----

----

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

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

|  Delaware  (State or other jurisdiction of  incorporation or organization)   |   |  59-2758596(I.R.S. EmployerIdentification No.) |
|-----------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
|   354 Eisenhower ParkwayLivingston, New Jersey (Address of principal executive offices)               |   |   07039(Zip Code)                         |

----

----

----

|                                                                                                                                                                          |   | June 30,         |         |   | December 31,     |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|--------------|--------|------------------|--------|
|                                                                                                                                                                          |   | 2010 (Restated)* |         |   | 2009 (Restated)* |   |
|                                                                                                                                                                          |   |             |         |   |             |   |
|                                                                                                                                                                          |   | (Unaudited)      |         |   |             |   |
| ASSETS                                                                                                                                                                        |   |             |         |   |             |   |
| Current Assets:                                                                                                                                                               |   |             |         |   |             |   |
| Cash and cash equivalents of which $8,211,306 in 2010 and   $12,225,732 in 2009 is interest bearing                                                            |   | $                | 24,878,162   |   |             | $      | 14,757,615 |   |
| Accounts receivable, net of allowances for doubtful accounts    of $100,000 in 2010 and 2009, respectively                                                |   |             | 4,239,934    |   |             |   | 4,262,851 |   |
| Inventories                                                                                                                                                                   |   |             | 3,030,217    |   |             |   | 2,532,722 |   |
| Prepaid expenses and other current assets                                                                                                                                     |   |             | 670,679      |   |             |   | 1,097,525 |   |
| Total current assets                                                                                                                                                          |   |             | 32,818,992   |   |             |   | 22,650,713 |   |
|                                                                                                                                                                          |   |             |         |   |             |   |   |   |
| Property and equipment, net                                                                                                                                                   |   |             | 590,655      |   |             |   | 691,479 |   |
| Intangible assets - net                                                                                                                                                       |   |             | 16,247,968   |   |             |   | 18,770,332 |   |
| Other assets                                                                                                                                                                  |   |             | 1,221,593    |   |             |   | 1,644,695 |   |
|                                                                                                                                                                          |   |             |         |   |             |   |   |   |
| TOTAL ASSETS                                                                                                                                                                  |   | $                | 50,879,208   |   |             | $      | 43,757,219 |   |
|                                                                                                                                                                          |   |             |         |   |             |   |   |   |
| LIABILITIES AND SHAREHOLDERS' DEFICIT                                                                                                                                         |   |             |         |   |             |   |   |   |
| Current Liabilities:                                                                                                                                                          |   |             |         |   |             |   |   |   |
| Current portion of financing agreements                                                                                                                                       |   | $                | -            |   |             | $      | 144,897 |   |
| Accounts payable                                                                                                                                                              |   |             | 2,681,586    |   |             |   | 3,662,091 |   |
| Accrued expenses                                                                                                                                                              |   |             | 6,498,806    |   |             |   | 4,588,088 |   |
| Derivative embedded within convertible notes, fair value                                                                                                                      |   |             | 4,829,036    |   |             |   | - |   |
| Common stock warrant liability                                                                                                                                                |   |             | 4,057,817    |   |             |   | 4,057,817 |   |
| Total current liabilities                                                                                                                                                     |   |             | 18,067,245   |   |             |   | 12,452,893 |   |
|                                                                                                                                                                          |   |             |         |   |             |   |   |   |
| Notes payable                                                                                                                                                                 |   |             | 34,558,425   |   |             |   | 32,965,863 |   |
| Deferred revenue                                                                                                                                                              |   |             | 296,183      |   |             |   | 328,367 |   |
| Long-term portion of financing agreements                                                                                                                                     |   |             | 31,466,525   |   |             |   | 15,234,406 |   |
| Long-term accrued interest                                                                                                                                                    |   |             | 50,000       |   |             |   | - |   |
| TOTAL LIABILITIES                                                                                                                                                             |   |             | 84,438,378   |   |             |   | 60,981,529 |   |
|                                                                                                                                                                          |   |             |         |   |             |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                 |   |             |         |   |             |   |   |   |
|                                                                                                                                                                          |   |             |         |   |             |   |   |   |
| Contingently Redeemable Series C Preferred Stock,  600 shares issued and outstanding in 2010 and 2009, respectively  (liquidation preference of $600,000) |   |             | 600,000      |   |             |   | 600,000 |   |
|                                                                                                                                                                          |   |             |         |   |             |   |   |   |
| SHAREHOLDERS' DEFICIT:                                                                                                                                                        |   |             |         |   |             |   |   |   |
| Preferred stock, $.01 par value;1,000,000 shares authorized                                                                                                                   |   |             |         |   |             |   |   |   |
| Series B Convertible Preferred Stock, 130 shares issued and   outstanding (liquidation preference of $13,000)                                                  |   |             | 1            |   |             |   | 1 |   |
| Series E Convertible Preferred Stock, 59,000 shares issued and   outstanding (liquidation preference of $5,900,000)                                            |   |             | 590          |   |             |   | 590 |   |
| Common Stock $.01 par value; 100,000,000 shares   authorized; 65,715,056 and 65,761,986 shares issued in 2010 and 2009, respectively                           |   |             | 657,150      |   |             |   | 657,619 |   |
| Capital in excess of par value                                                                                                                                                |   |             | 239,770,257  |   |             |   | 238,579,829 |   |
| Less cost of 155,305 and 131,935 treasury shares in     2010 and 2009, respectively                                                                  |   |             | (309,243     | )      |             |   | (280,813 | ) |
| Accumulated deficit                                                                                                                                                           |   |             | (274,452,141 | )      |             |   | (256,979,263 | ) |
| Accumulated other comprehensive income                                                                                                                                        |   |             | 174,216      |   |             |   | 197,727 |   |
| Shareholders' deficit                                                                                                                                                         |   |             | (34,159,170  | )      |             |   | (17,824,310 | ) |
| TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                                                                                                                                   |   | $                | 50,879,208   |   |             | $      | 43,757,219 |   |
|                                                                                                                                                                          |   |             |         |   |             |   |   |   |

----

|                               |   | Six Months Ended                                                                           |    |                                                                                                                      | Three Months Ended |
|------------------------------------|--------|--------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------------|--------------------|
|                               |   | June 30,                                                                                   |    |                                                                                                                      | June 30,           |
|                               |   | 2010                                                                                       |    | 2009                                                                                                                      |               |   | 2010 |   | 2009 |
|                               |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| NET REVENUES                       | $      |        16,621,984                                       |  $ |      15,744,891                                                                                  |               | $ |          9,449,085 |  $ |           8,423,704 |
|                               |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| COST OF REVENUES                   |   |         3,262,235                                  |    |        4,119,369                                                                       |               |   |          2,085,656 |   |           2,339,351 |
| Gross profit                       |   |        13,359,749                                       |    |      11,625,522                                                                                  |               |   |          7,363,429 |   |           6,084,353 |
|                               |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| OPERATING EXPENSES:                |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| Selling and distribution           |   |         5,956,631                                  |    |        5,902,367                                                                       |               |   |          2,706,312 |   |           3,109,131 |
| General and administrative         |   |         8,111,718                                  |    |        5,560,999                                                                       |               |   |          3,985,400 |   |           3,072,446 |
| Research and development           |   |         4,575,135                                  |    |        3,947,372                                                                       |               |   |          2,233,317 |   |           1,701,987 |
| Amortization of licensing right    |   |         2,522,364                                  |    |        2,522,364                                                                       |               |   |          1,261,182 |   |           1,261,182 |
| Total operating expenses           |   |        21,165,848                                       |    |      17,933,102                                                                                  |               |   |         10,186,211 |   |           9,144,746 |
|                               |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| Loss from operations               |   |        (7,806,099)                                      |    |       (6,307,580)                                                                           |               |   |         (2,822,782) |   |          (3,060,393) |
|                               |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| OTHER INCOME (EXPENSES):           |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| Interest income                    |   |               2,209  |    |            28,744                                                  |               |   |                   589 |   |                 9,547 |
| Interest expense                   |   |        (4,820,092)                                      |    |       (4,205,335)                                                                           |               |   |         (2,517,298) |   |          (2,157,234) |
| Change in fair value of derivative |   |        (4,829,036)                                      |    |                     - |               |   |          1,019,114 |   |                        - |
| Other, net                         |   |            (17,660)                 |    |           (73,127)                                                      |               |   |               93,025 |   |              (32,581) |
| Total other expenses               |   |        (9,664,579)                                      |    |       (4,249,718)                                                                           |               |   |         (1,404,570) |   |          (2,180,268) |
|                               |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| Loss before taxes                  |   |      (17,470,678)                                                 |    |     (10,557,298)                                                                                      |               |   |         (4,227,352) |   |          (5,240,661) |
| State income taxes                 |   |              (2,200)      |    |           (16,930)                                                      |               |   |                       - |   |                        - |
| NET LOSS                           | $      |      (17,472,878)                                                 |  $ |     (10,574,228)                                                                                      |               | $ |         (4,227,352) | $ |          (5,240,661) |
|                               |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| NET LOSS PER COMMON SHARE:         |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| Basic and diluted                  | $      |               (0.27) |  $ |              (0.19)                                      |               | $ |                (0.06) | $ |                 (0.10) |
|                               |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| WEIGHTED AVERAGE NUMBER OF         |   |                                                                                       |    |                                                                                                                      |               |   |   |
| COMMON SHARES OUTSTANDING:         |   |                                                                                       |    |                                                                                                                      |               |   |   |   |   |
| Basic and diluted                  |   | 65,385,125                                                                                 |    | 54,367,610                                                                                                                |               |   | 65,381,371 |   | 54,437,754 |

----

|                               |                                                      |     | Six Months Ended                                              |    | Three Months Ended                            |
|------------------------------------|-----------------------------------------------------------|----------|---------------------------------------------------------------|---------|-----------------------------------------------|
|                               |                                                      |     | June 30,                                                      |    | June 30,                                      |
|                               |                                                      |     | 2010                                                          |    | 2009                                          |   | 2010 |   | 2009 |
|                               |                                                      |     |                                                          |    |                                          |   |   |   |   |
| NET LOSS                           |                                                      |  $  |                                                          |  $ |                                          |  $            - |   |  $            - |
|                               |                                                      |     |                                                          |    |                                          |   |   |   |   |
| Other comprehensive income (loss): |                                                      |     |                                                          |    |                                          |   |   |
|                               | Foreign currency translation                              | (23,511) |                                                          | 18,841  |                                          | (14,693) |   | 6,208 |
|                               |                                                      |     |                                                          |    |                                          |   |   |   |   |
| COMPREHENSIVE LOSS                 |  $       (23,511) |     |  $        18,841 |    |  $     (14,693) |   |  $        6,208 |

----

|                                              |   | Six Months Ended June 30, |        |
|---------------------------------------------------|--------|---------------------------|-------------|
|                                              |   | 2010                      |        |   | 2009 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:             |   |                      |        |   |   |   |
| Net loss                                          |   | $                         | (17,472,878 | ) |   | $ | (10,574,228 | ) |
| Adjustments to reconcile net loss to net          |   |                      |        |   |   |   |   |   |
| cash used in operating activities-                |   |                      |        |   |   |   |   |   |
| Depreciation and amortization                     |   |                      | 3,053,736   |   |   |   | 2,773,421 |   |
| Amortization on beneficial conversion features    |   |                      | 918,710     |   |   |   | 801,093 |   |
| Amortization on warrant valuation                 |   |                      | 673,852     |   |   |   | 597,427 |   |
| Change in value of derivative                     |   |                      | 4,829,036   |   |   |   | - |   |
| Provision for sales returns                       |   |                      | 1,515,754   |   |   |   | 577,097 |   |
| Writedown of inventories                          |   |                      | 29,085      |   |   |   | 1,496 |   |
| Stock based compensation                          |   |                      | 1,204,959   |   |   |   | 972,035 |   |
| Non-cash interest expense on financing agreements |   |                      | 1,137,222   |   |   |   | 976,119 |   |
| Changes in assets and liabilities-                |   |                      |        |   |   |   |   |   |
| (Increase) decrease in:                           |   |                      |        |   |   |   |   |   |
| Accounts receivable                               |   |                      | 22,917      |   |   |   | (80,904 | ) |
| Inventories                                       |   |                      | (526,580    | ) |   |   | (558,552 | ) |
| Prepaid expenses and other current assets         |   |                      | 426,846     |   |   |   | 444,759 |   |
| Other assets                                      |   |                      | (294        | ) |   |   | (5,617 | ) |
|  Increase (decrease) in:                     |   |                      |        |   |   |   |   |   |
| Accounts payable                                  |   |                      | (980,506    | ) |   |   | 159,903 |   |
| Other accrued expenses                            |   |                      | 405,325     |   |   |   | (54,391 | ) |
| Deferred revenue                                  |   |                      | (32,184     | ) |   |   | (25,448 | ) |
| Net cash used in operating activities             |   |                      | (4,795,000  | ) |   |   | (3,995,790 | ) |
|                                              |   |                      |        |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:             |   |                      |        |   |   |   |   |   |
| Purchase of property and equipment                |   |                      | (7,152      | ) |   |   | (43,399 | ) |
| Net cash used in investing activities             |   |                      | (7,152      | ) |   |   | (43,399 | ) |
|                                              |   |                      |        |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:             |   |                      |        |   |   |   |   |   |
| Net proceeds from the sale of common stock        |   |                      | -           |   |   |   | 750,000 |   |
| Proceeds from financing agreements                |   |                      | 15,000,000  |   |   |   | - |   |
| Payments for purchase of treasury stock           |   |                      | (28,430     | ) |   |   | (73,008 | ) |
| Dividends paid                                    |   |                      | (15,000     | ) |   |   | (17,188 | ) |
| Net cash provided by financing activities         |   |                      | 14,956,570  |   |   |   | 659,804 |   |

----

|                                    |                                                     |                                                                                   | Six Months Ended June 30,                                    |
|-----------------------------------------|----------------------------------------------------------|----------------------------------------------------------------------------------------|--------------------------------------------------------------|
|                                    |                                                     |                                                                                   | 2010                                                         |   | 2009 |
|                                    |                                                     |                                                                                   |                                                         |   |   |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH |         (33,871) |                                                                                   |          51,786 |
|                                    |                                                     |                                                                                   |                                                         |   |   |
| NET INCREASE (DECREASE) IN CASH         |    10,120,547                             |                                                                                   |     (3,327,599)                          |
|                                    |                                                     |                                                                                   |                                                         |   |   |
| CASH, BEGINNING OF PERIOD               | 14,757,615                                               |                                                                                   | 12,497,382                                                   |
|                                    |                                                     |                                                                                   |                                                         |   |   |
| CASH END OF PERIOD                      |  $ 24,878,162                                       |                                                                                   |  $  9,169,783                                 |
|                                    |                                                     |                                                                                   |                                                         |   |   |
| NON-CASH FINANCING ACTIVITIES           |                                                     |                                                                                   |                                                         |
|                                    |                                                     |                                                                                   |                                                         |   |   |
|                                    | Conversion of Series C and Series E preferred shares     |  $             - |                                                         |  $     175,000 |
|                                    |                                                     |                                                                                   |                                                         |   |   |
| SUPPLEMENTAL INFORMATION                |                                                     |                                                                                   |                                                         |
|                                    |                                                     |                                                                                   |                                                         |   |   |
|                                    | Interest paid                                            |  $  1,600,000                                                           |                                                         |  $  1,600,002 |
|                                    |                                                     |                                                                                   |                                                         |   |   |
|                                    | Taxes paid                                               |                                                                                   |  $       60,552      |   |  $       31,634 |

----

| (1)              | SIGNIFICANT ACCOUNTING POLICIES: |
|-----------------------------------------------------------------------------------|----------------------------------|

| (2)              | RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS |
|-----------------------------------------------------------------------------------|--------------------------------------------------|

| Issuance Date |   | Number ofWarrants Issued |      |   | Exercise Price |   | Expiration ofWarrants |   | Fair Value ofWarrants atIssuance Date |   |
|--------------------|--------|--------------------------|-----------|--------|---------------------|--------|-----------------------|--------|---------------------------------------|--------|
|               |   |                     |      |   |                |   |                  |   | (In thousands)                        |   |
| October 23, 2009   |   |                     | 5,450,000 |   |                | $      | 1.52                  |   | April 30, 2015                        |   | $ | 4,057 |   |

----

| Consolidated Balance Sheet        |   | June 30, 2010            |                                                                                                                                        | June 30, 2010 |   |
|-----------------------------------|--------|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------|--------|
| (in thousands)                    |   | (As previously reported) | (As restated)                                                                                                                               |          |
|                              |   |                     |                                                                                                                                        |          |   |   |   |
| Current Liabilities:              |   |                     |                                                                                                                                        |          |   |   |   |
| Common stock warrant liability    |   | $                        |                        - |          | $      |                   4,058 |   |
| Total Current Liabilities         |   |                     |                 14,009                                      |          |   |                 18,067 |   |
|                              |   |                     |                                                                                                                                        |          |   |   |   |
| Total Liabilities                 |   |                     |                 80,380                                      |          |   |                 84,438 |   |
|                              |   |                     |                                                                                                                                        |          |   |   |   |
| Stockholders’ Deficit:      |   |                     |                                                                                                                                        |          |   |   |   |
| Additional paid-in-capital        |   |                     |               243,828                                                 |          |   |               239,770 |   |
| Total Stockholders’ Deficit |   |                     |               (30,101)                                                |          |   |               (34,159) |   |

| (3)              | SALES RETURN RESERVES: |
|-----------------------------------------------------------------------------------|------------------------|

|                            | Six Months Ended June 30,                                            |
|---------------------------------|----------------------------------------------------------------------|
|                            | 2010                                                                 |   | 2009 |
|                            |                                                                 |   |   |
| Balance at beginning of year    |  $     1,883,623                       |   |  $   1,864,316 |
|                            |                                                                 |   |   |
| Provision:                      |                                                                 |   |   |
| Related to current period sales | 694,913                                                              |   | 327,097 |
| Related to prior period sales   |           820,841  |   |         250,000 |
|                            |        1,515,754                  |   | 577,097 |
|                            |                                                                 |   |   |
| Returns:                        |                                                                 |   |   |
| Related to current period sales |           (36,220) |   |          (11,123) |
| Related to prior period sales   |         (552,322)            |   |        (853,696) |
|                            |         (588,542)            |   |        (864,819) |
|                            |                                                                 |   |   |
| Balance at end of quarter       |  $     2,810,835                       |   |  $   1,576,594 |

| (4)              | INVENTORIES: |
|-----------------------------------------------------------------------------------|--------------|

|           |   | June 30,                     |   | December 31,                       |
|----------------|--------|------------------------------|--------|------------------------------------|
|           |   | 2010                         |   | 2009                               |
| Finished goods |   |  $  1,965,561 |   |  $   1,343,742 |
| Raw materials  |   | 1,064,656                    |   | 1,188,980                          |
|           |   |                         |   |                               |
|           |   |  $  3,030,217 |   |  $   2,532,722 |

| (5)              | NOTES PAYABLE: |
|-----------------------------------------------------------------------------------|----------------|

| (6)              | FINANCING AGREEMENTS-STRIANT: |
|-----------------------------------------------------------------------------------|-------------------------------|

|                  |                                                                                                                      | June 30,                                        |                                                          |  December 31,            |
|-----------------------|---------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|---------------------------------------------------------------|-------------------------------|
|                  |                                                                                                                      | 2010                                            |                                                          | 2009                          |
| STRIANT Agreement     |  $     16,466,525                                                                           |                                            |  $  15,379,303                                 |
| Less: current portion |                     - |                                            |          144,897 |
|                  |                                                                                                                      |  $     16,466,525 |                                                          |  $  15,234,406 |

----

| (7)              | FINANCING AGREEMENTS-WATSON NOTE: |
|-----------------------------------------------------------------------------------|-----------------------------------|

|                       |                                                                                                                      | June 30,                                        |                                                                                                    |  December 31,                                                                           |
|----------------------------|---------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|---------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                       |                                                                                                                      | 2010                                            |                                                                                                    | 2009                                                                                         |
| Watson Note                |  $     15,050,000                                                                           |                                            |  $              -            |
| Less: current portion      |                     - |                                            |                  - |
| Accrued interest long term |               50,000                                |                                            |                  - |
|                       |                                                                                                                      |  $     15,000,000 |                                                                                                    |  $              - |

----

| (8)              | GEOGRAPHIC INFORMATION: |
|-----------------------------------------------------------------------------------|-------------------------|

|                         |                |                                                                                                                      | Net                                             |                                                                                                                      | Identifiable                                    |
|------------------------------|---------------------|---------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|
|                         |                |                                                                                                                      | Revenues                                        |                                                                                                                      | Assets                                          |
|                         |                |                                                                                                                      |                                            |                                                                                                                      |                                            |
| As of and for the six months |                |                                                                                                                      |                                            |
| ended June 30, 2010          |                |                                                                                                                      |                                            |
|                         | United States       |  $     10,744,125                                                                           |                                            |  $     46,149,267                                                                           |
|                         |                |                                                                                                                      |                                            |                                                                                                                      |                                            |
|                         | Switzerland         |          5,400,948                                                           |                                            |          4,729,941                                                           |
|                         | Other countries     |             476,911                                           |                                            |                     - |
|                         | Total International |          5,877,859                                                           |                                            |          4,729,941                                                           |
|                         | Total               |                                                                                                                      |  $     16,621,984 |                                                                                                                      |  $     50,879,208 |
|                         |                |                                                                                                                      |                                            |                                                                                                                      |                                            |
| As of and for the six months |                |                                                                                                                      |                                            |
| ended June 30, 2009          |                |                                                                                                                      |                                            |
|                         | United States       |  $      9,913,896                                                                      |                                            |  $     33,205,823                                                                           |
|                         |                |                                                                                                                      |                                            |                                                                                                                      |                                            |
|                         | Switzerland         |          5,830,995                                                           |                                            |          6,557,863                                                           |
|                         | Other countries     |                     - |                                            |                     - |
|                         | Total International |          5,830,995                                                           |                                            |          6,557,863                                                           |
|                         | Total               |                                                                                                                      |  $     15,744,891 |                                                                                                                      |  $     39,763,686 |

----

| (9)              | LOSS PER COMMON AND POTENTIAL COMMON SHARE: |
|-----------------------------------------------------------------------------------|---------------------------------------------|

|                   |                                              |                                                                      | Six Months Ended |                                                                      | Three Months Ended |
|------------------------|---------------------------------------------------|---------------------------------------------------------------------------|------------------|---------------------------------------------------------------------------|--------------------|
|                   |                                              |                                                                      | June 30,         |                                                                      | June 30,      |
|                   |                                              |                                                                      | 2010             |                                                                      | 2009               |   | 2010 |   | 2009 |
| Net loss               |                                              |  $ (17,472,878)                                                      |             |  $ (10,574,228)                                                      |               |  $(4,227,352) |   |  $(5,240,661) |
|                   | Less: Preferred stock dividends                   | (15,000)                                                                  |             | (17,188)                                                                  |               | (7,500) |   | (7,500) |
|                   |                                              |                                                                      |             |                                                                      |               |   |   |   |   |
| Net loss applicable to |                                              |                                                                      |             |                                                                      |               |   |   |
|                   | common stock                                      |  $ (17,487,878)                                                      |             |  $ (10,591,416)                                                      |               |  $(4,234,852) |   |  $(5,248,161) |
|                   |                                              |                                                                      |             |                                                                      |               |   |   |   |   |
| Basic and diluted:     |                                              |                                                                      |             |                                                                      |               |   |   |
|                   | Weighted average number of                        |                                                                      |             |                                                                      |               |   |   |   |
|                   |     common shares outstanding |      65,385,125                                  |             |      54,367,610                                  |               |    65,381,371 |   |    54,437,754 |
|                   |                                              |                                                                      |             |                                                                      |               |   |   |   |   |
|                   | Basic and diluted net loss per common share       |  $          (0.27) |             |  $          (0.19) |               |  $        (0.06) |   |  $        (0.10) |

| (10)              | LEGAL PROCEEDINGS: |
|------------------------------------------------------------------------------------|--------------------|

| (11)              | STOCK-BASED COMPENSATION: |
|------------------------------------------------------------------------------------|---------------------------|

|                       |   | Six Months Ended June 30,                                                            |
|----------------------------|--------|--------------------------------------------------------------------------------------|
| Stock Based Compensation   |   | 2010                                                                                 |   | 2009 |
|                       |   |                                                                                 |   |   |
| Cost of revenues           |   |  $           37,831      |   |  $          70,613 |
|                       |   |                                                                                 |   |   |
| Selling and distribution   |   |             326,782      |   |            175,798 |
|                       |   |                                                                                 |   |   |
| General and administrative |   |             777,610      |   |            647,353 |
|                       |   |                                                                                 |   |   |
| Research and development   |   |              62,736 |   |              78,271 |
|                       |   |                                                                                 |   |   |
| Total                      |   |  $      1,204,959                                 |   |  $        972,035 |

| (12)              | FAIR VALUE OF FINANCIAL INSTRUMENTS: |
|------------------------------------------------------------------------------------|--------------------------------------|

| (13)              | RECENT ACCOUNTING PRONOUNCEMENTS: |
|------------------------------------------------------------------------------------|-----------------------------------|

| (14)              | WATSON TRANSACTIONS AND DEBT RESTRUCTURING: |
|------------------------------------------------------------------------------------|---------------------------------------------|

| (15)              | SUBSEQUENT EVENTS: |
|------------------------------------------------------------------------------------|--------------------|

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|                  | Products                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Progesterone Products | ●  CRINONE® 8% (progesterone gel) marketed and sold by us in the U.S. through July  2, 2010 and sold to Watson for resale in the U.S. beginning after July 2, 2010 ●  CRINONE® 8% sold to Merck Serono for resale outside the U.S. ●  PROCHIEVE® 8% (progesterone gel) sold by us in the U.S. through July 1, 2010 and sold to Watson for resale in the U.S. beginning after July 2, 2010 ●  PROCHIEVE® 4% sold to Ascend Therapeutics, Inc., for resale in the U.S., pursuant to an agreement that terminated on July 23, 2010 and sold to Watson for resale in the U.S. beginning after July 2, 2010. |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Other Products        | ●  STRIANT® (testosterone buccal system) marketed and sold by us in the U.S. ●  STRIANT® sold to Mipharm, S.p.A. for resale in Italy. ●  Royalty, licensing and manufacturing revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

----

----

|                 | Six Months Ended                                              |
|----------------------|---------------------------------------------------------------|
|                 | June 30,                                                      |
|                 | 2010                                                          |   | 2009 |
| Cash flows:          |                                                          |   |   |
| Operating activities |  $(4,795,000)                                            |   |  $(3,995,790) |
| Investing activities |          (7,152) |   |        (43,399) |
| Financing activities |    14,956,570                                  |   |        659,804 |

|                    | Six Months Ended                                                                                                    |
|-------------------------|---------------------------------------------------------------------------------------------------------------------|
|                    | June 30,                                                                                                            |
|                    | 2010                                                                                                                | 2009 |
| Risk free interest rate |                    - | 1.72% |
| Expected term           |                    - | 4.16 years |
| Dividend yield          |                    - | 0 |
| Expected volatility     |                    - | 92.70% |

----

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----

----

----

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|   | ● | Clinical trials may show our product candidates to be ineffective for the indications studied or to have harmful side effects;                           |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                     |
|   | ● | Product candidates may fail to receive regulatory approvals required to bring the products to market;                                                    |
|   |    |                                                                                                                                                     |
|   | ● | Manufacturing costs or other factors may make our product candidates uneconomical; and                                                                   |
|   |    |                                                                                                                                                     |
|   | ● | The proprietary rights of others and their competing products and technologies may prevent our product candidates from being effectively commercialized. |

|   | ● | The rate of patient enrollment which is a function of factors including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study, and the nature of the study protocol; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                   |
|   | ● | Institutional Review Board, or IRB, approval of the study protocol and the informed consent form;                                                                                                                                      |
|   |    |                                                                                                                                                                                                                                   |
|   | ● | Prior regulatory agency review and approval;                                                                                                                                                                                           |
|   |    |                                                                                                                                                                                                                                   |
|   | ● | Analysis of data obtained from clinical activities, which are susceptible to varying interpretations and which interpretations could delay, limit or prevent regulatory approval;                                                      |
|   |    |                                                                                                                                                                                                                                   |
|   | ● | Changes in the policies of regulatory authorities for drug approval during the period of product development; and                                                                                                                      |
|   |    |                                                                                                                                                                                                                                   |
|   | ● | The availability of skilled and experienced staff to conduct and monitor clinical studies and to prepare the appropriate regulatory applications.                                                                                      |

----

|   | ●   | Our ability to raise any additional funds that we need to complete our trials;                                                                        |
|--------|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                |                                                                                                                                                  |
|   | ●             | The number and outcome of clinical trials conducted by us and/or our collaborators;                                                                   |
|   |                |                                                                                                                                                  |
|   | ●             | The number of products we may have in clinical development;                                                                                           |
|   |                |                                                                                                                                                  |
|   | ●             | In licensing or other partnership activities, including the timing and amount of related development funding, license fees or milestone payments; and |
|   |                |                                                                                                                                                  |
|   | ●             | Future levels of our revenue.                                                                                                                         |

----

|   | ● | A product candidate may not be deemed to be safe or effective;                                                          |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                    |
|   | ● | The manufacturing processes or facilities we have selected may not meet the applicable requirements; and                |
|   |    |                                                                                                                    |
|   | ● | Changes in their approval policies or adoption of new regulations may require additional clinical trials or other data. |

----

----

|   | None. |
|--------|-------|

|   | None. |
|--------|-------|

----

| (a)   | Exhibits |
|-----------------|----------|

| 3.1         | Certificate of Amendment to Restated Certificate of Incorporation of Columbia Laboratories, Inc., filed with the Secretary of State of Delaware July 1, 2010. (4) |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.1         | Watson Term Loan Promissory Note, dated June 1, 2010. (3)                                                                                                         |
| 4.2         | Form of Warrant to Purchase Common Stock. (4)                                                                                                                          |
| 10.1† | Amended and Restated Employment Agreement by and between Columbia Laboratories, Inc. and Frank C. Condella, Jr., dated May 4, 2010. (1)                           |
| 10.2        | Second Amended and Restated License and Supply Agreement between Columbia Laboratories (Bermuda) Ltd., and Ares Trading S.A., effective May 19, 2010. (2)         |
|        |                                                                                                                                                                   |
| 10.3        | Investor’s Rights Agreement, dated July 1, 2010. (4)                                                                                                        |
| 10.4        | Watson Supply Agreement, dated July 2, 2010. (4)                                                                                                                  |
| 10.5        | Watson License Agreement, dated July 2, 2010. (4)                                                                                                                 |
| 31.1        | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the Company.*                                                                                     |
| 31.2        | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the Company.*                                                                                     |
| 32.1        | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**                                              |
| 32.2        | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**                                              |

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

|   | ** | Furnished herewith. |
|--------|----|---------------------|

|   | † | Management contract or compensatory plans or arrangements |
|--------|---------|-----------------------------------------------------------|

|   | (1) | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 4, 2010 |
|--------|-----|---------------------------------------------------------------------------------------------------|

|   | (2) | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 14, 2010 |
|--------|-----|----------------------------------------------------------------------------------------------------|

|   | (3) | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated June 1, 2010 |
|--------|-----|----------------------------------------------------------------------------------------------------|

|   | (4) | Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated July 1, 2010 |
|--------|-----|----------------------------------------------------------------------------------------------------|

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|   | SIGNATURES |
|--------|------------|

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