**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**FORM
      10-KSB**




(Mark
      one)




x
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the
      fiscal year ended December 31, 2007




OR




o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the
      transition period from __________ to __________




Commission
      File No. 000-52454




**R** **XELITE,
      INC.**




(Name
      of
      Small Business Issuer in Its Charter)




**Delaware**
            **62-0201385**(State
                or Other Jurisdiction of Incorporation or Organization)
            (I.R.S.
                Employer Identification No.)





**1404
                North Main Street, Suite 200,**
              **Meridian,
                Idaho**
            **83642**(Address
                of Principal Executive Offices)
            (Zip
                Code)





**(202)
      288-5550**


(Issuer’s
      Telephone Number, Including Area Code)




Securities
      registered under Section 12(b) of the Exchange Act:


**None**




Securities
      registered under Section 12(g) of the Exchange Act:


**Common
      Stock,** **par
      value $0.001 per share**


(Title
      of
      Class)




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports); and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will 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-KSB or any
      amendment to this Form 10-KSB. x




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









The
      registrant’s revenues for the fiscal year ended December 31, 2007 were
      $2,811,596.




As
      of
      March 18, 2008, the aggregate market value of the voting and non-voting common
      equity held by non-affiliates (based upon the last sales price of the
      registrant’s common stock as reported on the OTC Bulletin Board on March 18,
      2008) was $0.315.




As
      of
      March 18, 2008, 116,315,303 shares of common stock of the registrant were
      outstanding.




**DOCUMENTS
      INCORPORATED BY REFERENCE**




Certain
      portions of the registrant’s definitive proxy statement for its 2008 annual
      meeting of stockholders, to be filed with the SEC within 120 days after the
      close of the fiscal year ended December 31, 2007, have been incorporated by
      reference into Part III hereof.




Transitional
      Small Business Disclosure Format: Yes oNo
x







**TABLE
      OF CONTENTS**




PagePART
                IItem
                1.
            Description
                of Business.
            1Item
                2.
            Description
                of Property.
            27Item
                3.
            Legal
                Proceedings.
            27Item
                4.
            Submission
                of Matters to a Vote of Security Holders.
            28PART
                IIItem
                5.
            Market
                For Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities.
            28Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation.
            29Item
                7.
            Financial
                Statements.
            42Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure.
            42Item
                8A(T).
            Controls
              and Procedures.
            42PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance With Section 16(a) of the Exchange Act.
            43Item
                10.
            Executive
                Compensation.
            43Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.
            43Item
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence.
            44Item
                13.
            Exhibits.
            44Item
                14.
            Principal
                Accountant Fees and Services.
            47




i


FORWARD-LOOKING
      STATEMENTS




This
      report contains forward-looking statements. To the extent that any statements
      made in this annual report contain information that is not historical, these
      statements are forward-looking. Forward-looking statements can be identified
      by
      the use of words such as “expects,” “plans”, “will”, “may”, “anticipates”,
“believes”, “should”, “intends”, “estimates”, “projects” and other words of
      similar meaning. These statements are subject to risks and uncertainties that
      cannot be predicted or quantified and consequently, actual results may differ
      materially from historical results or those expressed or implied by such
      forward-looking statements. Such risks and uncertainties include, without
      limitation, our ability to raise capital to finance the development of our
      products, the effectiveness, profitability and the marketability of those
      products, our ability to protect our proprietary information, economic
      conditions affecting the pharmaceutical industry, general economic and business
      conditions, the impact of competition, our expectations and estimates concerning
      future financial performance and financing plans, adverse results of any legal
      proceedings, our dependence on certain customers or suppliers, our ability
      to
      attract and retain customers, difficulties associated with integrating acquired
      businesses and customers into our operations, **** the
      effect of legislation and other matters affecting our industry, government
      regulation, the volatility of our operating results and financial condition,
      our
      ability to attract or retain qualified personnel, and other risks detailed
      from
      time to time in our filings with the SEC.




These
      forward-looking statements speak only as of the date of this report. We are
      under no duty to update any of the forward-looking statements. As a result,
      you
      should not place undue reliance on these forward-looking
      statements.




**PART
      I**




**Item
                1.**
            **Description
                of Business.**




**Corporate
      History**




We
      were
      organized as a limited liability company in the State of Delaware in November
      2001 under the name Southridge Technology Group, LLC. On August 24, 2005, we
      were converted into a Delaware corporation and changed our name from Southridge
      Technology Group, LLC to Southridge Technology Group, Inc.




On
      July
      13, 2007, we entered into an agreement and plan of merger and reorganization
      with RxElite Acquisition Corp., our wholly-owned Delaware subsidiary, and
      RxElite Holdings Inc. On that date, RxElite Acquisition Corp. merged with and
      into RxElite Holdings Inc., with RxElite Holdings Inc. remaining as the
      surviving corporation and our wholly-owned subsidiary. As a result of the
      merger, we succeeded to the business of RxElite Holdings Inc. as our sole line
      of business.




As
      used
      in this report, unless the context requires otherwise, references to the
“Company,” “RxElite,” “we,” “our” and “us” for periods prior to the closing of
      the reverse merger on July 13, 2007, refer to RxElite Holdings Inc., a private
      Delaware corporation that is now our wholly-owned subsidiary, and references
      to
      the “Company,” “RxElite,” “we,” “our” and “us” for periods subsequent to the
      closing of the reverse merger on July 13, 2007, refer to RxElite, Inc., a
      publicly traded company, and its subsidiary, RxElite Holdings Inc.




1




**Company
      Overview**




We
      develop and market generic prescription drug products in specialty generic
      markets. Our business strategy focuses on three key tenets: (1) serve specialty
      generic segments; (2) employ low cost manufacturing; and (3) deliver
      unparalleled customer service defined by consistent supply and a high level
      of
      service. Our marketed and pipeline products are in specialty markets which
      we
      believe are characterized by limited competition, barriers to entry, and good
      margin opportunities. These markets include specialty products in the areas
      of
      anesthesia gases, sterile liquid dose products (which includes ophthalmic
      products, sterile inhalation respiratory products and injectable drugs) and
      active pharmaceutical ingredients (“APIs”). Barriers to entry in these specialty
      markets include limited industry capacity, patented manufacturing processes,
      difficult formulations and limited sources of APIs. In addition, we have one
      abbreviated new drug application (“ANDA”) pending review at the United States
      Food and Drug Administration (“FDA”) pursuant to an agreement with Alkem
      Laboratories Limited, and we own three other ANDAs that are dormant and are
      not
      actively marketed.




Our
      customers include hospitals and hospital group purchasing organizations,
      national and regional wholesalers, direct retail pharmacy stocking chains,
      leading homecare companies, and outpatient surgery centers and ambulatory care
      clinics.





*Anesthetic
      Gases.* We
      currently market three anesthetic gases, Enflurane, Isoflurane, and Sevoflurane
      pursuant to a mutually exclusive manufacturing and distribution agreement with
      Minrad International, Inc. In addition to Enflurane, Isoflurane, and
      Sevoflurane, our agreement with Minrad International, Inc. grants us the right
      to market and sell Desflurane once it becomes available as a generic drug in
      the
      U.S. market. Assuming we meet the volume milestones in our agreement with Minrad
      International, Inc., we will be able to renew that agreement past December
      31,
      2008 and remain the exclusive distributor to Minrad International, Inc. of
      Enflurane, Isoflurane, Sevoflurane and, upon approval, Desflurane in the
      U.S.





We
      began
      purchasing human inhalation anesthetics under our agreement with Minrad
      International, Inc. on September 30, 2004. On April 14, 2005, we and Minrad
      International, Inc. amended this agreement in order for us to receive the
      non-exclusive right to purchase Isoflurane, for distribution for veterinary
      uses
      in the U.S. market. The amendment also gives us the exclusive right to purchase
      for distribution to end-users other generic inhalation anesthetic products
      that
      Minrad International, Inc. expects to make in the future, including Desflurane,
      for human use, when they become available. Terms of our original agreement
      with
      Minrad International, Inc. provide us with the exclusive right to distribute
      Sevoflurane, Isoflurane and Enflurane for human use under our own
      label.





The
      current term of our agreement with Minrad International, Inc. ends on December
      31, 2008, and we may renew it for successive one-year terms provided we meet
      certain requirements. Minrad International, Inc. may only terminate this
      agreement under limited circumstances, such as if we fail to meet minimum annual
      purchase commitments or fail to pay any amount we owe to Minrad International,
      Inc. This agreement also provides that if we or Minrad International, Inc.
      recall any of the products distributed by us because the products are believed
      to violate a provision of applicable law, Minrad International, Inc. will bear
      the costs of the recall.




In
      connection with the execution of our agreement with Minrad International, Inc.,
      we entered into an advisory consulting agreement, dated as of July 1, 2003,
      with
      PowerOne Capital Corp. pursuant to which we agreed to pay to PowerOne Capital
      Corp. a royalty on the gross revenues of any product developed and marketed
      under our agreement with Minrad International, Inc. The amount of the royalties
      per product is 1% for the first year of distribution and marketing, 2% for
      the
      second year, 3% for the third year, 3% for the fourth year and 3% for the fifth
      year. After the fifth year, no further royalties accrue. This royalty provision
      survived the termination of the agreement, which otherwise expired as of June
      1,
      2005, and is a continuing obligation so long as Minrad International, Inc.
      manufactures our products.




2




Enflurane
      and Isoflurane are marketed to U.S. hospitals and hospital group purchasing
      organizations. We estimate that the U.S. markets for Enflurane and Isoflurane
      are approximately $1 million and $10 million, respectively.




On
      May 2,
      2007, Minrad International, Inc. received FDA approval for its generic
      Sevoflurane product. This approval allowed us to immediately launch generic
      Sevoflurane in the U.S. market. We estimate that the U.S. market for Sevoflurane
      is approximately $400 million.




Minrad
      International, Inc. currently plans to file an ANDA with the FDA Center for
      Drug
      Evaluation and Research, Office of Generic Drugs for Desflurane in 2008. We
      estimate that the U.S. market for Desflurane is approximately $200 million.
      Upon
      U.S. FDA approval of the Desflurane ANDA application, we intend to move rapidly
      to market the product in the U.S. market.




We
      do not
      have the right under our agreement with Minrad International, Inc. to market
      and
      distribute any of Enflurane, Isoflurane, Sevoflurane or Desflurane outside
      the
      U.S.




*Sterile
      Liquid Dose Products.* The
      market for sterile liquid dose products is diverse and varies in size depending
      on the specific features of the drug being marketed. Our sterile liquid dose
      product pipeline includes generic ophthalmic products in unit and multi-dose
      presentations, sterile unit dose inhalation respiratory products and injectable
      drugs. Unit dose products are pre-measured dosages of drugs that have the
      advantage of being convenient to use while reducing the risk of dosage error,
      medication waste, and cross-contamination. We currently have eight sterile
      liquid dose ANDAs in various stages of development although none have been
      submitted for review at the FDA. We plan to file ANDAs on a regular basis and
      compete by marketing prescription generic equivalents.




In
      August
      2006, we made a strategic decision to divest our respiratory business to focus
      our corporate resources on growing our more profitable anesthetic gas franchise,
      including the preparation for the launch of generic Sevoflurane. The divestiture
      of our respiratory business significantly reduced our sales and business
      volumes, but also enabled us to retire approximately $15.9 million of long
      term
      debt. Prior to the divestiture, over the past six years, we had become a leading
      supplier of unit dose sterile respiratory inhalation drugs, Albuterol 0.083%
      and
      Ipratropium 0.02%, manufactured using advanced aseptic blow-fill-seal (BFS)
      technology. Our distribution strength and service levels made us a primary
      vendor for these products at a significant majority of the top 50 U.S. generic
      buyers that accounted for over 80% of all U.S. generic drug purchases. In doing
      so, we had attained a leading market share position in the unit dose sterile
      respiratory inhalation drug market ahead of larger competitors in the industry.




Since
      the
      divestiture of our respiratory business, we have not marketed any sterile liquid
      dose products, but are in the process of developing such products.




*Manufacturing.* We have
      pursued a contract manufacturing strategy to date, and prior to our recent
      divestiture, our sterile liquid products were manufactured at several sterile
      liquid products contract manufacturing sites. Our anesthetic gas products are
      manufactured by Minrad International, Inc. and any products developed or
      marketed pursuant to our agreements with Stason Pharmaceuticals, Inc. and Alkem
      Laboratories Limited will be manufactured in Asia.




Through
      our acquisition of the assets of FineTech Laboratories, Ltd., a company
      organized under the laws of the State of Israel (“FineTech”) in January 2008,
      our wholly-owned subsidiary, FineTech Pharmaceutical manufactures complex,
      low
      volume, high value APIs in its facility in Haifa, Israel. These APIs are
      developed for production and sale by FineTech Pharmaceutical, as well as on
      a
      contract basis for leading pharmaceutical companies in the U.S., Europe and
      Asia.




3




In
      the
      future, we expect to develop internal capabilities for sterile liquids
      manufacturing and ANDA development. The manufacture of high volume sterile
      liquid products requires a state-of-the-art facility, equipment and testing
      controls, as well as expertise. We believe the development of these internal
      capabilities will further improve our competitive position in the sterile liquid
      products market.




*Sales
      and Marketing.* Since
      all of our finished dose products (all products except for our APIs) are
      non-proprietary and generic in nature, we rely on our efforts in marketing,
      distribution, low manufacturing and operating costs, and high service levels
      to
      capture, maintain, and increase market share. To this end, we employ a
      three-tiered sales effort.




For
      our
      generic pharmaceutical products that are sold to U.S. generic drug buyers (who,
      in the aggregate, currently represent a significant majority of U.S. generic
      drug purchases), such as McKesson Corporation, Cardinal Health Inc., Amerisource
      Bergen, Wal-Mart and Walgreens Co., we employ a national accounts approach
      with
      a team of experienced retail national accounts representatives that sell and
      provide service to national wholesalers, regional wholesalers, direct retail
      pharmacy stocking chains and leading homecare companies.




For
      our
      hospital focused products, such as our portfolio of anesthetic gas products,
      we
      focus on contacting and servicing hospital group purchasing organizations such
      as Premier Purchasing Partners, L.P., Purchasing Alliance for Clinical
      Therapeutics LLC, Broadlane DSH, MedAssets, Inc., Health Trust Purchasing Group
      and Consorta, Inc. and integrated hospital delivery networks such as Catholic
      Health Initiatives, Centura Health, HCA Inc., Trinity Health, Holy Cross Health
      Systems, Provena Health, Catholic Health East and Ascension Health, Inc. at
      the
      national accounts level. In addition to providing national accounts focus,
      we
      are also building a national hospital focused sales force as a part of the
      launch of Sevoflurane and for future hospital products.




An
      in-house telemarketing sales team supports the direct selling efforts in retail
      and hospital national accounts, and also sells directly to outpatient and
      ambulatory clinics and small rural hospitals.




Our
      API
      products produced in FineTech Pharmaceutical’s Haifa, Israel facility are
      marketed and sold through direct contact with leading pharmaceutical companies
      worldwide, and through participation in major international chemical and
      pharmaceutical conferences.




To
      date,
      this approach has provided us with the ability to capture a market share in
      excess of 10% within 12 months for each of our product launches, but there
      can
      be no assurance that this level of market penetration can be attained for future
      products.




*Research
      and Product Development.* We are
      planning to aggressively expand our product line by pursuing new product
      development through a combination of contract development services, sponsored
      research, partnership development and the acquisition or in-licensing of
      products developed by others.




We
      currently have 11 ANDAs for generic pharmaceuticals in various stages of
      development, including eight sterile liquid dosage form products, three of
      which
      we are working with partners. We plan to continue to file ANDAs on a regular
      basis as pharmaceutical products come off patent allowing us to compete by
      marketing prescription generic equivalents. To date, we have successfully
      employed our contract development services approach to obtain ANDA approvals
      for
      Albuterol 0.083% in 2005 and Ipratropium 0.02% in 2006. In addition, along
      with
      our plans to develop sterile liquids manufacturing capabilities internally,
      we
      intend to develop internal formulation and capabilities for our sterile liquids
      pipeline products. Clinical trials and bioequivalent studies required in
      connection with the development of certain specialty generic products are
      performed by contract research organizations under the direction of our
      personnel. Generally, for sterile liquid dose products, bioequivalency testing
      is not required in connection with seeking approval from the FDA through the
      ANDA process.




4




At
      present, FineTech Pharmaceutical has a pipeline of five complex APIs being
      developed internally at its Haifa, Israel manufacturing facility. We currently
      plan to expand this pipeline as we are able to identify complex, low volume,
      high value APIs that are coming off patent in the next five years and have
      a
      limited number of competitors.




We
      also
      maintain a business development program that identifies potential product
      acquisition or product licensing candidates. In this regard, we focus our
      business development in two directions. First, we focus on niche products that
      complement our existing product lines and distribution channels, and that have
      limited competitors in the market. Alternatively, we focus on leveraging our
      commercial platform by partnering with low cost partners, to match their low
      cost manufacturing capabilities with our distribution strength in the U.S.
      to
      launch new products into the U.S. market.




In
      addition to our internal pipeline, we also have corporate partnerships with
      Stason Pharmaceuticals, Inc. and Alkem Laboratories Limited, each of which
      is a
      significant Asian generic pharmaceutical company and Zach Systems S.p.A., a
      European pharmaceutical company. The agreements are for the development, testing
      and manufacture of a portfolio of products to be launched by us exclusively
      in
      the U.S. market. Pursuant to our agreements with Alkem Laboratories Limited
      and
      Stason Pharmaceuticals, Inc., we will pay an equal share in the cost of the
      development of the products. Pursuant to other defined conditions, the agreement
      with Zach Systems S.p.A. includes provisions for a modification in the division
      of benefits to maintain an equitable allocation between the parties. Upon
      approval and launch, the products will be transferred to us at cost by Stason
      Pharmaceuticals, Inc. or Alkem Laboratories Limited, as applicable, and the
      profits will be shared equally. In our agreement with Zach Systems S.p.A.,
      Zach
      Systems S.p.A pays for the development costs and retains non-U.S. commercial
      rights to the products developed under the agreement. We currently have one
      ANDA
      pending for review at the FDA related to our partnership Alkem Laboratories
      Limited, but do not currently market that product or any other products under
      any of our corporate partnership agreements.




**Patents,
      Trademarks and Proprietary Technology**




We
      consider the protection of discoveries in connection with our development and
      third-party manufacturing activities important to our business. We have sought,
      and intend to continue to seek, patent protection in the U.S. and selected
      foreign countries where we deem such protection to be appropriate.




We
      hold
      an exclusive world-wide license to make, use, sell and offer to sell, import,
      distribute or otherwise transfer U.S. Patent No. 5,599,534, titled “Reversible
      gel-forming composition for delivery of bio-affecting substances, and method
      of
      use” issued on February 4, 1997, from U.S. Patent Application Serial No.
      08/287,694 filed August 9, 1994. Kenneth J. Himmelstein and Cara L. Baustian
      are
      the named inventors. All right, title and interest in and to the patent have
      been assigned to us. The patent covers a technique relating to the production
      of
      ophthalmic products with certain gelling properties. The patent covers only
      one
      method of production of such ophthalmic products and other patents exist that
      cover alternate methods of producing such ophthalmic products. We do not
      currently utilize our patent, though we may do so in the future if we were
      to
      develop and market ophthalmic products. In certain circumstances, if we utilize
      the rights granted pursuant to the license agreement, we may incur royalty
      obligations to various parties.




FineTech
      Pharmaceutical holds the following patents to protect the method of
      manufacturing for raw materials in pharmaceutical manufacturing.




5




U.S.
      Patent No. 6,696,568 and Israeli Patent No. IL134975 titled “Novel process and
      intermediates for production of Cabergoline and related compounds” issued on
      February 24, 2004, from U.S. Patent Application Serial No. 09/834,657 filed
      April 16, 2001. Arie Gutman, Gennadiy Nisnevich, Igor Ruchman, Boris Tishin,
      Alex Vilensky, and Boris Pertsikov are the named inventors.  All right,
      title, and interest to the product have been assigned to us. The patent covers
      a
      process for the preparation of dopamine agonists such as Cabergoline, to some
      novel intermediates used in this process and to their preparation.




U.S.
      Patent No. 7,026,483, European Patent No. 1620100, and Israeli Patent No.
      IL155545 titled “Forms of Cabergoline” issued on April 11, 2006, from U.S.
      Patent Application Serial No. 10/827,955 filed April 20, 2004.  Arie
      Gutman, Gennadiy Nisnevich, Albay Agazade, Boris Tishin, Alex Vilensky, and
      Boris Pertsikov are the named inventors.  All right, title, and interest to
      the product have been assigned to us. The patent covers a new crystalline form
      of Cabergoline and processes for its preparation. Uses of the novel form of
      Cabergoline in purification of crude Cabergoline, in the preparation of
      amorphous Cabergoline and in the manufacture of a medicament are disclosed.
      A
      method for treating a prolactin disorder with the medicaments is also
      disclosed.




U.S.
      Patent No. 6,492,522 titled “Process for production of highly pure Donepezil
      hydrochloride” issued on December 10, 2002, from U.S. Patent Application Serial
      No. 09/763,245 filed May 24, 2001, which was filed from a PCT Patent Application
      filed February 24, 2000.  Arie Gutman, Eleonora Shkolnik, Boris Tishin,
      Genady Nisnevich, Igor Zaltzman are the named inventors.  All right, title,
      and interest to the product have been assigned to us. The patent covers a new
      process for the preparation of acetylcholinesterase inhibitors (anti-AchE)
      such
      as Donepezil, to some novel intermediates used in this process and to their
      preparation.




U.S.
      Patent No. 6,927,300 titled “Process for the preparation of Latanoprost” issued
      on April 9, 2005, from U.S. Patent Application Serial No. 10/181,523 filed
      August 25, 2002, which was filed from a PCT Patent Application filed on January
      26, 2001.  Arie Gutman, Gennady Nisnevich, Marina Etinger, Igor Zaltzman,
      Lev Yudovitch, and Boris Pertsikov are the named inventors.  All right,
      title, and interest to the product have been assigned to us. The patent covers
      a
      novel process for the preparation of
      13,14-dihydro-17-phenyl-18,19,20-trinor-PGF.sub.2.sub..sub.. alpha. isopropyl
      ester (Latanoprost) of the formula [1]: ##STR1## drug for treating glaucoma
      (Merck Index, 12th Ed., 5787).




U.S.
      Patent No. 7,157,590 titled “Process for the preparation of
      17-phenyl-18,19,20-thinor-pgf 2a and its derivatives” issued on January 2, 2007,
      from U.S. Patent Application Serial No. 10/478,849 filed may 3, 2002, which
      was
      filed from a PCT Patent Application filed May 3, 2002.  Arie Gutman,
      Gennady  Nisnevich, Marina Etinger, Igor Zaltzman, Lev Yudovitch, and Boris
      Pertsikov are the named inventors.  All right, title, and interest to the
      product have been assigned to us. The patent covers a novel process for the
      preparation of 17-phenyl-18,19,20-trinor-PGF. sub.2.alpha. and its
      derivatives.




U.S.
      Patent No. 7,166,730 titled “Process for the preparation of prostaglandin
      derivatives” issued on January 23, 2007, from U.S. Patent Application Serial No.
      11/125,164 filed May 10, 2005.  Arie Gutman, Gennady Nisnevich, Marina
      Etinger, Igor Zaltzman, Lev Yudovitch, Boris Tishin, and Boris Pertsikov are
      the
      named inventors.  All right, title, and interest to the product have been
      assigned to us. The patent covers a novel process for the preparation of
      prostaglandins and analogues thereof.




In
      addition, we also hold licenses from third parties for certain patents, patent
      applications and technology utilized in some of our products and products in
      development.




We
      also
      rely on trademarks, trade secrets, unpatented proprietary know-how and
      continuing technological innovation to maintain and develop our competitive
      position. We enter into proprietary information and confidentiality agreements
      with certain of our employees pursuant to which such employees agree to assign
      to us any inventions relating to our business made by them while in our
      employ.




6




The
      RxElite name and corporate logo are registered trademarks.




**Competition**




The
      marketing and manufacturing of pharmaceutical products is highly competitive,
      with many established marketers, manufacturers, suppliers and distributors
      actively engaged in all phases of the business. Most of our competitors have
      substantially greater financial and other resources, including greater sales
      volume, larger sales forces, and greater product development and internal
      manufacturing capabilities and capacity, as well as greater regulatory and
      scientific resources. We believe that the principal factors on which we compete
      are marketing and distribution ability, product development capability, product
      quality, low cost third-party product manufacturing and customer service.
      However, there can be no assurance that we will be able to successfully develop
      and introduce new products in order to maintain our competitive
      position.




The
      companies that compete with us in the anesthetic gases segment for human use
      include Abbott Laboratories, Baxter Healthcare Corporation, and Hospira, Inc.,
      and for the veterinary market, we also compete with Halocarbon Products
      Corporation and Rhodia.




The
      companies that compete with our API business include Teva Pharmaceuticals
      Industries, Ltd., Aurobindo Pharma India and several international chemical
      companies.




The
      companies that compete with our sterile liquid dosage products include both
      generic and brand name companies such as Dey, L.P., Nephron Pharmaceuticals
      Corporation, Teva, Pharmaceutical Industries Ltd. and AstraZeneca plc for
      inhalation products; Alcon Inc., Allergan Inc., and Bausch Lomb Inc. for
      ophthalmic products; Hospira, Baxter International, Inc. and American
      Pharmaceutical Products for injectable drugs.




In
      all of
      these segments, the basis of competition is price, service, and the reliability
      of supply measured by order fulfillment and on-time deliveries.




**Suppliers
      and Customers**




We
      require a supply of quality raw materials and components to manufacture and
      package pharmaceutical products for our own needs and for third parties with
      which we have partnered or contracted for the manufacture of our products.
      The
      principal components of our products are active and inactive pharmaceutical
      ingredients and certain packaging materials. Some of these components are only
      available from a single source and, in the case of some of our ANDAs, only
      one
      supplier of raw materials has been identified. Because FDA approval of drugs
      requires manufacturers to specify their proposed suppliers of active ingredients
      and certain packaging materials in their applications, FDA approval of any
      new
      supplier would be required if active ingredients or such packaging materials
      were either no longer available or are no longer economically feasible from
      the
      specified supplier for us to continue to be competitive in the market. The
      qualification of a new supplier could delay our development and marketing
      efforts. If, for any reason, we are unable to obtain sufficient quantities
      of
      any of the raw materials or components required to produce or package our
      products, we may not be able to manufacture our products as planned, which
      could
      have a material adverse effect on our business, financial condition and results
      of operations. Similarly, as we rely on third party manufacturers for our
      products on a contracted or partnership basis, if for any reason we are unable
      to obtain sufficient quantities of any finished products as planned, it would
      also have a material adverse effect on our business financial condition and
      results of operations. For the fiscal year ended December 31, 2007, our two
      largest suppliers accounted for approximately $--1.9 million and $1.1 million,
      or 47.9% and 26.2%, respectively, of product purchases.




7




We
      focus
      on national account drug buyers, who, in the aggregate, currently account for
      a
      significant majority of all U.S. generic drug purchases. In the past, we have
      been the primary vendor for our respiratory products to a significant majority
      of these national accounts. They include national wholesalers such as McKesson
      Corporation and Cardinal Health, Inc., regional wholesalers such as Value Drug
      and Kinray, direct retail pharmacy stocking chains such as Wal-Mart Stores
      Inc.,
      and Walgreen Co., and leading homecare companies such as Lincare Holdings Inc.
      and Apria Healthcare Group Inc.




In
      the
      hospital and hospital group purchasing organization segment, we are an approved
      vendor and have approved vendor contracts in place with all eight major group
      purchasing organizations that, in the aggregate, currently account for a
      significant majority of all hospital drug purchases. These group purchasing
      organizations include Premier Purchasing Partners, L.P., Novation, LLC,
      MedAssets, Inc., Amerinet Inc. and Consorta, Inc.




The
      customer base for our anesthetic gas products consists of group purchasing
      organizations (46%), veterinary distributors and clinics (46%), direct sales
      to
      hospitals (6%) and alternate sites, such as clinics (2%).




Wholesalers
      such as McKesson Corporation, AmerisourceBergen Corporation, and Cardinal
      Health, Inc. distribute our products as well as a broad range of health care
      products for many other companies. None of these distributors is an end user
      of
      our products. If sales to any one of these distributors were to diminish or
      cease, we believe that the end user of our products would find little difficulty
      obtaining our products either directly from us, or from another distributor.
      However, the loss of one or more of these distributors, together with a delay
      or
      inability to secure an alternative distribution source for end users, could
      have
      a material negative impact on our revenue, business, financial condition and
      results of operations. For all national account customers, a change in
      purchasing patterns, a decrease in inventory levels, an increase in returns
      of
      our products, delays in purchasing products and delays in payment for products
      by one of more distributors could also have a material negative impact on our
      revenue, business, financial condition and results of operations.




Customers
      of our API business based in Haifa Israel include major U.S. pharmaceutical
      companies, and regional European and Asian pharmaceutical companies. Cabergoline
      accounts for the majority of our API sales, the majority of which are to Par
      Pharmaceutical Companies, Inc., a U.S. generic pharmaceutical company. We
      currently believe that Par Pharmaceutical Companies, Inc. will continue to
      purchase Cabergoline at the same level as the last two years. However, a reduced
      purchasing level could have a material negative impact on our revenue, business,
      financial condition and results of operations if we are not able to replace
      those sales with another buyer in a very short time frame. The sales cycle
      for
      APIs is usually 6-18 months. We are working to diversify our API customer base
      in 2008 and 2009 by offering our API products that are primarily sold in the
      U.S. to non-U.S. markets that have similar regulations, product demand and
      numbers of competitors. We believe the market for our current portfolio of
      APIs
      is larger outside of the U.S. than inside the U.S. However, there can be no
      assurance that we will be successful in our diversification
      efforts.




For
      the
      fiscal year ended December 31, 2007, our three largest customers accounted
      for
      approximately 22.7%, 17.6% and 13.6% of net sales, respectively.




8




**Backorders**




We
      have a
      well-established track record for consistent supply and service. We presently
      have no backorders.




**Government
      Regulations**




Pharmaceutical
      manufacturers and distributors are subject to extensive regulation by government
      agencies including the FDA, the Drug Enforcement Administration, or DEA, the
      Federal Trade Commission, and other federal, state, and local agencies. The
      Federal Food Drug and Cosmetic Act, or FDC Act, the Controlled Substance Act
      and
      other federal statues and regulations govern or influence the development,
      testing, formulations, manufacturing, safety, efficacy, labeling, storage,
      recordkeeping, approval, marketing, advertising, and promotion of products
      that
      we manufacture and market. The FDA inspects drug manufacturers and storage
      facilities to determine compliance with its cGMP regulations, non-compliance
      with which can result in fines, recall, and seizure of products, total or
      partial suspension of production, refusal to approve new drug applications
      and
      criminal prosecution. The FDA also has the authority to revoke approval of
      drug
      products.




FDA
      approval is required before a pharmaceutical manufacturing facility can
      manufacture a pharmaceutical product to be commercialized in the U.S. and
      pharmaceutical manufacturing facilities are required to operate within the
      cGMP
      regulation published by the FDA. New drugs require a new drug application,
      or
      NDA, filing including clinical studies demonstrating the safety and efficacy
      of
      the drug. In our case, generic drugs, which are equivalents of existing, brand
      name drugs, require an ANDA filing. An ANDA does not, for the most part, require
      clinical studies because the safety and efficacy of the drug have already been
      demonstrated by the product originator. However, an ANDA must provide data
      demonstrating the equivalency of the generic formulation in terms of
      bioavailability, that the duplicate product is properly manufactured and labeled
      and is stable after manufacture. ANDA approvals typically take up to two years
      to obtain from the date of initial application, although the time required
      by
      the FDA to review and approve NDAs and ANDAs is variable and beyond our control,
      depending upon the particular drug product and dosage form involved.
      Furthermore, there can be no assurance that the FDA will approve a particular
      ANDA at all, or that the FDA will agree that an ANDA is a suitable vehicle
      through which to secure approval rather than an NDA, which requires the
      applicant to conduct lengthy clinical trials and to incur substantial costs
      of
      development prior to submission. APIs require rigorous development and testing
      to prove equivalence in different markets around the world. To market an API
      in
      the U.S., a drug master file (“DMF”) must be filed with the FDA which meets FDA
      equivalence and manufacturing guidelines. Development of a new API and obtaining
      proper regulatory approval can take 2-5 years depending on the complexity of
      the
      API and there is no assurance that regulatory approval will ever be
      obtained.




*FDA
      Inspections.* The FDA
      routinely inspects FDA approved pharmaceutical manufacturing facilities to
      ensure the facility continues to operate in compliance with cGMPs. FDA warning
      letters may be issued as a consequence of violations observed during inspection.
      An FDA warning letter is intended to provide notice to a company of violations
      of the laws administered by the FDA and to elicit voluntary corrective action.
      Until the violations identified in the warning letter are corrected, the FDA
      frequently will withhold approval of any marketing applications (ANDAs, NDAs,
      DMFs) submitted by us and will share the contents of the warning letter with
      government agencies that may contract to purchase products from us. Failure
      to
      take effective corrective actions can result in FDA enforcement action such
      as
      monetary fines, seizure of products, or injunction that could suspend
      manufacturing and compel recall of a product.




9




If
      the
      confirmatory inspection shows that corrections have been made and no significant
      deviations are identified, the FDA can be expected to remove the sanctions
      of
      the warning letter and resume a routine inspection schedule.




If
      the
      confirmatory inspection identifies significant deviations from the established
      FDA standards, the FDA may initiate enforcement action including, but not
      limited to, the following: (1) maintain the warning letter sanctions and require
      further corrective actions, which could include a recall of certain products;
      (2) seek a court-ordered injunction which may include temporary suspension
      of
      some or all operations, mandatory recall of certain products, potential monetary
      penalties or other sanctions; or (3) seize our products. Though we are not
      currently subject to any enforcement action, any such action could significantly
      impair our ability to continue to manufacture and to distribute our products,
      and generate cash from our operations. Any or all of these actions would have
      a
      material adverse effect on our liquidity and our ability to continue as a going
      concern.




Our
      corporate facilities, as well as our warehousing and distribution operations
      have been routinely inspected by the FDA and we have not received any
      deficiencies or FDA warning letters. Our contract manufacturers have also been
      routinely inspected by the FDA and have informed us that they have no
      outstanding inspectional observations.




**Product
      Recalls**




We
      have
      not had any product recalls to date.




**Environment**




We
      do not
      anticipate any material cost or adverse effect from compliance with federal,
      state, and local provisions that have been enacted or adopted regulating the
      discharge of materials into the environment, or otherwise relating to the
      protection of the environment.




**Employees**




As
      of
      March 17, 2008, we had 47 full-time employees. We believe we enjoy good
      relations with our employees, none of whom is represented by a collective
      bargaining agreement.




**RISK
      FACTORS**




Investing
      in our common stock involves a high degree of risk. Prospective investors should
      carefully consider the risks described below, together with all of the other
      information included or referred to in this report, before purchasing shares
      of
      our common stock. There are numerous and varied risks, known and unknown, that
      may prevent us from achieving our goals. If any of these risks actually occurs,
      our business, financial condition or results of operations may be materially
      adversely affected. In such case, the trading price of our common stock could
      decline and investors in our common stock could lose all or part of their
      investment.




**Risks
      Related to Our Business**




***We
      may require additional capital to expand our operations and develop new
      products. Our ability to continue as a going concern is subject to our ability
      to realize a profit and/or obtain funding from outside
      sources.***




10




We
      have
      incurred losses since inception and may continue to incur losses for the
      foreseeable future. We anticipate that our near term activities will be funded
      from the issuance of additional equity and funds provided by ongoing operations.
      If sales from operations are insufficient to support our planned development
      of
      new products and expansion of operations, we will need to access additional
      equity or debt capital. If public or private financing is not available when
      needed or is not available on terms acceptable to us, we may be unable to pursue
      growth opportunities that we view as essential to the expansion of our business.
      Further, the terms of such additional financing, if obtained, may require the
      granting of rights, preferences or privileges senior to those of our common
      stock and could result in substantial dilution of the existing ownership
      interests of our common stockholders and could include covenants and
      restrictions that limit our ability to operate or expand our business in a
      manner that we deem to be in our best interest. As a result of these factors
      our
      independent registered public accountants have included a going concern
      qualification in their report on our audited financial statements for the fiscal
      year ended December 31, 2007, which may significantly limit the availability
      of
      financing available to us. In addition, because our common stock currently
      is
      traded on the OTC Bulletin Board and not listed on a national exchange, we
      may
      experience further difficulty accessing the capital markets.




***The
      majority of our inventory consists of Sevoflurane.***




The
      majority of our inventory consists of Sevoflurane, a generic pharmaceutical
      that
      received FDA approval for use in the U.S. on May 2, 2007. There is no guarantee
      that Sevoflurane will provide us with our projected sales and cash flows.
      Failure to achieve projected margin and/or market share will adversely affect
      our future financial position.




***We
      rely on Minrad International, Inc. as our sole supplier of our distributed
      products, which could result in us not being able to obtain sufficient
      quantities to meet our short-term needs.***




All
      the
      products that we currently distribute are produced by Minrad International,
      Inc.
      These products are the source of all of our current sales. If we were unable
      to
      acquire sufficient quantities of our products from Minrad International, Inc.
      or
      our products were not available, we would have to make a significant capital
      investment and divert resources to obtain such products. Manufacturers of our
      products are scarce and a disruption or termination of our relationship with
      Minrad could result in our inability to meet demand for our products, which
      could lead to customer dissatisfaction, damage our reputation, cause customers
      to cancel existing orders and to stop doing business with us and could result
      in
      the cessation of our business.




***We
      have only one product line, consisting of Enflurane, Isoflurane, and
      Sevoflurane, we are not diversified, and a decrease in sales of this product
      line could seriously harm our business.***




Our
      sole
      product line currently consists of Enflurane, Isoflurane, and Sevoflurane.
      As
      such, our line of products is not as diversified as those of some of our
      competitors. Consequently, if sales of Enflurane, Isoflurane, or Sevoflurane
      decline precipitously, our business would be seriously harmed, and it would
      likely be difficult for us to recover because we do not have the breadth of
      products that would enable us to sustain our business while seeking to develop
      new types of products or new markets for our existing product.




***Our
      obligations to the holder of our outstanding convertible note are secured by
      all
      of our assets, so if we default on those obligations, the holder of such note
      could foreclose on our assets.***




The
      holder of our 9.50% senior secured redeemable convertible note in the principal
      amount of $10,500,000 (“Convertible Note”), has a security interest in all of
      our assets and those of our subsidiary. As a result, if we default under our
      obligations under the Convertible Note, the holder could foreclose its security
      interests and liquidate some or all of our assets, which would harm our
      business, financial condition and results of operations.




11




***If
      we are unable to successfully develop or commercialize new products, our
      operating results will suffer.***




Our
      future growth and results of operations will depend to a significant extent
      upon
      our ability to successfully commercialize generic products in a timely manner
      that can be promoted through current marketing and distribution channels. There
      are numerous difficulties in developing and commercializing new products,
      including:




·
            developing,
                testing and manufacturing products in compliance with regulatory
                standards
                in a timely manner;·
            receiving
                requisite regulatory approvals for such products in a timely
                manner;·
            the
                availability, on commercially reasonable terms, of raw materials,
                including active pharmaceutical ingredients and other key ingredients;
                and·
            unexpected
                delays or unanticipated costs.





There
      can
      be no assurance that we will successfully develop new pharmaceutical products
      or, if we do develop new products, that we will successfully integrate such
      new
      products into our existing product lines. In addition, there can be no assurance
      that we will receive all necessary FDA approvals or that such approvals will
      not
      involve delays, which could adversely affect the marketing and sale of our
      products. Our failure to develop new products and receive FDA approvals for
      such
      products in a timely manner could have a material adverse effect on our
      business, financial condition and results of operations.





***Our
      success depends on the development of generic and off-patent pharmaceutical
      products that are particularly susceptible to competition, substitution and
      reimbursement policies.***





Our
      success depends, in part, upon our ability to anticipate which branded
      pharmaceuticals are about to come off patent and thus permit us to develop,
      manufacture (or contract with third-parties to manufacture) and market
      equivalent generic pharmaceutical products. Generic pharmaceutical products
      must
      meet the same quality standards as branded pharmaceutical products, even though
      these equivalent generic pharmaceutical products are sold at prices that are
      significantly lower than that of branded pharmaceutical products. Generic
      substitution is regulated by federal and state governments, as is reimbursement
      for generic drug dispensing. There can be no assurance that substitution will
      be
      permitted for newly approved generic drugs or that such products will be subject
      to government reimbursement. In addition, generic pharmaceutical products that
      third parties develop may render our generic pharmaceutical products
      noncompetitive or obsolete. There can be no assurance that we will be able
      to
      consistently bring generic pharmaceutical products to market quickly and
      efficiently in the future. An increase in competition in the sale of generic
      pharmaceutical products or our failure to bring such products to market before
      our competitors could have a material adverse effect on our business, financial
      condition and results of operations.




***If
      brand pharmaceutical companies are successful in limiting the use of generics
      through their legislative, regulatory, and commercial efforts, our sales of
      generic products may suffer.***




Many
      brand pharmaceutical companies increasingly have used state and federal
      legislative and regulatory means to delay generic competition. These efforts
      have included:




·
            pursuing
                new patents for existing products that may be granted just before
                the
                expiration of one patent, which could extend patent protection for
                additional years or otherwise delay the launch of
                generics;




12




·
            using
                the Citizen Petition process to request amendments to FDA
                standards;·
            seeking
                changes to U.S. Pharmacopeia, an organization that publishes industry
                recognized compendia of drug standards;·
            attaching
                patent extension amendments to non-related federal
                legislation;·
            engaging
                in state-by-state initiatives to enact legislation that restricts
                the
                substitution of some branded drugs, which could have an impact on
                products
                that we are developing; and·
            implementing
                commercial efforts to switch patients towards branded drugs with
                longer
                patent protection.





If
      brand
      pharmaceutical companies are successful in limiting the use of generic products
      through these or other means, our sales of generic products may decline. If
      we
      experience a material decline in generic product sales, our results of
      operations, financial condition and cash flows will suffer.





***From
      time to time we may need to rely on licenses to proprietary technologies, which
      may be difficult or expensive to obtain.***




We
      may
      need to obtain licenses to patents and other proprietary rights held by third
      parties to develop, manufacture (or contract with third-parties to manufacture)
      and market products. If we are unable to timely obtain these licenses on
      commercially reasonable terms, our ability to commercially market our products
      may be inhibited or prevented.




***Our
      business may be adversely affected by a decline in key
      products.***




The
      sales
      of our products could underperform due to numerous factors, many of which are
      beyond our control, including:




·
            lower
                prices or better terms offered on similar products by other manufacturers
                or marketers;·
            substitute
                or alternative products or therapies;·
            development
                by others of new pharmaceutical products or treatments that are more
                effective than our products;·
            introduction
                of other generic equivalents or products that may be therapeutically
                interchanged with our products;·
            interruptions
                in the manufacturing or supply of our products or their
                ingredients;·
            changes
                in the prescribing practices of physicians;·
            changes
                in third-party reimbursement practices; and·
            pending
                FDA approval of pipeline products.





Any
      factor adversely affecting the sale of these or our other key products may
      cause
      our sales to decline. In particular, if sales of Sevoflurane do not meet our
      expectations, our operating results will suffer and our ongoing partnering
      relationship with Minrad International, Inc. will be at risk.





***Our
      sales depend on sales of products manufactured by third-parties, which we cannot
      control.***




We
      derive
      all of our sales from the sale of products manufactured by third parties. There
      can be no assurance that our dependence on third parties for the manufacture
      of
      such products will not adversely affect our profit margins or our ability to
      develop and deliver our products on a timely and competitive basis. If for
      any
      reason we are unable to obtain or retain third-party manufacturers on
      commercially acceptable terms, we may not be able to distribute certain of
      our
      products as planned. No assurance can be made that the third-party manufacturers
      we use will be able to provide us with sufficient quantities of our products
      or
      that the products supplied to us will meet our specifications. Any delays or
      difficulties with third-party manufacturers could adversely affect the marketing
      and distribution of certain of our products, which could have a material adverse
      effect on our business, financial condition and results of
      operations.




13


***We
      may be required to perform additional testing if manufacturing problems are
      identified after the products are on the market.***




If
      manufacturing problems occur, product recalls may be required, regulatory
      approval may be withdrawn and reformulation of products, additional testing,
      and
      changes to or re-approvals of the facilities manufacturing our products may
      be
      required, any of which could have a material adverse effect on sales of the
      affected products and on our business and results of operations.




***If
      we are unable to obtain sufficient supplies from key suppliers that in some
      cases may be the only source of finished products or raw materials, our ability
      to deliver our products to the market may be impeded.***




We
      are
      required to identify the supplier(s) of all the raw materials for our products
      in our applications with the FDA. To the extent practicable, we attempt to
      identify more than one supplier in each drug application. However, some products
      and raw materials are available only from a single source and, in some cases,
      only one supplier of products and raw materials has been identified, even in
      instances where multiple sources exist. We were dependent on two outside
      suppliers who accounted for 47.9% and 26.2% of our product purchases during
      the
      fiscal year ended December 31, 2007 and are currently dependent on Minrad
      International, Inc. as the sole supplier of our product purchases. If our
      outside suppliers experienced regulatory or supply-related difficulties that
      inhibit their ability to deliver products and raw materials to us and, to the
      extent any difficulties experienced by our suppliers cannot be resolved within
      a
      reasonable time, and at reasonable cost, or if raw materials for a particular
      product become unavailable from an approved supplier and we are required to
      qualify a new supplier with the FDA, we may not be able to manufacture our
      products as planned, our sales and marketing efforts could be delayed and our
      profit margins and market share for the affected product could
      decrease.




Although
      we do not currently purchase any products under our existing arrangements with
      foreign suppliers, our arrangements with foreign suppliers are subject to
      certain additional risks, including the availability of government clearances,
      export duties, political instability, war, acts of terrorism, currency
      fluctuations and restrictions on the transfer of funds. Arrangements with
      international raw material suppliers are subject to, among other things, FDA
      regulation, customs clearances, various import duties and other government
      clearances. Acts of governments outside the U.S. may affect the price or
      availability of raw materials needed for the development or manufacture of
      our
      products.




***The
      formulation, development, manufacture (or contracting with third-parties to
      manufacture) and sale of our products involves the risk of product liability
      claims by consumers and other third parties, and insurance against such
      potential claims is expensive and may be difficult to
      obtain.***




The
      formulation, development, manufacture (or contracting with third-parties to
      manufacture) and sale of our products involve an inherent risk of product
      liability claims and the associated adverse publicity. Insurance coverage is
      expensive and may be difficult to obtain, and may not be available in the future
      on acceptable terms, or at all. Although we currently maintain product liability
      insurance for our products in amounts we believe to be commercially reasonable,
      if the coverage limits of these insurance policies are not adequate, a claim
      brought against us, whether covered by insurance or not, could have a material
      adverse effect on our business, results of operations, financial condition
      and
      cash flows.




14




***Our
      indebtedness and restrictive debt covenants could limit our financing options
      and liquidity position, which would limit our ability to grow our
      business.***




The
      terms
      of the Convertible Note could have negative consequences to us, such
      as:




·
            we
                may be unable to obtain additional financing to fund working capital,
                operating losses, capital expenditures or acquisitions on terms acceptable
                to us, or at all;·
            we
                may be unable to refinance our indebtedness on terms acceptable to
                us, or
                at all; and·
            we
                may be more vulnerable to economic downturns and our ability to withstand
                competitive pressure may be
                limited.





Additionally,
      covenants in the securities purchase agreement governing the Convertible Note
      impose operating and financial restrictions on us. These restrictions prohibit
      or limit our ability, and the ability of our subsidiaries, to, among other
      things:





·
            pay
                cash dividends to our stockholders;·
            incur
                additional indebtedness;·
            permit
                liens on assets or conduct sales of assets; and·
            engage
                in transactions with affiliates.





These
      restrictions may limit our ability to obtain additional financing, withstand
      downturns in our business or take advantage of business opportunities. Moreover,
      additional debt financing we may seek may contain terms that include more
      restrictive covenants, may require repayment on an accelerated schedule or
      may
      impose other obligations that limit our ability to grow our business, acquire
      needed assets, or take other actions we might otherwise consider appropriate
      or
      desirable.





***Dependence
      on key executive officers.***




Our
      success will depend, in part, on our ability to attract and retain key executive
      officers. The inability to attract and retain key executive officers, or the
      loss of one or more of our key executive officers could have a material adverse
      effect on our business, financial condition and results of
      operations.




***We
      must continue to attract and retain key personnel to be able to compete
      successfully.***




Our
      performance depends, to a large extent, on the continued service of our key
      personnel, other technical employees, managers and sales personnel and our
      ability to continue to attract and retain such personnel. Competition for such
      personnel is intense, particularly for highly motivated and experienced
      pharmaceutical personnel. We are facing increasing competition from companies
      with greater financial resources for such personnel. There can be no assurance
      that we will be able to attract and retain sufficient numbers of highly-skilled
      personnel in the future, and the inability to do so could have a material
      adverse effect on our business, and financial condition and results of
      operations.




**Risks
      Relating to Investing in the Pharmaceutical Industry**




***We
      are subject to substantial regulation by the FDA, the Drug Enforcement Agency
      and other regulatory agencies. The costs of complying or the consequences of
      failing to comply with such regulations may have a material adverse effect
      on
      our ability to conduct our business.***




Virtually
      all aspects of our business, including the development, testing, manufacturing,
      processing, quality, safety, efficacy, packaging, labeling, recordkeeping,
      distribution, storage and advertising of our products and disposal of waste
      products arising from these activities, are subject to extensive regulation
      by
      federal, state and local governmental authorities in the U.S., including the
      FDA, and are increasingly subject to regulation in foreign countries. Compliance
      with these regulations is costly and time-consuming.




15




The
      manufacturing facilities and procedures of our suppliers are subject to ongoing
      regulation, including periodic inspection by the FDA, the Drug Enforcement
      Agency, or DEA, foreign regulatory agencies, and other regulatory authorities,
      including state controlled substance authorities. For example, manufacturers
      of
      pharmaceutical products must comply with detailed regulations governing current
      good manufacturing practices, including requirements relating to quality control
      and quality assurance. Funds, time and effort must be spent in the areas of
      production, safety, quality control and quality assurance to ensure compliance
      with these regulations. Notwithstanding our efforts to ensure compliance with
      all laws, rules and regulations, there can be no assurance that the
      manufacturing facilities of our suppliers will not be subject to regulatory
      action in the future.




Products
      to be sold by us generally must receive appropriate regulatory clearance before
      they can be sold in a particular country, including the U.S. Delays in the
      introduction of a product may result from, among other things, insufficient
      or
      incomplete submissions to the FDA or similar regulatory authorities in foreign
      countries for approval of a product, objections by another company with respect
      to our submissions for approval, new patents by other companies, patent
      challenges by other companies that result in a 180-day exclusivity period and
      a
      30-month stay, and changes in regulatory policy during the period of product
      development or during the regulatory approval process. The FDA and foreign
      regulatory authorities have extensive administrative and judicial enforcement
      powers over the activities of pharmaceutical manufacturers and marketers to
      ensure compliance with FDA regulations. Those powers include, but are not
      limited to, the authority to initiate court action to seize unapproved or
      non-complying products, to enjoin non-complying activities, to halt
      manufacturing operations that are not in compliance with cGMP, to recall
      products, to seek civil monetary and criminal fines and penalties. Other
      enforcement activities include the refusal to approve product applications
      or to
      revoke drug approvals previously granted and remove from the market previously
      approved products for various reasons, including issues related to current
      good
      manufacturing practices for that particular product or in general. Any such
      enforcement activities could have a material adverse effect on our business,
      financial condition, and results of operations.




We
      may be
      subject from time to time to any such enforcement activities and any product
      recalls initiated by us or by the FDA and foreign regulatory authorities,
      unexpected delays in obtaining regulatory approvals, the revocation of a prior
      approval, the restriction or prohibition on sales of products we market, or
      the
      halting of the operations of our third-party manufacturers, each of which could
      impose significant costs on us and adversely affect our ability to generate
      revenue.




Our
      inability or the inability of our suppliers to comply with applicable FDA and
      other regulatory requirements could result in, among other things, warning
      letters, fines, consent decrees restricting or suspending the operations of
      our
      third-party manufacturers, delay of approvals for new products, injunctions,
      civil penalties, recall or seizure of products, total or partial suspension
      of
      sales and potential criminal prosecution. Any of these or other regulatory
      actions could materially adversely affect our business and financial
      condition.




We
      must
      obtain approval from the FDA for each pharmaceutical product that we market.
      The
      FDA approval process is typically lengthy and expensive, and approval is never
      certain. Our new products could take a significantly longer time than we expect
      to gain regulatory approval and may never gain approval. Even if the FDA or
      another regulatory agency approves a product, the approval may limit the
      indicated uses for a product, which may otherwise limit our ability to promote,
      sell and distribute a product.




16




We
      and
      our third-party manufacturers are subject to periodic inspection by the FDA
      to
      assure regulatory compliance regarding the manufacturing, distribution, and
      promotion of sterile pharmaceutical products. The FDA imposes stringent
      mandatory requirements on the manufacture and distribution of sterile
      pharmaceutical products to ensure their sterility. The FDA also regulates drug
      labeling, promotion and advertising of prescription drugs. A finding by a
      governmental agency or court that we are not in compliance the FDA requirements
      could have a material adverse effect on our business, financial condition and
      results of operations.




If
      the
      FDA changes its regulatory position, it could force us to delay or suspend
      indefinitely, the operations of our third-party manufacturers, distribution
      or
      sales of certain products. While we believe that all of our current
      pharmaceuticals are lawfully marketed in the U.S. and have received the
      requisite agency approvals for manufacture and sale, such marketing authority
      is
      subject to withdrawal by the FDA. In addition, modifications or enhancements
      of
      approved products are in many circumstances subject to additional FDA approvals
      which may or may not be granted and which may be subject to a lengthy
      application process.




***We
      may implement product recalls and could be exposed to significant product
      liability claims; we may have to pay significant amounts to those harmed and
      may
      suffer from adverse publicity as a result.***




The
      manufacturing and marketing of pharmaceuticals involves an inherent risk that
      our products may prove to be defective and cause a health risk. In that event,
      we may voluntarily implement a recall or market withdrawal or may be required
      to
      do so by a regulatory authority. In the case of a product recall, whether
      voluntary or mandated, we could experience significant costs, potential
      disruptions in the supply of our products to our customers, and adverse
      publicity, all of which could harm our ability to market our
      products.




Although
      we are not currently subject to any material product liability proceedings,
      we
      may incur material liabilities relating to product liability claims in the
      future. Even meritless claims could subject us to adverse publicity, hinder
      us
      from securing insurance coverage in the future and require us to incur
      significant legal fees and divert the attention of the key employees from
      running our business. Successful product liability claims brought against us
      could have a material adverse effect on our business, financial condition and
      results of operations.




We
      currently have product liability insurance in the amount of $5,000,000 for
      aggregate annual claims with a $25,000 deductible per incident and a $125,000
      aggregate annual deductible. However, there can be no assurance that such
      insurance coverage will be sufficient to fully cover potential claims.
      Additionally, there can be no assurance that adequate insurance coverage will
      be
      available in the future at acceptable costs, if at all, or that a product
      liability claim would not have a material adverse effect on our business,
      financial condition and results of operations.




***The
      FDA may authorize sales of some prescription pharmaceuticals on an
      over-the-counter drug or a non-prescription basis, which would reduce the
      profitability of our prescription products.***




From
      time
      to time, the FDA elects to permit sales of some pharmaceuticals currently sold
      on a prescription basis, without a prescription. FDA approval of the sale of
      our
      products without a prescription would reduce demand for our competing
      prescription products and, accordingly, reduce our profits. The FDA may also
      require us to stop selling our product as a prescription drug and obtain
      approval of the product for over-the-counter sale.




17




***The
      pharmaceutical industry is highly competitive and changes in technology could
      render our products obsolete.***




We
      face
      significant competition from other pharmaceutical companies, including major
      pharmaceutical companies with financial resources substantially greater than
      ours, in developing, acquiring, manufacturing and marketing pharmaceutical
      products. The selling prices of pharmaceutical products typically decline as
      competition increases. Further, other products now in use, under development
      or
      acquired by other pharmaceutical companies, may be more effective or offered
      at
      lower prices than our current or future products. The industry is characterized
      by rapid technological change that may render our products obsolete, and
      competitors may develop their products more rapidly than we can. Competitors
      may
      also be able to complete the regulatory process sooner, and therefore, may
      begin
      to market their products in advance of our products. We believe that competition
      in sales of our products is based primarily on price, service and technical
      capabilities.




Sales
      and
      gross profit derived from the sales of generic pharmaceutical products tend
      to
      follow a pattern based on certain regulatory and competitive factors. As patents
      for brand name products and related exclusivity periods expire, the first
      generic manufacturer to receive regulatory approval for generic equivalents
      of
      such products is generally able to achieve significant market penetration.
      As
      competing off-patent manufacturers receive regulatory approvals on similar
      products or as brand manufacturers launch generic versions of such products
      (for
      which no separate regulatory approval is required), market share, sales and
      gross profit typically decline, in some cases dramatically. Accordingly, the
      level of market share, revenue and gross profit attributable to a particular
      generic product normally is related to the number of competitors in that
      product’s market and the timing of that product’s regulatory approval and
      launch, in relation to competing approvals and launches. Consequently, we must
      continue to develop and introduce new products in a timely and cost-effective
      manner to maintain our sales and gross margins. Additionally, as new competitors
      enter the market, there may be increased pricing pressure on certain products,
      which would result in lower gross margins. There can be no assurance that we
      will be able to develop or acquire commercially attractive pharmaceutical
      products, additional competitors will not enter the market or competition from
      other pharmaceutical companies will not have a material adverse effect on our
      business, financial condition and results of operations.




***Sales
      of our products may continue to be adversely affected by the continuing
      consolidation of our distribution network and the concentration of our customer
      base.***




Our
      principal customers are wholesale drug distributors, retail drug store chains,
      hospitals and alternate site health care facilities. These customers comprise
      a
      significant part of the distribution network for pharmaceutical products in
      the
      U.S. This distribution network is continuing to undergo significant
      consolidation marked by mergers and acquisitions and the growth of large retail
      drug store chains. As a result, a small number of customers control a
      significant share of the market. We expect that consolidation of drug
      wholesalers and retailers will increase pricing and other competitive pressures
      on drug manufacturers.




***We
      depend on a small number of national account customers, the loss of any of
      which
      could have a material adverse effect.***




A
      small
      number of customers account for a large portion of the market’s generic drug
      purchases. For the fiscal year ended December 31, 2007, our three largest
      customers accounted for approximately 22.7%, 17.6% and 13.6% of net sales,
      respectively. The loss of one or more of these customers, together with a delay
      or inability to secure an alternative distribution source for end users, could
      have a material negative impact on our revenue and results of operations. A
      change in purchasing patterns, a decrease in inventory levels, an increase
      in
      returns of our products, delays in purchasing products and delays in payment
      for
      products by one or more customers also could have a material negative impact
      on
      our revenue and results of operations.




18




***We
      will face uncertainty related to pricing and reimbursement and health care
      reform.***




In
      both
      domestic and foreign markets, sales of our products will depend in part on
      the
      availability of reimbursement from third-party payors such as government health
      administration authorities, private health insurers, health maintenance
      organizations and other health care-related organizations. Reimbursement by
      such
      payors is presently undergoing reform and there is significant uncertainty
      at
      this time how this will affect sales of certain pharmaceutical
      products.




Medicare,
      Medicaid and other governmental healthcare programs govern drug coverage and
      reimbursement levels in the U.S. Federal law requires all pharmaceutical
      manufacturers to rebate a percentage of their revenue arising from
      Medicaid-reimbursed drug sales to individual states. Our rebates to Medicare
      vary by state, and historically, we rebate about 1.5% of sales in state Medicare
      rebates. Both the federal and state governments in the United States and foreign
      governments continue to propose and pass new legislation, rules and regulations
      designed to contain or reduce the cost of health care. Existing regulations
      that
      affect the price of pharmaceutical and other medical products may also change
      before any products are approved for marketing. Cost control initiatives could
      decrease the price that we receive for any product developed in the future.
      In
      addition, third-party payors are increasingly challenging the price and
      cost-effectiveness of medical products and services and litigation has been
      filed against a number of pharmaceutical companies in relation to these issues.
      Our products may not be considered cost effective or adequate third-party
      reimbursement may not be available to enable us to maintain price levels
      sufficient to realize an adequate return on our investment.




***Other
      companies may claim that we infringe their intellectual property or proprietary
      rights, which could cause us to incur significant expenses or prevent us from
      selling products.***




Our
      success will depend in part on our ability to operate without infringing the
      patents and proprietary rights of third parties. The manufacture, use and sale
      of new products have been subject to substantial patent rights litigation in
      the
      pharmaceutical industry. These lawsuits generally relate to the validity and
      infringement of patents or proprietary rights of third parties. Infringement
      litigation is prevalent with respect to generic versions of products for which
      the patent covering the brand name product is expiring, particularly since
      many
      companies that market generic products focus their development efforts on
      products with expiring patents. Other pharmaceutical companies, biotechnology
      companies, universities and research institutions may have filed patent
      applications or may have been granted patents that cover aspects of our products
      or our licensors’ products, product candidates or other
      technologies.




Future
      or
      existing patents issued to third parties may contain patent claims that conflict
      with our products. We expect to be subject to infringement claims from time
      to
      time in the ordinary course of business, and third parties could assert
      infringement claims against us in the future with respect to our current
      products or with respect to products that we may develop or license. Litigation
      or interference proceedings could force us to:




·
            stop
                or delay selling, manufacturing or using products that incorporate
                or are
                made using the challenged intellectual property;·
            pay
                damages; or·
            enter
                into licensing or royalty agreements that may not be available on
                acceptable terms, if at all.




19




Any
      litigation or interference proceedings, regardless of their outcome, would
      likely delay the regulatory approval process, be costly and require significant
      time and attention of key management and technical personnel.





***Any
      inability to protect intellectual property rights in the U.S. and foreign
      countries could limit our ability to facilitate the manufacture of, or to sell,
      our products.***




The
      patent and proprietary rights position of competitors in the pharmaceutical
      industry generally is highly uncertain, involves complex legal and factual
      questions, and is the subject of much litigation. We will rely on trade secrets,
      unpatented proprietary know-how, continuing technological innovation and, in
      some cases, patent protection to preserve a competitive position. Our patents
      and licensed patent rights may be challenged, invalidated, infringed or
      circumvented, and the rights granted in those patents may not provide
      proprietary protection or competitive advantages to us. We and our licensors
      may
      not be able to develop patentable products. Even if patent claims are allowed,
      the claims may not issue, or in the event of issuance, may not be sufficient
      to
      protect the technology owned by or licensed to us. Third party patents could
      reduce the coverage of the patent’s license, or that may be licensed to or owned
      by us. If patents containing competitive or conflicting claims are issued to
      third parties, we may be prevented from commercializing the products covered
      by
      such patents, or may be required to obtain or develop alternate technology.
      In
      addition, other parties may duplicate, design around or independently develop
      similar or alternative technologies. There can be no assurances that any patent
      applications or other proprietary rights, including licensed rights, relating
      to
      our potential products or processes will result in patents being issued or
      other
      proprietary rights secured, or that the resulting patents or proprietary rights,
      if any, will provide protection against competitors who successfully challenge
      our patents or proprietary rights, obtain patents or proprietary rights that
      may
      have an adverse effect on our ability to conduct business or are able to
      circumvent our patent or proprietary rights position.




It
      is
      possible that other parties have conducted or are conducting research and could
      make discoveries of pharmaceutical formulations or processes that would precede
      any discoveries made by us, which could prevent us from obtaining patent or
      other protection for these discoveries or marketing products developed
      therefrom. Consequently, there can be no assurance that others will not
      independently develop pharmaceutical products similar to or obsolescing those
      that we are planning to develop, or duplicate any of our products. Our inability
      to obtain patents for, or other proprietary rights in, our products and
      processes or the ability of competitors to circumvent or obsolete our patents
      or
      proprietary rights could have a material adverse effect on our business,
      financial condition, and results of operations.




We
      may
      not be able to prevent third parties from infringing or using our intellectual
      property, and the parties from whom we may license intellectual property may
      not
      be able to prevent third parties from infringing or using the licensed
      intellectual property. We generally will control and limit access to, and the
      distribution of, our product documentation and other proprietary information.
      Despite efforts to protect this proprietary information, however, unauthorized
      parties may obtain and use information that we may regard as proprietary. Other
      parties may independently develop similar know-how or may even obtain access
      to
      these technologies.




The
      laws
      of some foreign countries do not protect proprietary information to the same
      extent as the laws of the U.S., and many companies have encountered significant
      problems and costs in protecting their proprietary information in these foreign
      countries.




The
      U.S.
      Patent and Trademark Office and the courts have not established a consistent
      policy regarding the breadth of claims allowed in pharmaceutical patents. The
      allowance of broader claims may increase the incidence and cost of patent
      interference proceedings and the risk of infringement litigation. On the other
      hand, the allowance of narrower claims may limit the value of our proprietary
      rights.




20




***We
      may need to change our business practices to comply with changes to, or may
      be
      subject to charges under, the fraud and abuse laws.***




We
      will
      be subject to various federal and state laws pertaining to health care fraud
      and
      abuse, including anti-kickback, marketing and pricing laws. Violations of these
      laws are punishable by criminal and/or civil sanctions, including, in some
      instances, imprisonment and exclusion from participation in federal and state
      health care programs such as Medicare and Medicaid. We may have to change our
      business practices, or existing business practices could be challenged as
      unlawful due to changes in laws, regulations or rules or due to administrative
      or judicial findings, which could materially adversely affect our
      business.




***We
      may become subject to federal false claims or other similar litigation brought
      by private individuals and the government.***




The
      Federal False Claims Act allows persons meeting specified requirements to bring
      suit alleging false or fraudulent Medicare or Medicaid claims and to share
      in
      any amounts paid to the government in fines or settlement. These suits, known
      as
      qui tam actions, have increased significantly in recent years and have increased
      the risk that a health care company will have to defend a false claim action,
      pay fines and/or be excluded from Medicare and Medicaid programs. Federal false
      claims litigation can lead to civil monetary penalties, criminal fines and
      imprisonment and/or exclusion from participation in Medicare, Medicaid and
      other
      federally funded health programs. Other alternate theories of liability may
      also
      be available to private parties seeking redress for such claims. A number of
      parties have brought claims against numerous pharmaceutical manufacturers,
      and
      there can be no assurance that such claims will not be brought against us,
      or if
      they are brought, that such claims might not be successful.




**Risks
      Related to FineTech Pharmaceutical**




***The
      principal research and development and manufacturing facilities of FineTech
      Pharmaceutical, our wholly-owned subsidiary, are located in Israel and the
      unstable military and political conditions of Israel may cause interruption
      or
      suspension of our business operations without warning.***




FineTech
      Pharmaceutical’s principal research and development and manufacturing facilities
      are located in Haifa, Israel. As a result, FineTech Pharmaceutical is directly
      influenced by the political, economic and military conditions affecting Israel.
      Since the establishment of the State of Israel in 1948, a number of armed
      conflicts have taken place between Israel and its Arab neighbors and, since
      September 2000, involving the Palestinian population, and a state of hostility,
      varying in degree and intensity, has led to security and economic problems
      for
      Israel and companies based in Israel. Acts of random terrorism periodically
      occur which could affect our operations or personnel. In addition, Israeli-based
      companies and companies doing business with Israel, have been the subject of
      an
      economic boycott by members of the Arab League and certain other predominantly
      Muslim countries since Israel’s establishment. Although Israel has entered into
      various agreements with certain Arab countries and the Palestinian Authority,
      and various declarations have been signed in connection with efforts to resolve
      some of the economic and political problems in the Middle East, we cannot
      predict whether or in what manner these problems will be resolved. Also, since
      the end of September 2000, there has been a marked increase in the level of
      terrorism in Israel, which has significantly damaged both the Israeli economy
      and levels of foreign and local investment. Furthermore, certain of FineTech
      Pharmaceutical’s officers and employees may be obligated to perform annual
      reserve duty in the Israel Defense Forces and are subject to being called up
      for
      active military duty at any time.




21




***We
      have significant international operations, including in Israel, which may be
      adversely affected by acts of terrorism, major hostilities or adverse
      legislation or litigation.***




Significant
      portions of FineTech Pharmaceutical’s operations are conducted outside of the
      United States, and FineTech Pharmaceutical imports a substantial number of
      products into the United States. FineTech Pharmaceutical may, therefore, be
      directly affected and denied access to our customers by a closure of the borders
      of the United States for any reason or as a result of other economic, political
      and military conditions in the countries in which FineTech Pharmaceutical’s
      businesses are located. FineTech Pharmaceutical may also be affected by currency
      exchange rate fluctuations and the exchange control regulations of such
      countries or other political crises or disturbances, which impede access to
      FineTech Pharmaceutical’s suppliers.




FineTech
      Pharmaceutical’s executive offices and manufacturing facilities are located in
      Israel. FineTech Pharmaceutical’s Israeli operations are dependent upon
      materials imported from outside of Israel. We also export significant amounts
      of
      products from Israel. Accordingly, FineTech Pharmaceutical’s operations could be
      materially and adversely affected by acts of terrorism or if major hostilities
      should occur in the Middle East or trade between Israel and its present trading
      partners should be curtailed, including as a result of acts of terrorism in
      the
      United States or elsewhere. Any such effects may not be covered by insurance.




FineTech
      Pharmaceutical is subject to legislation in Israel, primarily relating to
      patents and data exclusivity provisions, that may prevent FineTech
      Pharmaceutical from exporting Israeli-manufactured products in a timely fashion.
      Additionally, the existence of third-party patents in Israel, with the attendant
      risk of litigation, may cause FineTech Pharmaceutical to move production outside
      of Israel or otherwise adversely affect FineTech Pharmaceutical’s ability to
      export certain products from Israel.




***Because
      some of FineTech Pharmaceutical’s officers are located in non-U.S.
      jurisdictions, there may be no effective recourse against the management for
      misconduct and may not be able to enforce judgment and civil liabilities against
      its officers, experts and agents.***




Most
      of
      FineTech Pharmaceutical’s officers are nationals and/or residents of countries
      other than the United States, and all or a substantial portion of their assets
      are located outside the United States. As a result, it may be difficult to
      enforce within the United States any judgments obtained against FineTech
      Pharmaceutical’s officers or directors, including judgments predicated upon the
      civil liability provisions of the securities laws of the United States or any
      U.S. state.




***FineTech
      Pharmaceutical’s failure to comply with applicable environmental laws and
      regulations worldwide could adversely impact FineTech Pharmaceutical’s business
      and results of operations.***




FineTech
      Pharmaceutical is subject to laws and regulations concerning the environment,
      safety matters, regulation of chemicals and product safety in the countries
      where FineTech Pharmaceutical manufactures and sells its products or otherwise
      operates its business. These requirements include regulation of the handling,
      manufacture, transportation, use and disposal of materials, including the
      discharge of pollutants into the environment. In the normal course of FineTech
      Pharmaceutical’s business, FineTech Pharmaceutical is exposed to risks relating
      to possible releases of hazardous substances into the environment that could
      cause environmental or property damage or personal injuries, and that could
      require remediation of contaminated soil and groundwater. Under certain laws,
      FineTech Pharmaceutical may be required to remediate contamination at certain
      of
      FineTech Pharmaceutical’s properties regardless of whether the contamination was
      caused by FineTech Pharmaceutical, or by previous occupants of the property.




22




In
      recent
      years, the operations of all companies have become subject to increasingly
      stringent legislation and regulation related to occupational safety and health,
      product registration and environmental protection. Such legislation and
      regulations are complex and constantly changing, and FineTech Pharmaceutical
      cannot assure you that future changes in laws or regulations would not require
      it to install additional controls for certain of FineTech Pharmaceutical’s
      emission sources, to undertake changes in its manufacturing processes or to
      remediate soil or groundwater contamination at facilities where such clean-up
      is
      not currently required.




**Risks
      Relating to the Market for our Common Stock**




***We
      may issue additional shares of our common stock upon the redemption of the
      Convertible Note or for our failure to meet certain performance targets, which
      could result in our existing stockholders experiencing
      dilution.***




The
      Convertible Note allows us, so long as there is not an event of default, to
      redeem up to 100% of the Note. However, should we redeem more than 50% of the
      Convertible Note, our outstanding Series B warrant will become exercisable
      at $1.1262 per share for 4,661,694 shares if the Convertible Note is redeemed
      in
      full, or such less number of shares, as adjusted pro rata depending on how
      much
      of the Convertible Note is redeemed. In addition, should we fail to meet certain
      earnings targets commencing in the first fiscal quarter of 2008 and more than
      50% of the Convertible Note has not yet been redeemed, the conversion price
      of
      the Convertible Note will be reset to the lower of (i) the then current
      conversion price or (ii) 85% of the average market price of our common stock
      at
      such time. Each of these scenarios could lead to us issuing substantially more
      shares of our common stock to the noteholder at discounted prices, which will
      lead to greater dilution of existing stockholders’ percentage of ownership and
      voting power.




***The
      requirements of being a public company may strain our resources and distract
      management.***




As
      a
      public company, we are subject to the reporting requirements of the Securities
      Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act of 2002. These
      requirements are extensive. The Securities Exchange Act of 1934, as amended,
      requires that we file annual, quarterly and current reports with respect to
      our
      business and financial condition. The Sarbanes-Oxley Act of 2002 requires that
      we maintain effective disclosure controls and procedures and internal controls
      for financial reporting. In order to maintain and improve the effectiveness
      of
      our disclosure controls and procedures and internal control over financial
      reporting, significant resources and management oversight is required. This
      may
      divert management’s attention from other business concerns, which could have a
      material adverse effect on our business, financial condition and results of
      operations.




***There
      is currently a limited trading market for our common stock and we cannot ensure
      that one will ever develop or be sustained.***




There
      is
      currently a limited trading market for our common stock. We cannot predict
      how
      liquid the market for our common stock might become. Our common stock is
      currently approved for quotation on the OTC Bulletin Board. We anticipate
      listing our common stock as soon as practicable on either the American Stock
      Exchange, the NASDAQ Stock Market or a different national or other securities
      exchange, assuming that we can satisfy the initial listing standards for such.
      We currently do not satisfy the initial listing standards, and cannot ensure
      that we will be able to satisfy such listing standards or that our common stock
      will be accepted for listing on any such exchange. Should we fail to satisfy
      the
      initial listing standards of such exchanges, or our common stock be otherwise
      rejected for listing and remain on the OTC Bulletin Board or be suspended from
      the OTC Bulletin Board, the trading price of our common stock could suffer,
      the
      trading market for our common stock may be less liquid and our common stock
      price may be subject to increased volatility.




23




In
      addition, the price at which our common stock may be sold is very unpredictable
      because there are very few trades in our common stock. Because our common stock
      is so thinly traded, a large block of shares traded can lead to a dramatic
      fluctuation in the share price.




***Failure
      to comply with internal control attestation requirements could lead to loss
      of
      public confidence in our financial statements and negatively impact our stock
      price.***




Pursuant
      to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include
      in our next annual report, management’s assessment of the
      effectiveness of our internal control over financial reporting. Furthermore,
      beginning with the fiscal year ending on December 31, 2008, our independent
      registered public accounting firm will be required to attest to whether
      management’s assessment of the effectiveness of internal controls over financial
      reporting is fairly stated in all material respects and separately report on
      whether it believes we maintained, in all material respects, effective internal
      control over financial reporting. If we fail to timely complete the development
      of our internal controls and management is unable to make this assessment,
      or,
      once required, if the independent registered public accounting firm cannot
      timely attest to this assessment, we could be subject to regulatory sanctions
      and a loss of public confidence in our internal control and the reliability
      of
      our financial statements, which ultimately could negatively impact our stock
      price.




Any
      future acquisitions and other material changes in our operations likely will
      require us to expand and possibly revise our disclosure controls and procedures,
      internal controls and related corporate governance policies. In addition, the
      new and changed laws and regulations are subject to varying interpretations
      in
      many cases due to their lack of specificity and, as a result, their application
      in practice may evolve over time as new guidance is provided by regulatory
      and
      governing bodies. If our efforts to comply with new or changed laws and
      regulations differ from the conduct intended by regulatory or governing bodies
      due to ambiguities or varying interpretations of the law, we could be subject
      to
      regulatory sanctions, our reputation may be harmed and our stock price may
      be
      adversely affected.




***Public
      company compliance may make it more difficult to attract and retain officers
      and
      directors.***




The
      Sarbanes-Oxley Act of 2002 and new rules subsequently implemented by the
      Securities and Exchange Commission have required changes in corporate governance
      practices of public companies. As a public company, we expect these new rules
      and regulations to increase our compliance costs in 2008 and beyond and to
      make
      certain activities more time consuming and costly. As a public company, we
      also
      expect that these new rules and regulations may make it more difficult and
      expensive for us to obtain director and officer liability insurance in the
      future and we may be required to accept reduced policy limits and coverage
      or
      incur substantially higher costs to obtain the same or similar coverage. As
      a
      result, it may be more difficult for us to attract and retain qualified persons
      to serve on our board of directors or as executive officers.




***Future
      changes in financial accounting standards or practices may cause adverse
      unexpected financial reporting fluctuations and affect reported results of
      operations.***




A
      change
      in accounting standards or practices can have a significant effect on our
      reported results and may even affect its reporting of transactions completed
      before the change is effective. New accounting pronouncements and varying
      interpretations of accounting pronouncements have occurred and may occur in
      the
      future. Changes to existing rules or the questioning of current practices may
      adversely affect our reported financial results or the way it conducts
      business.




24




***Our
      officers and directors own a substantial amount of our common stock and,
      therefore, exercise significant control over our corporate governance and
      affairs, which may result in their taking actions with which you do not
      agree.***




Our
      executive officers and directors, and entities affiliated with them,
      beneficially own approximately 33% of our outstanding common stock. These
      stockholders, if they act together, may be able to exercise substantial
      influence over the outcome of all corporate actions requiring approval of our
      stockholders, including the election of directors and approval of significant
      corporate transactions, which may result in corporate action with which you
      do
      not agree. This concentration of ownership may also have the effect of delaying
      or preventing a change in control, which might be in your best interest, but
      which might negatively affect the market price of our common stock.




***Significant
      quarterly fluctuation of our results of operations which may increase the
      volatility of our stock price.***




Our
      results of operations may vary from quarter to quarter due to a variety of
      factors including, but not limited to, the timing of the development and
      marketing of new pharmaceutical products, the failure to develop such products,
      delays in obtaining government approvals, including FDA approval of applications
      for our products, expenditures to comply with governmental requirements for
      manufacturing facilities, expenditures incurred to acquire and promote
      pharmaceutical products, changes in our customer base, a customer’s termination
      of a substantial account, the availability and cost of raw materials,
      interruptions in supply by third-party manufacturers, the introduction of new
      products or technological innovations by our competitors, loss of key personnel,
      changes in the mix of products sold by us, changes in sales and marketing
      expenditures, competitive pricing pressures, expenditures incurred to pursue
      or
      contest pending or threatened legal action and our ability to meet our financial
      covenants. There can be no assurance that we will be successful in avoiding
      losses in any future period. Such fluctuations may result in volatility in
      the
      price of our common stock.




***Our
      stock price may be volatile in response to market and other factors, which
      may
      limit our ability to raise capital in the future or cause investment losses
      for
      our stockholders.***




The
      market price for our stock may continue to be, volatile and subject to price
      and
      volume fluctuations in response to market and other factors, including the
      following, some of which are beyond our control:




·
            the
                concentration of the ownership of our shares by a limited number
                of
                affiliated stockholders may limit interest in our
                securities;·
            variations
                in quarterly operating results from the expectations of securities
                analysts or investors;·
            revisions
                in securities analysts’ estimates or reductions in security analysts’
                coverage;·
            announcements
                of technological innovations or new products or services by us or
                our
                competitors;·
            reductions
                in the market share of our products;·
            announcements
                by us or our competitors of significant acquisitions, strategic
                partnerships, joint ventures or capital commitments;·
            general
                technological, market or economic trends;·
            investor
                perception of our industry or prospects;·
            insider
                selling or buying;




25




·
            sales
                of large blocks of our stock;·
            investors
                entering into short sale contracts;·
            regulatory
                developments affecting our industry in general or us or our products
                in
                particular;·
            additions
                or departures of key personnel;·
            major
                catastrophic events;·
            failure
                of our common stock to be quoted on the OTC Bulletin Board or listed
                on
                the NASDAQ Capital Market, American Stock Exchange, or other national
                securities market or exchange;·
            changes
                in accounting principles; and·
            discussion
                of us or our stock price by the financial and scientific press and
                in
                online investor communities.





In
      the
      past, following periods of volatility in the market price of a company’s
      securities, securities class action litigation has often been brought against
      that company. Due to the potential volatility of our stock price, we may be
      the
      target of securities litigation in the future. Securities litigation could
      result in substantial costs and divert management’s attention and resources from
      our business.





***Our
      certificate of incorporation allows for our board to create new series of
      preferred stock without further approval by our stockholders, which could
      adversely affect the rights of the holders of our common
      stock.***




Our
      board
      of directors has the authority to fix and determine the relative rights and
      preferences of preferred stock. Our board of directors also has the authority
      to
      issue preferred stock without further stockholder approval. As a result, our
      board of directors could authorize the issuance of a series of preferred stock
      that would grant to holders the preferred right to our assets upon liquidation,
      the right to receive dividend payments before dividends are distributed to
      the
      holders of common stock and the right to the redemption of the shares, together
      with a premium, prior to the redemption of our common stock. In addition, our
      board of directors could authorize the issuance of a series of preferred stock
      that has greater voting power than our common stock or that is convertible
      into
      our common stock, which could decrease the relative voting power of our common
      stock or result in dilution to our existing stockholders.




***If
      we issue additional shares of stock, such issuances can dilute the tangible
      net
      book value of shares of our outstanding stock.***




We
      may
      issue shares of stock at a purchase price that is substantially lower than
      the
      market price of shares of our common stock, without stockholder approval. If
      we
      issue such shares of stock, then the tangible net book value of shares of our
      outstanding stock will be diluted.




***“Penny
      stock” rules may make buying or selling our common stock
      difficult.***




Trading
      in our common stock is subject to the “penny stock” rules. The Securities and
      Exchange Commission has adopted regulations that generally define a penny stock
      to be any equity security that has a market price of less than $4.00 per share,
      subject to certain exceptions. These rules require that any broker-dealer that
      recommends our common stock to persons other than prior customers and accredited
      investors, must, prior to the sale, make a special written suitability
      determination for the purchaser and receive the purchaser’s written agreement to
      execute the transaction. Unless an exception is available, the regulations
      require the delivery, prior to any transaction involving a penny stock, of
      a
      disclosure schedule explaining the penny stock market and the risks associated
      with trading in the penny stock market. In addition, broker-dealers must
      disclose commissions payable to both the broker-dealer and the registered
      representative and current quotations for the securities they offer. The
      additional burdens imposed upon broker-dealers by such requirements may
      discourage broker-dealers from effecting transactions in our common stock,
      which
      could severely limit the market price and liquidity of our common
      stock.




26




***Exercise
      of warrants and the conversion of debt may have a dilutive effect on our common
      stock.***




If
      the
      price per share of our common stock at the time of exercise or conversion of
      any
      warrants, options, convertible debt, or any other convertible securities is
      in
      excess of the various exercise or conversion prices of such convertible
      securities, exercise or conversion of such convertible securities would have
      a
      dilutive effect on our common stock. As of March 17, 2008, holders of our
      outstanding options and warrants would receive 48,823,434 shares of our common
      stock at a weighted average exercise price of $0.91 per share and the holder
      of
      our outstanding Convertible Note would receive 9,323,388 shares of our
      common stock at a conversion price of $1.1262 per share. The amount of such
      dilution that may result from the exercise or conversion of the foregoing,
      however, cannot currently be determined as it would depend on the difference
      between our common stock price and the price at which such convertible
      securities were exercised or converted at the time of such exercise or
      conversion. Any additional financing that we secure may require the granting
      of
      rights, preferences or privileges senior to those of our common stock and which
      result in additional dilution of the existing ownership interests of our common
      shareholders.


**Item
                  2.**
              **Description
                  of Property****.**
  We
        have
        leased our corporate headquarters and administrative offices located at 1404
        N.
        Main Street, Suite 200, Meridian, Idaho since 2003. We currently lease
        approximately 6,000 square feet at a monthly base rental of approximately
        $9,800, which lease expires in April 2008. Upon expiration of the lease,
        we
        currently intend to continue to lease such facilities on a month-to-month
        basis
        while our new facilities are under construction.
  We
        store
        and ship finished goods to all 50 states from a 48,000 square foot warehouse
        and
        distribution facility located in Mountain Home, Idaho. We lease such space
        on a
        month-to-month basis for $2,500 per month.
  We
        are in
        the process of building a new corporate facility located in Nampa, Idaho
        that
        will house our new office headquarters, product development laboratories
        and
        finished goods warehouse. In the future, we hope to expand such facilities
        to
        add sterile liquids manufacturing capabilities, which we currently do not
        have,
        and capacity for pipeline and future sterile liquids dose products. We currently
        expect our new facility to be completed by September 2008.
  We
        believe that our current combined space, along with the planned space expansion,
        is adequate to accommodate our office, manufacturing, and warehousing needs
        for
        the foreseeable future. We currently do not need sterile liquid dose products
        manufacturing capabilities, but we believe such capabilities would add important
        strategic value to our business, providing us with greater control over our
        sterile liquid dose products, allowing us to perform our product development
        internally with greater control and less cost, enabling us to pursue a broader
        ANDA filing program for sterile liquid dose products, and providing us with
        manufacturing cost strength to our sterile liquid dose product pipeline and
        product portfolio.
  **Item
                  3.**
              ******Legal
                  Proceedings.**
  There
        are
        no pending, and we are not aware of any threatened, legal proceedings against
        us.
  27
  **Item
                  4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders.**
  No
        matters were submitted to a vote of our stockholders during the fourth quarter
        of the fiscal year ended 2007 through the solicitation of proxies or
        otherwise.
  **PART
        II**
  **Item
                  5.**
              **Market
                  For Common Equity, Related Stockholder Matters and Small Business
                  Issuer
                  Purchases of Equity
                  Securities.**
  **Market
        Information**
  Our
        common stock was quoted on the OTC Bulletin Board from July 23, 2007 through
        November 7, 2007 under the symbol SOUT.OB and since November 8, 2007, our
        common
        stock has been quoted on the OTC Bulletin Board under the symbol "RXEI.OB”.
        Prior to July 23, 2007, there was no active market for our common stock.
        According to the record of our transfer agent, as of March 17, 2008, there
        were
        approximately 300 holders of record of our common stock.
  The
        following table sets forth the high and low bid prices for our common stock
        for
        the periods indicated as reported by the OTC Bulletin Board. These quotations
        reflect inter-dealer prices, without retail mark-up, mark-down, or commission,
        and may not represent actual transactions.
  High
              
              LowFiscal
                  2007Third
                  Quarter (from July 23, 2007)
              
              $
              1.79
              
              $
              0.70Fourth
                  Quarter
              
              $
              1.14
              
              $
              0.70Fiscal
                  2008First
                  Quarter (through March 17, 2008)
              
              $
              0.89
              
              $
              0.25
 
 The
        last
        reported sales price of our common stock on the OTC Bulletin Board on March
        17,
        2008 was $0.32 per share.
 
 **Dividends**
  We
        have
        not declared nor paid any cash dividend on our common stock, and we currently
        intend to retain future earnings, if any, to finance the expansion of our
        business, and we do not expect to pay any cash dividends in the foreseeable
        future. The decision whether to pay cash dividends on our common stock will
        be
        made by our board of directors, in their discretion, and will depend on our
        financial condition, operating results, capital requirements and other factors
        that our board of directors considers significant.
  **Equity
        Compensation Plan Information**
  The
        following table provides information as of December 31, 2007, with respect
        to
        the shares of common stock that may be issued under the 2007 Incentive Stock
        Plan, our existing equity compensation plan:
  28
 
 **Equity
        Compensation Plan Information**
  Plan
                  Category
              
              Number of securities to
                be issued upon
                exercise of outstanding
                options, warrants and
                rights
              
              Weighted-average
                exercise price of
                outstanding options,
                warrants and rights
              
              Number of
                securities
                remaining
                available for
                future issuance
                underequity
                compensation
                plansEquity
                  compensationplans
                  approved bysecurity
                  holders
              
              
              -
              
              
              -
              
              
              -Equity
                  compensationplans
                  not approved bysecurity
                  holders
              
              
              5,003,313
              
              $
              0.95
              
              
              9,870,570Total
              
              
              5,003,313
              
              $
              0.95
              
              
              9,870,570
 
 **Recent
        Sales of Unregistered Securities**
 
 During
        the period covered by this annual report, we have not issued any unregistered
        securities which have not been previously reported.
 
 **Item
                  6.**
              **Management****’****s
                  Discussion and Analysis or Plan of Operation****.**
  The
        following discussion and analysis should be read in conjunction with our
        financial statements and notes thereto appearing elsewhere in this report
        for
        our fiscal year ended December 31, 2007.
  **Overview**
  We
        develop and market generic prescription drug products in specialty generic
        markets in the areas of anesthesia, sterile liquid dose drugs (which includes
        ophthalmic and sterile inhalation respiratory products and injectible drugs)
        and
        APIs.
  We
        were
        formed as a Delaware limited liability company in November 2001 for the purpose
        of providing customized computing and communications services and solutions
        for
        small to medium-sized businesses. On August 24, 2005, we were converted into
        a
        Delaware corporation and changed our name from Southridge Technology Group,
        LLC
        to Southridge Technology Group, Inc. On July 13, 2007, we completed a reverse
        merger, pursuant to which a wholly-owned subsidiary of ours merged with and
        into
        a privately held Delaware corporation engaged in the development and marketing
        of generic pharmaceuticals, RxElite Holdings Inc., with the private company
        being the surviving company. In connection with the reverse merger, we
        discontinued our former business and succeeded to the business of RxElite
        Holdings Inc. as our sole line of business. For financial reporting purposes,
        RxElite Holdings Inc., and not us, is considered the accounting acquiror.
        Accordingly, the historical financial statements presented and the discussion
        of
        financial condition and results of operations herein are those of RxElite
        Holdings Inc. and do not include our historical financial results. Our July
        13,
        2007 merger is being accounted for as a reverse acquisition and recapitalization
        of RxElite Holdings Inc. for financial accounting purposes. Consequently,
        the
        assets and liabilities and the historical operations reflected in the financial
        statements prior to the merger are those of RxElite Holdings Inc. and recorded
        at the historical cost basis of RxElite Holdings, and the consolidated financial
        statements after completion of the merger includes our assets and liabilities
        and the assets and liabilities of RxElite Holdings Inc., historical operations
        of RxElite Holdings Inc. and our operations from the closing date of the
        merger.
  29
  On
        October 29, 2007, we amended our certificate of incorporation to change our
        name
        to “RxElite, Inc.” from “Southridge Technology Group, Inc.” and to increase the
        number of shares of authorized capital stock to 201,000,000, divided into
        two
        classes: 200,000,000 shares of common stock, par value $.001 per share, and
        1,000,000 shares of preferred stock, par value $.001 per share. Prior to
        the
        amendment, the number of shares of authorized capital stock was 99,000,000,
        divided into two classes: 98,000,000 shares of common stock, par value $.001
        per
        share, and 1,000,000 shares of preferred stock, par value $.001 per share.
  On
        December 31, 2007, we entered into a securities purchase agreement with the
        selling stockholder, pursuant to which we sold 5,594,033 shares of our common
        stock, a 9.50% senior secured redeemable convertible note in the
        principal amount of $10,500,000 (“Convertible Note”) a Series A warrant to
        purchase up to 13,985,083 shares of our common stock (“Series A Warrant”) and a
        Series B warrant to purchase up to 4,661,694 shares of our common stock (“Series
        B Warrant”, and together with the Series A Warrant, “Warrants”) for aggregate
        gross proceeds of $10,500,000 (“Securities Purchase Agreement”). To secure our
        obligations under the Convertible Note, we granted the selling stockholder
        a
        first priority perfected security interest in all of our assets and properties,
        together with all of the assets and properties of RxElite Holdings Inc.,
        including the stock of RxElite Holdings Inc. On January 18, 2008, we entered
        into a letter agreement with the selling stockholder, pursuant to which we
        amended certain terms of the Convertible Note, the Series A Warrant and the
        Series B Warrant.
 
 On
        January 4, 2008, our wholly owned subsidiary, FineTech Pharmaceutical Ltd.
        (formerly known as RxElite Israel Ltd.), a company organized under the laws
        of
        the State of Israel (“FineTech Pharmaceutical”), entered into an asset purchase
        agreement to acquire substantially all of the assets of FineTech Laboratories,
        Ltd., a company organized under the laws of the State of Israel (“FineTech”),
        for an aggregate purchase price of $6,200,000 (“FineTech Acquisition”). In
        connection with the FineTech Acquisition, Dr. Arie Gutman, the sole owner
        of
        FineTech and currently the president of FineTech Pharmaceutical and a director
        of our company, agreed not to engage in certain activities that would be
        competitive with our or FineTech Pharmaceutical’s business and to assign the
        right to receive royalties with respect to the sale of certain pharmaceutical
        products to us. On January 22, 2008 we issued 18,632,383 shares of our common
        stock to Dr. Gutman in consideration for his non-competition undertaking
        and assignment of royalty rights.
 
 **Results
        of Operations**
  **Year
        Ended December 31, 2007 Compared to Year Ended December 31,
        2006.**
  **Sales**
  Sales
        decreased by $11,359,538 from $14,171,134 for the twelve months ended December
        31, 2006 to $2,811,596 for the twelve months ended December 31, 2007. This
        decrease over the twelve months reflects the divestiture of two product lines,
        Albuterol 0.083% and Ipratropium 0.02%, to Nephron Pharmaceuticals Corporation
        on August 18, 2006. Over 99% of our sales came from customers in the U.S.
        We
        realized a higher gross margin on sales, however, in 2007 after the divestiture
        of the product lines.
  For
        the
        first quarter of 2006, over 90% of our sales came from our Albuterol 0.083%
        and
        Ipratropium 0.02% product lines. Since August 18, 2006, our anesthesia gas
        product line accounted for over 99% of our sales.
  30
  **Cost
        of Goods Sold**
  Cost
        of
        goods sold decreased by $11,202,776 from $13,870,372 for the twelve months
        ended
        December 31, 2006 to $2,667,596 for the twelve months ended December 31,
        2007.
        Cost of goods sold as a percentage of sales decreased from approximately
        98% for
        the twelve months ended December 31, 2006 to approximately 95% for the twelve
        months ended December 31, 2007. The increase in the cost of goods sold as
        a
        percentage of sales was a result of a transition in product mix.
  **Gross
        Profit**
  Gross
        profit decreased by $156,762 from $300,762 for the twelve months ended December
        31, 2006 to $144,000 for the twelve months ended December 31, 2007. Gross
        profit
        as a percentage of sales decreased for the twelve months ended December 31,
        2007
        resulting from a transition in product mix.
  **Operating
        Expenses**
  **Year
        Ended December 31, 2007 Compared to Year Ended December 31,
        2006.**
  **Selling
        Expense (Sales & Marketing)**
  Sales
        and
        marketing expense increased by $2,407,063 from $1,056,845 for the twelve
        months
        ended December 31, 2006 to $3,463,908 for the twelve months ended December
        31,
        2007. This growth in sales and marketing expenses was driven by the expansion
        of
        our sales organization and expenses related to preparation for product launches
        in future periods, including the launch of Sevoflurane that took place in
        May
        2007.
  **Product
        Purchase Agreements**
  We
        incurred a $4,400,000 non-cash expense in the second quarter of 2007 related
        to
        the issuance of common stock to our trade partner, Minrad, and to International
        Capital Advisory Inc. (“ICA”) for royalties related to Minrad products sold by
        us. Minrad owns the ANDAs and manufactures three of our products: Sevoflurane,
        Isoflurane, and Enflurane. As part of an agreement for Minrad to extend 180-day
        payment terms to us for two years, we agreed to issue a total of 7,333,333
        shares of our common stock to Minrad and ICA.
  **Salaries,
        Wages and Benefits**
  Salaries,
        wages and benefits increased $2,669,090 from $1,110,753 for the twelve months
        ended December 31, 2006 to $3,779,843 for the twelve months ended December
        31,
        2007. This increase was due primarily to the launch of Sevoflourane in 2007.
        This increase was partially offset due to a total of $202,126 in non-cash,
        stock-based compensation expense recorded in the twelve months ended December
        31, 2006 related to the modification of terms of common stock warrants and
        the
        issuance of shares of our common stock to employees. There was no similar
        expense during the twelve months ended December 31, 2007.
  **Research
        and Product Development**
  Research
        and development, or product development expenses increased by $2,643,415
        from
        $502,580 for the twelve months ended December 31, 2006 to $3,145,995 for
        the
        twelve months ended December 31, 2007. We have a pipeline of 11 ANDAs in
        various
        stages of development and currently anticipate making filings in 2008 and
        each
        year thereafter.
  31
  **General
        and Administrative**
  General
        and administrative expenses increased by $73,628 from $1,764,597 for the
        twelve
        months ended December 31, 2006 to $1,838,225 for the twelve months ended
        December 31, 2007. These increases were driven by the increase in new employee
        costs related to the launch of generic Sevoflurane, along with professional
        fees
        and expenses related to our merger and equity funding.
  **Depreciation
        and Amortization**
  Depreciation
        and amortization expense increased $103,275 from $91,126 for the twelve months
        ended December 31, 2006 to $194,401 for the twelve months ended December
        31,
        2007. In addition, for the year ended December 31, 2007, there was $239,964
        of
        depreciation expense included in cost of goods sold compared to $0 for the
        year
        ended December 31, 2006. The increase was due to the increase in property
        and
        equipment during 2007 from $465,649 at December 31, 2006 to $2,433,552 at
        December 31, 2007.
  **Other
        Income (Expenses)**
  The
        loss
        on debt restructure in the three months ended December 31, 2007 consisted
        of
        payments made to debt holders in accordance with early repayment terms in
        the
        related note agreements. The loss on debt restructure for the twelve months
        ended December 31, 2007 included these payments plus an amount resulting
        from
        our agreement with a shareholder to convert a portion of a loan to shares
        of our
        common stock and a portion of a loan to be paid in cash.
 
 For
        the
        twelve months ended December 31, 2006, we reported a gain on debt restructure
        described below. From 2002 through August 2006, we operated under a contract
        manufacturing, distribution and finance agreement with Nephron Pharmaceuticals
        Corporation, under which Nephron Pharmaceuticals Corporation manufactured
        Albuterol 0.083% and Ipratropium 0.02% for us to thereafter sell under our
        own
        label. Nephron Pharmaceuticals Corporation also provided extended credit
        terms
        to us. In August 2006, we mutually agreed to terminate our agreement. In
        order
        to continue to provide our former customers with an uninterrupted supply
        of
        Albuterol 0.083% and Ipratropium 0.02%, we worked together with Nephron
        Pharmaceuticals Corporation during the transition to establish direct sales
        to
        those customers by Nephron Pharmaceuticals Corporation. As to each such
        customer, Nephron Pharmaceuticals Corporation assumed any liability that
        we may
        have had for rebates of any type owed in relation to the service of those
        customers. In addition, Nephron Pharmaceuticals Corporation agreed to assume
        all
        chargeback balances specifically associated with servicing McKesson Corporation,
        Cardinal Health, Inc., AmerisourceBergen Corporation and Rochester Drug
        Cooperative, Inc. In exchange for the transition of our Albuterol 0.083%
        and
        Ipratropium 0.02% product lines to Nephron Pharmaceuticals Corporation, and
        the
        future value of the sales and gross margins Nephron Pharmaceuticals Corporation
        would receive from the direct sales of Albuterol 0.083% and Ipratropium 0.02%
        to
        our former customers, Nephron forgave all our then owed outstanding balances.
        The total value of this transaction resulted in a realized gain of $12,335,199
        in the twelve months ended December 31, 2006.
 
 Changes
        in the other income (expense) amounts not discussed above were not material
        to
        our operations.
 
 **Net
        Loss Available for Common Stock Holders**
 
 Net
        loss
        available for common stockholders increased by $24,691,106 from net income
        of
        $7,525,831 for the twelve months ended December 31, 2006 to a net loss of
        $17,165,275 for the twelve months ended December 31,2007. The increase in
        our
        net loss for the twelve months ended December 31, 2007 was attributed to
        the
        increase in our operating expenses in preparation for the launch of generic
        Sevoflurance, the significant increase in research and development expenses
        as
        we moved forward with our pipeline of ANDAs and the $4,400,000 non-cash expense
        related to the issuance of shares to Minrad International, Inc. for our product
        purchase agreements. In addition, net income for the twelve months ended
        December 31, 2006 included a gain on debt restructure of $12,335,199. Also
        contributing to our net loss were greater sales of higher margin products
        and
        further low gross margins, which were a result of a change in product
        mix.
  32
  **Liquidity
        and Capital Resources**
  As
        of
        December 31, 2007, we had current assets of $18,530,280, including cash and
        equivalents of $10,113,584, accounts receivable of $960,140, inventory of
        $7,353,339 and other current assets of $94,272. As of December 31, 2007,
        we had
        current liabilities of $7,145,245, consisting primarily of accounts payable
        of
        $5,720,737. As a result, at December 31, 2007, we had net working capital
        of
        $11,385,035.  On January 4, 2008, we paid $6,200,000 of the current cash
        available for the purchase of assets acquired from FineTech.
  Net
        cash
        used in operating activities was $13,366,194 and $3,679,005 for the twelve
        months ended December 31, 2007 and 2006, respectively.  The increase in net
        cash used in operating activities for the twelve months ended December 31,
        2007
        was due to the decrease in sales due to the divestiture of two product lines
        in
        anticipation of the launch of generic Sevoflurane, which received FDA approval
        on May 2, 2007. Also using cash in 2007 and in 2006 were increased levels
        of selling, research and development and general and administrative expenses,
        also discussed above. We also experienced a growth in our inventory balances
        during the 2007 due to increased inventory of generic Sevoflurane. Other
        assets
        increased during this twelve month period by $622,667 primarily due to increase
        in deposits on a building lease. We also reduced accounts payable by $514,760
        during the twelve months ended December 31, 2007.  On January 4, 2008, we
        paid $6,200,000 of the current cash available for the purchase of assets
        acquired from FineTech.
  Net
        cash
        used in investing activities was $1,847,239 and $300,302 for the twelve months
        ended December 31, 2007 and 2006, respectively.  Cash used in investing
        activities consisted of purchases of property and equipment, including new
        corporate office and warehouse facilities, and new furniture, computer equipment
        and software related to the implementation of new technology and the increase
        in
        number of employees needed to launch Sevoflurane.
  We
        have
        funded our operating losses primarily from proceeds from the sale of our
        common
        stock and proceeds from the issuance of convertible debentures and notes
        payable
        to related parties.
  Net
        cash
        provided by financing activities was $22,923,873 for the twelve months ended
        December 31, 2007, comprised of $15,714,161 from the sale of common stock
        subscribed as part of private placement stock offerings and $10,500,000 from
        proceeds of the Convertible Note, partially offset by net reductions in debt
        of
        $898,717, distributions to former preferred stockholders of $600,000, and
        the
        payment of stock issuance costs of $1,764,326. By comparison, net cash provided
        by financing activities was $4,751,966 for the twelve months ended December
        31,
        2006, comprised of $4,201,370 from the sale of common stock, and a net increase
        in debt of $1,147,000, partially offset by reductions of debt of
        $573,549.
  On
        June
        24, 2003, we issued a promissory note to William J. Marciniak, which was
        subsequently amended pursuant to a Letter Agreement, dated February 16, 2004.
        Following the closing of our reverse merger on July 13, 2007, this promissory
        note was cancelled in full in exchange for our payment of approximately $515,171
        and the issuance of 429,310 shares of our common stock.
  On
        July
        13, 2007, immediately following the closing of our reverse merger, we raised
        $10,703,092 of equity capital and converted $1,899,273 of convertible debentures
        through the issuance of 21,003,959 units in a private placement, consisting
        of
        an aggregate of (i) 21,003,959 shares of our common stock and (ii) two-year
        warrants to purchase an aggregate of 10,501,976 shares of our common stock
        at an
        exercise price of $0.85 per share, at $0.60 per unit. These warrants became
        exercisable, and their two-year term began, upon stockholder approval of
        the
        amendment to our articles of incorporation to increase the number of authorized
        shares of our common stock on October 23, 2007.
  33
  On
        December 31, 2007, we issued the Convertible Note, certain terms of which
        were
        amended by letter agreement, dated January 18, 2008, in the aggregate principal
        amount of $10,500,000. The Convertible Note matures on December 31, 2009,
        which
        date may be extended at the option of the noteholder as described below.
        The
        entire outstanding principal balance and any outstanding fees or interest
        are
        due and payable in full on the maturity date. The Convertible Note bears
        interest at the rate of 9.50% per annum, which rate may be increased to 15%
        upon
        the occurrence of an event of default, as described below. Interest on the
        Convertible Note is payable quarterly beginning on April 1, 2008.
  The
        maturity date with respect to all or any portion of the amounts due under
        the
        Convertible Note may be extended at the option of the noteholder (i) for
        so long
        as an event of default is continuing or for so long as an event is continuing
        that if not cured and with the passage of time would result in an event of
        default, (ii) in connection with a change of control, to a date within ten
        days
        after the change in control and (iii) for up to two years after the original
        maturity date.
  *Conversion*
 
 The
        Convertible Note is
        convertible at the option of the noteholder into shares of our common stock
        at
        an initial conversion price of $1.1262 per share, subject to adjustment for
        stock splits, combinations or similar events. The conversion price is also
        subject to a “full ratchet” anti-dilution adjustment which, in the event that we
        issue or are deemed to have issued certain securities at a price lower than
        the
        then applicable conversion price, immediately reduces the conversion price
        to
        equal the price at which we issued or are deemed to have issued common
        stock.
  Should
        we
        fail to record consolidated EBITDA, as defined in the Convertible Note, of
        at
        least (i) $0.00 for the fiscal quarter ending March 31, 2008, (ii) $0.00
        for the
        fiscal quarter ending June 30, 2008, (iii) $1,000,000 for the fiscal quarter
        ending September 30, 2008, (iv) $2,000,000 for the fiscal quarter ending
        December 31, 2008 and (v) $2,000,000 for each fiscal quarter thereafter,
        the
        conversion price shall be reset to the lower of (i) the then current conversion
        price or (ii) 85% of the average market price, as defined in the Note, of
        the
        common stock at such time. However, the conversion price will not be reset
        with
        respect to the fiscal quarter ending March 31, 2008 if we have redeemed at
        least
        50% of the original principal amount of the Note before our earnings for
        such
        quarter are required to have been announced.
  The
        Convertible Note contains certain limitations on conversion. For example,
        it
        provides that no conversion may be made if, after giving effect to the
        conversion, the noteholder would own in excess of 4.99% of the outstanding
        shares of our common stock. This percentage may, however, be raised or lowered
        to an amount not to exceed 9.99%, at the option of the noteholder, upon 61-days’
prior notice to us.
  The
        Convertible Note imposes penalties on us for any failure to timely deliver
        any
        shares of our common stock issuable upon conversion.
  34
  *Events
        of Default*
 
 The
        Convertible Note contains standard events of default, as well as the
        following:
  ·
              The
                  failure of any registration statement registering for resale the
                  common
                  stock issued on December 31, 2007, as well as the common stock
                  underlying
                  the Note and the Warrants issued on such day, to be declared effective
                  by
                  the Securities and Exchange Commission within 60 days after the
                  date
                  required by the registration rights agreement described below or
                  the lapse
                  or unavailability of such registration statement for more than
                  5
                  consecutive days or more than an aggregate of 20 days in any 365-day
                  period, other than certain allowable grace periods.·
              The
                  suspension from trading or failure of our common stock to be listed
                  for
                  trading on the OTC Bulletin Board or another eligible market for
                  more than
                  5 consecutive trading days or more than an aggregate of 10 trading
                  days in
                  any 365-day period.·
              The
                  failure to issue shares upon conversion of the Note for more than
                  10
                  business days after the relevant conversion date or a notice of
                  our
                  intention not to comply with a request for conversion.·
              The
                  failure for 10 consecutive business days to have reserved for issuance
                  the
                  full number of shares issuable upon conversion in accordance to
                  the terms
                  of the Note.·
              The
                  breach of any representation, warranty, covenant or term of any
                  transaction documents with respect to the sale of the Note, or
                  if such
                  breach is curable, if not cured within 10 business
                  days.·
              The
                  invalidity of any material provision of the documents perfecting
                  the
                  noteholder’s security interest in our assets or if the enforceability or
                  validity of any material provision of such security documents are
                  contested by us.·
              The
                  failure of the security documents to perfect or maintain the noteholder’s
                  first priority security interest.·
              The
                  failure by us to record consolidated EBITDA, as defined in the
                  Note, of at
                  least (i) ($1,500,000) for the fiscal quarter ending March 31,
                  2008, (ii)
                  ($1,000,000) for the fiscal quarter ending June 30, 2008, (iii)
                  $450,000
                  for the fiscal quarter ending September 30, 2008, (iv) $1,000,000
                  for the
                  fiscal quarter ending December 31, 2008 and (v) $1,000,000 for
                  each fiscal
                  quarter thereafter.
 
 If
        there
        is an event of default, the noteholder may force us to redeem all or any
        portion
        of the Convertible Note, at the greater of (i) up to 125% of the sum of the
        outstanding principal, interest and late fees, depending on the nature of
        the
        default or (ii) the product of (a) the number of shares into which the Note,
        including all principal, interest and late fees, may be converted and (b)
        the
        product of (1) 150% and (2) the highest closing sale price of our common
        stock beginning on the date immediately preceding the event of default and
        ending on the date the noteholder delivers its redemption notice for such
        event
        of default.
 
 *Fundamental
        Transactions*
 
 The
        Convertible Note prohibits us from entering into certain transactions involving
        a change of control, unless the successor entity is a public company and
        it
        assumes in writing all of our obligations under the Note and the other
        transaction documents.
  35
  In
        the
        event of such a transaction, the noteholder has the right to force redemption
        of
        the Convertible Note, at the greater of (i) 150% of the sum of the amount
        of
        principal, interest and late fees to be redeemed and (ii) the product of
        (x) 150% and (y) the product of (1) the sum of the amount of principal, interest
        and late fees to be redeemed and (2) the quotient determined by dividing
        (A) the
        value of the consideration paid per share of common stock in the change of
        control transaction by (B) the conversion price.
  *Redemption*
 
 At
        any
        time on or after September 30, 2008, the noteholder may require us to
        redeem up to 50% of the original principal amount of the Convertible Note
        at a
        price equal to 120% of the amount of principal to be redeemed plus all accrued
        but unpaid interest and late fees.
  At
        any
        time, provided there is not an event of default, we may redeem (i) the first
        50%
        of the Convertible Note for 120% of the sum of the amount of principal, interest
        and late fees to be redeemed and (ii) the remaining 50% of the Note for the
        sum
        of (A) 100% of the sum of the amount of principal, interest and late fees
        to be
        redeemed and (B) the amount of interest that, but for such redemption, would
        have been paid to the noteholder from the issuance date through the maturity
        date of the Note.
  *Covenants*
 
 The
        Convertible Note contains standard covenants, as well as the
        following:
  ·
              The
                  Note will rank senior to all other indebtedness.·
              We
                  will at all times reserve a number of shares equal to 130% of the
                  number
                  of shares of our common stock issuable upon conversion of the
                  Note.·
              We
                  will not incur other indebtedness, except for certain permitted
                  indebtedness.·
              We
                  will not incur any liens, except for certain permitted
                  liens.·
              We
                  will not, directly or indirectly, redeem or repay all or any portion
                  of
                  any permitted indebtedness if at the time such payment is due or
                  is made
                  or, after giving effect to such payment, an event constituting,
                  or that
                  with the passage of time and without being cured would constitute,
                  an
                  event of default has occurred and is continuing.·
              Except
                  for the redemption of 350,000 shares of our common stock within
                  50 days
                  following December 31, 2008 at a purchase price of $4.00 per share,
                  we
                  will not redeem, repurchase or pay any dividend or distribution
                  on our
                  common stock or any other capital stock.·
              From
                  and after December 31, 2008, we will maintain a consolidated total
                  debt to
                  consolidated EBITDA ratio, each as defined in the Note, equal to
                  or less
                  than (i) 3.5 for the fiscal quarter ending December 31, 2007, (ii)
                  3.5 for
                  the fiscal quarter ending March 31, 2008, (iii) 3.5 for the fiscal
                  quarter
                  ending June 30, 2008, (iv) 3.5 for the fiscal quarter ending September
                  30,
                  2008, (v) 3.0 for the fiscal quarter ending December 31, 2008 and
                  (v) 3.0
                  for each fiscal quarter thereafter.
  36
  *Participation
        Rights*
 
 Any
        holder of the Convertible Note is entitled to receive any dividends paid
        or
        distributions made to the holders of our common stock on an “as if converted” to
        common stock basis.
  *Purchase
        Rights*
 
 If
        we
        issue options, convertible securities, warrants or similar securities to
        holders
        of our common stock, any holder of the Convertible Note will have the right
        to
        acquire the same as if it had converted the Note.
  *Amendment
        of Convertible Note*
 
 On
        January 18, 2008, we entered into a letter agreement with the selling
        stockholder, pursuant to which we amended certain terms of the Convertible
        Note
        and the Series A Warrant and Series B issued by us to the selling stockholder
        on
        December 31, 2007. Pursuant to the letter agreement, the Consolidated EBITDA
        (as
        defined in the Convertible Note) thresholds contained in the Convertible
        Note
        for the fiscal quarter ending March 31, 2008 were lowered by $500,000 and
        the
        value of up to 1,000,000 shares of common stock that may be issued to
        consultants during the fiscal quarter ending March 31, 2008 was added to
        our
        Consolidated EBITDA for such fiscal quarter. In addition, the definition
        of
“Excluded Securities” with respect to anti-dilution price protection in both the
        Convertible Note and the Series A Warrant and Series B Warrant was expanded
        to
        include the issuance of up to 1,000,000 shares of common stock that may be
        issued to consultants during the fiscal quarter ending March 31,
        2008.
  **Going
        Concern Uncertainty**
  Our
        financial statements have been prepared assuming that we will continue as
        a
        going concern. We have incurred losses since inception and may continue to
        incur
        losses for the foreseeable future. As a result, the report of our independent
        registered public accounting firm on our audited financial statements for
        the
        years ended December 31, 2007 and 2006 contains a paragraph regarding the
        uncertainty of us continuing as a going concern. Our business plan anticipates
        that our near future activities will be funded from the issuance of additional
        equity and funds provided by ongoing operations.
  If
        sales
        are insufficient to support planned development of new products and expansion
        of
        operations, we will need to raise money through the issuance of equity or
        debt.
        If public or private financing is not available when needed or is not available
        on terms acceptable to us, our growth and revenue-generating plans may be
        materially impaired. Such results could have a material adverse effect on
        our
        financial condition, results of operations and future prospects. The condensed
        financial statements do not include any adjustments that might result from
        the
        outcome of these uncertainties.
  **Critical
        Accounting Estimates and Policies**
  *Cash
        and Cash Equivalents.* Cash and
        cash equivalents include highly liquid investments with a maturity of three
        months or less.
  *Accounts
        Receivable.* We
        record our accounts receivable at the original invoice amount less an allowance
        for doubtful accounts and less any applicable difference between the wholesale
        acquisition cost price and the negotiated contract price (rebate amount).
        We
        also adjust the receivable amount for a discount allowance for timely payments.
        An account receivable is considered to be past due if any portion of the
        receivable balance is outstanding beyond its scheduled due date. On a quarterly
        basis, we evaluate our accounts receivable and establish an allowance for
        doubtful accounts, based on our history of past write-offs and collections,
        and
        current credit conditions. No interest is accrued on past due accounts
        receivable. Payment discounts are recorded against sales at the end of each
        period to the extent they remain eligible against the corresponding receivable.
        Customers are given payment discounts of between 2% and 3% for making payments
        within a range of 30 to 45 days.
  37
  *Inventories.* Inventories are stated at the lower of cost (first-in, first-out) or market.
        A
        reserve for slow-moving and obsolete inventory is established for all inventory
        deemed potentially non-saleable by management in the period in which it is
        determined to be potentially non-saleable. The current inventory is considered
        properly valued and saleable. We concluded that there was no need for a reserve
        for slow moving and obsolete inventory at December 31, 2007 or at December
        31, 2006.
  *Property
        and Equipment.* Property
        and Equipment are stated at cost less accumulated depreciation. Expenditures
        related to repairs and maintenance that are not capital in nature are expensed
        in the period incurred. Appropriate gains and or losses related to the
        disposition of property and equipment are realized in the period in which
        such
        assets are disposed. Depreciation is computed using the straight-line method
        over the following estimated useful lives:
  Category
              
              Useful
                  LifeFurniture
                  and Fixtures
              
              3-7
                  yearsComputer
                  Equipment
              
              5
                  yearsSoftware
              
              3
                  years
  *Revenue
        Recognition.* We
        recognize revenue from product sales when the goods are received by the
        customer, resulting in the transfer of title and risk of loss. We sell our
        products to some wholesalers at the wholesale acquisition cost price and
        to some
        wholesalers at a negotiated contract price. Upon sale to wholesalers who
        operate
        based on the WAC price, the wholesale acquisition cost price less an allowance
        for the difference between the wholesale acquisition cost price and the contract
        price (rebate amount), is recorded based on the maximum calculated rebate
        amount
        which is treated as a sales revenue offset. Upon sale of our product by the
        wholesaler using the wholesale acquisition cost price, we are invoiced for
        the
        difference between the wholesale acquisition cost and the contract price
        and
        create a credit note for the difference. The credit notes are then reconciled
        with the sales revenue offset. Sales at negotiated contract prices, as opposed
        to wholesale acquisition costs, are recognized at the negotiated contract
        price.
  *Earnings
        Per Share* .
        We have
        adopted the provisions of Statement of Financial Accounting Standard (“FAS”) No.
        128, “Earnings Per Share.” Basic earnings or loss per share is computed by
        dividing income or loss (numerator) applicable to common stockholders by
        the
        weighted number of common shares outstanding (denominator) for the period.
        Diluted earnings per share assumes the exercise or conversion of all dilutive
        securities.
  *Share
        Based Payments.* We use
        the Black-Scholes valuation model to estimate the fair value of our stock
        options and warrants. The model requires various judgment in assumptions
        including estimated stock price volatility, forfeiture rates and expected
        life.
        Prior to our reverse merger on July 13, 2007, we were privately held and
        did not
        have an internal or external market for our shares and therefore we did not
        have
        sufficient information available to support an estimate of our stock’s expected
        volatility and share prices. In accordance with FAS 123(R), we identified
        a
        similar public entity for which sufficient share price information was available
        and used that information for estimating our expected volatility. Our
        calculations of the fair market value of each stock-based award that was
        granted, modified or calculated used the following assumptions:


38




Year
                Ended
              December
                31,
              2007
            
            Year
                Ended
              December
                31,
              2006Risk-free
                interest rate
            
            
            4.93
            %
            
            4.75
            %Expected
                life in years
            
            
            8.87
            
            
            0
                to 2Dividend
                yield
            
            
            0
            
            
            0Expected
                volatility
            
            
            74.70
            %
            
            46.137
            %




*Research
      and Development Costs* .
      All
      costs related to research and development are expensed as incurred. These costs
      include labor and other operating expenses related to product development,
      as
      well as costs to obtain regulatory approval.




*Advertising.* We
      expense advertising as incurred.




*Accounting
      Estimates* .
      The
      process of preparing financial statements in conformity with accounting
      principles generally accepted in the U.S. requires the use of estimates and
      assumptions regarding certain types of assets, liabilities, sales, and expenses.
      Such estimates primarily relate to unsettled transactions and events as of
      the
      date of the financial statements. Accordingly, actual results may differ from
      estimated amounts.




*Concentration
      of Credit Risk* .
      Financial instruments that potentially subject us to concentration of credit
      risk consist of cash accounts in financial institutions. Although the cash
      accounts exceed the federally insured deposit amount, we do not anticipate
      nonperformance by the financial institutions.




*Shipping
      and Handling* .
      We
      record shipping and handling expenses in the period in which they are incurred
      and are included in the cost of goods sold.




*Off-Balance
      Sheet Arrangements.* We do
      not have any off-balance sheets arrangements as of December 31,
      2007.




**Recent
      Accounting Pronouncements**




In
      September 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on
      Issue No. 05-8, “Income Tax Consequences of Issuing Convertible Debt with a
      Beneficial Conversion Feature.” Under EITF 05-8, the issuance of convertible
      debt with a beneficial conversion feature results in a temporary difference
      for
      purposes of applying Statement 109. The deferred taxes recognized for the
      temporary difference should be recorded as an adjustment to paid-in capital.
      EITF 98-5 “Accounting for Convertible Securities with Beneficial Conversion
      Features or Contingently Adjustable Conversion Ratios” and EITF 00-27
“Application of Issue No. 98-5 to Certain Convertible Instruments” require that
      the non-detachable conversion feature of a convertible debt security be
      accounted for separately if it is a beneficial conversion feature. A beneficial
      conversion feature is recognized and measured by allocating to additional
      paid-in capital a portion of the proceeds equal to the conversion feature’s
      intrinsic value. A discount on the convertible debt is recognized for the amount
      that is allocated to additional paid-in capital. The debt discount is accreted
      from the date of issuance to the stated redemption date of the convertible
      instrument or through the earliest conversion date if the instrument does not
      have a stated redemption date. The U.S. Federal Income Tax Code includes the
      entire amount of proceeds received at issuance as the tax basis of the
      convertible debt security. The EITF 05-8 Consensus should be applied
      retrospectively to all instruments with a beneficial conversion feature
      accounted for under EITF 98-5 and EITF 00-27 for periods beginning after
      December 15, 2005. The adoption of EITF 05-8 did not have a material impact
      on
      our financial statements.




39




In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154,
“Accounting Changes and Error Corrections” (“SFAS 154”), which replaces APB
      Opinion No. 20, “ Accounting Changes” and SFAS No. 3, Reporting Accounting
      Changes in Interim Financial Statements. SFAS 154 retained accounting guidance
      related to changes in estimates, changes in a reporting entity and error
      corrections. However, changes in accounting principles must be accounted for
      retrospectively by modifying the financial statements of prior periods unless
      it
      is impracticable to do so. SFAS 154 is effective for accounting changes made
      in
      fiscal years beginning after December 15, 2005. The adoption of SFAS 154 did
      not
      have a material impact on our financial position, results of operations or
      cash
      flows.




In
      December 2004, the FASB issued SFAS No. 123 (revised 2004), “ Share-Based
      Payment” (“SFAS No. 123R”), which revises and replaces SFAS No. 123, “Accounting
      for Stock-Based Payments” and supersedes APB Opinion No. 25, “Accounting for
      Stock Issued to Employees” (“APB 25”). SFAS 123R requires the measurement of all
      share-based payments to employees, including grants of employee stock options,
      using a fair-value based method and the recording of such expense in its
      statements of operations. The pro forma disclosures previously permitted under
      SFAS No. 123 will no longer be an alternative to financial statement
      recognition. The provisions for SFAS No. 123R are effective for the first
      interim or annual reporting period beginning after June 15, 2005. We have
      adopted SFAS No. 123R effective January 1, 2006. The adoption of SFAS 123R
      impacted our financial position in 2006 by reducing Net Income by approximately
      $1 million.




In
      June
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes – an interpretation
      of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for
      uncertainty in income taxes by prescribing a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return. The interpretation
      also provides guidance on de-recognition, classification, interest and
      penalties, accounting in interim periods, and disclosure. FIN 48 is effective
      January 1, 2007. We adopted FIN 48 on January 1, 2007, and the provisions of
      FIN
      48 were applied to all tax positions upon initial adoption of this standard.
      There was no financial statement impact of adopting FIN 48.




In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations”. This statement replaces SFAS No. 141, “Business Combinations” and
      applies to all transactions or other events in which an entity (the acquirer)
      obtains control of one or more businesses (the acquiree), including those
      sometimes referred to as “true mergers” or “mergers of equals” and combinations
      achieved without the transfer of consideration. This statement establishes
      principles and requirements for how the acquirer: a. recognizes and measures
      in
      its financial statements the identifiable assets acquired, the liabilities
      assumed, and any noncontrolling interest in the acquiree; b. recognizes and
      measures the goodwill acquired in the business combination or a gain from a
      bargain purchase; and c. determines what information to disclose to enable
      users
      of the financials statements to evaluate the nature and financial effects of
      the
      business combination. This statement will be effective for fiscal years, and
      interim periods within those fiscal years, beginning on or after December 15,
      2008. Earlier adoption is prohibited. The future application of this
      pronouncement may have a material effect on our financial condition and results
      of operations.




In
      December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
      Consolidated Financial Statements”. This statement applies to all entities that
      prepare consolidated financial statements, except not-for-profit organizations,
      and amends ARB 51 to establish accounting and reporting standards for the
      noncontrolling interest in a subsidiary and for the deconsolidation of a
      subsidiary. It also amends certain of ARB 51’s consolidation procedures for
      consistency with the requirements of SFAS No. 141 (revised 2007). This statement
      will be effective for fiscal years, and interim periods within those fiscal
      years, beginning on or after December 15, 2008. Earlier adoption is prohibited.
      The future application of this pronouncement may have a material effect on
      our
      financial condition and results of operations.




40




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities – Including an Amendment of FASB
      Statement No. 115”. This statement permits entities to choose to measure many
      financial instruments and certain other items at fair value. Most of the
      provisions of SFAS No. 159 apply only to entities that elect the fair value
      option. However, the amendment to SFAS No. 115, “Accounting for Certain
      Investments in Debt and Equity Securities”, applies to all entities with
      available-for-sale and trading securities. SFAS No. 159 is effective as of
      the
      beginning of an entity’s first fiscal year that begins after November 15, 2007.
      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
      provision of SFAS No. 157, Fair Value Measurements. The adoption of this
      statement is not expected to have a material effect on our consolidated
      financial statements.




In
      September 2006, the FASB issued SFAS Statement No. 158, “Employers’ Accounting
      for Defined Benefit Pension and Other Postretirement Plans”. This new standard
      will require employers to fully recognize the obligations associated with
      single-employer defined benefit pension, retiree healthcare and other
      postretirement plans in their financial statements. We adopted SFAS No. 158
      on
      December 31, 2007, and do not believe the adoption of the new accounting
      standard will result in a material impact on our consolidated financial
      statements since we currently do not sponsor the defined benefit pension or
      postretirement plans within the scope of the standard.




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      157”), which provides guidance on how to measure assets and liabilities that use
      fair value. SFAS 157 will apply whenever another U.S. GAAP standard requires
      (or
      permits) assets or liabilities to be measured at fair value but does not expand
      the use of fair value to any new circumstances. This standard will also require
      additional disclosures in both annual and quarterly reports. SFAS 157 will
      be
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007. The adoption of SFAS 157 is not expected to have a material
      impact on our results of operations or financial position.




In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets.” This statement amends SFAS 140, “Accounting for Transfers and Servicing
      of Financial Assets and Extinguishments of Liabilities, a replacement of FASB
      Statement 125”, or SFAS 140, regarding (1) the circumstances under which a
      servicing asset or servicing liability must be recognized, (2) the initial
      and
      subsequent measurement of recognized servicing assets and liabilities, and
      (3)
      information required to be disclosed relating to servicing assets and
      liabilities. We adopted this standard on January 1, 2007, with no impact on
      our
      consolidated financial statements.




In
      February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”, or SFAS 155. This statement amends SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities”, to narrow the
      scope exception for interest-only and principal-only strips on debt instruments
      to include only such strips representing rights to receive a specified portion
      of the contractual interest or principal cash flows. SFAS 155 also amends SFAS
      140 to allow qualifying special-purpose entities to hold a passive derivative
      financial instrument pertaining to beneficial interests that itself is a
      derivative financial instrument. We adopted this standard on January 1, 2007,
      with no impact on our consolidated financial statements.




In
      June
      2006, the FASB ratified EITF, No. 06-3, “How Taxes Collected from Customers and
      Remitted to Governmental Authorities Should Be Presented in the Income Statement
      (That Is, Gross versus Net Presentation)”. EITF No. 06-3 requires that, for
      interim and annual reporting periods beginning after December 15, 2006,
      companies disclose their policy related to the presentation of sales taxes
      and
      similar assessments related to their revenue transactions. We present revenue
      net of sales taxes and any similar assessments. EITF No. 06-3 had no effect
      on
      our financial position and results of operations.




41




EITF
      No.
      07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services
      Received for Use in Future Research and Development Activities”, was issued in
      June 2007. The EITF reached a consensus that nonrefundable payments for goods
      and services that will be used or rendered for future research and development
      activities should be deferred and capitalized. Such amounts should be recognized
      as an expense as the related goods are delivered and the related services are
      performed. Entities should continue to evaluate whether they expect the goods
      to
      be delivered or services to be rendered. If the entity does not expect the
      goods
      to be delivered or services to be rendered, the capitalized advance payment
      should be charged to expense. This pronouncement is effective for financial
      statements issued for fiscal years beginning after December 15, 2007 (our fiscal
      year beginning January 1, 2008) and interim periods within those fiscal years.
      Earlier application is not permitted. Entities are required to report the
      effects of applying this pronouncement prospectively for new contracts entered
      into on or after the effective date of this pronouncement. The future
      application of this pronouncement may have a material effect on our financial
      condition and results of operations.




**Item
                7.**
            **Financial
                Statements.**




See
      our
      financial statements beginning on page F-1.




**Item
                8.**
            **Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure.**




None.




**Item
      8A(T).**  **Controls
      and Procedures** **.**




**Controls
      and Procedures**




Disclosure
      controls and procedures include, without limitation, controls and procedures
      designed to ensure that information required to be disclosed by an issuer in
      the
      reports that it files or submits under the Exchange Act is accumulated and
      communicated to the issuer’s management, including its principal executive and
      principal financial officers, or persons performing similar functions, as
      appropriate to allow timely decisions regarding required disclosure. As noted
      below, we were unable to conclude that our disclosure controls and procedures
      are effective, as of the end of the period covered by this report (December
      31,
      2007), in ensuring that material information that we are required to disclose
      in
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the SEC rules
      and
      forms. We believe that we will have effective internal controls to meet this
      requirement prior to the filing of our annual reoprt for the year ended December
      31, 2008.




**Changes
      in Internal Control Over Financial Reporting**




There
      were no changes in our internal control over financial reporting during our
      most
      recent fiscal quarter that have materially affected, or are reasonably likely
      to
      materially affect, our internal control over financial reporting.




42




**Management’s
      Annual Report on Internal Control over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is
      defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act
      as a process designed by, or under the supervision of, a company’s principal
      executive and principal financial officers and effected by a company’s board of
      directors, management and other personnel to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation of
      financial statements for external purposes in accordance with generally accepted
      accounting principles. Our internal control over financial reporting includes
      those policies and procedures that: (i) pertain to the maintenance of records
      that, in reasonable detail, accurately and fairly reflect the transactions
      and
      dispositions of our assets; (ii) provide reasonable assurance that transactions
      are recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that our receipts
      and expenditures are being made only in accordance with authorizations of our
      management and directors; and provide reasonable assurance regarding
      prevention or timely detection of unauthorized acquisition, use or disposition
      of our assets that could have a material effect on the financial statements.




As
      a
      result of a recent merger, change in management and other factors, we did not
      have a reasonable period of time to design, implement and test compliance of
      our
      internal control over financial reporting. As a result, this annual report
      does
      include an assessment by our management of
      our
      internal control over financial reporting as of December 31, 2007, as noted
      above.




We
      are
      committed to maintaining disclosure controls and procedures that are designed
      to
      ensure that information required to be disclosed by us in the reports that
      we
      file or submit to the Securities and Exchange Commission under the Exchange
      Act,
      is recorded, processed, summarized and reported within the time periods
      specified by the Securities and Exchange Commission’s rules and forms, and that
      information is accumulated and communicated to our management, including our
      chief executive officer and chief financial officer, as appropriate, to allow
      timely decisions regarding required disclosure. We are in the process of
      designing such internal controls and procedures over financial
      reporting.





This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the Securities and Exchange
      Commission that permit us to provide only management’s report in this annual
      report.




**PART
      III**




**Item
                9.**
            **Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance With Section 16(a) of the Exchange
                Act.**




The
      information required by this item is incorporated by reference from the
      discussion responsive thereto contained in the Proxy Statement for our 2008
      Annual Meeting of Stockholders to be filed with the Securities and Exchange
      Commission not later than 120 days after the end of the fiscal year covered
      by
      this report.





**Item
                10.**
            **Executive
                Compensation.******




The
      information required by this item is incorporated by reference from the
      discussion responsive thereto contained in the Proxy Statement for our 2008
      Annual Meeting of Stockholders to be filed with the Securities and Exchange
      Commission not later than 120 days after the end of the fiscal year covered
      by
      this report.




**Item
                11.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.******




The
      information required by this item is incorporated by reference from the
      discussion responsive thereto contained in the Proxy Statement for our 2008
      Annual Meeting of Stockholders to be filed with the Securities and Exchange
      Commission not later than 120 days after the end of the fiscal year covered
      by
      this report.


43





**Item
                12.**
            **Certain
                Relationships and Related Transactions, and Director
                Independence.******




The
      information required by this item is incorporated by reference from the
      discussion responsive thereto contained in the Proxy Statement for our 2008
      Annual Meeting of Stockholders to be filed with the Securities and Exchange
      Commission not later than 120 days after the end of the fiscal year covered
      by
      this report.





**Item
                13.**
            **Exhibits.**




Exhibit
                Number
            
            Description2.1(1)
            
            Agreement
                and Plan of Merger and Reorganization, dated as of July 13, 2007,
                by and
                among Southridge Technology Group, Inc., RxElite Holdings Inc., and
                RxElite Acquisition Corp.3.1(2)
            
            Certificate
                of Incorporation of Southridge Technology Group, Inc.3.2(8)
            
            Amended
                and Restated Bylaws of Southridge Technology Group,
                Inc.3.3(9)
            
            First
                Amendment to Amended and Restated Bylaws10.1(6)
            
            Letter
                Agreement, dated January 18, 2008, between RxElite, Inc. and Castlerigg
                Master Investments Ltd.10.2(3)
            
            Securities
                Purchase Agreement, dated as of December 31, 2007, between RxElite,
                Inc.
                and Castlerigg Master Investments Ltd.10.3(3)
            
            Registration
                Rights Agreement, dated as of December 31, 2007, between RxElite,
                Inc. and
                Castlerigg Master Investments Ltd.10.4(3)
            
            Senior
                Secured Convertible Note, dated December 31, 2007.10.5(3)
            
            Series
                A Warrant, dated December 31, 2007.10.6(3)
            
            Series B
                Warrant, dated December 31, 2007.10.7(3)
            
            Security
                Agreement, dated as of December 31, 2007, by and among RxElite, Inc.,
                RxElite Holdings, Inc. and Castlerigg Master Investments
                Ltd.10.8(3)
            
            Pledge
                Agreement, dated as of December 31, 2007, by and between RxElite,
                Inc. and
                Castlerigg Master Investments Ltd.10.9(4)
            
            Asset
                Purchase Agreement, dated as of January 4, 2008, by and between RxElite
                Israel Ltd. and FineTech Laboratories, Ltd.10.10(4)
            
            Assignment
                & Non-Competition Agreement, dated as of January 4, 2008, by and
                between RxElite, Inc. and Dr. Arie
                Gutman




44




10.11(4)
            
            Registration
                Rights Agreement, dated as of January 4, 2008, by and between RxElite,
                Inc. and Dr. Arie Gutman10.12(4)
            
            Employment
                Agreement, dated as of January 4, 2008, by and between RxElite, Inc.
                and
                Dr. Arie Gutman10.13(5)
            
            Departure
                Agreement and General Release, dated as of January 16, 2008, by and
                between RxElite, Inc. and Daniel Chen10.14(5)
            
            Employment
                Agreement, dated as of January 11, 2008, by and between RxElite,
                Inc. and
                Shannon Stith10.15(7)
            
            Employment
                Agreement, dated as of January 21, 2008, by and between RxElite Holdings
                Inc. and Rick Schindewolf10.16(1)
            
            Second
                Amended and Restated Employment Agreement, made as of November 27,
                2006,
                between RxElite Holdings Inc. and Jonathan Houssian10.17(1)
            
            Second
                Amended and Restated Employment Agreement, made as of November 27,
                2006,
                between RxElite Holdings Inc. and Earl Sullivan10.18(1)
            
            Stock
                Purchase Agreement, dated as of July 13, 2007, by and among Southridge
                Technology Group, Inc., Joseph M. Garzi and Sunodia Partners
                LP.10.21(1)
            
            Stock
                Purchase Agreement, dated as of January 19, 2007, by and between
                RxElite
                Holdings Inc. and the investors listed on Exhibit A
                thereto.10.22(1)
            
            Form
                of First Amendment to Stock Purchase Agreement.10.23(1)
            
            Form
                of Amended and Restated Registration Rights Agreement.10.24(1)
            
            Form
                of Warrant Agreement.10.25(1)
            
            Form
                of Warrant Agreement issued pursuant to the Stock Purchase Agreement,
                dated as of January 19, 2007.10.26(1)
            
            Form
                of First Amendment to Warrant Agreement.10.27(1)
            
            Form
                of Escrow Agreement.10.28(1)
            
            Stock
                Purchase Agreement dated as of July 13, 2007 between Southridge Technology
                Group, Inc., RxElite Holdings Inc. and International Capital Advisory
                Inc.10.29(1)
            
            Stock
                Purchase Agreement dated as of July 13, 2007 between Southridge Technology
                Group, Inc., RxElite Holdings Inc. and Mr. Wu Kong
                King.10.30(1)
            
            Form
                of Securities Purchase Agreement.10.31(1)
            
            First
                Amended and Restated Conversion Agreement, dated as of April 26,
                2007, by
                and among RxElite Holdings Inc. and each of the persons who were
                holders
                of Series A Preferred Stock of the RxElite Holdings Inc., par value
                $0.01
                per share as at October 17, 2006.




45




10.32(1)
              
              Form
                  of RxElite Stockholder Warrant10.33(1)
              
              Exclusive
                  Manufacturing and Distribution Agreement, dated as of June 9, 2004,
                  by and
                  between Minrad International, Inc. and RxElite Holdings
                  Inc.10.34(1)
              
              RxElite
                  Holdings Inc. 2007 Incentive Stock Plan.10.35(10)
              
              Form
                  of Stock Option Award Agreement10.36(2)
              
              Amended
                  and Restated Advisory Consulting Agreement, dated as of July 13,
                  2007, by
                  and between International Capital Advisory Inc. and RxElite Holdings
                  Inc.10.37(9)
              
              Consulting
                  Agreement with MLF Group LLC10.38(10)
              
              Lease
                  Agreement, dated January 28, 2003, between RxHoldings, Inc. and
                  M & M
                  Management, and Addendum thereto, as of December 9, 2006 and May
                  1,
                  200721.1(10)
              
              List
                  of Subsidiaries.31.1*
              
              Section
                  302 Certification of Principal Executive Officer31.2*
              
              Section
                  302 Certification of Principal Financial Officer32.1*
              
              Section
                  906 Certification of Principal Executive Officer32.2*
              
              Section
                  906 Certification of Principal Financial Officer_____________________________
                *Filed
                  herewith(1)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  July 17, 2007.(2)
              
              Previously
                  filed as an Exhibit to Registration Statement on Form SB-2 filed
                  with the
                  SEC on December 22, 2005.(3)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 3, 2008.(4)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 10, 2008.(5)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 16, 2008.(6)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 23, 2008.(7)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 24, 2008.




46




(8)
              
              Previously
                  filed as an Exhibit on Current Report on Form 8-K/A filed with
                  the SEC on
                  August 3, 2007.(9)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  March 13, 2008.(10)
              
              Previously
                  filed as an Exhibit to registration Statement on Form S-1 filed
                  with the
                  SEC on March 13, 2008




**Item
                14.**
            **Principal
                Accountant Fees and
                Services.**




The
      information required by this item is incorporated by reference from the
      discussion responsive thereto contained in the Proxy Statement for our 2008
      Annual Meeting of Stockholders to be filed with the Securities and Exchange
      Commission not later than 120 days after the end of the fiscal year covered
      by
      this report.




47




**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




RxELITE,
                INC.By:
            /s/
Jonathan
                HoussianJonathan
                Houssian
              President,
                Chief Executive Officer
              and
                Chief Financial Officer





In
      accordance with the Exchange Act, this report has been signed by the following
      persons on behalf of the registrant and in the capacities
      indicated.




March
                19, 2008
            /s/
Jonathan
              HoussianJonathan
                Houssian
              President,
                Chief Executive Officerand
                Chief
              Financial
                Officer
              (Principal
                Executive Officer)March
                19, 2008
            /s/
              Shannon StithShannon
                Stith
              Vice
                President of Finance, Principal Accounting
              Officer
                and Secretary
              (Principal
                Financial Officer and Principal
              Accounting
                Officer)March
                19, 2008
            /s/
              Mark AuerbachMark
                Auerbach
              DirectorMarch
                19, 2008
            /s/
              David
              RectorDavid
                Rector
              DirectorMarch
                19, 2008
            /s/ Daniel
              ChenDaniel
                Chen
              DirectorMarch
                19, 2008
            /s/ Peter
              W. WilliamsPeter
                W. Williams
              Director
                and ChairmanMarch
                19, 2008
            /s/
              Arie GutmanArie
                Gutman
              DirectorMarch
                19, 2008
            /s/ Frank
              LeoFrank
                Leo
              Director




48







**RXELITE,
      INC.**


**(Formerly
      Southridge Technology Group, Inc.)**


**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**








Report
                of Independent Registered Public Accounting Firm
            F-2Consolidated
                Balance Sheet as of December 31, 2007
            F-3Consolidated
                Statements of Operations for the Years Ended December 31, 2007 and
                2006
            F-4Consolidated
                Statements of Shareholders’ Equity (Deficit) for the Years Ended December
                31, 2007 and 2006
            F-5Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2007 and
                2006
            F-7Notes
                to Consolidated Financial Statements
            F-8





F-1




**Report
      of Independent Registered Public Accounting Firm**





To
      the
      Board of Directors and Shareholders of


RxElite,
      Inc.


Meridian,
      Idaho





We
      have
      audited the balance sheet of RxElite, Inc. as of December 31, 2007, and the
      related statements of operations, shareholders’ equity (deficit) and cash flows
      for the years ended December 31, 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 the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. We were not engaged
      to
      perform an audit of the Company’s internal control over financial reporting. Our
      audit included consideration of internal control over financial reporting as
      a
      basis for designing audit procedures that are appropriate in the circumstances,
      but not for the purpose of expressing an opinion on the effectiveness of the
      Company’s internal control over financial reporting. Accordingly, we express no
      such opinion. An audit also 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 reasonable basis for our
      opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of RxElite, Inc. as of December 31,
      2007, and the results of its operations and its cash flows for the years ended
      December 31, 2007 and 2006, in conformity with U.S. generally accepted
      accounting principles.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 3 to the financial
      statements, the Company’s operating losses and lack of working capital raise
      substantial doubt about the Company's ability to continue as a going concern.
      Management's plans in regard to these matters are also described in Note 3.
      The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.











HJ
&
Associates,
      LLC


HJ
&
      Associates, LLC


Salt
      Lake
      City, Utah


March
      14,
      2008





F-2


**RXELITE,
                INC.**
              **(Formerly
                Southridge Technology Group, Inc.)****CONSOLIDATED
                BALANCE SHEET****DECEMBER
                31, 2007**





**ASSETS**CURRENT
                ASSETSCash
                and Cash Equivalents
            
            $
            10,113,584Accounts
                Receivable, Net of Allowances for Doubtful Accounts
              and
                Payment Discounts of $4,092 and $3,914, respectively
            
            
            494,762Related
                Party Accounts Receivable
            
            
            465,378Related
                Party Receivables
            
            
            8,945Inventory
            
            
            7,353,339Prepaid
                Expenses
            
            
            94,272TOTAL
                CURRENT ASSETS
            
            
            18,530,280PROPERTY
                AND EQUIPMENT, NET
            
            
            1,832,573OTHER
                ASSETSIntangible
                Assets
            
            
            67,194Restricted
                Deposits
            
            
            682,680Other
                assets
            
            
            153,638TOTAL
                OTHER ASSETS
            
            
            903,512**TOTAL
                ASSETS**
            
            **$**
            **21,266,365****LIABILITIES
                AND SHAREHOLDERS' EQUITY**CURRENT
                LIABILITIESAccounts
                Payable
            
            $
            5,720,737Accrued
                Payroll
            
            
            673,918Accrued
                Rebates
            
            
            273,148Notes
                Payable - Related Party
            
            
            100,000Current
                Portion of Severance Obligation
            
            
            334,009Current
                Portion of Capital Lease Obligations
            
            
            43,433TOTAL
                CURRENT LIABILITIES
            
            
            7,145,245LONG-TERM
                LIABILITIESSeverance
                Obligation
            
            
            445,881Payable
                to Former Preferred Stockholders
            
            
            1,255,692Capital
                Lease Obligations
            
            
            56,904Senior
                Secured Convertible Note, Net of Discount of $10,444,152
            
            
            55,848TOTAL
                LONG TERM LIABILITIES
            
            
            1,814,325TOTAL
                LIABILITIES
            
            
            8,959,570**COMMITMENTS
                AND CONTINGENCIES****SHAREHOLDERS'
                EQUITY**Preferred
                Stock, $.01 Par Value, 1,000,000 Shares Authorized, 0 Shares
              Issued
                and Outstanding
            
            
            -Common
                Stock, $.001 Par Value, 200,000,000 Shares Authorized,
              96,682,920
                Shares Issued and Outstanding
            
            
            96,683Additional
                Paid In Capital
            
            
            40,845,792Accumulated
                Deficit
            
            
            (28,635,680
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            12,306,795**TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)**
            
            **$**
            **21,266,365**




See
      Notes
      to Consolidated Financial Statements


F-3


**RXELITE,
                INC.**
              **(Formerly
                Southridge Technology Group, Inc.)****CONSOLIDATED
                STATEMENTS OF OPERATIONS**





**Years
                Ended December 31,****2007**
            
            **2006**SalesSales,
                (Net of Discounts and Allowances of $723,581 and$5,332,784,
                respectively)
            
            $
            2,346,218
            
            $
            14,171,134Sales
                - Related Party
            
            
            465,378
            
            
            -Total
                Sales
            
            
            2,811,596
            
            
            14,171,134Cost
                of Goods SoldCost
                of Goods Sold
            
            
            2,202,218
            
            
            13,870,372Cost
                of Goods Sold - Related Party
            
            
            465,378
            
            
            -Total
                Cost of Goods Sold
            
            
            2,667,596
            
            
            13,870,372Gross
                Profit
            
            
            144,000
            
            
            300,762Operating
                ExpensesSelling
                Expense
            
            
            3,463,908
            
            
            1,056,845Product
                Purchase Agreements
            
            
            4,400,000
            
            
            -Salaries,
                Wages and Benefits
            
            
            3,779,843
            
            
            1,110,753Research
                and Development
            
            
            3,145,995
            
            
            502,580Amortization
                Expense
            
            
            2,602
            
            
            2,602Depreciation
                Expense
            
            
            194,401
            
            
            91,126General
                and Administrative
            
            
            1,838,225
            
            
            1,764,597Total
                Operating Expenses
            
            
            16,824,974
            
            
            4,528,503**Loss
                from Operations**
            
            
            **(16,680,974**
            **)**
            
            **(4,227,741**
            **)**Other
                Income (Expenses)Interest
                Income
            
            
            65,330
            
            
            57,086Gain
                (loss) on Debt Restructure
            
            
            (358,054
            )
            
            12,335,199Loss
                on Disposal of Assets
            
            
            (3,016
            )
            
            (5,213
            )Other
                Revenue
            
            
            88,357
            
            
            6,121Other
                Expense
            
            
            (13,578
            )
            
            (57,450
            )Interest
                Expense
            
            
            (263,340
            )
            
            (582,171
            )Total
                Other Income (Expenses)
            
            
            (484,301
            )
            
            11,753,572**Income
                (Loss) before Income Taxes**
            
            
            **(17,165,275**
            **)**
            
            **7,525,831**Income
                Tax Provision
            
            
            0
            
            
            0**Net
                Income (Loss) Available for Common Stock Holders**
            
            **$**
            **(17,165,275**
            **)**
            **$**
            **7,525,831****Net
                Income (Loss) Per Share**Basic
            
            $
            (0.27
            )
            $
            0.37Diluted
            
            $
            (0.27
            )
            $
            0.27**Weighted
                Average Common Shares Outstanding**Basic
            
            
            62,432,499
            
            
            20,091,557Diluted
            
            
            62,432,499
            
            
            29,542,134




See
      Notes
      to Consolidated Financial Statements


F-4


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**




**PREFERRED
                  STOCK**
              
              **COMMON
                  STOCK**
              
              **ADDITIONAL**
                **PAID
                  IN CAPITAL**
              
              **SUBSCRIPTION**
                **SHARES
                  PAYABLE**
              
              **ACCUMULATED**
                **DEFICIT**
              
              **TOTAL**No.
                  of Shares
              
              Par
                  Value
              
              No.
                  of Shares
              
              Par
                  Value**BALANCE
                  AT 12/31/2005**
              
              
              **2,158,500**
              
              **$**
              **21,585**
              
              
              **15,929,262**
              
              **$**
              **15,930**
              
              **$**
              **2,827,616**
              
              **$**
              **1,278,396**
              
              **$**
              **(16,452,745**
              **)**
              **$**
              **(12,309,218**
              **)**Preferred
                  Stock Issued for Cash
              
              
              97,500
              
              
              975
              
              
              0
              
              
              0
              
              
              194,025
              
              
              0
              
              
              0
              
              
              195,000Preferred
                  Stock Issued for Services and Other Expenses
              
              
              82,000
              
              
              820
              
              
              0
              
              
              0
              
              
              23,880
              
              
              0
              
              
              0
              
              
              24,700Preferred
                  Stock Warrants Modified for Other Expense
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              36,658
              
              
              0
              
              
              0
              
              
              36,658Preferred
                  Stock Warrants Modified for Dividends
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              102,642
              
              
              0
              
              
              (102,642
              )
              
              0Preferred
                  Stock Issued for Subscription Shares Payable
              
              
              622,500
              
              
              6,225
              
              
              0
              
              
              0
              
              
              1,238,775
              
              
              (1,245,000
              )
              
              0
              
              
              0Preferred
                  Stock Conversion to Common Stock
              
              
              (2,960,500
              )
              
              (29,605
              )
              
              12,491,533
              
              
              12,491
              
              
              17,114
              
              
              0
              
              
              0
              
              
              0Common
                  Stock Warrants Modified for EmployeeCompensation
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              777,131
              
              
              0
              
              
              0
              
              
              777,131Common
                  Stock Issued for Cash
              
              
              0
              
              
              0
              
              
              529,273
              
              
              529
              
              
              120,241
              
              
              0
              
              
              0
              
              
              120,770Common
                  Stock Issued for EmployeeCompensation
                  and Legal Services
              
              
              0
              
              
              0
              
              
              1,702,752
              
              
              1,703
              
              
              220,635
              
              
              0
              
              
              0
              
              
              222,338Common
                  Stock Issued for Subscription SharesPayable
              
              
              0
              
              
              0
              
              
              43,776
              
              
              44
              
              
              20,706
              
              
              (20,750
              )
              
              0
              
              
              0Common
                  Stock Issued for Debt
              
              
              0
              
              
              0
              
              
              210,970
              
              
              211
              
              
              99,789
              
              
              0
              
              
              0
              
              
              100,000Common
                  Stock Issued for Other Expense
              
              
              0
              
              
              0
              
              
              21,097
              
              
              21
              
              
              9,979
              
              
              0
              
              
              0
              
              
              10,000Stock
                  Offering Costs
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              (525,676
              )
              
              0
              
              
              0
              
              
              (525,676
              )Common
                  Stock Subscribed for Cash
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              3,885,600
              
              
              0
              
              
              3,885,600Common
                  Stock Subscribed for Debt
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              947,000
              
              
              0
              
              
              947,000Common
                  Stock Subscribed for Interest
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              234,053
              
              
              0
              
              
              234,053Common
                  Stock Subscribed for EmployeeCompensation
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              18,035
              
              
              0
              
              
              18,035Net
                  Income
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              7,525,831
              
              
              7,525,831**BALANCE
                  AT 12/31/2006**
              
              
              **0**
              
              **$**
              **0**
              
              
              **30,928,663**
              
              **$**
              **30,929**
              
              **$**
              **5,163,515**
              
              **$**
              **5,097,334**
              
              **$**
              **(9,029,556**
              **)**
              **$**
              **1,262,222**





See
      Notes
      to Consolidated Financial Statements




F-5


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


**PREFERRED
                STOCK**
            
            **COMMON
                STOCK**
            
            **ADDITIONAL**
              **PAID
                IN**
              **CAPITAL**
            
            **SUBSCRIPTION**
              **SHARES
                PAYABLE**
            
            **ACCUMULATED**
              **DEFICIT**
            
            **TOTAL**No.
                of Shares
            
            Par
                Value
            
            No.
                of Shares
            
            Par
                Value**BALANCE
                AT 12/31/2006**
            
            
            **0**
            
            **$**
            **0**
            
            
            **30,928,663**
            
            **$**
            **30,929**
            
            **$**
            **5,163,515**
            
            **$**
            **5,097,334**
            
            **$**
            **(9,029,556**
            **)**
            **$**
            **1,262,222**Common
                Stock Subscribed for Cash
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            2,411,560
            
            
            0
            
            
            2,411,560Common
                Stock Subscribed for EmployeeCompensation
                and Services
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            8,842
            
            
            0
            
            
            8,842Common
                Stock Subscribed for Debt
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            975,805
            
            
            0
            
            
            975,805Common
                Stock Subscribed for
              ProductPurchase
                Agreements
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            4,400,000
            
            
            0
            
            
            4,400,000Common
                Stock Issued for Cash
            
            
            0
            
            
            0
            
            
            22,171,003
            
            
            22,171
            
            
            13,280,430
            
            
            0
            
            
            0
            
            
            13,302,601Common
                Stock Issued for Subscription SharesPayable
            
            
            0
            
            
            0
            
            
            21,489,238
            
            
            21,489
            
            
            12,872,052
            
            
            (12,893,541
            )
            
            0
            
            
            0Common
                Stock Issued for Senior SecuredConvertible
                Note Discount
            
            
            0
            
            
            0
            
            
            5,594,033
            
            
            5,594
            
            
            1,987,376
            
            
            0
            
            
            0
            
            
            1,992,970Stock
                Offering Costs
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            (3,140,724
            )
            
            0
            
            
            0
            
            
            (3,140,724
            )Common
                Stock Issued in Merger and OtherMerger-Related
                Adjustments
            
            
            0
            
            
            0
            
            
            16,499,983
            
            
            16,500
            
            
            (80,936
            )
            
            0
            
            
            62,686
            
            
            (1,750
            )Stock-Based
                Compensation
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            905,057
            
            
            0
            
            
            0
            
            
            905,057Warrants
                Issued for Accrued Expenses
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            687,840
            
            
            0
            
            
            0
            
            
            687,840Warrants
                Issued for Distribution to Stockholders
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            720,000
            
            
            0
            
            
            (720,000
            )
            
            0Warrants
                Issued for and Intrinsic Value ofConversion
                Feature of Senior SecuredConvertible
                Note
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            8,451,182
            
            
            0
            
            
            0
            
            
            8,451,182Cash
                Distributions to Former PreferredStockholders
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            (600,000
            )
            
            (600,000
            )Distribution
                Payable to Former PreferredStockholders
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            (1,183,535
            )
            
            (1,183,535
            )Net
                loss
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            (17,165,275
            )
            
            (17,165,275
            )**BALANCE
                AT 12/31/07**
            
            
            **0**
            
            **$**
            **0**
            
            
            **96,682,920**
            
            **$**
            **96,683**
            
            **$**
            **40,845,792**
            
            **$**
            **0**
            
            **$**
            **(28,635,680**
            **)**
            **$**
            **12,306,795**





See
      Notes
      to Consolidated Financial Statements





F-6


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**




**Years
                Ended December 31,****2007**
            
            **2006****Cash
                Flows from Operating Activities****Net
                Income (Loss)**
            
            $
            (17,165,275
            )
            $
            7,525,831**Adjustments
                to Reconcile Net Income (Loss) to Net Cash****Used
                In Operating Activities**Depreciation
                and Amortization
            
            
            436,967
            
            
            93,728Loss
                on Disposal of Assets
            
            
            3,016
            
            
            5,213(Gain)
                Loss on Debt Restructure
            
            
            188,054
            
            
            (12,335,199
            )Subscription
                Shares Issued for Services
            
            
            3,495
            
            
            18,035Subscription
                Shares Issued for Interest
            
            
            -
            
            
            234,053Subscription
                Shares Issued for Employee Compensation
            
            
            2,575
            
            
            -Subscription
                Shares Issued for Product Purchase Agreements
            
            
            4,400,000
            
            
            -Stock-Based
                Compensation Expense
            
            
            905,057
            
            
            -Severance
                Compensation
            
            
            779,890
            
            
            -Interest
                Expense Added to Payable to Stockholders
            
            
            72,157
            
            
            -Common
                Stock and Preferred Stock Issued and Warrants Modifiedfor
                Services and Compensation Expense
            
            
            -
            
            
            979,569Common
                Stock and Preferred Stock Issued and Warrants Modifiedfor
                Other Expenses
            
            
            -
            
            
            47,358Common
                Stock and Preferred Stock Issued for Legal Services
            
            
            -
            
            
            43,900**Decrease
                (Increase) in Operating Assets**Accounts
                Receivable, Net
            
            
            (861,911
            )
            
            2,139,398Inventory
            
            
            (1,645,829
            )
            
            (1,557,359
            )Prepaid
                Expenses and Deposits
            
            
            8,106
            
            
            (31,225
            )Deposits
            
            
            (622,667
            )
            
            (60,013
            )Other
                Assets
            
            
            (153,638
            )
            
            -**Increase
                (Decrease) in Operating Liabilities**Accounts
                Payable
            
            
            (514,760
            )
            
            4,163,849Accrued
                Expenses
            
            
            798,569
            
            
            (4,946,143
            )**Total
                Adjustments**
            
            
            3,799,081
            
            
            (11,204,836
            )**Net
                Cash Used In Operating Activities**
            
            
            (13,366,194
            )
            
            (3,679,005
            )**Cash
                flows from Investing Activities:**Purchase
                of Property and Equipment
            
            
            (1,847,239
            )
            
            (300,302
            )**Net
                Cash Used In Investing Activities**
            
            
            (1,847,239
            )
            
            (300,302
            )**Cash
                Flows from Financing Activities:**Proceeds
                from Common Stock Issued and Common Stock Subscribed
            
            
            15,714,161
            
            
            4,201,370Proceeds
                from Debt
            
            
            10,500,000
            
            
            1,147,000Payments
                of Debt
            
            
            (898,717
            )
            
            (573,549
            )Payments
                on Capital Lease
            
            
            (27,245
            )
            
            (1,300
            )Cash
                Paid for Offering Costs
            
            
            (1,764,326
            )
            
            (21,555
            )Distributions
                to Former Preferred Stockholders
            
            
            (600,000
            )
            
            -**Net
                Cash Provided By Financing Activities**
            
            
            22,923,873
            
            
            4,751,966**Net
                Increase in Cash and Cash Equivalents**
            
            
            7,710,440
            
            
            772,659**Cash
                and Cash Equivalents, Beginning of Period**
            
            
            2,403,144
            
            
            1,630,485**Cash
                and Cash Equivalents, End of Period**
            
            $
            10,113,584
            
            $
            2,403,144




See
      Notes
      to Consolidated Financial Statements


F-7


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





**NOTE
      1 –
      ORGANIZATION AND MERGER**





RxElite,
      Inc. (the “Company”) is a Delaware corporation headquartered in Meridian, Idaho.
      The Company is in the business of manufacturing and selling generic
      pharmaceuticals. The Company was originally organized as Southridge
      Technology Group, LLC (“STG”), a Delaware limited liability company ,
      in
      November 2001. On August 24, 2005, the limited liability company was converted
      into a Delaware corporation and changed its name to Southridge Technology Group,
      Inc. Prior to July 13, 2007, the Company provided customized computing and
      communication services and solutions for small to medium-sized
      businesses.




On
      July
      13, 2007, the Company entered into an Agreement and Plan of Merger and
      Reorganization (the “Merger Agreement”) by and among the Company, RxElite
      Holdings Inc., a privately owned Delaware corporation engaged in the
      manufacturing and selling of generic pharmaceuticals (“RHI”), and RxElite
      Acquisition Corp., a newly-formed, wholly-owned Delaware subsidiary of the
      Company (“Acquisition Sub”). Upon closing of the merger transaction (the
“Merger”), Acquisition Sub was merged with and into RHI, and RHI, as the
      surviving corporation, became a wholly-owned subsidiary of the Company. The
      Company succeeded to the business of RHI as its sole line of
      business.




The
      Merger is being accounted for as a reverse acquisition and recapitalization
      of
      RHI for financial accounting purposes. Consequently, the assets and liabilities
      and the historical operations that will be reflected in the financial statements
      of the Company prior to the Merger will be those of RHI and will be recorded
      at
      the historical cost basis of RHI, and the consolidated financial statements
      after completion of the Merger will include the assets and liabilities of the
      Company and RHI, and the historical operations of RHI and operations of STG
      from
      the closing date of the Merger. The consolidated stockholders’ equity will
      reflect the capital structure of the Company, including its $0.001 par value
      common stock. Inter-company accounts and transactions are eliminated in
      consolidation.




In
      connection with the closing of the Merger, the Board of Directors of the Company
      approved an amendment to its certificate of incorporation to (1) change the
      name
      of the Company from “Southridge Technology Group, Inc.” to “RxElite, Inc.” and
      (2) increase the number of authorized shares of the Company’s capital stock from
      99,000,000 to 201,000,000, consisting of 200,000,000 shares of common stock,
      par
      value $0.001 per share, and 1,000,000 shares of preferred stock, par value
      $0.001. The shareholders of the Company subsequently approved the amendment
      to
      the certificate of incorporation.




**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





Cash
      and
      Cash Equivalents - Cash and cash equivalents include highly liquid investments
      with a maturity of three months or less.





Accounts
      Receivable - The Company records its accounts receivable at the original invoice
      amount less an allowance for doubtful accounts. The Company also adjusts the
      receivable amount for a discount allowance for timely payments. An account
      receivable is considered to be past due if any portion of the receivable balance
      is outstanding beyond its scheduled due date. On a quarterly basis, the Company
      evaluates its accounts receivable and establishes an allowance for doubtful
      accounts, based on its history of past write-offs and collections, and current
      credit conditions.  No interest is accrued on past due accounts receivable.
 The allowance for doubtful accounts was $4,092 at December 31, 2007.
      Payment discounts are recorded against revenue at the end of each period to
      the
      extent they remain eligible against the corresponding receivable. Customers
      are
      given payment discounts of between 2% and 3% for making payments within a range
      of 30 to 45 days. The discount allowance was $3,914 at December 31, 2007.




F-8


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


Inventories
      - Inventories are stated at the lower of cost (first-in, first-out) or market.
       A reserve for slow-moving and obsolete inventory is established for all
      inventory deemed potentially non-saleable by management in the period in which
      it is determined to be potentially non-saleable. The current inventory is
      considered properly valued and saleable.  The Company concluded that there
      was no need for a reserve for slow moving and obsolete inventory at December
      31,
      2007.





Property
      and Equipment - Property and Equipment are stated at cost less accumulated
      depreciation. Expenditures related to repairs and maintenance which are not
      capital in nature are expensed in the period incurred. Appropriate gains and
      or
      losses related to the disposition of property and equipment are realized in
      the
      period in which such assets are disposed. Depreciation expense amounted to
      $434,365 for the year ended December 31, 2007 (of which $239,964 was included
      in
      cost of goods sold) and $91,126 for the year ended December 31, 2006.
      Depreciation is computed using the straight-line method over the following
      estimated useful lives:





Category
            Useful
                LifeFurniture
                and Fixtures
            3-7
                yearsComputer
                Equipment
            5
                yearsSoftware
            3
                yearsVaporizers
            2
                years





Revenue
      Recognition - The Company recognizes revenue from product sales when the goods
      are received by the customer, resulting in the transfer of title and risk of
      loss. The Company sells its products to some wholesalers at the WAC price and
      to
      some wholesalers at a negotiated contract price. Upon sale to wholesalers who
      operate based on the WAC price, the WAC price less an allowance for the
      difference between the WAC price and the contract price (rebate amount), is
      recorded based on the average calculated rebate amount which is treated as
      a
      sales revenue offset. Upon sale of our product by the wholesaler using the
      WAC
      price, we are invoiced for the difference between the WAC and the contract
      price
      and create a credit note for the difference. The Credit notes are then
      reconciled with the sales revenue offset. Sales at negotiated contract prices
      (non-WAC) are recognized at the negotiated contract price.





Earnings
      Per Share - The Company has adopted the provisions of SFAS No. 128, “Earnings
      Per Share.” Basic earnings or loss per share is computed by dividing income or
      loss (numerator) applicable to common stockholders by the weighted average
      number of common shares outstanding (denominator) for the period.   Diluted
      earnings per share assumes the exercise or conversion of all dilutive
      securities.




Share
      Based Payments - The Company uses the Black-Scholes valuation model to estimate
      the grant date fair value of its stock options and warrants. The model requires
      various judgmental assumptions including estimated stock price volatility,
      forfeiture rates and expected life.





Our
      calculations of the fair market value of each stock-based award that was
      granted, modified or calculated during the year ended December 31, 2007 used
      the
      following assumptions:




F-9


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


Risk-free
                interest rate
            
            
            4.93
            %Expected
                life in years
            
            
            8.87Dividend
                yield
            
            
            0Expected
                volatility
            
            
            74.70
            %





Our
      calculations of the fair market value of each stock-based award that was
      granted, modified or calculated during 2006 used the following
      assumptions:





Risk-free
                interest rate
            
            
            4.75
            %Expected
                life in years
            
            
            0
                to 2Dividend
                yield
            
            
            0Expected
                volatility
            
            
            46.137
            %





Research
      and Development Costs - All costs related to research and development are
      expensed as incurred. These costs include labor and other operating expenses
      related to product development, as well as costs to obtain regulatory
      approval.





Advertising
      - The Company expenses advertising as incurred. For the year ended December
      31,
      2007 and 2006, advertising expenses were $265,744 and $104,199, respectively.





Accounting
      Estimates - The process of preparing financial statements in conformity with
      accounting principles generally accepted in the United States requires the
      use
      of estimates and assumptions regarding certain types of assets, liabilities,
      revenues, and expenses.  Such estimates primarily relate to unsettled
      transactions and events as of the date of the financial statements. Accordingly,
      actual results may differ from estimated amounts.





Concentration
      of Credit Risk - Financial instruments that potentially subject the Company
      to
      concentration of credit risk consist of cash accounts in financial institutions.
       Although the cash accounts exceed the federally insured deposit amount,
      management does not anticipate nonperformance by the financial institutions.





Shipping
      and Handling - The Company records shipping and handling expenses in the period
      in which they are incurred and are included in the Cost of Goods
      Sold.




Incomes
      Taxes - Deferred income taxes are provided using the liability method whereby
      deferred tax assets are recognized for deductible temporary differences and
      operating loss and tax credit carryforwards and deferred tax liabilities are
      recognized for taxable temporary differences. Temporary differences are the
      differences between the reported amounts of assets and liabilities and their
      tax
      bases. Deferred tax assets are reduced by a valuation allowance when, in the
      opinion of management, it is more likely than not that some portion or all
      of
      the deferred tax assets will not be realized. Deferred tax assets and
      liabilities are adjusted for the effects of the changes in tax laws and rates
      of
      the date of enactment.




F-10


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**






When
      tax
      returns are filed, it is highly certain that some positions taken would be
      sustained upon examination by the taxing authorities, while others are subject
      to uncertainty about the merits of the position taken or the amount of the
      position that would be ultimately sustained. The benefit of a tax position
      is
      recognized in the financial statements in the period during which, based on
      all
      available evidence, management believes it is more likely than not that the
      position will be sustained upon examination, including the resolution of appeals
      or litigation processes, if any. Tax positions taken are not offset or
      aggregated with other positions. Tax positions that meet the
      more-likely-than-not recognition threshold are measured as the largest amount
      of
      tax benefit that is more than 50 percent likely of being realized upon
      settlement with the applicable taxing authority. The portion of the benefits
      associated with tax positions taken that exceeds the amount measured as
      described above is reflected as a liability for unrecognized tax benefits in
      the
      accompanying balance sheet along with any associated interest and penalties
      that
      would be payable to the taxing authorities upon examination.




Interest
      and penalties associated with unrecognized tax benefits are classified as
      additional income taxes in the statement of income.





**NOTE
      3 – GOING CONCERN**





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. The Company has incurred losses
      since inception and may continue to incur losses for the foreseeable future.
      The
      Company’s business plan anticipates that its near future activities will be
      funded from the issuance of additional equity or debt and funds provided by
      ongoing operations.





Immediately
      following the Merger, the Company raised $10,703,092 of equity capital and
      converted $1,899,273 of convertible debentures through the issuance
      of 21,003,959 units in a private placement. In addition, the Company
      received proceeds of $10,500,000 from a senior secured convertible note on
      December 31, 2007.





If
      sales
      are insufficient to support planned development of new products and expansion
      of
      operations, the Company will need to access additional equity or debt capital.
      If public or private financing is not available when needed or is not available
      on terms acceptable to the Company, the Company’s growth and revenue-generating
      plans may be materially impaired. Such results could have a material adverse
      effect on the Company’s financial condition, results of operations and future
      prospects. The consolidated financial statements do not include any adjustments
      that might result from the outcome of these uncertainties.




F-11





**RXELITE,
      INC.**


**(Formerly
      Southridge Technology Group, Inc.)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**






**NOTE
      4 – INVENTORIES**





Inventories
      consist of the following at December 31, 2007:





Finished
                goods
            
            $
            5,308,975Medical
                devices
            
            
            2,038,030Other
            
            
            6,334Total
            
            $
            7,353,339





In
      2006,
      the Company entered into an agreement with a manufacturer of Sevoflurane
      agreeing to purchase $5,065,410 of the product as finished goods. The product
      had not yet been approved by the FDA for use in the United States as of December
      31, 2006. Approval was obtained from the FDA on May 2, 2007. (See Note
      22).




**NOTE
      5 – INTANGIBLE ASSETS**





Intangible
      assets consist of a patent valued at $25,000 and an FDA approved “Abbreviated
      New Drug Application” (ANDA) for the generic pharmaceutical Fluoxetine valued at
      $50,000.





Patent
      and ANDA acquisition and application costs are recorded at cost. Patent costs
      are amortized over their remaining useful life, not to exceed their legal life.
       ANDA acquisition and application costs are recorded at cost and their
      value is periodically tested for impairment. At December 31, 2007, the Company
      concluded that there was no impairment of this intangible asset.





Patent
      and ANDA acquisition and application costs at December 31, 2007 are as
      follows:





Patent
                Costs
            
            $
            25,000ANDA
                Acquisition and Application Costs
            
            
            50,000Gross
                Carrying Value
            
            
            75,000Less
                Accumulated Amortization
            
            
            (7,806
            )Total
                Intangible Assets
            
            $
            67,194





Patent
      amortization expense for the years ended December 31, 2007 and 2006 was $2,602.
      Patent amortization expense will be $2,602 for each year from 2008 through
      2012.





F-12


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**







**NOTE
      6 – PROPERTY AND EQUIPMENT**





Property
      and Equipment are stated at cost and consist of the following at December 31,
      2007:





Furniture,
                Fixtures and Equipment
            
            $
            163,945Computer
                Equipment
            
            
            116,475Software
            
            
            641,648Vaporizers
            
            
            959,856Buildings
            
            
            483,407Total
                Property and Equipment
            
            
            2,365,331Less
                Accumulated Depreciation
            
            
            (532,758
            )Property
                and Equipment, net
            
            $
            1,832,573





**NOTE
      7 – NOTE PAYABLE - RELATED PARTY**





At
      December 31, 2007, the Company had a note payable to a related party of
      $100,000. The note is due on demand, and bears simple interest computed at
      12%
      per annum.




**NOTE
      8 – PAYABLE TO FORMER PREFERRED STOCKHOLDERS**





Pursuant
      to a transaction entered into immediately following the Merger, the Company
      is
      obligated to offer to purchase from the former holders of the RHI’s Series A
      Preferred Stock on/or before December 31, 2008 up to an aggregate of 350,000
      shares of the Company’s common stock at a price of $4.00 per share, or a total
      obligation of $1,400,000. The Company has recorded this obligation at its
      present value, using an interest rate of 11.25% per annum. The present value
      of
      the payable to stockholders, recorded as a current liability in the accompanying
      consolidated balance sheet, was $1,255,692 at December 31, 2007.





F-13


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**







**NOTE
      9 – SEVERANCE OBLIGATION**





Effective
      as of December 14, 2007, the Company entered into a Departure Agreement and
      General Release with its former Chief Executive Officer and Chairman of the
      Board of Directors (“Employee”) that calls for the following payments by the
      Company:




·
            Pay
                to Employee in accordance with regularly schedules paydays, $250,000
                per
                annum until December 31, 2010;




·
            Pay
                to Employee $125,000 on or before January 31, 2008, which sum represents
                Employee’s 2007 bonus;




·
            Pay
                to Employee $20,833 on or before January 31, 2008, which sum represents
                four weeks of accrued and unused vacation and/or sick
                days;




·
            Continue
                to pay Employee’s family medical and dental insurance premiums through
                December 31, 2010;




·
            Continue
                to pay a monthly premium of $265 on a universal variable life insurance
                policy through December 31, 2010;
                and




·
            Pay
                to Employee a sum up to, but not exceeding, $10,000 for documented
                legal
                fees relating to his departure from the
                Company.




The
      Company has recorded the salary obligation at its present value, using an
      interest rate of 11.25% per annum. At December 31, 2007, the total severance
      obligation is recorded in the accompanying consolidated balance sheet as
      follows:





Present
                value of salary obligation
            
            $
            634,056Payments
                due on or before January 31, 2008
            
            
            145,834Total
            
            
            779,890Current
                portion
            
            
            334,009Long-term
                portion
            
            $
            445,881





The
      long-term portion of the severance obligation is payable $210,472 in 2009 and
      $235,409 in 2010.




F-14


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





**NOTE
      10 – CAPITAL LEASE OBLIGATIONS**





The
      Company leases computer and office equipment under long-term capital lease
      obligations. The following is a schedule by year of future minimum lease
      payments under capital leases, together with the present value of the net
      minimum lease payments as of December 31, 2007:





2008
            
            $
            53,5732009
            
            
            49,6112010
            
            
            11,838Total
                minimum lease payments
            
            
            115,022Less
                amount representing interest
            
            
            (14,685
            )Present
                value of net minimum lease payments
            
            
            100,337Current
                portion
            
            
            43,433Long-term
                portion
            
            $
            56,904





Included
      in property and equipment at December 31, 2007 are assets under capital lease
      of
      $128,882, with accumulated depreciation of $22,248.




**NOTE
      11 – SENIOR SECURED CONVERTIBLE NOTE**





On
      December 31, 2007, the Company entered into a Securities Purchase Agreement
      with
      an institutional investor (“Buyer”), pursuant to which the Company sold
      5,594,033 shares of common stock, a $10,500,000 senior secured convertible
      note
      (the “Note”), a Series A warrant to purchase up to 13,985,083 shares of common
      stock and a Series B warrant to purchase up to 4,661,694 shares of common stock
      for aggregate proceeds of $10,500,000.





The
      Note
      has a principal amount of $10,500,000 and is convertible at the option of the
      Buyer into shares of the Company’s common stock at an initial conversion price
      of $1.1262 per share, subject to adjustment for stock splits, combinations
      or
      similar events, defined quarterly EBITDA targets, and for certain other
      anti-dilution adjustments. The Note matures on December 31, 2009 (the “Maturity
      Date”), which date may be extended at the option of the Buyer under certain
      conditions. The entire outstanding principal balance and any outstanding fees
      or
      interest is due and payable in full on the Maturity Date. The Note bears
      interest at the rate of 9.50% per annum, which rate may be increased to 15%
      upon
      the occurrence of an event of default. Interest on the Note is payable quarterly
      beginning on April 1, 2008.





At
      any
      time on or after August 31, 2008, the Buyer may require the Company to redeem
      up
      to 50% of the original principal amount of the Note for a price equal to the
      amount of principal to be redeemed plus all accrued but unpaid interest and
      late
      fees.





At
      any
      time, provided there is not an event of default, the Company may redeem (i)
      50%
      of the Note for 120% of the sum of the amount of principal, interest and late
      fees to be redeemed and, following such redemption, (i) the remaining 50% of
      the
      Note for the sum of (A) 100% of the sum of the amount of principal, interest
      and
      late fees to be redeemed and (B) the amount of interest that, but for such
      redemption, would have been paid to the Buyer from the issuance date through
      the
      maturity date.




F-15


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


The
      Note
      contains a variety of events of default, including the suspension from trading
      or failure of the Company’s common stock to be listed for trading on the OTC
      Bulletin Board or another eligible market for defined periods of time, the
      failure to meet certain quarterly EBITDA targets, and other defined events
      of
      default. If there is an event of default, then the Buyer has the right to redeem
      all or any portion of the Note, at the greater of (i) up to 125% of the sum
      of
      the outstanding principal, interest and late fees, depending on the nature
      of
      the default or (ii) the product of (a) the number of shares into which the
      Note
      (including all principal, interest and late fees) may be converted and (b)
      the
      product of (1) 150% and (2) the greatest closing sale price for the common
      stock
      beginning on the date immediately preceding the event of default and ending
      on
      the date the Buyer delivers its redemption notice for such event of
      default.





The
      Note
      prohibits the Company from entering into certain transactions involving a change
      of control, unless the successor entity is a public company and it assumes
      in
      writing all of the obligations of the Company under the Note and the other
      transaction documents. In the event of such a transaction, the Buyer has the
      right to force redemption of the Note, at the greater of (i) 150% of the sum
      of
      the amount of principal, interest and late fees to be redeemed or (ii) the
      product of (x) the sum of the amount of principal, interest and late fees to
      be
      redeemed and (y) the quotient determined by dividing (A) the value of the
      consideration paid per share of common stock in the change of control
      transaction by (B) the conversion price.





The
      Note
      contains a variety of covenants on the part of the Company, including the
      following:





·
            The
                Note will rank senior to all other indebtedness of the
                Company.





·
            The
                Company will at all times reserve a number of shares equal to 130%
                of the
                number of shares of common stock issuable upon conversion of the
                Note.





·
            The
                Company will not incur other indebtedness, except for certain permitted
                indebtedness.





·
            The
                Company will not incur any liens, except for certain permitted
                liens.





·
            The
                Company will not, directly or indirectly, redeem or repay all or
                any
                portion of any permitted indebtedness if at the time such payment
                is due
                or is made or, after giving effect to such payment, an event constituting,
                or that with the passage of time and without being cured would constitute,
                an event of default has occurred and is
                continuing.





·
            Except
                for the permitted redemption as defined in the agreement of $4.00
                per
                share to our former Series A preferred stockholders who hold 350,000
                shares of common stock, the Company will not redeem, repurchase or
                pay any
                dividend or distribution on its common stock or any other capital
                stock.





·
            From
                and after December 31, 2008, the Company shall maintain a consolidated
                total debt to consolidated EBITDA ratio equal to or less than (i)
                3.5 for
                the fiscal quarter ending December 31, 2007, (ii) 3.5 for the fiscal
                quarter ending March 31, 2008, (iii) 3.5 for the fiscal quarter ending
                June 30, 2008, (iv) 3.5 for the fiscal quarter ending September 30,
                2008,
                (v) 3.0 for the fiscal quarter ending December 31, 2008 and (v) 3.0
                for
                each fiscal quarter thereafter.




F-16


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


The
      Series A warrant is immediately exercisable and, in the aggregate, entitles
      the
      Buyer to purchase up to 13,985,083 shares of common stock. The
      Series B warrant becomes exercisable only upon an additional redemption, if
      any,
      based on the amount of principal subject to the additional redemption and,
      in
      the aggregate, entitles the Buyer to purchase up to 4,661,694 shares of common
      stock. The
      warrants each have an initial exercise price of $1.1262 per share payable in
      cash, or until each share of common stock issuable upon exercise of the warrants
      has been registered for resale with the SEC, by way of a “cashless exercise.”
The warrants expire on the earlier of December 31, 2014 or five years after
      the
      date all of the shares issuable upon conversion of the Note and the warrants
      have been included on one or more registration statements declared effective
      by
      the SEC.





Pursuant
      to a registration rights agreement, the Company agreed to file a registration
      statement with the SEC covering the resale of 130% of the common stock and
      130%
      of the common stock underlying the Note and the warrants on or before April
      9,
      2008 and to cause such registration statement to be declared effective by the
      SEC on or before May 9, 2008, in the event that the registration statement
      is
      not reviewed by the SEC, and on or before June 8, 2008, in the event that the
      registration statement is reviewed by the SEC.





To
      secure
      our obligations under the Note, we granted the Buyer a first priority perfected
      security interest in all of our assets and properties, together with the assets
      and properties of our operating subsidiary, RxElite Holdings, Inc., including
      the stock of RxElite Holdings, Inc.





The
      Company has allocated the $10,500,000 proceeds of the debt to the individual
      financial instruments included in the transaction, based on their relative
      estimated fair values, as follows:





Total
                proceeds
            
            $
            10,500,000Debt
                discount:Common
                stock
            
            
            1,992,970Series
                A warrant
            
            
            3,289,604Series
                B warrant
            
            
            1,096,534Intrinsic
                value of conversion feature
            
            
            4,065,044Total
                debt discount
            
            
            10,444,152Net
                debt amount
            
            $
            55,848





The
      estimated fair value of the common stock was based on the closing market price
      of the Company’s common stock on the date of the transactions. The estimated
      fair value of the warrants was based on the Black-Scholes valuation model.




On
      December 31, 2007, Buyer entered into a Put Agreement (the “ Put
      Agreement ”)
      with
      Tiburon LLC, an Idaho limited liability company with respect to which Jonathan
      Houssian, the Company’s president, chief executive officer, chief financial
      officer and secretary, is the sole managing member (“ Tiburon ”).
      Pursuant to the Put Agreement, upon an event of default under the Note, Buyer
      may compel Tiburon to purchase up to $10,500,000 principal amount of the Note
      at
      the greater of (i) up to 125% of the sum of the outstanding principal, interest
      and late fees to be redeemed, depending on the nature of the default or (ii)
      the
      product of (a) the number of shares into which the Note (including all
      principal, interest and late fees) may be converted and (b) the product of
      (1)
      150% and (2) the greatest closing sale price for the common stock beginning
      on
      the date immediately preceding the event of default and ending on the date
      Buyer
      delivers its redemption notice for such event of default (the “ Put
      Option ”).
      The
      Put Option is valid until the earlier of (i) the Maturity Date as defined in
      the
      Note as December 31, 2009 and (ii) the date that the Debt Coverage Threshold,
      which is defined as a consolidated EBITDA ratio equal to or less than (i) 3.5
      for the fiscal quarter ending December 31, 2007, (ii) 3.5 for the fiscal quarter
      ending March 31, 2008, (iii) 3.5 for the fiscal quarter ending June 30, 2008,
      (iv) 3.5 for the fiscal quarter ending September 30, 2008, (v) 3.0 for the
      fiscal quarter ending December 31, 2008 and (v) 3.0 for each fiscal quarter
      thereafter,  is
      met
      for two consecutive fiscal quarters.




F-17


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


Tiburon’s
      obligation under the Put Agreement is secured by a pledge by Tiburon to Buyer
      of
      6,879,653 shares of common stock pursuant to a Pledge Agreement, dated as of
      December 31, 2007, between Tiburon and Buyer. To the extent Tiburon fails to
      satisfy its obligations under the Put Agreement, Buyer’s sole remedies against
      Tiburon are pursuant to the Pledge Agreement.





The
      net
      debt amount of $55,848 is recorded as a long-term liability in the accompanying
      consolidated balance sheet as of December 31, 2007.





**NOTE
      12 – SHAREHOLDERS’ EQUITY**





On
      October 29, 2007, the Company amended its certificate of incorporation to change
      its name to “RxElite, Inc.” from “Southridge Technology Group, Inc.” The Company
      also amended its certificate of incorporation to increase the number of shares
      of authorized capital stock to 201,000,000, divided into two classes:
      200,000,000 shares of common stock, par value $.001 per share, and 1,000,000
      shares of preferred stock, par value $.001 per share. Prior to the amendment,
      the number of shares of authorized capital stock was 99,000,000, divided into
      two classes: 98,000,000 shares of common stock, par value $.001 per share,
      and
      1,000,000 shares of preferred stock, par value $.001 per share.





The
      certificate of amendment was unanimously approved by the Company’s board of
      directors on July 13, 2007 and by a majority of the Company’s stockholders on
      October 23, 2007.





Series
      A Preferred Stock





At
      January 1, 2006, each Series A preferred stock share was convertible into one
      share of common stock, and was not redeemable. Holders of Series A preferred
      stock (“Holders”), in preference to the holders of the other stock of the
      Company, were entitled to receive, when and as declared by the Board of
      Directors of the Company, but only out of funds that are legally available
      therefore, cash dividends at the rate of five percent of the Original Issue
      Price per annum on each outstanding share of Series A preferred stock (as
      adjusted for stock splits, stock dividends, stock combinations and the like
      with
      respect to such shares). Such dividends are payable only when as and if declared
      by the Board of Directors and are non-cumulative. The Series A preferred stock
      has a liquidation preference that upon a liquidation (or deemed liquidation)
      the
      Holder will receive, in priority to all junior securities, $4.00 per share
      (as
      adjusted for stock splits and the like) plus all declared but unpaid dividends,
      and thereafter, participation with the common stock in all of the remaining
      assets of the Corporation, on an as converted basis. Provided, however, that
      if
      the assets available for distribution exceeds $100,000,000, then in lieu of
      the
      liquidation preference, the Holders of Series A preferred stock will participate
      with the holders of common stock on an as converted basis (the $100,000,000
      threshold shall be proportionally increased if the Company raises additional
      capital).




F-18


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


In
      2006,
      the Company issued 802,000 shares of Series A preferred stock. Consideration
      for
      the foregoing was in the form of $195,000 in cash, $24,700 in services and
      other
      expenses and $1,245,000 in subscription shares payable.





On
      May
      17, 2006 the Board of Directors approved the reduction in the exercise price
      of
      warrants held by the Holders that were exercisable at $2.00 per share to $0.01
      per share. The total number of warrants held by the Company’s preferred stock
      shareholders was reduced to 70,000 shares. The Company accounted for the
      modification of these warrants in accordance with FAS 123(R) and used the
      Black-Scholes model, discussed in Note 2 under Share Based Payments, to
      determine the amount to be expensed for the reduction in the exercise price
      for
      the warrants. The resulting expense for modifying the warrants held by the
      Holders was $36,658 and was classified as other expense and $102,642 was
      classified as dividends.





In
      order
      to induce the Holders to convert their shares of preferred stock to common
      stock, the Company entered into a Conversion Agreement dated as of October
      17,
      2006, which provided for the Company buying back the Holders’ stock contingent
      on certain events and before any liquidation or similar type transaction and
      the
      payment of specified fees before any distribution of proceeds were effected.





On
      October 17, 2006, the Holders elected to convert the total 2,960,500 shares
      of
      Series A preferred stock outstanding into a total of 12,491,533 shares of common
      stock.





On
      April
      26, 2007, the Board of Directors approved and the Company entered into an
      amended agreement with the former Holders that provided for an aggregate cash
      payout of $600,000 contingent on the Company going public in a qualified merger
      and for an additional buy back of up to an aggregate of 350,000 shares of common
      stock at $4 per share or up to $1.4 million dollars on/or before December 31,
      2008 (See Note 8).





Common
      Stock





On
      May
      17, 2006 the Board of Directors approved the reduction in the exercise price
      of
      stock options then exercisable from $0.474 per share to $0.00237 per share.
      The
      number of options modified for common stock was 1,647,752. The Company accounted
      for the modification of these options in accordance with FAS 123(R) and used
      the
      Black-Scholes model discussed in Note 2, under Share Based Payments, to
      determine the amount to be expensed for the reduction in strike price for the
      warrants. The resulting expense for modifying the common stock warrants was
      $777,131 and has been included in general and administrative
      expenses.





On
      September 18, 2006, the Company filed its Second Amended and Restated
      Certificate of Incorporation with the Secretary of State of Delaware and
      increased its authorized shares to 37,974,600 shares of common stock, par value
      $0.00237 per share, and 4,000,000 shares of Series A Convertible Preferred
      Stock, par value $0.01 per share.





On
      November 9, 2006, the Company filed its Third Amended and Restated Certificate
      of Incorporation with the Secretary of State of Delaware and increased its
      authorized shares to 100,000,000 shares of common stock, par value $0.00237
      per
      share. In the context of the Third Amended and Restated Certificate of
      Incorporation, each share of common stock was split into 4.2194 shares of common
      stock.





During
      the year ended December 31, 2006, the Company issued a total of 14,999,401
      shares of its common stock for the following consideration: 12,491,533 shares
      for the conversion of 2,960,500 shares of Series A preferred stock with a book
      value of $29,605; 529,273 shares for cash of $120,770, 1,702,752 shares for
      employee compensation and legal services valued at $222,338; 43,776 shares
      for
      subscription shares payable of $20,750; 210,970 shares in payment of debt of
      $100,000; and 21,097 shares for other expenses valued at $10,000.




F-19


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


During
      the year ended December 31, 2006, the Company incurred stock offering costs
      of
      $525,676, which have been recorded as a reduction of additional paid-in
      capital.





During
      the year ended December 31, 2007, the Company issued a total of 65,754,257
      shares of its common stock for the following consideration: 22,171,003 shares
      for cash of $13,302,601; 21,489,238 shares for subscription shares payable
      of
      $12,893,541 (including 7,333,333 shares for extended payment terms and certain
      pricing discounts valued at $4,400,000); 16,499,983 shares issued in the Merger;
      and 5,594,033 shares issued for senior secured convertible Note (See Note 11).
      Details of these transactions are provided below.





In
      connection with the issuances of common stock for cash and for subscription
      shares payable in transactions completed in January and April 2007, the Company
      issued a total of 7,413,874 warrants. The warrants have a strike price of $0.85
      per share and became exercisable, and their two-year term began, on October
      29,
      2007 upon stockholder approval of the amendment to the Company’s Certificate of
      Incorporation to increase the number of authorized shares of common
      stock.





Pursuant
      to a certain Letter of Intent between the Company and Minrad International,
      Inc.
      (“Minrad”), the Company was obligated to issue 1,500,000 shares of the Company’s
      common stock valued at $0.60 per share to Minrad in consideration for extended
      payment terms and certain pricing discounts and 5,833,333 shares of the
      Company’s common stock valued at $0.60 per share to International Capital
      Advisory Inc. (“ICA”) in discharge of a certain royalty obligation owed to ICA
      on products commercialized by the Company and Minrad. The total value of this
      obligation of $4,400,000 has been recorded as Product Purchase Agreements
      Expense on the Consolidated Statements of Operation for the year ended December
      31, 2007. Based on instructions from Minrad International, Inc., upon the
      effectiveness of the amendment to the Company’s Certificate of Incorporation to
      increase its authorized capital stock on October 29, 2007, the Company issued
      1,500,000 of these shares to Minrad International, Inc. and 5,833,333 of these
      shares to International Capital Advisory Inc.  The Company decided to
      expense these 5,833,333 shares instead of amortizing these costs due to the
      uncertainty of future sales growth.





Merger
      Transaction




At
          the
          closing of the Merger, 45,756,389 shares of the Company's common stock
          were
          issued to the holders of RHI's common stock, and an aggregate of 2,482,850
          and
          7,545,878 shares of the Company's common stock were reserved for issuance
          under
          such RHI options and warrants, respectively.  Pursuant to the terms of the
          Merger Agreement, the Company assumed all of RHI's obligations under RHI's
          outstanding stock options and warrants.  Under RHI's 2007 Incentive
          Stock Plan, under which directors, employees and other qualified persons
          may
          receive options, the total reserved shares of common stock is 14,873,892. 
Neither the Company nor RHI had any other options to purchase shares of
          common
          stock outstanding immediately prior to the closing of the Merger.


F-20


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


Immediately
      following the closing of the Merger, under the terms of an Agreement of
      Conveyance, Transfer and Assignment of Assets and Assumption of Obligations,
      the
      Company transferred all of its pre-Merger operating assets and liabilities
      to
      its wholly-owned subsidiary, STG Holdings, Inc., a Delaware corporation
      (“SplitCo”). Thereafter, pursuant to a Split-Off Agreement, the Company
      transferred all of the outstanding capital stock of SplitCo to Joseph M. Garzi
      and Sunodia Partners LP, two stockholders of the Company, in exchange for
      cancellation of 9,050,000/pre-forward split shares of the Company’s common
      stock held by such stockholder, which left 16,500,011 shares of the
      Company’s common stock held by existing stockholders of the
      Company.





Private
      Placement





Immediately
      following the closing of the Merger and the effectuation of the Split-Off,
      the
      Company raised $10,703,092 of equity capital and converted $1,899,273 of
      Convertible Debentures through the issuance of 21,003,959 units in a private
      placement (the “Private Placement”) at $0.60 per unit, consisting of an
      aggregate of (i) 21,003,959 shares of the Company’s common stock and (ii)
      two-year warrants to purchase an aggregate of an additional 10,501,976 shares
      of
      the Company’s common stock at an exercise price of $0.85 per share.




Forward
      Stock Split





Immediately
      following consummation of the Merger and the Private Placement, on July 13,
      2007, the Board of Directors declared an 11.036789 for 1 forward stock split
      in
      the form of a dividend of 10.036789 shares for each one share of outstanding
      stock. The consolidated financial statements and related footnotes give
      retroactive effect to the forward stock split for all periods presented.





Other
      Post-Merger Transactions





In
      July
      2007, notes payable to related parties of $772,757, including $257,586 recorded
      as subscription shares payable at June 30, 2007, were paid in full in exchange
      for $515,171 in cash and 429,310 shares of the Company’s common
      stock.





In
      July
      2007, the Company issued a two-year warrant to purchase 2,500,000 shares of
      the
      Company’s common stock at a price of $0.60 per share and a two-year warrant to
      purchase 1,250,000 shares of the Company’s common stock at a price of $0.85 to a
      company for advisory services.





In
      July
      2007, the Company issued a two-year warrant to purchase 379,963 shares of its
      common stock at a price of $0.60 per share to an individual for advisory
      services.




F-21


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


The
      Company paid $600,000 to the former holders of the RHI’s Series A Preferred
      Stock and issued to them two-year warrants to purchase 1,000,000 shares of
      the
      Company’s common stock at an exercise price of $0.60 per share. The Company is
      also obligated to offer to purchase from the former holders of the RHI’s Series
      A Preferred Stock on/or before December 31, 2008 up to an aggregate of 350,000
      shares of the Company’s common stock at a price of $4.00 per share. This
      obligation has been recorded at its present value as a long-term liability
      of
      $1,255,692 in the accompanying consolidated balance sheet as of December 31,
      2007 (See Note 8).





The
      stockholders of the Company as of December 31, 2006 were issued two-year
      warrants to purchase 2,000,001 shares of the Company’s common stock at a price
      of $0.85 per share. As a result, additional paid-in capital and accumulated
      deficit were increased $720,000.





The
      Company issued an aggregate of 65,884 shares of its common stock to certain
      non-executive employees of the Company who elected to convert an aggregate
      of
      $39,530 of deferred compensations into such stock.




**NOTE
      13 - SIGNIFICANT CUSTOMERS**





During
      the year ended December 31, 2007, the Company recorded revenues from three
      customers that approximated 23%, 18% and 14% of net sales, respectively. During
      the year ended December 31, 2006, the Company recorded revenues from two
      customers that approximated 36% and 15% of net sales, respectively.





**NOTE
      14 - SIGNIFICANT SUPPLIERS**





The
      Company out-sources all of its generic pharmaceutical manufacturing for its
      own
      label to outside sources. The Company out-sourced the manufacturing of all
      its
      pharmaceutical products to three companies in both 2007 and 2006. For the year
      ended December 31, 2007, the Company’s largest supplier accounted for
      approximately $1.96 million or 48% of product purchases. The second largest
      supplier accounted for approximately $1.07 million or 26% of product purchases.
      For 2006, the Company’s largest supplier accounted for approximately $11 million
      or 67.3% of product purchases. The second largest supplier accounted for
      approximately $5 million or 32.5% of product purchases.




**NOTE
      15 – COMMITMENTS AND CONTINGENCIES**





Financial
      instruments that potentially subject the Company to concentrations of credit
      risk consist principally of cash in bank. Cash with one bank exceeded the
      federally insured limit by $10,013,584 at December 31, 2007 and $2,303,144
      at
      December 31, 2006.





At
      December 31, 2007, the Company did not have any commitments in excess of one
      year for operating leases. Rental expense on building and equipment leases
      for
      the years ended December 31, 2007 and 2006 was $128,663 and $63,372,
      respectively.





F-22


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**







**NOTE
      16 – INCOME TAXES - FAS 109 DISCLOSURE**





Deferred
      taxes are provided on a liability method whereby deferred tax assets are
      recognized for deductible temporary differences and operating loss and deferred
      tax liabilities are recognized for taxable temporary differences. Temporary
      differences are the differences between the reported amounts of assets and
      liabilities and their tax bases. Deferred tax assets are reduced by a valuation
      allowance when, in the opinion of management, it is more likely than not that
      some portion or all of the deferred tax assets will not be realized. Deferred
      tax assets and liabilities are adjusted for the effects of changes in tax laws
      and rates on the date of enactment.





Deferred
      tax assets are comprised of the following at December 31, 2007:





Deferred
                tax assets:Net
                operating loss carry forwards
            
            $
            7,200,645Severance
                obligation
            
            
            304,157Accrued
                expenses
            
            
            106,528Inventories
            
            
            92,810Allowance
                for doubtful accounts and payment discounts
            
            
            3,1227,707,262Less
                valuation allowance
            
            
            (7,707,262
            )Net
                deferred tax asset
            
            $
            -





The
      benefit (provision) for income taxes is different than amounts which would
      be
      provided by applying the statutory federal income tax rate to (loss) income
      before income taxes for the following reasons:





**Years
                Ended December 31,****2007**
            
            **2006**Income
                tax (provision) benefit at statutory rate
            
            $
            5,836,194
            
            $
            (4,083,518
            )Stock-based
                compensation
            
            
            (307,719
            )
            
            -Meals
                and entertainment
            
            
            (5,653
            )
            
            (280
            )Officer
                life
            
            
            (2,248
            )
            
            (6,559
            )State
                tax expense
            
            
            -
            
            
            370Net
                operating loss utilization
            
            
            -
            
            
            3,091,835Change
                in valuation allowance
            
            
            (5,520,574
            )
            
            998,152$
            -
            
            $
            -




At
      December 31, 2007, the Company had net operating loss carry forwards of
      approximately $18 million that may be offset against future taxable income
      from
      the year 2007 through 2027. No tax benefit has been reported in the December
      31,
      2007 financial statements since the potential tax benefit is offset by a
      valuation allowance of the same amount.





Due
      to
      the change in ownership provisions of the Tax Reform Act of 1986, the net
      operating loss carry forwards of the Company for Federal income tax purposes
      are
      subject to annual limitations.




F-23




**RXELITE,
      INC.**


**(Formerly
      Southridge Technology Group, Inc.)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





**NOTE
      17 – STOCK OPTIONS AND WARRANTS**





Stock
      Options





The
      Company had no stock options outstanding as of December 31, 2006.





In
      January and February 2007, the Company entered into employment agreements with
      three of its management employees. Pursuant to these agreements, the Company
      committed to issue options to purchase up to 545,000 shares of the Company’s
      common stock. Pursuant to verbal commitments, the Company was also obligated
      to
      issue options to other employees to purchase a total of 263,038 shares of the
      Company’s common stock. The options are to vest over a four-year period and have
      an exercise price of $0.60 per share.





The
      Company has adopted the provisions of Statement of Financial Accounting
      Standards (“SFAS”) No. 123R, *Share
      Based Payments* ,
      which
      requires companies to measure the cost of employee services received in exchange
      for equity instruments based on the grant date fair value of those awards and
      to
      recognize the compensation expense over the requisite service period during
      which the awards are expected to vest.





On
      July
      6, 2007, the Company adopted the RxElite Holdings Inc. 2007 Incentive Stock
      Plan
      (the “Plan”), which provides for the issuance of a variety of forms of equity
      awards, including stock options, restricted stock and stock appreciation rights
      to officers, directors, employees and other qualified persons. The Plan is
      administered by the Board of Directors of the Company or a committee appointed
      by the Board of Directors. The number of shares of the Company’s common stock
      initially reserved for issuance under the Plan is 14,873,883.





On
      July
      6, 2007, the Board of Directors of the Company approved a grant of employee
      stock options to purchase a total of 2,482,850 shares of the Company’s common
      stock, including options to purchase 808,038 shares of the Company’s common
      stock for which contractual or verbal commitments had been previously made
      as
      discussed above. Subsequently, 180,000 of the options were cancelled when one
      of
      the management employees left the Company.





In
      July
      and October 2007, the Board of Directors of the Company approved the issuance
      to
      three of the Company’s non-employee directors of options to purchase a total of
      1,200,000 shares of the Company’s common stock. The options vest over a period
      of four years and are exercisable for a period of ten years at $0.60 per
      share.





Effective
      December 31, 2007, the Board of Directors of the Company approved a grant of
      employee stock options to purchase a total of 471,643 shares of the Company’s
      common stock.





Total
      stock-based compensation expense for the year ended December 31, 2007 totaled
      $905,057, with $37,631 allocated to selling expenses and $867,426 allocated
      to
      general and administrative expenses. There was no stock compensation expense
      capitalized during year ended December 31, 2007.




F-24




**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





The
      following table summarizes the stock option activity during the year ended
      December 31, 2007:





**Options**
            
            **Weighted
                Average**
              **Exercise
                Price**
            
            **Weighted
                Average**
              **Remaining
                Contract Term**
            
            **Aggregate**
              **Intrinsic
                Value**Outstanding
                at December 31, 2006
            
            
            -
            
            
            $
            -Granted
            
            
            4,154,493
            
            
            
            0.63Exercised
            
            
            -
            
            
            
            -Forfeited
            
            
            (180,000
            )
            
            
            0.60Outstanding
                at December 31, 2007
            
            
            3,974,493
            
            
            $
            0.63
            
            
            6.25
            
            
            $
            980,898Options
                vested and exercisable atDecember
                31, 2007
            
            
            1,718,788
            
            
            $
            0.63
            
            
            6.78
            
            
            $
            424,763





The aggregate
      intrinsic valuein
      the
      preceding table represents the total pretax intrinsic value, based on the
      Company’s closing stock price of $0.88 as of December 31, 2007, which would have
      been received by the holders of in-the-money options had the option holders
      exercised their options as of that date.





As
      of
      December 31, 2007, the total future compensation cost related to non-vested
      stock-based awards not yet recognized in the consolidated statements of
      operations was $1,163,537.





Stock
      Warrants




The
      following table summarizes the activity in the Company’s warrants for the years
      ended December 31, 2007 and 2006. There was no activity in the preferred stock
      warrants subsequent to 2006.




**Preferred
                  Stock**
                **Warrants**
              
              **Exercise
                  Price**Outstanding
                  warrants at December 31, 2005
              
              
              70,000
              
              $
              2.00Granted
              
              
              70,000
              
              $
              0.01Cancelled/Expired
              
              
              (70,000
              )
              $
              2.00Exercised
              
              
              (70,000
              )
              $
              0.01Outstanding
                  warrants at December 31, 2006
              
              
              -
              
              
              N/AExercisable,
                  December 31, 2006
              
              
              -
              
              
              N/A





F-25


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





During
      the year ended December 31, 2006, the Company reduced the price of 70,000
      warrants for preferred stock from an exercise price of $2.00 per share to $.01
      per share. These warrants were issued in 2005 as part of an equity and
      convertible debenture sale. Due to this modification, the Company recorded
      a non
      cash dividend of $102,642 for the change in exercise price for the year ended
      December 31, 2006 and $36,658 in other expense.


**Common
                  Stock**
                **Warrants**
              
              **Exercise
                  Price**Outstanding
                  warrants at December 31, 2005
              
              
              1,899,895
              
              $
              0.474Granted
              
              
              1,647,752
              
              
              0.00237Cancelled/Expired
              
              
              (1,647,752
              )
              
              0.474Exercised
              
              
              (1,767,891
              )
              
              0.03442Outstanding
                  warrants at December 31, 2006
              
              
              132,004
              
              
              0.00237Granted
              
              
              43,692,590
              
              
              0.950Cancelled/Expired
              
              
              -
              
              
              N/AExercised
              
              
              -
              
              
              N/AOutstanding
                  warrants at December 31, 2007
              
              
              43,824,594
              
              
              0.950Exercisable,
                  December 31, 2007
              
              
              39,162,900
              
              
              0.930




Of
      the
      common stock warrants outstanding at December 31, 2007, 4,661,694 warrants
      issued in connection with the Note (Note 11) become exercisable only upon a
      defined additional redemption, if any, based on the amount of principal of
      the
      Note subject to the additional redemption.





**NOTE
      18 – FINDER FEE WARRANTS**





In
      2006,
      the Company contracted with a capital development consulting firm to assist
      the
      Company to raise capital. For any capital raised with the assistance of the
      consulting firm, the agreement provides for compensation in the form of cash
      and
      warrants in proportion to the capital raised, plus certain base fees and
      expenses. During 2006 the consulting firm assisted in raising $3,565,600 for
      the
      Company. Pursuant to the agreement, the Company owed the consulting firm
      $356,560 in cash and warrants to purchase 594,267 shares of common stock at
      an
      exercise price of $0.60 per share and warrants to purchase an aggregate of
      297,133 shares of common stock at $0.85 per share. At December 31, 2006, the
      Company had not issued the warrants related to this agreement, but as they
      had
      been earned by the consulting firm as of December 31, 2006, the Company
      calculated the fair market value of each warrant using the Black-Scholes
      valuation model described in Note 2, under Share Based Payments. The fair market
      value of the warrants owed was calculated to total $134,299 and was debited
      to
      Additional Paid in Capital and credited to accounts payable at December 31,
      2006.





During
      the year ended December 31, 2007, the consulting firm assisted in raising
      $11,491,951 for the Company, for which the Company owed the consulting firm
      $1,149,195 in cash. Through December 31, 2007, the Company issued the consulting
      firm warrants to purchase a total of 2,500,000 shares of common stock at an
      exercise price of $0.60 per share and warrants to purchase a total of 1,250,000
      shares of common stock at an exercise price of $0.85 per share. As of December
      31, 2007, the Company had a balance due the consulting firm of $203,308 for
      unpaid cash fees and expenses.




F-26




**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


**NOTE
      19 – RELATED PARTY TRANSACTIONS**





A
      related
      party is generally defined as (i) any person that holds 10% or more of the
      Company’s securities and their immediate families, (ii) the Company’s
      management, (iii) someone that directly or indirectly controls, is controlled
      by
      or is under common control with the Company, or (iv) anyone who can
      significantly influence the financial and operating decisions of the Company.
      A
      transaction is considered to be a related party transaction when there is a
      transfer of resources or obligations between related parties. A related party
      note payable is discussed in Note 7. Related party receivables totaled $8,945
      at
      December 31, 2007, respectively. The related parties are employees and officers
      of the Company.





At
      December 31, 2007, the Company also had a severance obligation to its former
      Chief Executive Officer that totaled $779,890.





During
      the year ended December 31, 2007, the Company had sales to its primary supplier
      totaling $465,378. These sales were made to the supplier at the Company’s
      cost.





As
      further discussed in Note 11, Tiburon is controlled by the Company’s Chief
      Executive Officer, Jonathan Houssian, and is the guarantor on the
      Note.





**NOTE
      20 – GAIN (LOSS) ON DEBT RESTRUCTURING**





For
      the
      twelve months ended December 31, 2007, the Company reported a loss on debt
      restructuring due to $170,000 for the restructuring of a related party debt.
      In
      addition, on June 24, 2003, the Company issued a promissory note to William
      J.
      Marciniak, which was subsequently amended pursuant to a Letter Agreement, dated
      February 16, 2004. Following the closing of our reverse merger on July 13,
      2007,
      this promissory note the Company cancelled in full in exchange for our payment
      of approximately $515,171 and the issuance of 429,310 shares of the Company’s
      common stock. This resulted in an additional loss of $188,054.




For
      the
      twelve months ended December 31, 2006, the Company reported a gain on debt
      restructure described below. From 2002 through August 2006, the Company operated
      under a contract manufacturing, distribution and finance agreement with Nephron
      Pharmaceuticals Corporation, under which Nephron Pharmaceuticals Corporation
      manufactured Albuterol 0.083% and Ipratropium 0.02% for the Company to
      thereafter sell under its own label. Nephron Pharmaceuticals Corporation also
      provided extended credit terms to the Company. In August 2006, the Company
      mutually agreed to terminate its agreement. In order to continue to provide
      the
      Company’s former customers with an uninterrupted supply of Albuterol 0.083% and
      Ipratropium 0.02%, the Company worked together with Nephron Pharmaceuticals
      Corporation during the transition that established direct sales to those
      customers by Nephron Pharmaceuticals Corporation. As to each such customer,
      Nephron Pharmaceuticals Corporation assumed any liability that the Company
      may
      have had for rebates of any type owed in relation to the service of those
      customers. In addition, Nephron Pharmaceuticals Corporation agreed to assume
      all
      chargeback balances specifically associated with servicing McKesson Corporation,
      Cardinal Health, Inc., AmerisourceBergen Corporation and Rochester Drug
      Cooperative, Inc. In exchange for the transition of the Company’s Albuterol
      0.083% and Ipratropium 0.02% product lines to Nephron Pharmaceuticals
      Corporation, and the future value of the sales and gross margins Nephron
      Pharmaceuticals Corporation would receive from the direct sales of Albuterol
      0.083% and Ipratropium 0.02% to the Company’s former customers, Nephron forgave
      all of the Company’s then owed outstanding balances. The total value of this
      transaction resulted in a realized gain of $12,335,199 in the twelve months
      ended December 31, 2006.




F-27




**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


**NOTE
      21 – SUPPLEMENTAL CASH FLOW INFORMATION**





Cash
      paid
      for interest amounted to $136,860 and $160,803 for the years ended December
      31,
      2007 and 2006, respectively.  There was no cash paid for income taxes
      during the years ended December 31, 2007 and 2006.





During
      the year ended December 31, 2007, the Company had the following non-cash
      investing and financing activities:





·
            Acquired
                property and equipment through the issuance of accounts payable of
                $9,437.





·
            Acquired
                property and equipment through increase of capital lease obligations
                of
                $82,082.





·
            Increased
                related party receivables and decreased subscription shares payable
                by
                $2,772.





·
            Decreased
                related party debt and increased subscription shares payable by
                $975,805.





·
            Increased
                common stock by $35,077, increased additional paid-in capital by
                $12,858,464, and reduced subscription shares payable by
                $12,893,541.





·
            Increased
                accounts payable and decreased additional paid-in capital by $203,308
                for
                advisory services payable.





·
            Increased
                common stock by $16,500 and decreased additional paid-in capital
                by
                $16,500.





·
            Increased
                common stock by $62,686 and increased accumulated deficit by
                $62,686.





·
            Increased
                accounts payable and decreased additional paid-in capital by
                $487,000.





·
            Increased
                additional paid-in capital and accumulated deficit by $720,000 for
                warrants issued to stockholders.





·
            Increased
                payable to stockholders and accumulated deficit by
                $1,183,535.





·
            Increased
                common stock by $5,594, increased additional paid-in capital by
                $10,438,558, and reduced senior secured convertible note by
                $10,444,152.





During
      the year ended December 31, 2006, the Company had the following non-cash
      investing and financing activities:





·
            Increased
                additional paid-in capital and decreased accumulated deficit by $102,642
                for modification of preferred stock
                dividends.




F-28




**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


·
            Increased
                preferred stock by $6,225, increased additional paid-in capital by
                $1,238,775, and reduced subscription shares payable by
                $1,245,000.





·
            Increased
                common stock by $12,491, increased additional paid-in capital by
                $17,114
                and decreased preferred stock by
                $29,605.




·
            Increased
                common stock by $44, increased additional paid-in capital by $20,706,
                and
                reduced subscription shares payable by
                $20,750.





·
            Increased
                common stock by $211, increased additional paid-in capital by $99,789
                and
                decreased notes payable - related party by
                $100,000.





·
            Increased
                accrued expenses by $1,091,295, decreased accounts receivable by
                $2,019,833 and decreased long term debt by
                $3,111,128.





·
            Decreased
                debt and increased subscription shares payable by
                $947,000.





·
            Decreased
                accrued expenses and increased subscription shares payable by
                $234,053.





·
            Increased
                long-term debt - related party and decreased accrued expenses by
                $13,315.





·
            Increased
                property and equipment and increased capital lease obligations by
                $46,800.





·
            Increased
                accounts payable and decreased additional paid-in capital by
                $504,121.





·
            Increased
                accounts payable and decreased debt by
                $63,905.




**NOTE
      22 – RECENT ACCOUNTING PRONOUNCEMENTS**





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), *Business
      Combinations* .
      This
      statement replaces SFAS No. 141, *Business
      Combinations* and
      applies to all transactions or other events in which an entity (the acquirer)
      obtains control of one or more businesses (the acquiree), including those
      sometimes referred to as “true mergers” or “mergers of equals” and combinations
      achieved without the transfer of consideration. This statement establishes
      principles and requirements for how the acquirer: a) recognizes and measures
      in
      its financial statements the identifiable assets acquired, the liabilities
      assumed, and any noncontrolling interest in the acquiree; b) recognizes and
      measures the goodwill acquired in the business combination or a gain from a
      bargain purchase; and c) determines what information to disclose to enable
      users
      of the financials statements to evaluate the nature and financial effects of
      the
      business combination. This statement will be effective for fiscal years, and
      interim periods within those fiscal years, beginning on or after December 15,
      2008, or the Company’s fiscal year beginning January 1, 2009. Earlier adoption
      is prohibited. The Company currently is unable to determine what impact the
      future application of this pronouncement may have on its financial statements.





In
      December 2007, the FASB issued SFAS 160, *Noncontrolling
      Interests in Consolidated Financial Statements* .
      This
      statement applies to all entities that prepare consolidated financial
      statements, except not-for-profit organizations, and amends Accounting Research
      Bulletin (“ARB”) 51 to establish accounting and reporting standards for the
      noncontrolling interest in a subsidiary and for the deconsolidation of a
      subsidiary. It also amends certain of ARB 51’s consolidation procedures for
      consistency with the requirements of SFAS No. 141 (revised 2007). This statement
      will be effective for fiscal years, and interim periods within those fiscal
      years, beginning on or after December 15, 2008, or the Company’s fiscal year
      beginning January 1, 2009. Earlier adoption is prohibited. The Company currently
      is unable to determine what impact the future application of this pronouncement
      may have on its financial statements.




F-29




**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      Amendment of FASB Statement No. 115* .
      This
      statement permits entities to choose to measure many financial instruments
      and
      certain other items at fair value. Most of the provisions of SFAS No. 159 apply
      only to entities that elect the fair value option. However, the amendment to
      SFAS No. 115 *Accounting
      for Certain Investments in Debt and Equity Securities* applies
      to all entities with available-for-sale and trading securities. SFAS No. 159
      is
      effective as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007. The Company adopted SFAS No. 159 on January 1, 2008,
      resulting in no financial statement impact.





In
      September 2006, the FASB issued SFAS Statement No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans* .
      This
      new standard will require employers to fully recognize the obligations
      associated with single-employer defined benefit pension, retiree healthcare
      and
      other postretirement plans in their financial statements. The Company adopted
      SFAS No. 158 on December 31, 2007, resulting in no financial statement impact
      since the Company currently does not sponsor the defined benefit pension or
      postretirement plans within the scope of the standard.





In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* .
      SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value,
      and requires enhanced disclosures about fair value measurements. SFAS No. 157
      requires companies to disclose the fair value of their financial instruments
      according to a fair value hierarchy as defined in the standard. Additionally,
      companies are required to provide enhanced disclosure regarding financial
      instruments in one of the categories, including a reconciliation of the
      beginning and ending balances separately for each major category of assets
      and
      liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) No.
      FAS
      157-2, which delays by one year the effective date of SFAS No. 157 for certain
      types of non-financial assets and non-financial liabilities. As a result, SFAS
      No. 157 will be effective for financial statements issued for fiscal years
      beginning after November 15, 2007, or the Company’s fiscal year beginning
      January 1, 2008, for financial assets and liabilities carried at fair value
      on a
      recurring basis, and on January 1, 2009, for non-recurring non-financial assets
      and liabilities that are recognized or disclosed at fair value. The
      Company adopted SFAS No. 157 on January 1, 2008, for financial assets and
      liabilities carried at fair value on a recurring basis, with no material impact
      on its financial statements. The
      Company is currently unable to determine what impact the application of SFAS
      No.
      157 on January 1, 2009, for non-recurring non-financial assets and liabilities
      that are recognized or disclosed at fair value, will have on its financial
      statements.





In
      March
      2006, the FASB issued SFAS No. 156, *Accounting
      for Servicing of Financial Assets.* This
      statement amends SFAS 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* ,
      a
      replacement of FASB Statement 125, or SFAS 140, regarding (1) the
      circumstances under which a servicing asset or servicing liability must be
      recognized, (2) the initial and subsequent measurement of recognized
      servicing assets and liabilities, and (3) information required to be
      disclosed relating to servicing assets and liabilities. The Company adopted
      this
      standard on January 1, 2007, with no impact on its consolidated financial
      statements.




F-30




**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


In
      February 2006, the FASB issued SFAS No. 155, *Accounting
      for Certain Hybrid Financial Instruments,* or SFAS
      155. This statement amends SFAS No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      to
      narrow the scope exception for interest-only and principal-only strips on debt
      instruments to include only such strips representing rights to receive a
      specified portion of the contractual interest or principal cash flows. SFAS
      155
      also amends SFAS 140 to allow qualifying special-purpose entities to hold a
      passive derivative financial instrument pertaining to beneficial interests
      that
      itself is a derivative financial instrument. The Company adopted this standard
      on January 1, 2007, with no impact on its consolidated financial
      statements.





The
      FASB
      has issued Financial Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* - An
      Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the
      accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FASB Statement No. 109, *Accounting
      for Income Taxes* .
      FIN 48
      also prescribes a recognition threshold and measurement standard for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. In addition, FIN 48 provides guidance
      on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. The Company adopted FIN 48 on January 1,
      2007, and the provisions of FIN 48 were applied to all tax positions upon
      initial adoption of this standard. There was no financial statement impact
      of
      adopting FIN 48.





EITF
      No.
      07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services
      Received for Use in Future Research and Development Activities”, ** was
      issued in June 2007. The EITF reached a consensus that nonrefundable payments
      for goods and services that will be used or rendered for future research and
      development activities should be deferred and capitalized. Such amounts should
      be recognized as an expense as the related goods are delivered and the related
      services are performed. Entities should continue to evaluate whether they expect
      the goods to be delivered or services to be rendered. If the entity does not
      expect the goods to be delivered or services to be rendered, the capitalized
      advance payment should be charged to expense. This pronouncement is effective
      for financial statements issued for fiscal years beginning after December 15,
      2007 (the Company’s fiscal year beginning January 1, 2008) and interim periods
      within those fiscal years. Earlier application is not permitted. Entities are
      required to report the effects of applying this pronouncement prospectively
      for
      new contracts entered into on or after the effective date of this pronouncement.
      The future application of this pronouncement may have a material effect on
      the
      Company’s financial condition and results of operations.





In
      June
      2006, the FASB ratified EITF, No. 06-3, “How Taxes Collected from Customers
      and Remitted to Governmental Authorities Should Be Presented in the Income
      Statement (That Is, Gross versus Net Presentation)” *.* EITF
      No. 06-3 requires that, for interim and annual reporting periods beginning
      after December 15, 2006, companies disclose their policy related to the
      presentation of sales taxes and similar assessments related to their revenue
      transactions. The Company presents revenue net of sales taxes and any similar
      assessments. EITF No. 06-3 had no effect on the Company’s financial
      position and results of operations. '




**NOTE
      23 – FDA APPROVAL**





On
      May 2,
      2007, the FDA approved the generic pharmaceutical, Sevoflurane. Generic
      Sevoflurane was the Company’s planned principal product for 2007 for the human
      market. The Company has exclusive rights to market generic Sevoflurane in the
      United States. The launch of Sevoflurane is a key component of the Company’s
      business plan and the Company’s future plans are largely dependent on
      successfully entering the market with this product and obtaining sufficient
      market share against competing pharmaceuticals to achieve profitable operations.
      There is no assurance the Company will be successful in these
      efforts.




F-31




**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


**NOTE
      24 – INCOME TAXES - FIN 48 DISCLOSURE**





In
      2005,
      the Company filed income tax returns in the U.S. federal jurisdiction, and
      in
      the states of Idaho, Texas, Kansas, Kentucky and New York. With few exceptions,
      the Company is no longer subject to U.S. federal, state and local, or non-U.S.
      income tax examinations by tax authorities for years before 2004. Tax returns
      for the states of New York, Kentucky and Kansas were not filed timely for 2006.
      Therefore the statute of limitations has not started to run on these states.
      There are outstanding liabilities that are owed to the states in the amount
      of
      $880 before accounting for accumulated penalties and interest.




The
      Company adopted the provisions of FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* ,
      on
      January 1, 2007. As a result of the implementation of Interpretation 48, the
      Company recognized no increase in the liability for unrecognized tax benefits.
      The Company has large losses and the only adjustments necessary will adjust
      the
      amount of net operating loss available to the Company. The 2006 tax return
      reports a carryforward net operating loss amount of $3,749,242. This amount
      needs to be adjusted to reflect a balance of 2,890,649. The Company will amend
      the 2006 tax return to account for this difference. A reconciliation of the
      beginning and ending amount of unrecognized tax benefits is as
      follows:




Balance
                at January 1, 2007
            
            $
            0Additions
                based on tax positions related to the current year
            
            
            -Additions
                for tax positions of prior years
            
            
            -Reductions
                for tax positions of prior years
            
            
            -Settlements
            
            
            -Balance
                at December 31, 2007
            
            $
            0





At
      December 31, 2007, there are no tax positions for which there is uncertainty
      about the timing of any tax deductions. Because of the impact of deferred tax
      accounting, other than interest and penalties, the disallowance of the shorter
      deductibility period would not affect the annual effective tax rate but would
      accelerate the payment of cash to the taxing authority to an earlier
      period.




The
      Company’s policy is to recognize interest accrued related to unrecognized tax
      benefits in interest expense and penalties in operating expenses. During the
      year ended December 31, 2007, the Company recognized approximately $13,576,
      in
      interest and penalties.





F-32


**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**






**NOTE
      25 – SUBSEQUENT EVENTS**





FineTech
      Acquisition and Gutman Agreement





On
      January 4, 2008, the Company acquired all of the business and assets of FineTech
      Laboratories, Ltd., a company organized under the laws of the State of Israel
      (“FineTech”), other than certain specifically excluded assets, pursuant to an
      Asset Purchase Agreement (the “Purchase Agreement”) dated as of January 4, 2008,
      for an aggregate purchase price of $6,200,000. Pursuant to the Purchase
      Agreement, FineTech agreed to provide termination notice to all of its employees
      and the Company agreed simultaneously to present all such employees an offer
      to
      become the employees of the Company’s wholly owned subsidiary, FineTech
      Pharmaceutical, Ltd., under terms similar to those applicable to their
      employment by FineTech. FineTech specializes in the production of active
      pharmaceutical ingredients (“APIs”) for the pharmaceutical industry and in
      collaborative research and development work and process
      development.





In
      connection with the Purchase Agreement, the Company entered into an Assignment
      and Non-Competition Agreement, dated as of January 4, 2008 (the “Gutman
      Agreement”), with Dr. Arie Gutman, the sole owner of FineTech. Pursuant to the
      Gutman Agreement, Dr. Gutman agreed not to engage in certain activities that
      would be competitive with the business of the Company. The Gutman Agreement
      also
      provided for the assignment from Dr. Gutman to the Company of certain royalty
      rights that FineTech had granted Dr. Gutman. In consideration for Dr. Gutman’s
      non-competition undertaking and assignment of royalty rights, the Gutman
      Agreement provided that the Company issue to Dr. Gutman 18,632,383 unregistered
      shares of common stock of the Company (the “Gutman Shares”), which were valued
      by the parties at $21,054,592 in the aggregate (or $1.13 per share). These
      shares were issued on January 22, 2008.





The
      Gutman Agreement further provided that Dr. Gutman will not transfer any of
      the
      Gutman Shares until January 4, 2010, except to a Permitted Transferee (as
      defined in the Gutman Agreement). In addition, the Gutman Agreement provided
      that the Company would use its best efforts to appoint Dr. Gutman or his nominee
      as a member of the Company’s Board of Directors. On February 7, 2008, the Board
      of Directors voted to appoint Dr. Gutman to the Company’s Board of
      Directors.





The
      Company and Dr. Gutman also entered into a Registration Rights Agreement, dated
      as of January 4, 2008, pursuant to which the Company granted Dr. Gutman certain
      registration rights with respect to the Gutman Shares.





Issuance
      of Common Shares and Warrants





On
      January 21, 2008, in connection with a five-year employment agreement with
      its
      new Senior Vice President of New Business Development, the Company granted
      an
      option to purchase 250,000 shares of the Company’s common stock with an exercise
      price equal to $0.46. The option vests
      as
      to 50% of the shares subject to the option on the first anniversary and 50%
      thereafter in four equal quarterly installments .





On
      January 11, 2008, in connection with a three-year employment agreement with
      its
      new Vice President of Finance, the Company granted an option to purchase 75,000
      shares of the Company’s common stock with an exercise price equal to $0.58 per
      share. The option vests
      as
      to 50% of the shares subject to the option on the first anniversary and 50%
      thereafter in four equal quarterly installments .




F-33




**RXELITE,
        INC.**
 **(Formerly
        Southridge Technology Group, Inc.)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





On
      January 30, 2008, the Company entered into a one year consulting agreement
      with
      MLF Group LLC (“ MLF ”),
      pursuant to which the Company engaged MLF as a financial consultant (i) to
      assist us in preparing an analysis of our business and industry for investors,
      underwriters and business partners, (ii) to revise and/or draft and documents
      that may be necessary in its efforts to secure new equity investors and to
      seek
      potential merger candidates and (iii) to help the Company seek additional
      business relationships. As consideration for these services, we agreed to pay
      MLF $500,000.00 and to issue MLF 1,000,000 shares of common stock.





Due
      to
      the Company’s failure to make certain payments to Core Tech Solutions, Inc.
      (“ CoreTech ”)
      totaling $800,000, on February 1, 2008, Core Tech elected to terminate a
      partnership agreement, entered into on November 7, 2006 and amended on December
      27, 2007. Pursuant to the Core Tech Agreement, the Company was developing a
      generic transdermal patch product with Core Tech under which Core Tech was
      to
      develop, test and manufacture certain transdermal patch products with respect
      to
      which the Company was to be the exclusive worldwide distributor under its own
      label. In addition, under the Core Tech Agreement, the Company had a right
      of
      first refusal with respect to any other generic patch products developed by
      Core
      Tech during the term of the agreement.





On
      February 7, 2008, the Company granted a new member of its Board of Directors
      an
      option to purchase 400,000 shares of the Company’s common stock at $0.49 per
      share. The option vests 25% per year over four years.




F-34


EXHIBIT
        INDEX
 
 Exhibit
                  Number
              
              Description2.1(1)
              
              Agreement
                  and Plan of Merger and Reorganization, dated as of July 13, 2007,
                  by and
                  among Southridge Technology Group, Inc., RxElite Holdings Inc.,
                  and
                  RxElite Acquisition Corp.3.1(2)
              
              Certificate
                  of Incorporation of Southridge Technology Group, Inc.3.2(8)
              
              Amended
                  and Restated Bylaws of Southridge Technology Group,
                  Inc.3.3(9)
              
              First
                  Amendment to Amended and Restated Bylaws10.1(6)
              
              Letter
                  Agreement, dated January 18, 2008, between RxElite, Inc. and Castlerigg
                  Master Investments Ltd.10.2(3)
              
              Securities
                  Purchase Agreement, dated as of December 31, 2007, between RxElite,
                  Inc.
                  and Castlerigg Master Investments Ltd.10.3(3)
              
              Registration
                  Rights Agreement, dated as of December 31, 2007, between RxElite,
                  Inc. and
                  Castlerigg Master Investments Ltd.10.4(3)
              
              Senior
                  Secured Convertible Note, dated December 31, 2007.10.5(3)
              
              Series
                  A Warrant, dated December 31, 2007.10.6(3)
              
              Series B
                  Warrant, dated December 31, 2007.10.7(3)
              
              Security
                  Agreement, dated as of December 31, 2007, by and among RxElite,
                  Inc.,
                  RxElite Holdings, Inc. and Castlerigg Master Investments
                  Ltd.10.8(3)
              
              Pledge
                  Agreement, dated as of December 31, 2007, by and between RxElite,
                  Inc. and
                  Castlerigg Master Investments Ltd.10.9(4)
              
              Asset
                  Purchase Agreement, dated as of January 4, 2008, by and between
                  RxElite
                  Israel Ltd. and FineTech Laboratories, Ltd.10.10(4)
              
              Assignment
                  & Non-Competition Agreement, dated as of January 4, 2008, by and
                  between RxElite, Inc. and Dr. Arie Gutman10.11(4)
              
              Registration
                  Rights Agreement, dated as of January 4, 2008, by and between RxElite,
                  Inc. and Dr. Arie Gutman10.12(4)
              
              Employment
                  Agreement, dated as of January 4, 2008, by and between RxElite,
                  Inc. and
                  Dr. Arie Gutman10.13(5)
              
              Departure
                  Agreement and General Release, dated as of January 16, 2008, by
                  and
                  between RxElite, Inc. and Daniel
                  Chen
  
 
 10.14(5)
              
              Employment
                  Agreement, dated as of January 11, 2008, by and between RxElite,
                  Inc. and
                  Shannon Stith10.15(7)
              
              Employment
                  Agreement, dated as of January 21, 2008, by and between RxElite
                  Holdings
                  Inc. and Rick Schindewolf10.16(1)
              
              Second
                  Amended and Restated Employment Agreement, made as of November
                  27, 2006,
                  between RxElite Holdings Inc. and Jonathan Houssian10.17(1)
              
              Second
                  Amended and Restated Employment Agreement, made as of November
                  27, 2006,
                  between RxElite Holdings Inc. and Earl Sullivan10.18(1)
              
              Stock
                  Purchase Agreement, dated as of July 13, 2007, by and among Southridge
                  Technology Group, Inc., Joseph M. Garzi and Sunodia Partners
                  LP.10.21(1)
              
              Stock
                  Purchase Agreement, dated as of January 19, 2007, by and between
                  RxElite
                  Holdings Inc. and the investors listed on Exhibit A
                  thereto.10.22(1)
              
              Form
                  of First Amendment to Stock Purchase Agreement.10.23(1)
              
              Form
                  of Amended and Restated Registration Rights Agreement.10.24(1)
              
              Form
                  of Warrant Agreement.10.25(1)
              
              Form
                  of Warrant Agreement issued pursuant to the Stock Purchase Agreement,
                  dated as of January 19, 2007.10.26(1)
              
              Form
                  of First Amendment to Warrant Agreement.10.27(1)
              
              Form
                  of Escrow Agreement.10.28(1)
              
              Stock
                  Purchase Agreement dated as of July 13, 2007 between Southridge
                  Technology
                  Group, Inc., RxElite Holdings Inc. and International Capital Advisory
                  Inc.10.29(1)
              
              Stock
                  Purchase Agreement dated as of July 13, 2007 between Southridge
                  Technology
                  Group, Inc., RxElite Holdings Inc. and Mr. Wu Kong
                  King.10.30(1)
              
              Form
                  of Securities Purchase Agreement.10.31(1)
              
              First
                  Amended and Restated Conversion Agreement, dated as of April 26,
                  2007, by
                  and among RxElite Holdings Inc. and each of the persons who were
                  holders
                  of Series A Preferred Stock of the RxElite Holdings Inc., par value
                  $0.01
                  per share as at October 17, 2006.10.32(1)
              
              Form
                  of RxElite Stockholder Warrant10.33(1)
              
              Exclusive
                  Manufacturing and Distribution Agreement, dated as of June 9, 2004,
                  by and
                  between Minrad International, Inc. and RxElite Holdings
                  Inc.10.34(1)
              
              RxElite
                  Holdings Inc. 2007 Incentive Stock
                  Plan.
  
  10.35(10)
              
              Form
                  of Stock Option Award Agreement10.36(2)
              
              Amended
                  and Restated Advisory Consulting Agreement, dated as of July 13,
                  2007, by
                  and between International Capital Advisory Inc. and RxElite Holdings
                  Inc.10.37(9)
              
              Consulting
                  Agreement with MLF Group LLC10.38(10)
              
              Lease
                  Agreement, dated January 28, 2003, between RxHoldings, Inc. and
                  M & M
                  Management, and Addendum thereto, as of December 9, 2006 and May
                  1,
                  200721.1(10)
              
              List
                  of Subsidiaries.31.1*
              
              Section
                  302 Certification of Principal Executive Officer31.2*
              
              Section
                  302 Certification of Principal Financial Officer32.1*
              
              Section
                  906 Certification of Principal Executive Officer32.2*
              
              Section
                  906 Certification of Principal Financial Officer_____________________________
                *Filed
                  herewith(1)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  July 17, 2007.(2)
              
              Previously
                  filed as an Exhibit to Registration Statement on Form SB-2 filed
                  with the
                  SEC on December 22, 2005.(3)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 3, 2008.(4)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 10, 2008.(5)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 16, 2008.(6)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 23, 2008.(7)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  January 24, 2008.(8)
              
              Previously
                  filed as an Exhibit on Current Report on Form 8-K/A filed with
                  the SEC on
                  August 3, 2007.(9)
              
              Previously
                  filed as an Exhibit to Current Report on Form 8-K filed with the
                  SEC on
                  March 13, 2008.(10)
              
              Previously
                  filed as an Exhibit to registration Statement on Form S-1 filed
                  with the
                  SEC on March 13, 2008