UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

[X]      QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934

                  For the quarterly period ended June 30, 2004

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

      For the transition period from _________________ to _________________

                        Commission file number 333-83152


                                   Inyx, Inc.
        (Exact name of small business issuer as specified in its charter)

             Nevada                                       75-2870720
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

                825 Third Avenue, 40th Floor, New York, New York
                    (Address of principal executive offices)

                                 (212) 838-1111
                           (Issuer's telephone number)

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

         Check whether the registrant  filed all documents and reports  required
to be  filed  by  Section  l2,  13 or  15(d)  of  the  Exchange  Act  after  the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of August 6, 2004: 28,790,000 shares of common stock.

Transitional Small Business Disclosure Format (Check one):  Yes [ ] No [X]

Include whether Registrant is an accelerated filer:    Yes [ ] No [X]



<PAGE>
<TABLE>
<CAPTION>

                         PART I -- FINANCIAL INFORMATION
                          Item 1. Financial Statements

                                   INYX, INC.
                           Consolidated Balance Sheets
                                   (Unaudited)
        (Expressed in thousands of U.S. dollars except for share amounts)


                                                                 June 30,     December 31,
                                                                  2004            2003
                                                              ----------------------------
<S>                                                           <C>             <C>
                                     Assets
                                     ------
Current assets:
    Cash                                                      $         36    $        796
    Accounts receivable, net                                         1,475           3,395
    Inventory, net                                                   1,100           1,089
    Prepaid expenses and other current assets                        3,770           1,089
                                                              ----------------------------
        Total current assets                                         6,381           6,369
                                                              ----------------------------

Property, plant and equipment, net                                   4,991           5,183
Deferred financing costs, net and other assets                       1,247             905
Deferred tax asset                                                   1,687           1,294
                                                              ----------------------------
                                                                     7,925           7,382
                                                              ----------------------------

        Total assets                                          $     14,306    $     13,751
                                                              ============================

                      Liabilities and Stockholders' Deficit
                      -------------------------------------

Current liabilities:
    Bank overdraft                                            $         51    $       --
    Borrowings under revolving line of credit                        4,496           3,133
    Accounts payable                                                 3,374           2,178
    Accrued expenses and other current liabilities                     924             996
    Current portion of long-term debt                                1,063           1,483
                                                              ----------------------------
        Total current liabilities                                    9,908           7,790
                                                              ----------------------------

Long term debt, net of current portion                              10,283           7,439
                                                              ----------------------------
        Total liabilities                                           20,191          15,229
                                                              ----------------------------

Stockholders' deficit:
    Preferred stock - $0.001 par value, 10,000,000 shares
    authorized -0- shares issued and outstanding                      --              --
    Common stock - $0.001 par value, 150,000,000 shares
    authorized, 28,790,000 shares issued
    and outstanding                                                     29              29
    Additional paid-in capital                                      12,499          11,584
    Accumulated deficit                                            (17,651)        (12,696)
    Subscriptions receivable                                          (393)           (100)
    Accumulated other comprehensive loss -
       foreign currency translation adjustment                        (369)           (295)
                                                              ----------------------------
        Total stockholders' deficit                                 (5,885)         (1,478)
                                                              ----------------------------

        Total liabilities and stockholders' deficit           $     14,306    $     13,751
                                                              ============================
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       2

<PAGE>
<TABLE>
<CAPTION>

                                   INYX, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)
       (Expressed in thousands of U.S. dollars, except per share amounts)


                                             Six Months Ended June 30,     Three Months Ended June 30,
                                               2004            2003            2004            2003
                                           ------------------------------------------------------------
<S>                                        <C>             <C>             <C>             <C>
Net revenues                               $      7,300    $      7,798    $      2,774    $      5,068
Cost of sales                                     6,821           6,202           2,910           3,933
Rsearch and development                             399            --               112            --
                                           ------------------------------------------------------------
        Gross profit                                 80           1,596            (248)          1,135

Expenses:
     General and administrative expenses          4,102           3,313           1,998           2,745
     Selling expenses                               160             147              76              96
     Depreciation and amortization                  476             356             242             128
                                           ------------------------------------------------------------

            Total operating expenses              4,738           3,816           2,316           2,969
                                           ------------------------------------------------------------

Loss from operations before
     other expenses                              (4,658)         (2,220)         (2,564)         (1,834)

Other expenses                                      690           5,399             470           5,168
                                           ------------------------------------------------------------

Loss before income tax benefit
and discontinued operations                      (5,348)         (7,619)         (3,034)         (7,002)

Income tax benefit                                  393             288            --               288
                                           ------------------------------------------------------------

Loss from continuing operations                  (4,955)         (7,331)         (3,034)         (6,714)

Loss from discontinued operations                  --               (25)           --              --
                                           ------------------------------------------------------------

Net loss                                   $     (4,955)   $     (7,356)   $     (3,034)   $     (6,714)
                                           ============================================================

Loss per share of common stock
     outstanding-basic and fully diluted   $      (0.17)   $      (0.38)   $      (0.11)   $      (0.30)
                                           ============================================================

Weighted-average number of shares
  outstanding - basic and fully diluted      28,747,582      19,322,099      28,747,582      22,607,692
                                           ============================================================
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                       3
<PAGE>
<TABLE>
<CAPTION>


                                   INYX, INC.
           Consolidated Statements of Changes in Stockholders' Equity
                          and Other Comprehensive Loss
                                   (Unaudited)
                    (Expressed in thousands of U.S. dollars)
                     For the six months ended June 30, 2004


                                                                                              Accumu-
                                                                                               lated
                                                                                               Other
                                             Common Stock        Additional       Stock       Compre-       Accumu-
                                       Number of                   Paid-in    Subscription    hensive        lated
                                        Shares      Par Value      Capital     Receivable       loss        Deficit         Total
                                      ----------    ----------   ----------    ----------    ----------    ----------    ----------
<S>                                   <C>           <C>          <C>           <C>           <C>           <C>           <C>
Balance at December 31, 2003              28,525    $       29   $   11,584    $     (100)   $     (295)   $  (12,696)   $   (1,478)

Issuance of Stock for options
  exercised in January 2004                  765             0          291          --            --            --             370
  (net of shares returned
   to treasury)
Issuance of stock options                   --            --            161          --            --            --             161

Return of shares into treasury               (60)         --            (79)         --            --            --             (79)

Subscription receivable                     --            --           --            (293)         --            --            (293)

Warrants issued for financing fees          --             414         --            --            --             414

Warrants issued for consulting fees         --            --             50          --            --            --              50

Net loss for the period                     --            --           --            --            --          (4,955)       (4,955)

Foreign currency translation
   adjustment                               --            --           --            --             (74)         --             (74)

                                      ----------    ----------   ----------    ----------    ----------    ----------    ----------
Balance at June 30, 2004                  28,790    $       29   $   12,499    $     (393)   $     (369)   $  (17,651)   $   (5,885)
                                      ==========    ==========   ==========    ==========    ==========    ==========    ==========
</TABLE>









The accompanying notes are an integral part of these consolidated financial
statements.


                                       4
<PAGE>
<TABLE>
<CAPTION>

                                   INYX, INC.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                    (Expressed in thousands of U.S. dollars)



                                                                            Six Months Ended June 30,    Three Months Ended June 30,
                                                                              2004           2003           2004           2003
                                                                           -----------    -----------    -----------    -----------
<S>                                                                        <C>            <C>            <C>            <C>
Cash flows from operating activities:
      Net loss for the period                                              $    (4,955)   $    (6,739)   $    (3,034)   $    (6,714)
      Adjustments to reconcile net loss to net cash
        used in operating activities:
          Depreciation                                                             276            128            124            128
          Amortization of financing costs                                          200           --              118           --
          Deferred tax asset                                                      (393)          (299)          --             (299)
          Reserve for inventory obsolescence                                      (217)          --             (603)          --
          Provision for bad debt                                                   111           --               52           --
          Stock option compensation                                                161            747             95           --
          Issuance of stock for services                                          --            2,103           --            3,155
          Warrants issued for financing  fees                                      414           --               45           --
          Issuance of warrants                                                      50            305             50           --
          Issuance of shares for exercise of stock options                         290           --             --             --
          Issuance of stock in recapitalization                                   --            2,081           --            2,081
          Subscription receivable                                                 (293)          --             --             --
      Changes in assets and liabilities:
          (Increase) decrease in accounts receivables                            1,809         (3,127)         1,710         (3,127)
          (Increase) decrease in inventory                                         206           (845)           418           (845)
          (Increase) decrease in prepaid and other current assets               (2,728)        (1,074)        (1,384)        (1,073)
          Increase in bank overdraft                                                51           --               51           --
          Increase (decrease) in accounts payable and accrued liabilities        1,400          2,237          1,265          2,237
          Increase (decrease) in deferred revenue                                 (276)          --              (85)          --
          Increase in deferred financing costs                                    (495)          --              (19)          --
                                                                           -----------    -----------    -----------    -----------

Net cash used in continuing operations                                          (4,389)        (4,483)        (1,197)        (4,457)

Net cash provided from discontinued
operations                                                                        --               60           --             --
                                                                           -----------    -----------    -----------    -----------

                  Net cash used in operating activities                         (4,389)        (4,423)        (1,197)        (4,457)
                                                                           -----------    -----------    -----------    -----------

Cash flows from investing activities:
      Purchase of fixed assets                                                     (84)        (5,131)           (26)        (5,131)
                                                                           -----------    -----------    -----------    -----------

                  Net cash  used in investing activities                           (84)        (5,131)           (26)        (5,131)
                                                                           -----------    -----------    -----------    -----------

Cash flows from financing activities:
      Advances by stockholder                                                     --               50           --              109
      Borrowings under revolving line of credit                                  3,363          2,294            157          2,294
      Proceeds from issuance of long term debt                                     500          3,593            500          3,593
      Repayment of long term debt                                                 --             (328)          --             (328)
      Proceeds from issuance of promissory note                                   --            4,013           --            4,013
      Repayment of capital lease obligation                                        (76)          --              (42)          --
                                                                           -----------    -----------    -----------    -----------

                  Net cash provided by financing activities                      3,787          9,622            615          9,681
                                                                           -----------    -----------    -----------    -----------

Effect of foreign exchange rate changes
      on cash and cash equivalents                                                 (74)           (62)          (109)           (62)
                                                                           -----------    -----------    -----------    -----------

Change in cash                                                                    (760)             6           (717)            31
Cash at beginning of period                                                        796             25            753           --
                                                                           -----------    -----------    -----------    -----------

Cash at end of period                                                      $        36    $        31    $        36    $        31
                                                                           ===========    ===========    ===========    ===========
</TABLE>




The accompanying notes are an integral part of these consolidated financial
statements.


                                       5
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              (Dollar amounts in tables are expressed in thousands)

NOTE 1:  BUSINESS DESCRIPTION AND PRESENTATION
------   -------------------------------------

         Inyx,  Inc.   ("Inyx"  or  the  "Company")   through  its  wholly-owned
subsidiaries,  Inyx  Pharma  Limited  and  Inyx  Canada  Inc.,  is  a  specialty
pharmaceutical  company which focuses on the  development and  manufacturing  of
prescription and over-the-counter  ("OTC") aerosol  pharmaceutical  products and
drug  delivery   technologies   for  the  treatment  of  respiratory,   allergy,
dermatological and topical conditions.  Inyx's client base primarily consists of
large  ethical  pharmaceutical  corporations,   branded  generic  pharmaceutical
distributors, and biotechnology companies.

         Inyx was incorporated on March 28, 2000, in the State of Nevada,  under
the name Doblique,  Inc.  ("Doblique").  As Doblique, the Company was engaged in
the business of breeding and racing  thoroughbred  horses at various major horse
racing venues throughout the United States. On March 6, 2003, management decided
to discontinue the Company's  thoroughbred horse operation by selling the assets
of that operation to a third party.  Concurrent with the  discontinuance  of its
horse racing operations, Doblique concluded a reverse acquisition of Inyx Pharma
Limited  ("Inyx  Pharma"),  an  aerosol  pharmaceutical   manufacturing  company
incorporated  under the laws of England and Wales, and changed its name to Inyx,
Inc. ("Inyx").

         The  acquisition  of Inyx Pharma was  consummated on April 28, 2003, by
exchanging  16  million  shares  of the  Company's  restricted  common  stock in
exchange for 100% of the outstanding common stock of Inyx Pharma. As a result of
the  exchange,   the   stockholders   of  Inyx  Pharma  became  the  controlling
stockholders of the Company. In the aggregate they hold approximately 64% of the
Company's  outstanding  shares.  The  acquisition  has been  accounted  for as a
capital  transaction  under the reverse  acquisition  method of  accounting  for
business combinations.  Under this method, Inyx Pharma (the legal subsidiary) is
considered to have acquired Inyx,  Inc. (the legal parent)  effective  April 28,
2003 and continued as Inyx, Inc. thereafter.  The net assets of Inyx Pharma were
recorded at carrying value with no recognition of goodwill.

         On  March  7,  2003,   Inyx  Pharma   acquired   the  majority  of  the
pharmaceutical business assets of Miza Pharmaceuticals (UK) Ltd. ("Miza UK") out
of Administration, a United Kingdom form of Chapter 11 bankruptcy protection and
reorganization. Prior to this transaction Inyx Pharma was a non-operating public
shell corporation with nominal net assets. This transaction was accounted for as
the  reorganization  of entities under common control with no  reorganization of
goodwill.

         As the Biopharma  Division was part of Miza UK but not acquired by Inyx
Pharma on March 7, 2003, its results of operation are eliminated for comparative
purposes in the pro forma financial results. The results of operations have been
presented  in this  manner to show the Miza UK  operation  with and  without the
Biopharma  Division  in order to  compare  its  results  of  operations,  as the
predecessor company, to Inyx.

         Additionally,  for the  comparative  six months  ended  June 30,  2003,
operations  relating to the  business of the former  Doblique,  Inc.,  now Inyx,
Inc., have been  eliminated from the pro forma  statements as if the divestiture
of assets and liabilities and the  discontinuance of the thoroughbred  operation
occurred on January 1, 2003.

         Inyx  currently  manages and  operates  its  business as one  operating
segment.



                                       6
<PAGE>

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------   ------------------------------------------

a)       Unaudited Consolidated Interim Financial Statements

         The accompanying consolidated financial statements include the accounts
of Inyx and its wholly owned  subsidiaries:  Inyx Pharma  Limited,  an operating
company  formed  under the laws of  England  and Wales;  Inyx  Canada,  Inc.,  a
federally  incorporated Canadian  corporation;  and Inyx Realty, Inc., a Florida
corporation  through the date of  disposition  of April 14,  2004.  On April 14,
2004, Inyx Realty, Inc. was sold to a related party for nominal consideration.

         All  inter-company  accounts and  transactions  have been eliminated in
consolidation.

         The accompanying  consolidated  financial statements for the six months
and three months ended June 30, 2004 and 2003 are unaudited  but, in the opinion
of  management,   include  all  necessary  adjustments  (consisting  of  normal,
recurring nature) for a fair presentation of the financial position,  results of
operations and cash flow for the interim periods presented.  Interim results are
not necessarily indicative of results for a full year. Therefore, the results of
operations for the six months ended June 30, 2004 are not necessarily indicative
of operating results to be expected for a full year.

b)       Use of Estimates

         The consolidated  financial  statements are prepared in conformity with
accounting  principles  generally accepted in the United States of America.  The
preparation of consolidated  financial statements,  in conformity with generally
accepted  accounting  principles,  requires  management  to make  estimates  and
assumptions.  Those  estimates and  assumptions  affect the reported  amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported amounts of revenues and expenses.  Actual results could differ from
those estimates.

         Estimates and assumptions are periodically  reviewed and the effects of
any material revisions are reflected in the consolidated financial statements in
the period that they are determined to be necessary.

c)       Accounts Receivable

         Accounts  receivable  are  stated at net  realizable  value,  net of an
allowance for doubtful accounts.  Periodically,  management reviews all accounts
receivable and based on an assessment of whether they are collectible, estimates
the  portion,  if any, of the  balance  that will not be  collected  in order to
establish an allowance for doubtful  accounts.  Such  allowance was based on the
specific  identification  of accounts deemed  uncollectible as of June 30, 2004.
The provision for the allowance for doubtful accounts is included in General and
Administrative   expenses,  in  the  accompanying   consolidated   statement  of
operations.

d)       Inventory

         Inventory  is  valued  using  the  first-in  and  first-out  method  of
accounting and is stated at the lower of cost or net realizable value.

e)       Property, Plant and Equipment

         Property,  plant and  equipment is stated at cost,  net of  accumulated
depreciation and  amortization,  which is provided for by charges to income over
the  estimated  useful life of the assets  using the straight  line method.  The
useful life of assets ranges from 3-10 years for  equipment,  and up to 25 years
for buildings.  Leasehold improvements and capital leases are amortized over the
life of the related lease.

         Expenditures  that extend the useful life of the respective  assets are
capitalized   and  depreciated   over  the  lives  of  the  respective   assets.
Maintenance, repairs and other expenses that do not extend their useful life are
expensed as incurred.



                                       7
<PAGE>

f)       Business Combinations

         The Company accounts for business  combinations in accordance with FASB
141 Business  Combinations.  Business combinations with public shells or related
entities have been accounted for as capital transactions without the recognition
of goodwill,  whereas business combinations that do not meet the latter criteria
are  accounted for under the purchase  method,  where any excess of the purchase
price over the  estimated  fair  value of net assets  acquired  is  recorded  as
goodwill.  FASB 141 requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized,  but instead tested for impairment at least
annually by comparing  carrying value to the respective fair value in accordance
with the  provisions  of Statement of Financial  Accounting  Standards  No. 142,
Goodwill  and Other  Intangible  Assets  (SFAS  142).  This  pronouncement  also
requires that  intangible  assets with estimable  useful lives be amortized over
their respective  estimated useful lives to their estimated residual values, and
reviewed for impairment by assessing the  recoverability  of the carrying value.
As of January 1, 2003,  the Company  adopted the provisions of SFAS 141 and SFAS
142.

g)       Deferred Financing Costs

         Costs directly  associated with obtaining financing are capitalized and
amortized on a  straight-line  basis over the  estimated  life of the  financing
arrangement.

h)       Impairment of Long Lived Assets

         The  Company  reviews  the  carrying  value of its long  lived  assets,
whenever  events  or  changes  in  circumstances  indicate  that the  historical
cost-carrying  value of an asset  may no  longer  be  appropriate.  The  Company
assesses  recoverability  of the carrying  value of the assets by estimating the
future net cash flows  expected to result from the  assets,  including  eventual
disposition.  If the future net cash flows are less than the  carrying  value of
the assets, an impairment loss is recorded,  equal to the difference between the
asset's  carrying  value  and  its  fair  value.  In  performing  such  reviews,
management takes into  consideration  the current operating levels including any
idle capacity,  alternative uses for production utilizing current equipment, and
growth trends and industry projections.

i)       Financial Instruments

         Financial  instruments consist of cash, accounts  receivable,  accounts
payable, accrued liabilities,  borrowings under the revolving line of credit and
loans payable.  Non-derivative  financial instruments include letters of credit,
commitments  to extend credit and  guarantees of debt.  There were no derivative
financial  instruments at June 30, 2004. The carrying  values of these financial
instruments approximate their fair market value as of June 30, 2004.

j)       Revenue Recognition

         The  Company  recognizes  revenue  when (1)  persuasive  evidence of an
arrangement  exists;  (2) product  delivery has  occurred or services  have been
rendered;  (3) the fee is  fixed  or  determinable;  and (4)  collectability  is
reasonably  assured.  Revenues are recognized FOB shipping point,  when products
are shipped,  which is when legal title and risk of loss is  transferred  to the
Company's customers, and is recorded at the net invoiced value of goods supplied
to customers  after  deduction of sales discounts and sales and value added tax,
where applicable. In situations where the Company receives payment in advance of
the performance of research and development services,  such amounts are deferred
and  recognized as revenue as the related  services are  performed.  For the six
month  period  ended June 30,  2004 and for the year  ended  December  31,  2003
deferred revenues amounting to approximately $73,000 (2003-$274,000) and 351,000
respectively, are included in Accrued Expenses and Other Liabilities.

         Non-refundable  fees are  recognized  as  revenue  over the term of the
arrangement,  based on the percentage of costs incurred to date, estimated costs
to  complete  and total  expected  contract  revenue.  Product  returns  are not
accepted.

         Shipping  costs are paid by the Company's  customers.  Any shipping and
handling  costs  incurred by the company are  included in costs of goods sold in
the accompanying consolidated statements of operations.


                                       8
<PAGE>

k)       Loss per Share

         The Company follows the guidelines of Statement of Financial Accounting
Standards  No. 128,  Earnings Per Share (SFAS 128) in  calculating  its loss per
share.  Basic loss per share  ("LPS") is  computed  using the  weighted  average
number of common shares outstanding  during the period.  Diluted LPS is computed
using the weighted  average  number of common and  potentially  dilutive  common
shares outstanding during the period. Potentially dilutive common shares consist
of common stock that is issuable upon the exercise of stock options and warrants
using the  treasury  stock  method.  No  adjustments  to earnings  were made for
purposes of per share calculations.  The Company has reported a net loss for the
six and three  months  ended  June 30,  2004 and 2003.  As a result,  10,547,500
(2003- 3,055,000)  shares of common stock,  which may be issued upon exercise of
stock options and warrants respectively, have been excluded from the calculation
of diluted loss per share,  for both the six and three month  periods ended June
30, 2004 and 2003, because their inclusion would be anti-dilutive.

l)       Stock Based Compensation

         On May 1, 2003,  the Company  adopted a Stock Option Plan that provides
for the granting of incentive  stock options and non qualified stock options for
the benefit of employees, officers,  consultants,  directors and persons who the
Company believes may have made a valuable contribution to the Company. The total
number of shares that may be issued  under the plan  amounts to  5,000,000.  The
exercise  price per share must be at least equal to the fair market price at the
time of  grant.  There  were  260,000  stock  option  granted,  325,000  options
exercised  and 350,000  options  cancelled  during the six months ended June 30,
2004. As of June 30, 2004,  there were 4,385,000 stock options  outstanding at a
weighted  average  exercise  price of $1.11 per share.  As of June 30, 2004, the
number of exercisable options is 3,390,000.

         The Company  applies the fair value  method of  Statement  of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation ( SFAS No.
123) in  accounting  for its stock  option  plan.  The fair value of each option
granted is estimated on the date of grant using the Black-Scholes option pricing
model.  The fair value of all  options  granted  has been  charged to  salaries,
wages, and benefits in accordance with SFAS No. 123 .

m)       Concentration of Credit Risk

         The Company obtains detailed credit evaluations of customers  generally
without  requiring  collateral,  and  establishes  credit  limits  as  required.
Exposure to losses on receivables is  principally  dependent on each  customer's
financial  condition.  The Company  monitors its exposure for credit risk losses
and maintains an allowance for anticipated  losses. For the six and three months
ended June 30, 2004 and 2003, the Company's  three largest  customers  accounted
for 52% (2003- 44%) and 40% (2003 44%) of net  revenues  and 53% (2003- 49 %) of
net  receivables,  respectively.  The loss of any of these  customers may have a
material adverse effect on the operations of the Company.

n)       Income Taxes

         The Company has adopted Statement of Financial Accounting Standards No.
109,  Accounting for Income Taxes (SFAS No. 109). This standard requires the use
of an asset and  liability  approach for financial  accounting  and reporting on
income taxes.  If it is more likely than not that some portion of a deferred tax
asset will not be realized, a valuation allowance is recognized.

o)       Translation of Foreign Currency

         The functional  currency of the Company's United Kingdom  subsidiary is
the Great Britain  Pound.  The Company's  financial  statements  are reported in
United  States  Dollars (the "Dollar" ) and are  translated  in accordance  with
Statement of Financial Accounting Standards No. 52, Foreign Currency Translation
(SFAS No. 52), which requires that foreign  currency  assets and  liabilities be
translated using the exchange rates in effect at the balance sheet date. Results
of operations are translated using the average exchange rates prevailing  during
the period.  For purposes of SFAS No. 52, the Company considers the Dollar to be
the reporting  currency.  The effects of  unrealized  exchange  fluctuations  on
translating foreign currency assets and liabilities into Dollars are accumulated
as a cumulative translation adjustment which is included as a separate component
in  stockholders'  deficit.  Realized  gains and losses  from  foreign  currency
transactions are included in the results of operation for the period.


                                       9
<PAGE>
<TABLE>
<CAPTION>

NOTE 3:  ACCOUNTS RECEIVABLE, NET
------   ------------------------

         Accounts receivable consists of the following:



                                                      June 30,      December 31,
                                                        2004            2003
                                                    ----------------------------
Trade receivables                                   $      1,777    $      3,586
Less allowance for doubtful accounts                        (302)           (191)
                                                    ----------------------------
                                                    $      1,475    $      3,395
                                                    ============================

                  There were no write-offs during the six and three months ended
         June 30, 2004.



NOTE 4:  INVENTORY, NET
------   --------------

         Inventory is comprised of the following:


                                                     June 30,      December 31,
                                                       2004            2003
                                                   ----------------------------
                                                                   $        197
Finished goods                                     $         15
Work in process                                             153             266
Raw materials                                             1,174           1,015
                                                   ----------------------------
                                                          1,524           1,296
Less provision for obsolescence                            (424)           (207)
                                                   ----------------------------
                                                   $      1,100    $      1,089
                                                   ============================


NOTE 5:  PREPAID EXPENSES AND OTHER CURRENT ASSETS
------   -----------------------------------------

         Prepaid expenses and other current assets consist of the following:

                                                            June 30,     December 31,
                                                              2004           2003
                                                          ---------------------------
<S>                                                       <C>
Prepaid refundable deposit for equipment (a)              $      1,205   $       --
Prepaid refundable deposit for business development (b)          1,342           --
Prepaid vendor invoices                                            133            347
Deferred Development costs                                         200           --
Prepaid refundable deposit for acquisition candidate              --               71
Deferred legal and consulting fees                                 530            152
Prepaid rent                                                        60             71
Prepaid property tax                                              --               55
Prepaid insurance                                                   13            128
Sales tax receivable, net                                          157            132
Other prepaid expenses                                             130            133
                                                          ---------------------------
                                                          $      3,770   $      1,089
                                                          ===========================
</TABLE>



                                       10
<PAGE>

         (a)  The  Company's   subsidiaries  will  be  providing   manufacturing
technology  transition  consulting  services to the country of Cuba on behalf of
the United  Nations  Development  Program  ("UNDP").  Consulting  services to be
provided include the installation of manufacturing  facilities,  equipment,  and
systems to  manufacture  CFC-free or  hydrofluoroalkane  ("HFA")  aerosol  based
respiratory  inhalers  for the  treatment  of  asthma  and  chronic  obstructive
respiratory disease conditions.  As the parent company is a U.S. corporation and
because  certain  involved  members of the  Company's  management  team are U.S.
residents, to perform on the contract, the Company's subsidiaries require United
States government  business  authorizations and export permits to do business in
that developing  nation.  Due to political events or changes to U.S.  government
laws, the U.S. government may not continue to provide the Company's subsidiaries
with the necessary permits and authorizations they require to provide consulting
services in that  developing  country.  The  failure to receive or sustain  such
authorizations  or  permits  may have a  material  adverse  affect on any costs,
expenses, or prepaid fees and deposits that the Company and its subsidiaries may
have  incurred  or will incur in relation to this  consulting  contract,  or the
subsidiaries' abilities to continue to provide their services to that developing
country. Additionally, although the Company's subsidiaries will be paid directly
by the UNDP through a series of progress payments,  they are subject to risks of
doing business in a developing country,  including dealing with import or export
licensing  requirements;  difficulties  in  enforcing  aspects of the  Company's
subsidiaries'  contracts  with  the  UNDP  and  that  country;  difficulties  in
protecting intellectual property; unexpected changes in regulatory requirements;
legal uncertainty  regarding  liability,  tax, tariffs and other trade barriers;
foreign  exchange  controls and other currency risks;  inflation;  challenges to
credit and collections;  expropriation;  and local government instability,  war,
riots, insurrections and other political events.

         (b) The Company has commenced the  development  of its own  proprietary
pharmaceutical   products   for   respiratory,   dermatological,   topical   and
cardiovascular drug delivery applications.  The Company has not yet obtained the
required regulatory approvals to market such products



NOTE 6:  PROPERTY, PLANT AND EQUIPMENT, NET
------   -----------------------------------

         Property, plant and equipment consisted of the following:

                                                     June 30,      December 31,
                                                       2004            2003
                                                   ----------------------------
                                                                   $        546
Land                                               $        546
Buildings                                                 1,059           1,059
Machinery, equipment and office furniture                 3,541           3,524
Computer hardware & software                                 86              19
                                                   ----------------------------
                                                          5,232           5,148
Less accumulated depreciation                              (588)           (340)
                                                   ----------------------------
                                                          4,644           4,808

Computer hardware & software under capital lease            382             382
Less accumulated amortization                               (35)             (7)
                                                   ----------------------------
                                                            347             375

                                                   ----------------------------
                                                   $      4,991    $      5,183
                                                   ============================

         For the six and three months ended June 30, 2004 and 2003, depreciation
of property,  plant and equipment was approximately $248,000 (2003-$128,000) and
$110,000 (2003-$128,000) respectively.  Amortization for equipment under capital
leases was approximately  $28,000 (2003-$0) and $14,000  (2003-$128,000) for the
six and three months ended June 30, 2004 and 2003 respectively.


                                       11
<PAGE>
<TABLE>
<CAPTION>

NOTE 7:  DEFERRED FINANCING COSTS, NET AND OTHER ASSETS
------   ----------------------------------------------

         Deferred  financing  costs,  net and  other  assets  are  comprised  of
deposits on office space of $28,000 and deferred  financing  costs of $1,202,000
associated with the Company's issuance of equity and convertible debt securities
and other assets approximating  $17,000. For the six and three months ended June
30, 2004 and 2003, the  amortization of deferred  financing  costs  approximated
$200,000 (2003-$0) and $118,000 (2003-$0).



NOTE 8:  BORROWINGS UNDER REVOLVING LINE OF CREDIT
------   -----------------------------------------

         The  Company  has a  $6.5  million  revolving  line  of  credit  with a
financial institution,  which is renewable in December 2006. Advances under this
facility,  amounting  to  approximately  $6.5  million  at June  30,  2004,  are
collateralized by accounts  receivables based on an agreed formula and all other
assets of the  Company.  The Company has the option of paying  interest on these
borrowings in cash or by issuing common stock.  Interest on these  borrowings is
payable  monthly  at  prime  plus 3%  with a  minimum  of 7% on the  outstanding
balance.  As of June 30, 2004 the total amount of interest  outstanding  on this
note amounted to approximately $156,000. Subsequent to June 30, 2004 the Company
paid  approximately  $118,000 of the interest  and received a deferral  from its
lender for the remaining balance of accrued interest until August, 2004.



NOTE 9:  LONG TERM DEBT, NET OF CURRENT PORTION
------   --------------------------------------

         Long-term debt, net of current portion consists of the following:

                                                                                June 30,     December 31,
                                                                                  2004           2003
                                                                              ---------------------------
<C>                                                                           <C>            <C>
7% convertible term note due to financial institution, collateralized by      $      5,000   $      4,500
accounts receivable and other assets of the Company (a)

Uncollateralized 6% convertible promissory note due to customer,(b)                  4,013          4,013

Uncollateralized 18% demand notes due to stockholders, principal and
interest due on demand                                                                 100            100

Capital lease obligations, due to financial institutions, collateralized by
software and equipment, due in monthly installments of $14,000 including
interest of 10% to 27%, through 2006 (c)                                               233            309
                                                                              ---------------------------
                                                                                     9,346          8,922

Less current portion                                                                 1,063          1,483
                                                                              ---------------------------
Debt, net of current portion                                                  $      8,283   $      7,439
                                                                              ===========================
</TABLE>


(a)      The principal is due in monthly  installments  of $140,625  starting in
         April of 2004  through  November  of 2006,  while  interest  on  unpaid
         balances is payable monthly. The Company has the option to issue common
         stock in lieu of debt service payments at the then-market  price of the
         stock.  In  addition,  at the  option  of the  holder,  the debt may be
         converted  into common  stock at a fixed  conversion  price of $0.80 to
         $1.00 per  share.  In April  2004,  the  Company  received a thirty day
         waiver  from the holder on the first  principal  payment  due which was
         subsequently  further  extended to November 1, 2004.  In addition,  the
         total  amount of interest due on the note  amounting  to  approximately
         $160,000  as at June 30,  2004 has been  deferred to be paid in August,
         2004. As consideration  for the waiver of principle payment the Company
         agreed to issue a five  year  Common  Stock  Purchase  Warrants  to the
         financial  institution to purchase 695,000 shares of common stock at an
         exercise price of $0.81 per share.


                                       12
<PAGE>

         The principle  amount of this  collateralized  7% convertible term note
         was increased by another $500,000 on May 27, 2004. As consideration for
         the  increase  the  Company  issued a five year Common  Stock  Purchase
         Warrant to the  financial  institution  to  purchase  82,500  shares of
         common stock at exercise prices ranging from $1.00 to $1.40 per share.

         The principle  amount of this  collateralized  7% convertible term note
         was increased by another $500,000 on May 27, 2004. As consideration for
         the  increase  the  Company  issued a five year Common  Stock  Purchase
         Warrant to the  financial  institution  to  purchase  82,500  shares of
         common stock at exercise prices ranging from $1.00 to $1.40 per share.

(b)      Principal  is due in Great  Britain  Pounds,  on March 6,  2007,  while
         interest is payable  annually  commencing on March 7, 2004.  The holder
         has the option to convert  this note and any  accrued  interest  into 4
         million  shares of the Company's  common stock at any time before March
         6, 2007. Additionally, the holder has the first right of refusal, for a
         period  of four  years on any  additional  debt  financing  that may be
         required by the Company.  In March of 2004, the Company received,  from
         the holder, a waiver of the first annual interest payment  amounting to
         approximately  $240,000 in consideration of future product  development
         services.

(c)      The Company  leases  computers and furniture  under capital leases that
         expire at various dates through 2006.  The  recognition of these assets
         and liabilities in the accompanying financial statements did not result
         in cash payments by the Company. Interest rate ranging from 10% to 28%.

         As at June 30, 2004 and December 31, 2003,  the principal  installments
payable on the debt are as follows:

                                                       June 30,     December 31,
                                                         2004           2003
                                                     ---------------------------
 2004                                                $      1,063   $      1,483
 2005                                                       1,787          1,787
 2006                                                       2,483          1,639
 2007                                                       4,013          4013
                                                     ---------------------------
Total                                                $      9,346   $      8,922
                                                     ===========================


NOTE 10: SUBSEQUENT EVENTS
-------  -----------------

         On  July  1,  2004,  the  Company  entered  into a  strategic  alliance
agreement. Under the agreement, the Company will collaborate with its partner in
the identification, acquisition and development of intellectual property that it
may require to implement its business initiatives in the aerosol  pharmaceutical
and drug delivery sector. Pursuant to this agreement, in August 2004 the Company
issued 31,579 restricted shares of common stock.

         On July 1, 2004 the Company  received a payment  deferral until August,
2004 on the total amount of interest  outstanding  on the  borrowings  under its
revolving  line of credit of  approximately  $156,000 as at June 30,  2004.  The
Company also received from the same lender, a deferral,  until August,  2004, on
approximately  $160,000  interest due on its  convertible  note with the lender.
Subsequent to June 30, 2004 th Company has paid  approximately  $118,000 of that
interest.



                                       13
<PAGE>

         On July 1, 2004,  subsequent to a cancellation of 227,500 stock options
the Company granted an aggregate of 292,500  incentive  stock options.  The fair
value of these  options was estimated  using the  Black-Scholes  option  pricing
model, with the following weighted average assumptions;  risk free rate of 3.14,
volatility  factor of 0.66, and dividend yield of 0%. The fair value assigned to
these options approximated $139,000.

         On July 2, 2004, the Company  granted a total of 1,500,000  warrants to
an entity  related  to  Company's  Chairman,  and his  spouse.  These  five-year
warrants were granted pursuant to various business development services provided
to the Company and allow the holder to purchase  our common  stock at a price of
$0.90 per  share.  The fair  value of these  warrants  was  estimated  using the
Black-Scholes   option  pricing  model,  with  the  following  weighted  average
assumptions:  risk free interest rate of 3.14, a contractual life of four years,
volatility  factor of 0.66 and dividend  yield of 0%. The fair value assigned to
these warrants approximated $367,000.

         In  July,  2004,  the  Company  issued  promissory  notes to two of its
executives and an outside  Director,  amounting to $700,000 and bearing interest
of 7% per annum. As additional  consideration for the loans, the Company granted
a five-year warrant to the lenders to purchase an aggregate of 700,000 shares of
its common stock at a price of $0.80 per share.  Net proceeds  from these loans,
amounting to $695,000, were used for working capital purposes.

         On July  22,  2004,  the  Company  signed  a letter  of  intent  with a
European-based  specialty  pharmaceutical  company to acquire a patented,  novel
platform  technology  that  will  enable  the  Company  to  effectively  develop
inhalation-therapy  drugs,  including  combination  drugs,  delivered in aerosol
formats.  The  Company  is  presently  completing  its  due  diligence  on  that
intellectual  property  acquisition  and expects to complete the  transaction by
September 22, 2004.

         On July 30, 2004, the holder of the Company's $5.0 million  convertible
note,  extended  the  Company's  waiver  until  November  1, 2004  amounting  to
approximately  $563,000 due under that note. As  consideration  for that waiver,
the Company  agreed to issue the note holder a five-year  Common Stock  Purchase
Warrant to purchase  695,000  shares of its common stock at an exercise price of
$0.81 per share.

         On August 3, 2004, the Company  closed,  in a private  placement to six
institutional  investors,  the sale of 1,358,025  shares of its common stock for
$1.1  million.  Investors in the offering also  received  five-year  warrants to
purchase in the aggregate  1,358,025 shares of common stock,  which warrants are
exercisable  at an  exercise  price of $1.01 per share.  There is a  performance
feature  related to the warrants,  whereby  during the warrant term the exercise
price shall be increased by certain  percentage based on an agreed upon formula.
The warrants also contain certain  weighted average  anti-dilution  rights which
terminate at different time intervals.


NOTE 11: STOCKHOLDERS' EQUITY
-------  --------------------

         The stockholders'  equity  information  presented in these consolidated
financial  statements  reflect the retroactive  recognition of the effect of the
reverse acquisition transaction with Inyx Pharma. (See Note 1).

         In  January,  2004,  pursuant  to an  exercise  of 325,000  options the
Company  issued  200,000  shares of common  stock at $1.10 per share and  65,000
shares of common  stock at $1.20 per share,  in addition  the  Company  received
60,000 shares as partial  consideration  for this  exercise  which were returned
into treasury.

         During the six and three month periods ended June 30, 2004, the Company
recorded approximately $161,000 and $66,000 respectively,  of additional paid-in
capital resulting from stock options which vested during the period. This amount
is included in general and administrative expenses in the consolidated statement
of operations.


                                       14
<PAGE>
<TABLE>
<CAPTION>

         During the three months  period ended March 31, 2004 there were 495,000
warrants granted to a financial  institution in consideration for an increase in
its secured  revolving line of credit to the Company.  These five-year  warrants
allow the holder to purchase the Company's  common stock at prices  ranging from
$1.25 to $1.75 per share.  The fair value of these warrants was estimated  using
the  Black-Scholes  option  pricing  model with the following  weighted  average
assumption:  a risk free  interest  rate of 3.14%,  a  contractual  life of four
years,  a  volatility   factor  of  0.66,  and  a  dividend  yield  of  0%.  The
weighted-average  fair value of these warrants was $1.50.  The value assigned to
these  warrants  was  approximately  $369,000,  which was  recorded  as deferred
financing  costs  to be  amortized  over  the  three-year  term  of the  secured
revolving line of credit.  There were no warrants granted during the same period
in prior year.


         On  May  27,  2004  the  Company  recorded   approximately  $45,000  of
additional  paid in  capital  from the  issuance  of a five  year  Common  Stock
Purchase Warrant to a financial  institution as consideration  for an additional
loan of $500,000 under its  collateralized 7% convertible term note, to purchase
82,500 shares of common stock at exercise prices ranging from $1.00 to $1.40 per
share.  The fair value of these warrants was estimated  using the  Black-Scholes
option pricing model, with the following weighted average assumptions: risk free
interest rate of 3.14, a contractual  life of four years,  volatility  factor of
0.66 and dividend  yield of 0%. This amount was  recorded as deferred  financing
costs to be amortized over the three-year term of the secured  revolving line of
credit.

         On  May  11,  2004,  the  Company  recoded   approximately  $50,000  of
additional paid up capital resulting from the issuance of 100,000 stock purchase
warrants to a resigning  director as an  exchange  for  cancellation  of 350,000
stock options.  These Common Stock  Purchase  Warrants have an exercise price of
$1.20 per  share.  The fair  value of these  warrants  was  estimated  using the
Black-Scholes   option  pricing  model,  with  the  following  weighted  average
assumptions:  risk free interest rate of 3.14, a contractual life of four years,
volatility  factor of 0.66 and dividend  yield of 0%. This amount is included in
general and administrative expenses in the consolidated statement of operations



NOTE 12: ACCUMULATED COMPREHENSIVE LOSS

         The  accumulated  comprehensive  loss  reflected  in  the  Consolidated
Statements of Operations  represents  accumulated  foreign currency  translation
adjustments  associated  with the  conversion  of the Company's  United  Kingdom
subsidiary's  accounts to US dollars.  These amounts are not adjusted for income
taxes as they relate to an indefinite investment in a foreign subsidiary.



NOTE 13: OTHER EXPENSES

         Other expenses consisted of the following:

                                                        Six months ended June 30,    Three months ended June 30,
                                                           2004           2003           2004           2003
                                                       ---------------------------------------------------------
<S>                                                    <C>            <C>            <C>            <C>
Interest expense on debt                               $        478   $        159   $        264   $        159
Termination of agreement settlement (a)                         120           --              120           --
Reversal of goodwill - Acquisition costs (b)                   --            3,186           --            3,186
Shares issued for consulting fees                              --              799           --              799
Reversal of goodwill - Excess of purchase price over
     carrying value of assets acquired (b)                     --              707           --              707
Warrants issued for services                                     50            305             50            305
Settlement of claim(c)                                           27           --               27           --
Consulting fees                                                --               12           --               12
Interest expense - other                                         15           --                9           --
                                                       ---------------------------------------------------------
                                                       $        690   $      5,168   $        470   $      5,168
                                                       =========================================================
</TABLE>


                                       15
<PAGE>
<TABLE>
<CAPTION>

(a) On May 7, 2004 the Company  terminated its investment  banking  relationship
with its present investment banker. As termination fee the Company agreed to pay
$120,000,  plus eight percent interest on the outstanding  principal over twelve
months, commencing May 15, 2004.

(b) Summary of components of goodwill reversed during 2003 are as follows:

      <S>                                                                              <C>
      Reversal of goodwill-excess of purchase price over  assets acquired in
                  conjunction with acquisition of Miza UK                              $   707

      Reversal of goodwill - acquisition costs (included $1,884,000 paid in cash to
                   outside consultants for accounting, legal and appraisal fees and
                   $1,302,000 issued in stock for finders' fees )                        3,186

      Reversal of  additional paid-in capital arising from shares issued pursuant to
                  acquisition of Inyx Pharma                                             6,407

                                                                                       -------
                                                                                       $10,300
                                                                                       =======
      </TABLE>


(c) On June 20, 2004 the Company  settled a dispute a public  relations  firm to
avoid the costs and uncertainties of litigation.  As a result the Company agreed
to pay $40,000 which was partially applied to outstanding invoices.



NOTE 14: SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
                                                                      June 30,     December 31,
                                                                        2004           2003
                                                                    ---------------------------
<S>                                                                 <C>            <C>
Supplemental Disclosure of Cash Flow Information:
      Cash paid during the period for interest                      $         32   $        216
                                                                    ===========================
Supplemental Disclosure of Non-Cash Financing Activities:
      Conversion of shareholder debt into 100,000 shares of stock           --              100
                                                                    ===========================
      Shares issued for services                                            --              799
                                                                    ===========================
      Shares issued for finders fees                                        --            1,302
                                                                    ===========================
      Warrants issued for financing fees and services                        414          2,411
                                                                    ===========================
Supplemental Disclosure of Non-Cash Investing Activities:
     Capital leases                                                         --              309
                                                                    ===========================
</TABLE>



                                       16
<PAGE>
<TABLE>
<CAPTION>

                    PRO FORMA FINANCIAL STATEMENT INFORMATION

         The following condensed pro forma consolidated statements of operations
are based on the assumption  that the  acquisition of Inyx Pharma Limited ("Inyx
Pharma") took place as of January 1, 2003,  and includes the  operations of Miza
Pharmaceuticals (UK) Limited ("Miza UK"), the predecessor company to Inyx Pharma
for the period  from  January 1, 2002 to March 6, 2003.  On March 7, 2003,  Inyx
Pharma  acquired  the majority of the  operating  assets of Miza UK from a court
appointed  Administrator.  The  acquisition  did not include the  operations  of
Miza's  Biopharma  Division which have been eliminated for the purposes of these
pro forma statements.

                                   INYX, INC.
        Unaudited Pro Forma Condensed Combining Statements of Operations
                  For the Six Month Period Ended June 30, 2003
            (In thousands of U.S. dollars, except per share amounts)


                                                                                                                 Adjusted
                                                   Inyx,        Inyx       Miza UK     Combined    Pro Forma     Combined
                                                   Inc.        Pharma        (1)         Total      Adj. (2)       Total
<S>                                             <C>          <C>          <C>          <C>          <C>          <C>
Net revenues                                    $    --      $   5,068    $   2,730    $   7,798    $    (334)   $   7,464
Cost of sales                                        --          3,933        2,269        6,202         (393)       5,809

                                                -------------------------------------------------------------    ---------
Gross profit                                         --          1,135          461        1,596           59        1,655

Expenses:
   General and administrative expenses              1,651        1,094          568        3,313          (33)       3,280
   Selling expenses                                  --             96           51          147         --            147
   Depreciation and amortization                     --            128          228          356          120          476
   Management fees                                   (619)         619         --           --           --           --
                                                -------------------------------------------------------------    ---------
       Total operating expenses                     1,032        1,937          847        3,816           87        3,903
                                                -------------------------------------------------------------    ---------

Loss from operations before other expenses         (1,032)        (802)        (386)      (2,220)         (28)      (2,248)

Other expense:
   Administration expense                            --           --             55           55         --             55
   Acquisition costs                                1,996        1,897         --          3,893         --          3,893
   Shares issued for consulting                       799         --           --            799         --            799
   Consulting fee                                      12         --           --             12         --             12
   Warrants issued for services                       305         --           --            305         --            305
   Interest expense                                  --            159          176          335          253          588
                                                -------------------------------------------------------------    ---------
                                                    3,112        2,056          231        5,399          253        5,652
Loss before income tax benefit
  and discontinued operations                      (4,144)      (2,858)        (617)      (7,619)        (281)      (7,900)

Income tax benefit                                   --            288         --            288         --            288

Loss from discontinued operations, net of tax         (25)        --           --            (25)        --            (25)
                                                -------------------------------------------------------------    ---------

Net loss                                        $  (4,169)   $  (2,570)   $    (617)   $  (7,356)        (281)   $  (7,637)
                                                =============================================================    =========
</TABLE>


(1) Results  of  predecessor  company,  Miza UK,  including  the  operations  of
    Biopharma division which was not included in the acquisition

(2) Interest  and  depreciation  expense  are  adjusted  to reflect  the charges
    related  to pro forma  debt and net fixed  assets as of the  closing  of the
    asset acquisition. The activity relating to Biopharma division which was not
    included in the acquisition is eliminated




                                       17
<PAGE>

Item 2.  Management's Discussion and Analysis or Plan of Operations

         The financial  information set forth in the following discussion should
be read in  conjunction  with,  and  qualified in its entirety by the  Company's
consolidated  financial statements and related notes appearing elsewhere in this
report.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

         Statements  that are not  historical  facts included in this report are
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation  Reform Act of 1995 that involve risks and  uncertainties  that could
cause actual results to differ from projected  results.  Such statements address
activities, events or developments that the Company expects, believes, projects,
intends or  anticipates  will or may  occur,  including  such  matters as future
capital, business strategies,  expansion and growth of the Company's operations,
cash flow,  marketing of products and services,  and development of new products
and  services.  Factors  that could cause  actual  results to differ  materially
("Cautionary  Disclosures")  are described  throughout  this report.  Cautionary
Disclosures include, among others: general economic conditions,  the markets for
and market price of the Company's  products and services,  the Company's ability
to find,  acquire,  market,  develop and produce new products and services,  the
strength and  financial  resources of the Company's  competitors,  the Company's
ability to find and retain skilled personnel, labor relations,  availability and
cost of material and equipment, the results of financing efforts, and regulatory
developments  and compliance.  All written and oral  forward-looking  statements
attributable  to the Company are  expressly  qualified in their  entirety by the
Cautionary Disclosures. The Company disclaims any obligation to update or revise
any  forward-looking  statement  to reflect  events or  circumstances  occurring
hereafter or to reflect the occurrence of anticipated or unanticipated events.

GENERAL

         Inyx,  Inc.   ("Inyx"  or  the  "Company")   through  its  wholly-owned
subsidiaries,  Inyx Pharma Limited ("Inyx Pharma") and Inyx Canada,  Inc. ("Inyx
Canada"), is a specialty  pharmaceutical  company. We focus our expertise on the
development and manufacture of prescription and over-the-counter ("OTC") aerosol
pharmaceutical  products and drug  delivery  technologies  for the  treatment of
respiratory, allergy, cardiovascular, dermatological and topical conditions. Our
client base primarily consists of ethical pharmaceutical  corporations,  branded
generic pharmaceutical  distributors,  and biotechnology companies. We depend on
our customers'  distribution  channels or strategic  partners to market and sell
the pharmaceutical products we develop and manufacture for them.

         We  intend  to  expand  our  product   development  and   manufacturing
activities into our own lines of prescription and OTC  pharmaceutical  products,
but as of June 30,  2004,  we had not yet  commercialized  or  marketed  our own
products or drug delivery applications.  Additionally, a material element of our
growth  strategy  is to expand  our  existing  business  through  the  strategic
acquisition of pharmaceutical  products and drug delivery  technologies that are
complementary with our expertise in the aerosol pharmaceutical sector.

         Our Company was incorporated  under the laws of Nevada in March 2000 as
Doblique,  Inc. ("Doblique").  In July 2002, we became a publicly-traded company
when  we  completed  a  registration  statement  for the  sale by our  principal
stockholder of 2,450,000 shares of common stock.  Since July 2002, we have filed
annual,  quarterly  and  periodic  reports  with  the  Securities  and  Exchange
Commission pursuant to Section 15(d) of the Securities Exchange Act of 1934.

         Prior to March 2003,  Doblique was in the business of owning and racing
thoroughbred  horses at various major horse racing tracks  throughout the United
States.  In March 2003,  Doblique's  assets were sold for cash to a third party,
and the Company  discontinued  the business of breeding and racing  thoroughbred
race horses.  Then, on March 26, 2003, we announced that Doblique's  controlling
stockholder at the time had accepted an unsolicited  offer to sell a controlling
block of 2,250,000 shares of common stock, representing approximately 45% of the
Company's  then  issued  and  outstanding  shares,  to Medira  Investments,  LLC
("Medira"),  which later conveyed these shares to its sole member,  Ms. Viktoria
Benkovitch,  our  Chairman's  and CEO's spouse.  At that time, we also announced
that, through Doblqiue, we would pursue strategic investment  opportunities in a
number of sectors within the  pharmaceutical,  biotechnology and medical devices
industries.


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<PAGE>

Acquisition of Inyx Pharma

         On April 28, 2003, we acquired all of the outstanding  common shares of
Inyx  Pharma  (the  "Inyx  Pharma  Transaction"),   an  aerosol   pharmaceutical
manufacturing  company  incorporated  under the laws of England and Wales,  in a
transaction  accounted  for as a  reverse  acquisition  of our  Company  by Inyx
Pharma.  In that  transaction,  we exchanged 16 million of our common shares for
all the  outstanding  and  issued  shares  of Inyx  Pharma.  As a result of such
transaction,  the  stockholders  of  Inyx  Pharma  became  our  controlling  and
principal stockholders, owning approximately 64% of our outstanding stock at the
time;  Inyx Pharma became our  wholly-owned  subsidiary;  and on May 6, 2003, we
changed our name to Inyx, Inc.

         As a result of our reverse  acquisition of Inyx Pharma,  we now operate
in one business segment, the development, commercialization and manufacturing of
aerosol drug delivery pharmaceutical products.

         We  believe   that  we  can  improve  our  revenue  and   profitability
opportunities through the addition of our own proprietary pharmaceutical product
lines,  which would offer  greater  profit  margins  than those  provided by our
contract  manufacturing  services.  Proprietary  products that we presently have
under   development   are   for   respiratory,   dermatological,   topical   and
cardiovascular drug delivery  applications.  These products include metered dose
inhalers,  nasal pumps, topical aerosols, wound care sprays, and oral sprays. We
are  primarily  focusing  our  efforts  on generic  versions  or  extensions  of
established  non-patented  products and products that will be coming off patent,
or those barrier  delivery  systems that overcome present product and propellant
incompatibility  and consumer use issues in the aerosol  pharmaceutical  sector.
While we do not currently derive any revenues from the sale of our own products,
it is  anticipated  that our  first  proprietary  product,  a wound  care  spray
utilizing a barrier delivery system should be ready for commercial  marketing in
2005. We plan to distribute our proprietary  products through our own customers'
distribution  channels or in collaboration  with strategic  marketing  partners,
although  we do not as of yet  have  any  distribution  agreements  for  our own
products completely finalized.

Recent Developments

         Since our reverse  acquisition  of Inyx Pharma,  we have been  actively
marketing  to our  customer  base and  expect  that the  manufacturing  capacity
utilization  at our Inyx  Pharma  operation  will  continue  to  increase as new
customer  contracts  and purchase  orders  commence.  Additionally,  although we
continue to add new  manufacturing  and product  development  customers,  it has
taken  time to  start-up  a number of new client  projects  due to the  required
regulatory or business approvals, lead times required for critical raw materials
and  components in the  pharmaceutical  aerosol  sector,  and as a result of the
production commissioning and validation processes involved in the pharmaceutical
manufacturing industry.

         We have recently made a number of announcements  regarding key business
development  milestones  that  should  start  to  materially  contribute  to our
revenues and profitability improvement during the second half of 2004.

         On  April  26,  2004,  we  announced  that we had  acquired  a group of
parenteral    pharmaceutical    products   (i.e.   injectable   and   irrigation
pharmaceuticals  that are  administered  intravenously)  enabling the Company to
enter the hospital  supply  market in the United  Kingdom.  These  licenses were
acquired for a nominal fee from a U.K. Administrator (equivalent to a Chapter 11
bankruptcy  trustee  in the  U.S.)  and  give us the  exclusive  production  and
distribution  rights in the U.K. for these  products,  although  there are other
companies with similar products in this market area. We are presently attempting
to identify an appropriate  strategic  partner to help us with the manufacturing
and  distribution  of these  products.  Although we do not expect to receive any
revenues  from sale and  marketing of these  hospital  products  until 2005,  we
believe that this acquisition  broadens our product portfolio and will therefore
help  enhance  our  competitive  position in the U.K.  specialty  pharmaceutical
market.



                                       19
<PAGE>

         On May 11, 2004,  we announced  that we had received a major  follow-on
order for 460,000 units of beclomethasone dipropionate (BDP) aqueous nasal spray
from one of our largest customers, a leading pan-European generic pharmaceutical
company.  Then,  on June 1, 2004,  we  announced  that we had  received a second
follow-on  order from the same  customer  for  435,000  additional  units of BDP
aqueous nasal spray. As a result of lead times  associated with the receipt of a
critical  valve required to  manufacture  these nasal sprays,  we were unable to
commence  production  of the BDP nasal spray until the third quarter of 2004. We
believe that we will be able to manufacture,  test and deliver these products to
our customer by the end of 2004,  which  should  contribute  approximately  $1.6
million in net revenues over the third and fourth quarters of 2004.

         On May 26, 2004, we announced that Ulrich Bartke,  Ph.D. will join Inyx
on June 1, 2004 in the newly  established,  senior  management  position of Vice
President  Global  Sales  &  Marketing.   Initially,   Mr.  Bartke,   our  first
professional  marketing  executive  is  focusing  on  building  Inyx's  contract
manufacturing  revenues and increasing the  utilization of production  capacity,
with the  objective  to  increase  sales and  profitability.  Our  manufacturing
capacity is presently  significantly  underutilized;  we are currently operating
our  manufacturing  facilities at an average  utilization rate of 20-25%,  which
increases  our cost of goods on a per unit basis as a result of the lower  fixed
overhead absorption rate. To help grow our revenues, Mr. Bartke is also striving
to cultivate  strategic  marketing  relationships with key clients to handle the
distribution of Inyx's own proprietary products, which we are now developing and
plan to start to introduce into U.S. and European markets by 2005.

         On June 14, 2004, we announced that we plan to commercially  launch, in
2005, our first proprietary  product, a wound care irrigation  treatment that is
utilizes barrier-pack  technology.  This technology enables sustained 360-degree
spraying with no loss of propellant while allowing a hermetical seal between the
product and propellant,  therefore overcoming any incompatibility issues between
the active product and the propellant.  This new-generation  wound spray is part
of our strategic initiative to competitively position ourselves as a specialized
pharmaceutical  company.  We are currently in discussions with several potential
strategic  marketing partners to handle the distribution of this product both in
Europe and U.S. markets, under a joint-venture agreement.

         On June 29,  2004,  we  announced a new contract  with  AstraZeneca  AB
("AstraZeneca")  to  assist  them  with  the  development  and  production  of a
non-ozone depleting  hydroflouralkane  (HFA) version of AstraZeneca's  Pulmicort
(Budefonide)  asthma spray for European markets.  AstraZeneca had been marketing
the  chlorofluorocarbon  ("CFC") version of Pulmicort in Europe until CFC's were
banned in that market due to the Montreal Protocol.  The Montreal Protocol is an
international agreement signed by 180 countries (both developed and undeveloped)
designed to eliminate the production and  consumption of substances that deplete
the  stratospheric  ozone  layer,  including  the  reduction of the use of CFC's
within the pharmaceutical  industry.  The AstraZeneca  agreement is a multi-year
contract with an initial term of three and a half years.  Commercial  production
is planned to commence in early 2005 and we expect to receive approximately $6.5
million in annual  revenues  based on  current  production  targets.  This is in
addition  to a contract  development  service fee that we are  receiving  in the
second half of 2004 for  preparing  the  HFA-Pulmicort  product  for  commercial
production.

         During the second half of 2004 and beyond, we will continue to focus on
strengthening and growing our  pharmaceutical  aerosol contract  development and
manufacturing  operations,  where we believe that, in addition to the conversion
of CFC  inhalers to non-ozone  depleting  HFA  products,  a second major area of
potential  growth  is a  result  of our  proprietary  hydrocarbon  aerosol  foam
expertise.

         Hydorcarbon    aerosol   foams   are    corticosteroids    or   similar
anti-inflammatory  agents,  which are kept under  pressure  in a can with liquid
hydrocarbons  (normally a mixture of propane,  iso-butane  and  butane).  As the
product is dispensed and released from the can, the  hydrocarbons  spontaneously
vaporize,  turning the  resulting  mixture  into a foam or mousse,  allowing the
active drug to be more readily absorbed into the skin. Hydrocarbon foam products
can be advantageous for dermatological and topical  applications where rubbing a
cream or ointment  into an affected  skin area may cause  further  inflammation,
discomfort or spread the  condition.  In 2003,  we signed a five-year  exclusive
agreement with Stiefel Laboratories, Inc. ("Stiefel") to develop and manufacture


                                       20
<PAGE>

for them a number of hydrocarbon  aerosol foam generic  pharmaceutical  products
for global markets.  Headquartered in Coral Gables,  Florida,  Stiefel is one of
the  largest  privately-held  dermatology  companies  in the  world.  Stiefel is
focused  on branded  generic  pharmaceutical  products,  and  markets  and sells
products   through  its  own  sales  force.   Stiefel   also   markets   generic
pharmaceuticals  and consumer health  products  through its Glades  Division,  a
wholly-owned  subsidiary.  In addition to our exclusive agreements with Stiefel,
they also  invested  approximately  $4 million into our company in the form of a
convertible loan.

         Our  other  key area of new  business  focus  will  continue  to be the
development  of  our  Company's  own  proprietary  pharmaceutical  products  for
respiratory,   dermatological,   topical  and   cardiovascular   drug   delivery
applications,  to be  marketed  and sold  through  our  customers'  distribution
channels or with strategic marketing partners.

CRITICAL ACCOUNTING POLICIES

         Our  accounting  policies  are  disclosed in Note 2 to the Notes to the
Consolidated  Financial  Statements  in our Annual Report on Form 10-KSB for the
year ended December 31, 2003. We consider the following policies to be important
to our financial statements.

Revenue Recognition

         The  Company  recognizes  revenue  when (1)  persuasive  evidence of an
arrangement exists; (2) product delivery has occurred or services rendered;  (3)
the fee is fixed or  determinable;  and (4)  collection is  reasonably  assured.
Revenues are recognized FOB (Freight-on-Board) shipping point, when products are
shipped,  which  is when  legal  title  and risk of loss is  transferred  to the
Company's customers, and is recorded at the net invoiced value of goods supplied
to customers  after  deduction of sales discounts and sales and value added tax,
where applicable. In situations where the Company receives payment in advance of
the performance of research and development services,  such amounts are deferred
and recognized as revenue as the related services are performed.

         Non-refundable  fees are  recognized  as  revenue  over the term of the
arrangement,  based on the percentage of costs incurred to date, estimated costs
to  complete  and total  expected  contract  revenue.  Product  returns  are not
accepted.

         Shipping  costs are paid for by the Company's  customers.  Any shipping
and handling  costs  incurred by the company are included in costs of goods sold
in the accompanying consolidated statements of operations.

Translation of Foreign Currency

         The functional currency of our Company's U.K.  subsidiary,  Inyx Pharma
Ltd.,  is the Great  Britain  Pound.  Our  Company's  financial  statements  are
reported  in  United  States  Dollars  and are  translated  in  accordance  with
Statement of Financial  Accounting Standards No. 52, which requires that foreign
currency assets and liabilities be translated using the exchange rates in effect
at the balance  sheet  date.  Results of  operations  are  translated  using the
average  exchange rates prevailing  during the period.  For purposes of SFAS No.
52, we  consider  the  dollar  to be the  reporting  currency.  The  effects  of
unrealized  exchange  fluctuations  on translating  foreign  currency assets and
liabilities into Dollars are accumulated as a cumulative  translation adjustment
in  stockholders'  deficit.  Realized  gains and losses  from  foreign  currency
transactions   are  included  in  the  results  of  operation  for  the  period.
Fluctuations arising from inter-company  transactions are of long term in nature
and are accumulated as cumulative translation adjustments.

         As of June 30, 2004, we had not utilized any currency-hedging programs.
However, as we intend to continue to utilize US-based financing sources,  and as
the  significant  majority  of our  revenues  are in  Pounds  Sterling,  we have
established a commercial  banking  relationship with a major US-based  financial
institution that will also provide us with  currency-hedging  advisory  services
including our  participation  in  currency-forward  contracts for the purpose of
mitigating  foreign exchange losses. We believe that we will be in a position to
commence utilizing such currency-hedging services by the end of 2004.


                                       21
<PAGE>

RESULTS OF OPERATIONS

THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2004 and 2003

Consolidated Results

         The  accompanying   consolidated  financial  information  includes  the
accounts  of  Inyx,  Inc.  and  its  wholly-owned  subsidiaries,   Inyx  Pharma,
incorporated  under the laws of England  and  Wales;  Inyx  Canada,  formed as a
federally  incorporated  Canadian  corporation;  and Inyx  Realty,  Inc.  ("Inyx
Realty"),  a Florida  corporation  through  April 14,  2004.  All  inter-company
accounts and transactions have been eliminated in consolidation.

         On April 14, 2004, Inyx Realty,  which we established solely to operate
a corporate office lease in Miami Florida, was acquired by First Jemini Trust, a
discretionary  family  trust  in  which  our  Chairman/CEO  and his  spouse  are
beneficiaries.  As a result,  as of April 14, 2004,  Inyx Realty was no longer a
subsidiary of our Company and all of Inyx's obligations relating to Inyx Realty,
primarily an office lease in Miami, have been terminated.

         Prior to our acquisition of Inyx Pharma,  we were a public company with
nominal  operations and assets, as we had divested all prior operations,  namely
our thoroughbred horse business,  conducted as Doblique,  therefore  designating
our  Company  as a  non-operating  public  shell.  As a result,  the  timing and
reporting of our  acquisition  of Inyx Pharma is such that the  substance of the
discussion centering on our actual comparative results, for the three months and
six months ended June 30, 2003, is primarily in reference to  approximately  two
months of  operations  commencing on April 28, 2003 and ending on June 30, 2003.
Therefore, a more extensive comparative analysis of the Company's operations for
those three and six months ended June 30,2003 can be found in those  sections of
this  discussion  and analysis  dealing  with  comparative  pro forma  financial
statement information.

         Additionally,  as noted above,  our single  largest  shareholder at the
time of our reverse acquisition of Inyx Pharma was Viktoria Benkovitch, the wife
of our Chairman and CEO (Dr. Jack Kachkar),  who owned  approximately 45% of our
Company.  At that time, Ms.  Benkovitch and Dr.  Kachkar,  were also  non-voting
beneficiaries  of the JEM Family Trust, a discretionary  family trust that owned
approximately 48% of Inyx Pharma.

         As a consequence of these circumstances, our acquisition of Inyx Pharma
was accounted for as a capital  transaction,  recorded at the carrying  value of
the underlying net assets acquired with no recognition of goodwill.

Pro Forma Results

         On March 7, 2003, Inyx Pharma had acquired the majority of the business
assets of Miza  Pharmaceuticals  (UK) Limited ("Miza UK") out of  Administration
(the  U.K.   equivalent  of  Chapter  11   reorganization   protection)  from  a
court-appointed  Administrator.  Additionally,  under  United  Kingdom  law, the
Administrator operates and controls a business that has gone into Administration
on behalf of a court  until that  business  is sold as a going  concern,  or its
assets sold or liquidated for the benefit of the creditors. Miza UK was operated
and  controlled by its  Administrator  from  September 3, 2002, the date it went
into  Administration,  until March 7, 2003, the date the Administrator  sold the
majority  of its  assets  to Inyx  Pharma.  As a  result  of the  administration
process, at the time of its acquisition of Miza UK's assets, Inyx Pharma and its
shareholders  did not directly or  indirectly  own or control Miza UK,  although
prior to September 3 2002, Dr.  Kachkar was a director and indirect  shareholder
of Miza UK.

         Therefore, Miza UK's results for the period January 1, 2003 until March
6, 2003, while it was still controlled, operated and managed by an Administrator
are shown herein in the pro forma statements,  only for comparative purposes and


                                       22
<PAGE>

not as our own  historical  results.  Prior to its  acquisition of Miza UK, Inyx
Pharma had no business operations. Therefore, the acquisition of Miza UK by Inyx
Pharma was accounted for as a business  combination  with a non-operating  shell
company.  As a consequence,  as noted above, our comparative  historical results
are presented from April 28, 2003,  the date of our reverse  acquisition of Inyx
Pharma  while  the  results  prior  to this  date  are  those  of Miza UK as the
predecessor company to Inyx Pharma and presented only in the pro forma condensed
combining statements of operations, for comparative purposes.

         Additionally, for the comparative pro forma six month period ended June
30, 2003, operations relating to the business of the former Doblique,  now Inyx,
have been  eliminated  from the pro forma  statements as if the  divestiture  of
assets and  liabilities  and the  discontinuance  of the  Doblique  thoroughbred
business operation occurred on January 1, 2003.

         Through  the  Miza  UK  purchase,  Inyx  Pharma  acquired  one  aerosol
pharmaceutical  manufacturing  site  (the  Miza  UK  Aerosols  Division)  and  a
pharmaceutical  product development operation (the Miza UK Development Division)
in England. Prior to the sale to Inyx Pharma, Miza UK's operations also included
another pharmaceutical manufacturing operation (the Miza UK Biopharma Division).
The business  assets of the  Biopharma  Division  were excluded in Inyx Pharma's
Miza UK asset purchase.

         As the Biopharma  business was part of Miza UK but not acquired by Inyx
Pharma on March 7, 2003,  its results of operation are included in Miza UK's pro
forma historical results for the period January 1, 2003 until March 6, 2003. For
comparative  purposes,  we have also shown  results for the pro forma six months
ended June 30, 2003 without the Biopharma  Division,  as this comparison is more
indicative of the type of results Inyx Pharma would have had, if it had acquired
Miza UK's assets on January 1, 2003 rather than on March 7, 2003.

         For the six months ended June 30, 2003,  Miza UK's  Biopharma  Division
had net  revenues of  approximately  $334,000  and costs of revenue of $393,000,
resulting in a gross loss of approximately  $59,000. Other than selling expenses
of $33,000, the Biopharma division had no other costs associated with it for the
six months  ended June 30,  2003,  as all other  costs were  centralized  by the
Administrator.

         As  noted  above,  prior  to its  acquisition  of the  majority  of the
business  assets of Miza UK, Inyx Pharma had no  business  operations,  thus the
acquisition  of  Miza  UK was  accounted  for  as  business  combination  with a
non-operating shell company.  Therefore, the assets acquired by Inyx Pharma were
recorded at book value without the  recognition of goodwill.  Transaction  costs
incurred in this transaction,  consisting  primarily of legal costs,  consulting
and finders' fees, were expensed on the date of the transaction.

NET REVENUES

         Net   revenues   for  the  three   months  ended  June  30,  2004  were
approximately  $2.8  million as compared to  approximately  $5.1  million in net
revenues for the three months  ended June 30,  2003.  Net revenues  decreased by
approximately 2.3 million or approximately  45% between the comparative  periods
primarily due to delays beyond our control in the  commencement or completion of
a number of contract  development and multi-year  manufacturing  contracts,  and
purchase orders.  As explained  below,  these contracts and purchase orders have
been delayed into the second half of 2004.

         Total  net  revenues  for the six  months  ended  June  30,  2004  were
approximately  $7.3  million as compared to  approximately  $5.1  million in net
revenues for the six months ended June 30, 2003, and approximately  $7.8 million
in net  revenues for the  comparative  pro forma six month period ended June 30,
2003.  Excluding the Biopharma Division,  which was not acquired by Inyx Pharma,
net revenues for the  comparative pro forma six month period ended June 30, 2003
amounted to approximately $7.5 million.



                                       23
<PAGE>

         In comparison  to the six months ended June 30, 2003,  net revenues for
the six months ended June 30, 2004 increased by approximately $2.2 million or by
approximately  44%.  This  increase  is  attributable  to a full six  months  of
operations  during  the six  month  reporting  period  in 2004  as  compared  to
approximately  two months of operations during the six month reporting period in
2003, as we completed our reverse  acquisition  of Inyx Pharma on April 28, 2003
(after it had completed  its  acquisition  of the business  assets of Miza UK on
March 7, 2003). Prior to its acquisition of the business assets of Miza UK, Inyx
Pharma had no business operations.

         As a result of the noted deferral of a number of customer contracts and
purchase orders during the three months ended June 30, 2004 into the latter half
of 2004,  net  revenues  for the six months  ended June 30,  2004  decreased  by
approximately  $500,000  or  approximately  6% as  compared to the pro forma six
month period ended June 30, 2003, and by approximately $200,000 or approximately
3% as compared to the pro forma six month period  ended June 30,  2003,  when we
exclude the Biopharma Division.

         For the six months ended June 30,  2004,  our three  largest  customers
accounted for approximately $3.7 million in net revenues or approximately 52% of
total net  revenues.  During the six months ended June 30,  2004,  our top three
customers were the Merck Generics group of companies ("Merck Generics"), a large
international  generic drug marketing and distribution  company,  accounting for
approximately  $1.9  million in net revenues or  approximately  27% of total net
revenues for the six month period;  SSL International Plc ("SSL") accounting for
approximately  $960,000  in net  revenues  or  approximately  13% of  total  net
revenues for the six month period;  and Genpharm Inc.  ("Genpharm"),  accounting
for  approximately  $873,000 in net revenues or  approximately  12% of total net
revenues.

         In  comparison,  for the six months ended June 30, 2003,  our top three
customers  accounted for approximately  $2.2 million or approximately 44% of our
total  net  revenues.   These  customers  were  Merck  Generics  accounting  for
approximately  $1.3  million in net revenues or  approximately  25% of total net
revenues  for  the  reporting  period;  Genpharm  accounting  for  approximately
$595,000 in net  revenues or  approximately  12% of total net  revenues  for the
reporting period;  and Convatec Limited  accounting for $345,000 in net revenues
or approximately 7% of total net revenues for the reporting period.

         The  loss of any one of our top  three  customers,  particularly  Merck
Generics,  would have a material  adverse  affect on our Company's  revenues and
profitability  opportunities.  As part of our strategic growth objectives in the
contract  manufacturing  area,  we are  continuing  our  efforts to broaden  our
customer base and to generate revenues from our own product  development program
to mitigate  the risk of our  economic  dependence  on any one  client.  We also
believe that by utilizing  our  existing or  potential  customers'  distribution
channels  to  distribute  our  own  proprietary  products,  we can  broaden  and
strengthen our relationship with such clients.

         Our  revenues  are now derived from  pharmaceutical  manufacturing  and
associated product formulation and development  outsourcing services,  including
product stability,  commercial  scale-up,  and validation and regulatory support
for our  clients'  products.  These  contract  revenues are  dependant  upon our
clients' maintaining or obtaining the necessary regulatory approvals and product
specifications  for  the  commercialization  of  their  products  in  designated
markets,  and our  vendors/suppliers  being able to provide us with required raw
materials and components to manufacture our clients'  products on a timely basis
and in line with our customers' requirements and demands.

         For the  three  months  ended  June 30,  2004,  we  experienced  delays
totaling  approximately $1.7 million in expected customer  revenues,  which have
been delayed into the second half of 2004. This includes  approximately $800,000
in development  revenues  because two of our major customers did not receive the
regulatory  and business  approvals  they required to commence their HFA metered
dose inhaler  commercialization  projects until July,  2004, while a third major
customer   experienced   technical   delays  in  the   introduction   of  a  new
dermatological  product formulation that have now been rectified.  Additionally,
approximately  $900,000 of expected manufacturing revenues were delayed into the
second half of 2004  because  vendor  production  lead times and quality  issues
caused delays in the receipt of critical product components  (including specific
types of cans,  valves  and  actuators)  that were  required  for nasal pump and
nitrogen-propelled  aerosol  products planned for production and delivery during
the three months ended June 30, 2004. We have now resolved the majority of these
issues with our vendors, and have commenced manufacturing these products for our
customers.


                                       24
<PAGE>

         As a result of such  delays,  net  revenues  for the three months ended
June 30, 2004 amounted to approximately $2.8 million as compared to targeted net
revenues for the quarter of approximately  $4.5 million,  while net revenues for
the six months ended June 30, 2004  totalled  approximately  $7.3 as compared to
targeted net revenues for the six month period of approximately  $9 million.  We
now expect to receive these delayed revenues during the second half of 2004.

         Our contract manufacturing  revenues and, therefore,  our manufacturing
capacity  utilization  must  continue  to  increase  in order  for us to  become
profitable,  especially as we have not yet  commercialized  our own  proprietary
pharmaceutical  products, which we believe will significantly add to our revenue
base and profitability opportunities in the future.

         With this in view, we expect that our significant  proven  expertise in
converting  from  CFC to  CFC-free  aerosol  pharmaceuticals,  particularly  the
production of HFA  non-ozone-depleting  aerosol pharmaceutical  products such as
respiratory metered dose inhalers (MDIs), should generate increasing business as
the Montreal Protocol banning  ozone-depleting CFC pharmaceuticals  continues to
be  implemented  by countries  around the world.  We are  currently  assisting a
number of our clients with the transition to non-CFC based respiratory  inhalers
and, as noted earlier, have commenced developing and manufacturing such inhalers
at our Inyx Pharma production  facility.  Despite the delays we have experienced
as a result of our  customers'  obtaining  the required  regulatory  or business
approvals to commence  such HFA projects  with us, we expect  revenue  levels to
increase in this area as more and more pharmaceutical  companies are required to
convert their respiratory MDIs to CFC-free products.

         Additionally, we believe that based on our proprietary expertise in the
development and manufacturing of hydrocarbon aerosol pharmaceutical products for
dermatological and topical applications,  we will see significant revenue growth
in this sector as the use of non-CFC foam based products continues to grow. This
is being driven by the trend to convert  conventional cream or lotion treatments
into aerosol foam or mousse  formulations,  which better penetrate the skin and,
in turn, provide faster medication as well as do not leave any greasy residue on
skin or clothing as compared to traditional ointments.

         As  we   continue  to  evolve   into  a  fully   integrated   specialty
pharmaceutical  company, we believe that our revenues can grow not only from our
contract  manufacturing and development services,  but also from the sale of our
own proprietary  pharmaceutical  products,  which may also  potentially  provide
royalty and licensing fees from potential product distributors or licensees.  We
expect that our first proprietary product will be ready for commercial marketing
by the first half of 2005.

COST OF SALES

         Cost  of  sales  for  the  three   months  ended  June  30,  2004  were
approximately  $2.9 million or approximately 104% of net revenues as compared to
approximately  $3.9 million or  approximately  78% of net revenues for the three
months ended June 30, 2003.

         The total  cost of sales for the six months  ended  June 30,  2004 were
approximately  $6.8  million  or  approximately  93% of total  net  revenues  as
compared to cost of sales of approximately  $3.9 million or approximately 78% of
net  revenues for the six months ended June 30,  2003,  and  approximately  $6.2
million or  approximately  80% of net revenues for the comparative pro forma six
month period ended June 30, 2003. Excluding the Biopharma Division,  the cost of
sales for the  comparative  six month  period  ended June 30,  2003  amounted to
approximately $5.8 million or approximately 78% of net revenues.

         The  increase  of the cost of sales for the three and six months  ended
June 30,  2004,  as  compared to the costs of sales for the three and six months
ended  June  30,  2003,  is  primarily  a  result  of  the  noted  delay  in the
commencement or completion of a number of  manufacturing  contracts and purchase



                                       25
<PAGE>

orders  during the  reporting  periods.  These delays  resulted in a significant
decrease in manufacturing capacity utilization,  thereby reducing fixed overhead
cost  absorption  (such as labor and plant  maintenance,  operating  and quality
support costs) at our Inyx Pharma manufacturing and development facilities,  and
therefore  concomitantly  increasing  our  production  costs as a percentage  of
revenues.

         Our costs of sales are associated  with  manufacturing  and development
revenues,  and include  materials,  labor,  factory overheads and other internal
costs including  purchasing and customer  service costs, and quality control and
quality assurance regulatory support.

         We expect our cost of sales as a  percentage  of revenues to be reduced
from present  levels as more  manufacturing  contracts  and purchase  orders are
initiated,  especially in the HFA and hydrocarbon  manufacturing  areas where we
have  signed  a  number  of  new  customer  contracts,  thereby  increasing  the
utilization of our manufacturing  capacity from present levels. We are currently
operating our manufacturing  facilities at an average utilization rate of 20-25%
but have  targeted  at  least a 40-45%  utilization  rate in 2005  which  should
materially  reduce our cost of sales on a per unit basis and  therefore  improve
our operating margins.

Research and Development Costs

         Research and development costs for the three months ended June 30, 2004
were approximately  $112,000 or approximately 4% of net revenues. In comparison,
we did not incur research and development  costs for the three months ended June
30, 2003.

         Total research and development  costs for the six months ended June 30,
2004  were  approximately  $400,000  or  approximately  5% of net  revenues.  In
comparison,  we did not incur any research and development  costs for either the
actual or pro forma six month periods ended June 30, 2003.

         As part of our  strategy  to  evolve  into a  specialty  pharmaceutical
company with its own proprietary products, we have started to incur research and
development costs as part of our cost of sales. These costs include intellectual
property  development  costs,  salaries for required  technical  staff,  fees to
consultants, and costs associated with the use of external laboratory facilities
as may be required. We believe that even though product research and development
costs may increase our cost of sales in the short term, in the long term,  these
costs  should  be  offset  by  the  higher  profit  margins   derived  from  the
manufacturing  and  sale of our own  proprietary  products  as  compared  to the
operating margins of our contract manufacturing services.

         We   are   focusing   our   research   and   development   efforts   on
inhalation-therapy  drug delivery devices and methods,  and generic prescription
and   over-the-counter   aerosol   pharmaceutical   products  for   respiratory,
dermatological  and topical,  and cardiovascular  applications.  We also believe
that  we can  enhance  our  competitive  position  through  the  acquisition  of
regulatory-approved  pharmaceutical  products  and  drug  delivery  devices  for
respiratory,   dermatological,   topical  and   cardiovascular   drug   delivery
applications  or such  products  in  development,  including  those  through the
acquisition  of  other  pharmaceutical  companies.  We  plan to  distribute  our
proprietary  products  through our own  customers'  distribution  channels or in
collaboration with strategic marketing partners.

         At this time,  we have not  commercialized  any of our own  proprietary
products although we do have a number of aerosol pharmaceutical products already
under  development or in late planning stages.  These consist of single molecule
and  combination HFA respiratory  inhalants,  non-CFC  propelled oral sprays for
cardiovascular  ailments,  wound irrigation and cleansing sprays utilizing novel
barrier technologies, and anti-inflammatory nasal pumps.

         Our  initial  two  proprietary  products,  a  wound  spray  and an oral
inhalation product,  are expected to be ready for commercial  marketing in 2005,
at which time they should  start to  materially  contribute  to our revenues and
earnings.



                                       26
<PAGE>

GROSS PROFIT

         For the  three  months  ended  June 30,  2004,  we had a gross  loss of
approximately  $250,000  as  compared to a gross  profit of  approximately  $1.1
million for the three  months ended June 30, 2003.  Gross  profits  decreased by
approximately $1.4 million or approximately 122% between the comparative periods
as a result of the noted delays in the commencement or completion of a number of
booked  development and  manufacturing  contracts  during the three months ended
June 30, 2004.

         Gross  profit  for the six  months  ended  June 30,  2004  amounted  to
approximately  $80,000 as compared to approximately $1.1 million in gross profit
for the six months ended June 30, 2003, and approximately  $1.6 million in gross
profit for the  comparative  pro forma six month  period  ended  June 30,  2003.
Excluding the Biopharma Division, the gross profit for the comparative six month
pro forma period ended June 30, 2003 amounted to approximately $1.7 million.

         As a result of the noted delays of a number of customer  contracts  and
purchase orders and concomitant increase in our cost of sales as a result of the
reduced fixed overhead  absorption  during the three months ended June 30, 2004,
the  gross  profit  for  the  six  months  ended  June  30,  2004  decreased  by
approximately  $1.0 million or  approximately  93% as compared to the six months
ended June 30, 2003.

         In  comparison  to the pro forma six months  ended June 30,  2003,  the
gross  profit   decreased  by   approximately   $1.5  million  or  94%,  and  by
approximately  $1.6 million or approximately 95%, when the Biopharma Division is
excluded.

         Our gross profit has also decreased between the comparative  periods as
we have now  commenced  research and  development  activities to develop our own
proprietary   pharmaceutical  products.  We  did  not  incur  any  research  and
development  costs during 2003.  As we have not yet  commercialized  or sold any
products,  we believe  that our gross  profit  margins and our gross profit as a
percentage  of our revenues  will improve  once we have  commercialized  planned
proprietary products such as topical, oral, nasal and pulmonary pharmaceuticals,
which  traditionally  provide greater profit margins at the  distribution  level
than that of manufacturing services.

         Additionally, we are anticipating improved gross profits as we increase
the  utilization  of our  manufacturing  capacity.  As a result of lower factory
overhead  absorption,  the gross profit  related to our  contract  manufacturing
services  has been less than  what  would be  expected  if we were  running  our
manufacturing  facilities at higher operating levels. We expect the gross profit
to significantly  improve as we commence a number of new manufacturing  projects
during the next twelve months.

         We also  believe  that  our  gross  profits  will be  improved  as more
development  support  service  contracts,  associated  with these  manufacturing
projects, are initiated. Our product research and development contract services,
historically,  have had higher gross  margins  than our  contract  manufacturing
services  because we only have to account for our own labor  support costs while
charging out such  professional  services we provide to our  customers at agreed
higher rates. We expect that our manufacturing  consulting services,  planned to
commence  later this year,  should also offer greater  profit margins than those
provided by contract manufacturing services.

OPERATING EXPENSES

         Operating expenses,  consisting of general and administrative,  selling
and  depreciation  and  amortization  expenses  amounted to  approximately  $2.3
million or approximately 83% of net revenues for the three months ended June 30,
2004. In comparison, operating expenses for the three months ended June 30, 2003
amounted to approximately $3.0 million or approximately 59% of net revenues.

         Total  operating  expenses  for the six months ended June 30, 2004 were
approximately  $4.7  million  or  approximately  65% of total  net  revenues  as
compared to operating  expenses of  approximately  $3.0 million or approximately
59% of net revenues for the six months  ended June 30, 2003,  and  approximately


                                       27
<PAGE>

$3.8 million or approximately  49% of net revenues for the comparative pro forma
six  month  period  ended  June 30,  2003.  Excluding  the  Biopharma  Division,
operating expenses for the comparative pro forma six month period ended June 30,
2003  amounted  to  approximately  $3.9  million  or  approximately  52%  of net
revenues.

         Our operating expenses, as a percentage of net revenues, have increased
between the  comparative  six month periods of 2004 and 2003 primarily due to an
increase in general and administrative  expenses.  We have had increasing salary
and benefit,  insurance and corporate and business development costs as a result
of our growing business  operations,  although for the six months ended June 30,
2003 we expensed approximately $750,000 in employee stock options as compared to
approximately  $94,000 in stock  option  costs for the six months ended June 30,
2004.

General and Administrative Expenses

         For the three months ended June 30,  2004,  general and  administrative
expenses were  approximately  $2.0 million or approximately 72% of net revenues,
as compared to general and administrative expenses of approximately $2.7 million
or approximately 54% of net revenues for the three months ended June 30, 2003.

         Total general and administrative expenses for the six months ended June
30, 2004 were approximately $4.1 million or approximately 56% of net revenues as
compared to general and administrative expenses of approximately $2.7 million or
approximately  54% of net revenues  for the six months ended June 30, 2003,  and
approximately  $3.3  million or  approximately  42% of net  revenues for the pro
forma six month period ended June 30, 2003.  Excluding the  Biopharma  Division,
general and  administrative  expenses  for the  comparative  pro forma six month
period  ended  June  30,  2003  amounted  to   approximately   $3.3  million  or
approximately 44% of net revenues.

         Our  general  and  administrative  expenses  include  salaries  at  the
corporate and subsidiary levels,  consulting fees including legal and accounting
costs, insurance,  business and corporate development costs including directors'
fees, investor relations,  travel and communication expenses, and other business
costs such as rent and maintenance.

         The increase in our general and administrative expenses as a percentage
of net revenues for the respective comparative periods is primarily attributable
to an increase in costs related to a larger  enhanced  business  operation  with
higher  infrastructure and insurance costs, an expanded  management team and new
corporate  development  costs as well as due to lower  than  expected  sales for
period as described above.

         For the three  months  ended June 30,  2004,  salaries  and  associated
benefit costs amounted to approximately $868,000 or approximately 31% of our net
revenues as compared to $1.4  million or  approximately  27% of net revenues for
the three months ended June 30, 2003.

         For the six months ended June 30, 2004, salaries and associated benefit
costs amounted to  approximately  $1.7 million or  approximately  24% of our net
revenues as compared to approximately  $1.4 million or approximately  27% of net
revenues for the six months ended June 30, 2003.

         Excluding   employee  stock  options  that  were  expensed  during  the
comparative  three and six  months,  salaries  and  benefit  costs for the three
months ended June 30, 2004 increased by approximately  $231,000 or approximately
27% as  compared to the three  months  ended June 30,  2003,  and  increased  by
approximately $1 million or approximately 170% for the six months ended June 30,
2004 as  compared  to the six months  ended June 30,  2003.  In  addition  to an
expanded staff in the six months ended June 30, 2004, as we continue to grow and
operate our business, salary and benefit costs for the comparative six months in
2003 consisted of two months of operations only.

         Other  general  and  administrative  expenses  that  contributed  to an
increase in our general and administrative expenses for the three and six months
ended June 30, 2004 amounted to approximately  $1.1 million or approximately 41%
of net  revenues and $2.3 million or 32% of net  revenues,  respectively.  These
other  general and  administrative  expenses  consisted  of  insurance  costs of
approximately $200,000 for the three months ended June 30, 2004 and $411,000 for
the six  months  ended  June 30,  2004;  consulting  fees  including  legal  and


                                       28
<PAGE>

accounting costs of  approximately  $233,000 for the three months ended June 30,
2004 and $560,000 for the six months ended June 30, 2004; corporate and business
development costs, including travel, communication and investor relations costs,
of approximately  $343,000 for the three months ended June 30, 2004 and $868,000
for the six months  ended  June 30,  2004;  and other  business  overhead  costs
including  rent,   currency   exchange  losses,   and  bad  debt  provisions  of
approximately $355,000 for the three months ended June 30, 2004 and $515,000 for
the six months ended June 30, 2004.

         In  comparison,  for the  three and six  months  ended  June 30,  2003,
general and administrative  costs,  exclusive of salaries and associated benefit
costs,  amounted  to  approximately  $1.4  million or  approximately  27% of net
revenues.

         Our general and  administrative  costs,  excluding  salaries  and other
employee  costs,  have  increased as a percentage  of revenues  primarily due to
delays  beyond our  control in the  commencement  or  completion  of a number of
contract development and manufacturing contracts, and purchase orders during the
three months ended June 30, 2004,  which reduced  expected  revenues  during the
period.  As explained  above,  these contracts and purchase orders have now been
delayed into the second half of 2004.

         As we  continue  to  implement  our  corporate  development  and growth
strategy,  we expect to incur some additional general and  administrative  costs
due to the addition of senior sales and marketing  executives to our  management
team.  We believe that as we grow our  business  and begin to introduce  our own
proprietary products,  which we believe will have higher profit margins than the
contract  development and manufacturing  fees that we presently receive from our
customers, we can offset these administrative incremental costs on a longer term
basis.

Selling Expenses

         Selling  expenses,  consisting  primarily of salaries,  commissions and
marketing costs  associated with the commercial,  and sales and marketing arm of
our  business,  amounted to  approximately  $76,000 or  approximately  3% of net
revenues  for the three  months  ended June 30,  2004.  In  comparison,  selling
expenses  for the three  months  ended June 30, 2003  amounted to  approximately
$96,000 or approximately 2% of net revenues.

         Total  selling  expenses  for the six months  ended June 30,  2004 were
approximately  $160,000 or approximately 2% of total net revenues as compared to
selling  expenses of  approximately  $96,000 or approximately 2% of net revenues
for  the  six  months  ended  June  30,  2003,  and  approximately  $147,000  or
approximately  2% of net revenues for the comparative pro forma six month period
ended June 30, 2003. Excluding the Biopharma Division,  selling expenses for the
comparative  pro  forma  six  month  period  ended  June 30,  2003  amounted  to
approximately $147,000 or approximately 2% of net revenues.

         Our selling  expenses,  as a percentage  of net revenues  have remained
fairly consistent  between the comparative  periods.  For the three months ended
June 30, 2004 have increased slightly as compared to the three months ended June
30, 2003 as we hired a new sales and marketing executive,  Mr. Ulrich Bartke, on
June 1, 2004.  Initially,  Mr. Bartke,  our first senior executive in this area,
will focus on building Inyx's contract manufacturing revenues and increasing the
utilization  of production  capacity,  with the objective to increase  sales and
profitability.   As  noted  above,  our  manufacturing   capacity  is  presently
significantly  underutilized;  we  are  presently  operating  our  manufacturing
facilities at an average utilization rate of 20-25%, which increases our cost of
goods on a per unit  basis as a result of the lower  fixed  overhead  absorption
rate.

         As we continue  to ramp-up  our  business  development  and  commercial
activities,  we expect our  selling  expenses  to  increase  concomitantly  with
expected  revenue  expansion,  and as we continue  to  intensify  our  marketing
activities to both existing and potential customers.



                                       29
<PAGE>

         To help grow our revenues,  Mr. Bartke will also aiming to be cultivate
strategic marketing relationships with key clients to handle the distribution of
Inyx's own proprietary  products,  which we are now developing and plan to start
to introduce into U.S. and European markets by 2005.

         Once we commence the marketing of our own proprietary  products, we may
also need to build or  contract  our own sales  force.  We believe  that we will
incur substantial  additional  selling expenses once we undertake these types of
commercial  activities.  Initially,  however, until we can adequately afford the
cost of  building  or  contracting  our own sales  force,  we will depend on our
customers'  distribution  channels or strategic  partners to market and sell the
pharmaceutical products that we are presently developing or planning to develop.

Depreciation and Amortization Expenses

         Depreciation and amortization  expenses for the three months ended June
30, 2004 amounted to approximately $242,000 or approximately 9% of net revenues,
as compared to depreciation and amortization expenses of approximately  $128,000
or approximately 3% of net revenues for the three months ended June 30, 2003.

         Total  depreciation and amortization  expenses for the six months ended
June 30, 2004 were approximately $476,000 or approximately 7% of net revenues as
compared to depreciation and amortization expenses of approximately  $128,000 or
approximately  3% of net revenues  for the six months  ended June 30, 2003,  and
approximately  $356,000 or  approximately 5% of net revenues for the comparative
pro forma  six  month  period  ended  June 30,  2003.  Excluding  the  Biopharma
Division,  depreciation and amortization  expenses for the comparative pro forma
six month  period  ended June 30,  2003  amounted to  approximately  $476,000 or
approximately 6% of net revenues.

         For the three and six months ended June 30, 2004, our  depreciation and
amortization  expenses  include  amortization  of financing  costs  amounting to
approximately  $118,000 or  approximately  4% of net  revenues,  and $200,000 or
approximately 3% of net revenues,  respectively.  There were no expenses for the
amortization  of  financing  costs for the  comparative  three and six months in
2003. We also had approximately  $30,000 and $84,000 of capital expenditures for
the three and six months ended June 30, 2004, respectively.

         Our  depreciation  and  amortization  expenses have also increased as a
result of a full six months of  operations  in 2004 as compared to the six month
period in 2003, which only included two months of operations.

         The value of our property and equipment is stated at cost. Depreciation
is computed using the  straight-line  method based on the estimated useful lives
of the  assets,  which  range  from 25 years for  buildings  and 3-10  years for
equipment.

OPERATING LOSS BEFORE OTHER EXPENSES

         For the three  months  ended June 30,  2004,  our loss from  operations
before other expenses  amounted to  approximately  $2.6 million as compared to a
loss from operations before other expenses of approximately $1.8 million for the
three months ended June 30, 2003.

         The  loss  from   operations   before  other   expenses   increased  by
approximately  $730,000 or  approximately  39% between the  comparative  periods
primarily as a result of the noted delays in the commencement or completion of a
number of booked  development and manufacturing  contracts,  and purchase orders
during  the three  months  ended June 30,  2004.  Although  our total  operating
expenses  decreased from  approximately  $3.0 million to $2.3 million during the
comparative  three months,  as a result of the noted revenue delays,  during the
three months ended June 30, 2004, we had a gross loss of approximately  $250,000
as compared to a gross profit of  approximately  $1.1  million  during the three
months ended June 30, 2003,  which therefore  resulted in an increased loss from
operations before other expenses.



                                       30
<PAGE>

         Our operating  loss from  operations  before other expenses for the six
months ended June 30, 2004 amounted to approximately $4.7 million as compared to
an operating loss from operations  before other expenses of  approximately  $1.8
million  for the six months  ended  June 30,  2003,  and a loss from  operations
before other  expenses of  approximately  $2.2 million for the  comparative  pro
forma six month period ended June 30, 2003.  Excluding the  Biopharma  Division,
the loss from operations before other expenses for the comparative pro forma six
month period ended June 30, 2003 also amounted to approximately $2.2 million.

         In addition to the noted  revenue  delays during the three months ended
June 30, 2004,  our  operating  loss from  operations  increased  during the six
months ended June 30,  2004,  as compared to the six months ended June 30, 2003,
as a result of a full six months of operations as compared to two months of such
costs during the comparative six months in 2003.

         The increase in losses from  operations  before other expenses  between
the  comparative  periods  is  also  a  result  of  the  increased  general  and
administrative  expenses  we have  incurred  since our reverse  acquisition  and
integration  of the Inyx Pharma  business,  which have been required to grow our
company and evolve into an integrated pharmaceutical company.

         We believe that we can offset these  additional  costs and expenses and
achieve  profitability  as more  customer  contracts  and  purchase  orders  are
initiated  or  renewed,  through  the  increase  of our  manufacturing  capacity
utilization,  the  increased  business  that we  expect to be  derived  from our
expertise  in  non-CFC  aerosol  pharmaceuticals,   and  the  marketing  of  our
proprietary  pharmaceutical  products,  which we expect  will  improve our gross
margins.

OTHER EXPENSES

         Other  expenses,  consisting of interest  payments and other  financing
costs,  amounted to  approximately  $470,000 for the three months ended June 30,
2004.  In  comparison,  other  expenses for the three months ended June 30, 2003
amounted to approximately $5.2 million.

         For the six months  ended June 30,  2004,  other  expenses  amounted to
approximately  $690,000  as compared to other  expenses  of  approximately  $5.2
million for the six months ended June 30, 2003, and  approximately  $5.4 million
for the  comparative  pro forma six month period ended June 30, 2003.  Excluding
the Biopharma Division,  other expenses for the pro forma six month period ended
June 30, 2003 amounted to approximately $5.7 million.

         Other expenses have decreased between the comparative periods as during
the three and six months  ended June 30,  2003 we  expensed  approximately  $4.0
million of goodwill and consulting fees, associated with our reverse acquisition
of Inyx Pharma.

         For the three and six months ended June 30, 2004, the major  components
of other expenses are interest costs.  These amounted to approximately  $264,000
and $478,000, for the three and six months ended June 30, 2004, respectively. In
comparison,  interest  expenses for the three and six months ended June 30, 2003
amounted to approximately $159,000.

         The  interest  expense for the three and six months ended June 30, 2004
includes  interest  accrued and paid to our primary lender,  Laurus Master Fund,
Ltd. and interest  accrued our convertible  note holder,  Stiefel  Laboratories,
Inc.  During the three months ended June 30,  2004,  Laurus Funds  provided us a
deferral on the interest  payments due under our credit facilities with them. As
of June 30, 2004,  these deferred  interest  payments  amounted to approximately
$320,000.

         Excluding  interest  expenses,  other expenses for the three months and
six months ended June 30, 2004 consist of financial and other  settlement  costs
amounting to approximately $206,000 and $212,000  respectively.  On May 7, 2004,
we terminated our investment banking relationship with Duncan Capital, LLC. As a
termination fee, we agreed to pay Duncan  $120,000,  plus eight percent interest
on the outstanding principal, over twelve months commencing May 15, 2004.


                                       31
<PAGE>

INCOME TAX BENEFIT

         For the three and six months ended June 30,  2004,  the tax benefit net
of valuation allowance is approximately  $393,000,  as compared to a tax benefit
of  approximately  $288,000 for the three and six months ended June 30, 2003. As
of June 30, 2004, our deferred tax asset amounts to approximately $1.7 million.

         We have not made any  provisions  for United States  federal or foreign
taxes that may result  from  future  remittances  of  undistributed  earnings of
foreign  subsidiaries,  because  it is  expected  that  such  earnings  will  be
permanently reinvested in our foreign operations.

NET LOSS

         For the three  months  ended June 30,  2004,  our net loss  amounted to
approximately  $3.0  million as  compared  to a net loss of  approximately  $6.7
million for the three  months  ended June 30,  2003.  The net loss  decreased by
approximately $3.7 million or approximately 54% between the comparative periods.

         The total net loss for the six months  ended June 30, 2004  amounted to
approximately  $5.0  million as  compared  to a net loss of  approximately  $6.7
million for the six months ended June 30, 2003, and a net loss of  approximately
$7.4 million for the comparative pro forma six month period ended June 30, 2003.
Excluding the Biopharma Division, the net loss for the comparative pro forma six
month period ended June 30, 2003 amounted to approximately $7.6 million.

         The net losses we incurred during the comparative  three and six months
ended June 30, 2004 and June 30, 2003, respectively, resulted primarily from low
gross profit  margins as we continue our efforts to increase the  utilization of
our  manufacturing  capacity,  research  and  development  costs  as we have now
commenced to develop our own proprietary  pharmaceutical  products, and a number
of  important  business  and  corporate  development  expenditures  that  we are
required to make to  effectively  grow our company and evolve into an integrated
pharmaceutical company.

         Also,  as noted above,  for the six months  ended June 30,  2004,  as a
result of the noted delays of a number of customer contracts and purchase orders
and  concomitant  increase in our cost of sales as a result of the reduced fixed
overhead  absorption  during the three  months  ended June 30,  2004,  our gross
profits decreased by approximately $1.0 million or approximately 93% as compared
to the six months ended June 30, 2003, which contributed to our net loss.

         We now expect to receive these delayed  revenues during the second half
of 2004.  Additionally,  based on new multi-year  contracts and purchase  orders
from  existing  and  new  customers,  we  believe  that  our  revenues  and  our
manufacturing  capacity  utilization will increase,  which should  significantly
improve our operating profitability.

         We also expect to improve our profitability  opportunities  through the
addition of our own pharmaceutical product lines, which may offer greater profit
margins than those provided by contract manufacturing  services.  Although we do
not  currently  derive any  revenues  from the sale of our own  products,  it is
anticipated  that our first  proprietary  product should be ready for commercial
marketing  by the first half of 2005.  We believe  that this  evolving  business
initiative will allow us to earn greater revenues, improve our gross margins and
offset  a  number  of our  expenditures,  thereby  significantly  improving  our
profitability potential.



                                       32
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

General

         We are financing our operations  primarily  through  credit  facilities
revenues  from  multi-year   contract   manufacturing  and  product  development
contracts and purchase orders, sale fo equity securities,  credit facilities and
capital lease financing.

         As of  June  30,  2004,  the  current  portion  of our  long-term  debt
obligations amounted to approximately $1.1 million. Additionally, we continue to
incur operating losses since our reverse acquisition of Inyx Pharma on April 28,
2003. For the three and six months ended June 30, 2004,  such losses amounted to
approximately  $3 million  and  approximately  $5 million,  respectively.  These
losses  are  primarily  as a  result  of low  gross  profit  margins  due to the
underutilization of our manufacturing  capacity,  research and development costs
as we continue the development of our own proprietary  pharmaceutical  products,
and a number of business and corporate  development costs,  including  expanding
wage costs,  associated  with our efforts to grow our Company and evolve into an
integrated pharmaceutical company.

         In 2005, we believe that we can achieve  profitability by continuing to
intensify  our sales and  marketing  efforts to increase  the number of customer
purchase  orders and contracts for our contract  development  and  manufacturing
services.  We also  believe  that we can  establish  new  sources  of revenue by
providing  pharmaceutical  consulting  services to the industry and by marketing
our own proprietary  pharmaceutical  products.  Based on pharmaceutical industry
profit  margins  for  proprietary   products,  we  expect  that  the  successful
development and  manufacturing  of our own proprietary  products will provide us
with  greater   operating  margins  and  improve  our  performance  and  overall
profitability opportunities.

         Until that time, we will  continue to depend on our credit  facilities,
and  placements  of equity and debt  securities,  to assist us with our  working
capital  requirements  and to continue  implementing  our  business  development
strategies,  capital  expenditure plans, and proprietary product development and
commercialization initiatives.

Capital Resources

         During the three months ended June 30, 2004, we completed two financing
transactions  amounting  to  approximately  $700,000  in gross  proceeds  to the
Company.  We also received a deferral on accrued interest payments  amounting to
approximately  $320,000  that were due to our largest  creditor,  Laurus  Master
Fund, Ltd. ("Laurus Funds"), during the three month period.

         On May 7,  2004,  we  entered  into an Offset  Agreement  with  Stiefel
Laboratories,  Inc. ("Stiefel"),  where we received from Stiefel a waiver on our
annual interest  payment to them under their  four-year 6% unsecured  promissory
note. An interest payment amounting to approximately  $240,000  ((pound)150,000)
for the period  March 6, 2003 to March 5, 2004,  due to  Stiefel,  was waived in
consideration  of future  contract  product  development  services  required  by
Stiefel.

         On May 27, 2004, we obtained an additional $500,000 advance from Laurus
Funds under the October 29, 2003 Convertible Term Note,  convertible into common
stock at $0.80 per share,  and issued  additional  warrants to  purchase  82,500
shares at exercise prices of $1.00 per share for 27,500 shares,  $1.20 per share
for 27,500 shares, and $1.40 per share for 27,500 shares. Net proceeds from this
advance amounted to approximately $460,000 and were utilized for working capital
purposes.

         Additionally, during the three months ended June 30, 2004, Laurus Funds
provided us a deferral on the interest  payments due under our credit facilities
with them. As of June 30, 2004,  these deferred  interest  payments  amounted to
approximately $320,000. Subject to certain limitations,  the Laurus Funds credit
facilities,  including  principal and interest  payments,  permit payments to be
made in our  common  stock.  We have  filed a  registration  statement,  not yet
effective, to register the shares issued upon the conversion of the Laurus Funds
convertible  loans or in lieu of loan and  interest  payments,  and the warrants
that we have issued to Laurus Funds.


                                       33
<PAGE>

         During the three  months  ended June 30,  2004,  the Stiefel and Laurus
Funds financing  transactions  were sufficient to assist our funding and working
capital requirements for the period. For the next twelve months, we believe that
we will require  approximately  $7.1 million in  additional  funding to meet our
working capital,  capital expenditure and product development  requirements (see
Subsequent Events and Other Information below).

         On a longer-term  basis, we believe that we will require funding in the
amount of approximately $5 million annually for a further two years to assist in
the  development  of planned  proprietary  aerosol  products  and drug  delivery
technologies.

         Additionally,  we believe that we can enhance our competitive  position
through the acquisition of regulatory-approved  pharmaceutical products and drug
delivery devices for respiratory, cardiovascular, and dermatological and topical
drug delivery  applications  or such products in  development,  including  those
through the  acquisition  of other  pharmaceutical  companies.  We are  actively
pursuing  acquisitions that may require  substantial  capital resources.  In the
event  that we make a  significant  future  acquisition  or change  our  capital
structure,  we may also be required to raise additional funds through additional
borrowings or the issuance of additional debt or equity securities.

Analysis of Cash Flows

         The net cash, used in operating activities for the three and six months
ended June 30, 2004  amounted to  approximately  $1.2 million and $4.4  million,
respectively.

         For the three  months  ended  June 30,  2004,  the net cash used in the
operations  was primarily the result of an  approximately  $3.0 million net loss
from  continuing  operations  of the  business.  This was  adjusted  by non-cash
charges,  including  depreciation and amortization of approximately  $242,000, a
reserve  for  bad  debts  amounting  to  approximately   $52,000,  stock  option
compensation for vested options,  approximating  $95,000, and warrants issued to
consultant and financing costs of approximately  $95,000. These non-cash charges
were offset by an increase in the reserve for inventory  obsolescence  amounting
to  approximately  $169,000.  For the three months ended June 30, 2004,  working
capital  changes  reducing cash flow from  operations  were  primarily due to an
increase  in  our  prepaid  deposits  and  other  current  assets  amounting  to
approximately  $1.4 million,  resulting  from  increasing new sales and business
development  activities,   and  an  increase  in  deferred  financing  costs  of
approximately  $19,000.  Working  capital  changes  increasing  cash  flow  from
operations  were  due  primarily  to  a  decrease  of  accounts   receivable  of
approximately $1.7 million, a decrease in inventory of approximately $16,000, an
increase in  accounts  payable and accrued  liabilities  of  approximately  $1.3
million,  an  increase in bank  overdraft  of $51,000 and a decrease in deferred
revenue amounting to approximately $85,000.

         For the six months ended June 30, 2004, the net cash used in operations
was  primarily  the  result  of an  approximately  $5.0  million  net loss  from
continuing  operations  of the business.  This was adjusted by non-cash  charges
including depreciation and amortization of approximately $476,000, a reserve for
bad  debts   amounting  to   approximately   $111,000,   reserve  for  inventory
obsolescence of approximately $217,000 and issuance of warrants for finders fees
and consulting of approximately $464,000.  These non-cash charges were offset by
an increase in a deferred income tax asset of  approximately  $393,000.  For the
six months ended June 30, 2004,  working capital changes reducing cash flow from
operations  were primarily due to an increase in our prepaid  deposits and other
current  assets  amounting  to  approximately   $2.7  million,   resulting  from
increasing  new sales  and  business  development  activities.  Working  capital
changes increasing cash flow from operations were due primarily to a decrease of
accounts  receivable of approximately $1.8 million,  and an increase in accounts
payable and accrued  liabilities of approximately  $1.4 million which was offset
by a decrease in deferred revenue amounting to approximately $276,000 an increse
in  deferred  financing  costs of  approximately  $495,000  and an  increase  in
inventory of $228,000.

         The net cash used in investing  activities for the three and six months
ended June 30, 2004 amounted to approximately $26,000 and $84,000, respectively.
These investing  activities  related to the acquisition of office  equipment and
computers.


                                       34
<PAGE>

         The net cash provided by financing activities, for the three months and
six months  ended June 30, 2004  amounted  to  approximately  $615,000  and $3.8
million,  respectively.  For the three months  ended June 30, 2004,  we borrowed
approximately  $657,000  from  Laurus  Funds.  These  advances  were  offset  by
approximately $42,000 in repayments under our capital lease obligations. For the
six months  ended June 30,  2004,  we borrowed  approximately  $3.9 million from
Laurus  Funds,  which was  offset by  approximately  $76,000  in  capital  lease
repayments.

         As an emerging specialty  pharmaceutical  company, we are involved in a
number of business  development  projects  including  research  and  development
activities  that require the use of capital  resources over extended  periods of
time. From time to time,  these  activities may also include the use of external
resources  that require  prepayment or cash  deposits for supplies,  products or
services that we require. As we intensify the development of our own proprietary
products, our capital requirements may increase accordingly.  The profit margins
on our  proprietary  products and consulting  services are expected to be higher
than  our  contract  manufacturing  services,  although  the  time  line for the
commencement  of  revenues  and  earnings  from these  newly  evolving  business
activities  may be longer than that of our  established  contract  manufacturing
operations.

         For the three and six months ended June 30, 2004,  our existing  credit
facilities and capital  resources  were  sufficient to fund the cash required to
operate our business. However, on both a short-term and long-term basis, we will
be required to continually  raise capital through  additional  borrowings or the
issuance of  additional  debt or equity  securities  in order to  implement  our
business and growth strategies,  which may also include significant  business or
corporate acquisitions or changes to our capital structure.

Subsequent Events and Expectations

         On July 1, 2004, we entered into a strategic  alliance  agreement  with
Utek Corporation ("Utek").  Under this agreement,  we will collaborate with Utek
in the identification, acquisition and development of intellectual property that
we  may  require  to  implement   our  business   initiatives   in  the  aerosol
pharmaceutical  and drug delivery  sector.  Persuant to this agreement we issued
31,579 restricted shares of common stock in August 2004.

         On July 1, 2004 the Company  received a payment  deferral until August,
2004 on the total amount of interest  outstanding  on the  borrowings  under its
revolving  line of credit of  approximately  $156,000 as at June 30,  2004.  The
Company also received from the same lender, a deferral,  until August,  2004, on
approximately $160,000 interest due on its convertible note with the lender. The
Company has already repaid approximately $118,000 of that interest.

         On July 2, 2004,  we  granted a total of  1,500,000  warrants  to First
Jemini Trust, a discretionary  family trust in which the Company's  Chairman/CEO
and his spouse are  non-voting  beneficiaries.  These  five-year  warrants  were
granted  pursuant  to various  business  development  services  provided  to the
Company  and allow the holder to purchase  our common  stock at a price of $0.90
per share.

         On July 19, 2004, we issued  promissory  notes to our Chairman and CEO,
Dr. Jack  Kachkar,  the  Executive  Vice  President  and  Director of  Corporate
Development,  Jay M. Green, and an outside Director,  J. Douglas Brown amounting
to $700,000 and bearing  interest of 7% per annum.  As additional  consideration
for the loans,  we granted a  five-year  warrant to the  lenders to  purchase an
aggregate  of 700,000  shares of our common stock at a price of $0.80 per share.
Net  proceeds  from these loans,  amounting  to $695,000,  were used for working
capital purposes.

         On July  22,  2004,  in line  with  our  strategy  to  develop  our own
proprietary pharmaceutical products for respiratory, dermatological, topical and
cardiovascular  drug delivery  applications,  we announced  that we had signed a
letter of intent with Phares  Technology  BV  ("Phares")  to acquire from them a
patented,  novel platform  technology that will enable us to effectively develop
inhalation-therapy  drugs,  including  combination  drugs,  delivered in aerosol


                                       35
<PAGE>

formats.  Phares  has  already  successfully  utilized  the  technology  in  the
pharmaceutical,   nutraceutical  and  cosmetic  industries.   We  are  presently
completing  our due  diligence on that  intellectual  property  acquisition  and
expect to complete the transaction by September 22, 2004.

         On July 30, 2004, we agreed to a waiver from Laurus  Funds,  the holder
of a long term $5.0  million  convertible  note,  on the  first  four  principal
payments amounting to approximately $563,000 due under that note, until November
1, 2004.  As  consideration  for that waiver,  we agreed to issue Laurus Funds a
five-year Common Stock Purchase Warrant to purchase 695,000 shares of our common
stock at an exercise price of $0.81 per share.

         On  August  3,  2004,   we  closed  in  a  private   placement  to  six
institutional  investors related to a New York investment  banking firm the sale
in the  aggregate  of  1,358,025  shares of our common  stock for $1.1  million.
Investors in the offering  also received  five-year  warrants to purchase in the
aggregate 1,358,025 shares of common stock, which warrants are exercisable at an
exercise price of $1.01 per share. There is a performance feature related to the
warrants,  whereby during the warrant term the exercise price shall be increased
by 2% (but no more than  cumulatively  20%) for every $2 million  that our sales
are above $35 million for the year ended  December  31, 2005 and $55 million for
the year ended  December 31, 2006.  The exercise  price shall be decreased by 5%
(but no more than  cumulatively  50%) for every $2 million  that sales are below
$35 million and $55 million for 2005 and 2006,  respectively.  The warrants also
contain certain weighted average  anti-dilution  rights which terminate upon the
earlier  to occur of (i) a  qualified  public  offering  or (ii)  eighteen  (18)
months.

         On August 2, 2004, we had also engaged the New York Investment  banking
firm to raise a minimum  of $4.0  million  and a maximum  of $7.0  million  in a
private  placement to accredited  investors on essentially the same terms as the
August 3, 2004 transaction (see Other Information below).

Item 3.  Controls and Procedures

a)       Within the 90-day  period prior to the date of this report,  we carried
         out an evaluation,  under the supervision and with the participation of
         our  management,  including  the  Chief  Executive  Officer  and  Chief
         Financial Officer,  of the effectiveness of the design and operation of
         our disclosure  controls and procedures  pursuant to Rule 13a-14 of the
         Securities  Exchange Act of 1934 (the "Exchange Act").  Based upon that
         evaluation,  the Chief Executive  officer and Chief  Financial  Officer
         concluded that our disclosure  controls and procedures are effective in
         timely  alerting them to material  information  relating to the Company
         required to be included in our Exchange Act filings.  The two Executive
         Officers  responsible for the financial reporting and disclosure are in
         direct control of the books and records of the Company and are involved
         first-hand in the decision making process for material transactions.

b)       There have been no significant  changes in our internal  controls or in
         other  factors,  which could  significantly  affect  internal  controls
         subsequent to the date we carried out our evaluation.


PART II-- OTHER INFORMATION

Item 1.  Legal Proceedings

         None.

Item 2.  Changes in Securities

         On May 11,  2004,  we issued  100,000  stock  purchase  warrants to Mr.
Orestes Lugo in exchange for the cancellation of 350,000 employee stock options.
These three year Common Stock Purchase  Warrants have an exercise price of $1.20
per share.



                                       36
<PAGE>

         On May 27, 2004 we issued a five year Common Stock Purchase  Warrant to
Laurus  Funds as  consideration  for an  additional  loan of $500,000  under its
collateralized  7%  convertible  term note, to purchase  82,500 shares of common
stock at exercise  prices of $1.00 per share for 27,500 shares,  $1.20 per share
for 27,500 shares, and $1.40 per share for 27,500 shares.

Item 3.  Defaults Upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         None.

Item 5.  Other Information

         On August  2,  2004,  we  engaged a New York  investment  banking  firm
(certain  of whose  affiliates  were  investors  in an August  3,  2004  private
placement  with the Company) to raise a minimum of $4.0 million and a maximum of
$7.0 million in a private  placement to accredited  investors on essentially the
same terms as the August 3, 2004  transaction.  If this additional  financing is
completed,  we presently  believe that the net proceeds  would be  sufficient to
fund Inyx's  current  operations for  approximately  eight months if the minimum
amount of additional capital is secured,  and for approximately 12 months if the
maximum amount is secured.  We expect the private placement,  which is scheduled
to be completed  before the close of this third  quarter of 2004,  to materially
strengthen  our  financial  position and allow us to continue to  implement  our
business strategies.

         In the second half of 2004, we will continue to focus on  strengthening
and growing our pharmaceutical  aerosol contract manufacturing business in order
to reach profitability. Additionally, we plan to continue the development of our
own proprietary pharmaceutical products for respiratory, dermatological, topical
and cardiovascular drug delivery  applications,  to be marketed and sold through
our  customers'  distribution  channels or with  strategic  marketing  partners.
Planned products include metered dose inhalers,  nasal pumps,  topical aerosols,
wound care sprays and oral sprays for cardiovascular  disease.  We are primarily
focusing  our efforts on generic  pharmaceutical  products and  innovative  drug
delivery  systems that allow line extensions of established  products,  or those
delivery  systems that overcome  present product and propellant  incompatibility
and consumer use issues in the pharmaceutical aerosol sector.

         During this year, we also expect to continue to explore  pharmaceutical
business   acquisitions   or  the   acquisition  of   pharmaceutical   products,
intellectual properties or drug delivery devices.


Item 6.  Exhibits and Reports on Form 8-K.

         (a)      Exhibits

         10.23.10 Stock  Purchase  Warrant  for 82,500  shares of the  Company's
                  common stock with Laurus Master Fund LTD dated May 27, 2004.

         31.1     Certification  by CEO  pursuant  to 18  USC  Section  1350  as
                  adopted by Section 302 of the Sarbanes-Oxley Act of 2002.

         31.2     Certification  by CFO  pursuant  to 18  USC  Section  1350  as
                  adopted by Section 302 of the Sarbanes-Oxley Act of 2002.



                                       37
<PAGE>

         32.1     Certification  by CEO  pursuant  to 18  USC  Section  1350  as
                  adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

         32.2     Certification  by CFO  pursuant  to 18  USC  Section  1350  as
                  adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

         (b)      Reports on Form 8-K.

                  Form 8-K filed with the SEC on June 29,  2004  disclosing  the
supply agreement with Astra-Zeneca under Item 5.





                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

         Date:    August 16, 2004

                                                     INYX, INC.


                                                       By: /s/ Rima Goldshmidt
                                                          ----------------------
                                                          Rima Goldshmidt,
                                                          Vice President Finance










                                       38