, Inc. ("HARRIS") for the
co-development and license of a controlled-release generic product. The
innovator has now received approval for an alternative dose form (a tablet
rather than capsule) and has discontinued the original dose form. While a
reference product remains for the capsule, the market opportunity has changed
and this affects how we might commercialize the capsule dosage form. On June 19,
2006, we received written notice from Harris of Harris' intent to terminate the
agreement in accordance with Section 9.3 of the agreement and therefore Elite is
not currently going forward with the development of this product. As of the date
hereof, Elite has received $29,700 for this development work.

         On June 21, 2005, Elite entered into a product development and
commercialization agreement with IntelliPharmaCeutics Corp. ("IPC"), a privately
held, specialty pharmaceutical Canadian company that develops generic
controlled-release drug products. It is affiliated with IntelliPharmaCeutics,
Ltd. The agreement provides for the co-development and commercialization of a
controlled-released generic product. IPC has taken a formulation for the product
into a pilot bioequivalence biostudy. Upon commercialization, Elite is to share
the profits, if any, realized upon sales. A successful pivotal biostudy and an
approved ANDA filing is required to commercialize this product.

         On December 12, 2005, Elite and IPC amended their obligations to
suspend their obligations under their agreement with respect to the development
and commercialization of the controlled-release drug product in Canada. IPC, in
turn, entered into an agreement with ratiopharm, inc., a Canadian company, for
the development and commercialization of the product in Canada and will pay
Elite a certain percentage of any payments received by IPC with respect to the
commercial sale of this product by ratiopharm, inc. in Canada.

         On June 22, 2005, Elite entered into a Product Development and License
Agreement with PLIVA, Inc. ("PLIVA"), now a subsidiary of Barr Pharmaceuticals,
Inc. providing, for the development and license of a controlled-released generic
product. On June 28, 2007, shortly after the acquisition of Pliva by Barr
Pharmaceuticals, Inc., Elite and Pliva terminated the Product Development and
License Agreement and entered into a termination agreement according to which it
was agreed that Elite owns all intellectual property rights relating to the
controlled-released generic product under development and Pliva agreed to pay
Elite $100,000 in discharge of outstanding payments under the Product
Development and License Agreement.

         On January 10, 2006, Elite entered into an agreement with Orit
Laboratories LLC ("ORIT"), an affiliate of Tish Technologies LLC, providing that
Elite and Orit will co-develop and commercialize an extended-release drug
product for treatment of anxiety, and, upon completion of development, may
license it for manufacture and sale. Orit has been providing formulation and
analytical resources for the development work. Elite's facility has been used
for manufacture of development batches. There have been a number of generic
approvals on this product and Elite has determined that it no longer is


                                       6
<PAGE>

economically  desirable to complete the development and to file this product. We
are in discussion with Orit about terminating the agreement.

         On November 10, 2006, Elite entered into a product collaboration
agreement with The PharmaNetwork, LLC ("TPN") for the development of the generic
product equivalent of a synthetic narcotic analgesic drug product. TPN is to
perform development services and prepare and file an ANDA in the name of TPN
with the FDA. Elite is to provide development support, including the purchase of
active pharmaceutical ingredients and materials and supplies to manufacture the
batch, provide adequate facilities to TPN for use in its development work and
following ANDA approval, Elite will manufacture the drug product developed.
Elite is to pay TPN for the development services rendered upon the attainment of
certain milestones. The out-of-pocket costs are to be shared by TPN and Elite,
with TPN's obligation to be payable from the royalty compensation. We have
completed the formulation development work and compilation of the ANDA
submission is currently underway.

JOINT VENTURE WITH NOVEL

         Under the terms of the Strategic Alliance Agreement (the "ALLIANCE
AGREEMENT"), dated as of December 6, 2006, between us, Dr. Veerappan S.
Subramanian and VGS Pharma, LLC, a Delaware limited liability company ("VGS"),
we and VGS jointly formed Novel Laboratories, Inc., a Delaware corporation
("NOVEL"), a specialty pharmaceutical company for the research, development,
manufacturing, licensing and acquisition of specialty generic pharmaceuticals.
Under the Alliance Agreement, we acquired 49% and VGS acquired 51% of Novel's
Class A Voting Common Stock, for $9,800 and $10,200 respectively. In order to
maintain our full 49% interest in Novel, we had agreed to provide additional
cash contributions to Novel upon achievement by Novel of certain performance
milestones. While the contributions were not mandatory obligations of Elite,
under the Stockholders Agreement, dated as of December 6, 2006, between Elite
and VGS, if we did not fund an agreed upon contribution after the occurrence of
the related performance milestone, VGS would have the right to purchase from us
a pre-defined portion of our shares of Class A Voting Common Stock, resulting in
a decrease in our ownership interest in Novel.

         Subsequent to the entry into the Alliance Agreement, we and VGS agreed
that the performance milestones relating to the funding of our remaining
$20,000,000 of cash contributions would be (i) $10,000,000 upon the submission
to the FDA of three abbreviated new drug applications (ANDAs) related to three
different prospective products developed by Novel and (ii) $10,000,000 upon the
submission to the FDA of three ANDAs related to at least three additional
different prospective products developed by Novel. In October 2007, we were
notified by Novel of the submission to the FDA of its third ANDA and, pursuant
to the terms of the Alliance Agreement, we requested and received, in November
2007, written evidence verifying that such ANDA filings related to prospective
products developed by Novel.

         At the end of 2007, we elected not to fund our remaining contributions
to Novel upon the terms set forth in the Alliance Agreement because we had
reached agreement with the FDA under a Special Protocol Assessment on the Phase
III clinical trial of ELI-216, our abuse deterrent oxycodone product, and
determined that our funds would be better used to support the clinical trials
for ELI-216. We and VGS negotiated alternative structures that would permit
investments by us at valuations which differed from those set forth in the


                                       7
<PAGE>

Alliance Agreement, however VGS and we were unable to agree upon an alternative
acceptable to both parties. Accordingly, upon our determination not to fund our
remaining contributions to Novel at the valuation set forth in the Alliance
Agreement, VGS exercised its rights to purchase from us our shares of Class A
Voting Common Stock of Novel proportionate to the amount of remaining
contributions which were not funded by us. As a result, our remaining ownership
interest in Class A Voting Common Stock of Novel is approximately 10% of the
outstanding shares of Class A Voting Common Stock of Novel.

PATENTS

         Since our incorporation, we have secured seven United States patents of
which two have been assigned for a fee to another pharmaceutical company.
Elite's patents are:

         U.S. patent 5,871,776
         U.S. patent 5,902,632
         U.S. patent 6,620,439
         U.S. patent 5,837,284 (assigned to Celgene Corporation)
         U.S. patent 6,635,284 (assigned to Celgene Corporation)
         U.S. patent 6,926,909
         U.S. patent 6,984,402

         We have pending applications for three United States patents. The
pending patent applications relate to two different controlled-release
pharmaceutical products on which we are working. Two of these patents are for an
opioid agonist and antagonist product that we are developing to be used with
oxycodone and other opioids to minimize the abuse potential for the opioids.
Another U.S. patent is for formulation of oral sustained-release opioids
intended to improve the delivery of the opioids. We intend to apply for patents
for other products in the future; however, there can be no assurance that any of
the pending applications or other applications which we may file will be
granted. We have also filed corresponding foreign applications for key patents.

         Prior to the enactment in the United States of new laws adopting
certain changes mandated by the General Agreement on Tariffs and Trade (GATT),
the exclusive rights afforded by a U.S. Patent were for a period of 17 years
measured from the date of grant. Under GAAT, the term of any U.S. Patent granted
on an application filed subsequent to June 8, 1995 terminates 20 years from the
date on which the patent application was filed in the United States or the first
priority date, whichever occurs first. Future patents granted on an application
filed before June 8, 1995, will have a term that terminates 20 years from such
date, or 17 years from the date of grant, whichever date is later.

         Under the Drug Price Act, a U.S. product patent or use patent may be
extended for up to five years under certain circumstances to compensate the
patent holder for the time required for FDA regulatory review of the product.
The benefits of this Act are available only to the first approved use of the
active ingredient in the drug product and may be applied only to one patent per
drug product. There can be no assurance that we will be able to take advantage
of this law.

         Also, different countries have different procedures for obtaining
patents, and patents issued by different countries provide different degrees of
protection against the use of a patented invention by others. There can be no
assurance, therefore, that the issuance to us in one country of a patent
covering an invention will be followed by the issuance in other countries of
patents covering the same invention, or that any judicial interpretation of the
validity, enforceability, or scope of the claims in a patent issued in one
country will be similar to the judicial interpretation given to a corresponding
patent issued in


                                       8
<PAGE>

another country. Furthermore, even if our patents are determined to be valid,
enforceable, and broad in scope, there can be no assurance that competitors will
not be able to design around such patents and compete with us using the
resulting alternative technology.

         We also rely upon unpatented proprietary and trade secret technology
that we seek to protect, in part, by confidentiality agreements with our
collaborative partners, employees, consultants, outside scientific
collaborators, sponsored researchers, and other advisors. There can be no
assurance that these agreements provide meaningful protection or that they will
not be breached, that we will have adequate remedies for any such breach, or
that our trade secrets, proprietary know-how, and technological advances will
not otherwise become known to others. In addition, there can be no assurance
that, despite precautions taken by us, others have not and will not obtain
access to our proprietary technology.

TRADEMARKS

         We currently plan to license our products to marketing partners and not
to sell under our brand name and so we do not currently intend to register any
trademarks related to our products.

GOVERNMENT REGULATION AND APPROVAL

         The design, development and marketing of pharmaceutical compounds, on
which our success depends, are intensely regulated by governmental regulatory
agencies, in particular the FDA. Non-compliance with applicable requirements can
result in fines and other judicially imposed sanctions, including product
seizures, injunction actions and criminal prosecution based on products or
manufacturing practices that violate statutory requirements. In addition,
administrative remedies can involve voluntary withdrawal of products, as well as
the refusal of the FDA to approve ANDAs and NDAs. The FDA also has the authority
to withdraw approval of drugs in accordance with statutory due process
procedures.

         Before a drug may be marketed, it must be approved by the FDA either by
an NDA or an ANDA, each of which is discussed below.

         NDAS AND NDAS UNDER SECTION 505(B) OF THE DRUG PRICE ACT

         The FDA approval procedure for an NDA is generally a two-step process.
During the Initial Product Development stage, an investigational new drug
application ("IND") for each product is filed with the FDA. A 30-day waiting
period after the filing of each IND is required by the FDA prior to the
commencement of initial clinical testing. If the FDA does not comment on or
question the IND within such 30-day period, initial clinical studies may begin.
If, however, the FDA has comments or questions, they must be answered to the
satisfaction of the FDA before initial clinical testing can begin. In some
instances this process could result in substantial delay and expense. These
initial clinical studies generally constitute Phase I of the NDA process and are
conducted to demonstrate the product tolerance/safety and pharmacokinetic in
healthy subjects.

         After Phase I testing, extensive efficacy and safety studies in
patients must be conducted. After completion of the required clinical testing,
an NDA is filed, and its approval, which is required for marketing in the United
States, involves an extensive review process by the FDA. The NDA itself is a
complicated and detailed application and must include the results of extensive
clinical and other testing, the cost of which is substantial. However, the NDA
filings contemplated by us, which are already marketed drugs, would be made
under Sections 505 (b)(1) or 505 (b)(2) of the Drug Price Act, which do


                                       9
<PAGE>

not require certain studies that would otherwise be necessary; accordingly, the
development timetable should be shorter. While the FDA is required to review
applications within a certain timeframe, during the review process, the FDA
frequently requests that additional information be submitted. The effect of such
request and subsequent submission can significantly extend the time for the NDA
review process. Until an NDA is actually approved, there can be no assurance
that the information requested and submitted will be considered adequate by the
FDA to justify approval. The packaging and labeling of our developed products
are also subject to FDA regulation. It is impossible to anticipate the amount of
time that will be needed to obtain FDA approval to market any product.

         Whether or not FDA approval has been obtained, approval of the product
by comparable regulatory authorities in any foreign country must be obtained
prior to the commencement of marketing of the product in that country. We intend
to conduct all marketing in territories other than the United States through
other pharmaceutical companies based in those countries. The approval procedure
varies from country to country, can involve additional testing, and the time
required may differ from that required for FDA approval. Although there are some
procedures for unified filings for certain European countries, in general each
country has its own procedures and requirements, many of which are time
consuming and expensive. Thus, there can be substantial delays in obtaining
required approvals from both the FDA and foreign regulatory authorities after
the relevant applications are filed. After such approvals are obtained, further
delays may be encountered before the products become commercially available.

         ANDAS

         The FDA approval procedure for an ANDA differs from the procedure for a
NDA in that the FDA waives the requirement of conducting complete clinical
studies, although it normally requires bioavailability and/or bioequivalence
studies. "Bioavailability" indicates the rate and extent of absorption and
levels of concentration of a drug product in the blood stream needed to produce
a therapeutic effect. "Bioequivalence" compares the bioavailability of one drug
product with another, and when established, indicates that the rate of
absorption and levels of concentration of the active drug substance in the body
are equivalent for the generic drug and the previously approved drug. An ANDA
may be submitted for a drug on the basis that it is the equivalent of a
previously approved drug or, in the case of a new dosage form, is suitable for
use for the indications specified.

         The timing of final FDA approval of an ANDA depends on a variety of
factors, including whether the applicant challenges any listed patents for the
drug and whether the brand-name manufacturer is entitled to one or more
statutory exclusivity periods, during which the FDA may be prohibited from
accepting applications for, or approving, generic products. In certain
circumstances, a regulatory exclusivity period can extend beyond the life of a
patent, and thus block ANDAs from being approved on the patent expiration date.

         In May 1992, Congress enacted the Generic Drug Enforcement Act of 1992,
which allows the FDA to impose debarment and other penalties on individuals and
companies that commit certain illegal acts relating to the generic drug approval
process. In some situations, the Generic Drug Enforcement Act requires the FDA
to not accept or review ANDAs for a period of time from a company or an
individual that has committed certain violations. It also provides for temporary
denial of approval of applications during the investigation of certain
violations that could lead to debarment and also, in more limited circumstances,
provides for the suspension of the marketing of approved drugs by the affected
company. Lastly, the Generic Drug Enforcement Act allows for civil penalties and
withdrawal of previously


                                       10
<PAGE>

approved applications. Neither we nor any of our employees have ever been
subject to debarment. We do not believe that we receive any services from any
debarred person.

         CONTROLLED SUBSTANCES

         We are also subject to federal, state, and local laws of general
applicability, such as laws relating to working conditions. We are also licensed
by, registered with, and subject to periodic inspection and regulation by the
Drug Enforcement Agency ("DEA") and New Jersey state agencies, pursuant to
federal and state legislation relating to drugs and narcotics. Certain drugs
that we currently develop or may develop in the future may be subject to
regulations under the Controlled Substances Act and related statutes. As we
manufacture such products, we may become subject to the Prescription Drug
Marketing Act, which regulates wholesale distributors of prescription drugs.

GMP

         All facilities and manufacturing techniques used for the manufacture of
products for clinical use or for sale must be operated in conformity with GMP
regulations issued by the FDA. We engage in manufacturing on a commercial basis
for distribution of products, and operate our facilities in accordance with GMP
regulations. If we hire another company to perform contract manufacturing for
us, we must ensure that our contractor's facilities conform to GMP regulations.

COMPLIANCE WITH ENVIRONMENTAL LAWS

         We are subject to comprehensive federal, state and local environmental
laws and regulations that govern, among other things, air polluting emissions,
waste water discharges, solid and hazardous waste disposal, and the remediation
of contamination associated with current or past generation handling and
disposal activities, including the past practices of corporations as to which we
are the successor legally or in possession. We do not expect that compliance
with such environmental laws will have a material effect on our capital
expenditures, earnings or competitive position in the foreseeable future. There
can be no assurance, however, that future changes in environmental laws or
regulations, administrative actions or enforcement actions, or remediation
obligations arising under environmental laws will not have a material adverse
effect on our capital expenditures, earnings or competitive position.

COMPETITION

         We have competition with respect to our two principal areas of
operation. We develop and manufacture products using controlled-release drug
technology for other pharmaceutical companies, and we develop and market (either
on our own or by license to other companies) proprietary controlled-release
pharmaceutical products. In both areas, our competition consists of those
companies which develop controlled-release drugs and alternative drug delivery
systems.

         In recent years, an increasing number of pharmaceutical companies have
become interested in the development and commercialization of products
incorporating advanced or novel drug delivery systems. We expect that
competition in the field of drug delivery will significantly increase in the
future since smaller specialized research and development companies are
beginning to concentrate on this aspect of the business. Some of the major
pharmaceutical companies have invested and are continuing to invest significant
resources in the development of their own drug delivery systems and technologies
and some have invested funds in such specialized drug delivery companies. Many
of these companies have greater financial and other resources as well as more
experience than we do in commercializing


                                       11
<PAGE>

pharmaceutical products. Certain companies have a track record of success in
developing controlled-release drugs. Significant among these are Alpharma, Inc.,
Sandoz (a Novartis company), Durect Corporation, Mylan Laboratories, Inc., Par
Pharmaceuticals, Inc., Teva Pharmaceuticals Industries Ltd., Biovail
Corporation, Ethypharm S.A., Eurand, Impax Laboratories, Inc., K-V
Pharmaceutical Company and Penwest Pharmaceuticals Company. Each of these
companies has developed expertise in certain types of drug delivery systems,
although such expertise does not carry over to developing a controlled-release
version of all drugs. Such companies may develop new drug formulations and
products or may improve existing drug formulations and products more efficiently
than we can. In addition, almost all of our competitors have vastly greater
resources than we do. While our product development capabilities and, if
obtained, patent protection may help us to maintain our market position in the
field of advanced drug delivery, there can be no assurance that others will not
be able to develop such capabilities or alternative technologies outside the
scope of our patents, if any, or that even if patent protection is obtained,
such patents will not be successfully challenged in the future.

         In addition to competitors that are developing products based on drug
delivery technologies, there are also companies that have announced that they
are developing opioid abuse deterrent products that might compete directly or
indirectly with Elite's products. These include, but are not limited to
Alpharma, Inc., Pain Therapeutics (which has an agreement with Durect
Corporation), Shire Pharmaceuticals Group plc (which purchased New River
Pharmaceuticals Inc.), Endo Pharmaceuticals, Inc. through an agreement with
Collegium Pharmaceuticals, Inc., Purdue Pharma LP, and Acura Pharmaceuticals,
Inc.

         We also face competition in the generic pharmaceutical market. The
principal competitive factors in the generic pharmaceutical market include: (i)
introduction of other generic drug manufacturers' products in direct competition
with our products under development, (ii) introduction of authorized generic
products in direct competition with any of our products under development,
particularly if such products are approved and sold during exclusivity periods,
(iii) consolidation among distribution outlets through mergers and acquisitions
and the formation of buying groups, (iv) ability of generic competitors to
quickly enter the market after the expiration of patents or exclusivity periods,
diminishing the amount and duration of significant profits, (v) the willingness
of generic drug customers, including wholesale and retail customers, to switch
among pharmaceutical manufacturers, (vi) pricing pressures and product deletions
by competitors, (vii) a company's reputation as a manufacturer and distributor
of quality products, (viii) a company's level of service (including maintaining
sufficient inventory levels for timely deliveries), (ix) product appearance and
labeling and (x) a company's breadth of product offerings.

SOURCES AND AVAILABILITY OF RAW MATERIALS; MANUFACTURING

         We manufacture for commercial sale by our partner, ECR, two products,
Lodrane 24(R) and Lodrane 24D(R), for which to date we have obtained sufficient
amounts of the raw materials for its production. We are not currently in the
manufacturing phase for any other products and do not expect that significant
amounts of raw materials will be required for their production. We currently
obtain the raw materials that we need from over twenty suppliers.

         We have acquired pharmaceutical manufacturing equipment for
manufacturing our products. We have registered our facilities with the FDA and
the DEA.


                                       12
<PAGE>

DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS

         Each year we have had one or a few customers that have accounted for a
large percentage of our limited revenues therefore the termination of a contract
with a customer may result in the loss of substantially all of our revenues. We
are constantly working to develop new relationships with existing or new
customers, but despite these efforts we may not, at the time that any of our
current contracts expire, have other contracts in place generating similar or
material revenue. We have an agreement with ECR which sells and distributes two
products that we manufacture: Lodrane 24(R) and Lodrane 24D(R). We receive
revenues to manufacture these products and also receive royalties based on
in-market sales of the products. These are our only products that are being sold
commercially now and are the primary source of our revenue currently. We receive
development fees or milestone payments under some of the co-development
agreements with partners, but these fees are currently small compared to the
Lodrane 24(R) and Lodrane 24D(R) revenues.

EMPLOYEES

         As of June 18, 2008, we had 34 full-time employees and no part-time
employees. Full-time employees are engaged in administration, research and
development. None of our employees is represented by a labor union and we have
never experienced a work stoppage. We believe our relationship with our
employees to be good. However, our ability to achieve our financial and
operational objectives depends in large part upon our continuing ability to
attract, integrate, retain and motivate highly qualified personnel, and upon the
continued service of our senior management and key personnel.


                                       13
<PAGE>

ITEM 1A. RISK FACTORS

         In addition to the other information contained in this report, the
following risk factors should be considered carefully in evaluating an
investment in us and in analyzing our forward-looking statements.

                          RISKS RELATED TO OUR BUSINESS

WE HAVE A RELATIVELY LIMITED OPERATING HISTORY, WHICH MAKES IT DIFFICULT TO
EVALUATE OUR FUTURE PROSPECTS.

         Although we have been in operation since 1990, we have a relatively
short operating history and limited financial data upon which you may evaluate
our business and prospects. In addition, our business model is likely to
continue to evolve as we attempt to expand our product offerings and our
presence in the generic pharmaceutical market. As a result, our potential for
future profitability must be considered in light of the risks, uncertainties,
expenses and difficulties frequently encountered by companies that are
attempting to move into new markets and continuing to innovate with new and
unproven technologies. Some of these risks relate to our potential inability to:

    o    develop new products;
    o    obtain regulatory approval of our products;
    o    manage our growth, control expenditures and align costs with revenues;
    o    attract, retain and motivate qualified personnel; and
    o    respond to competitive developments.

         If we do not effectively address the risks we face, our business model
may become unworkable and we may not achieve or sustain profitability or
successfully develop any products.

WE HAVE NOT BEEN PROFITABLE AND EXPECT FUTURE LOSSES.

         To date, we have not been profitable, and since our inception in 1990,
we have not generated any significant revenues. We may never be profitable or,
if we become profitable, we may be unable to sustain profitability. We have
sustained losses in each year since our incorporation in 1990. We incurred net
losses of $13,893,060, $11,803,512, $6,883,914, $5,906,890 and $6,514,217 for
the years ended March 31, 2008, 2007, 2006, 2005 and 2004, respectively. We
expect to realize significant losses for the current year of operation and to
continue to incur losses until we are able to generate sufficient revenues to
support our operations and offset operating costs.

THERE IS DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.

         Our condensed consolidated unaudited financial statements were prepared
on the assumption that we will continue as a going concern. We estimate that our
cash reserves will be sufficient to permit us to continue at our anticipated
level of operations until September 30, 2008. During 2008, we will require
additional funding to continue our research and development programs, including
clinical testing of our product candidates, for operating expenses and to pursue
regulatory approvals for our product candidates. We intend to use our cash
reserves, as well as other funds in the event that they shall be available on
commercially reasonable terms, to finance these activities and other activities
described herein, although we can provide no assurance that these additional
funds will be available in the amounts or at the times we may require. If
sufficient capital is not available, we would likely be required to scale back
or terminate our research and development efforts. See "RISK FACTORS -- IF WE
ARE UNABLE TO OBTAIN



                                       14
<PAGE>

ADDITIONAL FINANCING NEEDED FOR THE EXPENDITURES FOR THE DEVELOPMENT AND
COMMERCIALIZATION OF OUR DRUG PRODUCTS, IT WOULD IMPAIR OUR ABILITY TO CONTINUE
TO MEET OUR BUSINESS OBJECTIVES".

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING NEEDED FOR THE EXPENDITURES FOR
THE DEVELOPMENT AND COMMERCIALIZATION OF OUR DRUG PRODUCTS, IT WOULD IMPAIR OUR
ABILITY TO CONTINUE TO MEET OUR BUSINESS OBJECTIVES.

         We continue to require additional financing to ensure that we will be
able to meet our expenditures to develop and commercialize our products. As of
March 31, 2008, we had cash and cash equivalents of $3.7 million. We believe
that our existing cash and cash equivalents will be sufficient to fund our
anticipated operating expenses and capital requirements until September 30,
2008. We will require additional funding to continue our research and
development programs, including clinical testing of our product candidates, for
operating expenses and to pursue regulatory approvals for our product
candidates. We are considering a number of different financing alternatives and
we intend to seek additional capital in 2008 through private financing or
collaborative agreements. However, no assurance can be given that we will
consummate a financing or that any material cash will be generated to us
therefrom. Other possible sources of the required financing are income from
product sales or sales of market rights, income from co-development or
partnering arrangements and the cash exercise of warrants and options that are
currently outstanding. No representation can be made that we will be able to
obtain such revenue or additional financing or if obtained it will be on
favorable terms, or at all. No assurance can be given that any offering if
undertaken will be successfully concluded or that if concluded the proceeds will
be material. If adequate funds are not available to us as we need them, we will
be required to curtail significantly or delay or eliminate one or more product
development programs which would impair our ability to meet our business
objectives.

IF NOVEL LABORATORIES ISSUES ADDITIONAL EQUITY IN THE FUTURE OUR EQUITY INTEREST
IN NOVEL MAY BE DILUTED, RESULTING IN A DECREASE IN OUR SHARE OF REVENUE AND
CASH FLOW GENERATED BY NOVEL.

         As a result of our determination not to fund our remaining
contributions to Novel at the valuation set forth in the Alliance Agreement and
the resulting purchase from us of a portion of our shares of Class A Voting
Common Stock of Novel by VGS Pharma, LLC, our remaining ownership interest in
equity of Novel was reduced to approximately 10% of the outstanding shares of
Novel. Novel may seek to raise additional operating capital in the future and
may do so by the issuance of equity. If Novel issues additional equity our
future equity interest in Novel will decrease and we will be entitled to a
decreased portion of any revenue and cash flow which Novel may generate in the
future.

SUBSTANTIALLY ALL OF OUR PRODUCT CANDIDATES ARE AT AN EARLY STAGE OF DEVELOPMENT
AND ONLY A PORTION OF THESE ARE IN CLINICAL DEVELOPMENT.

         Other than ELI-154 which is in Phase III clinical development and
ELI-216 which is in Phase III clinical development, our three other product
candidates are still at an early stage of development. We do not have any
products that are commercially available other than Lodrane 24(R) and Lodrane
24D(R). We will need to perform additional development work for all of our
product candidates in our pipeline before we can seek the regulatory approvals
necessary to begin commercial sales.

IF WE ARE UNABLE TO SATISFY REGULATORY REQUIREMENTS, WE MAY NOT BE ABLE TO
COMMERCIALIZE OUR PRODUCT CANDIDATES.


                                       15
<PAGE>

         We need FDA approval prior to marketing our product candidates in the
United States of America. If we fail to obtain FDA approval to market our
product candidates, we will be unable to sell our product candidates in the
United States of America and we will not generate any revenue from the sale of
such products.

         This regulatory review and approval process, which includes evaluation
of preclinical studies and clinical trials of our product candidates is lengthy,
expensive and uncertain. To receive approval, we must, among other things,
demonstrate with substantial evidence from well-controlled clinical trials that
our product candidates are both safe and effective for each indication where
approval is sought. Satisfaction of these requirements typically takes several
years and the time needed to satisfy them may vary substantially, based on the
type, complexity and novelty of the pharmaceutical product. We cannot predict if
or when we might submit for regulatory approval any of our product candidates
currently under development. Any approvals we may obtain may not cover all of
the clinical indications for which we are seeking approval. Also, an approval
might contain significant limitations in the form of narrow indications,
warnings, precautions, or contra-indications with respect to conditions of use.

         The FDA has substantial discretion in the approval process and may
either refuse to file our application for substantive review or may form the
opinion after review of our data that our application is insufficient to allow
approval of our product candidates. If the FDA does not file or approve our
application, it may require that we conduct additional clinical, preclinical or
manufacturing validation studies and submit that data before it will reconsider
our application. Depending on the extent of these or any other studies, approval
of any applications that we submit may be delayed by several years, or may
require us to expend more resources than we have available. It is also possible
that additional studies, if performed and completed, may not be considered
sufficient by the FDA to make our applications approvable. If any of these
outcomes occur, we may be forced to abandon our applications for approval, which
might cause us to cease operations.

         We will also be subject to a wide variety of foreign regulations
governing the development, manufacture and marketing of our products. Whether or
not FDA approval has been obtained, approval of a product by the comparable
regulatory authorities of foreign countries must still be obtained prior to
manufacturing or marketing the product in those countries. The approval process
varies from country to country and the time needed to secure approval may be
longer or shorter than that required for FDA approval. We cannot assure you that
clinical trials conducted in one country will be accepted by other countries or
that approval in one country will result in approval in any other country.

BEFORE WE CAN OBTAIN REGULATORY APPROVAL, WE NEED TO SUCCESSFULLY COMPLETE
CLINICAL TRIALS, OUTCOMES OF WHICH ARE UNCERTAIN.

         In order to obtain FDA approval to market a new drug product, we must
demonstrate proof of safety and effectiveness in humans. To meet these
requirements, we must conduct extensive preclinical testing and "adequate and
well-controlled" clinical trials. Conducting clinical trials is a lengthy, time
consuming, and expensive process. Completion of necessary clinical trials may
take several years or more. Delays associated with products for which we are
directly conducting preclinical or clinical trials may cause us to incur
additional operating expenses. The commencement and rate of completion of
clinical trials may be delayed by many factors, including, for example:

    o    ineffectiveness of our product candidate or perceptions by physicians
         that the product candidate is not safe or effective for a particular
         indication;
    o    inability to manufacture sufficient quantities of the product candidate
         for use in clinical trials;


                                       16
<PAGE>

    o    delay or failure in obtaining approval of our clinical trial protocols
         from the FDA or institutional review boards;
    o    slower than expected rate of patient recruitment and enrollment;
    o    inability to adequately follow and monitor patients after treatment;
    o    difficulty in managing multiple clinical sites;
    o    unforeseen safety issues;
    o    government or regulatory delays; and
    o    clinical trial costs that are greater than we currently anticipate.

         Even if we achieve positive interim results in clinical trials, these
results do not necessarily predict final results, and positive results in early
trials may not be indicative of success in later trials. A number of companies
in the pharmaceutical industry have suffered significant setbacks in advanced
clinical trials, even after promising results in earlier trials. Negative or
inconclusive results or adverse medical events during a clinical trial could
cause us to repeat or terminate a clinical trial or require us to conduct
additional trials. We do not know whether our existing or any future clinical
trials will demonstrate safety and efficacy sufficiently to result in marketable
products. Our clinical trials may be suspended at any time for a variety of
reasons, including if the FDA or we believe the patients participating in our
trials are exposed to unacceptable health risks or if the FDA finds deficiencies
in the conduct of these trials.

         Failures or perceived failures in our clinical trials will directly
delay our product development and regulatory approval process, damage our
business prospects, make it difficult for us to establish collaboration and
partnership relationships, and negatively affect our reputation and competitive
position in the pharmaceutical community.

         Because of these risks, our research and development efforts may not
result in any commercially viable products. Any delay in, or termination of, our
preclinical or clinical trials will delay the filing of our drug applications
with the FDA and, ultimately, our ability to commercialize our product
candidates and generate product revenues. If a significant portion of these
development efforts are not successfully completed, required regulatory
approvals are not obtained or any approved products are not commercially
successfully, our business, financial condition, and results of operations may
be materially harmed.

IF OUR COLLABORATION OR LICENSING ARRANGEMENTS ARE UNSUCCESSFUL, OUR REVENUES
AND PRODUCT DEVELOPMENT MAY BE LIMITED.

         We have entered into several collaboration and licensing arrangements
for the development of generic products. However, there can be no assurance that
any of these agreements will result in FDA approvals, or that we will be able to
market any such finished products at a profit. Collaboration and licensing
arrangements pose the following risks:

    o    collaborations and licensing arrangements may be terminated, in which
         case we will experience increased operating expenses and capital
         requirements if we elect to pursue further development of the product
         candidate;
    o    collaborators and licensees may delay clinical trials and prolong
         clinical development, under-fund a clinical trial program, stop a
         clinical trial or abandon a product candidate;
    o    expected revenue might not be generated because milestones may not be
         achieved and product candidates may not be developed;
    o    collaborators and licensees could independently develop, or develop
         with third parties,


                                       17
<PAGE>

         products that could compete with our future products;
    o    the terms of our contracts with current or future collaborators and
         licensees may not be favorable to us in the future;
    o    a collaborator or licensee with marketing and distribution rights to
         one or more of our products may not commit enough resources to the
         marketing and distribution of our products, limiting our potential
         revenues from the commercialization of a product;
    o    disputes may arise delaying or terminating the research, development or
         commercialization of our product candidates, or result in significant
         and costly litigation or arbitration; and
    o    one or more third party developers could obtain approval for a similar
         product prior to the collaborator or licensee resulting in unforeseen
         price competition in connection with the development product.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND AVOID CLAIMS
THAT WE INFRINGED ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, OUR ABILITY TO
CONDUCT BUSINESS MAY BE IMPAIRED.

         Our success depends on our ability to protect our current and future
products and to defend our intellectual property rights. If we fail to protect
our intellectual property adequately, competitors may manufacture and market
products similar to ours.

         We currently hold five patents, have two patents pending and we intend
to file further patent applications in the future. With respect to our pending
patents, we cannot be certain that these applications will result in the
issuance of patents. If patents are issued, third parties may sue us to
challenge such patent protection, and although we know of no reason why they
should prevail, it is possible that they could. It is likewise possible that our
patent rights may not prevent or limit our present and future competitors from
developing, using or commercializing products that are similar or functionally
equivalent to our products.

         In addition, we may be required to obtain licenses to patents, or other
proprietary rights of third parties, in connection with the development and use
of our products and technologies as they relate to other persons' technologies.
At such time as we discover a need to obtain any such license, we will need to
establish whether we will be able to obtain such a license on favorable terms.
The failure to obtain the necessary licenses or other rights could preclude the
sale, manufacture or distribution of our products.

         We rely particularly on trade secrets, unpatented proprietary expertise
and continuing innovation that we seek to protect, in part, by entering into
confidentiality agreements with licensees, suppliers, employees and consultants.
We cannot provide assurance that these agreements will not be breached or
circumvented. We also cannot be certain that there will be adequate remedies in
the event of a breach. Disputes may arise concerning the ownership of
intellectual property or the applicability of confidentiality agreements. We
cannot be sure that our trade secrets and proprietary technology will not
otherwise become known or be independently developed by our competitors or, if
patents are not issued with respect to products arising from research, that we
will be able to maintain the confidentiality of information relating to these
products. In addition, efforts to ensure our intellectual property rights can be
costly, time-consuming and/or ultimately unsuccessful.

LITIGATION IS COMMON IN OUR INDUSTRY, PARTICULARLY THE GENERIC PHARMACEUTICAL
INDUSTRY, AND CAN BE PROTRACTED AND EXPENSIVE AND COULD DELAY AND/OR PREVENT
ENTRY OF OUR PRODUCTS INTO THE MARKET, WHICH, IN TURN, COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.


                                       18
<PAGE>

         Litigation concerning patents and proprietary rights can be protracted
and expensive. Companies that produce brand pharmaceutical products routinely
bring litigation against applicants that seek FDA approval to manufacture and
market generic forms of their branded products. These companies allege patent
infringement or other violations of intellectual property rights as the basis
for filing suit against an applicant. Likewise, other patent holders may bring
patent infringement suits against us alleging that our products, product
candidates and technologies infringe upon intellectual property rights.
Litigation often involves significant expense and can delay or prevent
introduction or sale of our products.

         There may also be situations where we use our business judgment and
decide to market and sell products, notwithstanding the fact that allegations of
patent infringement(s) have not been finally resolved by the courts. The risk
involved in doing so can be substantial because the remedies available to the
owner of a patent for infringement include, among other things, damages measured
by the profits lost by the patent owner and not by the profits earned by the
infringer. In the case of a willful infringement, the definition of which is
subjective, such damages may be trebled. Moreover, because of the discount
pricing typically involved with bioequivalent products, patented brand products
generally realize a substantially higher profit margin than bioequivalent
products. An adverse decision in a case such as this or in other similar
litigation could have a material adverse effect on our business, financial
position and results of operations and could cause the market value of our
common stock, par value $0.01 per share (the "COMMON STOCK") to decline.

THE PHARMACEUTICAL INDUSTRY IS HIGHLY COMPETITIVE AND SUBJECT TO RAPID AND
SIGNIFICANT TECHNOLOGICAL CHANGE, WHICH COULD IMPAIR OUR ABILITY TO IMPLEMENT
OUR BUSINESS MODEL.

         The pharmaceutical industry is highly competitive, and we may be unable
to compete effectively. In addition, it is undergoing rapid and significant
technological change, and we expect competition to intensify as technical
advances in each field are made and become more widely known. An increasing
number of pharmaceutical companies have been or are becoming interested in the
development and commercialization of products incorporating advanced or novel
drug delivery systems. We expect that competition in the field of drug delivery
will increase in the future as other specialized research and development
companies begin to concentrate on this aspect of the business. Some of the major
pharmaceutical companies have invested and are continuing to invest significant
resources in the development of their own drug delivery systems and technologies
and some have invested funds in such specialized drug delivery companies. Many
of our competitors have longer operating histories and greater financial,
research and development, marketing and other resources than we do. Such
companies may develop new formulations and products, or may improve existing
ones, more efficiently than we can. Our success, if any, will depend in part on
our ability to keep pace with the changing technology in the fields in which we
operate.

         As we expand our presence in the generic pharmaceuticals market our
product candidates may face intense competition from brand-name companies that
have taken aggressive steps to thwart competition from generic companies. In
particular, brand-name companies continue to sell or license their products
directly or through licensing arrangements or strategic alliances with generic
pharmaceutical companies (so-called "authorized generics"). No significant
regulatory approvals are required for a brand-name company to sell directly or
through a third party to the generic market, and brand-name companies do not
face any other significant barriers to entry into such market. In addition, such
companies continually seek to delay generic introductions and to decrease the
impact of generic competition, using tactics which include:


                                       19
<PAGE>

    o    obtaining new patents on drugs whose original patent protection is
         about to expire;
    o    filing patent applications that are more complex and costly to
         challenge;
    o    filing suits for patent infringement that automatically delay approval
         of the FDA;
    o    filing citizens' petitions with the FDA contesting approval of the
         generic versions of products due to alleged health and safety issues;
    o    developing controlled-release or other "next-generation" products,
         which often reduce demand for the generic version of the existing
         product for which we may be seeking approval;
    o    changing product claims and product labeling;
    o    developing and marketing as over-the-counter products those branded
         products which are about to face generic competition; and
    o    making arrangements with managed care companies and insurers to reduce
         the economic incentives to purchase generic pharmaceuticals.

         These strategies may increase the costs and risks associated with our
efforts to introduce our generic products under development and may delay or
prevent such introduction altogether.

IF OUR PRODUCT CANDIDATES DO NOT ACHIEVE MARKET ACCEPTANCE AMONG PHYSICIANS,
PATIENTS, HEALTH CARE PAYORS AND THE MEDICAL COMMUNITY, THEY WILL NOT BE
COMMERCIALLY SUCCESSFUL AND OUR BUSINESS WILL BE ADVERSELY AFFECTED.

         The degree of market acceptance of any of our approved product
candidates among physicians, patients, health care payors and the medical
community will depend on a number of factors, including:

    o    acceptable evidence of safety and efficacy;
    o    relative convenience and ease of administration;
    o    the prevalence and severity of any adverse side effects;
    o    availability of alternative treatments;
    o    pricing and cost effectiveness;
    o    effectiveness of sales and marketing strategies; and
    o    ability to obtain sufficient third-party coverage or reimbursement.

         If we are unable to achieve market acceptance for our product
candidates, then such product candidates will not be commercially successful and
our business will be adversely affected.

WE ARE DEPENDENT ON A SMALL NUMBER OF SUPPLIERS FOR OUR RAW MATERIALS AND ANY
DELAY OR UNAVAILABILITY OF RAW MATERIALS CAN MATERIALLY ADVERSELY AFFECT OUR
ABILITY TO PRODUCE PRODUCTS.

         The FDA requires identification of raw material suppliers in
applications for approval of drug products. If raw materials were unavailable
from a specified supplier, FDA approval of a new supplier could delay the
manufacture of the drug involved. In addition, some materials used in our
products are currently available from only one supplier or a limited number of
suppliers.

         Further, a significant portion of our raw materials may be available
only from foreign sources. Foreign sources can be subject to the special risks
of doing business abroad, including:

    o    greater possibility for disruption due to transportation or
         communication problems;
    o    the relative instability of some foreign governments and economies;
    o    interim price volatility based on labor unrest, materials or equipment
         shortages, export duties,


                                       20
<PAGE>

         restrictions on the transfer of funds, or fluctuations in currency
         exchange rates; and
    o    uncertainty regarding recourse to a dependable legal system for the
         enforcement of contracts and other rights.

         In addition, recent changes in patent laws in certain foreign
jurisdictions (primarily in Europe) may make it increasingly difficult to obtain
raw materials for research and development prior to expiration of applicable
United States or foreign patents. Any delay or inability to obtain raw materials
on a timely basis, or any significant price increases that cannot be passed on
to customers, can materially adversely affect our ability to produce products.
This can materially adversely affect our business and operations.

EVEN AFTER REGULATORY APPROVAL, WE WILL BE SUBJECT TO ONGOING SIGNIFICANT
REGULATORY OBLIGATIONS AND OVERSIGHT.

         Even if regulatory approval is obtained for a particular product
candidate, the FDA and foreign regulatory authorities may, nevertheless, impose
significant restrictions on the indicated uses or marketing of such products, or
impose ongoing requirements for post-approval studies. Following any regulatory
approval of our product candidates, we will be subject to continuing regulatory
obligations, such as safety reporting requirements, and additional
post-marketing obligations, including regulatory oversight of the promotion and
marketing of our products. If we become aware of previously unknown problems
with any of our product candidates here or overseas or our contract
manufacturers' facilities, a regulatory agency may impose restrictions on our
products, our contract manufacturers or on us, including requiring us to
reformulate our products, conduct additional clinical trials, make changes in
the labeling of our products, implement changes to or obtain re-approvals of our
contract manufacturers' facilities or withdraw the product from the market. In
addition, we may experience a significant drop in the sales of the affected
products, our reputation in the marketplace may suffer and we may become the
target of lawsuits, including class action suits. Moreover, if we fail to comply
with applicable regulatory requirements, we may be subject to fines, suspension
or withdrawal of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecution. Any of these events could harm
or prevent sales of the affected products or could substantially increase the
costs and expenses of commercializing and marketing these products.

IF KEY PERSONNEL WERE TO LEAVE US OR IF WE ARE UNSUCCESSFUL IN ATTRACTING
QUALIFIED PERSONNEL, OUR ABILITY TO DEVELOP PRODUCTS COULD BE MATERIALLY HARMED.

         Our success depends in large part on our ability to attract and retain
highly qualified scientific, technical and business personnel experienced in the
development, manufacture and marketing of oral, controlled-release drug delivery
systems and generic products. Our business and financial results could be
materially harmed by the inability to attract or retain qualified personnel.

IF WE WERE SUED ON A PRODUCT LIABILITY CLAIM, AN AWARD COULD EXCEED OUR
INSURANCE COVERAGE AND COST US SIGNIFICANTLY.

         The design, development and manufacture of our products involve an
inherent risk of product liability claims. We have procured product liability
insurance; however, a successful claim against us in excess of the policy limits
could be very expensive to us, damaging our financial position. The amount of
our insurance coverage, which has been limited due to our limited financial
resources, may be materially below the coverage maintained by many of the other
companies engaged in similar activities. To the best of our knowledge, no
product liability claim has been made against us as of


                                       21
<PAGE>

March 31, 2008.

                        RISKS RELATED TO OUR COMMON STOCK

FUTURE SALES OF OUR COMMON STOCK COULD LOWER THE MARKET PRICE OF OUR COMMON
STOCK.

         Sales of substantial amounts of our shares in the public market could
harm the market price of our Common Stock, even if our business is doing well. A
significant number of shares of our Common Stock are eligible for sale in the
public market under SEC Rule 144 subject in some cases to volume and other
limitations. In addition, we filed a registration statement for the resale of
6,465,504 shares of Common Stock issuable upon conversion of outstanding shares
of our Series C 8% Convertible Preferred Stock, par value $0.01 per share (the
"SERIES C PREFERRED STOCK") issued in the private placement that closed on April
24, 2007, 4,187,643 shares of Common Stock issuable in satisfaction of certain
Series C Preferred Stock dividend obligations and 2,133,606 shares of Common
Stock issuable upon exercise of warrants issued in the private placement; and a
registration statement for the resale of 957,396 shares of Common Stock and
478,698 shares of Common Stock issuable upon the exercise of warrants issued to
VGS Pharma, an affiliate of Veerappan Subramanian, one of our directors and
former acting Chief Scientific Officer and 1,750,000 shares of Common Stock
issuable upon the exercise of options granted to Dr. Subramanian of which
750,000 options have since expired; and a registration statement for the resale
of 1,313,747 shares of Common Stock issuable upon conversion of outstanding
shares of our Series C Preferred Stock issued in a private placement that closed
on July 17, 2007 and in satisfaction of certain Series C Preferred Stock
dividend obligations and 242,068 shares of Common Stock issuable upon exercise
of warrants issued in the private placement.

         Due to the foregoing factors sales of a substantial number of shares of
our Common Stock in the public market could occur at any time. These sales, or
the perception in the market that the holders of a large number of shares intend
to sell shares, could reduce the market price of our Common Stock.

OUR STOCK PRICE HAS BEEN VOLATILE AND MAY FLUCTUATE IN THE FUTURE.

         There has been significant volatility in the market prices for publicly
traded shares of pharmaceutical companies, including ours. For the twelve months
ended March 31, 2008, the closing sale price on the American Stock Exchange
("AMEX") of our Common Stock fluctuated from a high of $2.75 per share to a low
of $0.78 per share. The per share price of our Common Stock may not remain at or
exceed current levels. The market price for our Common Stock, and for the stock
of pharmaceutical companies generally, has been highly volatile. The market
price of our Common Stock may be affected by:

    o    Results of our clinical trials;
    o    Approval or disapproval of abbreviated new drug applications or new
         drug applications;
    o    Announcements of innovations, new products or new patents by us or by
         our competitors;
    o    Governmental regulation;
    o    Patent or proprietary rights developments;
    o    Proxy contests or litigation;
    o    News regarding the efficacy of, safety of or demand for drugs or drug
         technologies;
    o    Economic and market conditions, generally and related to the
         pharmaceutical industry;
    o    Healthcare legislation;
    o    Changes in third-party reimbursement policies for drugs; and
    o    Fluctuations in our operating results.


                                       22
<PAGE>

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

         On January 4, 2006, we received a letter from the AMEX notifying us
that, based on our unaudited financial statements as of September 30, 2005, we
were not in compliance with the continued listing standards set forth in the
AMEX Company Guide in that under one listing standard our shareholders' equity
is less than $4,000,000 and we had losses from continuing operations and/or net
losses in three of our four most recent fiscal years and under another listing
standard our shareholders' equity is less than $6,000,000 and we had losses from
continuing operations and/or net losses in our five most recent fiscal years. At
the request of AMEX, we submitted a plan on February 3, 2006 advising AMEX of
action, we had taken and will take, to bring ourselves in compliance with the
continued listing standards within a maximum of 18 months from January 4, 2006.
On March 15, 2006, we completed a private placement of our Series B 8%
Convertible Preferred Stock, par value $0.01 per share (the "SERIES B PREFERRED
STOCK") and warrants to purchase Common Stock. We received $10,000,000 in gross
proceeds from the private placement. On March 21, 2006, we submitted an update
to the plan we had previously submitted on February 6, 2006. Upon notice of the
March 2006 private placement and the acceptance of the updated plan, AMEX
allowed us to maintain our AMEX listing, subject to periodic review of the our
progress by the AMEX staff. If we are not in compliance with the continued
listing standards, AMEX may then initiate delisting proceedings. The failure to
maintain listing of our Common Stock on AMEX will have an adverse effect on the
market and the market price for our Common Stock.

IF WE RAISE ADDITIONAL FUNDING THROUGH SALES OF OUR SECURITIES, OUR EXISTING
STOCKHOLDERS WILL LIKELY EXPERIENCE SUBSTANTIAL DILUTION.

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

THE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK OR OUR PREFERRED STOCK
COULD MAKE A CHANGE OF CONTROL MORE DIFFICULT TO ACHIEVE.

         The issuance of additional shares of our Common Stock or the issuance
of shares of an additional series of preferred stock could be used to make a
change of control of us more difficult and expensive. Under certain
circumstances, such shares could be used to create impediments to or frustrate
persons seeking to cause a takeover or to gain control of us. Such shares could
be sold to purchasers who might side with the Board of Directors in opposing a
takeover bid that the Board of Directors determines not to be in the best
interests of our stockholders. It might also have the effect of discouraging an
attempt by another person or entity through the acquisition of a substantial
number of shares of our Common Stock to acquire control of us with a view to
consummating a merger, sale of all or part of our assets, or a similar
transaction, since the issuance of new shares could be used to dilute the stock
ownership of such person or entity.

IF PENNY STOCK REGULATIONS BECOME APPLICABLE TO OUR COMMON STOCK THEY WILL
IMPOSE RESTRICTIONS ON THE MARKETABILITY OF OUR COMMON STOCK AND THE ABILITY OF
OUR STOCKHOLDERS TO SELL SHARES OF OUR STOCK COULD BE IMPAIRED.


                                       23
<PAGE>

         The SEC has adopted regulations that generally define a "penny stock"
to be an equity security that has a market price of less than $5.00 per share or
an exercise price of less than $5.00 per share subject to certain exceptions.
Exceptions include equity securities issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in continuous
operation for more than three years, or (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average revenue of at least $6,000,000 for the preceding three
years. Unless an exception is available, the regulations require that prior to
any transaction involving a penny stock, a risk of disclosure schedule must be
delivered to the buyer explaining the penny stock market and its risks. Our
Common Stock is currently trading at under $5.00 per share. Although we
currently fall under one of the exceptions, if at a later time we fail to meet
one of the exceptions, our Common Stock will be considered a penny stock. As
such the market liquidity for our Common Stock will be limited to the ability of
broker-dealers to sell it in compliance with the above-mentioned disclosure
requirements.

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

    o    Control of the market for the security by one or a few broker-dealers;
    o    "Boiler room" practices involving high-pressure sales tactics;
    o    Manipulation of prices through prearranged matching of purchases and
         sales;
    o    The release of misleading information;
    o    Excessive and undisclosed bid-ask differentials and markups by selling
         broker-dealers; and
    o    Dumping of securities by broker-dealers after prices have been
         manipulated to a desired level, which hurts the price of the stock and
         causes investors to suffer loss.

         We are aware of the abuses that have occurred in the penny stock
market. Although we do not expect to be in a position to dictate the behavior of
the market or of broker-dealers who participate in the market, we will strive
within the confines of practical limitations to prevent such abuses with respect
to our Common Stock.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW MAY DETER A THIRD PARTY FROM
ACQUIRING US.

         Section 203 of the Delaware General Corporation Law prohibits a merger
with a 15% shareholder within three years of the date such shareholder acquired
15%, unless the merger meets one of several exceptions. The exceptions include,
for example, approval by the holders of two-thirds of the outstanding shares
(not counting the 15% shareholder), or approval by the Board of Directors prior
to the 15% shareholder acquiring its 15% ownership. This provision makes it
difficult for a potential acquirer to force a merger with or takeover of us, and
could thus limit the price that certain investors might be willing to pay in the
future for shares of our Common Stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

         Our facility, which we own, is located at 165 Ludlow Avenue, Northvale,
New Jersey, and contains approximately 20,000 square feet of floor space. This
real property and the improvements


                                       24
<PAGE>

thereon are encumbered by a mortgage in favor of the New Jersey Economic
Development Authority ("NJEDA") as security for a loan through tax-exempt bonds
from the NJEDA to Elite. The mortgage contains certain customary provisions
including, without limitation, the right of NJEDA to foreclose upon a default by
Elite.

         On July 15, 2005, we entered into a lease for two years commencing on
July 1, 2005 for a portion of a one-story warehouse for the storage of finished
and raw material of pharmaceutical products and equipment. We have exercised an
option to rent the property through July 1, 2008.

         We are currently using our facilities as a laboratory, manufacturing,
storage and office space. Properties used in our operations are considered
suitable for the purposes for which they are used and are believed to be
adequate to meet our needs for the reasonably foreseeable future.

ITEM 3. LEGAL PROCEEDINGS.

         In the ordinary course of business we may be subject to litigation from
time to time. There is no past, pending or, to our knowledge, threatened
litigation or administrative action (including litigation or action involving
our officers, directors or other key personnel) which in our opinion has or is
expected to have, a material adverse effect upon our business, prospects
financial condition or operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to a vote of security holders during the
three months ended March 31, 2008.

         Stockholders at the Company's Annual Meeting of Stockholders held on
June 26, 2008 took the following actions:

         1.   Elected its four Directors.

                                    No. of Votes For       No. of Votes Against

         Bernard Berk               16,460,240             3,161,806
         Barry Dash                 17,692,942             1,931,104
         Robert Levensen            17,692,942             1,931,104
         Melvin Van Woert           16,937,460             2,684,586


         2.   Approved the proposal to approve and ratify the amendment to the
              Company's Certificate of Incorporation to increase the number of
              authorized shares of Common Stock from 65,000,000 to 150,000,000
              by a vote of a majority of the shares of Common Stock outstanding:
              16,774,807 shares for, 2,843,614 shares against and 28,854 shares
              abstaining.

         3.   Approved the proposal to approve and ratify the amendment to the
              Company's Certificate of Incorporation to provide that holders of
              Common Stock are not entitled to vote on any amendment to the
              Company's Certificate of Incorporation (including any Preferred
              Stock certificate of designation) that relates solely to the terms
              of one or more outstanding series of the Company's Preferred Stock
              if the holders of such affected series are entitled to vote on
              such amendment by a vote of a majority of the shares of Common
              Stock outstanding: 13,645,843 shares for, 5,946,664 shares against
              and 29,537 shares abstaining.

         4.   Did not approve the proposal to ratify certain amendments made to
              the Company's Certificate of Incorporation which relate solely to
              the Series B Preferred Stock which were previously approved by a
              majority of the holders of the Series B Preferred Stock by a vote
              of less than a majority of the Common Stock outstanding: 4,393,575
              shares for, 1,492,691 shares against and 61,450 shares abstaining.

         5.   Approved the proposal to approve and ratify the amendment to the
              Company's Stock Option Plan to increase the number of shares of
              Common Stock reserved for issuance under the Stock Option Plan
              from 7,000,000 shares to 10,000,000 shares by a vote of a majority
              of the shares voting in person or proxy: 4,057,474 shares for,
              209,460 shares against and 219,313 shares abstaining.

         6.   Approved the engagement of Miller, Ellin & Company LLP as the
              Company's independent auditors for the year ended March 31, 2008
              by a vote of a majority of the shares voting in person or by
              proxy: 19,193,274 shares for, 209,460 shares against and 219,313
              shares abstaining.

                                     PART II

ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Our Common Stock is quoted on the American Stock Exchange under the
symbol "ELI". The following table shows, for the periods indicated, the high and
low sales prices per share of our Common Stock as reported by the American Stock
Exchange.

                                COMMON STOCK

         QUARTER ENDED                                        HIGH          LOW

         FISCAL YEAR ENDING MARCH 31, 2008:

         March 31, 2008.......................................$1.80       $0.72
         December 31, 2007....................................$2.75       $1.45
         September 30, 2007...................................$2.77       $1.95
         June 30, 2007 .......................................$2.70       $2.08

         FISCAL YEAR ENDING MARCH 31, 2007:

         March 31, 2007.......................................$2.40       $1.94
         December 31, 2006....................................$2.49       $2.02
         September 30, 2006...................................$2.46       $2.03
         June 30, 2006 .......................................$2.54       $2.02


                                       25
<PAGE>

         On June 18, 2008, the last reported sale price of our Common Stock, as
reported by the American Stock Exchange, was $0.50 per share.

         As of June 18, 2008, there were approximately 115 holders of record
and, we believe, approximately 2,482 are beneficial owners of our Common Stock.
We are informed and believe that as of June 18, 2008, Cede & Co. held 20,756,593
shares of our Common Stock as nominee for Depository Trust Company, 55 Water
Street, New York, New York 10004. It is our understanding that Cede & Co. and
Depository Trust Company both disclaim any beneficial ownership therein and that
such shares are held for the account of numerous other persons.

         We have never paid cash dividends on our Common Stock. During the
fiscal year ended March 31, 2008, we have paid dividends in the aggregate
principal amount of $2,104,797 on our Series B Preferred Stock and Series C
Preferred Stock. Such amount reflects $474,087 paid in cash and 1,116,173 shares
of Common Stock. We currently anticipate that we will retain all available funds
for use in the operation and expansion of our business.

         Please see our Quarterly Reports on Form 10-Q for the three month
periods ending June 30, 2007, September 30, 2007 and December 31, 2007 and our
Current Reports on Form 8-K dated April 25, 2007, July 17, 2007 and January 3,
2008, for information concerning our issuances of unregistered securities during
the 12 months ended March 31, 2008.

                      EQUITY COMPENSATION PLAN INFORMATION

         The following table sets forth certain information regarding Elite's
equity compensation plans as of March 31, 2008.


<TABLE>
<CAPTION>
                                                                                                 Number of
                                   Number of                                                securities remaining
                                  securities                                                available for future
                               to be issued upon              Weighted-average                 issuance under
                                  exercise of                exercise price per             equity compensation
                             outstanding options,           share of outstanding              plans (excluding
                                 warrants and               options, warrants and           securities reflected
Plan Category                       rights                         rights                      in column (a))
-------------                --------------------           ---------------------           ---------------------
                                      (a)                            (b)                            (c)
<S>                                   <C>                           <C>                                <C>
Equity compensation
   plans approved by
   security holders                   4,468,300(1)                  $2.18                              2,531,700

Equity compensation
   plans not approved
   by security holders                1,075,000(2)                  $2.06                                     --
                        ------------------------     ------------------------------------ -----------------------
Total:                                5,543,300                     $2.16                              2,531,700
                        ------------------------     ------------------------------------ -----------------------
</TABLE>
(1) Stock options issued under the 2004 Stock Option Plan

(2) Represents 1,000,000  non-qualified  options issued to Veerappan Subramanian
and 75,000 non-qualified options to The Investor Relations Group.



                                       26
<PAGE>

         2004 STOCK OPTION PLAN

         Our 2004 Stock Option Plan (the "STOCK OPTION PLAN") permits us to
grant both incentive stock options ("INCENTIVE STOCK OPTIONS" or "ISOS") within
the meaning of Section 422 of the Internal Revenue Code (the "CODE"), and other
options which do not qualify as Incentive Stock Options (the "NON-QUALIFIED
OPTIONS") to employees, officers, Directors of and consultants to Elite.

         Unless earlier terminated by the Board of Directors, the Stock Option
Plan (but not outstanding options issued thereunder) terminates on March 1,
2014, after which no further awards may be granted under the Stock Option Plan.
The Stock Option Plan is administered by the full Board of Directors or, at the
Board of Directors' discretion, by a committee of the Board of Directors
consisting of at least two persons who are "disinterested persons" as defined
under Rule 16b-2(c)(ii) under the Securities Exchange Act of 1934, as amended
(the "Committee").

         Recipients of options under the Stock Option Plan ("OPTIONEES") are
selected by the Board of Directors or the Committee. The Board of Directors or
Committee determines the terms of each option grant including (1) the purchase
price of shares subject to options, (2) the dates on which options become
exercisable and (3) the expiration date of each option (which may not exceed ten
years from the date of grant). The minimum per share purchase price of options
granted under the Stock Option Plan for Incentive Stock Options is the fair
market value (as defined in the Stock Option Plan) or for Nonqualified Options
is 85% of fair market value of one share of the Common Stock on the date the
option is granted.

         Optionees have no voting, dividend or other rights as stockholders with
respect to shares of Common Stock covered by options prior to becoming the
holders of record of such shares. The purchase price upon the exercise of
options may be paid in cash, by certified bank or cashier's check, by tendering
stock held by the Optionee, as well as by cashless exercise either through the
surrender of other shares subject to the option or through a broker. The total
number of shares of Common Stock available under the Stock Option Plan, and the
number of shares and per share exercise price under outstanding options will be
appropriately adjusted in the event of any stock dividend, reorganization,
merger or recapitalization or similar corporate event. Subject to limitations
set forth in the Stock Option Plan, the terms of option agreements will be
determined by the Board of Directors or Committee, and need not be uniform among
Optionees.

         The Board of Directors may at any time terminate the Stock Option Plan
or from time to time make such modifications or amendments to the Stock Option
Plan as it may deem advisable and the Board of Directors or Committee may
adjust, reduce, cancel and regrant an unexercised option if the fair market
value declines below the exercise price except as may be required by any
national stock exchange or national market association on which the Common Stock
is then listed. In no event may the Board of Directors, without the approval of
stockholders, amend the Stock Option Plan to increase the maximum number of
shares of Common Stock for which options may be granted under the Stock Option
Plan or change the class of persons eligible to receive options under the Stock
Option Plan.

FEDERAL INCOME TAX CONSEQUENCES. The following is a brief discussion of the
Federal income tax consequences of transactions under the Stock Option Plan.
This discussion is not intended to be exhaustive and does not describe state or
local tax consequences.

INCENTIVE OPTIONS

         No taxable income is realized by the Optionee upon the grant or
exercise of an Incentive Option, except as noted below with respect to the
alternative minimum tax. If Common Stock is issued to an Optionee pursuant to
the exercise of an Incentive Option, and if no disqualifying disposition of such
shares is made by such Optionee within two years after the date of grant or
within one year after the


                                       27
<PAGE>

transfer of such shares to such Optionee, then (1) upon sale of such shares, any
amount realized in excess of the option price will be taxed to such Optionee as
a long-term capital gain and any loss sustained will be a long-term capital
loss, and (2) no deduction will be allowed to the Optionee's employer for
Federal income tax purposes.

         Except as noted below for corporate "insiders," if the Common Stock
acquired upon the exercise of an Incentive Stock Option is disposed of prior to
the expiration of either holding period described above, generally (1) the
Optionee will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of such shares at exercise
(or, if less, the amount realized on the disposition of such shares) over the
option price paid for such shares and (2) the Optionee's employer will be
entitled to deduct such amount for Federal income tax purposes if the amount
represents an ordinary and necessary business expense. Any further gain (or
loss) realized by the Optionee will be taxed as short-term or long-term capital
gain (or loss), as the case may be, and will not result in any deduction by the
employer.

         Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following termination of
employment, the exercise of the Option will generally be taxed as the exercise
of a Non-Qualified Option.

         For purposes of determining whether an Optionee is subject to any
alternative minimum tax liability, an Optionee who exercises an Incentive Stock
Option generally would be required to increase his or her alternative minimum
taxable income, and compute the tax basis in the stock so acquired, in the same
manner as if the Optionee had exercised a Non-Qualified Option. Each Optionee is
potentially subject to the alternative minimum tax. In substance, a taxpayer is
required to pay the higher of his/her alternative minimum tax liability or
his/her "regular" income tax liability. As a result, a taxpayer has to determine
his potential liability under the alternative minimum tax.

NON-QUALIFIED OPTIONS

         With respect to Non-Qualified Options: (1) no income is realized by the
Optionee at the time the Option is granted; (2) generally, at exercise, ordinary
income is realized by the Optionee in an amount equal to the difference between
the option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise, and the Optionee's employer is generally
entitled to a tax deduction in the same amount subject to applicable tax
withholding requirements; and (3) at sale, appreciation (or depreciation) after
the date of exercise is treated as either short-term or long-term capital gain
(or loss) depending on how long the shares have been held.

         Pursuant to Section 409A of the Internal Revenue Code (the "CODE"),
Non-Qualified Options must be issued at fair market value at the time of the
grant in order to achieve the federal tax consequences described above and to
avoid substantial penalties.

COMPLIANCE WITH SECTION 409A OF THE CODE

         To the extent that the Board of Directors or Committee determines that
any option granted under the Stock Option Plan is subject to Section 409A of the
Code, the award agreement evidencing such option shall incorporate the terms and
conditions required by Section 409A. To the extent applicable, the Stock Option
Plan and award agreements shall be interpreted in accordance with Section 409A.
Notwithstanding any provision of the Stock Option Plan to the contrary, in the
event that, following the effective date of this amendment to the Stock Option
Plan, the Board of Directors or Committee


                                       28
<PAGE>

determines that any option may be subject to Section 409A of the Code, the Board
of Directors or Committee may adopt such amendments to the Stock Option Plan and
the applicable award agreement or adopt such other policies and procedures
(including amendments, policies and procedures with retroactive effect), or take
any other actions that the Board of Directors or Committee determines are
necessary or appropriate to (a) exempt the option from Section 409A and/or
preserve the intended tax treatment of the benefits provided with respect to the
option or (b) comply with the requirements of Section 409A of the Code.

SPECIAL RULES APPLICABLE TO CORPORATE INSIDERS

         As a result of the rules under Section 16(b) of the Exchange Act,
"insiders" (as defined in the Securities Exchange Act of 1934), depending upon
the particular exemption from the provisions of Section 16(b) utilized, may not
receive the same tax treatment as set forth above with respect to the grant
and/or exercise of options. Generally, insiders will not be subject to taxation
until the expiration of any period during which they are subject to the
liability provisions of Section 16(b) with respect to any particular option.
Insiders should check with their own tax advisers to ascertain the appropriate
tax treatment for any particular option.

COMPARATIVE STOCKHOLDER RETURN

         The graph that follows compares the yearly percentage change in Elite's
cumulative total stockholder return on its Common Stock for the five year period
ended March 31, 2008 with the cumulative total stockholder return of (1) all
United States companies traded on the American Stock Exchange (where Elite's
Common Stock is now traded) and (2) all companies traded on the American Stock
Exchange which carry the Standard Industrial Classification (SIC) code 283
(Pharmaceuticals). The table was prepared by the Research Data Group, Inc.

         Elite's Common Stock was traded on the NASDAQ over-the-counter bulletin
board from July 23, 1998 until February 24, 2000. Elite's Common Stock began
trading on the American Stock Exchange on February 24, 2000. Elite's fiscal year
ends on March 31.

                 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
           Among Elite Pharmaceuticals Inc, The AMEX Composite Index
                  And Amex Stocks (SIC 2830-2839 US Companies)

             [DATA BELOW REPRESENTS A LINE GRAPH IN PRINTED PIECE]

<TABLE>
<CAPTION>
         ELITE PHARMACEUTICALS INC    AMEX COMPOSITE    AMEX STOCKS (SIC 2830-2839 US
                                                                  COMPANIES)
<S>                <C>                     <C>                    <C>
 3/03              100.00                  100.00                 100.00
 4/03               98.69                  102.41                 112.88
 5/03              137.25                  112.28                 132.93
 6/03              186.27                  116.45                 157.11
 7/03              160.13                  114.15                 159.02
 8/03              182.35                  117.99                 162.88
 9/03              189.54                  122.38                 172.66
10/03              209.80                  130.63                 188.07
11/03              209.15                  134.87                 194.84
12/03              196.08                  143.10                 209.13
 1/04              241.83                  146.38                 213.78
 2/04              163.40                  153.00                 211.93
 3/04              194.12                  154.59                 213.21
 4/04              212.42                  146.95                 198.59
 5/04              196.08                  145.51                 190.77
 6/04              150.98                  150.55                 190.49
 7/04              143.79                  148.89                 153.66
 8/04               85.62                  149.57                 142.78
 9/04               78.43                  154.14                 151.15
10/04              114.38                  159.18                 158.23
11/04              212.42                  171.27                 175.06
12/04              239.87                  175.85                 187.83
 1/05              271.24                  175.10                 172.45
 2/05              313.07                  185.97                 164.87
 3/05              287.58                  181.53                 151.12
 4/05              232.03                  178.70                 148.43
 5/05              196.08                  181.88                 154.59
 6/05              201.31                  192.51                 152.30
 7/05              189.54                  197.64                 156.91
 8/05              179.74                  206.60                 143.43
 9/05              194.77                  217.10                 133.66
10/05              160.13                  202.71                 129.66
11/05              118.30                  207.56                 136.48
12/05              120.26                  216.73                 134.48
 1/06              132.68                  229.93                 162.36
 2/06              152.29                  227.67                 171.00
 3/06              162.75                  240.62                 176.01
 4/06              149.02                  247.53                 178.18
 5/06              143.79                  237.77                 167.33
 6/06              150.33                  237.15                 160.31
 7/06              143.79                  239.39                 154.96
 8/06              156.86                  248.53                 166.57
 9/06              156.21                  238.63                 162.92
10/06              133.33                  245.10                 169.23
11/06              139.22                  259.72                 176.88
12/06              142.48                  258.04                 181.77
 1/07              130.72                  263.15                 189.32
 2/07              131.37                  262.94                 179.35
 3/07              153.59                  271.66                 181.62
 4/07              144.44                  275.04                 176.80
 5/07              150.33                  294.64                 191.49
 6/07              167.32                  293.49                 190.72
 7/07              153.59                  282.71                 179.56
 8/07              156.86                  278.18                 174.71
 9/07              150.33                  299.45                 190.97
10/07              179.74                  312.46                 203.12
11/07              137.25                  293.16                 192.66
12/07              135.95                  299.65                 181.77
 1/08               59.48                  277.04                 154.24
 2/08              101.31                  290.81                 123.74
 3/08               60.13                  281.78                 120.79
</TABLE>
                                       29
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

         The following consolidated selected financial data, at the end of and
for the last five fiscal years, should be read in conjunction with our
Consolidated Financial Statements and related Notes thereto appearing elsewhere
in this Annual Report on Form 10-K. The consolidated selected financial data are
derived from our audited Consolidated Financial Statements. The audit report of
Miller, Ellin & Company, LLP, our independent auditors, for the three years
ended March 31, 2008, 2007 and 2006 is included herein. The selected financial
data provided below is not necessarily indicative of our future results of
operations or financial performance.

<TABLE>
<CAPTION>
                                      2008             2007            2006             2005              2004
<S>                       <C>                <C>              <C>             <C>               <C>
                                ----              ----             ----            ----              ----
Net revenues              $      1,413,119   $    1,143,841   $     550,697   $      301,480    $      258,250
Net (loss)                $    (13,893,060)  $  (11,803,512)  $  (6,883,914)  $   (5,906,890)   $   (6,514,217
Net (loss) per common
share                     $          (0.73)  $        (0.64)  $       (0.49)  $        (0.47)   $        (0.58)
Total assets              $     15,310,270   $    9,208,006   $  15,702,241   $    9,245,292    $    7,853,434
Long-term obligations     $      3,637,388   $    3,795,000   $   3,980,000   $    2,367,128    $    2,495,000
Weighted average
number of common
shares outstanding              21,801,042       19,815,780      18,463,514       12,869,924        11,168,618
</TABLE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION

GENERAL

         The following discussion and analysis should be read with the financial
statements and accompanying notes, included elsewhere in this Annual Report on
Form 10-K. It is intended to assist the reader in understanding and evaluating
our financial position.

OVERVIEW

         We are a specialty pharmaceutical company principally engaged in the
development and manufacture of oral, controlled-release products. We develop
oral, controlled-release products using proprietary technology. 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 develop delayed, sustained or
targeted release pellets, capsules, tablets, granules and powders.

         We have two products, Lodrane 24(R) and Lodrane 24D(R), currently being
sold commercially, and a pipeline of five drug candidates under development in
the therapeutic areas that include pain management, allergy and infection. Of
the products under development, ELI-216, an abuse deterrent oxycodone product,
and ELI-154, a once daily oxycodone product, are in clinical trials and we have
completed pilot studies on two of our generic product candidates. The
addressable market for the pipeline of products exceeds $6 billion. Our facility
in Northvale, New Jersey also is a Good Manufacturing Practice ("GMP") and DEA
registered facility for research, development and manufacturing.

         In January 2006, the FDA accepted our IND for ELI-154, our once-a-day
oxycodone painkiller. We completed a second pharmacokinetic study to evaluate
ELI-154's sustained release formation in 2006. In December 2007, we submitted to
the FDA a Special Protocol Assessment ("SPA") for the Phase III protocol for
ELI-154. We are currently scaling up the product and expect to wait until we
reach agreement with the FDA on this SPA before beginning the Phase III.
Currently there is no once-daily oxycodone available. We estimate that the U.S.
market for sustained release, twice-daily oxycodone was about $1.6 billion as of
September, 2006.


                                       30
<PAGE>

         In May 2005, the FDA accepted our IND for ELI-216, our once-a-day,
abuse resistant oxycodone painkiller. After the acceptance of the IND, we
completed two pharmacokinetic studies and a euphoria study in recreational drug
users to assess the abuse deterrent properties of ELI-216. In November 2007, we
reached agreement with the FDA on a Special Protocol Assessment for the Phase
III protocol for ELI-216. We are currently scaling up the product and preparing
for additional studies including a multi-dose study in opioid dependent
patients, a food effect study and the Phase III study for ELI-216, Currently
there is no abuse deterrent oxycodone product available.

         At the end of 2006, we entered into a joint venture 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.

         At the end of 2007, we elected not to fund our remaining contributions
to Novel upon the terms set forth in the Alliance Agreement because we had
reached agreement with the FDA under a SPA on the Phase III clinical trial of
ELI-216, our abuse deterrent oxycodone product and determined that our funds
would be better used to support the clinical trials for ELI-216. Upon our
determination not to fund our remaining contributions to Novel at the valuation
set forth in the Alliance Agreement, VGS exercised its rights to purchase from
us our shares of Class A Voting Common Stock of Novel proportionate to the
amount of remaining contributions which were not funded by us. As a result, our
remaining ownership interest in Class A Voting Common Stock of Novel is
approximately 10% of the outstanding shares of Class A Voting Common Stock of
Novel.

         Until VGS purchased our shares of Class A Voting Common Stock of Novel,
Novel was consolidated into our financial statements as a "variable interest
entity" because of the extent of its dependence on the Company. Since then,
Novel is no longer considered a "variable interest entity" of the Company and
therefore is not consolidated into our financial statements. Accordingly, the
information in our Quarterly Report on Form 10-Q consolidates the results of
operations of Novel for the six months ended September 30, 2007. As of October
1, 2007, Elite deconsolidated its financial statements from that of Novel. Our
investment in Novel was decreased from $7,009,800 to $3,329,322 to recognize the
cumulative losses of $3,672,638 from Novel from inception through September 30,
2007 and the return of 80% of our initial investment of $9,800.

STRATEGY

         We are focusing our efforts on the following areas: (i) development of
our pain management products, (ii) manufacture of Lodrane 24(R) and Lodrane
24D(R) products; (iii) development of the other products in our pipeline; (iv)
commercial exploitation of our products either by license and the collection of
royalties, or through the manufacture of our formulations, and (v) development
of new products and the expansion of our licensing agreements with other
pharmaceutical companies, including co-development projects, joint ventures and
other collaborations, including Novel.

         We are focusing on the development of various types of drug products,
including branded drug products (which require NDAs) under Section 505(b)(1) or
505(b)(2) of the Drug Price


                                       31
<PAGE>

Competition and Patent Term Restoration Act of 1984 as well as generic drug
products (which require ANDAs).

         We intend to continue to collaborate in the development of additional
products with our current partners. We also plan to seek additional
collaborations to develop more drug products.

         We believe that our business strategy enables us to reduce our risk by
having a diverse product portfolio that includes both branded and generic
products in various therapeutic categories and build collaborations and
establish licensing agreements with companies with greater resources thereby
allowing us to share costs of development and to improve cash-flow.

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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE

EFFECTIVE FOR FISCAL YEAR BEGINNING AFTER DECEMBER 15, 2008

STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS (SFAS):

SFAS 157, "FAIR VALUE MEASUREMENTS" - defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value
measurements. This Statement applies under other accounting pronouncements that
require or permit fair value measurements, where the Board previously concluded
in those accounting pronouncements that fair value is the relevant measurement
attribute. Accordingly, this Statement does not require any new fair value
measurements. However, for some entities, the application of this Statement will
change current practice. This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet


                                       32
<PAGE>

issued financial statements for that fiscal year, including financial statements
for an interim period within that fiscal year.

SFAS 159, "THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL
LIABILITIES-INCLUDING AN AMENDMENT OF FASB STATEMENT NO. 115" - permits entities
to choose to measure many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. This Statement is expected to expand the
use of fair value measurement, which is consistent with the Board's long-term
measurement objectives for accounting for financial instruments. This Statement
is effective as of the beginning of an entity's first fiscal year that begins
after November 15, 2007, and interim periods within those fiscal years. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15,2007, provided the entity also elects to apply the provisions
of FASB Statement No. 157, "FAIR VALUE MEASUREMENTS".

EFFECTIVE  FOR FISCAL YEARS AND INTERIM  PERIODS  BEGINNING  AFTER  NOVEMBER 15,
2008. EARLY APPLICATION IS ENCOURAGED.

FASB Statement No. 161, "DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES - AN AMENDMENT OF FASB STATEMENT 133" - enhances required disclosures
regarding derivatives and hedging activities, including enhanced disclosures
regarding how: (a) an entity uses derivative instruments; (b) derivative
instruments and related hedged items are accounted for under FASB Statement No.
133, Accounting for Derivative Instruments and Hedging Activities; and (c)
derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. Specifically, Statement 16 1
requires:

    o    Disclosure of the objectives for using derivative instruments be
         disclosed in terms of underlying risk and accounting designation;

    o    Disclosure of the fair values of derivative instruments and their gains
         and losses in a tabular format;

    o    Disclosure of information about credit-risk-related contingent
         features; and

    o    Cross-reference from the derivative footnote to other footnotes in
         which derivative related information is disclosed.

SFAS 141 (R), "BUSINESS COMBINATIONS"- retains the fundamental requirements in
Statement 141 that the acquisition method of accounting (which Statement 141
called the purchase method) be used for all business combinations and for an
acquirer to be identified for each business combination. This Statement defines
the acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control.

    o    replaces Statement 141's cost-allocation process and requires an
         acquirer to recognize the assets acquired, the liabilities assumed, and
         any noncontrolling interest in the acquiree at the acquisition date,
         measured at their fair values as of that date,


                                       33
<PAGE>

    o    requires the acquirer in a business combination achieved in stages
         (sometimes referred to as a step acquisition) to recognize the
         identifiable assets and liabilities, as well as the noncontrolling
         interest in the acquiree, at the full amounts of their fair values,

    o    requires that an acquirer evaluate new information and measure a
         liability at the higher of its acquisition-date fair value or the
         amount that would be recognized if applying Statement 5, then measuring
         an asset at the lower of its acquisition-date fair value or the best
         estimate of its future settlement amount,

    o    requires the acquirer to recognize contingent consideration at the
         acquisition date, measured at its fair value at that date,

EFFECTIVE FOR FISCAL YEARS BEGINNING AFTER NOVEMBER 15, 2007

SFAS 160, "NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS" -
changes the way the consolidated income statement is presented. It requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interest. It also
requires disclosure, on the face of the consolidated statement of income, of the
amounts of consolidated net income attributable to the parent and to the
noncontrolling interest. Previously, net income attributable to the
noncontrolling interest generally was reported as an expense or other deduction
in arriving at consolidated net income. It also was often presented in
combination with other financial statement amounts. Effective for fiscal years
beginning after December 15, 2008.

FASB STAFF POSITIONS (FSP):

FSP APB 14-1, "ACCOUNTING FOR CONVERTIBLE DEBT INSTRUMENTS THAT MAY BE SETTLED
IN CASH UPON CONVERSION (INCLUDING PARTIAL CASH SETTLEMENT)" - clarifies that
convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) are not addressed by paragraph 12 of APB
Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants. Additionally, this FSP specifies that issuers of such
instruments should separately account for the liability and equity components in
a manner that will reflect the entity's nonconvertible debt borrowing rate when
interest cost is recognized in subsequent periods. This FSP is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years.

FSP FAS 140-3, "ACCOUNTING FOR TRANSFERS OF FINANCIAL ASSETS AND REPURCHASE
FINANCING TRANSACTIONS" - amends FASB Statement 140 to state that a transferor
and transferee shall not separately account for a transfer of a financial asset
and a related repurchase financing unless (a) the two transactions have a valid
and distinct business or economic purpose for being entered into separately and
(b) the repurchase financing does not result in the initial transferor regaining
control over the financial asset. This FSP is effective for financial statements
issued for fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years. Earlier application is not permitted.

FSP FAS 142-3, "DETERMINATION OF THE USEFUL LIFE OF INTANGIBLE ASSETS"- amends
the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under FASB Statement No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. Paragraph 1
l(d) of Statement 142 precluded an entity from using its own assumptions about
renewal or extension of an arrangement where there is likely to be substantial
cost or material modifications. This FSP amends paragraph 1 l(d) of Statement
142 so that an entity will use its own assumptions about renewal or extension of
an arrangement, adjusted for the entity-specific factors in paragraph 11 of


                                       34
<PAGE>

Statement 142, even when there is likely to be substantial cost or material
modifications. Therefore, in determining the useful life of the asset for
amortization purposes, an entity shall consider the period of expected cash
flows used to measure the fair value of the recognized intangible asset,
adjusted for the entity-specific factors including, but are not limited to, the
entity's expected use of the asset and the entity's historical experience in
renewing or extending similar arrangements. This FSP shall be effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited.

FSP FAS 157-1, APPLICATION OF FASB STATEMENT NO. 157 TO FASB STATEMENT NO. 13
AND OTHER ACCOUNTING PRONOUNCEMENTS THAT ADDRESS FAIR VALUE MEASUREMENTS FOR
PURPOSES OF LEASE CLASSIFICATION OR MEASUREMENT UNDER STATEMENT 13" - amends
FASB Statement No. 157, Fair Value Measurements, to exclude FASB Statement No.
13, Accounting for Leases, and other accounting pronouncements that address fair
value measurements for purposes of lease classification or measurement under
Statement 13. However, this scope exception does not apply to assets acquired
and liabilities assumed in a business combination that are required to be
measured at fair value under FASB Statement No. 141, Business Combinations, or
No. 141 (revised 2007), Business Combinations, regardless of whether those
assets and liabilities are related to leases.

FSP FAS 157-2, "EFFECTIVE DATE OF FASB STATEMENT NO. 157" - delays the effective
date of FASB Statement No. 157, Fair Value Measurements, for nonfinancial assets
and nonfinancial liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis (at least
annually). The delay is intended to allow the Board and constituents additional
time to consider the effect of various implementation issues that have arisen,
or that may arise, from the application of Statement 157. This FSP defers the
effective date of Statement 157 to fiscal years beginning after November 15,
2008, and interim periods within those fiscal years for items within the scope
of this FSP.

FSP SOP 07-1-1, - indefinitely delays the effective date of AICPA Statement of
Position 07-1, "CLARIFICATION of THE SCOPE OF THE AUDIT AND ACCOUNTING GUIDE
INVESTMENT COMPANIES AND ACCOUNTING BY PARENT COMPANIES AND EQUITY METHOD
INVESTORS FOR INVESTMENTS IN INVESTMENT COMPANIES."

EITF CONSENSUSES (EITF):

EITF Issue No. 07-1, "ACCOUNTING FOR COLLABORATIVE ARRANGEMENTS" - when entities
enter into arrangements to participate in a joint operating activity a
collaborative arrangement may provide that one participant has sole or primary
responsibility for certain activities or that two or more participants have
shared responsibility for certain activities. Participants should evaluate
whether an arrangement is a collaborative arrangement at the inception of the
arrangement based on the facts and circumstances present at that time. Revenue
generated and costs incurred by participants from transactions with parties
should be reported gross or net on the appropriate line item in each
participant's respective financial statements depending on the nature of the
participation. Disclosures should include information about the nature and
purpose of its collaborative arrangements, the entity's rights and obligations
under the collaborative arrangements, the accounting policy for collaborative
arrangements, and the income statement classification and amounts attributable
to transactions arising from the collaborative arrangement. Effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years.



                                       35
<PAGE>

YEAR ENDED MARCH 31, 2008 VS. YEAR ENDED MARCH 31, 2007

         Our revenues for the year ended March 31, 2008 were $1,413,119, an
increase of $269,278 or approximately 24%, over revenues for the prior year, and
consisted of $1,173,890 in manufacturing fees and $239,229 in royalty fees.
Revenues for the year ended March 31, 2007 consisted of $1,038,916 in
manufacturing fees and $104,925 in royalty fees. The increase in manufacturing
fees and royalties was primarily due to the launch of our second product,
Lodrane 24D(R) in the later part of the year ended March 31, 2007.

         Research and development costs for the year ended March 31, 2008 were
$5,795,779, a negligible increase of $17,914 from $5,777,865 of such costs for
the prior year, primarily due to costs associated with increased spending on raw
materials which are primarily for scale up of the pain products. We expect our
research and development costs to continue to increase in future periods
primarily due to clinical costs for Phase III and other clinical trials for
ELI-216 and ELI-154.

         General and administrative expenses ("G&A") for the year ended March
31, 2008 were $2,434,803, an increase of $238,649, or approximately 11% from
$2,196,154 of G&A for the prior year. The increase was attributable to increases
in salaries and fringe benefits as a result of the hiring of managerial level
employees and consulting fees associated with seeking potential strategic
transactions.

         Depreciation and amortization for the year ended March 31, 2008
increased by $116,079 from $408,814 for the prior year to $524,893. The increase
in 2008 was due to acquired new machinery and equipment and continued upgrading
of the corporate and warehouse facilities.

         Other income (expenses) for the year ended March 31, 2008 were
$(2,543,473), a decrease of $546,765, or approximately 18%, from $(3,090,238)
for the prior year due to (i) a decrease of $871,600 in charges related to the
issuances of stock options and warrants and (ii) an increase in interest income
of $69,671, due to higher compensating balances as a result of the private
placement offset by (x) a decrease of $377,259 in sale of New Jersey tax losses,
and (y) an increase of $17,247 in interest expense resulting from a loan
initially used to fund Novel and a loan to finance the purchase of a new truck.

         Our prior year financial statements were restated as a result of the
Company's decision not to continue to fund Novel and therefore not include
Novel's expenses as part of the Company's operating activities for the year
ending March 31, 2008 and 2007. Consequently, losses from discontinued
operations of $2,979,600 and $642,032 respectively are reflected in the 2008 and
2007 financial statements.

         As a result of the foregoing, our net loss for the year ended March 31,
2008 was $13,893,060 compared to $11,803,512 for the year ended March 31, 2007.

YEAR ENDED MARCH 31, 2007 VS. YEAR ENDED MARCH 31, 2006

         Our revenues for the year ended March 31, 2007 were $1,143,841, an
increase of $593,144, or approximately 108%, over revenues for the comparable
prior year, and consisted of $1,038,916 in manufacturing fees and $104,925 in
royalty fees. Revenues for the year ended March 31, 2006 consisted $494,231 in
manufacturing fees and $56,466 in royalty fees. The increase in manufacturing
fees and royalties was primarily due to the launch of our second product,
Lodrane 24D(R).

         Research and development costs for the year ended March 31, 2007 were
$5,777,865, an increase of $1,433,975, or approximately 33% from $4,343,890 of
such costs for the prior year,


                                       36
<PAGE>

primarily the result of increased wages, raw materials, laboratory and
manufacturing supplies and consulting fees. As of March 31, 2007 Elite had 41
employees, an increase of 58% from 26 employees one year ago. The increase in
employees was primarily for the scale up work for the pain products and included
manufacturing, analytical and quality assurance people. Elite had also increased
its spending on raw materials, primarily API, by 100% from $300,000 to $600,000.
The raw materials were also primarily for scale up of the pain products.
Spending on biostudies increased to $1,000,000 from $100,000 a year ago due to
spending on the Phase II study for ELI-216. We expect our research and
development costs to continue to increase in future periods primarily due to
clinical costs for Phase III and other clinical trials for ELI-216 and ELI-154.

         G&A for the year ended March 31, 2007 were $2,196,154, an increase of
$469,528, or approximately 27% from $1,726,626 of G&A for the prior year. The
increase was attributable to increases in salaries and fringe benefits as a
result of increases in staff and consulting fees associated with seeking
potential strategic transitions.

         We are in the initial stages of breaking down the specific costs
associated with the research and development of each product on which we devoted
resources through the use of detailed time sheets and general ledger account
classifications. In the past, we have not historically allocated these expenses
to any particular product. We cannot estimate the additional costs and expenses
that may be incurred in order to potentially complete the development of any
product, nor can we estimate the amount of time that might be involved in such
development because of the uncertainties associated with the development of
controlled-release drug delivery products as described in this report.

         Depreciation and amortization decreased by $77,873 from $486,687 for
the prior year to $408,814. The decrease was the result of our taking in 2006
the full write-off of financing costs associated with the redemption of tax
exempt NJEDA Bonds, partially offset by an increase in depreciation in 2007 due
to the acquisition of new machinery and equipment and upgrading of the corporate
and warehouse facilities.

         Other income (expenses) for the year ended March 31, 2007 were
$(3,090,238), an increase of $2,213,830, or approximately 253%, of $(876,408)
for the prior year due to an increase of $2,576,143 in charges related to the
issuances of stock options and warrants, offset by (i) an increase of $158,138
in sale of New Jersey tax losses, (ii) additional interest income of $195,741,
due to higher compensating balances as a result of the private placement, and
(iii) a decrease of $8,433 in interest expense resulting from a decrease in
NJEDA Bonds outstanding.

         Expenses associated with Novel were reclassed as a result of the
Company's decision not to fund this venture. As a result, a loss from
discontinued operations increased to $642,032 for the year ended March 31, 2007.

         As a result of the foregoing, our net loss for the year ended March 31,
2007 was $11,803,512 compared to $6,883,914 for the year ended March 31, 2006.

MATERIAL CHANGES IN FINANCIAL CONDITION

         Our working capital (total current assets less total current
liabilities), increased to $5,029,930 as of March 31, 2008 from $244,288 as of
March 31, 2007, primarily due to net proceeds received as a result of our
private placement of Series C 8% Convertible Preferred Stock, offset by net loss
from operations, exclusive of non-cash charges.


                                       37
<PAGE>

         We experienced negative cash flows from operations of $(9,834,277) for
the year ended March 31, 2008, primarily due to our net loss from operations of
$13,893,060, an increase in accrued interest receivable, prepaid expenses and
security deposits of $1,193,331, and reductions of $867,016 in accounts payable,
accrued expenses and other liabilities offset by reductions in accounts
receivable of $67,353 and by non-cash charges of $3,021,171 which included
$2,607,470 in connection with the issuance of stock options and warrants and
$413,701 in depreciation and amortization expenses.

         On November 15, 2004 and on December 18, 2006, Elite's partner, ECR,
launched Lodrane 24(R) and Lodrane 24D(R), respectively. Under its agreement
with ECR, Elite is currently manufacturing commercial batches of Lodrane 24(R)
and Lodrane 24D(R) in exchange for manufacturing margins and royalties on
product revenues. Manufacturing revenues and royalty income earned for the year
ended March 31, 2008 was $1,173,890 and $239,229, respectively. We expect future
cash flows from manufacturing fees and royalties to provide additional cash to
help fund our operations. However, no assurance can be given that we will
generate any material revenues from the manufacturing fees and royalties earned
on the Lodrane products.

LIQUIDITY AND CAPITAL RESOURCES

         As of March 31, 2008, we had approximately six months of cash available
based on our current operations. We are considering a number of different
financing alternatives and we intend to seek additional capital in 2008 through
private financing or collaborative agreements. However, no assurance can be
given that we will consummate a financing or that any material cash will be
generated to us therefrom. If adequate funds are not available to us as we need
them, we will be required to curtail significantly or delay or eliminate one or
more product development programs. These matters raise substantial doubt over
our ability to continue as a going concern. The accompanying financial
statements do not provide for any adjustments should this occur.

         For the year ended March 31, 2008, we expended $9,834,277 in operating
activities which we funded through the $20,000,000 in gross proceeds raised
through our private placement of Series C Preferred Stock. Our working capital
at March 31, 2008 was $5.0 million compared with working capital of $.2 million
at March 31, 2007. Cash and cash equivalents at March 31, 2008 were $3.7
million, an increase of $2.9 million from the $.8 million at March 31, 2007.

         We spent approximately $506,000 on improvements and machinery and
equipment during the year ended March 31, 2008.

         On April 24, 2007, we sold in a private placement through Oppenheimer &
Company, Inc., the placement agent (the "PLACEMENT AGENT"), 15,000 shares of our
Series C Preferred Stock, at a price of $1,000 per share, each share convertible
(at $2.32 per share) into 431.0345 shares of Common Stock, or an aggregate of
6,465,517 shares of Common Stock. The investors also acquired warrants to
purchase shares of Common Stock, exercisable on or prior to April 24, 2012. The
warrants represent the right to purchase an aggregate of 1,939,655 shares of
Common Stock at an exercise price of $3.00 per share. The gross proceeds of the
sale were $15,000,000 before payment of $1,050,000 in commissions to the
Placement Agent and selected dealers. We also paid certain legal fees and
expenses of counsel to the Placement Agent. We issued to the Placement Agent and
its designees five year warrants to purchase 193,965 shares of Common Stock with
similar terms to the warrants issued to the Investors with an exercise price of
$3.00 per share.


                                       38
<PAGE>

         On July 17, 2007 we sold, in a private placement, the remaining 5,000
authorized shares of its Series C Preferred Stock at a price of $1,000 per
share, each share convertible (at $2.32 per share) into 431.0345 shares of
Common Stock, or an aggregate 2,155,172 shares of Common Stock. The investors
also acquired warrants to purchase shares of Common Stock, exercisable on or
prior to July 17, 2012. The warrants represent the right to purchase 646,554
shares of Common Stock, at an exercise price of $3.00 per share. The gross
proceeds of the sale were $5,000,000 before payment of 350,000 in commissions to
Placement Agent and selected dealers and $18,000 in expenses incurred by
Placement Agent and selected dealers. We issued to the Placement Agent and its
designees five year warrants to purchase 64,655 shares of Common Stock with
similar terms to the warrants issued to the Investors with exercise price of
$3.00 per share. The approximate $18,531,500 of net proceeds generated from
these private placements will contribute materially to our efforts to advance
our part of pain products through the clinic as well as accelerate the
development of our other controlled-release products, which utilize our
proprietary oral drug delivery systems and abuse resistant technology.

         From time to time we will consider potential strategic transactions
including acquisitions, strategic alliances, joint ventures and licensing
arrangements with other pharmaceutical companies. We retained an
investment-banking firm to assist with our efforts. There can be no assurance
that any such transaction will be available or consummated in the future.

         As of March 31, 2008 our principal source of liquidity was
approximately $3,703,000 of cash and cash equivalents. Additionally, we may have
access to funds through the exercise of outstanding stock options and warrants
in addition to funds that may be generated from the potential sale of New Jersey
tax losses. There can be no assurance that the sale of tax losses or by the
exercise of outstanding warrants or options will generate or provide sufficient
cash.

         The Company had outstanding, as of March 31, 2008, bonds in the
aggregate principal amount of $3,795,000, consisting of $3,415,000 of 6.5% tax
exempt Bonds with an outside maturity of September 1, 2030 and $380,000 of 9.0%
Bonds with an outside maturity of September 1, 2012. The bonds are secured by a
first lien on the Company's facility in Northvale, New Jersey. Pursuant to the
terms of the bonds, several restricted cash accounts have been established for
the payment of bond principal and interest. Bond proceeds were utilized for the
redemption of previously issued tax exempt bonds issued by the Authority in
September 1999 and to refinance equipment financing, as well as provide
approximately $1,000,000 of capital for the purchase of additional equipment for
the manufacture and development at the Company's facility of pharmaceutical
products and the maintenance of a $415,500 debt service reserve. All of the
restricted cash, other than the debt service, was expended within the year ended
March 31, 2007. Pursuant to the terms of the related bond indenture agreement,
the Company is required to observe certain covenants, including covenants
relating to the incurrence of additional indebtedness, the granting of liens and
the maintenance of certain financial covenants. As of March 31, 2008, the
Company was in compliance with the bond covenants.

         The following table depicts our obligations and commitments to make
future payments under existing contracts or contingent commitments.

<TABLE>
<CAPTION>
                                                                      PAYMENTS DUE BY PERIOD
                                                                      ----------------------

                                                Less than 1                                           After 5
Contractual Obligations             TOTAL          YEAR                1-3 YEARS        4-5 YEARS      YEARS
                                    -----          ----                ---------        ---------      -----
<S>                             <C>            <C>                 <C>               <C>             <C>
NJEDA Bonds payable             $3,795,000     $    200,000        $    680,000      $   445,000     $2,470,000
Note Payable-Niagara Bank       $   52,252     $      9,864        $     22,587      $    19,801            ---
</TABLE>


                                       39
<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

         None.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We do not invest in or own any market risk sensitive instruments
entered into for trading purposes or for purposes other than trading. All loans
to us have been made at fixed interest rates and accordingly, the market risk to
us prior to maturity is minimal.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Attached hereto and filed as a part of this Annual Report on Form 10-K
are our Consolidated Financial Statements, beginning on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

          None.


                                       40
<PAGE>

ITEM 9AT. CONTROLS AND PROCEDURES

         Within the 90 days prior to the date of this report, based on an
evaluation of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT")), our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures are effective for
ensuring that information required to be disclosed by us in our Exchange Act
reports is recorded, processed, summarized and reported within the applicable
time periods specified by the SEC's rules and forms. We also concluded that
information required to be disclosed in such reports is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure. There was no change in our internal controls over financial
reporting that occurred during the most recent fiscal quarter that materially
affected or is reasonably likely to materially affect our internal controls over
financial reporting. Our management has not yet completed, and is not yet
required to have completed, its assessment of internal controls over financial
reporting.

ITEM 9B. OTHER INFORMATION.

         None.

                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

DIRECTORS AND EXECUTIVE OFFICERS

Our current directors, executive officers and key employees, and such persons'
biographical information are set forth below:

<TABLE>
<CAPTION>
NAME                                      AGE     TITLE
----                                      ---     -----
<S>                                       <C>     <C>
Bernard Berk                              59      Director, Chairman, Chief Executive Officer and President

Barry Dash, Ph. D                         76      Director

Melvin M. Van Woert, M.D.                 77      Director

Veerappan Subramanian, Ph. D.             58      Former Director*

Robert J. Levenson                        67      Director

Mark I. Gittelman                         48      Chief Financial Officer, Secretary and Treasurer

Stuart Apfel                              48      Chief Scientific Officer and Chief Medical Officer

Chris Dick                                53      Executive Vice President of Corporate Development

Charan Behl                               56      Head of Technical Affairs
</TABLE>

* Dr. Veerappan Subramanian ceased being a Director on June 26, 2008.


                                       41
<PAGE>

         The principal occupations and employment of each such person during the
past five years is set forth below. In each instance in which dates are not
provided in connection with a nominee's business experience, such nominee has
held the position indicated for at least the past five years.

         MR. BERNARD BERK, President and Chief Executive Officer since June
2003, Director since February 2004 and Member of the Nominating Committee from
June 2004 to June 2008. From 1996 to 2003, Mr. Berk was the President and Chief
Executive Officer of Michael Andrews Corporation, a pharmaceutical management
consultant firm. Mr. Berk was, from 1994 until 1996, President and Chief
Executive Officer of Nale Pharmaceutical Corporation. From 1989 until 1994, he
was Senior Vice President of Sales, Marketing and Business Development of Par
Pharmaceuticals, Inc. Mr. Berk holds a B.S. from New York University.

         DR. BARRY DASH, Director since April 2005, Member of the Audit
Committee since April 2005, Member of the Nominating Committee since April 2005
and Member of the Compensation Committee since June 2007. Dr. Dash has been,
since 1995, President and Managing Member of Dash Associates, L.L.C., an
independent consultant to the pharmaceutical and health industries. From 1983 to
1996 he was employed by American Home Products Corporation (now known as Wyeth)
its Whitehall-Robins Healthcare Division, initially as Vice President of
Scientific Affairs, then Senior Vice President of Scientific Affairs and then
Senior Vice President of Advanced Technologies during which time he personally
supervised six separate departments: Medical and Clinical Affairs, Regulatory
Affairs, Technical Affairs, Research and Development, Analytical R&D and Quality
Management/Q.C. Dr. Dash had been employed by the Whitehall Robins Healthcare
Division from 1960 to 1976, during which time he served as Director of Product
Development Research, Assistant Vice President of Product Development and Vice
President of Scientific Affairs. Dr. Dash had been employed by J.B. Williams
Company (Nabisco Brands, Inc.) from 1978 to 1982. From 1976 to 1978 he was Vice
President and Director of Laboratories of the Consumer Products Division of
American Can Company. He currently serves on the board of directors of
GeoPharma, Inc. (NASDQ: GORX). Dr. Dash holds a Ph.D. from the University of
Florida and M.S. and B.S. degrees from Columbia University where he was
Assistant Professor at the College of Pharmaceutical Sciences from 1956 to 1960.
He is a member of the American Pharmaceutical Association, the American
Association for the Advancement of Science and the Society of Cosmetic Chemist,
American Association of Pharmaceutical Scientists, Drug Information Association,
American Foundation for Pharmaceutical Education, and Diplomate American Board
of Forensic Examiners. He is the author of scientific publications and patents
in the pharmaceutical field.

         ROBERT J. LEVENSON, Director since 2007, Member of the Audit Committee
since June 2007, Member of the Compensation Committee since June, 2007 and
Member of the Nominating Committee since June 2008. Since 2000, Mr. Levenson has
been a Managing Member of the Lenox Capital Group, L.L.C. Mr. Levenson was
previously an Executive Vice President of First Data Corporation from 1993 to
2000 and a member of its Board of Directors from 1992 to 2003. He was Senior
Executive Vice President, Chief Operating Officer, Member of the Office of the
President and Director of Medco Containment Services, Inc., a provider of
managed care prescription benefits, from October 1990 to December 1992. From
1985 until October 1990, Mr. Levenson was a Group President and Director of
Automatic Data Processing, Inc. (ADP-NYSE). Mr. Levenson was a Director of
Emisphere Technologies, Inc., a biopharmaceutical company, from 1998 to 2005,
and has been a director of several other companies, public and private.

         DR. MELVIN VAN WOERT, Director since April 2005, Member of the Audit
Committee since April 2005, Member of the Nominating Committee since April 2005
and Member of the Compensation Committee since June 2007. Dr. Van Woert has been
since 1974 a member of the staff of Mount Sinai Medical


                                       42
<PAGE>

Center and, since 1978 has also been a Professor in the Department of Neurology
and Pharmacology at Mount Sinai School of Medicine. Dr. Van Woert had been a
consultant for Neuropharmacological Drug Products to the FDA from 1974 to 1980;
Associate Editor for Journal of the Neurological Sciences; Member of the
Editorial Board of the Journal of Clinical Neurpharmacology; and Medical
Director of National Organization for Rare Disorders for which he received in
1993 the Humanitarian Award. Dr. Van Woert's other awards include the U.S.
Public Health Service Award for Exceptional Achievement in Orphan Products
Development and the National Myoclonus Foundation Award. He has authored and
co-authored more than 150 articles appearing in pharmacological, medical and
other professional journals or publications.

         DR. VEERAPPAN SUBRAMANIAN, Director from December 2006 to June 2008 and
was acting Chief Scientific Officer from February 2007 to April 2008. Since
December 2006, Dr. Subramanian serves as Chief Executive Officer and Chairman of
the Board of Novel Laboratories, Inc. Dr. Subramanian has been a pharmaceutical
executive since 1981 and a pharmaceutical entrepreneur since 1997, when he
formed Kali Laboratories, Inc. ("KALI LABS"). Kali Labs was acquired by Par
Pharmaceuticals, Inc. ("PAR PHARMACEUTICALS") in 2004 and Dr. Subramanian
continued to work as an executive vice president at Par Pharmaceuticals after
the acquisition. Dr. Subramanian ended his relationship with Par Pharmaceuticals
in January 2006. Prior to organizing Kali Labs, Dr. Subramanian served for 6
years as vice president of scientific affairs for Zenith Laboratories, Inc.
Prior to working with Zenith Laboratories, Inc. he was (i) the Director of New
Product Development and Technical Services for Kali Pharma, Inc., (ii) a Senior
Scientist, Commercial Products with Vicks Research Center, (iii) a Research
Pharmacist, Dermatological with Johnson & Johnson and (iv) a Research Pharmacist
in Product Development with E.R. Squibb & Sons. Between 2001 and 2005, Dr.
Subramanian served on the board of Generic Pharmaceutical Industry Association.
Dr. Subramanian has a Ph.D. in Pharmacy (1981) from Rutgers University, a M.S.
in Phamaceutics (1973) from Birla Institute of Technology & Science, and a B.S.
in Pharmacy (1971) from Madurai Medical College.

         DR. STUART APFEL, Chief Medical Officer since January 2008 and Chief
Scientific Officer since April 2008. Dr. Apfel is also the founder and current
president of Parallax Clinical Research, a New York-based consulting firm that
provides strategic and practical assistance with clinical trial protocol design,
planning, initiating and management to biotechnology and small pharmaceutical
companies with making the transition from the bench to a clinical development
program, and in this capacity he had served as a consultant to Elite from
January 2007 through December 2007. From 2004 to 2006, Dr. Apfel was employed at
DOV Pharmaceuticals, Inc. (OTC:DOVP), initially as a director of clinical
research and then as a senior director of clinical research. From 2000 to 2004,
Dr. Apfel was employed at Purdue Pharma L.P. Dr. Apfel initially worked as an
associate director of clinical research at Purdue Pharma L.P. and then was
promoted to a director of clinical research. Dr. Apfel is a board certified
neurologist, and is currently on faculty as Associate Professor of Neurology at
the Albert Einstein College of Medicine and at Downstate Medical School, where
he continues to teach. From 1990 to 2000, he was a full time faculty member in
the departments of Neurology and Neuroscience at Albert Einstein College of
Medicine, where his research focused on the application of neurotrophic factors
to neurologic disease.

         MARK I. GITTELMAN, Chief Financial Officer, Secretary and Treasurer of
the Company, is the President of Gittelman & Co., P.C., an accounting firm in
Clifton, New Jersey. Prior to forming Gittelman & Co., P.C. in 1984, he worked
as a certified public accountant with the international accounting firm of KPMG
Peat Marwick, LLP. Mr. Gittelman holds a B.S. in accounting from New York
University and a Masters of Science in Taxation from Fairleigh Dickinson
University. He is a Certified Public Accountant licensed in New Jersey and New
York, and is a member of the American Institute of


                                       43
<PAGE>

Certified Public Accountants ("AICPA"), and the New Jersey State and New York
State Societies of CPAs. Other than Elite Labs, no company with which Mr.
Gittelman was affiliated in the past was a parent, subsidiary or other affiliate
of the Company.

         CHRIS DICK, Executive Vice President of Corporate Development since
March, 2006. Since November 2002, the Company has engaged Mr. Dick to direct its
licensing and business development activities. From 1999 to 2002, Mr. Dick
served as Director of Business Development for Elan Drug Delivery, Inc.
responsible for licensing and business development of Elan's portfolio of drug
delivery technologies. From 1997 to 1999, he was Manager of Business Development
and Marketing for EnTec, a drug delivery business unit within FMC Corporation's
Pharmaceutical Division. Prior thereto he held various other business and
technical positions at FMC Corporation, including Manager of Marketing for its
pharmaceutical functional coatings product line. Mr. Dick holds an M.B.A. from
the Stern School of Business, New York University, and a B.S. and M.S. in
Chemical Engineering from Cornell University.

         DR. CHARAN BEHL, Head of Technical Affairs since February 2007 and
Executive Vice President and Chief Scientific Officer from March 2006 to
February 2007. Dr. Behl has provided the Company since June 2003 consulting
technological services as an independent contractor. He was from January 1995 to
July 1998 Vice President of R&D and from July 1988 to January 2001 Executive
Vice President of R&D of Nastech Pharmaceutical Corporation, Inc. ("NASTECH").
From April 1981 to November 1994, Dr. Behl was employed by Hoffman La Roche
("ROCHE"), where he held a number of positions, including research leader of its
Pharmaceutical R&D Department. During his tenure at Roche and Nastech, Dr. Behl
created intellectual property in the area of drug delivery. His patent portfolio
includes over 40 patents issued, pending and in preparation. Dr. Behl holds a
B.S. in Pharmaceutical Sciences from BITS, Pilani, India, an M.S. in
Pharmaceutics from Duquesne University, under the mentorship of Dr. Alvin M.
Galinsky, and a Ph.D. in Pharmaceutical Sciences from the University of
Michigan, under the mentorship of Dr. William I. Higuchi. Dr. Behl was an
Assistant Research Scientist from 1978 to 1981 at the University of Michigan.
Dr. Behl is internationally known for his scientific and professional
activities. He has coauthored over 200 publications, including research
articles, book chapters, and abstracts, and has made numerous presentations at
national and international conferences and workshops. In conjunction with
associates from academia and industry and representatives of the FDA, Dr. Behl
has co-organized several workshops and symposia. He was the founding chair of
Nasal Drug Delivery Focus Group formed in 1995 under the auspices of the
American Association of Pharmaceutical Scientists ("AAPS"), and served as its
Chairman from 1995 to 2001. Dr. Behl is a fellow of the AAPS.

         There is no family relationship among our directors and executive
officers.

         Each director holds office (subject to our By-Laws) until the next
annual meeting of stockholders and until such director's successor has been
elected and qualified. Except for Mr. Berk, Mr. Dick, Dr. Apfel and Dr. Behl,
each of whom is employed pursuant to an employment agreement, all of our
executive officers are serving until the next annual meeting of directors and
until their successors have been duly elected and qualified. There are no family
relationships between any of our directors and executive officers.

BOARD MEETINGS

         During the fiscal year ended March 31, 2008, our Board of Directors
held eight meetings and acted via written consent on three occasions. No
incumbent director attended fewer than 75% of the meetings of the Board of
Directors during that year.


                                       44
<PAGE>

         We do not have a formal policy regarding attendance by members of the
Board of Directors at our annual meeting of stockholders, although it does
encourage attendance by the directors. Historically, more than a majority of the
directors have attended the annual meeting.

COMMITTEES OF THE BOARD

The Board of Directors has an Audit Committee, a Compensation Committee and a
Nominating Committee.

         AUDIT COMMITTEE

         During the fiscal year ended March 31, 2008, the members of the Audit
Committee were Barry Dash, Robert J. Levenson (Chairman of the Audit Committee)
and Melvin Van Woert. The Audit Committee held four meetings during the fiscal
year ended March 31, 2008. A copy of the Audit Committee's written charter
(adopted by the Board of Directors) can be found on our website at
www.elitepharma.com. The Audit Committee reviews with management and our
auditors our financial statements, the accounting principles applied in their
preparation, the scope of the audit, any comments made by the auditors on our
financial statements and our accounting controls and procedures, the
independence of our auditors, our internal controls, the other matters set forth
in its charter, as adopted by the Board of Directors, and such other matters as
the Audit Committee deems appropriate. The Audit Committee is directly
responsible for the appointment, compensation, retention and oversight of the
work of our independent auditors for the purpose of preparing or issuing an
audit report or performing other audit, review or attest services for us. We
deem the members of our Audit Committee to be independent and Mr. Levenson to be
qualified as an audit committee financial expert.

         NOMINATING COMMITTEE

         During the fiscal year ended March 31, 2008, the members of the
Nominating Committee were Melvin Van Woert (Chairman of the Nominating
Committee), Bernard Berk and Barry Dash. The Nominating Committee acted via
written consent on one occasion. This committee does not have a charter. The
Nominating Committee assists the Board of Directors in identifying and
recommending qualified Board candidates. The Nominating Committee identifies
Board candidates through numerous sources, including recommendations from
Directors, executive officers and our stockholders. The Nominating Committee
seeks to have available to it qualified candidates from a broad pool of
individuals with a range of talents, experience, backgrounds and perspectives.
The Nominating Committee seeks to identify those individuals most qualified to
serve as Board members and considers many factors with regard to each candidate,
including judgment, integrity, diversity, prior experience, the interplay of the
candidate's experience with the experience of other Board members, the extent to
which the candidate would be desirable as a member of any committees of the
Board of Directors, and the candidate's willingness to devote substantial time
and effort to Board responsibilities. The Nominating Committee makes
recommendations to the Board of Directors with respect to Director nominees.

         COMPENSATION COMMITTEE

         During the fiscal year ended March 31, 2008, the members of the
Compensation Committee were Barry Dash (Chairman of the Compensation Committee),
Robert J. Levenson and Melvin Van Woert. The Compensation Committee held six
meetings during the fiscal year ended March 31, 2008. The Compensation Committee
was formed June 26, 2007 and adopted a charter which was included as an appendix
to the proxy statement sent to stockholders in connection with the annual
meeting of the



                                       45
<PAGE>

stockholders held on June 26, 2008. The Compensation Committee reviews our
compensation practices and policies, reviews and approves corporate goals and
objectives relevant to the chief executive officer and other executive officer
compensation, evaluates chief executive officer and executive officer
performance in light of those goals and objectives and, either as a committee or
together with other independent directors (as directed by the Board of
Directors), determines and approves chief executive officer and executive
officer compensation based on this evaluation, reviews and approves the terms of
the offer letters, employment agreements, severance agreements,
change-in-control agreements, indemnification agreements and other material
agreements between the Company and its Chief Executive Officer and executive
officers, annually reviews and approves perquisites for the chief executive
officer and executive officers, considers and approves the report of the
Compensation Committee for inclusion in the Company's proxy statement, makes
recommendations to the Board of Directors with respect to the Company's employee
benefit plans, administers incentive, deferred compensation and equity based
plans, and has the other responsibilities as set forth in its charter, as
adopted by the Board of Directors, and such other matters as the Compensation
Committee deems appropriate. For more information on the compensation of
directors and officers of the Company, see the "Compensation Discussion and
Analysis" and "Compensation" sections below.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         No members of the Compensation Committee were officers or employees of
the Company or any of its subsidiaries during the year ended March 31, 2008, or
had any relationship otherwise requiring disclosure.

CODE OF CONDUCT

         At the first meeting of the Board of Directors following the annual
meeting of stockholders held on June 22, 2004, the Board of Directors adopted a
Code of Business Conduct and Ethics for its officers and employees which it
believes complies with the requirements for a company code of ethics for
financial officers that were promulgated by the SEC pursuant to the
Sarbanes-Oxley Act of 2002 (the "SARBANES-OXLEY ACT") as well as for the members
of our Board of Directors. The directors will be surveyed annually regarding
their compliance with the policies as set forth in the Code of Conduct for
Directors. A copy of the Code of Business Conduct and Ethics is available on our
website at www.elitepharma.com. To receive a copy of our Code of Business
Conduct and Ethics, at no cost, requests should be directed to the Secretary,
Elite Pharmaceuticals, Inc., 165 Ludlow Avenue, Northvale, New Jersey 07647. We
intend to disclose any amendment to, or waiver of, a provision of the Business
Conduct and Ethics for Directors in a report filed under the Exchange Act within
five business days of the amendment or waiver.

STOCKHOLDER COMMUNICATIONS

         Stockholders and other interested parties may contact the Board of
Directors or the non-management directors as a group at the following address:
Board of Directors or Outside Directors, Elite Pharmaceuticals, Inc., 165 Ludlow
Avenue, Northvale, NJ 07647. All communications received at the above address
will be relayed to the Board of Directors or the non-management directors, as
the case may be. Communications regarding accounting, internal accounting
controls or auditing matters may also be reported to the Board of Directors
using the above address.



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<PAGE>

         Typically, we do not forward to our directors communications from our
stockholders or other communications which are of a personal nature or not
related to the duties and responsibilities of the Board, including:

    o    Junk mail and mass mailings
    o    New product suggestions
    o    Resumes and other forms of job inquiries
    o    Opinion surveys and polls
    o    Business solicitations or advertisements

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         To our knowledge, there was no person who, at any time during the
fiscal year ended March 31, 2008, was a director, officer or beneficial owner of
more than 10% of any class of our equity securities registered pursuant to
Section 12 of the Exchange Act, who failed to file on a timely basis the reports
required by Section 16(a) of the Exchange Act. Dr. Barry Dash filed one late
Form 4 since the fiscal year ended March 31, 2008.

ITEM 11. EXECUTIVE COMPENSATION.

                      COMPENSATION DISCUSSION AND ANALYSIS
                                     SUMMARY

         Our approach to executive compensation, one of the most important and
complex aspects of corporate governance, is influenced by our belief in
rewarding people for consistently strong execution and performance. We believe
that the ability to attract and retain qualified executive officers and other
key employees is essential to our long-term success.

COMPENSATION LINKED TO ATTAINMENT OF PERFORMANCE GOALS

         Our plan to obtain and retain highly skilled employees is to provide
significant incentive compensation opportunities and market competitive
salaries. The plan was intended to link individual employee objectives with
overall company strategies and results, and to reward executive officers and
significant employees for their individual contributions to those strategies and
results. We use compensation and performance data from comparable companies in
the pharmaceutical industry to establish market competitive compensation and
performance standards for our employees. Furthermore, we believe that equity
awards serve to align the interests of our executives with those of our
stockholders. As such, equity is a key component of our compensation program.

ROLE OF THE COMPENSATION COMMITTEE AND ITS ADVISORS

         The Company formed the Compensation Committee in June 2007. Since the
formation of the Compensation Committee all elements of the executives'
compensation are determined by the Compensation Committee, which is comprised
solely of independent non-employee directors. However, the Compensation
Committee's decisions concerning the compensation of the Company's Chief
Executive Officer are subject to ratification by the independent directors of
the Board of Directors. As of March 31, 2008, the members of the Compensation
Committee were Barry Dash, Robert J. Levenson and Melvin Van Woert. The
Committee operates pursuant to a charter which was included as an appendix to


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<PAGE>

the proxy statement sent to stockholders in connection with the annual meeting
of the stockholders held on June 26, 2008. Under the Compensation Committee
charter, the Compensation Committee has authority to retain compensation
consultants, outside counsel, and other advisors that the committee deems
appropriate, in its sole discretion, to assist it in discharging its duties, and
to approve the terms of retention and fees to be paid to such consultants. In
September, 2007, the Compensation Committee directly retained an independent
compensation consultant, Pearl Meyer & Partners ("PM&P"), to assist the
Committee in selecting a comparator group of companies for compensation purposes
as well as benchmarking the Chief Executive Officer's compensation.

         The compensation consultant reported directly and exclusively to the
Compensation Committee and received no other fees from the Company outside its
role as advisor to the Compensation Committee. PM&P periodically interacted with
the Company's Compensation Committee, predominately with its Chairman, Dr. Barry
Dash, to gather and review information related to the executive compensation
program, but such work is done only at the direction of the Compensation
Committee. PM&P does not perform any services unrelated to executive and
director compensation for the Company. Accordingly, the Compensation Committee
considers PM&P to be independent from our management.

                   NAMED EXECUTIVE OFFICERS AND KEY EMPLOYEES

         The named executive officers and key employees for fiscal year ending
March 31, 2008 are Bernard Berk, President and Chief Executive Officer; Mark I.
Gittelman, Chief Financial Officer; Christopher Dick, Executive Vice President
of Corporate Development; Charan Behl, Chief Scientific Officer until February
9, 2007, Head of Technical Affairs since February 9, 2007; Veerappan
Subramanian, acting Chief Scientific Officer from February 9, 2007 to April 24,
2008; and Stuart Apfel, Chief Medical Officer since January 1, 2008 and Chief
Scientific Officer since April 24, 2008. These individuals are referred to
collectively in this Annual Report on Form 10-K as the "Named Executive
Officers."

                       OUR EXECUTIVE COMPENSATION PROGRAM

OVERVIEW

         The primary elements of our executive compensation program are base
salary, incentive cash and stock bonus opportunities and equity incentives
typically in the form of stock option grants. Although we provide other types of
compensation, these three elements are the principal means by which we provide
the Named Executive Officers with compensation opportunities.

         The emphasis on the annual bonus opportunity and equity compensation
components of the executive compensation program reflect our belief that a large
portion of an executive's compensation should be performance-based. This
compensation is performance-based because payment is tied to the achievement of
corporate performance goals. To the extent that performance goals are not
achieved, executives will receive a lesser amount of total compensation. We have
entered into employment agreements with four of our Named Executive Officers.
Such employment agreements set forth base salaries, bonuses and stock option
grants. Such stock option grants are predicated on our achievement of corporate
performance goals as set forth in such agreements.


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<PAGE>

ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM


BASE SALARY

         We pay a base salary to certain of the Named Executive Officers. In
general, base salaries for the Named Executive Officers are determined by
evaluating the responsibilities of the executive's position, the executive's
experience and the competitive marketplace. Base salary adjustments are
considered and take into account changes in the executive's responsibilities,
the executive's performance and changes in the competitive marketplace. We
believe that the base salaries of the Named Executive Officers are appropriate
within the context of the compensation elements provided to the executives and
because they are at a level which remains competitive in the marketplace.

BONUSES

         The Board of Directors may authorize us to give discretionary bonuses,
payable in cash or shares of Common Stock, to the Named Executive Officers and
other key employees. Such bonuses are designed to motivate the Named Executive
Officers and other employees to achieve specified corporate, business unit
and/or individual, strategic, operational and other performance objectives.

STOCK OPTIONS

         Stock options constitute performance-based compensation because they
have value to the recipient only if the price of our Common Stock increases.
Stock options for each of the Named Executive Officers generally vest over time,
obtainment of a corporate goal or a combination.

         The  grant  of  stock  options  at  Elite  is  the  centerpiece  of our
compensation program and is designed to motivate our Named Executive Officers to
achieve our short-term and long-term corporate goals.

         As the pharmaceutical industry is characterized by a long product
development cycle, including a lengthy research and product-testing period and a
rigorous approval phase involving human testing and governmental regulatory
approval, many of the traditional benchmarking metrics for vesting, such as
product sales, revenues and profits are inappropriate for an early-stage
pharmaceutical company such as Elite. We consider when determining vesting
benchmarks the following which are aligned with our short-term and long-term
corporate goals:

         o    clinical trial progress;
         o    achievement of regulatory milestones; and
         o    establishment of key strategic relationships.

RETIREMENT AND DEFERRED COMPENSATION BENEFITS

         We do not presently provide the Named Executive Officers with a defined
benefit pension plan or any supplemental executive retirement plans, nor do we
provide the Named Executive Officers with retiree health benefits. We have
adopted a deferred compensation plan under Section 401(k) of the Code. The plan
provides for employees to defer compensation on a pretax basis subject to
certain limits, however, Elite does not provide a matching contribution to its
participants.


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<PAGE>

         The retirement and deferred compensation benefits provided to the Named
Executive Officers are not material factors considered in making other
compensation determinations with respect to Named Executive Officers.

PERQUISITES

         As described in more detail below, the perquisites provided to certain
of the Named Executive Officers consist of car and parking allowances and life
insurance premiums. These perquisites represent a small fraction of the total
compensation of each such Named Executive Officer. The value of the perquisites
we provide are taxable to the Named Executive Officers and the incremental cost
to us of providing these perquisites is reflected in the Summary Compensation
Table. The Board of Directors believes that the perquisites provided are
reasonable and appropriate. For more information on perquisites provided to the
Named Executive Officers, please see the "All Other Compensation" column of the
Summary Compensation Table on page 60 of this Annual Report on Form 10-K and
"Agreements with Named Executive Officers" below.

POST-TERMINATION/ CHANGE OF CONTROL COMPENSATION

         In addition to retirement and deferred compensation benefits described
above, we have arrangements with certain of the Named Executive Officers that
may provide them with compensation following termination of employment. These
arrangements are discussed below under "Agreements with Named Executive
Officers".

TAX IMPLICATIONS OF EXECUTIVE COMPENSATION

         Our aggregate deductions for each Named Executive Officer compensation
are potentially limited by Section 162(m) of the Code to the extent the
aggregate amount paid to an executive officer exceeds $1.0 million, unless it is
paid under a predetermined objective performance plan meeting certain
requirements, or satisfies one of various other exceptions specified in the
Code. At our 2006 Named Executive Officer compensation levels, we did not
believe that Section 162(m) of the Code would be applicable, and accordingly, we
did not consider its impact in determining compensation levels for our Named
Executive Officers in 2007.

AGREEMENTS WITH NAMED EXECUTIVE OFFICERS AND KEY EMPLOYEES

BERNARD BERK

         On November 13, 2006, we entered into the Second Amended and Restated
Employment Agreement with Mr. Berk, our president, chief executive officer and
chairman of the Board of Directors (the "BERK AGREEMENT")

         The Berk Agreement provides for a base annual salary of $330,140 (his
current salary) which may at the discretion of the Board of Directors be
increased in light of factors including our existing financial condition and Mr.
Berk's success in implementing our business plan and achieving our strategic
alternatives. Mr. Berk is entitled to an automobile allowance of $800 per month.
The Berk Agreement provides for payment of a discretionary bonus following the
end of each fiscal year of up to 50% of Mr. Berk's then annual base salary. The
amount, if any, of the discretionary bonus will be determined by the
Compensation Committee. Mr. Berk's bonus is to be based on any commercialization
of products, merger or acquisition, business combination or collaborations,
growth in revenues and earnings,



                                       50
<PAGE>

additional financings or other strategic business transactions that inure to the
benefit of our stockholders. The bonus, if any, may be paid in cash or shares of
Common Stock, valued at the closing price of the Common Stock on the immediately
preceding trading day. For the year ended March 31, 2008 Mr. Berk received a
$165,070 bonus.

         The Berk Agreement provides for the grant of options to purchase up to
300,000 additional shares of Common Stock (the "OPIOID PRODUCT OPTIONS") at a
$3.00 exercise price per share, which are to vest in two 150,000 share tranches
upon the closing of an exclusive product license for the United States national
market, the entire European Union Market or the Japan market or a product sale
transaction of all our ownership rights in the United States (only once for each
product) for our first drug developed by us for which the FDA approval will be
sought under a NDA (including a 505(b) (2) application) for oxycodone,
hydrocodone, hydromorphone, oxymorphone, or morphine (each a "NON-GENERIC OPIOID
PRODUCT") as to the first tranche and as to our second Non-Generic Opioid
Product for the second tranche.

         The Berk Agreement provides for the amendment of the vesting of options
as to 400,000 shares of Common Stock which had been granted on September 2, 2005
to Mr. Berk at an exercise price of $2.69 per share (the "BERK MILESTONE
OPTIONS") with the Berk Milestone Options to vest (A) as to not more than
125,000 shares and 75,000 shares, respectively, upon the commencement of the
first Phase III clinical trial relating to the first and then the second
Non-Generic Opioid Product developed by us; (B) 50,000 shares upon the closing
of each product license or product sale transaction (on a product by product
basis and only once for each product) other than Non-Generic Opioid Product for
which options were granted above; (C) 10,000 shares upon the filing by us (in
our name) with the FDA of either an ANDA or a NDA, for a product not covered by
a previous FDA application; (D) 40,000 shares upon the approval by the FDA of
any ANDA or NDA (filed in our name) for a product not previously approved by the
FDA; (E) 25,000 shares upon the filing of an application for a U.S. patent by us
(in our name); and (F) 25,000 shares upon the granting by the U.S. Patent and
Trademark Office (the "PTO") of a patent to us filed in our name or an approval
of an ANDA or NDA; provided, however the foregoing options terminate upon Mr.
Berk's termination of employment except that options under (D) and (F)
nevertheless vest if the filing was made during the initial term but prior to
termination of Mr. Berk's employment by us without cause and the approval was
made within 540 days of the filing of the ANDA, NDA or patent application.

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


                                       51
<PAGE>

shares in the event of the granting by the PTO of the foregoing additional
patent applications to us (filed in our name).

         The Berk Agreement acknowledges that Mr. Berk holds previously granted
incentive stock options to purchase 725,000 shares, of which 300,000 vested
options are exercisable at $2.01 per share, 225,000 vested options are
exercisable at $2.15 per share and 200,000 vested options are exercisable at
$2.69 per share.

         The Berk Agreement allows us at our discretion to grant to Mr. Berk
additional options under the Stock Option Plan and provides Mr. Berk the right
to register at our expense for reoffering shares issued upon exercise of the
options under the Securities Act in certain registration statements filed by us
with respect to offerings of securities by us.

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

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

         The Berk Agreement contains his non-solicitation covenant for a period
of one year from termination.

         Mr. Berk is to be reimbursed for expenses (including business, travel
and entertainment) reasonably incurred in the performance of his duties. Mr.
Berk is entitled to participate in such employee benefit and welfare plans and
programs which may be offered to our senior executives, including life
insurance, health and accident insurance, medical plans and programs and profit
sharing and retirement plans.


                                       52
<PAGE>

         The Berk Agreement is for an initial term ending November 13, 2009,
subject to automatic one-year renewals unless terminated by Mr. Berk or us upon
at least 60 days' notice prior to the end of the then scheduled expiration date.
We have the right to terminate Mr. Berk's employment in the event of his
inability to perform work due to physical or mental illness or injury for nine
full calendar months during any eight consecutive calendar months.

CHRIS DICK

         On November 13, 2006, we entered into an employment agreement with Mr.
Dick as Executive Vice President of Corporate Development (the "DICK
AGREEMENT"). The Dick Agreement is for an initial term ending November 13, 2009,
subject to automatic one-year renewals unless terminated by the executive or us
upon at least 60 days notice prior to the end of the then scheduled expiration
date. We have the right to terminate Mr. Dick's employment due to disability as
defined in a long-term disability insurance policy reasonably satisfactory to
him or, in the absence of such policy, due to Mr. Dick's inability for 120 days
in any 12 month period to substantially perform his duties as a result of a
physical or mental illness.

         The Dick Agreement provides for an initial base annual salary of
$200,000, a guaranteed bonus of $25,000 payable within 30 calendar days of the
end of each fiscal year during the term and a $700 per month automobile
allowance. The Dick Agreement provides for payment of a discretionary bonus
following the end of each fiscal year of up to 50% of Mr. Dick's then annual
base salary. The amount, if any, of the discretionary bonus will be determined
by the Board of Directors or the Compensation Committee. The discretionary
bonus, if paid to Mr. Dick will be based on the achievement of goals discussed
with the executive in good faith and within a reasonable time following the
commencement of each fiscal year and may be paid in cash or shares of our Common
Stock valued at the average of the closing price per share during the five
trading days immediately preceding the date of issuance of the shares. For the
year ended March 31, 2008 Mr. Dick is to receive a $25,000 bonus.

         The Dick Agreement provides for the grant under the Stock Option Plan
of fully-vested options to purchase 250,000 shares of Common Stock at an
exercise price of $2.25 per share. The Dick Agreement also provides for the
grant of options to purchase up to 300,000 shares of Common Stock, at an
exercise price of $2.25 per share, which vest in two 150,000 share tranches upon
the closing of an exclusive product license for the United States national
market, the entire European Union Market or the Japan market or a product sale
transaction of all our ownership rights in the United States (only once for each
product) for our first drug developed by us for which FDA approval will be
sought under a NDA (including a 505(b) (2) application) for a Non-Generic Opiod
Product as to the first tranche and as to our second Non-Generic Opioid Product
for the second tranche.

         The Dick Agreement also provides for the grant of options to purchase
up to 200,000 shares of Common Stock at an exercise price of $2.25 per share
(the "DICK MILESTONE OPTIONS") with the Dick Milestone Options to vest (A) as to
not more than 125,000 shares and 75,000 shares, respectively, upon the
commencement of the first Phase III clinical trial relating to the first and
then the second Non-Generic Opioid Product developed by us; (B) 50,000 shares
upon the closing of each product license or product sale transaction (on a
product by product basis and only once for each product) other than Non-Generic
Opioid Products for which options were granted above; (C) 10,000 shares upon the
filing by us (in our name) with the FDA of either an ANDA or an NDA, for a
product not covered by a previous FDA application; (D) 40,000 shares upon the
approval by the FDA of any ANDA or NDA (filed in our name) for a product not
previously approved by the FDA; (E) 25,000 shares upon the filing of an
application for a U.S. patent by us (in our name); and (F) 25,000 shares upon
the granting by the PTO of


                                       53
<PAGE>

a patent to us filed in our name or an approval of an ANDA or NDA; provided,
however, that the foregoing options terminate upon the executive's termination
of employment except that options under (D) and (F) nevertheless vest if the
filing was made during the initial term but prior to termination of Mr. Dick's
employment by us without cause and the approval was made within 540 days of the
filing of the ANDA, NDA or patent application.

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

         The Dick Agreement allows us at our discretion to grant to Mr. Dick
additional options under the Stock Option Plan and provides Mr. Dick the right
to register at our expense for reoffering shares issued upon exercise of the
options under the Securities Act in certain registration statements filed by us
with respect to offerings of securities by us.

         The Dick Agreement provides that in the event we terminate Mr. Dick's
employment for Cause (as defined in the Dick Agreement) or Mr. Dick terminates
employment without Good Reason (as defined in the Dick Agreement), he is to
receive salary through date of termination, reimbursement for expenses incurred
prior to termination, all unvested options will terminate as of the date of
termination and vested options will be governed by the terms of the Stock Option
Plan and the related option agreement. In the event of a termination due to
death, disability or by us without cause or by Mr. Dick for Good Reason, we are
to pay him or his estate subject to his compliance with certain covenants,
including non-competition, non-solicitation, confidentiality and assignment of
intellectual property, his base salary for the longer of the balance of the
initial term or one year from date of termination, continue health insurance
coverage for 12 months from termination and his vested options are to be
exercisable for 90 days from date of termination.

         In the event the employment of Mr. Dick is terminated by us following a
Change of Control (as defined below) of Elite, Mr. Dick will be entitled to the
amounts payable as a result of termination by us without cause plus a lump sum
payment of $500,000 and all unvested options shall immediately vest and along
with unexercised vested options be exercisable within 90 days from the date of
termination. "Change of Control" is defined as the acquisition of Elite pursuant
to a merger or consolidation which results in the reduction to less than 50% of
the shares outstanding upon consummation of the holders of its outstanding
shares immediately prior thereto or sale of substantially all our assets or
capital stock to another person, or the acquisition by a person or a related
group in a single transaction or a series of


                                       54
<PAGE>

related transaction of more than 50% of the combined voting power of Elite's
outstanding voting securities.

         Mr. Dick has agreed to a one-year non-competition covenant and a two
year non-solicitation covenant following termination of employment.

         Mr. Dick is to be reimbursed for expenses (including business, travel
and entertainment) reasonably incurred in the performance of his duties,
provided, however that reimbursement of expenses in excess of $2,000 per month
are subject to the approval of our chief executive officer. Mr. Dick is entitled
to participate in such employee benefit and welfare plans and programs, which
may be offered to our senior executives including life insurance, health and
accident insurance, medical plans and programs and profit sharing and retirement
plans.

DR. STUART APFEL

         On January 3, 2008, we entered into an employment agreement with Dr.
Stuart Apfel (the "APFEL Agreement") providing for Dr. Apfel to serve as our
Chief Medical Officer through January 3, 2009. The Apfel Agreement is
automatically renewable for one year periods thereafter unless terminated by Dr.
Apfel or us upon at least 60 days notice prior to the end of the then scheduled
expiration date.

         The Apfel Agreement provides that Dr. Apfel shall be entitled to an
initial base annual salary of $220,000. Dr. Apfel shall be entitled to a
discretionary bonus following the end of each calendar year, commencing with the
calendar year beginning January 1, 2008, of up to 50% of Dr. Apfel's then annual
base salary. The amount, if any, of the discretionary bonus will be determined
by the Board of Directors or the Compensation Committee. The discretionary
bonus, if paid to Dr. Apfel shall be based on the achievement of goals discussed
with the executive in good faith and within a reasonable time following the
commencement of each calendar year and may be paid in cash or shares of the
Common Stock valued at the closing price of the Common Stock on the immediately
preceding trading day, for the relevant calendar year (pro-rated for periods of
less than a full calendar year).

         Pursuant to the terms of the Apfel Agreement, we granted to Dr. Apfel
under the Stock Option Plan fully vested options to purchase 120,000 shares of
Common Stock at an exercise price of $1.75 per share.

         Pursuant to the terms of the Apfel Agreement, we granted to Dr. Apfel
under the Stock Option Plan options to purchase up to 280,000 shares of Common
Stock at an exercise price of $1.75 per share, which will vest and become
exercisable as follows: (A) 80,000 shares upon the successful completion, as
determined by the Board of Directors, of a Company sponsored Phase III clinical
trial of our developmental drug product referred to as ELI-216; (B) 80,000
shares upon the successful completion, as determined by the Board of Directors,
of a Company sponsored Phase III clinical trial of our developmental drug
product referred to as ELI-154; (C) 80,000 shares upon the successful
completion, as determined by the Board of Directors, by us during the term of
the Apfel Agreement of a Company sponsored long-term safety study for ELI-216;
and (D) 40,000 shares upon the closing of an exclusive product license for the
United States national market, or product sale transaction of all of our
ownership rights, for either ELI-216 or ELI-154. Upon the earlier to occur of
(x) January 3, 2017 and (y) the termination of Dr. Apfel's employment under the
terms of the Apfel Agreement, all unvested options granted shall automatically
terminate and all vested but unexercised options shall terminate to the extent
unexercised within ninety (90) days of such date and in accordance with the
terms of the stock option agreement by and between Dr. Apfel and us with respect
to the options and the Stock Option Plan. The Apfel Agreement also allows us at
our discretion to grant to Dr. Apfel additional options under the Stock


                                       55
<PAGE>

Option Plan. The shares of Common Stock issuable upon exercise of the options
are subject to an effective registration statement filed with the SEC.

         Pursuant to the terms of the Apfel Agreement, Dr. Apfel is entitled to
a $420 per month automobile allowance, 15 business days of paid vacation per
calendar year, and reimbursement of expenses (including business, travel and
entertainment) reasonably incurred in the performance of his duties, provided
that reimbursement of expenses in excess of $500 per month are subject to the
approval of the chief executive officer. Dr. Apfel is entitled to participate in
such employee benefit and welfare plans and programs, which may be offered to
our senior executives including life insurance, health and accident insurance,
medical plans and programs and profit sharing and retirement plans. We will
obtain and maintain during the term of the Apfel Agreement a term life insurance
policy in the amount of $500,000 on the life of Dr. Apfel payable to the estate
of Dr. Apfel in the event of Dr. Apfel's death during the term of the Apfel
agreement.

         We have the right to terminate Dr. Apfel's employment due to disability
as defined in a long-term disability insurance policy reasonably satisfactory to
him or, in the absence of such policy, due to his inability for 120 days in any
12 month period to substantially perform his duties as a result of a physical or
mental illness.

         In the event we terminate Dr. Apfel's employment for Cause (as such
term is defined in the Apfel Agreement) or due to Dr. Apfel's death or
disability, or Dr. Apfel terminates his employment for any reason other than
Good Reason (as defined in the Apfel Agreement), Dr. Apfel or his estate is to
receive salary through date of termination, reimbursement for expenses incurred
prior to termination, all unvested options will terminate as of the date of
termination and vested options are to be exercisable for 90 days from the date
of termination.

         In the event of Dr. Apfel's termination by us without Cause or by Dr.
Apfel for Good Reason, we are to pay Dr. Apfel, subject to his compliance with
certain covenants, including non-competition, non-solicitation, confidentiality
and assignment of intellectual property, his base salary for the balance of the
calendar year and any accrued but unused vacation, maintain his benefits during
the balance of the calendar year, and all unvested options will terminate as of
the date of termination and his vested options are to be exercisable for 90 days
from date of termination.

         Pursuant to the Apfel Agreement, Dr. Apfel has agreed to covenants not
to disclose confidential information and assignment of intellectual property.
Additionally, Dr. Apfel has agreed to a two-year non-competition covenant and a
two year non-solicitation covenant following termination of employment.

         Dr. Apfel holds an ownership interest in Parallax Clinical Research
("PARALLAX"), a New York-based consulting firm that provides strategic and
practical assistance with clinical trial protocol design, planning, initiating
and management to biotechnology and small pharmaceutical companies with making
the transition from the bench to a clinical development program and during the
term of the Apfel Agreement, Dr. Apfel shall continue to devote a portion of his
time to Parallax and provides services, on behalf of Parallax, to its clients,
provided that such time and services do not interfere with the effective
performance of his duties under the Apfel Agreement and such services do not
violate any provision of the Apfel Agreement or any of our policies.

         On April 24, 2008, we appointed Dr. Apfel Chief Scientific Officer.
This appointment does not modify the Apfel Agreement in any way.


                                       56
<PAGE>

DR. CHARAN BEHL

         On November 13, 2006, we entered into an employment agreement with Dr.
Behl as Executive Vice President and Chief Scientific Officer. The employment
agreement with Dr. Behl was subsequently amended and restated on February 9,
2007 (as amended and restated, the "BEHL AGREEMENT"), under which Dr. Behl's
position was changed from Chief Scientific Officer to Head of Technical Affairs
and requiring him to report to our Chief Executive Officer, Chief Scientific
Officer and any additional executive officer designated by the Board of
Directors.

         The Behl Agreement is for an initial term ending November 13, 2009,
subject to automatic one-year renewals unless terminated by Dr. Behl or us upon
at least 60 days notice prior to the end of the then scheduled expiration date.
We have the right to terminate Dr. Behl's employment due to disability as
defined in a long-term disability insurance policy reasonably satisfactory to
him or, in the absence of such policy, due to Dr. Behl's inability for 120 days
in any 12 month period to substantially perform his duties as a result of a
physical or mental illness.

         The Behl Agreement provides for an initial base annual salary of
$250,000, a guaranteed bonus of $25,000 payable within 30 calendar days of the
end of each fiscal year during the term and a $700 per month automobile
allowance. The Behl Agreements provides for payment of a discretionary bonus
following the end of each fiscal year of up to 50% of Dr. Behl's then annual
base salary. The amount, if any, of the discretionary bonus will be determined
by the Board of Directors or the Compensation Committee. The discretionary
bonus, if paid to Dr. Behl, is to be based on the achievement of goals discussed
with the executive in good faith and within a reasonable time following the
commencement of each fiscal year and may be paid in cash or shares of our Common
Stock valued at the average of the closing price per share during the five
trading days immediately preceding the date of issuance of the shares. For the
year ended March 31, 2008, Dr. Behl is to receive a $25,000 bonus.

         The Behl Agreement provides for the grant under the Stock Option Plan
of fully-vested options to purchase 250,000 shares of Common Stock at an
exercise price of $2.25 per share. The Behl Agreement also provides for the
grant of options to purchase up to 300,000 shares of Common Stock at an exercise
price of $2.25 per share which vest in two 150,000 share tranches upon the
closing of an exclusive product license for the United States national market,
the entire European Union Market or the Japan market or a product sale
transaction of all our ownership rights in the United States (only once for each
product) for our first drug developed by us for which FDA approval will be
sought under a Non-Generic Opiod Product as to the first tranche and as to our
second Non-Generic Opioid Product for the second tranche.

         The Behl Agreement also provides for the grant of options to purchase
up to 200,000 shares of Common Stock at an exercise price of $2.25 per share
(the "BEHL MILESTONE OPTIONS") with the Behl Milestone Options to vest (A) as to
not more than 125,000 shares and 75,000 shares, respectively, upon the
commencement of the first Phase III clinical trial relating to the first and
then the second Non-Generic Opioid Product developed by us; (B) 50,000 shares
upon the closing of each product license or product sale transaction (on a
product by product basis and only once for each product) other than Non-Generic
Opioid Products for which options were granted above; (C) 10,000 shares upon the
filing by us (in our name) with the FDA of either an ANDA or a NDA for a product
not covered by a previous FDA application; (D) 40,000 shares upon the approval
by the FDA of any ANDA or NDA (filed in our name) for a product not previously
approved by the FDA; (E) 25,000 shares upon the filing of an application for a
U.S. patent by us (in our name); and (F) 25,000 shares upon the granting by the
PTO of a patent to us filed in our name or an approval of an ANDA or NDA;
provided, however, that the foregoing options terminate upon Dr. Behl's
termination of employment except that options under (D) and (F) nevertheless


                                       57
<PAGE>

vest if the filing was made during the initial term but prior to termination of
the executive's employment by us without cause and the approval was made within
540 days of the filing of the ANDA, NDA or patent application.

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

         The Behl Agreement allows us at our discretion to grant to Dr. Behl
additional options under the Stock Option Plan and provides Dr. Behl the right
to register at our expense for reoffering shares issued upon exercise of the
options under the Securities Act of 1933, as amended, in certain registration
statements filed by us with respect to offerings of securities by us.

         The Behl Agreement provides that in the event we terminate his
employment for Cause (as defined in the Behl Agreement) or Dr. Behl terminates
his employment without Good Reason (as defined in the Behl Agreement), he is to
receive salary through date of termination, reimbursement for expenses incurred
prior to termination, all unvested options will terminate as of the date of
termination and vested options will be governed by the terms of the Stock Option
Plan and the related option agreement. In the event of a termination due to
death, disability or by us without Cause or by Dr. Behl for Good Reason, we are
to pay Dr. Behl or his estate subject to his compliance with certain covenants,
including non-competition, non-solicitation, confidentiality and assignment of
intellectual property, his base salary for the longer of the balance of the
initial term or one year from date of termination, continue health insurance
coverage for 12 months from termination and his vested options are to be
exercisable for 90 days from date of termination. The Behl Agreement provides
that the definition of "Cause" has been amended to include a determination by
the Board of Directors, in its sole discretion, that the employment of Dr. Behl
should terminate, provided that such termination will be effective on the 30th
day after the written notice to Dr. Behl of such determination.

         In the event the employment of Dr. Behl is terminated by us following a
Change of Control of Elite, he will be entitled to the amounts payable as a
result of termination by us without cause plus a lump sum payment of $500,000
and all unvested options shall immediately vest and along with unexercised
vested options be exercisable within 90 days from the date of termination.

         Dr. Behl has agreed to a one-year non-competition covenant and a two
year non-solicitation covenant following termination of employment.


                                       58
<PAGE>

         Dr. Behl is to be reimbursed for expenses (including business, travel
and entertainment) reasonably incurred in the performance of his duties,
provided that reimbursement of expenses in excess of $2,000 per month are
subject to the approval of our chief executive officer. Dr. Behl is entitled to
participate in such employee benefit and welfare plans and programs, which may
be offered to our senior executives including life insurance, health and
accident, medical plans and programs and profit sharing and retirement plans.

MR. GITTELMAN

         On February 26, 1998, we entered into an agreement with Gittelman &
Co., P.C., whereby fees are paid to Gittelman & Co., P.C., a firm wholly-owned
by Mark I. Gittelman, our Chief Financial Officer, Secretary and Treasurer, in
consideration for services rendered by the firm as internal accountant and
financial and management consultant to us. The firm's services include the
services rendered by Mr. Gittelman in his capacity as Chief Financial Officer,
Secretary and Treasurer. For the fiscal years ended March 31, 2008, 2007 and
2006, the fees paid by us under the agreement were $176,206, $151,214 and
$154,704, respectively. The services rendered by the firm to us for the fiscal
years ended March 31, 2008, 2007 and 2006 averaged 105, 98 and 103 hours per
month, respectively, of which an average of 25 hours per month were services
rendered by Mr. Gittelman in his capacity as an officer of Elite.

DR. SUBRAMANIAN

         Dr. Subramanian entered into an Advisory Services Agreement with us on
December 6, 2006, the terms of which are summarized under the caption "Certain
Related Person Transactions." On April 24, 2008, Dr. Subramanian resigned as our
acting Chief Scientific Officer upon the appointment of Stuart Apfel to the
office of Chief Scientific Officer.

HEDGING POLICY

         We do not permit the Named Executive Officers to "hedge" ownership by
engaging in short sales or trading in any options contracts involving our
securities.

OPTION EXERCISES AND STOCK VESTED

         No options have been exercised by our Named Executive Officers during
the fiscal year ended March 31, 2008.

PENSION BENEFITS

         We do not provide pension benefits to the Named Executive Officers.

NONQUALIFIED DEFERRED COMPENSATION

         We do not have any defined contribution or other plan that provides for
the deferral of compensation on a basis that is not tax-qualified.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

         Please see the discussion under "Compensation Discussion and Analysis -
Agreements with Named Executive Officers."


                                       59
<PAGE>

              COMPENSATION OF EXECUTIVE OFFICERS AND KEY EMPLOYEES

SUMMARY COMPENSATION TABLE

         The table below summarizes the compensation information in respect of
the Named Executive Officers for the fiscal years ended March 31, 2008, 2007 and
2006.

<TABLE>
<CAPTION>




                                                                                                       NON-EQUITY
                                                                      STOCK          OPTION          INCENTIVE PLAN
                            YEAR          SALARY         BONUS        AWARDS         AWARDS           COMPENSATION
      NAME AND               (1)                          (2)           (3)            (4)
 PRINCIPAL POSITION                         ($)           ($)           ($)            ($)                 ($)
-------------------         ----          ------         -----        ------         ------          --------------
<S>                       <C>            <C>          <C>                <C>        <C>                        <C>
Bernard Berk              2007-08        330,140      165,070            --              --                     --
    President and
    Chief                 2006-07        330,140       63,063            --         574,422                     --
    Executive
    Officer               2005-06        344,295      150,000            --         379,439                     --

Mark. Gittelman           2007-08             --           --            --              --                     --
    Chief Financial
    Officer               2006-07             --           --            --          83,293                     --

                          2005-06             --           --            --          23,100                     --


Christopher Dick          2007-08        200,000       25,000            --              --                     --
    Executive Vice
    President of          2006-07        168,750       25,000            --         482,037                     --
    Corporate
    Development           2005-06        150,000       25,000            --              --                     --


Charan Behl(5)            2007-08        250,000       25,000            --              --                     --
    Head of
    Technical Affairs     2006-07        344,135       25,000            --         482,037                     --

                          2005-06        450,000           --            --              --                     --


Veerappan                 2007-08             --           --            --              --                     --
  Subramanian(6)
    Former Chief          2006-07             --           --            --       1,114,445                     --
    Scientific
    Officer               2005-06             --           --            --              --                     --


Stuart Apfel(7)                           55,000           --            --        354,760                        --
     Chief                                                                              --
     Medical              2007-08             --           --            --                                       --
     Officer and                                                                        --
     Chief                2006-07             --           --            --                                       --
     Scientific
     Officer              2005-06

<CAPTION>
                             CHANGE IN
                           PENSION VALUE
                                AND
                            NONQUALIFIED
                              DEFERRED
                            COMPENSATION            ALL OTHER             TOTAL
                              EARNINGS            COMPENSATION
      NAME AND
 PRINCIPAL POSITION              ($)                   ($)                 ($)
-------------------        --------------         -------------           -----
<S>                                  <C>            <C>                   <C>
Bernard Berk                          --             21,260(8)            516,470
    President and
    Chief                             --             21,260(8)            988,885
    Executive
    Officer                           --                 --               873,734

Mark. Gittelman                       --                 --                    --
    Chief Financial
    Officer                           --                 --                83,293

                                      --                 --                23,100


Christopher Dick                      --              8,400(9)            233,400
    Executive Vice
    President of                      --              3,150(10)           678,937
    Corporate
    Development                       --                                  175,000


Charan Behl(5)                        --                    --            275,000
    Head of
    Technical Affairs                 --                    --            851,172

                                      --                    --            450,000


Veerappan                             --                    --                 --
  Subramanian(6)
    Former Chief                      --                    --          1,114,445
    Scientific
    Officer                           --                    --                 --


Stuart Apfel(7)                       --              1,260(11)           411,020
     Chief
     Medical                          --                    --                 --
     Officer and
     Chief                            --                    --                 --
     Scientific
     Officer

</TABLE>

(1)  The information is provided for each fiscal year which begins on April 1
     and ends on March 31.

(2)  Bonuses paid to Mr. Berk represent discretionary bonuses and bonuses paid
     to Mr. Dick and Dr. Behl represent guaranteed bonuses.


                                       60
<PAGE>

(3)  No stock awards were granted to the Named Executive Officers in the fiscal
     years ended March 31, 2008, 2007 or 2006.

(4)  The amounts reflect the compensation expense in accordance with FAS 123(R)
     of these option awards. The assumptions used to determine the fair value of
     the option awards for fiscal year ended March 31, 2008 are set forth as
     follows: the per share weighted average of the above mentioned stock
     options was 0.8869 using the Black-Scholes options pricing model with the
     following weighted average assumptions: no dividend yield; expected
     volatility of 33%; risk free interest rate of 4.00% and expected lives of
     ten (10) years. The assumptions used to determine the fair value of the
     option awards for fiscal year ended March 31, 2007 are set forth in Note 3
     of our financial statements included in our Quarterly Report on Form 10-Q
     for the quarter ended December 31, 2006. The assumptions used to determine
     the fair value of the option awards for fiscal years ended March 31, 2006
     are set forth in Note 9 of our audited Consolidated Financial Statements
     included in our Form 10-K for the fiscal year ended March 31, 2006. Our
     Named Executive Officers will not realize the value of these awards in cash
     unless and until these awards are exercised and the underlying shares
     subsequently sold.

(5)  Dr. Behl was Executive Vice President and Chief Scientific Officer from
     March 9, 2006 to February 9, 2007 and has been Head of Technical Affairs
     since February 9, 2007.

(6)  Dr. Subramanian was acting Chief Scientific Officer from February 9, 2007
     to April 24, 2008.

(7)  Dr. Apfel has been Chief Medical Officer since January 3, 2008 and Chief
     Scientific Officer since April 24, 2008.

(8)  Represents $16,345 for auto and parking allowance and $4,915 for life
     insurance premiums.

(9)  Represents $8,400 for auto and parking allowance.

(10) Represents $3,150 for auto and parking allowance.

(11) Represents $1,260 for auto and parking allowance.

                           GRANTS OF PLAN-BASED AWARDS


         The following table sets forth information regarding grants of plan
based awards to the Named Executive Officers during the fiscal year ended March
31, 2008.

<TABLE>
<CAPTION>
                                                                                 ESTIMATED FUTURE PAYOUTS
                               ESTIMATED POSSIBLE PAYOUTS                                  UNDER
                               UNDER NON-EQUITY INCENTIVE                          EQUITY INCENTIVE PLAN
                                      PLAN AWARDS                                         AWARDS
                            ------------------------------        -----------------------------------------------------


                  GRANT     THRESHOLD    TARGET    MAXIMUM        THRESHOLD               TARGET                MAXIMUM
NAME               DATE        ($)        ($)        ($)             (#)                   (#)                    (#)
----              -----     ----------   ------    -------        ---------               -----                 -------
<S>               <C>       <C>          <C>       <C>            <C>                     <C>                   <C>
Stuart Apfel       1/03/08
     Chief
    Medical        1/03/08
    Officer and
    Chief
    Scientific
    Officer

<CAPTION>
                                                                     GRANT
                      ALL OTHER                                       DATE
                        STOCK          ALL OTHER                      FAIR
                       AWARDS:           OPTION       EXERCISE      VALUE OF
                       NUMBER            AWARDS:         OR          STOCK
                         OF             NUMBER OF    BASE PRICE       AND
                      SHARES OF        SECURITIES     OF OPTION      OPTION
                      STOCK OR         UNDERLYING      AWARDS        AWARDS
NAME                  UNITS (#)        OPTIONS (#)     ($/SH)          (1)
----                 ----------       ------------   -----------     -------
<S>                  <C>               <C>                <C>        <C>
Stuart Apfel                                              $1.75      106,428
     Chief                             120,000
    Medical                                               $1.75      248,332
    Officer and                        280,000
    Chief
    Scientific
    Officer
</TABLE>

(1)  The amounts reflect the compensation expense in accordance with FAS 123(R)
     of these option awards. The assumptions used to determine the fair value of
     the option awards for fiscal year ended March 31, 2008 are set forth as
     follows: the per share weighted average of the above mentioned stock
     options was 0.8869 using the Black-Scholes options pricing model with the
     following weighted average assumptions: no dividend yield; expected
     volatility of 33%; risk free interest rate of 4.00% and expected lives of
     ten (10) years. Our Named Executive Officers will not realize the value of
     these awards in cash unless and until these awards are exercised and the
     underlying shares subsequently sold.


                                       61
<PAGE>

                  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END


         The following table sets forth information concerning stock options and
stock awards held by the Named Executive Officers as of March 31, 2008.

                                  OPTION AWARDS
                             -----------------------

<TABLE>
<CAPTION>


                                                                            EQUITY
                                                                          INCENTIVE
                                                                             PLAN
                                                                            AWARDS
                                NUMBER OF            NUMBER OF             NUMBER OF                                      NUMBER OF
                               SECURITIES           SECURITIES            SECURITIES                                      SHARES OR
                               UNDERLYING           UNDERLYING            UNDERLYING                                       UNITS OF
                               UNEXERCISED          UNEXERCISED           UNEXERCISED          OPTION                     STOCK HELD
                                 OPTIONS              OPTIONS              UNEARNED           EXERCISE       OPTION       THAT HAVE
                               EXERCISABLE         UNEXERCISABLE            OPTIONS             PRICE      EXPIRATION     NOT VESTED
         NAME                      (#)                  (#)                   (#)                ($)          DATE           (#)
         ----                  -----------         -------------          -----------         ---------    -----------    ----------
<S>                              <C>                  <C>                  <C>                    <C>       <C>                <C>
         Bernard Berk            300,000(1)                   --                   --             $2.01     06/03/13            --
              Berk               225,000(2)                   --                   --             $2.15     07/22/13            --
              President           30,000(3)                   --                   --             $2.34     06/22/14            --
             and Chief            10,000(4)                   --                   --             $2.75     08/30/15            --
             Executive            10,000(4)
             Officer                                          --                   --             $2.75     08/30/15            --
                                          --           10,000(4)                   --             $2.75     08/30/15            --

                                 100,000(5)                   --                   --             $2.69     09/02/15            --

                                          --          100,000(5)                   --             $2.69     09/02/15            --

                                          --                  --           400,000(6)             $2.69     09/02/15            --

                                          --                  --           150,000(7)             $3.00     11/13/16            --

                                          --                  --           150,000(8)             $3.00     11/13/16            --

         Mark.                    10,000(9)                   --                   --             $2.34     03/08/14            --
         Gittelman                 6,666(10)                  --                   --             $2.80     07/14/15            --
             Chief                 6,667(10)                  --                   --             $2.80     07/14/15            --
             Financial                    --            6,667(10)                  --             $2.80     07/14/15            --
             Officer              23,333(11)                  --                   --             $2.26     05/03/16            --
                                          --           23,333(11)                  --             $2.26     05/03/16            --
                                          --           23,334(11)                  --             $2.26     05/03/16            --

         Christopher              10,000(12)                  --                   --             $2.34     10/31/12           --
             Dick                 10,000(12)                  --                   --             $2.34     10/31/12           --
             Executive            10,000(12)                  --                   --             $2.34     10/31/12           --
             Vice                 10,000(13)                  --                   --             $2.21     06/13/13           --
             President            10,000(13)                  --                   --             $2.21     06/13/13           --
             of                   10,000(13)                  --                   --             $2.21     06/13/13           --
             Corporate            40,000(14)                  --                   --             $2.80     07/14/15           --
             Development         250,000(15)                  --                   --             $2.25     11/13/16           --
                                         --                   --             150,000(7)           $2.25     11/13/16           --
                                         --                   --             150,000(8)           $2.25     11/13/16           --
                                         --                   --             200,000(6)           $2.25     11/13/16           --

          Charan Behl            250,000(15)                  --                   --             $2.25     11/13/16            --
             Head of                                          --             150,000(7)           $2.25     11/13/16            --
             Technical                   --                   --             150,000(8)           $2.25     11/13/16            --
             Affairs                     --                   --             200,000(6)           $2.25     11/13/16            --

         Veerappan               250,000(16)                  --                   --             $2.13     12/16/16            --
         Subramanian             250,000(16)                  --                   --             $2.13     12/16/16            --
             Former              250,000(16)                  --                   --             $2.13     12/16/16            --
             Chief               250,000(16)                  --                   --             $2.13     12/16/16            --
             Scientific
             Officer

         Stuart Apfel             120,000(17)                                                     $1.75      1/03/18
             Chief
             Medical                                                         280,000(18)          $1.75      1/03/18            --
             Officer
             and
             Chief
             Scientific
             Officer

<CAPTION>

                                              EQUITY
                                            INCENTIVE          EQUITY
                                              PLAN           INCENTIVE
                                             AWARDS:        PLAN AWARDS:
                                            NUMBER OF         MARKET OR
                                             UNEARNED      PAYOUT VALUE OF
                            MARKET VALUE      SHARES,         UNEARNED
                            OF SHARES OR      UNITS        SHARES, UNITS
                              UNITS OF       OR OTHER           OR
                             STOCK HELD     RIGHTS THAT     OTHER RIGHTS
                             THAT HAVE        HAVE NOT      THAT HAVE NOT
                             NOT VESTED        VESTED          VESTED
         NAME                   ($)             (#)              ($)
         ----               ------------    -----------    ---------------
<S>                                 <C>          <C>              <C>
         Bernard Berk                --           --              --
              Berk                   --           --              --
              President              --           --              --
             and Chief               --           --              --
             Executive
             Officer                 --           --              --
                                     --           --              --

                                     --           --              --

                                     --           --              --

                                     --           --              --

                                     --           --              --

                                     --           --              --

         Mark.                       --           --              --
         Gittelman                   --           --              --
             Chief                   --           --              --
             Financial               --           --              --
             Officer                 --           --              --
                                     --           --              --
                                     --           --              --

         Christopher                 --           --              --
         Dick                        --           --              --
             Executive               --           --              --
             Vice                    --           --              --
             President               --           --              --
             of                      --           --              --
             Corporate               --           --              --
             Development             --           --              --
                                     --           --              --
                                     --           --              --
                                     --           --              --

          Charan Behl                --           --              --
             Head of                 --           --              --
             Technical               --           --              --
             Affairs                 --           --              --

         Veerappan                   --           --              --
         Subramanian                 --           --              --
             Former                  --           --              --
             Chief                   --           --              --
             Scientific
             Officer

         Stuart Apfel
             Chief
             Medical                 --           --              --
             Officer
             and
             Chief
             Scientific
             Officer

</TABLE>


                                       62
<PAGE>

(1)  These options vested as of June 3, 2003.

(2)  These options vested as of September 2, 2005.

(3)  These options vested on June 22, 2004.

(4)  These options vest in annual increments over a three year period on August
     30, 2006, August 30, 2007 and August 30, 2008, respectively.

(5)  These options vested in annual increments over a two year period on
     September 2, 2006 and September 2, 2007, respectively.

(6)  These options vest as follows: (i) upon the commencement of the first Phase
     III clinical trial relating to the first "Non-Generic Opioid Product"
     developed by us as to 125,000 options and relating to the second
     "Non-Generic Opioid Product" developed by the company as to 75,000 options;
     (ii) 50,000 shares of Common Stock shall vest and become immediately
     exercisable in full only upon the closing of an exclusive product license
     for the United States national market or product sale transaction of all of
     our ownership rights (on a product by product basis and only once for each
     individual product) for each Company drug product, other than the
     "Non-Generic Opioid Products" for which the "Non-Generic Opioid Product"
     options were granted; (iii) 10,000 options upon the filing by us (in our
     name) with FDA of either an ANDA or a NDA (including a NDA filed with the
     FDA, for a product not covered by a previous FDA application); (iv) 40,000
     options upon the approval by the FDA of any ANDA or NDA (filed in our name)
     for a product not previously approved by the FDA; (v) 25,000 options upon
     filing of an application for U.S. patent by us (filed in our name); and
     (vi) 25,000 options upon the granting by PTO of a patent to us (filed in
     our name).

(7)  These options vest upon the closing of an exclusive product license for the
     first of the United States national market, the entire European Union
     market or the Japan market or product sale transaction of all of our
     ownership rights in the United States (only once for each individual
     product) for our first Non-Generic Opioid Product.

(8)  These options vest upon the closing of an exclusive product license for the
     United States national market, the entire European Union market or the
     Japan market or product sale transaction of all of our ownership rights in
     the United States (only once for each individual product) for our second
     Non-Generic Opioid Product.

(9)  These options vested on June 22, 2004.

(10) These options vest in annual increments over a three year period on July
     14, 2006, July 14, 2007 and July 14, 2008, respectively.

(11) These options vest in annual increments over a three year period on May 3,
     2007, May 3, 2008 and May 3, 2009, respectively.

(12) These options vested on November 1, 2003, 2004 and 2005, respectively.

(13) These options vested on June 13, 2004, 2005 and 2006, respectively.

(14) These options vested on July 14, 2005.


                                       63
<PAGE>

(15) These options vested on November 13, 2006.

(16) These options vested as follows: (i) 250,000 on December 6, 2006, (ii)
     250,000 on May 6, 2007, (iii) 250,000 on December 6, 2007 and (iv) 250,000
     on our acceptance of the initial business plan of Novel.

(17) These options vested on January 3, 2008.

(18) These options vest as follows: (i) 80,000 shares upon the successful
     completion, as determined by the Board, of a Company sponsored Phase III
     clinical trial of the Company's developmental drug product referred to as
     ELI-216; (ii) 80,000 shares upon the successful completion, as determined
     by the Board, of a Company sponsored Phase III clinical trial of the
     Company's developmental drug product referred to as ELI-154; (iii) 80,000
     shares upon the successful completion, as determined by the Board, by the
     Company during the term of the Apfel Agreement of a Company sponsored
     long-term safety study for the Company's developmental drug product
     referred to as ELI-216; and (iv) 40,000 shares upon the closing of an
     exclusive product license for the United States national market, or product
     sale transaction of all of the Company's ownership rights, for either
     ELI-216 or ELI-154.

                              DIRECTOR COMPENSATION


         The following table sets forth director compensation for the year ended
March 31, 2008:

<TABLE>
<CAPTION>
                                                                                                            CHANGE IN PENSION VALUE
                                    FEES PAID OR                                                               AND NONQUALIFIED
                                     EARNED IN         STOCK         OPTION       NON EQUITY INCENTIVE       DEFERRED COMPENSATION
                                       CASH            AWARDS        AWARDS        PLAN COMPENSATION                EARNINGS
NAME                                    ($)             ($)           ($)                  ($)                        ($)
----                                ------------------------------------------------------------------------------------------------
<S>                                    <C>              <C>         <C>                         <C>                          <C>
Bernard Berk                            6,000           ---             ---                     ---                           ---

Barry Dash                             12,000           ---         50,616(1)                   ---                           ---

Robert J. Levenson                     12,000           ---         50,616(1)                   ---                           ---

Melvin Van Woert                       12,000           ---         50,616(1)                   ---                           ---

Veerappan Subramanian                   2,000           ---             ---                     ---                           ---

<CAPTION>

                                     ALL OTHER
                                    COMPENSATION             TOTAL
NAME                                    ($)                   ($)
----                                -------------------------------
<S>                                          <C>            <C>
Bernard Berk                                 ---             6,000

Barry Dash                                   ---            62,616

Robert J. Levenson                           ---            62,616

Melvin Van Woert                             ---            62,616

Veerappan Subramanian                        ---             2,000
</TABLE>
----------------------------
(1) Represents 90,000 options of which 30,000 vest during the period commencing
on January 24, 2008 and ending June 26, 2008; 30,000 vest during the period
commencing on June 27, 2008 and ending on June 26, 2009 and 30,000 vest during
the period commencing on June 27, 2009 and ending on June 26, 2010; provided,
however that the options shall fully vest upon the director's death, disability,
retirement as a director or removal as a director without cause at the request
of the Board of Directors.

FEE COMPENSATION

         Prior to January 1, 2008, each Director received $2,000 per each
meeting such Director attends. As of January 1, 2008, the Company's policy
regarding director fees has been revised as follows: (i) Directors who are
employees or consultants of the Company (and/or any of its subsidiaries) receive
no additional remuneration for serving as directors or members of committees of
the Board; (ii) all Directors are entitled to reimbursement for out-of-pocket
expenses incurred by them in connection with their attendance at the Board or
committee meetings; (iii) Directors who are not employees or consultants of the
Company (and/or any of its subsidiaries) receive $15,000 annual retainer fee for
their service on the Board and all committees; (iv) Directors who are not
employees or consultants of the Company (and/or any of its subsidiaries) receive
a per board meeting fee of $1,000 for each board meeting and a per committee
meeting fee of $1,000 for each committee meeting attended by such Director;
provided that the chairperson of the committee conducting such meeting shall (in
place of the $1,000 meeting fee) receive a per committee meeting fee of $1,500
for each committee meeting attended; and (v) for


                                       64
<PAGE>

purposes of the compensation schedule set forth above, (x) a meeting shall only
constitute a meeting of the Board or a committee entitling a participant to a
meeting fee if such meeting extends to at least sixty (60) minutes (including
the time of any reconvened portion of a meeting after an adjournment), (y) a
meeting shall include all meetings attended in-person (whether at the Company's
offices or at any other location) or via telephone conference, and (z) only one
fee may be payable to Director and/or committee member per calendar day. Except
as described in this section, non-employee Directors do not receive any
additional compensation for their services on the Board of Directors.

EQUITY COMPENSATION

         Members of the Board of Directors during the fiscal years ended March
31, 2007 and 2008 did not receive any options or equity compensation for serving
as directors other than the grant of 90,000 options to each of the independent
directors in January, 2008.

OTHER

         The Company has entered into indemnification agreements with each of
its directors to indemnify them to the fullest extent permitted under Delaware
General Corporation Law.


                                       65
<PAGE>

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

         The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of June 18, 2008 by (i) each person who is
known by us to own beneficially more than 5% of the Common Stock, (ii) each of
our directors and nominees for director, (iii) each of the Named Executive
Officers (as defined below) and (iv) all our directors and executive officers as
a group. On such date, we had 23,232,207 shares of Common Stock outstanding
(exclusive of 100,000 treasury shares). (The 8,410 shares of Series B Preferred
Stock outstanding and the 18,981 shares of Series C Preferred Stock outstanding
are nonvoting and none of the individuals listed below beneficially owns any
shares of Series B Preferred Stock or Series C Preferred Stock other than Barry
Dash who owns 20 shares of Series C Preferred Stock. There are currently no
shares of Series A Preferred Stock outstanding).

         As used in the table below and elsewhere in this Annual Report on Form
10-K, the term beneficial ownership with respect to a security consists of sole
or shared voting power, including the power to vote or direct the vote, and/or
sole or shared investment power, including the power to dispose or direct the
disposition, with respect to the security through any contract, arrangement,
understanding, relationship, or otherwise, including a right to acquire such
power(s) during the 60 days immediately following June 18, 2008. Except as
otherwise indicated, the stockholders listed in the table have sole voting and
investment powers with respect to the shares indicated.

<TABLE>
<CAPTION>
NAME AND ADDRESS                                                                         COMMON STOCK
----------------                                                                         ------------
                                                                            AMOUNT                  %
                                                                            ------                  -

<S>                                                                         <C>                <C>
Bernard Berk, Director, President and Chief Executive Officer*              1,734,800(1)        7.02

Barry Dash, Director*                                                       138,207(2)          **

Robert J. Levenson, Director*                                               90,000(3)           **

Melvin Van Woert, Director*                                                 120,000(4)          **

Veerappan Subramanian(5)*                                                   2,436,094(6)        9.86
c/o Novel Laboratories, Inc.
400 Campus Drive
Somerset, NJ 08873

Stuart Apfel, Chief Scientific Officer and Chief Medical Officer*           400,000(7)          1.69

Chris Dick, Executive Vice President of Corporate Development*              885,287(8)          3.67

Mark I. Gittelman, Chief Financial Officer*                                 39,999(9)           **

Dr. Charan Behl(10)*                                                        1,375,000(11)       5.70

Trellus Management Company                                                  3,450,795(12)      13.43
Adam Usdan
350 Madison Avenue, 9th Floor
New York, New York  10017
</TABLE>


                                       66
<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS                                                                         COMMON STOCK
----------------                                                                         ------------
                                                                            AMOUNT                  %
                                                                            ------                  -

<S>                                                                         <C>                 <C>
Mark Fain                                                                   1,094,164(13)        4.67
237 Park Avenue, Suite 900
New York, NY 10017

Chad Comiteau                                                               1,114,096(14)        4.76
237 Park Avenue, Suite 900
New York, NY 10017

Davidson Kempner Healthcare International Ltd.                              4,528,328(15)       16.35
65 East 55th Street, 19th Floor
New York, NY 10022

All Directors and Officers as a group***                                    5,844,387(16)       20.83
</TABLE>

     ------------------------
     *    The address is c/o Elite Pharmaceuticals Inc., 165 Ludlow Avenue,
          Northvale, NJ 07647.
     **   Less than 1%
     ***  As of June 18, 2008

(1) Includes options to purchase 1,485,000 shares of Common Stock. See "Named
Executive Officers."

(2) Includes options to purchase 120,000 shares of Common Stock, 20 shares of
Series C Preferred Stock convertible into 8,621 shares of Common Stock and
warrants to purchase 2,586 shares of Common Stock.

(3) Represents options to purchase shares of Common Stock.

(4) Represents options to purchase shares of Common Stock.

(5) Dr. Subramanian was acting Chief Scientific Officer from February 9, 2007 to
April 25, 2007 and ceased being a director on June 26, 2007. See "Named
Executive Officers."

(6) Includes options to purchase 1,000,000 shares of Common Stock which are
owned by Dr. Subramanian and 957,396 shares of Common Stock and warrants to
purchase 478,698 shares of Common Stock which are owned by VGS Pharma, LLC
("VGS"), a wholly-owned subsidiary of Kali Capital, L.P., which is controlled by
Kali Management, LLC ("KALI"), its general partner, and Kali is controlled by
the daughter of Dr. Subramanian, its managing member. Dr. Subramanian disclaims
beneficial ownership of these shares of Common Stock, except to the extent of
his pecuniary interest therein, if any.

(7) Represents options to purchase shares of Common Stock.

(8) Includes options to purchase 850,000 shares of Common Stock and warrants
held by Mr. Dick and Hedy Rogers as joint tenants to purchase 10,479 shares of
Common Stock.

(9) Represents options to purchase shares of Common Stock.

(10) Behl was Executive Vice President and Chief Scientific Officer from March
9, 2006 to February 9, 2007 and has been Head of Technical Affairs since
February 9, 2007. See "Named Executive Officers."

(11) Includes warrants to purchase 130,000 shares of Common Stock and options to
purchase 750,000 shares of Common Stock. See "Named Executive Officers."

(12) Based on information provided by Trellus Management Company, LLC ("TMC")
and Adam Usdan in the Schedule 13G filed February 13, 2007 and also based on
information set forth in Form S-3 filed on May 24, 2007 and information provided
to us by TMC. Includes 862,068 shares of Common Stock issuable upon conversion
of Series C Preferred Stock held in the aggregate by Trellus Partners L.P
("TP"), Trellus Partners II L.P. ("TPI") and Trellus Offshore Fund Limited
("TPOF"), 888,889 shares of Common Stock issuable upon conversion of shares of
Series B Preferred Stock held by TP and 703,063 shares of Common Stock issuable
upon exercise of warrants held in the aggregate by TP, TPI and TPOF. Adam Usdan
is the President of TMC. Adam Usdan and TMC share voting power and dispositive
power over the shares. Notwithstanding the inclusion of the aforementioned
beneficial ownership calculation, pursuant to our Certificate of Designation of
Preferences, Rights and Limitations of Series C 8% Preferred Stock, the Amended
Certificate of Designations of the Series B 8% Convertible Preferred Stock and
the Common Stock Purchase Warrant for the aforementioned warrants, the number of
shares of Common Stock into which the Series C 8% Preferred Stock and Series B
8% Preferred Stock are convertible and the warrants are exercisable is limited
to that number of shares of Common Stock which would result in the Adam Usdan
and TMC affiliated entities having aggregate beneficial ownership of not more
than 9.99% of the total issued and outstanding shares of Common Stock.


                                       67
<PAGE>

(13) Based on information provided by Mark Fain and Chad Comiteau in their
Schedule 13G/A filed February 14, 2008. Mark Fain beneficially owned 1,094,164
shares of Common Stock, which amount includes (i) 168,000 shares beneficially
owned by Mr. Fain over which he has sole voting power and sole dispositive
power; (ii) 33,333 convertible shares beneficially owned by Mr. Fain over which
he has sole voting power and sole dispositive power; (iii) 33,000 shares
beneficially owned by Stratford Management Money Purchase Pension Plan over
which Mr. Fain has shared voting power and shared dispositive power; (iv)
709,8631 shares beneficially owned by Stratford Partners, L.P. of which Mr. Fain
is a Managing Member, and over which Mr. Fain has shared voting power and shared
dispositive power; and (v) 150,000 convertible shares beneficially owned by
Stratford Partners, L.P. over which Mr. Fain has shared voting power and shared
dispositive power.

(14) Based on information provided by Mark Fain and Chad Comiteau in their
Schedule 13G/A filed February 14, 2008. Chad Comiteau beneficially owned
1,114,096 shares of Common Stock which amount includes (i) 188,600 shares
beneficially owned by Mr. Comiteau over which he has sole voting power and sole
dispositive power; (ii) 32,665 convertible shares beneficially owned by Mr.
Comiteau over which he has sole voting power and sole dispositive power; (iii)
33,000 shares beneficially owned by Stratford Management Money Purchase Pension
Plan over which he has shared voting power and shared dispositive power; (iv)
709,831 shares beneficially owned by Stratford Partners, L.P. of which Mr.
Comiteau is a Managing Member, and over which Mr. Comiteau has shared voting
power and shared dispositive power; and (v) 150,000 convertible shares
beneficially owned by Stratford Partners, L.P. over which Mr. Comiteau has
shared voting power and shared dispositive power.

(15) Davidson Kempner Healthcare International Ltd. ("DKHI") and its affiliates,
Davidson Kempner Partners ("DKP"), Davidson Kempner Institutional Partners, L.P.
("DKIP"), M.H. Davidson & Co. ("CO"), Davidson Kempner International, Ltd.
("DKIL"), Serena Limited ("Serena"), Davidson Kempner Healthcare Fund LP
("DKHF"), MHD Management Co., Davidson Kempner Advisors Inc., Davidson Kempner
International Advisors, L.L.C., DK Group LLC, DK Management Partners LP, DK
Stillwater GP LLC, Thomas L. Kempner, Jr., Marvin H. Davidson, Stephen M.
Dowicz, Scott E. Davidson, Michael J. Leffell, Timothy I. Levart, Robert J.
Brivio, Jr., Anthony A. Yoseloff, Eric P. Epstein and Avram Z. Friedman jointly
filed a Schedule 13GA on February 14, 2008, reflecting the beneficial ownership,
subject to an ownership limitation, of an aggregate of 7,967 Series C Preferred
Stock convertible into 3,434,052 shares of common stock, 1,030,208 warrants
exercisable into 1,030,208 shares of Common Stock and 64,068 shares of Common
Stock as a result of their voting and dispositive power over 7,967 Series C
Preferred Stock convertible into 3,434,052 shares of Common Stock, 1,030,208
warrants exercisable into 1,030,208 shares of Common Stock and 64,068 shares of
Common stock beneficially owned by DKP, DKIP, DKIL, Serena, CO, DKHF and DKHI.
Notwithstanding the inclusion of the aforementioned beneficial ownership
calculation, pursuant to our Certificate of Designation of Preferences, Rights
and Limitations of Series C Preferred Stock and the Common Stock Purchase
Warrant for the aforementioned warrants, the number of shares of Common Stock
into which the Series C Preferred Stock are convertible and the warrants are
exercisable is limited to that number of shares of Common Stock which would
result in the Davidson Kempner affiliated entities having aggregate beneficial
ownership of not more than 9.99% of the total issued and outstanding shares of
Common Stock. The above information was obtained from such Schedule 13G/A.

(16) Includes 20 shares of Series C Preferred Stock convertible into 8,621
shares of Common Stock and options and warrants to purchase an aggregate of
5,306,763 shares of Common Stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
         INDEPENDENCE.

         All related person transactions are reviewed and, as appropriate, may
be approved or ratified by the Board of Directors. If a Director is involved in
the transaction, he or she may not participate in any review, approval or
ratification of such transaction. Related person transactions are approved by
the Board of Directors only if, based on all of the facts and circumstances,
they are in, or not inconsistent with, our best interests and the best interests
of our stockholders, as the Board of Directors determines in good faith. The
Board of Directors takes into account, among other factors it deems appropriate,
whether the transaction is on terms generally available to an unaffiliated
third-party under the same or similar circumstances and the extent of the
related person's interest in the transaction. The Board of Directors may also
impose such conditions as it deems necessary and appropriate on us or the
related person in connection with the transaction.


                                       68
<PAGE>

         In the case of a transaction presented to the Board of Directors for
ratification, the Board of Directors may ratify the transaction or determine
whether rescission of the transaction is appropriate.


                       CERTAIN RELATED PERSON TRANSACTIONS

TRANSACTIONS WITH DR. SUBRAMANIAN AND VGS PHARMA LLC

         On December 6, 2006, we entered into a Strategic Alliance Agreement
with Dr. Subramanian and VGS,under which (i) Dr. Subramanian was appointed to
our Board of Directors, (ii) VGS made a $2,000,000 equity investment in Elite,
(iii) we engaged Dr. Subramanian to serve as our strategic advisor on the
research, development and commercialization of our existing pipeline and (iv)
we, together with VGS formed Novel,, as a separate specialty pharmaceutical
company for the research, development, manufacturing, licensing and acquisition
of specialty generic pharmaceuticals. VGS is wholly-owned subsidiary of Kali
Capital, L.P., which is controlled by Kali Management, LLC ("KALI"), its general
partner, and Kali is controlled by Anu Subramanian, its managing member and
daughter of Dr. Subramanian.

         The specialty pharmaceutical product initiative of the strategic
alliance between Elite and Dr. Subramanian is to be conducted by Novel, of which
we acquired 49% and VGS acquired 51% of its Class A Voting Common Stock for
$9,800 and $10,200 respectively. Pursuant to the Alliance Agreement, VGS
acquired for $2,000,000: (i) 957,396 shares of our Common Stock at approximately
$2.089 per share and (ii) a five year Warrant to purchase 478,698 shares of our
Common Stock, for cash, at an exercise price of $3.00 per share, subject to
adjustment upon the occurrence of certain events.

         We contributed $5,000,000 to Novel. During the three months ended
December 31, 2007, we elected not to fund our remaining contributions to Novel
upon the terms set forth in the Alliance Agreement because we had reached
agreement with the FDA under a SPA on the Phase III clinical trial of ELI-216,
Elite's abuse deterrent oxycodone product and determined that our funds would be
better used to support the clinical trials for ELI-216.

         We and VGS negotiated alternative structures that would permit
investments by us at valuations which differed from those set forth in the
Alliance Agreement, however we were unable to agree upon an alternative
acceptable to both parties. Accordingly, upon our determination not to fund our
remaining contributions to Novel at the valuation set forth in the Alliance
Agreement, VGS exercised its rights under the Stockholders Agreement to purchase
from us shares of Class A Voting Common Stock of Novel proportionate to the
amount of remaining contributions which were not funded by us. As a result, our
remaining ownership interest in Class A Voting Common Stock of Novel is
approximately 10% of the outstanding shares of Class A Voting Common Stock of
Novel.

         Pursuant to an advisory agreement, Dr. Subramanian had agreed to
provide advisory services to us, including but not limited to, assisting in the
implementation of current and new drug product development projects of Elite and
assisting in the recruitment of additional R&D staff members. As an inducement
to enter into the agreement, we granted Dr. Subramanian a non-qualified stock
option to purchase up to 1,750,000 shares of Common Stock, at a price of $2.13
per share, of which 1,000,000 options have vested and 750,000 unvested options
have terminated.


                                       69
<PAGE>

TRANSACTIONS WITH MARK GITTELMAN AND GITTELMAN & CO. P.C.

         For a description of the agreement between Elite and Gittelman & Co.,
P.C., please see "Compensation Discussion Analysis - Agreements with Named
Executive Officers and Key Employees". Mark Gittelman, our chief financial
officer is the principal of Gittelman & Co., P.C.

TRANSACTIONS WITH DR. APFEL

         From January 8, 2007 to December 31, 2007, Dr. Apfel provided
consulting services to us through Parallex Clinical Research, which included,
without limitation, assistance in development and execution of our regulatory
and clinical program with respect to our abuse resistance opioid products.
Parallex Clinical Research received $52,843 as consulting fees for his services.

SERIES C PREFERRED STOCK FINANCING

         The following related persons participated in our Series C Preferred
Stock private placement that closed on April 24, 2007 according to which we sold
15,000 shares of our Series C Preferred Stock, and 1,939,655 warrants for gross
proceeds of $15,000,000.

         o    Barry Dash, one of our directors, purchased 20 shares of Series C
              Preferred Stock and warrants to purchase 2,586 shares of Common
              Stock for a purchase price of $20,000.

         o    Affiliates of Adam Usdan, one of our stockholders which
              beneficially owns more than 5% of our outstanding Common Stock,
              purchased an aggregate of 2,000 shares of Series C Preferred Stock
              and warrants to purchase 258,619 shares of Common Stock for an
              aggregate purchase price of $2,000,000.

         o    Indigo Securities LLC of whom Edward Neugeboren, a director until
              June 26, 2007, is a consultant, acted as a selected dealer in the
              private placement of the Series C Preferred Financing and received
              a $194,547 cash commission and warrants to purchase 36,045 shares
              of Common Stock for its services.

The following related persons participated in our Series C Preferred Stock
private placement that closed on July 17, 2007 according to which we sold the
remaining 5,000 shares of our Series C Preferred Stock, and 646,544 warrants for
gross proceeds of $5,000,000.

         o    Midsummer Investment Ltd., one of our stockholders that
              beneficially owns more than 5% of our outstanding Common Stock,
              purchased an aggregate of 1,000 shares of Series C Preferred Stock
              and warrants to purchase 129,310 shares of Common Stock for an
              aggregate purchase price of $1,000,000.

         See "Item 10 - Directors and Executive Officers of Registrant" for
information as to employment or engagement agreements with Bernard Berk, Chris
Dick, Charan Behl, Stuart Apfel and Gittelman & Co. PC, an affiliate of Mark I.
Gittelman.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

         The following table presents fees, including reimbursements for
expenses, for professional audit services rendered by Miller Ellin & Company,
LP. ("MILLER ELLIN") for the audits of our annual financial


                                       70
<PAGE>

statements and interim reviews of our quarterly financial statements for the
years ended March 31, 2008 and March 31, 2007 and fees billed for other services
rendered by Miller Ellin during those periods.

                                                 2008                      2007
                                                 ----                      ----
Audit Fees(1)                                   $52,847                  $58,360
Audit-Related Fees                                 --                       --
Tax Fees                                           --                       --
All Other Fees                                     --                       --

(1)  Audit Fees relate to the audit of our financial statements and reviews of
     financial statements included in our quarterly reports on Form 10-Q.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES.

(a)      Documents filed as part of this Annual Report on Form 10-K

         (1) The financial statements listed in the Index to Consolidated
Financial Statements are filed as part of this Annual Report on Form 10-K

         (2) The financial statements listed in the Index are filed a part of
this Annual Report on Form 10-K.

         (3) List of Exhibits

         See Index to Exhibits in paragraph (b) below.

         The Exhibits are filed with or incorporated by reference in this Annual
Report on Form 10-K.

(b)      Financial Statement Schedules

         None.

(c)      Exhibits required by Item 601 of Regulation S-K.

EXHIBIT
  NO.         DESCRIPTION

  3.1(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") and (b) Exhibit 4.1 to the Company's Current Report on Form
              8-K dated July 28, 2004.

  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.


                                       71
<PAGE>

  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.

  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, 2007

    3.2       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.


                                       72
<PAGE>

    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, 2004.

    4.9       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 as
              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 as 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.


                                       73
<PAGE>

   4.17       Form of Warrant to purchase up to 478,698 shares of Common Stock
              issued to VGS PHARMA, LLC, incorporated by reference as 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 on Non-Qualified Stock Option Agreement for 1,750,000 shares
              of Common Stock granted to Veerappan Subramanian, incorporated by
              reference as Exhibit 3(b) to the Current Report on Form 8-K, dated
              December 6, 2006 and filed with the SEC on December 12, 2006.

   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.

   10.1       2004 Employee Stock Option Plan approved by stockholders on June
              22, 2004, incorporated by reference to Exhibit A to the Proxy
              Statement filed on Schedule 14A with respect to the Annual Meeting
              of Stockholders held on June 22, 2004.

   10.2       Form of Confidentiality Agreement (corporate), incorporated by
              reference to Exhibit 10.7 to the Form SB-2.

   10.3       Form of Confidentiality Agreement (employee), incorporated by
              reference to Exhibit 10.8 to the Form SB-2.

   10.4       Amended and Restated Employment Agreement dated as of September 2,
              2005 between Bernard Berk and the Company, incorporated by
              reference to Exhibit 10.1 to Current Report on Form 8-K, dated
              September 2, 2005, and filed with the SEC on September 9, 2005.

   10.5       Option Agreement between Bernard Berk and the Company dated as of
              July 23, 2003 incorporated by reference to Exhibit 10.7 to the
              Quarterly Report on Form 10-Q for three months ended June 30, 2003
              (the "June 30, 2003 10Q Report").

   10.6       Option Agreement between Bernard Berk and the Company dated as of
              July 23, 2003, incorporated by reference to Exhibit 10.8 to the
              June 30, 2003 10Q Report.

   10.7       Amendment, dated as of September 2, 2005, by and between, the
              Company and Bernard Berk, to the Stock Option Agreement, dated as
              of July 23, 2003, incorporated by reference to Exhibit 10.2 to
              Current Report on Form 8-K, dated September 2, 2005, and filed
              with the SEC on September 9, 2005.

   10.8       Stock Option Agreement, dated as of September 2, 2005, by and
              between the Company and Bernard Berk, incorporated by reference to
              Exhibit 10.3 to Current Report on Form 8-K, dated September 2,
              2005, and filed with the SEC on September 9, 2005.



                                       74
<PAGE>

   10.9       Stock Option Agreement, dated as of September 2, 2005, by and
              between the Company and Bernard Berk, incorporated by reference to
              Exhibit 10.4 to Current Report on Form 8-K, dated September 2,
              2005, and filed with the SEC on September 9, 2005.

   10.10      Engagement letter dated February 26, 1998, between Gittelman & Co.
              P.C. and the Company incorporated by reference to Exhibit 10.10 to
              the Form 10-K for the period ended March 31, 2004 filed with the
              SEC on June 29, 2004.

   10.11      Product Development Manufacturing and Distribution Agreement,
              dated as of March 30, 2005, by and among Elite Laboratories, Inc.,
              a Delaware corporation and wholly-owned subsidiary of the Company
              ("Elite Labs"), Harris Pharmaceuticals, Inc. and Tish Technologies
              LLC, incorporated by reference as Exhibit 10.1 to the Current
              Report on Form 8-K, dated March 30, 2005, originally filed with
              the SEC on April 5, 2005, as amended on the Current Report on Form
              8-K/A filed May 10, 2005, as further amended by the Current Report
              on Form 8-K/A filed June 13, 2005, as further amended by the
              Current Report on Form 8-K/A filed July 20, 2005, as further
              amended by the Current Report on Form 8-K/A filed August 23, 2005,
              as further amended by the Current Report on Form 8-K/A filed
              September 27, 2005, as further amended by the Current Report on
              Form 8-K/A filed December 7, 2005 (Confidential Treatment granted
              with respect to portions of the Agreement).

   10.12      Product Development and Commercialization Agreement, dated as of
              June 21, 2005, between the Company and IntelliPharmaceutics,
              Corp., incorporated by reference as Exhibit 10.1 to the Current
              Report on Form 8-K, dated June 21, 2005 and originally filed with
              the SEC on June 27, 2005, as amended on the Current Report on Form
              8-K/A filed September 7, 2005, as further amended by the Current
              Report on Form 8-K/A filed December 7, 2005 (Confidential
              Treatment granted with respect to portions of the Agreement).

   10.13      Product Development and License Agreement, dated as of June 22,
              2005, between the Company and Pliva, Inc., incorporated by
              reference as Exhibit 10.1 to the Current Report on Form 8-K, dated
              June 22, 2005 and originally filed with the SEC on June 28, 2005,
              as amended on the Current Report on Form 8-K/A filed September 6,
              2005, as further amended by the Current Report on Form 8-K/A filed
              December 7, 2005 (Confidential Treatment granted with respect to
              portions of the Agreement).

   10.14      Agreement, dated December 12, 2005, by and among the Company,
              Elite Labs, and IntelliPharmaCeutics Corp., incorporated by
              reference as Exhibit 10.1 to the Current Report on Form 8-K, dated
              December 12, 2005, and originally filed with the SEC on December
              16, 2005, as amended by the Current Report on Form 8-K/A filed
              March 7, 2006 (Confidential Treatment granted with respect to
              portions of the Agreement).

   10.15      Product Development and Commercialization Agreement, dated January
              10, 2006, by and among the Company, Elite Laboratories, Inc., its
              wholly-owned subsidiary and Orit Laboratories LLC, incorporated by
              reference as Exhibit 10.1 to the Current Report on Form 8-K, dated
              January 10, 2006, and filed with the SEC on January 17, 2006.
              (Confidential Treatment granted with respect to portions of the
              Agreement).

   10.16      Loan Agreement, dated as of August 15, 2005, between New Jersey
              Economic Development Authority ("NJEDA") and the Company,
              incorporated by reference to Exhibit 10.1 to the


                                       75
<PAGE>

              Current Report on Form 8-K, dated August 31, 2005 and filed with
              the SEC on September 6, 2005.

   10.17      Series A Note in the aggregate principal amount of $3,660,000.00
              payable to the order of the NJEDA, incorporated by reference to
              Exhibit 10.2 to the Current Report on Form 8-K, dated August 31,
              2005 and filed with the SEC on September 6, 2005.

   10.18      Series B Note in the aggregate principal amount of $495,000.00
              payable to the order of the NJEDA, incorporated by reference to
              Exhibit 10.3 to the Current Report on Form 8-K, dated August 31,
              2005 and filed with the SEC on September 6, 2005.

   10.19      Mortgage from the Company to the NJEDA, incorporated by reference
              to Exhibit 10.4 to the Current Report on Form 8-K, dated August
              31, 2005 and filed with the SEC on September 6, 2005.

   10.20      Indenture between NJEDA and the Bank of New York as Trustee, dated
              as of August 15, 2005, incorporated by reference to Exhibit 10.5
              to the Current Report on Form 8-K, dated August 31, 2005 and filed
              with the SEC on September 6, 2005.

   10.21      Form of Warrant Exercise Agreement, between the Registrant and the
              signatories thereto, incorporated by reference to Exhibit 10.1 to
              the Current Report on Form 8-K, dated December 14, 2005 and filed
              with the SEC on December 20, 2005.

   10.22      Form of Registration Rights Agreement, between the Registrant and
              signatories thereto, incorporated by reference to Exhibit 10.2 to
              the Current Report on Form 8-K, dated December 14, 2005 and filed
              with the SEC on December 20, 2005.

   10.23      Form of Securities Purchase Agreement, between the Registrant and
              the signatories thereto, incorporated by reference to Exhibit 10.1
              to the Current Report on Form 8-K, dated March 15, 2006 and filed
              with the SEC on March 16, 2006.

   10.24      Form of Registration Rights Agreement, between the Registrant and
              the signatories thereto, incorporated by reference to Exhibit 10.2
              to the Current Report on Form 8-K, dated March 15, 2006 and filed
              with the SEC on March 16, 2006.

   10.21      Form of Placement Agent Agreement, between the Registrant and
              Indigo Securities, LLC, incorporated by reference as Exhibit 10.3
              to the Current Report on Form 8-K, dated March 15, 2006, and filed
              with the SEC on March 16, 2006.

   10.22      Financial Advisory Agreement between the Registrant and Indigo
              Ventures LLC, incorporated by reference as Exhibit 10.1 to the
              Current Report on Form 8-K dated July 12, 2006 and filed with the
              SEC on July 18, 2006.

   10.23      Seconded Amended and Restated Employment Agreement between the
              Registrant and Bernard Berk, incorporated by reference as Exhibit
              10.1 to the Quarterly Report on Form 10-Q for the quarter ended
              September 30, 2006 and filed with the SEC on November 14, 2006.


                                       76
<PAGE>

   10.24      Employment Agreement between the Registrant and Charan Behl,
              incorporated by reference as Exhibit 10.2 to the Quarterly Report
              on Form 10-Q for the quarter ended September 30, 2006 and filed
              with the SEC on November 14, 2006.

   10.25      Employment Agreement between the Registrant and Chris Dick,
              incorporated by reference as Exhibit 10.3 to the Quarterly Report
              on Form 10-Q for the quarter ended September 30, 2006 and filed
              with the SEC on November 14, 2006.

   10.26      Product Collaboration Agreement between the Registrant and
              ThePharmaNetwork LLC, incorporated by reference as Exhibit 10.1 to
              the Current Report on Form 8-K, dated November 10, 2006 and filed
              with the SEC on November 15, 2006. (Confidential Treatment granted
              with respect to portions of the Agreement).

   10.27      Strategic Alliance Agreement among the Registrant, VGS Pharma
              ("VGS") and Veerappan S. Subramanian ("VS"), incorporated by
              reference as Exhibit 10(a) to the Current Report on Form 8-K,
              dated December 6, 2006 and filed with the SEC on December 12,
              2006.

   10.28      Advisory Agreement, between the Registrant and VS, incorporated by
              reference as Exhibit 10(b) to the Current Report on Form 8-K,
              dated December 6, 2006 and filed with the SEC on December 12,
              2006.

   10.29      Registration Rights Agreement between the Registrant, VGS and VS,
              incorporated by reference as Exhibit 10(c) to the Current Report
              on Form 8-K, dated December 6, 2006 and filed with the SEC on
              December 12, 2006.

   10.30      Employment Agreement between Novel Laboratories Inc. ("Novel") and
              VS, incorporated by reference as Exhibit 10(d) to the Current
              Report on Form 8-K, dated December 6, 2006 and filed with the SEC
              on December 12, 2006.

   10.31      Stockholders' Agreement between Registrant, VGS, VS and Novel,
              incorporated by reference as Exhibit 10(e) to the Current Report
              on Form 8-K, dated December 6, 2006 and filed with the SEC on
              December 12, 2006.

   10.32      Amended and Restated Employment Agreement, between the Registrant
              and Charan Behl, incorporated by reference as Exhibit 10.1 to the
              Current Report on Form 8-K, dated February 9, 2007 and filed with
              the SEC on February 14, 2007.

   10.33      Form of Securities Purchase Agreement, between the Registrant and
              the signatories thereto, incorporated by reference to Exhibit 10.1
              to the Current Report on Form 8-K, dated April 24, 2007 and filed
              with the SEC on April 25, 2007.

   10.34      Form of Registration Rights Agreement, between the Registrant and
              the signatories thereto, incorporated by reference to Exhibit 10.2
              to the Current Report on Form 8-K, dated April 24, 2007 and filed
              with the SEC on April 25, 2007.

   10.35      Form of Placement Agent Agreement, the Company and Oppenheimer &
              Company, Inc., incorporated by reference as Exhibit 10.3 to the
              Current Report on Form 8-K, dated April 24,


                                       77
<PAGE>

              2007 and filed with the SEC on April 25, 2007.

   10.36      Form of Securities Purchase Agreement, between the Registrant and
              the signatories thereto, incorporated by reference to Exhibit 10.1
              to the Current Report on Form 8-K, dated July 17, 2007 and filed
              with the SEC on July 23, 2007.

   10.37      Form of Registration Rights Agreement, between the Registrant and
              the signatories thereto, incorporated by reference as Exhibit 10.2
              to the Current Report on Form 8-K, dated July 17, 2007 and filed
              with the SEC on July 23, 2007.

   10.38      Consulting Agreement, dated as of July 27, 2007, between the
              Registrant and Wilstar Consultants, Inc., incorporated by
              reference as Exhibit 10.1 to the Quarterly Report on Form 10-Q for
              the period ending September 30, 2007 and filed with the SEC on
              November 14, 2007.

   10.39      Consulting Agreement, dated as of September 4, 2007, between the
              Registrant, Bridge Ventures, Inc. and Saggi Capital, Inc.,
              incorporated by reference as Exhibit 10.2 to the Quarterly Report
              on Form 10-Q for the period ending September 30, 2007 and filed
              with the SEC on November 14, 2007.

   10.40      Employment Agreement, dated as of January 3, 2008, by and between
              the Registrant and Dr. Stuart Apfel, incorporated by reference as
              Exhibit 10.1 to the Current Report on Form 8-K dated January 3,
              2008 and filed with the SEC on January 9, 2008.

    21        Subsidiaries of the Company.*

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

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

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

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

---------------------
* Filed herewith.

** As contemplated by SEC Release No. 33-8212, these exhibits are furnished with
this Annual Report on Form 10-K and are not deemed filed with the Securities and
Exchange Commission and are not incorporated by reference in any filing of Elite
Pharmaceuticals, Inc. under the Securities Act of 1933 or the Securities
Exchange Act of 1934, whether made before or after the date hereof and
irrespective of any general incorporation language in any such filings.


                                       78
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                              By:    /s/ Bernard Berk
                                                 -------------------------------
                                                     Bernard Berk
                                                     Chief Executive Officer

                              Dated: June 27, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                                   TITLE                                   DATE
---------                                   -----                                   ----

<S>                                <C>                                          <C>
/s/ Bernard Berk                   Chief Executive Officer                      June 27, 2008
--------------------------         (Principal Executive
Bernard Berk                       Officer)


/s/  Mark Gittelman                Chief Financial Officer                      June 27, 2008
--------------------------         and Treasurer (Principal
Mark I. Gittelman                  Financial and Accounting
                                   Officer)

                                   Director
--------------------------
Barry Dash

/s/  Robert J. Levenson            Director                                     June 27, 2008
--------------------------
Robert J. Levenson

/s/  Melvin Van Woert              Director                                     June 27, 2008
--------------------------
Melvin Van Woert
</TABLE>


                                       79
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006

                                    CONTENTS

                                                                      PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               F - 1

CONSOLIDATED BALANCE SHEETS                                           F - 2

CONSOLIDATED STATEMENTS OF OPERATIONS                                 F - 4

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                       F - 5

CONSOLIDATED STATEMENTS OF CASH FLOWS                                 F - 8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                       F - 9 TO F - 27











<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To Elite Pharmaceuticals, Inc.

We have audited the accompanying consolidated balance sheets of Elite
Pharmaceuticals, Inc. and Subsidiaries (the "Company") as of March 31, 2008 and
2007, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended March 31, 2008, 2007 and 2006. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the Consolidated Financial Statements referred to above present
fairly, in all material respects, the financial position of Elite
Pharmaceuticals, Inc. and Subsidiaries as of March 31, 2008 and 2007, and the
results of their operations and their cash flows for each of the three years
ended March 31, 2008, 2007 and 2006 in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that he
Company will continue as a going concern. As shown in the financial statements,
the Company has experiences significant losses and negative cash flows,
resulting in decreased capital and accumulated deficits. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters are described in Note 2.

                                                /s/ MILLER, ELLIN & COMPANY, LLP
                                                CERTIFIED PUBLIC ACCOUNTANTS


New York, New York
June 27, 2008


                                      F-1
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             MARCH 31, 2008 AND 2007

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                             2008                  2007
                                                                                             ----                  ----
<S>                                                                                       <C>                   <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                               $ 3,702,615           $   811,545
  Accounts receivable                                                                         148,484               215,837
  Inventories                                                                               2,124,420               812,969
  Prepaid expenses and other current assets                                                   177,972               306,395

                                                                                          -----------           -----------
    Total current assets                                                                    6,153,491             2,146,746

                                                                                          -----------           -----------
PROPERTY AND EQUIPMENT- net of accumulated
  depreciation and amortization                                                             5,008,701             4,861,601

                                                                                          -----------           -----------
INTANGIBLE ASSETS - net of accumulated amortization                                            35,276                42,809

                                                                                          -----------           -----------
OTHER ASSETS:
  Accrued interest receivable                                                                   4,744                   949
  Deposit on equipment                                                                         14,073                32,880
  Investment in Novel Laboratories Inc.                                                     3,329,322             1,367,768
  Security deposit                                                                             13,488                 6,980
  Restricted cash - debt service                                                              432,079               414,999
  EDA bond offering costs, net of accumulated
  amortization of $35,356 and $21,178, respectively                                           319,096               333,274
                                                                                          -----------           -----------
    Total other assets                                                                      4,112,802             2,156,850
                                                                                          -----------           -----------
    TOTAL ASSETS                                                                          $15,310,270           $ 9,208,006
                                                                                          ===========           ===========
</TABLE>

         The accompanying notes are an integral part of the Consolidated
                             Financial Statements.


                                      F-2
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             MARCH 31, 2008 AND 2007

                                   (CONTINUED)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                  2008              2007
                                                                                                  ----              ----
<S>                                                                                          <C>                 <C>
CURRENT LIABILITIES:
  Current portion of EDA bonds                                                               $    200,000        $    185,000
  Current portion of long-term debt                                                                 9,864                  --
  Accounts payable and accrued expenses                                                           850,442           1,717,458
  Dividends payable                                                                                63,255                  --
                                                                                             ------------        ------------
    Total current liabilities                                                                   1,123,561           1,902,458
                                                                                             ------------        ------------
LONG TERM DEBT:
  EDA bonds - net of current portion                                                            3,595,000           3,795,000
  Long-term debt, less current portion                                                             42,388                  --
                                                                                             ------------        ------------
    Total long-term liabilities                                                                 3,637,388           3,795,000
                                                                                             ------------        ------------
    Total liabilities                                                                           4,760,949           5,697,458
                                                                                             ------------        ------------

COMMITMENTS AND CONTINGENCIES:

STOCKHOLDERS' EQUITY:
  Preferred stock - $.01 par value;
    Authorized - 4,483,442  (originally  5,000,000 shares of which 516,558 shares of
    Series A Convertible Preferred Stock were retired) and 0 shares
    Outstanding as of March 31, 2008 and 2007, respectively                                            --                  --
    Authorized - 10,000 Convertible Series B Preferred Stock - issued and
    outstanding - 8,410 shares and 9,695 shares, respectively                                          84                  97

  Authorized 20,000 Series C Convertible Preferred stock issued and
    Outstanding - 19,155 and 0 shares, respectively                                                   192                  --
  Common Stock - $.01 par value;
    Authorized - 65,000,000
    Issued and outstanding - 23,131,035 and 20,799,102
    shares in 2008 and 2007, respectively                                                         231,310             207,991
  Subscription receivable                                                                         (75,000)            (75,000)
  Additional paid-in capital                                                                   91,889,978          66,495,618
  Accumulated deficit                                                                         (81,190,402)        (62,811,317)
                                                                                             ------------        ------------
                                                                                               10,856,162           3,817,389
  Treasury stock, at cost (100,000 shares)                                                       (306,841)           (306,841)
                                                                                             ------------        ------------
  Total stockholders' equity                                                                   10,549,321           3,510,548
                                                                                             ------------        ------------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                               $ 15,310,270        $  9,208,006
                                                                                             ============        ============
</TABLE>

         The accompanying notes are an integral part of the Consolidated
                             Financial Statements.


                                      F-3
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                     YEARS ENDED
                                                                                                      MARCH 31,
                                                                                                     -----------
                                                                                             2008         2007            2006
                                                                                             ----         ----            ----
<S>                                                                                    <C>             <C>             <C>
REVENUES:
  Manufacturing fees                                                                   $  1,173,890    $  1,038,916    $    494,231
  Royalties                                                                                 239,229         104,925          56,466
                                                                                       ------------    ------------    ------------
       Total revenues                                                                     1,413,119       1,143,841         550,697
Cost of Revenues                                                                          1,024,511         831,250              --
                                                                                       ------------    ------------    ------------
Gross Profit                                                                                388,608         312,591         550,697
OPERATING EXPENSES:
  Research and development                                                                5,795,779       5,777,865       4,343,890
  General and administrative                                                              2,434,803       2,196,154       1,726,626
  Depreciation and amortization                                                             524,893         408,814         486,687
                                                                                       ------------    ------------    ------------
                                                                                          8,755,475       8,382,833       6,557,203
                                                                                       ------------    ------------    ------------
LOSS FROM OPERATIONS                                                                     (8,366,867)     (8,070,242)     (6,006,506)
                                                                                       ------------    ------------    ------------
OTHER INCOME (EXPENSES):
  Interest income                                                                           356,274         286,603          90,862
  Sale of New Jersey tax losses                                                                  --         377,259         219,121
  Interest expense                                                                         (292,277)       (275,030)       (283,464)
  Non-cash compensation satisfied by issuance of
    stock options and warrants                                                           (2,607,470)     (3,479,070)       (902,927)
                                                                                       ------------    ------------    ------------
                                                                                         (2,543,473)     (3,090,238)       (876,408)
                                                                                       ------------    ------------    ------------
LOSS BEFORE PROVISION FOR INCOME
  TAXES                                                                                 (10,910,340)    (11,160,480)     (6,882,914)

Provision For Income Taxes                                                                   (3,120)         (1,000)         (1,000)
                                                                                       ------------    ------------    ------------

Loss from continuing operations                                                         (10,913,460)    (11,161,480)     (6,883,914)
Loss from discontinued operations                                                        (2,979,600)       (642,032)             --
                                                                                       ------------    ------------    ------------
NET LOSS                                                                                (13,893,060)    (11,803,512)     (6,883,914)
Preferred Stock Dividends                                                                (2,104,797)       (791,181)     (2,155,250)
                                                                                       ------------    ------------    ------------
NET LOSS ATTRIBUTABLE TO COMMON
  SHAREHOLDERS                                                                         $(15,997,857)   $(12,594,693)   $ (9,039,164)
                                                                                       ============    ============    ============
BASIC AND DILUTED LOSS PER COMMON
  SHARE                                                                                $       (.73)   $       (.64)   $       (.49)
                                                                                       ============    ============    ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING                                                                21,801,042      19,815,780      18,463,514
                                                                                       ============    ============    ============
</TABLE>
         The accompanying notes are an integral part of the Consolidated
                             Financial Statements.


                                      F-4
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                             PREFERRED STOCK         COMMON STOCK       ADDITIONAL            TREASURY STOCK
                                                                         PAID-IN
                              SHARES  AMOUNT      SHARES      AMOUNT     CAPITAL             SHARES      AMOUNT
                              ------  ------      ------      ------     -------             ------      ------
<S>                           <C>      <C>       <C>          <C>        <C>                <C>         <C>
BALANCES AT APRIL 1, 2005         --   $  --     18,022,183   $180,222   $ 47,006,379       (100,000)   $(306,841)
Net proceeds from issuance
of Series B
8% Convertible Preferred
Stock and warrants            10,000   $ 100             --         --      8,792,569             --           --
Non-cash compensation
satisfied by the
issuance of stock, options
and warrants                      --      --             --         --        902,927
Exercise of stock options         --      --         20,000        200         39,800             --           --
Exercise of stock warrants        --      --      1,147,976     11,480      1,241,515             --           --
Net loss                          --      --             --         --             --             --           --
Dividends                         --      --             --         --      2,121,917             --           --
                              ------   -----     ----------   --------   ------------       --------    ---------
BALANCES AT MARCH 31, 2006    10,000   $ 100     19,190,159   $191,902   $ 60,105,107       (100,000)   $(306,841)
                              ======   =====     ==========   ========   ============       ========    =========

<CAPTION>

                             ACCUMULATED   STOCKHOLDERS'
                               DEFICIT        EQUITY
                               -------        ------
<S>                           <C>             <C>
BALANCES AT APRIL 1, 2005     $(41,177,459)   $  5,702,301
Net proceeds from issuance
of Series B
8% Convertible Preferred
Stock and warrants                      --       8,792,669
Non-cash compensation
satisfied by the
issuance of stock, options
and warrants                                       902,927
Exercise of stock options               --          40,000
Exercise of stock warrants              --       1,252,995
Net loss                        (6,883,914)     (6,883,914)
Dividends                       (2,155,250)        (33,333)
                              ------------    ------------
BALANCES AT MARCH 31, 2006    $(50,216,623)   $  9,773,645
                              ============    ============
</TABLE>



         The accompanying notes are an integral part of the Consolidated
                             Financial Statements.


                                      F-5
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                          ADDITIONAL
                                  PREFERRED STOCK                 COMMON STOCK           SUBSCRIPTION         PAID-IN
                                     SHARES     AMOUNT         SHARES       AMOUNT        RECEIVABLE          CAPITAL
                                     ------     ------         ------       ------        ----------      -----------
<S>                                 <C>       <C>          <C>          <C>                            <C>
BALANCES AT APRIL 1, 2006           10,000    $   100      19,190,159   $    191,902             --    $ 60,105,107
Equity Investment in Company            --         --         957,396          9,574             --       1,990,426
Conversion of Preferred to Common     (305)        (3)        135,555          1,356             --          (1,353)
Conversion of Warrants to Common        --         --          84,430            844             --            (844)
Exercise of Stock Options               --         --          59,000            590             --          87,910
Non-cash compensation through
issuance of stock options
and warrants                            --         --              --             --             --       3,479,070
Sale of Warrants                        --         --              --             --        (75,000)         75,000
Costs associated with Raising
Capital                                 --         --              --             --             --         (26,347)
Net loss                                --         --              --             --             --              --
Dividends                               --         --         372,562          3,725             --         786,649
                                              -------    ------------   ------------   ------------    ------------
BALANCES AT MARCH 31, 2007           9,695    $    97      20,799,102   $    207,991        (75,000)   $ 66,495,618
                                    ======    =======    ============   ============   ============    ============

<CAPTION>

                                       TREASURY STOCK              ACCUMULATED     STOCKHOLDERS'
                                   SHARES            AMOUNT          DEFICIT         EQUITY
                                   ------            ------          -------         ------
<S>                                   <C>         <C>             <C>             <C>
BALANCES AT APRIL 1, 2006             (100,000)   $   (306,841)   $(50,216,623)   $  9,773,645
Equity Investment in Company                --              --              --       2,000,000
Conversion of Preferred to Common           --              --              --              --
Conversion of Warrants to Common            --              --              --              --
Exercise of Stock Options                   --              --              --          88,500
Non-cash compensation through
issuance of stock options
and warrants                                --              --              --       3,479,070
Sale of Warrants                            --              --              --              --
Costs associated with Raising
Capital                                     --              --              --         (26,347)
Net loss                                    --              --     (11,803,512)     (11,803,51)
Dividends                                   --              --        (791,182)           (808)
                                  ------------    ------------    ------------    ------------
BALANCES AT MARCH 31, 2007            (100,000)   $   (306,841)   $(62,811,317)   $ (3,510,548)
                                  ============    ============    ============    ============
</TABLE>



         The accompanying notes are an integral part of the Consolidated
                             Financial Statements.


                                      F-6
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                      SERIES B                    SERIES C
                                                  PREFERRED STOCK              PREFERRED STOCK                COMMON STOCK
                                               SHARES         AMOUNT        SHARES        AMOUNT          SHARES         AMOUNT
                                               ------         ------        ------        ------          ------         ------

<S>                                            <C>      <C>                   <C>       <C>               <C>          <C>
BALANCE AT MARCH 31, 2007                      9,695    $         97              --    $         --      20,799,102   $    207,991

Sale of Series C Preferred Stock and              --              --          20,000             200              --             --
Warrants

Conversion of Preferred to Common             (1,285)            (13)           (845)             (8)        937,992          9,380

Exercise of Stock Options and
  Warrants                                        --              --              --              --         280,424          2,804

Non-cash compensation through
  Issuance of stock options and
      warrants                                    --              --              --              --              --             --

Beneficial Conversion                             --              --              --              --              --             --

Costs associated with Raising Capital             --              --              --              --              --             --

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

Dividends                                         --              --              --              --       1,113,517         11,135
                                        ------------    ------------    ------------    ------------    ------------   ------------

BALANCE AT MARCH 31, 2008                      8,410    $         84          19,155    $        192      23,131,035   $    231,310
                                        ============    ============    ============    ============    ============   ============

<CAPTION>
                                                          ADDITIONAL
                                       SUBSCRIPTION         PAID-IN              TREASURY STOCK         ACCUMULATED    STOCKHOLDERS'
                                        RECEIVABLE          CAPITAL       SHARES             AMOUNT       DEFICIT          EQUITY
                                        ----------          -------       ------            -------       -------          ------

<S>                                    <C>             <C>                 <C>         <C>             <C>             <C>
BALANCE AT MARCH 31, 2007              $    (75,000)   $ 66,495,618        (100,000)   $   (306,841)   $(62,811,317)   $  3,510,548

Sale of Series C Preferred Stock and             --      19,999,800              --              --              --      20,000,000
Warrants

Conversion of Preferred to Common                --          (9,359)             --              --              --              --

Exercise of Stock Options and
  Warrants                                       --         371,701              --              --              --         374,505

Non-cash compensation through
  Issuance of stock options and
      warrants                                   --       2,607,470              --              --              --       2,607,470

Beneficial Conversion                            --       2,384,609              --              --      (2,384,609)             --

Costs associated with Raising Capital            --      (1,576,055)             --              --              --      (1,576,055)

Net loss                                         --              --              --              --     (13,893,060)    (13,893,060)

Dividends                                        --       1,616,194              --              --      (2,101,416)       (474,087)
                                       ------------    ------------    ------------    ------------    ------------    ------------

BALANCE AT MARCH 31, 2008              $    (75,000)   $ 91,889,978        (100,000)   $   (306,841)   $(81,190,402)   $(10,549,321)
                                       ============    ============    ============    ============    ============    ============
</TABLE>



         The accompanying notes are an integral part of the Consolidated
                             Financial Statements.


                                      F-7
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                 YEARS ENDED
                                                                                                  MARCH 31,
                                                                                            ---------------------
                                                                                      2008                2007           2006
                                                                                      ----                ----           ----
<S>                                                                               <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Loss from Continuing Operations                                                 $(10,913,460)   $(11,161,480)   $ (6,883,914)
  Adjustments to reconcile net loss to cash used in operating activities:
    Depreciation and amortization                                                      413,701         408,814         486,687
    Non-cash compensation satisfied by issuance of stock,
      options and warrants                                                           2,607,470       3,479,070         902,927
  Changes in assets and liabilities:
    Accounts receivable                                                                 67,353        (215,837)        142,113
    Accrued interest receivable                                                         (3,795)           (949)             --
    Inventories                                                                     (1,311,451)       (485,964)       (124,380)
    Prepaid expenses and other current assets                                          128,423        (162,767)            652
    Security Deposit                                                                    (6,508)             --          (6,980)
    Accounts payable, accrued expenses and other current liabilities                  (867,016)        (22,805)        857,346
                                                                                  ------------    ------------    ------------

NET CASH USED IN CONTINUING OPERATING ACTIVITIES                                    (9,885,283)     (8,161,918)     (4,625,549)
                                                                                  ------------    ------------    ------------
   Discontinued Operations

     Loss from Discontinued Operations                                              (2,979,600)       (642,032)             --
     Equity in loss of discontinued operations                                       3,030,606         642,032              --
                                                                                  ------------    ------------    ------------
NET CASH PROVIDED BY DISCONTINUED OPERATIONS                                            51,006              --              --
                                                                                  ------------    ------------    ------------
NET CASH USED IN OPERATING ACTIVITIES                                               (9,834,277)     (8,161,918)     (4,625,549)
                                                                                  ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Increase in intangible assets due to patent costs                                         --          (5,470)             --
  Deposits to restricted cash                                                          (17,080)             --      (1,175,971)
  Release of restricted cash                                                                --       1,174,397              --
  Payment of deposit for manufacturing equipment                                       (14,703)        (32,880)             --
  Purchases of property and equipment                                                 (505,580)       (925,150)       (448,280)
  Investment in Novel Laboratories, Inc.                                            (4,992,160)     (2,009,800)             --
                                                                                  ------------    ------------    ------------
NET CASH USED IN INVESTING ACTIVITIES                                               (5,529,523)     (1,798,903)     (1,624,251)
                                                                                  ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments of bank loans                                                              (5,752)             --              --
  Dividends paid                                                                      (410,832)        (34,141)             --
  Proceeds from issuance of Common Stock and warrants                                       --       2,000,000              --
  Principal repayments of NJEDA bonds                                                 (185,000)       (175,000)     (2,345,000)
  Proceeds from issuance of Series C 8% Convertible Preferred
    Stock and Warrants                                                              20,000,000              --              --
  Costs associated with raising capital                                             (1,576,055)        (26,347)             --
  Proceeds from bank loan                                                               58,004              --              --
  Proceeds - NJEDA Tax Exempt Bonds                                                         --              --       4,155,000
  Payment - NJEDA Bond Offering Costs                                                       --              --        (354,452)
  Proceeds from issuance of Series B 8% Convertible Preferred
    Stock and warrants                                                                      --              --       8,792,669
  Repayments of equipment note                                                              --              --        (315,074)
  Prepaid interest                                                                          --              --          41,013
  Proceeds from exercise of stock options                                               61,500          88,500          40,000
  Proceeds from exercise of stock warrants                                             313,005              --       1,252,995
                                                                                  ------------    ------------    ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                           18,254,870       1,853,012      11,267,151
                                                                                  ------------    ------------    ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                              2,891,070      (8,107,809)      5,017,351
CASH AND CASH EQUIVALENTS - beginning of period                                        811,545       8,919,354       3,902,003
                                                                                  ------------    ------------    ------------
CASH AND CASH EQUIVALENTS - end of period                                         $  3,702,615    $    811,545    $  8,919,354
                                                                                  ============    ============    ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for interest                                                          $    293,404    $    275,554    $    275,071
  Cash paid (received) for income taxes                                                  3,120        (376,259)       (218,121)

SCHEDULES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Preferred Stock dividends of $1,627,328, $791,182 and $120,675 paid by
    issuance of 1,113,517, 372,562 and 64,033 shares of Common Stock              $         --    $         --    $         --
  Utilization of equipment deposit towards purchase of equipment                        32,880              --              --
  Dividends accrued on preferred stock                                                      --              --          33,333
  Beneficial Conversion Dividend                                                     2,384,609              --       2,121,917
</TABLE>


         The accompanying notes are an integral part of the Consolidated
                             Financial Statements.


                                      F-8
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Elite
Pharmaceuticals, Inc. and its consolidated subsidiaries, (collectively the
"Company") including its wholly-owned subsidiaries, Elite Laboratories, Inc.
("Elite Labs") and Elite Research, Inc. ("ERI") for the years ended March 31,
2008, 2007 and 2006 and its variable interest entity, Novel Laboratories, Inc.
("Novel"). During the quarter ended December 31, 2007, Novel ceased to be a
variable interest entity of Elite. Accordingly, the information in this 10K has
been prepared as if Elite divested of Novel as a wholly owned subsidiary on
October 1, 2007 and the operations are being reflected as a discontinued
operation. Our Company consolidates all entities that we control by ownership of
a majority voting interest. As of March 31, 2008, the financial statements of
all wholly-owned entities are consolidated and all significant intercompany
accounts are eliminated upon consolidation.

NATURE OF BUSINESS

Elite Pharmaceuticals, Inc. was incorporated on October 1, 1997 under the laws
of the State of Delaware, and its wholly-owned subsidiary Elite Laboratories,
Inc. was incorporated on August 23, 1990 under the laws of the State of
Delaware. Elite Labs engages primarily in researching, developing and licensing
proprietary controlled-release drug delivery systems and products. The Company
is also equipped to manufacture controlled-release products on a contract basis
for third parties and itself if and when the products are approved; however the
Company has concentrated on developing orally administered controlled-release
products. These products include drugs that cover therapeutic areas for pain,
allergy and infection. The Company also engages in research and development
activities for the purpose of obtaining Food and Drug Administration approval,
and, thereafter, commercially exploiting generic and new controlled-release
pharmaceutical products. The Company also engages in contract research and
development on behalf of other pharmaceutical companies.

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.

INVENTORIES

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

LONG-LIVED ASSETS

The Company periodically evaluates the fair value of long-lived assets, which
include property and equipment and intangibles, whenever events or changes in
circumstances indicate that its carrying amounts may not be recoverable. Such
conditions may include an economic downturn or a change in the assessment of
future operations. A charge for impairment is recognized whenever the carrying
amount of a long-lived asset exceeds its fair value. Management has determined
that no impairment of long-lived assets has occurred.

Property and equipment are stated at cost. Depreciation is provided on the
straight-line method based on the estimated useful lives of the respective
assets which range from five to forty years. Major repairs or improvements are
capitalized. Minor replacements and maintenance and repairs which do not improve
or extend asset lives are expensed currently.

Upon retirement or other disposition of assets, the cost and related accumulated
depreciation are removed from the accounts and the resulting gain or loss, if
any, is recognized in income.

Costs incurred to acquire intangible assets such as for the application of
patents and trademarks 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 and trademarks. Such costs are
charged to expense if the patent or trademark is unsuccessful.


                                      F-9
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RESEARCH AND DEVELOPMENT

Research and development expenditures are charged to expense as incurred.

CONCENTRATION OF CREDIT RISK

The Company maintains cash balances, which, at times, may exceed the amounts
insured by the Federal Deposit Insurance Corp. Management does not believe that
there is any significant risk of losses.

The Company in the normal course of business extends credit to its customers
based on contract terms and performs ongoing credit evaluations. An allowance
for doubtful accounts due to uncertainty of collectability is established based
on historical collection experience. Amounts are written off when payment is not
received after exhaustive collection efforts.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant estimates made by
management include, but are not limited to, the recognition of revenue, the
amount of the allowance for doubtful accounts receivable and the fair value of
intangible assets and stock-based awards.

INCOME TAXES

The Company uses the liability method for reporting income taxes, under which
current and deferred tax liabilities and assets are recorded in accordance with
enacted tax laws and rates. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. Under
the liability method, the amounts of deferred tax liabilities and assets at the
end of each period are determined using the tax rate expected to be in effect
when taxes are actually paid or recovered. Further tax benefits are recognized
when it is more likely than not that such benefits will be realized. Valuation
allowances are provided to reduce deferred tax assets to the amount considered
likely to be realized.

Effective April 1, 2007, the Company adopted the provisions of FASB's
Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB No. 109." Fin 48 prescribes a recognition threshold and
measurement attribute for how a company should recognize, measure, present, and
disclose in its financial statements uncertain tax positions that the company
has taken or expects to take on a tax return. FIN 48 requires that the financial
statements reflect expected future tax consequences of such positions presuming
the taxing authorities' full knowledge of the position and all relevant facts,
but without considering time values. No such amounts were accrued for April 1,
2007. Additionally, no adjustments related to uncertain tax positions were
recognized during the year ended March 31, 2008.

The Company recognizes interest and penalties related to uncertain tax positions
as a reduction of the income tax benefit. No interest and penalties related to
uncertain tax positions were accrued as of March 31, 2008.

The Company operates in multiple tax jurisdictions within the United States of
America. Although we do not believe that we are currently under examination in
any of our major tax jurisdictions, we remain subject to examination in all of
our tax jurisdiction until the applicable statues of limitation expire. As of
March 31, 2008, a summary of the tax years that remain subject to examination in
our major tax jurisdictions are: United States - Federal and State - 2004 and
forward. The Company does not expect to have a material change to unrecognized
tax positions within the next twelve months.


                                      F-10
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EARNINGS PER COMMON SHARE

Basic earnings per common share is calculated by dividing net earnings by the
weighted average number of shares outstanding during each period presented.
Diluted earnings per share is calculated by dividing earnings by the weighted
average number of shares and common stock equivalents. The Company's common
stock equivalents, consist of options, warrants and convertible securities.

REVENUE RECOGNITION

Revenues derived from providing research and development services under
contracts with other pharmaceutical companies are recognized when earned. These
contracts provide for non-refundable upfront and milestone payments. Because no
discrete earnings event has occurred when the upfront payment is received, that
amount is deferred until the achievement of a defined milestone. Each
nonrefundable milestone payment is recognized as revenue when the performance
criteria for that milestone have been met. Under each contract, the milestones
are defined, substantive effort is required to achieve the milestone, the amount
of the non-refundable milestone payment is reasonable, commensurate with the
effort expended, and achievement of the milestone is reasonably assured.

Revenues earned by licensing certain pharmaceutical products developed by the
Company are recognized at the beginning of a license term when the Company's
customer has legal right to the use of the product. To date, no revenues have
been earned by licensing products and there are no continuing obligations under
any licensing agreements.

Revenues derived from royalties to the extent that they cannot be reasonably
estimated are recognized when the payment is received. Revenues earned under
manufacturing agreements with other pharmaceutical companies are recognized when
product is shipped.

TREASURY STOCK

The Company records common shares purchased and held in treasury at cost.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of current assets and liabilities approximate fair value
due to the short-term nature of these instruments. The carrying amounts of
noncurrent assets are reasonable estimates of their fair values based on
management's evaluation of future cash flows. The long-term liabilities are
carried at amounts that approximate fair value based on borrowing rates
available to the Company for obligations with similar terms, degrees of risk and
remaining maturities.

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with the
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," which
provided guidance for the recognition of compensation expense as it related to
the issuance of stock options and warrants. In addition, the Company adopted the
provisions of SFAS No. 148, "Accounting for Stock-Based Compensation -Transition
and Disclosure - an amendment of SFAS No. 123." SFAS No. 148 amended SFAS No.
123 to provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation
provided by SFAS No. 123. As permitted by SFAS No. 148, the Company has adopted
the fair value method recommended by SFAS No. 123 to effect a change in
accounting for stock-based employee compensation. In addition, the Company
adopted the provisions of SFAS No. 123R, "Share-Based Payment," which revised
SFAS No. 123 to require all share-based payments to employees, including grants
of employee stock options, to be recognized based on their fair values.

The compensation expense recognized for the years ended March 31, 2008, 2007 and
2006 was $2,607,470, $3,479,070 and $902,927, respectively.


                                      F-11
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

There are a number of recently issued, but not yet effective statements of
Financial Accounting Standards, FASB Staff Positions, Consensus of the Emerging
Issues Task Force, and an AICPA Statement of Position. The Company does not
believe that adoption of any of those pronouncements will have a material effect
on its Consolidated Financial Statements.

RECLASSIFICATIONS

Certain accounts and amounts in the 2006 and 2007 financial statements have been
reclassified in order to conform with the 2008 presentation. These
reclassifications have no effect on net income.

NOTE 2 - MANAGEMENT'S LIQUIDITY PLANS

The Company reported net losses of $13,893,060, $11,803,512 and $6,883,914 for
the fiscal years ended March 31, 2008, 2007 and 2006, respectively. At March 31,
2008, the Company had an accumulated deficit of approximately $81.2 million,
consolidated assets of approximately $15.3 million, stockholders' equity of
approximately $10.5 million, and working capital of approximately $5 million.
The Company has not generated any significant revenue to date. During the fiscal
year ended March 31, 2008, the Company raised $18,423,945 of net proceeds from
the sale of Series C Preferred Stock.

The Company's strategy is to continue to be engaged in the development and
manufacturing of oral controlled-release products. It will continue to develop
generic versions of controlled-release drug products with high barriers to entry
and assist partner companies in the life cycle management of products to improve
off-patent drug products. The Company has two products currently being sold
commercially and a pipeline of five products under development. Of the products
under development, ELI-216, an abuse deterrent oxycodone product, and ELI-154, a
once daily oxycodone product, are in clinical trials and we have completed pilot
studies on two of our generic product candidates.

As of March 31, 2008, the Company's principal source of liquidity was
approximately $3,703,000 of cash and cash equivalents. As of March 31, 2008, the
Company had approximately six months of cash available based on its current
operations. The Company may also receive funds through the exercise of
outstanding stock options and warrants in addition to funds that may be
generated from the potential sale of New Jersey tax losses. There can be no
assurance that proceeds from the sale of the tax losses and from the exercise,
if any, of outstanding warrants or options will be material.

The Company retained an investment banking firm in 2008 to assist the Company in
connection with potential acquisitions, strategic alliances with other
pharmaceutical companies, advice to future financings and introductions to key
parties in capital markets. In addition the Company entered into an engagement
agreement with Placement Agents to act as co-leads for a private financing
between $10-15 million.

There is no assurance that the Company's business strategy will be successfully
implemented, however with the Company's existing working capital levels, it will
be able to continue operations at least through the end of fiscal 2009.


                                      F-12
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006

NOTE 3- PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2008 and 2007 consists of the following:

<TABLE>
<CAPTION>
                                                                                                   2008                     2007
                                                                                                   ----                     ----
<S>                                                                                           <C>                       <C>
Laboratory manufacturing, and warehouse equipment                                             $ 5,075,215               $ 4,648,083
Office equipment                                                                                   53,607                    32,981
Furniture and fixtures                                                                             62,406                    51,781
Transportation equipment                                                                           66,855                     4,500
Land, building and improvements                                                                 2,463,939                 2,385,401
Equipment under capital lease                                                                     168,179                   168,179
                                                                                              -----------               -----------
                                                                                                7,890,201                 7,290,925
Less: Accumulated depreciation and amortization                                                (2,881,500)               (2,429,324)
                                                                                              -----------               -----------
                                                                                              $ 5,008,701               $ 4,861,601
                                                                                              ===========               ===========
</TABLE>

Depreciation and amortization expense amounted to $413,701, $403,698 and
$333,748 for the years ended March 31, 2008, 2007 and 2006, respectively.

NOTE 4 - INTANGIBLE ASSETS

Intangible assets at March 31, 2008 and 2007, consist of the following:

<TABLE>
<CAPTION>
                                                                                                2008                         2007
                                                                                                ----                         ----
<S>                                                                                          <C>                          <C>
Patents                                                                                      $ 151,300                    $ 151,300
Trademarks                                                                                       8,120                        8,120
                                                                                             ---------                    ---------
                                                                                               159,420                      159,420
Less: Accumulated amortization                                                                (124,144)                    (116,611)
                                                                                             ---------                    ---------
                                                                                             $  35,276                    $  42,809
                                                                                             =========                    =========
</TABLE>

Amortization of intangible assets amounted to $21,711, $22,118 and $21,727 for
the years ended March 31, 2008, 2007 and 2006, respectively.


                                      F-13
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 5 - LONG TERM DEBT

On September 2, 1999, the Company completed the issuance of tax exempt bonds by
the New Jersey Economic Development Authority ("NJEDA" or the "Authority"). The
aggregate proceeds from the issuance of the fifteen year term bonds was
$3,000,000. Interest on the bonds accrues at 7.75% per annum. A portion of the
proceeds were used by the Company to refinance its land and building, and the
remaining proceeds were intended to be used for the purchase of manufacturing
equipment and building improvements.

On August 31, 2005, the Company successfully completed a refinancing of the 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
March 31, 2008, 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 financing costs
amounted to $14,178, $14,178 and $7,000 for the years ended March 31, 2008, 2007
and 2006, respectively.

Bond issue costs of the 1999 bonds were being amortized over the term of those
bonds. Such amortization amounted to $5,500 in the year ended March 31, 2006.
Upon the refinancing the remaining unamortized issue costs of $118,712 were
charged to expenses.

As of March 31, 2008, $1,274,311 has been requisitioned and deposited into
operating accounts to fund the purchase of equipment and to upgrade our
manufacturing facility.


                                      F-14
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 5 - LONG TERM DEBT (CONTINUED)

Bond financings consisted of the following at March 31:

<TABLE>
<CAPTION>
                                                                     2008           2007
                                                                 -----------    -----------
<S>                                                              <C>            <C>
Refinanced NJEDA Bonds                                           $ 3,795,000    $ 3,980,000
                                                                 -----------    -----------
                                                                   3,795,000      3,980,000
Current portion                                                     (200,000)      (185,000)
                                                                 -----------    -----------
Long term portion, net of current maturities                     $ 3,595,000    $ 3,795,000
                                                                 ===========    ===========
</TABLE>

Maturities of Bonds for the next five years follow:

                      YEAR ENDING MARCH 31,             AMOUNT
                      ---------------------             ------
                               2009                  $   200,000
                               2010                      210,000
                               2011                      225,000
                               2012                      245,000
                               2013                      260,000
                            Thereafter                 2,655,000
                                                     -----------
                                                     $ 3,795,000
                                                     ===========

In 2004, the Company entered into a loan and financing agreement to purchase
machinery and equipment. The $400,000 loan was payable in 36 monthly
installments of $13,671, each, including principal and interest at 14% annum. As
part of the agreement, the Company issued to the lender's designees warrants to
purchase 50,000 shares of the Company's Common Stock at $4.20 per share. The
warrants vested immediately and their cost of $41,252 was charged to expense in
the year ended March 31, 2005. Proceeds from the refinancing of the Company's
EDA Bonds were used to pay off the unpaid portion of the loan.


                                      F-15
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 5 - LONG TERM DEBT (CONTINUED)

Long-term debt consists of the following at March 31:

<TABLE>
<CAPTION>
                                                                               2008           2007
                                                                           -----------    -----------
<S>                                                                        <C>            <C>
Note payable to First Niagara Bank in 60 monthly  installments of $1,180
including interest at 9.00%; final payment September, 2012; secured by
vehicle purchased.                                                         $    52,252    $        --
                                                                           -----------    -----------
                                                                                52,252             --
Less Current Portion                                                            (9,864)            --
                                                                           -----------    -----------
LONG-TERM DEBT, LESS CURRENT PORTION                                       $    42,388    $        --
                                                                           ===========    ===========
</TABLE>

Maturities of long-term debt in each of the next five years are as follows:

                     YEAR ENDED MARCH 31,                AMOUNT
                     --------------------                ------

                             2009                     $      9,864
                             2010                           10,788
                             2011                           11,798
                             2012                           12,904
                             2013                            6,898
                                                      ------------
                                                      $     52,252
                                                      ============

NOTE 6 - INCOME TAXES

The components of the provision for income taxes are as follows:

                                                    YEAR ENDED MARCH 31,
                                                2008         2007         2006
                                              ------       ------       ------

Federal:
   Current                                    $   --       $   --       $   --
   Deferred                                       --           --           --
                                              ------       ------       ------
                                                  --           --           --
                                              ------       ------       ------
State:
   Current                                     3,120        1,770        1,000
   Deferred                                       --           --           --
                                              ------       ------       ------
                                               3,120        1,770        1,000
                                              ------       ------       ------
                                              $3,120       $1,770       $1,000
                                              ======       ======       ======

During the years ended March 31, 2007 and 2006 the Company received approval for
the sale of an additional $4,818,122 and $2,798,478 of New Jersey net-operating
losses under the Technology Tax Certificate Transfer Program sponsored by the
New Jersey Economic Development Authority (NJEDA). The total tax benefits
received during the years ended March 31, 2007 and 2006 were $377,259 and
$219,121, respectively and are recorded as other income in the statements of
operations.


                                      F-16
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 6 - INCOME TAXES (CONTINUED)

The major  components  of deferred  tax assets at March 31, 2008 and 2007 are as
follows:

                                                       2008            2007
                                                   ------------    ------------

Net operating loss carry forwards                  $ 15,128,722    $ 11,733,884

Valuation allowance                                 (15,128,722)    (11,733,884)
                                                   ------------    ------------
                                                   $         --    $         --
                                                   ============    ============

At March 31, 2008 and 2007, a 100% valuation allowance is provided, as it is
uncertain if the deferred tax assets will provide any future benefits because of
the uncertainty about the Company's ability to generate the future taxable
income necessary to use the net operating loss carryforwards. The valuation
allowance increased during 2008, 2007 and 2006 by $3,394,838, $948,084 and
$2,363,575, respectively.

At March 31, 2008, for federal income tax purposes, the Company has unused net
operating loss carryforwards of approximately $44,496,241 expiring in fiscal
years ending in 2009 through 2023. For state tax purposes, the Company has
$23,665,140 of unused net operating losses, which are net of the $19,784,360 of
the New Jersey net-operating losses sold, as discussed above.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

EMPLOYMENT AGREEMENTS

On January 3, 2008, the Company entered into an employment agreement with Dr.
Stuart Apfel (the "Employment Agreement") providing for Dr. Apfel to serve as
the Company's Chief Medical Officer through January 3, 2009 and automatically
renewable for one year periods thereafter unless terminated by Dr. Apfel or the
Company upon at least 60 days notice prior to the end of the then scheduled
expiration date.

Dr. Apfel has an annual base salary of $220,000 and will be entitled to a
discretionary bonus following the end of each calendar year of up to 50% of Dr.
Apfel's then annual base salary.

Additionally, the Company has granted to Dr. Apfel under the 2004 Plan fully
vested options to purchase 120,000 shares of Common Stock at an exercise price
of $1.75 per share.

The Company has granted to Dr. Apfel under the 2004 Plan options to purchase up
to an additional 280,000 shares of Common Stock ("Milestone Options") at an
exercise price of $1.75 per share. Such Milestone Options vest and become
exercisable as follows: (A) 80,000 shares upon the successful completion, as
determined by the Board, of a Company sponsored Phase III clinical trial of the
Company's developmental drug product referred to as ELI-216; (B) 80,000 shares
upon the successful completion, as determined by the Board, of a Company
sponsored Phase III clinical trial of the Company's developmental drug product
referred to as ELI-154; (C) 80,000 shares upon the successful completion, as
determined by the Board, by the Company during the term of the Employment
Agreement of a Company sponsored long-term safety study for the
Company'sdevelopmental drug product referred to as ELI-216; and (D) 40,000
shares upon the closing of an exclusive product license for the United States
national market, or product sale transaction of all of the Company's ownership
rights, for either ELI-216 or ELI-154. Upon the earlier to occur of (x) January
3, 2017 and (y) the termination of Dr. Apfel's employment hereunder, all
unvested Milestone Options granted shall automatically terminate and all vested
but unexercised Milestone Options shall terminate to the extent unexercised
within ninety (90) days of such date and in accordance with the terms of the
stock option agreement by and between Dr. Apfel and the Company with respect to
the Milestone Options and the 2004 Plan. The shares of Common Stock issuable
upon exercise of the Milestone Options are subject to an effective registration
statement filed with the Securities and Exchange Commission.


                                      F-17
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

CHIEF SCIENTIFIC OFFICER

On April 24, 2008, Dr. Subramanian resigned as the Acting Chief Scientific
Officer of the Company and Dr. Apfel was appointed the Chief Scientific Officer
of the Company. The appointment of Dr. Apfel did not modify his employment
agreement in any way.

ALLIANCE AGREEMENT

On December 6, 2006, the Company entered into a Strategic Alliance Agreement
(the "ALLIANCE AGREEMENT") with Dr. Veerappan S. Subramanian ("VS") and VGS
Pharma, LLC, a Delaware limited liability company ("VGS"), under which (i) VS
was appointed to the Company's Board of Directors, (ii) VGS made a $2,000,000
equity investment in the Company, (iii) VS was engaged to serve as strategic
advisor on the research, development and commercialization of the Company's
existing pipeline and (iv) the Company and VGS formed Novel Laboratories Inc., a
Delaware corporation ("Novel"), as a separate specialty pharmaceutical company
for the research, development, manufacturing, licensing, acquisition and
marketing of specialty generic pharmaceuticals.

Pursuant to the Alliance Agreement, Novel entered into an employment agreement
with VS and the Company entered into (i) an Advisory Agreement with VS, (ii) a
Registration Rights Agreement with VGS and VS, and (iii) a Stockholders
Agreement with VS, VGS and Novel.

The specialty pharmaceutical product initiative of the strategic alliance
between the Company and VS is to be conducted by Novel, of which the Company
acquired 49% and VGS acquired 51% of its Class A Voting Common Stock for $9,800
and $10,200 respectively. Pursuant to the Alliance Agreement, VGS acquired for
$2,000,000: (i) 957,396 shares of the Company's Common Stock at approximately
$2.089 per share and (ii) a five year Warrant to purchase 478,698 shares of the
Company's Common Stock, for cash, at an exercise price of $3.00 per share,
subject to adjustment upon the occurrence of certain events.

The Company contributed $5,000,000 to Novel. During the three months ended
December 31, 2007, the Company elected not to fund its remaining contributions
to Novel upon the terms set forth in the Alliance Agreement because the Company
had reached agreement with the FDA under a Special Protocol Assessment on the
Phase III clinical trial of ELI-216, the Company's Abuse Deterrent Oxycodone
product and determined that its funds would be better used to support the
clinical trials for ELI-216.

The Company and VGS negotiated alternative structures that would permit
investments by the Company at valuations which differed from those set forth in
the Alliance Agreement, however VGS and the Company were unable to agree upon an
alternative acceptable to both parties. Accordingly, upon the Company's
determination not to fund its remaining contributions to Novel at the valuation
set forth in the Alliance Agreement, VGS exercised its rights pursuant to the
Stockholders Agreement to purchase from the Company, its shares of Class A
Voting Common Stock of Novel proportionate to the amount of remaining
contributions which were not funded by the Company. As a result, the Company's
remaining ownership interest in Class A Voting Common Stock of Novel is
approximately 10% of the outstanding shares of Class A Voting Common Stock of
Novel.


                                      F-18
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

ADVISORY AGREEMENT

The Advisory Agreement obligated VS to provide advisory services to the Company,
including but not limited, to assist in the implementation of current and new
drug product development projects of the Company and assisting in the Company's
recruitment of additional R&D staff members. As an inducement to enter into the
agreement, the Company granted VS a non-qualified stock option to purchase up to
1,750,000 shares of Common Stock (the "Option Shares") at a price of $2.13 per
share. The option vests in 250,000 share installments, the first immediately,
the second on May 6, 2007, the third on December 6, 2007, the fourth upon the
Company's acceptance of the Initial Business Plan of Novel, and the other
installments vesting on the accomplishment of certain milestones with respect to
the first or second drug product developed by the Company (excluding drug
products of Novel) on or after February 4, 2007, under the advisory services
provided to the Company. As of December 31, 2007, 1,000,000 of the options have
vested and the remaining 750,000 unvested options terminated as a result of the
Company owning in the aggregate less than 20% of the outstanding capital stock
of Novel.

The option terminates on December 6, 2016, or 90 days following a termination of
his advisory services to the Company or his employment by Novel other than a
termination without Cause or by VS for Good Reason or 48 months after the
termination of his advisory services under the Advisory Agreement or his
employment under the employment agreement as a result of: (i) a termination by
the Company of the Advisory Agreement or by Novel of the employment agreement
without Cause or by VS without Good Reason or (ii) the post-December 6, 2007,
termination of the term of the Advisory Agreement or of the Novel employment
agreement.

Effective July 10, 2007, the Acquired Company Shares, the Option Shares and
Warrant Shares were registered for reoffering under the Securities Act of 1933,
as amended (the "Act").

CONSULTING AGREEMENTS

On July 27, 2007, the Company entered into a consulting agreement with Willstar
Consultants, Inc. ("Willstar") for advice pertaining to overall strategic
planning, business opportunities, acquisition policy investment and banking
relationships and stockholder matters. The term of the agreement is for 120 days
at a fee of $50,000. In addition Willstar received 90,000 non-qualified stock
options, which vest over a three year period from the time of grant. These
options are exercisable at $2.50 per option. Expenses incurred under this
agreement amounted to $50,000 for the year ended March 31, 2008.

On September 4, 2007, the Company entered into a consulting agreement with
Bridge Ventures, Inc. ("BVI"), and Saggi Capital, Inc. ("SCI") relating to the
introduction of potential contacts and investors, the attraction of investment
capital and providing investor relations services and to generate investor
interest in the Company. The term of the agreement is for a period of 180 days
for a fee of $10,000 per month. In addition, each of BVI and SCI received
five-year warrants to purchase 75,000 shares of Common Stock at $3.25 exercise
price. Expenses incurred under this agreement amounted to $60,000 for the year
ended March 31, 2008.

COLLABORATIVE AGREEMENTS

The Company is a party to two separate and distinct development and license
agreements with ECR Pharmaceuticals ("ECR"). Pursuant to the agreements, the
Company agreed to commercially develop two products, Lodrane 24(R) and Lodrane
24D(R) in exchange for development fees, certain payments, royalties and
manufacturing rights. The products are currently being marketed by ECR which
also has the responsibility for regulatory matters. In addition to receiving
revenues for manufacture of these products, the Company also receives a royalty
on in-market sales.


                                      F-19
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 8 - STOCKHOLDERS' EQUITY

During 2005, the Certificate of Incorporation was amended to increase the number
of authorized shares of capital stock from 25,000,000 shares of Common Stock to
65,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, each
with a par value of $.01 per share.

LOSS PER COMMON SHARE

Basic net loss per common share has been calculated by dividing the net loss by
the weighted average number of shares outstanding during the periods presented.
Diluted earnings per share is not presented because the effect of the Company's
common stock equivalents is antidilutive. For the three years ended March 31,
the following potentially dilutive securities were not included in the
computation of diluted loss per share:

<TABLE>
<CAPTION>
                            2008                   2007                    2006
                               WEIGHTED                WEIGHTED                WEIGHTED
                               AVERAGE                 AVERAGE                 AVERAGE
                               EXERCISE                EXERCISE                EXERCISE
                    SHARES      PRICE       SHARES      PRICE       SHARES      PRICE
<S>               <C>          <C>         <C>         <C>         <C>         <C>
Stock options      5,543,300   $   2.16    6,622,500   $   2.28    2,971,250   $   2.36

Convertible
Preferred Stock   11,994,243   $   2.25    4,308,885   $   2.25    4,444,444   $   2.25
Warrants           9,216,736   $   2.59    6,640,446   $   2.31    6,079,199   $   2.26
                  ----------              ----------              ----------
                  26,754,279              17,571,831              13,494,893
                  ==========              ==========              ==========
</TABLE>


                                      F-20
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 8 - STOCKHOLDERS' EQUITY (CONTINUED)

SERIES B 8% CONVERTIBLE PREFERRED STOCK

On March 15, 2006, the Company sold in a private placement 10,000 shares of
Series B 8% Convertible Preferred Stock (the "Series B Preferred Stock"), for
gross proceeds of $10,000,000. The Series B Preferred Stock is convertible at
$2.25 per share, into 4,444,444 shares of Common Stock. In connection with the
issuance of the Series B Preferred Stock, the Company also issued two classes of
warrants which are exercisable for a period of five years and represent the
right to purchase an aggregate of 1,111,111 shares of Common Stock at an
exercise price of $2.75 per share and the second class of warrants are
exercisable for a period of five years and represent the right to purchase an
aggregate of 1,111,111 shares of Common Stock at an exercise price of $3.25 per
share. Based on the relative fair values, the Company has attributed $2,033,029
of the total proceeds to the warrants and has recorded the warrants as
additional paid-in capital. The remaining portion of the proceeds of $7,966,971
was used to determine the value of the 4,444,444 shares of the Company Common
Stock underlying the Series B Preferred Stock, or $1.7925 per share. Since the
value was $0.4774 lower than the fair market value of the Company's Common Stock
on March 15, 2006, the $2,121,917 fair value of the conversion option resulted
in the recognition of a preferred stock dividend and an increase to additional
paid-in capital.

SERIES C 8% CONVERTIBLE PREFERRED STOCK

On April 24, 2007, the Company sold 15,000 shares of its Series C 8% Convertible
Preferred Stock, par value $0.01 (the "Series C Preferred Stock"), and 1,939,655
warrants for gross proceeds of $15,000,000. The 15,000 shares of Series C
Preferred Stock are convertible into 6,465,517 shares of Common Stock. The
warrants are exercisable at $3.00 per share and are exercisable through April
27, 2012. The Company paid $1,050,000 in commissions to the placement agent and
others in connection with the sale of the Series C Preferred Stock. In addition,
the Company granted the placement agent 193,965 warrants exercisable at $3.00
per share which were valued at $129,627. The gross proceeds of the private
placement were $15,000,000 before payment of $1,050,000 in commissions to the
placement agent and selected dealers. In addition, the Company agreed to
reimburse the placement agent for all documented out-of-pocket expenses incurred
by the placement agent in connection with the private placement, including
reasonable fees and expenses of its counsel, which the Company and placement
agent agreed to be limited to $25,000. Based on the relative fair values, the
Company has attributed $1,182,101 of the total proceeds to the warrants and has
recorded the warrants as additional paid-in capital. The remaining portion of
the proceeds of $13,817,899 was used to determine the value of the 6,465,517
shares of the Company Common Stock underlying the Series C Preferred Stock, or
$2.1372 per share. Since the value was $0.1628 lower than the fair market value
of the Company's Common Stock on April 24, 2007, the $1,052,790 fair value of
the conversion option resulted in the recognition of a preferred stock dividend
and an increase to additional paid-in capital.

On July 17, 2007, the Company sold the remaining 5,000 authorized shares of its
Series C Preferred Stock. Each share of Series C Preferred Stock was sold at a
price of $1,000 per share and is initially convertible at $2.32 into 431.0345
shares of the Company's Common Stock, or an aggregate of 2,155,172 shares of
Common Stock. Each purchaser of Series C Preferred Stock also received a warrant
to purchase shares of the Company's Common Stock in an amount equal to 30% of
the aggregate number of shares of Common Stock into which the shares of Series C
Preferred Stock purchased by such purchaser may be converted. The warrants are
exercisable on or before July 17, 2012 and represent the right to purchase an
aggregate of 646,554 shares of Common Stock, at an exercise price of $3.00 per
share. The lead placement agent for the offering was Oppenheimer & Company, Inc.
The gross proceeds of the private placement were $5,000,000 before payment of
$350,000 in commissions to the placement agent and its selected dealers and
$18,000 in expenses incurred by the placement agent and its selected dealers.
Pursuant to the placement agent agreement, the Company issued to the placement
agent and its designees warrants (the "Placement Warrants") to purchase 64,655
shares of Common Stock. Such Placement Warrants are at an exercise price of
$3.00 per share, exercisable on or prior to July 17, 2012. The Company received
net proceeds from the sale of the Series C 8% Preferred Stock of $4,631,500.
Based on the relative fair values, the Company has attributed $534,407 of the
total proceeds to the warrants and has recorded the warrants as additional
paid-in capital. The remaining portion of the proceeds of $4,465,593 was used to
determine the value of the 2,155,172 shares of the Company Common Stock
underlying the Series C Preferred Stock, or $2.0720 per share. Since the value
was $0.6180 lower than the fair market value of the Company's Common Stock on
July 17, 2007, the $1,331,819 fair value of the conversion option resulted in
the recognition of a preferred stock dividend and an increase to additional
paid-in capital.


                                      F-21
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 8 - STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

SERIES C 8% CONVERTIBLE PREFERRED STOCK (CONTINUED)

The Company sought and obtained the consent of 70% of the holders of its Series
B Preferred Stock (the "SERIES B CONSENT"), as a condition to the sale of the
Series C Preferred Stock, to modify to the Series B Certificate and to the
creation of the Series C Preferred Stock.

The holders of the Series B Preferred Stock consented to (i) the filing of the
Amended Certificate of Designations of Preferences, Rights and Limitations of
the Series B Preferred Stock (the "Amended Series B Preferred Certificate") with
the Secretary of State of the State of Delaware, which, INTER ALIA, (a) provides
for group voting by and among the holders of the Series B Preferred Stock and
the holders of the Series C Preferred Stock, and (b) extends the date on which
the cumulative dividend rate increases from 8% to 15% from March 16, 2008 to
April 24, 2009; and (ii) the authorization, creation, offering and issuance of
the Series C Preferred Stock. On April 24, 2007, pursuant to the authority of
its Board of Directors, Company filed with the Secretary of State of Delaware
the Amended Series B Preferred Certificate.

In consideration for the Series B Consent, (i) the Company agreed to extend the
expiration date of certain warrants issued to each holder of Series B Preferred
Stock at the time of the original issuance of the Series B Preferred Stock from
March 16, 2011 to March 16, 2012; and (ii) each of Midsummer Investment, Ltd.
and Bushido Capital Master Fund, LP (each, a "Principal Holder"), as the holders
of the largest number of the currently outstanding shares of Series B Preferred
Stock, were granted a covenant by the Company pursuant to which, so long as each
Principal Holder continues to hold at least 20% of the then outstanding Series B
Preferred Stock, the Company will not take any action which requires the consent
of at least 70% of the holders of the Preferred Stock, unless each Principal
Holder consents to such action.

COMMON STOCK TRANSATIONS

The following grants were made under the Company's 2004 Stock Option Plan in the
year ended March 31, 2008:

On July 27, 2007, the Company entered into a consulting agreement with Willstar
Consultants, Inc. ("Willstar") whereby Willstar is to provide advice pertaining
to overall strategic planning, business opportunities, acquisition policy,
investment and banking relationships and stockholders matters in consideration
of the grant of options to purchase 90,000 shares of Common Stock, at a price of
$2.50 per share. One third of options vest on each of July 27, 2008, July 27,
2009 and July 27, 2010.

On January 24, 2008, the Company granted options to 29 employees to purchase an
aggregate of 148,800 shares of Common Stock with an exercise price of $1.08 to
vest over a period of three years from grant date.

Additionally under an employment agreement dated January 3, 2008 with Dr. Stuart
Apfel, the Company granted options to purchase 400,000 shares of Company Stock
with an exercise price of $1.75 per share. 120,000 options vested immediately
and 280,000 will vest upon successful completion of Company sponsored Phase III
clinical trials of Company's developmental drug products and strategic events or
milestones.


                                      F-22
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 8 - STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

COMMON STOCK TRANSATIONS (CONTINUED)

On January 24, 2008, the Board granted 90,000 options to each of its three
non-executive independent Board members under the Company's option plan. The
options vest in equal thirds on June 26, 2008, 2009 and 2010, assuming each
Director continues to serve on the Company's Board; provided, however that, the
options shall fully vest upon such Director's death, disability, retirement as a
director on the Board or such Director's removal as a director, without cause,
at the request of the Board. The options are exercisable at $1.08 per option.
The options are subject to the Company's customary stock option agreements and
the Company's Stock Option Plan

On March 7, 2008, the Company granted The Investor Relations Group, Inc. an
option to purchase up to 75,000 shares of the Company's Common Stock at $1.12
pursuant to Stipulation of Settlement dated March 7, 2008. The option vested
immediately.

During the year ended March 31, 2008, there were cashless exercises of 100,633
warrants issued in our October, 2004 Private Placement, which resulted in the
issuance of 36,174 shares of Common Stock.

During the year ended March 31, 2008, $313,005 was received and 203,250 shares
of Common Stock were issued upon the exercise of 203,250 Long-Term Warrants
granted at an exercise price of $1.54, as part of the Company's private
placement in October, 2004.

During the year ended March 31, 2008, 1,285 shares of Series B 8% preferred
Stock were converted into 571,112 shares of Common Stock.

Dividends accrued on Series B Stock through conversion date and March 31, 2008
were satisfied by the issuance of 1,631 and 454,923 shares of Common Stock,
respectively.

On April 20, $61,500 was received from the exercise of stock options previously
granted to purchase 41,000 shares of Common Stock at $1.50 per share. During the
year ended March 31, 2008, 470,000 options expired and 1,552,000 were forfeited.

On April 24, 2007, the Company sold 15,000 shares of its Series C 8% Convertible
Preferred Stock, par value $0.01, and 1,939,655 warrants for gross proceeds of
$15,000,000. The 15,000 Preferred Series C shares are convertible into 6,465,517
shares of common stock. The warrants are exercisable at $3.00 per share and are
exercisable through April 27, 2012. The Company paid $1,050,000 in commissions
to the placement agent and others in connection with the sale of the Series C
Preferred. In addition, the Company granted the placement agent 193,965 warrants
exercisable at $3.00 per share which were valued at $129,627. The Series C 8%
Convertible Preferred will pay a quarterly dividend at 8% per annum on its
purchase price of $1,000 per share. The dividend will be payable in other shares
or cash. The gross proceeds of the private placement were $15,000,000 before
payment of $1,050,000 in commissions to the Placement Agent and selected
dealers. In addition, the Company agreed to reimburse the Placement Agent for
all documented out-of-pocket expenses incurred by the Placement Agent in
connection with the private placement, including reasonable fees and expenses of
its counsel, which the Company and Placement Agent agreed to be limited to
$25,000. Pursuant to the placement agent agreement, the Company issued to the
Placement Agent and its designees warrants to purchase 193,965 shares of Common
Stock. Such warrants are at an exercise price of $3.00 per share, exercisable on
or prior to April 24, 2012.

On April 24, 2007, pursuant to the authority of its Board of Directors, Company
filed with the Secretary of State of Delaware the Certificate of Designations,
Preferences and Rights of Series C Preferred Stock.

During the year ended March 31, 2008, 845 shares of Series C Preferred Stock
were converted into 364,224 shares of Common Stock.

Dividends accrued on Series C Stock through conversion date and March 31, 2008
were satisfied by the issuance of 1,025 and 658,594 shares of Common Stock,
respectively.


                                      F-23
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 8 - STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

COMMON STOCK TRANSATIONS (CONTINUED)

The following grants were made under the Company's 2004 Stock Option Plan in the
year ended March 31, 2007:

On November 21, 2006, the Company granted options to sixteen employees to
purchase an aggregate of 66,500 shares of Common Stock with an exercise price of
$2.26 to vest over a period of three years from grant date.

On November 13, 2006, the Company granted to Bernard Berk, the Company's Chief
Executive Officer, according to terms of the Second Amended and Restated
Employment Agreement additional stock options to purchase up to 300,000 shares
of the Company's Common Stock at $3.00 a share.

Additionally, under employment agreements with each of Dr. Charan Behl,
Executive Vice President and Chief Scientific Officer, and Chris Dick, Executive
Vice President of Corporate Development, the Company granted to each, options to
purchase up to 750,000 shares of Common Stock at $2.25 a share.

On June 1, 2006, the Company entered into a one year consulting agreement with
David Filer, whereby Dr. Filer is to provide financial advisory services to the
Company, in consideration of the grant of three year options to purchase 10,000
shares of Common Stock, at a price of $3.00 per share.

On May 3, 2006, the Company granted options to purchase 70,000 shares of Common
Stock at a price of $2.26 per share to Mark Gittelman, its Chief Financial
Officer. One-third of the options vest on each of May 3, 2007, May 3, 2008 and
May 3, 2009.

Between February and October 2006, the Company granted ten year options to
twelve employees to purchase an aggregate of 83,000 shares of Common Stock with
exercise prices ranging from $2.25 to $2.30 per share, which vest over a period
of three years from grant date.

During the year ended March 31, 2007, there were cashless exercises of 217,452
warrants issued in our October, 2004 Private Placement, which resulted in the
issuance of 84,430 shares of Common Stock.

During the year ended March 31, 2007, 305 shares of Series B Preferred Stock
were converted into 135,555 shares of Common Stock.

Dividends accrued on Series B Stock through conversion date and March 31, 2007
were satisfied by the issuance of 1,318 and 371,244 shares of Common Stock,
respectively.

During the year ended March 31, 2007, 3,750 options expired, 65,500 were
forfeited and 59,000 options were exercised for gross proceeds of $88,500.

On December 6, 2006, the Company issued to VGS Pharma, LLC ("VGS") a five year
warrant to purchase 478,698 shares of Common Stock for cash at a price of $3.00
per share, subject to adjustment upon the occurrence of certain events. The per
share weighted value of the warrant to purchase 478,698 shares of Common Stock
at $3.00 per share is $0.77. The warrant was valued using the Black-Scholes
option pricing model with the following weighted average assumptions: no
dividend yield; expected volatility of 46.12%; risk free interest rate of 5%;
and expected life of 5 years. As a result, a charge of $366,396 is reflected in
the consolidated statement of operations. VGS is a wholly owned subsidiary of
Kali Capital, L.P., which is controlled by Kali Management, LLC ("KALI"), its
general partner, and Kali is controlled by Anu Subramanian, its managing member
and daughter of VS.

In addition, on December 6, 2006, the Company granted to Veerappan Subramanian
("VS") an option to purchase up to 1,750,000 shares of the Common Stock at $2.13
a share. The option vests as to 250,000 shares immediately and in subsequent
250,000 share installments, with one vesting on May 6, 2007, another on December
6, 2007, a third upon acceptance of the initial business plan of Novel, and the
other installments vesting on the accomplishment of certain milestones with
respect to the first or second drug product developed by the Company (excluding
drug products of Novel) on or after the 60th day after December 6, 2006, under
the advisory services provided to the Company. The per share weighted-average
fair value of the option to purchase up to 1,750,000 shares of Common Stock
granted to VS is $1.36 a share for an actual charge of $2,380,000 which will be
recognized over the vesting period of the instrument. The option was valued
using the Black-Scholes option pricing model with the following weighted average
assumptions: no dividend yield; expected volatility of 46.12%; risk free
interest rate of 5%; and expected life of 10 years. As of December 31, 2007,
1,000,000 of the options have vested and the remaining 750,000 unvested options
terminated as a result of the Company owning in the aggregate less than 20% of
the outstanding capital stock of Novel.


                                      F-24
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 8 - STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

COMMON STOCK TRANSATIONS (CONTINUED)

On July 12, 2006, the Company sold to Indigo Ventures, LLC ("Indigo") for
$150,000 a warrant to purchase up to 600,000 shares of Common Stock at $3.00 per
share pursuant to the Financial Advisory Agreement with Indigo (the "Advisory
Agreement"), of which 100,000 shares of Common Stock have vested. The Advisory
Agreement has been amended and the warrant reduced from 600,000 to 300,000
shares of common stock.

WARRANTS

To date, the Company has authorized the issuance of Common Stock Purchase
Warrants, with terms of five to six years, to various corporations and
individuals, in connection with the sale of securities, loan agreements and
consulting agreements. Exercise prices range from $2.00 to $3.74 per warrant.
The warrants expire at various times through March 15, 2011.

A summary of warrant activity for the fiscal years indicated below were as
follows:

<TABLE>
<CAPTION>
                                                   2008          2007          2006
                                                ----------    ----------    ----------
<S>                                              <C>           <C>           <C>
Balance at beginning of year:                    6,640,445     6,079,199     8,035,875
Warrants issued                                    150,000       778,698       220,705
Warrants issued pursuant to Placement Agent
  Agreements                                       258,620            --       381,028
Warrants issued pursuant to Private Placement    2,586,209            --     2,222,222
Warrants exercised, forfeited or expired          (353,883)     (217,452)   (4,780,631)
                                                ----------    ----------    ----------
Ending balance                                   9,281,391     6,640,445     6,079,199
                                                ==========    ==========    ==========
</TABLE>

CLASS B WARRANTS

The Company's Class B Warrants originally issued in a private placement in
September 1998 expired on November 30, 2005, their amended expiration date.


                                      F-25
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006

NOTE 9 - STOCK OPTION PLANS

STOCK-BASED COMPENSATION

During the years ended March 31, 2006, 2007 and 2008 the Company issued 969,200,
3,779,500 and 983,800, respectively options to purchase Common Stock to
employees, consultants, financial advisors and to members of the board of
directors. The options have an exercise price ranging from $1.08 to $3.00 per
share and all vest over three years except 75,000 issued for the year ending
March 31, 2006 which vested pro-rata over a 6 month period and 750,000 issued
for year ending March 31, 2007 which vested upon grant date, and 250,000 which
vested in 6 months and 1,025,000 which vest based upon strategic events or
accomplishments of certain milestones. For the year ending March 31, 2008,
195,000 options vested upon grant date and 280,000 vest based upon strategic
events or accomplishments of certain milestones. The options expire between five
and ten years from the date of grant. The Company has recorded compensation
expense of $902,927, $3,479,070 and $2,607,470 for the years ended March 31,
2006, 2007 and 2008, respectively, which represents the fair value of the
options vested computed using the Black-Scholes options pricing model on each
grant date.

Under its 2004 Stock Option Plan and prior option plans, the Company may grant
stock options to officers, selected employees, as well as members of the board
of directors and advisory board members. All options have generally been granted
at a price equal to or greater than the fair market value of the Company's
Common Stock at the date of grant. Generally, options are granted with a vesting
period of up to three years and expire ten years from the date of grant.
Transactions under the plans for the years indicated were as follows:

<TABLE>
<CAPTION>
                              2008                      2007                    2006
                                   AVERAGE                  AVERAGE                  AVERAGE
                                   WEIGHTED                 WEIGHTED                 WEIGHTED
                                   EXERCISE                 EXERCISE                 EXERCISE
                      OPTIONS       PRICE       OPTIONS      PRICE       OPTIONS      PRICE
                     ----------    --------   ----------    --------   ----------    --------
<S>                   <C>          <C>         <C>          <C>         <C>          <C>
Outstanding at
beginning of year     6,622,500    $   2.28    2,971,250    $   2.36    2,277,050    $   2.16
Granted                 983,800        1.49    3,779,500        2.20      969,200        2.74
Exercised               (41,000)       1.50      (59,000)       1.50      (20,000)       2.00
Expired              (2,022,000)      (2.23)     (69,250)       2.31     (255,000)       2.04
                     ----------    --------   ----------    --------   ----------    --------
Outstanding at end
of year               5,543,300    $   2.16    6,622,500    $   2.28    2,971,250    $   2.36
                     ==========    ========   ==========    ========   ==========    ========
</TABLE>


The following table summarizes information about stock options outstanding at
March 31, 2008:

<TABLE>
<CAPTION>
                               WEIGHTED AVERAGE   WEIGHTED-                  WEIGHTED
                                   REMAINING       AVERAGE                    AVERAGE
   RANGE OF        OPTIONS        CONTRACTUAL     EXERCISE      OPTIONS     EXERCISABLE
EXERCISE PRICE   OUTSTANDING      LIFE (YEARS)      PRICE     EXERCISABLE      PRICE
--------------   -----------   ----------------   ---------   -----------   -----------
<S>              <C>                   <C>        <C>         <C>            <C>
 $ 1.00 - 2.00       893,800            9.50       $   1.29       195,000    $   1.51
   2.01 - 3.00     4,649,500            7.50           2.33     2,858,928        2.24
 -------------   -----------           -----       --------   -----------    --------
 $ 1.00 - 3.00     5,543,300            7.82       $   2.16     3,053,928    $   2.19
 -------------   -----------           -----       --------   -----------    --------
</TABLE>


                                      F-26
<PAGE>

                  ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          MARCH 31, 2008, 2007 AND 2006


NOTE 9 - STOCK OPTION PLANS (CONTINUED)

STOCK-BASED COMPENSATION (CONTINUED)

The per share weighted-average fair value of each option granted during fiscal
2008, 2007 and 2006, ranged from $.56 to $1.20 during fiscal 2008, $1.36 to
$1.39 during fiscal 2007 and $1.48 to $1.70 during fiscal 2006 on the date of
grant using the Black-Scholes options pricing model with the following
weighted-average assumptions; no dividend yield; expected volatility of 33.0%
for fiscal 2008, ranging from 46.12% to 57.95% for fiscal 2007 and expected
volatility of 97.84% for fiscal year 2006; risk-free interest rates of 4.00% in
2008, 5.00% in 2007 and 4.18% in 2006 and expected lives ranging from five to
ten years.

There are 2,531,700 options available for future grant under our Stock Option
Plan.

NOTE 10 - MAJOR CUSTOMERS


For the years ended March 31, revenues from its major customers are as follows:

                                               2008          2007          2006
                                              ------        ------        ------
   Customer A -                                 100%          100%          100%

NOTE 11 - SUBSEQUENT EVENTS

On April 14, 2008, the Company entered into a consulting agreement with New
Castle Consulting, LLC ("New Castle") whereby New Castle is to provide
consulting services to the Company for a six month term. Services include, but
will not necessarily be limited to analyzing, the Company's needs with respect
to investor relations, consulting, assisting and advising the Company with
respect to its needs for investor relations, oversee and facilitate investor
relations, assist the Company in developing and implementing appropriate means
for presenting the Company and its business plans, strategy and personnel to
financial community and advising the Company with respect to its relations with
brokers, dealers, analysts and other investment professionals. For its services
New Castle will receive $8,000 per month in addition to 125,000 shares of the
Company's restricted Common Stock.

On April 24, 2008, the Board of Directors of the Company appointed Dr. Stuart
Apfel to be the Company's Chief Scientific Officer, effective immediately, and
accepted the resignation of Dr. Veerappan Subramanian as the Company's acting
Chief Scientific Officer. Dr. Apfel will continue his duties as the Company's
Chief Medical Officer. The existing employment agreement between Dr. Apfel and
the Company shall continue and not be modified in any was as a result of this
new appointment.

On April 14, 2008, a holder of 872 shares of Series C 8% Preferred Stock
converted 87 shares into 37,745 shares of common stock. The same holder
converted an additional 87 shares into 38,427 shares of Common Stock on May 4,
2008. All accrued dividends were paid through dates of conversion.

On June 26, 2008, at the annual meeting of the stockholders of the Company, the
stockholders approved (i) an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
65,000,000 shares to 150,000,000 shares and (ii) an amendment to the Company's
Stock Option Plan to increase the number of shares of Common Stock reserved for
issuance under the Stock Option Plan from 7,000,000 shares to 10,000,000 shares.



                                      F-27