AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 2008
                                                     REGISTRATION NO. 333-145502

================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   -----------


                                   FORM S-3/A
                                AMENDMENT NO. 1

                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                                   -----------

                           ELITE PHARMACEUTICALS, INC.
             (Exact name of Registrant as specified in its charter)
--------------------------------------------------------------------------------
             DELAWARE                    2834                    22-3542636
         (State or other     (Primary Standard Industrial     (I.R.S. Employer
         jurisdiction of      Classification Code Number)      Identification
         incorporation or                                          Number)
          organization)
--------------------------------------------------------------------------------


                      BERNARD BERK, CHIEF EXECUTIVE OFFICER
                           ELITE PHARMACEUTICALS, INC.
                                165 LUDLOW AVENUE
                           NORTHVALE, NEW JERSEY 07647
                                 (201) 750-2646
                          (Name, address, including zip
                code, and telephone number, including area code,
                   of registrant's principal executive offices
                             and agent for service)

                                 With copies to:

                            SCOTT H. ROSENBLATT, ESQ.
                             GARY M. EMMANUEL, ESQ.
                         REITLER BROWN & ROSENBLATT, LLC
                          800 THIRD AVENUE, 21ST FLOOR
                          NEW YORK, NEW YORK 10022-4611
                                 (212) 209-3050

         Approximate  date of  commencement  of proposed sale to the public:  As
soon as practicable after the effective date of this Registration Statement.

         If the only securities  being registered on this form are being offered
pursuant to dividend or reinvestment plans, please check the following box. |_|

         If any of the  securities  being  registered  on  this  Form  are to be
offered  on a  delayed  or  continuous  basis  pursuant  to Rule 415  under  the
Securities Act of 1933, check the following box. |X|

         If this Form is filed to  register  additional  securities  pursuant to
Rule 462(b) under the  Securities  Act,  please check the following box and list
the  Securities  Act  Registration  Statement  number of the  earlier  effective
Registration Statement for the same offering. |_|

         If this  Form is a  post-effective  amendment  filed  pursuant  to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act  Registration   Statement  number  of  the  earlier  effective  Registration
Statement for the same offering. |_|

         If  this  form  is  a  registration   statement   pursuant  to  General
Instruction  I.D.  or a  post-effective  amendment  thereto  that  shall  become
effective  upon filing  with the  Commission  pursuant to Rule 462(e)  under the
Securities Act, check the following box. |_|

         If this form is a post-effective  amendment to a registration statement
pursuant to General Instruction I.D. filed to register additional  securities or
additional  classes of securities  pursuant to Rule 413(b) under the  Securities
Act, check the following box. |_|



                                     CALCULATION OF REGISTRATION FEE



                                                             Proposed      Proposed
                                             Shares of       maximum        maximum
                                            common stock     offering      aggregate
        Title of each class of                  to be        price per     offering         Amount of
     securities to be registered            registered(1)    share(2)        price       registration fee
     ---------------------------           ---------------   --------        -----       ----------------
                                                                             
Common Stock, par value $.01 per share       1,555,815(3)      $2.18      $3,391,676.70     $104.13(4)



(1)      In  accordance  with  Rule 416  under the  Securities  Act of 1933,  as
         amended,  this registration  statement also registers the resale by the
         selling stockholders of any additional shares of our common stock which
         become  issuable in  connection  with such shares  because of any stock
         dividend,  stock split,  recapitalization  or other similar transaction
         effected  without  the  receipt of  consideration  which  results in an
         increase in the number of outstanding shares of our common stock.

(2)      Estimated  solely for purposes of calculating the  registration  fee in
         accordance  with Rule  457(c)  under  the  Securities  Act of 1933,  as
         amended,  and based on the  average  of the high and low sale price per
         share of shares of the common stock on the American  Stock  Exchange on
         August 10, 2007.

(3)      Consists of (i)  1,313,747  shares of our common  stock  issuable  upon
         conversion of outstanding shares of our Series C Preferred Stock issued
         in a  private  placement  that  closed on July 17,  2007 and  shares of
         common stock  issuable in  satisfaction  of certain  Series C Preferred
         Stock dividend obligations; and (ii) 242,068 shares of our common stock
         issuable upon exercise of warrants issued in the private placement.

(4)      A filing fee of $282.44 was submitted previously.


                                   -----------

         THE REGISTRANT HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS  EFFECTIVE  DATE UNTIL THE  REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY  STATES THAT THIS REGISTRATION
STATEMENT SHALL  THEREAFTER  BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE  SECURITIES  ACT OF 1933 OR UNTIL THE  REGISTRATION  STATEMENT  SHALL BECOME
EFFECTIVE  ON SUCH  DATE  AS THE  SECURITIES  AND  EXCHANGE  COMMISSION,  ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.




================================================================================




THE  INFORMATION  IN THIS  PROSPECTUS  IS NOT COMPLETE  AND MAY BE CHANGED.  THE
SELLING  STOCKHOLDERS  MAY NOT SELL  THESE  SECURITIES  UNTIL  THE  REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE  COMMISSION IS EFFECTIVE.  THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE  SECURITIES,  AND IT IS NOT  SOLICITING
OFFERS TO BUY THESE  SECURITIES,  IN ANY STATE  WHERE THE OFFER OR SALE OF THESE
SECURITIES IS NOT PERMITTED.


                                   PROSPECTUS


                  SUBJECT TO COMPLETION, DATED JANUARY __, 2008




                           ELITE PHARMACEUTICALS INC.

                                  COMMON STOCK

                             ----------------------

         This is an offering (the  "OFFERING") of the following shares of common
stock, par value $.01 per share, of Elite Pharmaceuticals,  Inc. (the "COMPANY",
"ELITE",  "WE",  "US" or  "OUR"),  by the  selling  stockholders  named  in this
prospectus or by pledgees,  donees,  transferees or other successors in interest
to the selling stockholders (the "SELLING STOCKHOLDERS"):


(i)      1,313,747   shares  of  common  stock   issuable  upon   conversion  of
         outstanding  shares of our Series C Preferred Stock, par value $.01 per
         share  issued in a private  placement  that closed on July 17, 2007 and
         shares of common stock  issuable in  satisfaction  of certain  Series C
         Preferred Stock dividend obligations;

(ii)     242,068  shares of common  stock  issuable  upon  exercise  of warrants
         issued in the private placement;

         The common stock is listed on the  American  Stock  Exchange  under the
symbol "ELI." On November 26, 2007,  the closing sales price of our common stock
on the American Stock Exchange was $2.00 per share.



         SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF FACTORS THAT
YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.

                             ----------------------

         NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS  IS TRUTHFUL OR  COMPLETE.  ANY  REPRESENTATION  TO THE CONTRARY IS A
CRIMINAL OFFENSE.

            Other than receipt of the cash  exercise  price upon exercise of the
warrants issued in the private  placement,  we will receive no proceeds from the
sale of the shares of common stock sold by the Selling Stockholders.

                             ----------------------


                The date of this prospectus is January __, 2008.





                                TABLE OF CONTENTS

                                                                            Page

WHERE YOU CAN FIND MORE INFORMATION ABOUT US...................................1

PROSPECTUS SUMMARY.............................................................1

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION.....................2

RISK FACTORS...................................................................3

USE OF PROCEEDS...............................................................11

SELLING STOCKHOLDERS..........................................................12

SUPPLEMENTAL INFORMATION REGARDING THE JULY PRIVATE PLACEMENT AND THE
SELLING STOCKHOLDERS .........................................................14

PLAN OF DISTRIBUTION..........................................................32

LEGAL MATTERS.................................................................33

EXPERTS.......................................................................33

INCORPORATION BY REFERENCE....................................................34

INFORMATION NOT REQUIRED IN PROSPECTUS......................................II-1

SIGNATURES..................................................................II-4



                                       i


                  WHERE YOU CAN FIND MORE INFORMATION ABOUT US


         We file reports,  proxy  statements,  information  statements and other
information   with  the  Securities  and  Exchange   Commission  (the  "SEC"  or
"COMMISSION"). You may read and copy this information, for a copying fee, at the
SEC's Public  Reference  Room at 100 F Street,  N.E.,  Washington,  D.C.  20549.
Please  call  the SEC at  1-800-SEC-0330  for  more  information  in its  public
reference  rooms.  Our  SEC  filings  are  also  available  to the  public  from
commercial document retrieval services,  from the American Stock Exchange and at
the web site maintained by the SEC at http://www.sec.gov.

         We have  not  authorized  anyone  to give any  information  or make any
representation about the offering that differs from, or adds to, the information
in this  prospectus or in our documents that are publicly filed with the SEC and
that are  incorporated in this  prospectus.  Therefore,  if anyone does give you
different or additional information,  you should not rely on it. The delivery of
this  prospectus  does not mean  that  there  have not been any  changes  in our
condition since the date of this prospectus.  If you are in a jurisdiction where
it is unlawful to offer the securities offered by this prospectus, or if you are
a person  to whom it is  unlawful  to  direct  such  activities,  then the offer
presented by this prospectus does not extend to you. This prospectus speaks only
as of its date except where it indicates  that another date  applies.  Documents
that are  incorporated  by reference in this  prospectus  speak only as of their
date, except where they specify that other dates apply.

         THIS PROSPECTUS IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL  THERE BE ANY SALE OF  SECURITIES  IN ANY  STATE IN WHICH  SUCH
OFFER,  SOLICITATION  OR  SALE  WOULD  BE  UNLAWFUL  PRIOR  TO  REGISTRATION  OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.


                               PROSPECTUS SUMMARY

         THE  FOLLOWING  SUMMARY  HIGHLIGHTS   SELECTED   INFORMATION  FROM,  OR
INCORPORATED  BY REFERENCE  INTO,  THIS  PROSPECTUS  AND MAY NOT CONTAIN ALL THE
INFORMATION  THAT IS  IMPORTANT  TO YOU. TO  UNDERSTAND  OUR  BUSINESS  AND THIS
OFFERING FULLY, YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY,  INCLUDING THE
CONSOLIDATED  FINANCIAL  STATEMENTS  AND THE  RELATED  NOTES  AND THE  DOCUMENTS
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. REFERENCES IN THIS PROSPECTUS TO
THE "COMPANY," "ELITE," "ELITE  PHARMACEUTICALS," "WE," "OUR," AND "US" REFER TO
ELITE  PHARMACEUTICALS,   INC.,  A  DELAWARE  CORPORATION,   TOGETHER  WITH  OUR
SUBSIDIARIES.  PLEASE SEE  "INCORPORATION  BY REFERENCE"  FOR A  DESCRIPTION  OF
PUBLIC FILINGS DEEMED INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. PLEASE SEE
"SUPPLEMENTAL  INFORMATION  REGARDING THE JULY PRIVATE PLACEMENT AND THE SELLING
STOCKHOLDERS" FOR ADDITIONAL  INFORMATION RELATING TO THE JULY PRIVATE PLACEMENT
AND THE SELLING STOCKHOLDERS.


                                   THE COMPANY

OVERVIEW

         We are a specialty  pharmaceutical  company  principally engaged in the
development and manufacture of oral,  controlled  release  products.  We develop
oral, controlled release products using proprietary technology and license these
products.  Our strategy  includes  improving  off-patent  drug products for life
cycle  management and  developing  generic  versions of controlled  release drug
products  with high barriers to entry.  Our  technology is applicable to develop
delayed, sustained or targeted release pellets, capsules,  tablets, granules and
powders.

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

         At the end of 2006,  we formed,  together with VGS Pharma,  LLC,  Novel
Laboratories,  Inc.  ("NOVEL"),  a Delaware  corporation as a separate specialty
pharmaceutical company for the research, development,  manufacturing,  licensing
and acquisition of specialty generic pharmaceuticals.

         We believe that our business  strategy enables us to reduce our risk by
having a


                                        1


diverse  product  portfolio  that includes both branded and generic  products in
various therapeutic  categories and build collaborations and establish licensing
agreements with companies with greater  resources  thereby  allowing us to share
costs of development and to improve cash-flow.

CORPORATE INFORMATION

         Elite  Pharmaceuticals,  Inc. was incorporated on October 1, 1997 under
the laws of Delaware,  and our wholly-owned  subsidiaries,  Elite  Laboratories,
Inc.  ("ELITE  LABS")  and  Elite  Research,   Inc.   ("ELITE   RESEARCH")  were
incorporated on August 23, 1990 and December 20, 2002,  respectively,  under the
laws of Delaware.

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

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

         Our common stock is traded on the  American  Stock  Exchange  under the
symbol  "ELI".  The market  for our stock has  historically  been  characterized
generally  by low volume and broad  range of prices  and volume  volatility.  We
cannot give any  assurance  that a stable  trading  market will  develop for our
stock.

         Our executive offices are located at 165 Ludlow Avenue,  Northvale, New
Jersey 07647, Phone No.: (201) 750-2646; Facsimile No.: (201) 750-2755.


           CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

         Certain information contained in or incorporated by reference into this
prospectus includes forward-looking statements (as defined in Section 27A of the
Securities Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934)
that  reflect  our current  views with  respect to future  events and  financial
performance.  Certain factors, such as unanticipated technological difficulties,
the volatile and  competitive  environment  for drug  delivery  products and the
development of generic drug products,  changes in domestic and foreign economic,
market  and  regulatory  conditions,   the  inherent  uncertainty  of  financial
estimates and projections, the degree of success, if any, in concluding business
partnerships  or licenses with viable  pharmaceutical  companies,  instabilities
arising from terrorist actions and responses thereto,  and other  considerations
described as "RISK  FACTORS" in this  prospectus  could cause actual  results to
differ  materially from those in the  forward-looking  statements.  When used in
this  registration  statement,  statements that are not statements of current or
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "plan",  "intend",  "may," "will," "expect," "believe",
"could," "anticipate," "estimate," or "continue" or similar expressions or other
variations   or   comparable   terminology   are   intended  to  identify   such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. Except
as required by law, we undertake  no  obligation  to update any  forward-looking
statements, whether as a result of new information, future events or otherwise.


                                        2


                                  RISK FACTORS

         IN  ADDITION TO THE OTHER  INFORMATION  CONTAINED  IN THIS  PROSPECTUS,
INCLUDING  THE OTHER  DOCUMENTS  INCORPORATED  HEREIN BY REFERENCE  AND REFERRED
BELOW,  THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED  CAREFULLY IN EVALUATING
AN INVESTMENT IN US AND IN ANALYZING OUR FORWARD-LOOKING STATEMENTS.

                          RISKS RELATED TO OUR BUSINESS

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

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

         o        develop new products;

         o        obtain regulatory approval of our products;

         o        manage our growth,  control  expenditures and align costs with
                  revenues;

         o        attract, retain and motivate qualified personnel; and

         o        respond to competitive developments.

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

WE HAVE NOT BEEN PROFITABLE AND EXPECT FUTURE LOSSES.

         To date, we have not been profitable,  and since our inception in 1990,
we have not generated any significant  revenues.  We may never be profitable or,
if we become  profitable,  we may be unable to  sustain  profitability.  We have
sustained  losses in each year since our  incorporation in 1990. We incurred net
losses of $11,803,512,  $6,883,914,  $5,906,890,  $6,514,217 and $4,061,422, for
the years ended March 31, 2007,  2006,  2005,  2004 and 2003,  respectively.  We
expect to realize  significant  losses for the current year of operation  and to
continue to incur  losses until we are able to generate  sufficient  revenues to
support our operations and offset operating costs.

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

         We continue to require  additional  financing to ensure that we will be
able to meet our  expenditures  to develop and  commercialize  our products.  In
particular,  in order to maintain our  investment in our joint venture in Novel,
we  are  required  to  make  a  substantial  investment  of up to an  additional
$20,000,000. If we fail to meet this financing requirement, VGS, our co-venturer
in Novel,  may  exercise a  purchase  right  that  would  result in  significant
dilution of our interest in Novel.

         We do not have  committed  external  sources of funding  and may not be
able to obtain any additional funding,  especially if volatile market conditions
persist for  biotechnology  companies.  We believe our existing cash  resources,
including the gross proceeds of $20 million  raised in the private  placement of
our Series C Preferred Stock that closed on April 24, 2007 and July 17, 2007, is
sufficient to meet our cash requirements for the next six months.

         Other  possible  sources of the  required  financing  are  income  from
product sales or sales of market rights,  distributions from Novel,  income from
co-development or partnering  arrangements and the cash exercise of warrants and
options that are currently outstanding. No


                                        3


representation  can be made  that we will be  able to  obtain  such  revenue  or
additional financing or if obtained it will be on favorable terms, or at all. No
assurance  can be given that any  offering if  undertaken  will be  successfully
concluded or that if concluded the proceeds  will be material.  Our inability to
obtain additional financing when needed would impair our ability to continue our
business.

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

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

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

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

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

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

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

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

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

         In order to obtain FDA approval to market a new drug  product,  we must
demonstrate  proof  of  safety  and  effectiveness  in  humans.  To  meet  these
requirements,  we must conduct extensive  preclinical  testing and "adequate and
well-controlled" clinical trials. Conducting


                                        4


clinical trials is a lengthy, time consuming, and expensive process.  Completion
of necessary  clinical trials may take several years or more.  Delays associated
with  products  for which we are  directly  conducting  preclinical  or clinical
trials may cause us to incur additional operating expenses. The commencement and
rate of completion of clinical trials may be delayed by many factors, including,
for example:

         o        ineffectiveness  of our product  candidate or  perceptions  by
                  physicians that the product candidate is not safe or effective
                  for a particular indication;

         o        inability to manufacture  sufficient quantities of the product
                  candidate for use in clinical trials;

         o        delay or failure in obtaining  approval of our clinical  trial
                  protocols from the FDA or institutional review boards;

         o        slower  than   expected  rate  of  patient   recruitment   and
                  enrollment;

         o        inability  to  adequately  follow and monitor  patients  after
                  treatment;

         o        difficulty in managing multiple clinical sites;

         o        unforeseen safety issues;

         o        government or regulatory delays; and

         o        clinical  trial  costs  that  are  greater  than we  currently
                  anticipate.

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

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

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

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

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

         o        collaborations and licensee arrangements may be terminated, in
                  which case we will experience increased operating expenses and
                  capital requirements if we elect to pursue further development
                  of the product candidate;

         o        collaborators  and  licensees  may delay  clinical  trials and
                  prolong  clinical  development,  under-fund  a clinical  trial
                  program, stop a clinical trial or abandon a product candidate;


                                        5


         o        expected revenue might not be generated because milestones may
                  not be achieved and product candidates may not be developed;

         o        collaborators and licensees could  independently  develop,  or
                  develop with third  parties,  products that could compete with
                  our future products;

         o        the   terms  of  our   contracts   with   current   or  future
                  collaborators  and licensees may not be favorable to us in the
                  future;

         o        a  collaborator  or licensee with  marketing and  distribution
                  rights to one or more of our  products  may not commit  enough
                  resources to the marketing and  distribution  of our products,
                  limiting our potential revenues from the  commercialization of
                  a product;

         o        disputes  may arise  delaying  or  terminating  the  research,
                  development or commercialization of our product candidates, or
                  result in significant and  costly  litigation  or arbitration;
                  and

         o        one or more third party developers could obtain approval for a
                  similar   product  prior  to  the   collaborator  or  licensee
                  resulting in unforeseen  price  competition in connection with
                  the development product.

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

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

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

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

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

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

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


                                        6


involves  significant  expense and can delay or prevent  introduction or sale of
our products.

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

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

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

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

         o        obtaining   new  patents  on  drugs  whose   original   patent
                  protection is about to expire;

         o        filing patent applications that are more complex and costly to
                  challenge;

         o        filing suits for patent  infringement that automatically delay
                  approval of the FDA;

         o        filing citizens' petitions with the FDA contesting approval of
                  the generic  versions of  products  due to alleged  health and
                  safety issues;

         o        developing   controlled-release  or  other   "next-generation"
                  products, which often reduce demand for the generic version of
                  the existing product for which we may be seeking approval;

         o        changing product claims and product labeling;

         o        developing  and marketing as  over-the-counter  products those
                  branded products which are about to face generic  competition;
                  and

         o        making  arrangements  with managed care companies and insurers
                  to  reduce  the  economic   incentives  to  purchase   generic
                  pharmaceuticals.

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


                                       7


altogether.

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

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

         o        acceptable evidence of safety and efficacy;

         o        relative convenience and ease of administration;

         o        the prevalence and severity of any adverse side effects;

         o        availability of alternative treatments;

         o        pricing and cost effectiveness;

         o        effectiveness of sales and marketing strategies; and

         o        ability  to  obtain   sufficient   third-party   coverage   or
                  reimbursement.

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

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

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

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

         o        greater  possibility for disruption due to  transportation  or
                  communication problems;

         o        the  relative  instability  of some  foreign  governments  and
                  economies;

         o        interim price volatility  based on labor unrest,  materials or
                  equipment  shortages,   export  duties,  restrictions  on  the
                  transfer of funds, or fluctuations in currency exchange rates;
                  and

         o        uncertainty  regarding  recourse to a dependable  legal system
                  for the enforcement of contracts and other rights.

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

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

         Even if  regulatory  approval  is  obtained  for a  particular  product
candidate, the FDA and foreign regulatory authorities may, nevertheless,  impose
significant restrictions on the indicated uses or marketing of such products, or
impose ongoing requirements for post-approval studies.  Following any regulatory
approval of our product candidates,  we will be subject to continuing regulatory
obligations,   such   as   safety   reporting   requirements,   and   additional
post-marketing obligations, including regulatory oversight of the promotion and


                                        8


marketing of our  products.  If we become aware of previously  unknown  problems
with  any  of  our  product   candidates   here  or  overseas  or  our  contract
manufacturers'  facilities,  a regulatory agency may impose  restrictions on our
products,  our  contract  manufacturers  or on  us,  including  requiring  us to
reformulate our products,  conduct additional  clinical trials,  make changes in
the labeling of our products, implement changes to or obtain re-approvals of our
contract  manufacturers'  facilities or withdraw the product from the market. In
addition,  we may  experience  a  significant  drop in the sales of the affected
products,  our  reputation in the  marketplace  may suffer and we may become the
target of lawsuits, including class action suits. Moreover, if we fail to comply
with applicable regulatory requirements,  we may be subject to fines, suspension
or withdrawal of regulatory  approvals,  product  recalls,  seizure of products,
operating restrictions and criminal prosecution.  Any of these events could harm
or prevent sales of the affected  products or could  substantially  increase the
costs and expenses of commercializing and marketing these products.

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

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

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


         The design,  development  and  manufacture  of our products  involve an
inherent risk of product  liability  claims.  We have procured product liability
insurance; however, a successful claim against us in excess of the policy limits
could be very expensive to us,  damaging our financial  position.  The amount of
our  insurance  coverage,  which has been  limited due to our limited  financial
resources,  may be materially below the coverage maintained by many of the other
companies  engaged  in  similar  activities.  To the best of our  knowledge,  no
product liability claim has been made against us as of December 31, 2007.


                        RISKS RELATED TO OUR COMMON STOCK

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

         Sales of  substantial  amounts of our shares in the public market could
harm the market price of our common stock, even if our business is doing well. A
significant  number of shares of our common  stock are  eligible for sale in the
public  market  under SEC Rule 144  subject  in some  cases to volume  and other
limitations.  In addition,  we have recently filed a registration  statement for
the resale of  6,465,504  shares of common stock  issuable  upon  conversion  of
outstanding  shares  of our  Series C  Preferred  Stock  issued  in the  private
placement  that  closed  on April 24,  2007,  4,187,643  shares of common  stock
issuable  in   satisfaction   of  certain  Series  C  Preferred  Stock  dividend
obligations  and  2,133,606  shares of common stock  issuable  upon  exercise of
warrants  issued in the private  placement and a registration  statement for the
resale of 957,396  shares of common  stock and  478,698  shares of common  stock
issuable upon the  exercise of warrants  issued to VGS Pharma, LLC, an affiliate
of Veerappan  Subramanian,  one of our  directors  and acting  Chief  Scientific
Officer and  1,750,000  shares of common  stock  issuable  upon the  exercise of
options granted to Dr. Subramanian.

         In addition, pursuant hereto, we are registering the resale of:


         o        1,313,747  shares of common stock issuable upon  conversion of
                  outstanding  shares of our Series C Preferred  Stock issued in
                  the private  placement that closed on July 17, 2007 and shares
                  of common stock issuable in  satisfaction  of certain Series C
                  Preferred Stock dividend obligations; and

         o        242,068  shares of common  stock  issuable  upon  exercise  of
                  warrants issued in the private placement.


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

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


                                       9



         There has been significant volatility in the market prices for publicly
traded shares of pharmaceutical companies, including ours. For the twelve months
ended  December 31, 2007,  the closing sale price on the American Stock Exchange
of our common stock  fluctuated from a high of $2.75 per share to a low of $1.95
per share.  The per share price of our common  stock may not remain at or exceed
current  levels.  The market  price for our common  stock,  and for the stock of
pharmaceutical  companies generally,  has been highly volatile. The market price
of our common stock may be affected by:


         o        Results of our clinical trials;

         o        Approval or disapproval of abbreviated  new drug  applications
                  or new drug applications;

         o        Announcements  of innovations,  new products or new patents by
                  us or by our competitors;

         o        Governmental regulation;

         o        Patent or proprietary rights developments;

         o        Proxy contests or litigation;

         o        News  regarding the efficacy of, safety of or demand for drugs
                  or drug technologies;

         o        Economic and market  conditions,  generally and related to the
                  pharmaceutical industry;

         o        Healthcare legislation;

         o        Changes in third-party reimbursement policies for drugs; and

         o        Fluctuations in our operating results.

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

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

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

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


                                       10


transaction,  since the issuance of new shares could be used to dilute the stock
ownership of such person or entity.

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

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

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

         o        Control  of  the  market  for  the  security  by  one or a few
                  broker-dealers;

         o        "Boiler room" practices involving high-pressure sales tactics;

         o        Manipulation  of  prices  through   prearranged   matching  of
                  purchases and sales;

         o        The release of misleading information;

         o        Excessive and undisclosed bid-ask differentials and markups by
                  selling broker- dealers; and

         o        Dumping of securities by broker-dealers after prices have been
                  manipulated to a desired  level,  which hurts the price of the
                  stock and causes investors to suffer loss.

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

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

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


                                 USE OF PROCEEDS

         We will not receive any of the proceeds  from the sale of shares by the
Selling Stockholders pursuant to this prospectus.

         A portion of the shares  covered by this  prospectus  are issuable upon
exercise  of warrants to purchase  our common  stock.  Upon any  exercise of the
warrants for cash, the Selling  Stockholders  would pay us the exercise price of
the warrants, as applicable. Under certain conditions set forth in the warrants,
the warrants are  exercisable on a cashless basis. If the warrants are exercised
on a cashless  basis,  we would not  receive any cash  payment  from the Selling
Stockholder upon any exercise of the warrants. Any proceeds from the exercise of
the warrants will be used for working capital.


                                       11


                              SELLING STOCKHOLDERS

         On July 17, 2007 we issued  5,000  shares of Series C  Preferred  Stock
convertible  into 2,155,167  shares of our common stock and warrants to purchase
711,199  shares of our common stock in a private  placement  (the "JULY  PRIVATE
PLACEMENT").  Pursuant  to the  registration  rights  agreement  related to such
private placement,  we agreed to file, at our expense, a registration statement,
of which this  prospectus is a part,  with the SEC to register for resale,  from
time to time, the 2,155,167  shares of our common stock issuable upon conversion
of the shares of Series C Preferred Stock,  1,353,756 shares of our common stock
issuable  in   satisfaction   of  certain  Series  C  Preferred  Stock  dividend
obligations,  and 711,199  shares of our common stock  issuable upon exercise of
the warrants issued in the private placement.

         Of these shares, we are registering  806,896 shares of our common stock
issuable upon conversion of shares of Series C Preferred  Stock,  506,851 shares
of our common stock issuable in satisfaction of certain Series C Preferred Stock
dividend  obligations,  and 242,068  shares of our common  stock  issuable  upon
exercise of warrants,  to permit the Selling  Stockholders to offer these shares
for resale from time to time.  The Selling  Stockholders  may sell all,  some or
none of the shares covered by this  prospectus.  For more  information,  see the
section  of  this  prospectus  entitled  "PLAN  OF  DISTRIBUTION."   Please  see
"Supplemental  Information  Regarding the July Private Placement and the Selling
Stockholders" for additional  information relating to the July Private Placement
and the Selling Stockholders.

         The table below presents  information as of January 2, 2008,  regarding
the Selling  Stockholders and the shares of our common stock that they may offer
and sell from time to time under this  prospectus.  The  information is based on
information  provided  by or on behalf of the  Selling  Stockholders.  Except as
noted in the footnotes,  no Selling  Stockholder  has had, within the past three
years,  any position,  office,  or material  relationship  with us or any of our
predecessors  or affiliates.  The table has been prepared on the assumption that
all shares offered under this  prospectus  will be sold to parties  unaffiliated
with  the  Selling   Stockholders.   Except  as  indicated   below  the  Selling
Stockholders have sole voting and investment power with their respective shares.



                                                                       SHARES BENEFICIALLY OWNED
                                                                            AFTER OFFERING
                                 NUMBER OF
                                  SHARES
                               BENEFICIALLY
   NAME OF SELLING            OWNED PRIOR TO         NUMBER OF        NUMBER OF      PERCENTAGE
    STOCKHOLDER(1)               OFFERING         SHARES OFFERED     SHARES(2)      OF CLASS(3)
                                                                            
Consonance Capital
Master Account LP(4)           724,717(5)           724,717(5)           0                 0

Midsummer
Investment Ltd.(6)           2,640,431(7)          831,098(8)       1,809,333           7.8%




                                       12





(1)      Selling  Stockholders  means the persons listed in the table above,  as
         well as the pledgees,  assignees or other successors in interest to the
         Selling Stockholders.


(2)      Assumes  that the  Selling  Stockholders  dispose  of all the shares of
         common stock covered by this  prospectus  and do not acquire or dispose
         of any additional shares of common stock. The Selling  Stockholders are
         not  representing,  however,  that any of the  shares  covered  by this
         prospectus  will be  offered  for sale,  and the  Selling  Stockholders
         reserve  the  right to  accept  or  reject,  in  whole or in part,  any
         proposed sale of shares.

(3)      The  percentage  of  common  stock   beneficially  owned  is  based  on
         21,299,667  shares of common stock (excluding  100,000 treasury shares)
         outstanding  on July 17,  2007.  Notwithstanding  the  inclusion of the
         warrants and Series B and Series C Preferred Stock  beneficially  owned
         by the referenced  investors in the beneficial  ownership  calculation,
         the warrants and Series B and Series C Preferred Stock provide that the
         holder of the  warrants and Series B and Series C Preferred  Stock,  as
         applicable,  shall not have the right to  exercise  any  portion of the
         warrants and Series B and Series C Preferred Stock,  respectively,  and
         we shall not  effect any  exercise  of such  warrants  and Series B and
         Series C  Preferred  Stock,  as  applicable,  to the extent  that after
         giving  effect  to such  issuance  after  exercise  such  holder of the
         warrants  and Series B and Series C  Preferred  Stock,  as  applicable,
         together with his, her or its  affiliates,  would  beneficially  own in
         excess of 4.99% of the  number of  shares of common  stock  outstanding
         immediately after giving effect to such issuance. Such 4.99% limitation
         may be waived by each holder upon not less than 61 days prior notice to
         change such limitation to 9.99% of the number of shares of common stock
         outstanding immediately after giving effect to such issuance.


(4)      Mr. Mitchell J. Blutt has the power to vote or dispose of the shares.

(5)      Consists of 375,862  shares of common stock  issuable  upon  conversion
         of shares of Series C  Preferred  Stock,  236,097  dividend  shares and
         112,758 shares of common stock issuable upon exercise of warrants.

(6)      Midsummer   Capital,   LLC  is  the  investment  advisor  to  Midsummer
         Investment, Ltd. By virtue of such relationship, Midsummer Capital, LLC
         may be  deemed  to have  dispositive  power  over the  shares  owned by
         Midsummer Investment,  Ltd. Midsummer Capital, LLC disclaims beneficial
         ownership of such shares. Mr. Michel Amsalem and Mr. Scott Kaufman have
         delegated  authority  from the members of Midsummer  Capital,  LLC with
         respect to the shares of common  stock owned by  Midsummer  Investment,
         Ltd.  Messrs.  Amsalem and  Kaufman may be deemed to share  dispositive
         power  over  the  shares  of  our  common   stock  owned  by  Midsummer
         Investment,  Ltd.  Messrs.  Amsalem  and  Kaufman  disclaim  beneficial
         ownership of such shares of our common stock and neither person has any
         legal right to maintain such delegated authority.

(7)      Consists of 1,612,367  shares of common stock issuable upon  conversion
         of shares of Series C  Preferred  Stock,  270,754  dividend  shares and
         757,310 shares of common stock issuable upon exercise of warrants. Does
         not include any shares of common  stock  issuable  in  satisfaction  of
         certain Series B Preferred  Stock dividend  obligations  from the March
         15, 2006 private placement.

(8)      Consists of 431,034  shares of common stock  issuable  upon  conversion
         of shares of Series C  Preferred  Stock,  270,754  dividend  shares and
         129,310 shares of common stock issuable upon exercise of warrants.


                                       13






                       SUPPLEMENTAL INFORMATION REGARDING
             THE JULY PRIVATE PLACEMENT AND THE SELLING STOCKHOLDERS


DESCRIPTION OF THE JULY PRIVATE PLACEMENT

         In the July Private Placement,  we sold, through Oppenheimer & Company,
Inc., the placement agent ("PLACEMENT AGENT"), the remaining 5,000 shares of our
Series C Preferred Stock, at a price of $1,000 per share, each share convertible
(at $2.32 per share) into 431.0345  shares of our common stock,  or an aggregate
of 2,155,167  shares of our common  stock.  Purchasers of the Series C Preferred
Stock (the  "INVESTORS")  also  acquired  warrants to purchase  shares of common
stock (the  "WARRANTS"),  exercisable on or prior to July 17, 2012. The Warrants
represent the right to purchase shares of our common stock in an amount equal to
30% of the  aggregate  number of shares of common  stock into which the Series C
Preferred  Stock  purchased by the  Investors may be converted as of the date of
issuance,  or an aggregate  of 646,544  shares of common  stock,  at an exercise
price  of  $3.00  per  share.  If at any time  after  one year  from the date of
issuance  of  the  Warrants  there  is  no  effective   registration   statement
registering, or no current prospectus available for, the resale of the shares of
common stock  underlying the Warrants by the holder of such  Warrants,  then the
Warrants may also be exercised at such time by means of a "cashless exercise."

         The private  placement of the Series C Preferred Stock and the Warrants
was made pursuant to a Securities Purchase Agreement,  dated as of July 17, 2007
(the "PURCHASE  AGREEMENT"),  between us and the  Investors.  For so long as the
Series C Preferred Stock is outstanding, if at any time we issue common stock or
securities  convertible  or  exercisable  for common  stock,  the holders of the
Series C Preferred Stock will have preemptive  rights to purchase their pro rata
share of the common stock or securities  convertible or  exercisable  for common
stock on the same terms,  conditions  and price  provided for in such  issuance;
provided,  that this right is subject to exceptions as set forth in the Purchase
Agreement.

         The gross proceeds of the July Private Placement were $5,000,000 before
payment of $350,000  in  commissions  to the  Placement  Agent and its  selected
dealers and $18,000 in expenses incurred by the Placement Agent and its selected
dealers.  Pursuant to the placement agent agreement,  we issued to the Placement
Agent and its  designees  warrants  (the  "PLACEMENT  WARRANTS")  to purchase an
aggregate of 64,655 shares of common stock.  Such  Placement  Warrants are at an
exercise price of $3.00 per share, exercisable on or prior to July 17, 2012.

         Pursuant to the  Registration  Rights  Agreement,  dated as of July 17,
2007 (the "REGISTRATION  RIGHTS  AGREEMENT"),  holders of the Series C Preferred
Stock are provided demand and piggy-back  registration rights at our expense. We
have filed the  registration  statement (of which this prospectus  forms a part)
under the Securities Act of 1933, as amended (the "ACT" or "SECURITIES ACT"), to
register the resale of the shares of common stock (the "REGISTRABLE SECURITIES")
issuable upon conversion of the Series C Preferred  Stock,  upon exercise of the
Warrants,  and as payment of dividends on the Series C Preferred Stock within


                                       14




30 days of the closing of the private placement (the "FILING DATE") as set forth
in the Registration  Rights Agreement,  subject to limitations based on written,
oral,  or other  guidance  provided by the  Commission  otherwise  limiting  the
securities which may be included in the registration statement ("SEC GUIDANCE").
Subject to SEC Guidance,  if (i) the Initial Registration  Statement (as defined
in the  Registration  Rights  Agreement)  is not filed on or prior to its Filing
Date (as defined in the Registration Rights Agreement);  (ii) as to 7,000,000 of
the Registrable Securities,  subject to certain adjustments  (collectively,  the
"INITIAL SHARES"),  a registration  statement  registering for resale all of the
Initial  Shares is not  declared  effective  by the SEC by November 13, 2007 (or
December  13,  2007 in the  case of a "full  review"  by the SEC of the  Initial
Registration Statement); or (iii) all of the Registrable Securities,  other than
the  Initial  Shares,  are not  registered  for resale  pursuant  to one or more
effective  Registration  Statements  on or before  February 28, 2008,  (any such
failure or breach  being  referred to as an "EVENT",  and the date on which such
Event  occurs,  the "EVENT  DATE"),  then,  in addition to any other  rights the
holders of Registrable  Securities may have under the registration  statement or
under applicable law, on each such Event Date and on each monthly anniversary of
each such Event Date (if the applicable  Event shall not have been cured by such
date) until the applicable  Event is cured, we have agreed to pay to each holder
of Registrable  Securities an amount in cash, as partial  liquidated damages and
not as a penalty,  equal to 1.5% of the  aggregate  purchase  price paid by such
holder  pursuant to the  Purchase  Agreement  for any  unregistered  Registrable
Securities then held by such holder (calculated as if all convertible securities
had been fully converted).  In no event will we be liable for liquidated damages
under the  Registration  Rights  Agreement  (1) with  respect to any Warrants or
shares of common stock issuable upon exercise of the Warrants; and (2) in excess
of 1.5% of the Subscription Amount (as defined in the Purchase Agreement) in any
30-day period. In addition,  the maximum aggregate liquidated damages payable to
a holder of Registrable Securities under the Registration Rights Agreement shall
be 15% of the aggregate Subscription Amount paid by such holder.

         Each  of  the  Investors  has  represented  that  it is an  "ACCREDITED
INVESTOR"  and has  agreed  that  the  securities  issued  in the  July  Private
Placement are to bear a restrictive  legend against resale without  registration
under  the Act.  The  Series C  Preferred  Stock  and  Warrants  were sold by us
pursuant to the exemption from registration  afforded by Section 4(2) of the Act
and Regulation D thereunder.

         The rights and preferences of the Series C Preferred Stock are governed
by the Certificate of Designations, Preferences and Rights of Series C Preferred
Stock  filed with the  Secretary  of State of the State of Delaware on April 24,
2007,  as  amended  by the  Certificate  of  Correction  of the  Certificate  of
Designations,  Preferences and Rights of Series C Preferred Stock filed with the
Secretary of State of the State of Delaware on April 25, 2007 (the  "CERTIFICATE
OF DESIGNATIONS").  Pursuant to the Purchase  Agreement,  the Series C Preferred
Stock  purchased by the  Investors in the July Private  Placement  are to accrue
dividends,  commencing  on July 17,  2007,  at the rate of 8% per annum on their
purchase price of $1,000 per share  (increasing to 15% per annum after April 24,
2009) payable  quarterly on January 1, April 1, July 1 and October 1, payable in
cash or shares of common stock,  which will be valued solely for such purpose at
95% of the average  Volume-Weighted  Average  Price  ("VWAP") (as defined in the
Certificate of Designations)  for the 20 consecutive  trading days ending on the
trading  day  that  is  immediately


                                       15




prior  to the  dividend  payment  date,  in  accordance  with  the  terms of the
Certificate of  Designations.  Any dividends,  whether paid in cash or shares of
common stock,  that are not paid within five trading days,  following a dividend
payment date,  shall  continue to accrue and shall entail a late fee, which must
be paid in cash,  at the rate of 18% per annum or the lesser rate  permitted  by
applicable  law (such  fees to accrue  daily,  from the  dividend  payment  date
through and  including  the date of  payment).  No payment or  dividends  may be
payable on common stock or any other capital stock ranked junior to the Series C
Preferred  Stock prior to the  satisfaction  of the dividend  obligation  on the
Series C Preferred Stock.

         Each share of Series C Preferred Stock will be entitled to a preference
equal to the per share  purchase price ($1,000  subject to adjustment)  plus any
accrued but unpaid  dividends  thereon and any other fees or liquidated  damages
owing thereon upon our liquidation, dissolution or winding-up, whether voluntary
or  involuntary  ("LIQUIDATION"),  which  preference  ranks  PARI PASSU with our
Series B 8% Convertible  Preferred Stock, par value $0.01 per share (the "SERIES
B  PREFERRED  STOCK"  and  together  with the  Series  C  Preferred  Stock,  the
"PREFERRED  STOCK") and senior to any other  capital  stock ranked junior to the
Series  C  Preferred  Stock.  A  Fundamental  Transaction  (as  defined  in  the
Certificate of Designations) or Change of Control Transaction (as defined in the
Certificate  of  Designations)  will  not be  deemed  a  Liquidation  under  the
Certificate of Designations.

         The holders of Series C Preferred Stock will not have any voting rights
except  as  specifically  provided  in the  Certificate  of  Designations  or as
required by law. However,  as long as any shares of Series C Preferred Stock are
outstanding,  we will not,  without the prior  affirmative vote of holders of at
least 70% of the then outstanding shares of the Series C Preferred Stock and our
Series B Preferred Stock collectively, (i) alter or change adversely the powers,
preferences  or  rights  given to the  Preferred  Stock  or  alter or amend  the
Certificate of Designations; (ii) authorize or create any class of stock ranking
as to dividends,  redemption or distribution of assets upon a Liquidation senior
to or otherwise PARI PASSU with the Preferred Stock; (iii) amend our certificate
of  incorporation,  by-laws  or  other  charter  documents  in any  manner  that
adversely  affects  any  rights of the  holders  of the  Preferred  Stock;  (iv)
increase  the  authorized  number of shares of Preferred  Stock;  (v) other than
Permitted  Indebtedness (as defined in the Certificate of  Designations),  until
April 24, 2010,  incur any  indebtedness  for borrowed  money of any kind;  (vi)
other than  Permitted  Liens (as defined in the  Certificate  of  Designations),
until April 24,  2010,  incur any liens of any kind;  (vii) repay or  repurchase
other than more than a DE MINIMIS number of shares of common stock or securities
convertible or  exchangeable  into common stock,  other than as permitted by the
Certificate of  Designations;  (viii) pay cash dividends or distributions on any
of our  securities  junior  to the  Preferred  Stock;  or (ix)  enter  into  any
agreement or understanding  with respect to the foregoing.  Notwithstanding  the
above,  the  Registrant  may issue any  security  issued  in  connection  with a
Strategic Transaction (as defined in the Certificate of Designations) that ranks
as to dividends,  redemption or distribution  of assets upon a Liquidation  PARI
PASSU with or junior to the Preferred Stock without the prior  affirmative  vote
of holders of at least 70% of the then outstanding shares of Preferred Stock.

         Each share of Series C Preferred  Stock is initially  convertible  into
431.0345 shares of common stock. The conversion price per share for the Series C
Preferred  Stock is equal to $2.32,


                                       16




subject to adjustment for certain  events,  including  dividends,  stock splits,
combinations  and the sale of common  stock or  securities  convertible  into or
exercisable for common stock at a price less than the then applicable conversion
price.  If we do not meet  our  share  delivery  requirements  set  forth in the
Certificate of Designations, the holders of Preferred Stock shall be entitled to
(i)  liquidated  damages,  payable in cash; and (ii) cash equal to the amount by
which the cost of the shares of common  stock  such  holder is  required  by its
brokerage  firm to purchase (in an open market  transaction  or  otherwise)  for
delivery in  satisfaction of a sale by such holder of the shares of common stock
issuable upon  conversion of such holder's  Series C Preferred  Stock which such
holder was entitled to receive upon the  conversion at issue exceeds the product
of (1) the  aggregate  number of shares of common  stock  that such  holder  was
entitled to receive from the  conversion  at issue  multiplied by (2) the actual
sale price at which the sell order giving rise to such purchase  obligation  was
executed.

         We may force  conversion  of our Series C Preferred  Stock in the event
that we provide  written  notice to the holders of the Series C Preferred  Stock
that the VWAP for each 20  consecutive  trading  day period  during a  Threshold
Period (as defined in the Certificate of  Designations) of common stock exceeded
$5.38  (subject to  adjustment)  and the average  volume the trading days during
such  Threshold  Period  exceed  50,000  shares  of  common  stock  (subject  to
adjustment  for forward  and  reverse  stock  splits,  recapitalizations,  stock
dividends and the like).

         Upon the  occurrence  of certain  Triggering  Events (as defined in the
Certificate of  Designations)  each holder of the Series C Preferred Stock shall
have the right,  exercisable at the sole option of such holder, to require us to
redeem  each  share of such  holder's  Series C  Preferred  Stock for cash in an
amount  equal to 130% of the stated  value,  all  accrued  but unpaid  dividends
thereon and all liquidated  damages and other costs,  expenses or amounts due in
respect of the Series C Preferred Stock (the  "TRIGGERING  REDEMPTION  AMOUNT");
provided,  however,  that each  Investor  has waived its right,  pursuant to the
Certificate of Designations, to require us to redeem any or all shares of Series
C Preferred  Stock  purchased  under the Purchase  Agreement upon our failure to
cause  the  Conversion  Shares   Registration   Statement  (as  defined  in  the
Certificate of Designations) to be declared  effective by the SEC on or prior to
January 23, 2008;  provided further,  that if the Conversion Shares Registration
Statement  is not  declared  effective by the SEC on or prior to April 16, 2008,
each Investor  shall have the right to require  redemption as provided under the
Certificate of  Designations.  Upon certain  Triggering  Events,  each holder of
Series C Preferred Stock shall have the right, exercisable at the sole option of
such holder,  to require us to redeem each share of Series C Preferred Stock for
shares of common  stock  equal to the number of shares of common  stock equal to
the Triggering  Redemption  Amount divided by 85% of the average of the VWAP for
the 10 consecutive trading days immediately prior to the date of the redemption.
If at any time the Securities and Exchange  Commission,  our auditors,  American
Stock  Exchange  (or similar  trading  exchange)  or any other  governmental  or
regulatory  authority having  jurisdiction  over us determines that a Triggering
Event for which a holder shall be entitled to a cash  redemption  constitutes  a
condition for redemption which is not solely within our control (as set forth in
Item 28 of Rule 5-02 of Regulation S-X of the  Securities  Exchange Act of 1934,
as  amended),  or that as a result of any such  Triggering  Event,  the Series C
Preferred  Stock shall not be  included  in our balance  sheet under the heading
"stockholder  equity," then the holders


                                       17




of Series C Preferred Stock shall not be entitled to receive a cash payment, but
instead shall be entitled to receive shares of common stock.

         We may redeem all of the Series C Preferred Stock  outstanding,  at any
time after April 24, 2009,  for a redemption  price,  payable in cash,  for each
share of Series C  Preferred  Stock  equal to the sum of (i) 150% of the  stated
value;  (ii)  accrued but unpaid  dividends  thereon;  and (iii) all  liquidated
damages and other amounts due in respect of the Series C Preferred Stock.

LIMITATION ON SECURITIES INCLUDED HEREIN

         Prior to the July Private Placement, we consummated an offering of such
securities which closed on April 24, 2007 (the "APRIL PRIVATE  PLACEMENT").  The
resale of shares of common stock  issuable upon the  conversion of, or otherwise
pursuant  to, the shares of Series C Preferred  Stock sold in the April  Private
Placement,  and the shares of common  stock  issuable  upon the  exercise of the
Warrants  sold  in  the  April  Private  Placement,  was  registered  by us in a
registration  statement under the Securities Act (Registration No.  333-143246),
declared effective by the SEC on July 10, 2007 (the "PRIOR  REGISTRATION").  The
registration  statement  of which this  prospectus  forms a part  registers  the
resale of shares of common stock  attributable to purchasers in the July Private
Placement who were not, and the  affiliates  of which were not,  included in the
Prior Registration.  We refer to the purchasers in the July Private Placement so
excluded from the  registration  statement of which this prospectus forms a part
as the "EXCLUDED PURCHASERS."

PROCEEDS OF THE PRIVATE PLACEMENT

         Our net proceeds from the July Private Placement were $4,632,000, after
the payment of $368,000 in placement agent fees and related  expenses.  Assuming
the exercise in full of the  Warrants,  the  aggregate  net proceeds of the July
Private Placement would be $6,765,597.

         Based upon a closing market price of $2.69 per share of common stock on
the American Stock Exchange on July 17, 2007, the aggregate  dollar value of the
securities that we have registered for resale in the  registration  statement of
which this prospectus forms a part is  $4,185,142.35,  or  $11,352,128.18  if we
include the Excluded Purchasers.

POTENTIAL PAYMENTS REQUIRED DURING INITIAL YEAR

         Set forth  below is  disclosure  of the dollar  amount of each  payment
(including  the value of any payments to be made in common  stock) in connection
with the July Private  Placement that we have made or may be required to make to
any Selling Stockholder,  any affiliate of a Selling Stockholder,  or any person
with whom any Selling Stockholder has a contractual  relationship  regarding the
July Private Placement  (including any interest  payments,  liquidated  damages,
payments  made to "finders"  or  "placement  agents," and any other  payments or
potential payments).  We have excluded from the table below any shares of common
stock to be issued upon the conversion of the Series C Preferred Stock.


                                       18




         The total  possible  payments  to the Selling  Stockholders,  and their
affiliates,  in the  first  year  following  the  closing  of the  July  Private
Placement is $430,560,  equaling the total value, assuming all cash payments, of
dividends  payable on the Series C Preferred Stock purchased in the July Private
Placement,  plus maximum partial liquidated damages for which we may potentially
be liable, as described more fully below.



                                             SERIES C PREFERRED             POTENTIAL PARTIAL
                                             STOCK DIVIDENDS                LIQUIDATED
  SELLING STOCKHOLDER                        PAYABLE IN FIRST YEAR(2)       DAMAGES(3)               TOTAL
  -------------------                        ------------------------       --------                 -----
                                                                                            
  Consonance Capital Master Account L.P.     $69,760                        $130,800(4)              $200,560

  Midsummer Investment, Ltd.                 $80,000                        $150,000(5)              $230,000

  TOTAL                                      $149,760                       $280,800                 $430,560
  -----


-----------

(1) Listed below are payments that we may  potentially  be required to make to a
    Selling  Stockholder,  pursuant  to the  Certificate  of  Designations,  the
    Purchase Agreement,  and the Registration Rights Agreement,  but that cannot
    properly be valued  currently  as a result of the  contingent  nature of the
    payments and/or the need for future  information which cannot be ascertained
    currently:

         -    LIQUIDATION  PAYMENTS:  Selling  Stockholders  may be  entitled to
              liquidation payments, pursuant to the Certificate of Designations,
              however  these  payments  cannot  be valued  unless  and until the
              occurrence of an applicable dissolution or winding-up;

         -    PARTIAL LIQUIDATED DAMAGES:  Selling  Stockholders may be entitled
              to partial  liquidated  damages,  pursuant to the  Certificate  of
              Designations,  however,  these  payments  cannot be valued because
              valuation is contingent on our failure, in the future, to properly
              issue and deliver shares of common stock upon conversion of Series
              C Preferred Stock;

         -    COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY DELIVER  CERTIFICATES
              UPON CONVERSION:  Selling  Stockholders may be entitled to partial
              liquidated  damages,  pursuant to the Certificate of Designations,
              however,  these  payments  cannot be valued  because  valuation is
              contingent  on  our  failure,  upon  a  conversion  by  a  Selling
              Stockholder,  to  deliver  on a timely  basis  the  certificate(s)
              evidencing  the shares the  Selling  Stockholder  is  entitled  to
              receive upon conversion;

         -    INDEMNIFICATION OF THE SELLING STOCKHOLDERS:  Selling Stockholders
              may benefit from  indemnification by us in certain situations,  as
              provided in the Registration Rights Agreement.

         Excluded from the table,  above,  are redemptions of shares of Series C
Preferred  Stock.  For a  discussion  of both forced and  optional  redemptions,
please see "Description of the Private  Placement," above,  under  "Supplemental
Information Regarding the July Private Placement and the Selling Stockholders."

(2) For purposes of this table,  we disclosed the value of dividends  payable to
    the Selling  Stockholders  on the Series C Preferred  Stock purchased in the
    July Private  Placement  (the "SERIES C DIVIDENDS")  for the first full year
    following  the  date  of  sale,  assuming  cash  payment.  This  amount  was
    calculated by multiplying the aggregate stated value of the shares of Series
    C Preferred Stock held by the Selling  Stockholders by 8%, the rate at which
    the dividends  accrue  during the one-year  period,  in accordance  with the
    Certificate of Designations. Series C Dividends that we fail to pay, whether
    in cash or shares of common stock,  within the time period prescribed in the
    Certificate of Designations, continue to accrue and entail a late fee, which
    must be paid in cash, at the rate of 18% per annum or lesser rate  permitted
    by law, accruing daily until and including the date of payment.


                                       19




(3) The data provided in this table represents the maximum  possible  liquidated
    damages payable to the Selling  Stockholders  under the Registration  Rights
    Agreement,   as  described  below.   Pursuant  to  the  Registration  Rights
    Agreement,  upon the  occurrence  of  certain  events,  we may be liable for
    partial liquidated damages, with certain limitations, payable in cash to the
    Selling  Stockholders.  On each date on which an applicable event occurs and
    on each  anniversary  of such date (if such event has not been cured)  until
    cured,  we  must  pay to each  Selling  Stockholder  1.5%  of the  aggregate
    purchase  price paid by each  Selling  Stockholder  pursuant to the Purchase
    Agreement for any unregistered  Registrable Security, as defined thereunder,
    then  held  (calculated  as if all  convertible  securities  had been  fully
    converted).  Our liability for liquidated  damages is limited,  however,  to
    1.5% of the aggregate  subscription  amount of a Selling  Stockholder in any
    30-day period,  and the maximum  aggregate  liquidated  damages payable to a
    Selling Stockholder is 15% of the aggregate subscription amount paid by such
    Selling Stockholder under the Purchase Agreement.  We are not liable for the
    payment of partial liquidated damages on Warrants or Warrant Shares.

(4) Represents maximum partial liquidated damages payable based on 872 shares of
    Series C Preferred Stock.

(5) Represents  maximum partial liquidated damages payable based on 1,000 shares
    of Series C Preferred Stock.

                                       20



POTENTIAL PROFIT

         JULY PRIVATE  PLACEMENT - TOTAL  POSSIBLE  PROFIT AND SHARES;  COMBINED
         MARKET PRICE OF UNDERLYING SECURITIES; DISCOUNT

         Set forth below is disclosure of the following:

              o   the total possible profit the Selling Stockholders could
                  realize as a result of the conversion discount for the
                  securities underlying the Series C Preferred Stock and
                  Warrants;

              o   the total possible shares underlying the Series C Preferred
                  Stock and Warrants (assuming no cash dividend payments,
                  complete conversion of the shares of preferred stock and
                  complete exercise of the warrants) of the Selling
                  Stockholders;

              o   the combined market price of the total number of shares
                  underlying the Series C Preferred Stock and Warrants of the
                  Selling Stockholders, calculated by using the market price per
                  share on the date of the sale of the Series C Preferred and
                  Warrants and the total possible shares underlying the Series C
                  Preferred Stock and Warrants;

              o   the total possible shares the Selling Stockholders may receive
                  and the combined conversion price of the total number of
                  shares underlying the Series C Preferred Stock and Warrants of
                  the Selling Stockholders calculated by using the
                  conversion/exercise price on the date of the sale of the
                  Series C Preferred Stock and Warrants and the total possible
                  number of shares the Selling Stockholders may receive; and

              o   the total possible discount to the market price as of the date
                  of the sale of the Series C Preferred Stock and Warrants,
                  calculated by subtracting the total conversion/exercise price
                  on the date of the sale of the Series C Preferred Stock and
                  Warrants from the combined market price of the total number of
                  shares underlying the Series C Preferred Stock and Warrants on
                  that date.


                                       21






                                                                                                         COMBINED
                                                                                                         CONVERSION &
                                                             COMBINED                                    EXERCISE
                                             SHARES OF       MARKET PRICE   CONVERSION                   PRICE
               SHARES OF                     COMMON STOCK    OF SHARES      PRICE OF                     OF SHARES       TOTAL
               COMMON STOCK     SHARES OF    UNDERLYING      UNDERLYING     SHARES          EXERCISE     UNDERLYING      POSSIBLE
               UNDERLYING       COMMON       THE SERIES C    SERIES C       UNDERLYING      PRICE OF     SERIES C        DISCOUNT
               THE SERIES C     STOCK        PREFERRED       PREFERRED      SERIES C        SHARES       PREFERRED       TO THE
SELLING        PREFERRED        UNDERLYING   STOCK &         STOCK &        PREFERRED       UNDERLYING   STOCK &         MARKET
STOCKHOLDER    STOCK            WARRANTS     WARRANTS        WARRANTS(1)    STOCK(2)        WARRANTS(3)  WARRANTS        PRICE
-----------    ------------     ----------   --------        ----------     -----------     -----------  ----------      --------

                                                                                                 
Consonance
Capital
Master
Account L.P.   375,862          112,758      488,620          $1,314,387.80  $871,999.84    $338,274.00  $1,210,273.84   $104,113.96

Midsummer
Investment,
Ltd.           431,034          129,310      560,344          $1,507,325.36  $999,998.88    $387,930.00   $1,387,928.88  $119.396.48


TOTAL          806,896          242,068      1,048,964        $2,821,713.16  $1,871,998.72  $726,204     $2,598,202.72   $223,510.44
-----





--------------

(1)  Using a market  price of $2.69 per share,  the  closing  price per share of
     common stock listed on the American Stock Exchange, as of July 17, 2007.

(2)  Using a conversion price of $2.32 per share, pursuant to the Certificate of
     Designations.

(3)  Using a Warrant exercise price of $3.00 per share, pursuant to the Purchase
     Agreement.


                                       22






         ALL OFFERINGS - TOTAL POSSIBLE PROFIT AND SHARES; COMBINED MARKET PRICE
         OF UNDERLYING SECURITIES; DISCOUNT

         Set forth in the below table(1) is disclosure of the following:

o                 the total possible profit to be realized by the Selling
                  Stockholders as a result of any conversion discounts for
                  securities underlying any warrants, options, notes, or other
                  securities of ours that are held by the Selling Stockholders
                  or any of their affiliates;

o                 the total possible shares to be received by the Selling
                  Stockholders under the particular securities (assuming
                  complete conversion/exercise);

o                 the combined market price of the total number of underlying
                  shares, calculated by using the market price per share on the
                  date of the sale of that other security and the total possible
                  shares to be received;

o                 the total possible shares to be received and the combined
                  conversion price of the total number of shares underlying that
                  security calculated by using the conversion price on the date
                  of the sale of that other security and the total possible
                  number of underlying shares; and

o                 the total possible discount to the market price as of the date
                  of the sale of that security, calculated by subtracting the
                  total conversion/exercise price on the date of the sale of
                  that other security from the combined market price of the
                  total number of underlying shares on that date.



                                                                           COMBINED       COMBINED
                                                                           CONVERSION &   CONVERSION     TOTAL          TOTAL
                 SHARES OF                                 MARKET          EXERCISE       & EXERCISE     POSSIBLE       POSSIBLE
                 COMMON       MARKET PRICE   SHARES OF     PRICE OF        PRICE OF       PRICE OF       DISCOUNT TO    DISCOUNT TO
                 STOCK        OF SHARES      COMMON STOCK  SHARES          SHARES         SHARES         THE MARKET     THE MARKET
                 UNDERLYING   UNDERLYING     UNDERLYING    UNDERLYING      UNDERLYING     UNDERLYING     PRICE OF THE   PRICE OF THE
                 SERIES B     SERIES B       SERIES C      SERIES C        SERIES B       SERIES C       SERIES B       SERIES C
                 PREFERRED    PREFERRED      PREFERRED     PREFERRED       PREFERRED      PREFERRED      PREFERRED      PREFERRED
                 STOCK &      STOCK &        STOCK &       STOCK &         STOCK &        STOCK &        STOCK AND      STOCK AND
SELLING          SERIES B     SERIES B       SERIES C      SERIES C        SERIES B       SERIES C       SERIES B       SERIES C
STOCKHOLDER      WARRANTS     WARRANTS       WARRANTS      WARRANTS        WARRANTS(2)    WARRANTS(3)    WARRANTS       WARRANTS
-----------      --------     --------       --------      --------        --------       --------       --------       --------

                                                                                                
Consonance
Capital Master
Account L.P.     -            -              488,620       $1,314,387.80   -              $1,210,273.84  -              $104,113.96

Midsummer
Investment,
Ltd.             1,884,000(4) $4,239,000     560,344       $1,507,325.36   $4,710,000     $1,387,928.88  ($471,000)     $119,396.48


TOTAL            1,884,000    $4,239,000     1,048,964     $2,821,713.16   $4,710,000     $2,598,202.72  ($471,000)     $223,510.44
-----



                                       23




--------

(1) March 15,  2006 is the date of sale for the Series B  Preferred  Stock.  For
    purposes of the calculations in this table, we used the following prices, as
    of the date of sale of the Series B Preferred  Stock: (a) $2.25, the closing
    price per share of our common stock, as listed on Yahoo! Finance; (b) $2.25,
    the conversion  price per share of the Series B Preferred Stock, as provided
    in the  Certificate  of  Designations,  Preferences  and  Rights of Series B
    Preferred  Stock,  dated as of March 15, 2006 (the "SERIES B CERTIFICATE  OF
    DESIGNATIONS");  (c) $2.75,  the exercise price per share of the first class
    of warrants (the "FIRST CLASS SERIES B WARRANTS")  issued in connection with
    the  Series B  Preferred  Stock,  as  provided  in the  Securities  Purchase
    Agreement,  dated as of March 15, 2006 (the "SERIES B PURCHASE  AGREEMENT");
    and (d) $3.25,  the price per share of the  second  class of  warrants  (the
    "SECOND  CLASS SERIES B WARRANTS")  issued in  connection  with the Series B
    Preferred  Stock, as provided in the Series B Purchase  Agreement.  July 17,
    2007 is the date of sale of the  Series C  Preferred  Stock  listed  in this
    table,  and the prices we used to determine the figures in this table can be
    found in the immediately preceding table and its accompanying footnotes.

(2) Calculated  by taking  the sum of (a) the  number of shares of common  stock
    underlying the Series B Preferred Stock  multiplied by the conversion  price
    per share,  (b) the number of shares of common  stock  underlying  the First
    Class Series B Warrants  multiplied by the exercise price per share, and (c)
    the number of shares of common  stock  underlying  the Second Class Series B
    Warrants multiplied by the exercise price per share.

(3) Calculated  by taking  the sum of (a) the  number of shares of common  stock
    underlying the Series C Preferred Stock  multiplied by the conversion  price
    per  share,  and (b) the  number of shares of common  stock  underlying  the
    Warrants issued in connection  with the Series C Preferred Stock  multiplied
    by the exercise price per share.

(4) Representing  1,256,000 shares of common stock underlying Series B Preferred
    Stock,  314,000  shares of common  stock  underlying  First  Class  Series B
    Warrants,  and 314,000 shares of common stock underlying Second Class Series
    B Warrants.

ADJUSTMENTS TO CONVERSION PRICE AND EXERCISE PRICE

         SERIES C PREFERRED STOCK

         Set  forth  below  is a  description  of  provisions  set  forth in the
Certificate  of  Designations  that could  result in a change in the  conversion
price per share upon the occurrence of certain events.

TRIGGERING EVENT (AS
EACH IS DEFINED UNDER
THE CERTIFICATE OF
DESIGNATIONS)                 RESULTING ADJUSTMENT IN THE CONVERSION PRICE
---------------------         --------------------------------------------

"Stock Dividends and       The Conversion Price is multiplied by a fraction, the
Stock Splits"              numerator  being the number of shares of common stock
                           (excluding Treasury Shares)  outstanding  immediately
                           before,  and the denominator  the number  outstanding
                           immediately after, such event.

"Subsequent Equity         The Conversion Price is multiplied by a fraction, the
Sales,"at an effective     numerator  being the number of shares of common stock
price lower than           issued  and  outstanding  immediately  prior  to  the
the then applicable        Dilutive Issuance plus the number of shares of common
conversion price(1)        stock  which the  offering  price  for such  Dilutive
                           Issuance  would  purchase  at  the  then   applicable
                           Conversion Rate, and the denominator being the sum of
                           the  number  of shares of  common  stock  issued  and
                           outstanding   immediately   prior  to  the   Dilutive
                           Issuance  and the  number  of  shares  so  issued  or
                           issuable   in    connection    with   the    Dilutive
                           Issuance.(2)

"Subsequent Rights         The Conversion Price is multiplied by a fraction, the
Offerings"(3)              numerator  being the number of shares of common stock
                           outstanding on the date of issuance of such rights or
                           warrants   plus  the  number  of  shares   which  the
                           aggregate  offering  price  of the  total  number  of
                           shares so offered  would  purchase at such VWAP,  and
                           the denominator  being the number of shares of common
                           stock  outstanding  on the date of  issuance  of such
                           rights or  warrants  plus the  number  of  additional
                           shares of common stock  offered for  subscription  or
                           purchase.(4)


                                       24




"Pro Rata                  The  Conversion  Price,  in each such case, in effect
Distributions"             immediately  prior  to  the  record  date  fixed  for
                           determination  of  stockholders  entitled  to receive
                           such  distribution  is multiplied by a fraction,  the
                           numerator  being such VWAP less the then fair  market
                           value,  on such record  date,  of the portion of such
                           assets,   evidence  of   indebtedness  or  rights  or
                           warrants so distributed applicable to one outstanding
                           share of the common stock as  determined by the Board
                           of Directors in good faith, and the denominator being
                           the VWAP  determined as of the record date  described
                           above.

"Fundamental               The Conversion Price is adjusted, for purposes of any
Transaction"               such   conversion,   to  apply   to  such   Alternate
                           Consideration   based  on  the  amount  of  Alternate
                           Consideration  issuable  in  respect  of one share of
                           common stock in such Fundamental Transaction,  and we
                           apportion  the  Conversion  Price among the Alternate
                           Consideration in a reasonable  manner  reflecting the
                           relative  value of any  different  components  of the
                           Alternate Consideration.(5)

------------

(1) Excluding a reduction  in the Exercise  Price of the Warrants  issued to the
    Selling  Stockholders  on the  "Original  Issue  Date,"  as  defined  in the
    Certificate of Designations.

(2) In the event of an  "Exempt  Issuance,"  as defined  in the  Certificate  of
    Designations,  there  is no  adjustment  of  the  Conversion  Price  despite
    circumstances that would otherwise merit an adjustment.

(3) We, while Series C Stock is outstanding,  issue rights, options, or warrants
    to all holders of common stock  entitling  them to subscribe for or purchase
    shares of common  stock at a price per share  that is lower than the VWAP on
    the record date for the  determination  of stockholders  entitled to receive
    such rights, options, or warrants.

(4) Such adjustment  becomes  effective  immediately  after the described record
    date.  If any  such  rights,  options,  or  warrants  expire  without  being
    exercised,  the  Conversion  Price as adjusted upon the issuance of the same
    shall be readjusted to the  Conversion  Price that would have been in effect
    had an  adjustment  been made on the basis  that only  additional  shares of
    common stock so issued were the additional  shares of common stock,  if any,
    actually issued or sold on the exercise of such rights, options, or warrants
    and such  additional  shares of common stock if any, were issued or sold for
    the  consideration  actually  received  by us upon such  exercise,  plus the
    consideration,  if any, actually received by us for the granting of all such
    rights,  options,  or warrants,  whether or not exercised,  except that such
    readjustment  does not apply to prior  conversions of the Series C Preferred
    Stock.

(5) If the  holders  of shares of  common  stock are given any  choice as to the
    securities,  cash, or property to be received in a Fundamental  Transaction,
    then the holders of Series C Preferred Stock are to be given the same choice
    as to the Alternate  Consideration  it receives  upon any  conversion of the
    Series C Preferred Stock following such Fundamental Transaction.

         WARRANTS

         Set forth below is a description of provisions set forth in the Warrant
that  could  result  in a  change  in the  exercise  price  per  share  upon the
occurrence of certain events.

TRIGGERING EVENT (AS
EACH IS DEFINED UNDER
THE TERMS OF THE
WARRANT)                   RESULTING ADJUSTMENT IN THE WARRANT EXERCISE PRICE
---------------------      --------------------------------------------------


"Stock Dividends and       The Exercise  Price is multiplied by a fraction,  the
Splits"                    numerator  being the number of shares of common stock
                           (excluding Treasury Shares)  outstanding  immediately
                           before,  and the denominator  the number  outstanding
                           immediately after, such event.

"Subsequent Equity         The Exercise  Price is multiplied by a fraction,  the
Sales," at an effective    numerator  being the number of shares of common stock
price lower than the       issued  and  outstanding  immediately  prior  to  the
then applicable            Dilutive Issuance plus the number of shares of common
Conversion Price           stock  which the  offering  price  for such  Dilutive
                           Issuance  would  purchase  at  the  then


                                       25




                           applicable  Conversion  Price,  and  the  denominator
                           being the sum of the number of shares of common stock
                           issued  and  outstanding  immediately  prior  to  the
                           Dilutive  Issuance and the number of shares so issued
                           or issuable in connection with the Dilutive  Issuance
                           and the number of Warrant  Shares  issuable under the
                           Form of Warrant,  are to be  increased  such that the
                           aggregate  Exercise  Price  payable under the Form of
                           Warrant,  after  taking into  account the decrease in
                           the Exercise  Price,  shall be equal to the aggregate
                           Exercise Price prior to such adjustment.(1)

"Subsequent Rights         The Exercise  Price is multiplied by a fraction,  the
Offerings"(2)              numerator  being the number of shares of common stock
                           outstanding on the date of issuance of such rights or
                           warrants   plus  the  number  of  shares   which  the
                           aggregate  offering  price  of the  total  number  of
                           shares so offered  would  purchase at such VWAP,  and
                           the denominator  being the number of shares of common
                           stock  outstanding  on the date of  issuance  of such
                           rights or  warrants  plus the  number  of  additional
                           shares of common stock  offered for  subscription  or
                           purchase.(3)

"Pro Rata Distributions"   The  Exercise  Price,  in each such  case,  in effect
                           immediately  prior  to  the  record  date  fixed  for
                           determination  of  stockholders  entitled  to receive
                           such  distribution  is multiplied by a fraction,  the
                           numerator  being such VWAP less the then fair  market
                           value  at such  record  date of the  portion  of such
                           assets or evidence  of  indebtedness  so  distributed
                           applicable  to one  outstanding  share of the  common
                           stock as determined by the Board of Directors in good
                           faith, and the denominator  being the VWAP determined
                           as of the record date described above.

"Fundamental               The Exercise  Price is adjusted,  for purposes of any
Transactions"              such exercise by the Warrant holder, to apply to such
                           Alternate   Consideration  based  on  the  amount  of
                           Alternate  Consideration  issuable  in respect of one
                           share   of   common   stock   in   such   Fundamental
                           Transaction,  and we apportion the  Conversion  Price
                           among the  Alternate  Consideration  in a  reasonable
                           manner reflecting the relative value of any different
                           components of the Alternate Consideration.(4)

--------------

(1) Such  adjustments  are made  whenever  such shares of common stock or common
    stock  Equivalents  are issued.  However,  under no  circumstance  will such
    adjustments be made, paid or issued with respect to an Exempt Issuance.

(2) We, while Warrants are outstanding,  issue rights,  options,  or warrants to
    all holders of common  stock  entitling  them to  subscribe  for or purchase
    shares of common  stock at a price per share  that is lower than the VWAP on
    the record date for the  determination  of stockholders  entitled to receive
    such rights, options, or warrants.

(3) Such adjustment  becomes  effective  immediately  after the described record
    date.  If any  such  rights,  options,  or  warrants  expire  without  being
    exercised,  the  Conversion  Price as adjusted upon the issuance of the same
    shall be readjusted to the  Conversion  Price that would have been in effect
    had an  adjustment  been made on the basis  that only  additional  shares of
    common  stock,  if any,  actually  issued  or sold on the  exercise  of such
    rights,  options, or warrants and such additional shares of common stock, if
    any, were issued or sold for the consideration  actually received by us upon
    such exercise,  plus the consideration,  if any, actually received by us for
    the  granting  of all such  rights,  options,  or  warrants,  whether or not
    exercised,  except that such  readjustment does not apply to prior exercises
    of the Warrant.

(4) If the  holders  of shares of  common  stock are given any  choice as to the
    securities,  cash, or property to be received in a Fundamental  Transaction,
    then the  holders  of  Warrants  are to be given  the same  choice as to the
    Alternate Consideration it receives upon any exercise of a Warrant following
    such Fundamental Transaction.


ANALYSIS OF PAYMENTS IN RELATION TO NET OFFERING  PROCEEDS  AND  COMBINED  TOTAL
PROFITS

         Set forth below is disclosure of the following:

         o    the  gross  proceeds  paid or  payable  to us in the July  Private
              Placement;


                                       26




         o    all  payments  that have been made or that may be  required  to be
              made by us to the Selling Stockholders;

         o    the resulting net proceeds to us;

         o    the combined total  possible  profit to be realized by the Selling
              Stockholders  and  the  Excluded  Purchasers  as a  result  of any
              conversion  discounts  regarding  the  securities  underlying  the
              Series C Preferred  Stock and the Warrants and any other warrants,
              options,  notes, or other  securities of ours that are held by the
              Selling   Stockholders   or  any   affiliates   of   the   Selling
              Stockholders; and

         o    the  percentage of the total amount of all possible payments by us
              and the total possible  discount to the market price of the shares
              underlying  the Series C Preferred  Stock and Warrants  divided by
              the net  proceeds  to us from the sale of the  Series C  Preferred
              Stock and the Warrants,  as well as the amounts of that  resulting
              percentage averaged over the term of the warrants.



                                                                COMBINED TOTAL
                                                                POSSIBLE PROFIT
                                                                REALIZABLE FROM
                                                                CONVERSION                            POTENTIAL PAYMENTS
                                                                DISCOUNTS IN      PAYMENTS OR         TO BE MADE BY US
                                                                CONNECTION WITH   POTENTIAL           PLUS COMBINED TOTAL
                                                                THE JULY          PAYMENTS TO BE      POSSIBLE PROFIT
                                                                PRIVATE           MADE BY US PLUS     REALIZABLE FROM
                                                                PLACEMENT AND     COMBINED TOTAL      CONVERSION
                                                                ANY OTHER         POSSIBLE PROFIT     DISCOUNTS DIVIDED
                                                                SECURITIES OF     REALIZABLE FROM     BY OUR NET
                                PAYMENTS OR                     OURS HELD BY      CONVERSION          PROCEEDS(%)
                                POTENTIAL                       THE SELLING       DISCOUNTS DIVIDED   AVERAGED OVER
                  GROSS         PAYMENTS TO BE                  STOCKHOLDERS OR   BY OUR  NET         5-YEAR TERM OF
                  PROCEEDS      MADE BY  US      NET PROCEEDS   THEIR AFFILIATES  PROCEEDS(%)         WARRANTS
                  --------      --------------   ------------   ----------------  -----------------   ------------------

                                                                                    
SELLING
STOCKHOLDERS      $2,598,204(1) $(430,560)(2)    $2,167,644     $(247,489.56)     (31.28)%            (6.26)%

EXCLUDED
PURCHASERS        $4,535,393(3) $(719,440)(4)    $3,815,953     $(540,493.18)(5)  (33.02)%            (6.6)%

PLACEMENT AGENT   $0            $(368,000)       $(368,000)     N/A               N/A                 N/A

TOTAL             $7,133,597    $(1,518,000)     $5,615,597     $(787,982.74)     (41.06)%            (8.21)%
-----


--------------

(1) Representing  the  proceeds  payable to us by the  Selling  Stockholders  in
    connection with the July Private Placement  assuming the exercise in full of
    the Warrants held by the Selling Stockholders.

(2) Representing  dividends payable to the Selling  Stockholders on the Series C
    Preferred  Stock  purchased in the July Private  Placement  during the first
    year following sale, plus potential  partial  liquidated  damages payable to
    the Selling Stockholders.

(3) Representing proceeds payable to us by the Excluded Purchasers in connection
    with  the  July  Private  Placement  assuming  the  exercise  in full of the
    Warrants acquired by the Excluded Purchasers.

(4) Representing  dividends  payable to the Excluded  Purchasers on the Series C
    Preferred  Stock  purchased in the July Private  Placement  during the first
    year following sale, plus potential  partial  liquidated  damages payable to
    the Excluded  Purchasers  based on the Series C Preferred Stock purchased in
    the July Private Placement.


                                       27




(5) Representing the total discount to the market price realized by the Excluded
    Purchasers  in the July  Private  Placement  plus the total  discount to the
    market  price  realized  by the  Excluded  Purchasers  in the April  Private
    Placement; this calculation does not include warrants issued to any Excluded
    Purchasers or their  affiliates  for placement  agent services in connection
    with the Series B Preferred Stock private placement  transaction that closed
    on March 15, 2006 (the "SERIES B PRIVATE  PLACEMENT").  Based on information
    provided  to us by or on  behalf  of the  Excluded  Purchasers,  none of the
    Excluded  Purchasers or their  affiliates  purchased  shares of our Series B
    Preferred Stock in the Series B Private Placement.

SECURITIES OUTSTANDING PRIOR TO OFFERINGS

         In  connection   with  the  Series  B  Private   Placement,   Midsummer
Investment,  Ltd.  purchased  from us 2,826 shares of Series B Preferred  Stock,
convertible  into 1,256,000  shares of common stock,  at a conversion  rate of 1
share of Series B Preferred Stock for 444.4444 shares of common stock. We issued
a total of 10,000  shares of Series B  Preferred  Stock in  connection  with the
Series B Private Placement. Immediately prior to the Series B Private Placement,
no shares of Series B Preferred Stock were outstanding and 19,090,159  shares of
common stock were outstanding.  The closing market price per share of our common
stock on the date of  closing of the  Series B Private  Placement,  as listed on
Yahoo!  Finance,  was $2.15.  The closing  market  price per share of the common
stock as of December 17, 2007, as listed on Yahoo! Finance, was $1.75.

         There were no other prior securities transactions between us (or any of
our predecessors) and the Selling Stockholders (or any affiliates of the Selling
Stockholders,  or any person with whom any Selling Stockholder has a contractual
relationship regarding the transaction (or any predecessors of those persons)).

SHARES REGISTERED ON BEHALF OF THE SELLING STOCKHOLDERS; SALES; PRIOR HOLDINGS

         Set forth below in tabular form is an analysis of the following:

         o    the number of shares of common stock outstanding prior to the July
              Private  Placement that are held by persons other than the Selling
              Stockholders,  our  affiliates,  and  affiliates  of  the  Selling
              Stockholders;

         o    the number of shares of common stock  registered for resale by the
              Selling  Stockholders or affiliates of the Selling Stockholders in
              prior registration statements;

         o    the number of shares of common stock  registered for resale by the
              Selling  Stockholders  or affiliates  of the Selling  Stockholders
              that continue to be held by the Selling Stockholders or affiliates
              of the Selling Stockholders;

         o    the  number  of  shares  of  common  stock  that have been sold in
              registered  resale  transactions  by the Selling  Stockholders  or
              affiliates of the Selling Stockholders; and

         o    the  number of shares of common  stock  registered  for  resale on
              behalf of the Selling  Stockholders  or  affiliates of the Selling
              Stockholders in the current


                                       28




              transaction.

         For purposes of this table, the calculation of the number of
outstanding shares of common stock does not include any securities underlying
any outstanding convertible securities, options, or warrants.



                                       SHARES OF
                      SHARES OF        COMMON STOCK
                      COMMON STOCK     REGISTERED FOR
                      REGISTERED FOR   RESALE BY
                      RESALE BY        SELLING                                                 SHARES OF COMMON
                      SELLING          STOCKHOLDERS      PREVIOUSLY                            STOCK OUTSTANDING
                      STOCKHOLDERS     THAT CONTINUE     REGISTERED                            PRIOR TO THE JULY
                      OR AFFILIATES    TO BE HELD BY     SHARES SOLD IN                        PRIVATE PLACEMENT(2)
                      OF SELLING       THE SELLING       REGISTERED                            HELD BY PERSONS
                      STOCKHOLDERS     STOCKHOLDERS OR   RESALE           SHARES OF COMMON     OTHER THAN THE
                      IN PRIOR         AFFILIATES OF     TRANSACTIONS     STOCK REGISTERED     SELLING STOCKHOLDERS
SELLING               REGISTRATION     SELLING           BY SELLING       FOR RESALE IN        (OR THEIR AFFILIATES)
STOCKHOLDER(1)        STATEMENTS       STOCKHOLDERS      STOCKHOLDERS     CURRENT TRANSACTION  OR OUR AFFILIATES
--------------        --------------   ----------------  --------------   -------------------  ---------------------

                                                                                
Consonance Capital
Master Account L.P.   0                0                 0                724,717              --

Midsummer
Investment, Ltd.      2,690,484        2,690,484         0                831,098              --

TOTAL                 2,690,484        2,690,484         0                1,555,815            17,903,959
-----


----------

(1) For  purposes  of  this  table,  the  term  "Selling  Stockholder"  includes
    affiliates of the Selling Stockholders.

(2) There were a total of 21,299,667  shares of our common stock  outstanding on
    July 17, 2007, just prior to the closing of the July Private Placement.


FINANCIAL ABILITY TO MAKE PAYMENTS AND DIVIDENDS

         We intend to make,  and have  reasonable  basis to believe that we have
the  financial  ability to make,  all  payments and  dividends on the  overlying
securities.

SHORT SALES BY SELLING STOCKHOLDERS

         The following statements are based on information provided to us by, or
on behalf of, the Selling Stockholders.

         Midsummer  Investment,  Ltd. in the ordinary course of its business may
inter  into  short  sales.  However,  no such short  sales are  entered  into by
Midsummer  Investment,  Ltd.  while in  possession  of any  material,  nonpublic
information.  Midsummer Investment,  Ltd. acknowledges the position of the Staff
of the SEC set forth in Item A.65 of the SEC Telephone Interpretations Manual.


                                       29




RELATIONSHIPS BETWEEN US AND THE SELLING STOCKHOLDERS

         No  Selling  Stockholder  has had,  within the past  three  years,  any
position, office, or material relationship or arrangements with us or any of our
predecessors or affiliates,  except as provided in this prospectus, and all such
arrangements between or among us, or any of our predecessors or affiliates,  and
any of the Selling  Stockholders  are  included as exhibits to the  registration
statement of which this prospectus forms a part.

         So long as Midsummer  Investment  Ltd. and Bushido Capital Master Fund,
LP (collectively,  the "PRINCIPAL SERIES B INVESTORS") continue to hold at least
25% of our then outstanding shares of the Series B Preferred Stock, in the event
that we intend to take an action,  pursuant to certain  sections of the Series B
Certificate of  Designations,  as amended,  which would require the  affirmative
vote or written  consent of the holders of at least 70% of the then  outstanding
shares of the Series B  Preferred  Stock or Series C  Preferred  Stock,  then we
shall not take such action  unless  both  Principal  Series B Investors  vote in
favor of, or consent to, such action.

DETERMINATION OF TO BE SHARES REGISTERED

         We  determined  the  number of shares of common  stock  that we seek to
register  for resale in the  registration  statement,  of which this  prospectus
forms a part, by taking the sum of the following:

         o    the  number  of shares of common  stock  underlying  the  Series C
              Preferred Stock purchased by the Selling  Stockholders in the July
              Private Placement;

         o    the  number  of shares of common  stock  underlying  the  Warrants
              issued in the July Private Placement; and

         o    the  aggregate  number  of  shares of  common  stock  issuable  in
              satisfaction  of  dividend  obligations  on the shares of Series C
              Preferred Stock purchased by the Selling  Stockholders in the July
              Private Placement (the "DIVIDEND SHARES").

In deciding the number of Dividend Shares to register, we first determined that,
pursuant to the  Certificate of  Designations,  the VWAP portion of the dividend
formula at such time amounted to 2.185. Accordingly, we calculated the number of
Dividend  Shares to register with respect to each Selling  Stockholder by taking
the sum of:

         o    for the initial  partial year,  commencing  on July 17, 2007,  and
              ending  April 24, 2008,  0.77 times the product of the  aggregated
              stated value of the shares of Series C Preferred  Stock  purchased
              and a fraction,  of which the  numerator is .08, the rate at which
              dividends accrue during that period, and the denominator is 2.185,
              rounding down to the nearest number;

         o    for the subsequent full year, the product of the aggregated stated
              value of the shares of Series C Preferred  Stock  purchased  and a
              fraction,  of  which


                                       30




              the  numerator is .08, the rate at which  dividends  accrue during
              that period,  and the  denominator is 2.185,  rounding down to the
              nearest number; and

         o    for the  subsequent  three full years,  three times the product of
              the  aggregated  stated  value of the shares of Series C Preferred
              Stock purchased and a fraction, of which the numerator is .15, the
              rate  at  which  dividends  accrue  during  that  period,  and the
              denominator is 2.185, rounding down to the nearest number.


                                       31



                              PLAN OF DISTRIBUTION

OFFER AND SALE OF SHARES

         Each  Selling   Stockholder   has  or  its   pledgees,   assignees  and
successors-in-interest  may, from time to time,  sell any or all of their shares
of common  stock on the  American  Stock  Exchange or any other stock  exchange,
market  or  trading  facility  on which the  shares  are  traded  or in  private
transactions.  These  sales  may be at fixed or  negotiated  prices.  A  Selling
Stockholder  may  use any one or more  of the  following  methods  when  selling
shares:

         o        ordinary brokerage  transactions and transactions in which the
                  broker-dealer solicits purchasers;

         o        block trades in which the  broker-dealer  will attempt to sell
                  the shares as agent but may  position  and resell a portion of
                  the block as principal to facilitate the transaction;

         o        purchases by a  broker-dealer  as principal  and resale by the
                  broker-dealer for its account;

         o        an exchange  distribution  in accordance with the rules of the
                  applicable exchange;

         o        privately negotiated transactions;

         o        broker-dealers may agree with the Selling Stockholders to sell
                  a specified  number of such shares at a  stipulated  price per
                  share;

         o        through the writing or  settlement of options or other hedging
                  transactions,   whether   through  an  options   exchange   or
                  otherwise;

         o        a combination of any such methods of sale; or

         o        any other method permitted pursuant to applicable law.

         The Selling  Stockholders  may also sell  shares  under Rule 144 of the
Securities Act, if available, rather than under this prospectus.

         In  connection  with sales of the shares of common stock or  otherwise,
the   Selling   Stockholders   may  enter   into   hedging   transactions   with
broker-dealers,  which may in turn engage in short sales of the shares of common
stock  in  the  course  of  hedging  in  positions  they  assume.   The  Selling
Stockholders  may also sell shares of common  stock short and deliver  shares of
common stock  covered by this  prospectus  to close out short  positions  and to
return  borrowed  shares  in  connection  with such  short  sales.  The  Selling
Stockholders  may also loan or pledge  shares of common stock to  broker-dealers
that in turn may sell such shares.

         The  Selling  Stockholders  may pledge or grant a security  interest in
some or all of the warrants or shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time pursuant
to this prospectus or any amendment to this  prospectus  under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933, as amended,  amending,
if  necessary,  the  list  of  selling  stockholders  to  include  the  pledgee,
transferee or other  successors in interest as selling  stockholders  under this
prospectus.  The Selling Stockholders also may transfer and donate the shares of
common stock in other

                                       32



circumstances  in  which  case  the  transferees,   donees,  pledgees  or  other
successors in interest will be the selling beneficial owners.

         Broker-dealers  engaged by the  Selling  Stockholders  may  arrange for
other  brokers-dealers  to  participate  in sales.  Broker-dealers  may  receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares,  from the purchaser) in amounts to be
negotiated,  but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage  commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

         The Selling  Stockholders and any  broker-dealers or agents involved in
selling the shares may be deemed to be "underwriters"  within the meaning of the
Securities Act in connection  with such sales.  In such event,  any  commissions
received  by such  broker-dealers  or agents and any profit on the resale of the
shares  purchased  by them  may be  deemed  to be  underwriting  commissions  or
discounts  under the Securities  Act. Each Selling  Stockholder  has informed us
that it does not have any written or oral agreement or  understanding,  directly
or indirectly, with any person to distribute the common stock. In no event shall
any broker-dealer receive fees, commissions and markups which, in the aggregate,
would exceed eight percent (8%).

         We are  required  to pay  certain  fees  and  expenses  incurred  by us
incident to the  registration  of the shares.  We have agreed to  indemnify  the
Selling  Stockholders against certain losses,  claims,  damages and liabilities,
including liabilities under the Securities Act.

         Because Selling Stockholders may be deemed to be "underwriters"  within
the  meaning of the  Securities  Act,  they will be  subject  to the  prospectus
delivery  requirements of the Securities Act including Rule 172  thereunder.  In
addition,  any  securities  covered by this  prospectus  which  qualify for sale
pursuant to Rule 144 under the  Securities Act may be sold under Rule 144 rather
than under this  prospectus.  There is no  underwriter  or  coordinating  broker
acting in connection  with the proposed sale of the resale shares by the Selling
Stockholders.

         We agreed to keep this  prospectus  effective  until the earlier of (i)
the date on which the shares  may be sold by the  Selling  Stockholders  without
registration  and  without  regard to any volume  limitations  by reason of Rule
144(k) under the  Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold  pursuant to this  prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The shares will be sold only
through  registered or licensed  brokers or dealers if required under applicable
state  securities  laws. In addition,  in certain states,  the shares may not be
sold unless they have been  registered or qualified  for sale in the  applicable
state or an exemption  from the  registration  or  qualification  requirement is
available and is complied with.

         Under  applicable  rules and  regulations  under the Exchange  Act, any
person engaged in the distribution of the shares may not  simultaneously  engage
in market making  activities with respect to the common stock for the applicable
restricted  period, as defined in Regulation M, prior to the commencement of the
distribution.   In  addition,  the  Selling  Stockholders  will  be  subject  to
applicable  provisions  of the  Exchange  Act  and  the  rules  and  regulations
thereunder,  including Regulation M, which may limit the timing of purchases and
sales of shares of the common  stock by the  Selling  Stockholders  or any other
person.  We  will  make  copies  of this  prospectus  available  to the  Selling
Stockholders  and  have  informed  them of the  need to  deliver  a copy of this
prospectus to each  purchaser at or prior to the time of the sale  (including by
compliance with Rule 172 under the Securities Act).


                                  LEGAL MATTERS

         Reitler Brown & Rosenblatt LLC, New York, New York, as our counsel will
pass upon  whether the shares of common stock which are being  registered  under
the Securities Act of 1933, as amended,  by the registration  statement of which
this prospectus is a part are fully paid, nonassessable and validly issued.


                                     EXPERTS

         Miller, Ellin & Company, LLP, independent certified public accountants,
has audited our consolidated  financial statements included in our Annual Report
on Form 10-K for the year ended  March 31,  2007 as set forth in their  reports,
which are  incorporated  by reference in this  prospectus  and  elsewhere in the
registration statement. Our financial statements are


                                       33



incorporated by reference in reliance on Miller Ellin's  report,  given on their
authority as experts in accounting and auditing.


                           INCORPORATION BY REFERENCE

         The  Securities  and Exchange  Commission  allows us to  incorporate by
reference the information that we file with it, which means that we can disclose
important  information  to  you  by  referring  you  to  those  documents.   The
information  incorporated  by  reference  into this  registration  statement  is
considered to be part of this  registration  statement,  and information that we
file later with the  Commission  will  automatically  update and supersede  this
information.  We  incorporate  by reference the  documents  listed below and any
future  filings  (including  those filed by us prior to the  termination  of the
offering) we make with the Commission under Sections 13(a),  13(c), 14, or 15(d)
of the Exchange Act:

         a.       our annual  report on Form 10-K for the year  ended  March 31,
                  2007, filed with the Commission on June 28, 2007;

         b.       our  quarterly  report on Form 10-Q for the quarter ended June
                  30, 2007, filed with the Commission on August 10, 2007;

         c.       our  current  report on Form 8-K dated  July 23,  2007,  filed
                  with the Commission on July 23, 2007;


         d.       the description of our capital stock which is contained in our
                  registration  statement on Form 8-A filed on February 16, 2000
                  including any subsequent  amendments and reports filed for the
                  purpose of updating that description;

         e.       our  quarterly  report  on Form  10-Q  for the  quarter  ended
                  September 30, 2007,  filed with the Commission on November 14,
                  2007;

         f.       our current  report on Form 8-K dated October 24, 2007,  filed
                  with the Commission on October 24, 2007;

         g.       our current report on Form 8-K dated November 13, 2007,  filed
                  with the Commission on November 13, 2007.


         You may request a copy of these filings, at no cost, by written or oral
request to us at the following address:

                                Mark I. Gittelman
                               Corporate Secretary
                           Elite Pharmaceuticals, Inc.
                                165 Ludlow Avenue
                           Northvale, New Jersey 07647
                                 (201) 750-2646

         No person has been  authorized to give any  information  or to make any
representation  other than those contained in this prospectus in connection with
the offering of the shares of our common stock by the Selling  Stockholders.  If
information or representations other than those contained in this prospectus are
given or made,  you must not  rely on it as if we  authorized  it.  Neither  the
delivery  of this  prospectus  nor any sale  made  hereunder  shall,  under  any
circumstances,   create  an  implication  that  the  information   contained  or
incorporated  by reference  herein is correct as of any time  subsequent  to its
date or that  there has been no change in our  affairs  since  such  date.  This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any  securities  offered hereby in any  jurisdiction  in which such offer or
solicitation  is not  permitted,  or to anyone  whom it is unlawful to make such
offer or  solicitation.  The  information in this prospectus is not complete and
may be changed.


                                       34






                                1,888,251 SHARES




                          ELITE PHARMACEUTICALS, INC.






                                  COMMON STOCK


                          ----------------------------

                                   PROSPECTUS
                              [____________], 2008

                          ----------------------------


     Until  [__________],  2008, all dealers that buy, sell, or trade the common
stock,  may be required to deliver a prospectus,  regardless of whether they are
participating in this offering.  This is in addition to the dealers'  obligation
to deliver a prospectus  when acting as  underwriters  and with respect to their
unsold allotments or subscriptions.





                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

         The following is a statement of the estimated  expenses  incurred by us
in connection  with the  distribution  of the securities  registered  under this
registration statement:


                                     AMOUNT
                                  TO BE PAID *
                                   ----------

                SEC Registration Fee ........... $   282.44
                Legal Fees and Expenses ........ $10,000.00*
                Accounting Fees and Expenses ... $ 1,000.00*
                Printing Expenses .............. $ 2,000.00*
                Miscellaneous .................. $ 2,000.00*
                                                 ----------

                Total .......................... $15,282.44*
        *  Estimated

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

         Pursuant to authority  conferred by Section 102 of the Delaware General
Corporation  Law (the "DGCL"),  our  Certificate of  Incorporation,  as amended,
contains a provision  providing  that the  personal  liability  of a director is
eliminated  to the  fullest  extent  provided  by the DGCL.  The  effect of this
provision  is that  none of our  directors  is  personally  liable  to us or our
stockholders  for monetary  damages for breach of fiduciary  duty as a director,
except for liability for (i) any breach of the director's  duty of loyalty to us
or our  stockholders,  (ii) acts or omissions not in good faith or which involve
intentional  misconduct or a knowing violation of law, (iii) unlawful payment of
dividends as provided in Section 174 of the DGCL and (iv) any  transaction  from
which the  director  derived an improper  personal  benefit.  This  provision is
intended to eliminate the risk that a director might incur personal liability to
us or  our  stockholders  for  breach  of  duty  of  care.  The  Certificate  of
Incorporation,  as amended, also provides that if the Delaware Law is amended to
eliminate or limit further the liability of directors, then the liability of our
directors shall be eliminated or limited, without further stockholder action.

         Section 145 of the DGCL  contains  provisions  permitting  and, in some
situations,   requiring   Delaware   corporations,   such  as  us,  to   provide
indemnification  to their  officers  and  directors  for losses  and  litigation
expenses  incurred in connection  with their service to the corporation in those
capacities.  Our Certificate of Incorporation,  as amended,  and by-laws contain
such a provision  requiring  that we indemnify our directors and officers to the
fullest extent permitted by law, as the law may be amended from time to time.

         In  our  registration   rights  agreement  with  each  of  the  Selling
Stockholders,  we have agreed to  indemnify  the  purchaser  against  damages or
losses and expenses  arising from any losses or expenses  incurred in connection
with a loss  or  alleged  loss  arising  from a  material  misstatement  in or a
material  omission  from the  registration  statement  or any  violation  of the
Securities Act except for a material  misstatement  or omission based on written
information provided to us by the purchaser.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant
to the  foregoing  provisions  or  otherwise,  it has been advised  that, in the
opinion of the  Securities  and Exchange  Commission,  such  indemnification  is
against  public  policy as expressed in the  Securities  Act and is,  therefore,
unenforceable.

ITEM 16. EXHIBITS

4.1      Form of Common Stock certificate,  incorporated by reference to Exhibit
         4.1 to the  Registration  Statement  on  Form  SB-2,  Registration  No.
         333-90633, made effective on February 28, 2000.

5.1      Opinion of Reitler Brown & Rosenblatt LLC.


                                      II-1


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

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

10.3     Placement  Agent  Agreement  between  Oppenheimer  & Co.,  Inc. and the
         Registrant,  incorporated  by  reference to Exhibit 10.3 to the Current
         Report on Form 8-K dated April 25,  2007 and filed with the  Commission
         on April 25, 2007.

10.4     Form of Common Stock  Purchase  Warrant,  incorporated  by reference to
         Exhibit 4.2 to Elite's  Current Report on Form 8-K dated April 25, 2007
         and filed with the Commission on April 25, 2007.

10.5     Form of Common Stock Purchase  Warrant  issued to the Placement  Agent,
         incorporated  by reference to Exhibit 4.3 to the Current Report on Form
         8-K dated  April 25,  2007 and filed with the  Commission  on April 25,
         2007.

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

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

10.8     Certificate  of  Designations,  Preferences  and  Rights  of  Series  B
         Preferred  Stock,  incorporated  by  reference  to  Exhibit  3.1 to the
         Current  Report on Form 8-K dated  March  15,  2006 and filed  with the
         Commission on March 16, 2006.

23.1     Consent of Miller, Ellin & Company LLP.

23.2     Consent of Reitler  Brown &  Rosenblatt  LLC  (included  in Exhibit 5.1
         above).

24.1     Power of Attorney (included on Signature page).

---------------

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

         (a)(1) To file,  during any  period in which  offers or sales are being
made, a post-effective amendment to this registration statement:

         (i) To include  any  prospectus  required  by Section  10(a)(3)  of the
Securities Act of 1933;

         (ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration  statement (or the most recent post-effective
amendment  thereof)  which,  individually  or  in  the  aggregate,  represent  a
fundamental  change in the information set forth in the registration  statement;
notwithstanding the foregoing,  any increase or decrease in amount of securities
offered (if the total dollar value of the  securities  offered  would not exceed
that which was registered) may be reflected in the form of prospectus filed with
the Securities and Exchange  Commission pursuant to Rule 424(b) if the change in
volume  represents no more than a 20% change in the maximum  aggregate  offering
price set forth in the "Calculation of Registration  Fee" table in the effective
registration statement; and

         (iii) To include any material  information  with respect to the plan of
distribution  not  previously  disclosed  in the  registration  statement or any
material change to such  information in the  registration  statement;  provided,
however,  that  paragraphs  (a)(1)(i),  (ii)  and  (iii)  do  not  apply  if the
information  required  to be  included in a  post-effective  amendment  by those
paragraphs  is  contained  in periodic  reports  filed with or  furnished to the
Securities and Exchange  Commission by the Registrant  pursuant to Section 13 or
15(d) of the Securities  Exchange Act of 1934 that are incorporated by reference
in this registration statement.

         (2) That,  for the  purpose  of  determining  any  liability  under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (3) To remove from registration by means of a post-effective  amendment
any of the securities being registered which remain unsold at the termination of
the offering.

         (4)  That,  for  purposes  of  determining   any  liability  under  the
Securities Act of 1933, each filing of the  Registrant's  annual report pursuant
to  Section  13(a) or 15(d) of the  Securities  Exchange  Act of 1934 (and where
applicable,  each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities  Exchange Act of 1934) that is  incorporated  by
reference  in  this  registration   statement  shall  be  deemed  to  be  a  new
registration  statement  relating to the  securities  offered  therein,  and the
offering of such


                                      II-2


securities  at that time shall be deemed to be the  initial  bona fide  offering
thereof.

         (b)  INSOFAR  AS  INDEMNIFICATION  FOR  LIABILITIES  ARISING  UNDER THE
SECURITIES ACT OF 1933 MAY BE PERMITTED TO DIRECTORS,  OFFICERS AND  CONTROLLING
PERSONS OF THE REGISTRANT  PURSUANT TO THE FOREGOING  PROVISIONS,  OR OTHERWISE,
THE  REGISTRANT  HAS BEEN  ADVISED  THAT IN THE  OPINION OF THE  SECURITIES  AND
EXCHANGE  COMMISSION SUCH  INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED
IN THE SECURITIES  ACT OF 1933 AND IS,  THEREFORE,  UNENFORCEABLE.  IN THE EVENT
THAT A CLAIM  FOR  INDEMNIFICATION  AGAINST  SUCH  LIABILITIES  (OTHER  THAN THE
PAYMENT BY THE REGISTRANT OF EXPENSES INCURRED OR PAID BY A DIRECTOR, OFFICER OR
CONTROLLING  PERSON OF THE REGISTRANT IN THE  SUCCESSFUL  DEFENSE OF ANY ACTION,
SUIT OR PROCEEDING) IS ASSERTED AGAINST THE REGISTRANT BY SUCH DIRECTOR, OFFICER
OR CONTROLLING  PERSON IN CONNECTION WITH THE SECURITIES BEING  REGISTERED,  THE
REGISTRANT  WILL,  UNLESS IN THE  OPINION  OF ITS  COUNSEL  THE  MATTER HAS BEEN
SETTLED BY CONTROLLING PRECEDENT,  SUBMIT TO A COURT OF APPROPRIATE JURISDICTION
THE QUESTION  WHETHER SUCH  INDEMNIFICATION  BY IT IS AGAINST  PUBLIC  POLICY AS
EXPRESSED  IN THE  SECURITIES  ACT OF 1933 AND  WILL BE  GOVERNED  BY THE  FINAL
ADJUDICATION OF SUCH ISSUE.

         (c)(1) For purposes of determining  any liability  under the Securities
Act of 1933, the information  omitted from the form of prospectus  filed as part
of this  registration  statement in reliance  upon Rule 430A and  contained in a
form of prospectus filed by the Registrant  pursuant to Rule 424(b)(1) or (4) or
497(h)  under  the  Securities  Act of 1933  shall be  deemed to be part of this
registration statement as of the time it was declared effective.

         (2) For the purpose of determining  any liability  under the Securities
Act of 1933,  each  post-effective  amendment that contains a form of prospectus
shall be deemed to be a new  registration  statement  relating to the securities
offered  therein,  and the  offering  of such  securities  at that time shall be
deemed to be the initial bona fide offering thereof.


                                      II-3


                                   SIGNATURES


         Pursuant  to the  requirements  of the  Securities  Act  of  1933,  the
registrant  has duly  caused  this  registration  statement  to be signed on its
behalf  by  the  undersigned,  thereunto  duly  authorized,  in the  Borough  of
Northvale, State of New Jersey, on January 2, 2008.



                                    ELITE PHARMACEUTICALS, INC.

                                    /s/ Bernard Berk
                                    --------------------------------------------
                                    Bernard Berk
                                    President and Chief Executive Officer


                                      II-4


         KNOW  ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears below constitutes and appoints Bernard Berk and Mark I. Gittelman as his
attorney-in-fact  and agent, with full power of substitution and resubstitution,
for him and in his name,  place,  and stead, in any and all capacities,  to sign
and  file  Registration  Statement(s)  and any and  all  pre- or  post-effective
amendments  to such  Registration  Statement(s),  with all exhibits  thereto and
hereto,  and  other  documents  with the  Securities  and  Exchange  Commission,
granting unto said  attorney-in-fact and agent, and each of them, full power and
authority to do and perform each and every act and thing  requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in  person,  hereby  ratifying  and  confirming  all that said
attorneys-in-fact  and agents, or any of them, or their or his substitutes,  may
lawfully do or cause to be done by virtue hereof.

         Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
registration  statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.



Dated: January 2, 2008              /s/ Bernard Berk
                                    --------------------------------------------
                                    Bernard Berk
                                    Chief Executive Officer and
                                    Chairman of the Board of Directors

Dated: January 2, 2008                                   *
                                    --------------------------------------------
                                    Mark I. Gittelman
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

Dated: January 2, 2008                                   *
                                    --------------------------------------------
                                    Barry Dash
                                    Director

Dated: January 2, 2008                                   *
                                    --------------------------------------------
                                    Veerappan Subramanian
                                    Director


Dated: January 2, 2008                                   *
                                    --------------------------------------------
                                    Robert J. Levenson
                                    Director

*By  /s/ Bernard Berk
   ---------------------
       Bernard Berk
     Attorney-in-Fact


                                      II-5