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

                                  FORM 10-QSB/A

(Mark One)

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

               For the quarterly period ended September 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
  (State or other jurisdiction of                      75-2870720
   incorporation or organization)             (IRS Employer Identification No.)


                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 November 10, 2004: 38,012,479 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>

                                EXPLANATORY NOTE

      Inyx,  Inc.  (the  "Company")  is filing  this  Amended  Form  10-QSB (the
"Amended  Form  10-QSB/A")  to restate  Items 1 and 2 of Part I contained in the
Company's  Quarterly  Report on Form 10-QSB (the "Original Form 10-QSB") for the
third quarter ended  September 30, 2004 as originally  filed with the Securities
and  Exchange  Commission  on November 22,  2004.  This  Amended  Form  10-QSB/A
reflects  restatements  of  the  previously  published  unaudited   consolidated
financial  statements  as of  September  30,  2004 and  related  changes  in the
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations resulting from the matters discussed below.

      The restatement  resulted  primarily from correction of accounting for the
following transactions: (1) accounting for the acquisition of the Miza UK assets
as a purchase  transaction rather than a reorganization of entities under common
control,  (2) correction to the  recognition and measurement of the warrants and
the beneficial  conversion  feature relating to convertible debt, (3) correction
to classification of amortization of deferred financing costs, (4) correction to
classification  of  various  non  recurring  operating  costs (see Note 3 to the
financial statements).

      This Amended Form  10-QSB/A does not attempt to modify or update any other
disclosures set forth in the Original Form 10-QSB, except as required to reflect
the effects of the noted restatements.  Additionally, this Amended Form 10-QSB/A
and the  Original  Form  10-QSB is  subject to  updating  and  supplementing  as
provided in the periodic  reports that the Company has filed and will file after
the  original  filing  date with the  Securities  and  Exchange  Commission.  In
addition,  the  filing  on this  Amended  Form  10-QSB/A  shall not be deemed an
admission that the original filing,  when made, included any untrue statement of
material  fact or omitted a material  fact  necessary  to make a statement  made
therein not misleading.
<PAGE>

                                   INYX, INC.

      ITEM 1: FINANCIAL STATEMENTS

      Consolidated Balance Sheets as of September 30, 2004 and
        December 31, 2003................................................... F-2

      Consolidated Statements of Operations for the Nine and Three months
        Ended September 30, 2004; for the period from March 7, 2003 through
        September 30, 2003;for the three months ended September 30, 2003
        and for the period from January 1, 2003 through March 6, 2003....... F-3

      Consolidated Statements of Stockholders' Equity (Deficit) and Other
        Comprehensive Loss for the Nine and Three months Ended
        September 30, 2004; for the period from March 7, 2003 through
        September 30, 2003; for the period ended December 31, 2003; and
        for the period from January 1, 2003 through March 6, 2003 .......... F-4

      Consolidated Statements of Cash Flows for Nine and Three months
        Ended September 30, 2004; for the period from March 7, 2003
        through September 30, 2003; for the three months ended
        September 30, 2004 and 2003 and for the period from
        January 1, 2003 through March 6, 2003 .............................. F-5

      Notes to Consolidated Financial Statements............................ F-6
<PAGE>

                                   INYX, INC.
                           CONSOLIDATED BALANCE SHEETS
       (EXPRESSED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                     --------------------------------
                                                                        SEPTEMBER 30,   DECEMBER 31,
                                                                            2004           2003
                                                                          RESTATED       RESTATED
                                                                        (UNAUDITED)
                                                                     ---------------------------------
<S>                                                                         <C>           <C>
                                     Assets

Current assets:

    Cash                                                                    $    534      $    796
    Accounts receivable, net                                                   2,648         3,395
    Inventory, net                                                             1,812         1,089
    Prepaid expenses and other current assets                                  5,604         1,089
                                                                            --------      --------
          Total current assets                                                10,598         6,369
                                                                            --------      --------

Property, plant and equipment, net                                             4,850         5,183
Deferred financing costs, net                                                    738           860
Other assets                                                                      45            45
Deferred tax asset                                                             1,687         1,294
Purchased intangible assets, net                                               1,614         1,739
                                                                            --------      --------
                                                                               8,934         9,121
                                                                            --------      --------

          Total assets                                                      $ 19,532      $ 15,490
                                                                            ========      ========

                      Liabilities and Stockholders' Equity

Current liabilities:

    Borrowings under revolving line of credit                               $  5,994      $  2,375
    Accounts payable                                                           3,372         2,178
    Accrued expenses and other current liabilities                               640           996
    Current portion of long-term debt                                          1,959         1,483
                                                                            --------      --------
          Total current liabilities                                           11,965         7,032
                                                                            --------      --------
Long term debt, net of current portion                                         6,613         6,617
                                                                            --------      --------
          Total liabilities                                                   18,578        13,649
                                                                            --------      --------

Commitments and contingencies

Stockholders' equity:

    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, 38,012,479 shares issued and outstanding
      at September 30, 2004; 28,525,000 shares issued
      and outstanding at December 31, 2003                                        38            29
    Additional paid-in capital                                                24,822        15,599
    Accumulated deficit                                                      (23,288)      (13,392)
    Subscriptions receivable                                                    (343)         (100)
    Accumulated other comprehensive loss -
       foreign currency translation adjustment                                  (275)         (295)
                                                                            --------      --------
          Total stockholders' equity                                             954         1,841
                                                                            --------      --------

          Total liabilities and stockholders' equity                        $ 19,532      $ 15,490
                                                                            ========     =========
</TABLE>

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


                                      F-2
<PAGE>

                                   INYX, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
       (EXPRESSED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                          Sucessor                                     Predecessor
                                                 ----------------------------------------------------------------    ---------------
                                                 For the Nine     For the Period   For the Three    For the Three
                                                 Month Period     from March 7,    Month Period     Month Period     For the Period
                                                    Ended         2003 through        Ended            Ended         from January 1,
                                                 September 30,    September 30,    September 30,    September 30,     2003 through
                                                     2004             2003             2004             2003         March 6, 2003
                                                           Restated                          Restated
                                                          (Unaudited)                       (Unaudited)
                                                          -----------                       -----------
<S>                                              <C>              <C>              <C>              <C>              <C>
Net revenues                                     $     11,549     $      8,134     $      4,249     $      3,067     $      2,396
Cost of sales                                          10,392            6,530            3,571            2,597            1,876
                                                 ------------     ------------     ------------     ------------     ------------
    Gross profit                                        1,157            1,604              678              470              520

Operating expenses:

    Research and development                            1,341               --              942               --               --
    General and administrative                          6,820            8,459            2,521            2,610              568
    Selling                                               255              166               95               70               51
    Depreciation and amortization                         431              225              155               97               75
    Amortization of intangible assets                     125               97               42               42               --
                                                 ------------     ------------     ------------     ------------     ------------
                 Total operating expenses               8,972            8,947            3,755            2,819              694
                                                 ------------     ------------     ------------     ------------     ------------

Loss from continuing operations before
 interest and financing costs, income
 tax benefit and discontinued operations               (7,815)          (7,343)          (3,077)          (2,349)            (174)

Interest and financing costs                            2,474              359              750              149              176
                                                 ------------     ------------     ------------     ------------     ------------

Loss before income tax benefit and
 discontinued operations                              (10,289)          (7,702)          (3,827)          (2,498)            (350)

Income tax benefit                                        393              510               --              222               --
                                                 ------------     ------------     ------------     ------------     ------------

Loss before discontinued operations                    (9,896)          (7,192)          (3,827)          (2,276)            (350)

Loss from discontinued operations, net
  of income taxes                                          --               --               --               --              558
                                                 ------------     ------------     ------------     ------------     ------------

Net loss                                         $     (9,896)    $     (7,192)    $     (3,827)    $     (2,276)    $       (908)
                                                 ============     ============    =============     ============     ============

Basic and fully diluted loss per share
    Loss before discontinued operations          $      (0.32)    $      (0.34)    $      (0.12)    $      (0.09)              --

    Loss from discontinued operations,
      net of income taxes                                  --               --               --               --               --
                                                 ------------     ------------     ------------     ------------     ------------
                                                 $      (0.32)    $      (0.34)    $      (0.12)    $      (0.09)              --
                                                 ============     ============    =============     ============     ============
Weighted-average number of shares outstanding
  used in computing per share amounts              30,780,479       21,308,425       32,523,000       25,119,565               --

</TABLE>

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


                                      F-3
<PAGE>


                                   INYX, INC.
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                          AND OTHER COMPREHENSIVE LOSS
                    (EXPRESSED IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                                                            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>
Predecessor
Balances at January 1, 2003                            5,000   $  8,022   $     --   $     --    $ (1,503)   $(30,464)   $(23,945)
Net loss for the year                                     --         --         --         --          --        (908)       (908)
Foreign currency translation adjustment                   --         --         --         --        (102)         --        (102)

                                                      ---------------------------------------------------------------------------
Balances at March 6, 2003                              5,000   $  8,022   $     --   $     --    $ (1,605)   $(31,372)   $(24,955)
                                                      ===========================================================================


Successor
Balances at March 7, 2003                             16,000   $     16   $  2,081   $     --    $     --    $     --    $  2,097
Issuance of stock for reverse acquisition              5,000          5         18         --          --          --          23
Issuance of stock for finders fees (April 17)          2,450          2      1,302         --          --          --       1,304
Issuance of stock for services (April 21)              1,500          2        799         --          --          --         801
Issuance of stock net of offering
  costs of $11,800 (August 22)                           500         --        488         --          --          --         488
Issuance of stock options                                 --         --      1,251         --          --          --       1,251
Issuance of warrants for services                         --         --        507         --          --          --         507
Subscriptions receivable                                  --         --         --        374          --          --         374
Foreign currency translation adjustment                   --         --         --         --        (107)         --        (107)
Net loss for the period                                   --         --         --         --          --      (7,192)     (7,192)

                                                      ---------------------------------------------------------------------------
Balances at September 30, 2003                        25,450         25      6,446        374        (107)     (7,192)       (454)
                                                      ---------------------------------------------------------------------------

Issuance of stock net of offering
  costs of $310,702 (November 4)                       3,000          3      2,686         --          --          --       2,689
Issuance of stock for options exercised
  (November 17)                                           75          1         90         --          --          --          91
Issuance of stock options                                 --         --        262         --          --          --         262
Issuance of warrants for services                         --         --        754         --          --          --         754
Issuance of warrants with convertible debt and
  related beneficial conversion feature                   --         --      5,361         --          --          --       5,361
Subscriptions receivable                                  --         --         --       (474)         --          --        (474)
Foreign currency translation adjustment                   --         --         --         --        (188)         --        (188)
Net loss for the period                                   --         --         --         --          --      (6,200)     (6,200)

                                                      ---------------------------------------------------------------------------
Balances at December 31, 2003                         28,525         29     15,599       (100)       (295)    (13,392)      1,841
                                                      ---------------------------------------------------------------------------

Issuance of stock for options exercised in
January 2004 (net of shares returned to treasury)        265         --        291         --          --          --         291
Issuance of stock for services (July 1)                   32         --         30         --          --          --          30
Issuance of stock net of offering costs
  of $768,000 (August 3 - September 3)                 9,191          9      6,622         --          --          --       6,631
Issuance of stock options                                 --         --        227         --          --          --         227
Issuance of warrants with convertible debt and
  related beneficial conversion feature                   --         --      1,295         --          --          --       1,295
Issuance of warrants for financing fees                   --         --        178         --          --          --         178
Issuance of warrants for consulting fees                  --         --        580         --          --          --         580
Subscription receivable                                   --         --         --       (243)         --          --        (243)
Foreign currency translation adjustment                   --         --         --         --          20          --          20
Net loss for the period                                   --         --         --         --          --      (9,896)     (9,896)
                                                      ---------------------------------------------------------------------------
Balances at September 30, 2004                        38,013   $     38   $ 24,822   $   (343)   $   (275)   $(23,288)   $    954
                                                      ===========================================================================
</TABLE>

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

                                      F-4
<PAGE>

                                   INYX, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                    (EXPRESSED IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                   --------------------------------------------------------------------------
                                                            Successor                     Successor              Predecessor
                                                   --------------------------------------------------------------------------
                                                                  For the                                        For the
                                                   For the        Period         For the          For the        Period from
                                                   Nine Month     from March 7,  Three Month      Three Month    January 1,
                                                   Period Ended   2003, through  Period Ended     Period Ended   2003 through
                                                   September 30,  September 30,  September 30,    September 30,  March 6,
                                                   2004           2004           2004             2003           2003

                                                             Restated                       Restated
                                                            (Unaudited)                    (Unaudited)
                                                   --------------------------------------------------------------------------
<S>                                                <C>            <C>            <C>            <C>              <C>
Cash flows from operating activities:
    Net loss for the period                        $    (9,896)   $(7,192)       $(3,827)       $(2,276)         $ (908)
      Add: loss from discontinued operations                --         --                                           558
                                                   -----------------------------------------------------------------------
      Loss from continuing operations                   (9,896)    (7,192)        (3,827)        (2,276)           (350)
    Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities:
      Depreciation and amortization                        431        225            155             97              75
      Interest and amortization of
      financing costs and debt discount                  1,505         --            275             --              --
      Amortization of intangible assets                    125         97             42             42              --
      Deferred tax asset                                  (393)      (510)            --           (222)             --
      Issuance of stock for services                        30      2,105             30             --              --
      Reserve for inventory obsolescence                   116        166            333             --              --
      Provision for bad debts                              (29)        --            (82)            --              --
      Stock option compensation                            227        504             66            504              --
      Warrants issued for financing  fees                  178      1,254            178            203              --
      Warrants issued for consulting fees                  580         --            531             --              --
      Issuance of shares in recapitalization                --         23             --             --              --
      Issuance of shares for exercise of stock
        options                                            291         --             --             --              --
      Subscription receivable                             (243)       374             50            374              --
    Changes in assets and liabilities:
      Decrease (increase) in accounts receivables          776     (2,547)        (1,091)           580            (215)
      (Increase) decrease in inventory                    (839)        71         (1,045)          (237)            385
      (Increase) decrease in prepaid and other
        current assets                                  (4,515)       370         (1,835)           442             267
      Increase in deferred financing costs and
        debt discount                                     (127)        --             --             --              --
      Increase in accounts payable and accrued
        liabilities                                        836      2,741           (563)           834             640
      Increase in bank overdraft                            --        154             --            154              --
      Increase in deferred revenues                          2         --            278             --              --
      Increase in liabilities subject to
        compromise                                          --         --             --             --             353
                                                   -----------------------------------------------------------------------

          Net cash (used in) provided by
            continuing operations                      (10,945)    (2,165)        (6,505)           495           1,155
                                                   -----------------------------------------------------------------------
    Net cash provided by (used in) discontinued
      operations                                            --         50             --             --            (617)
                                                   -----------------------------------------------------------------------
          Net cash (used in) provided by
            operating activities                       (10,945)    (2,115)        (6,505)           495             538
                                                   -----------------------------------------------------------------------
Cash flows from investing activities:
    Purchase of property, plant and equipment              (97)        (5)           (13)            --             (18)
                                                   -----------------------------------------------------------------------
          Net cash  used in investing activities           (97)        (5)           (13)            --             (18)
                                                   -----------------------------------------------------------------------
Cash flows from financing activities:
    Borrowings(repayments) under revolving line
      of credit, net                                     3,694      1,862            331           (379)           (522)
    Advances by stockholder                                 --        400             --            400              --
    Proceeds from issuance of long term debt               500         --             --             --
    (Repayment) advances of long term debt                  --     (1,016)            --           (975)            104
    Proceeds from issuance of promissory demand
      notes                                                700         50            700             --              --
    Repayment of promissory demand notes                  (650)        --           (650)            --              --
    Proceeds from issuance of stock, net of issue
      costs                                              6,631        488          6,631            488              --
    Repayment of capital lease obligation                 (115)        --            (39)            --              --
                                                   -----------------------------------------------------------------------
          Net cash provided by (used in)
            financing activities                        10,760      1,784          6,973           (466)           (418)
                                                   -----------------------------------------------------------------------
Effect of foreign exchange rate changes
    on cash and cash equivalents                            20       (107)            94            (45)           (102)
                                                   -----------------------------------------------------------------------

Change in cash                                            (262)      (443)           549            (16)             --

Cash at beginning of period                                796        458            (15)            31              --
                                                   -----------------------------------------------------------------------

Cash at end of period                              $       534    $    15        $   534        $    15              --
                                                   =======================================================================
</TABLE>

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

                                      F-5
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          (Tabular amounts are expressed in thousands of U.S. dollars)

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.

      The Company 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;  such assets and  operations  were
nominal.  Subsequent to the discontinuance of its horse racing  operations,  the
Company 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 for 100%
of the outstanding common stock of Inyx Pharma. As a result of the exchange, the
stockholders of Inyx Pharma became the Company's  controlling  stockholders,  in
the aggregate,  holding  approximately 64% of the Company's  outstanding shares.
The  transaction  was  accounted  for as a  recapitalization  of Inyx  using the
reverse acquisition method of accounting and therefore, the historical financial
statements  of Inyx  Pharma are  presented  herein as the  Company's  historical
financial  statements.  As a result of the Inyx Pharma transaction,  the Company
incurred  costs of  approximately  $2.7 million  consisting  primarily of legal,
accounting,  consulting  and  finders'  fees.  All such costs were  expensed  as
incurred.

      Prior to its reverse  acquisition by the Company,  on March 7, 2003,  Inyx
Pharma had purchased the majority of the pharmaceutical  business assets of Miza
Pharmaceuticals  (UK) Ltd. ("Miza UK") out of  Administration  (a United Kingdom
equivalent  of  Chapter  11  bankruptcy   protection  and   reorganization)  for
approximately  $8.3 million,  consisting of an  approximately  $7.1 million cash
payment to the Administrator for Miza UK's assets and approximately $1.2 million
in direct  transaction  costs. The Inyx Pharma acquisition of Miza UK's business
assets  was  accounted  for  utilizing  the  purchase   method  of   accounting.
Accordingly,  the  total  purchase  price  was  allocated  to the  tangible  and
identifiable  intangible  assets  acquired based on their estimated fair values.
The  intangible  assets  acquired  consisted of customer list and know-how which
were  allocated  a fair  value  of  approximately  $1.3  million  and  $600,000,
respectively, based on an independent third party evaluation.

      Prior to its  acquisition  of the majority of Miza UK's  business  assets,
Inyx Pharma was a non-operating  private corporation with nominal net assets. As
the historical  financial  statements of Inyx Pharma are presented herein as the
Company's historical financial statements, and because as of March 7, 2003, Inyx
Pharma's  sole  operation  was  essentially  the  continuation  of the  Miza  UK
business,  the Company's  historical  financial  statements  for the period from
January 1, 2003 through  March 6, 2003 and prior,  are those of Miza UK, and are
therefore presented as "Predecessor" financial statements.

      The Company's  financial  statements for the periods  commencing  March 7,
2003  are  referred  to  as  "Successor"  financial  statements.  The  financial
statements  for all  periods  are  collectively  referred  to as  "Inyx"  or the
"Company".  Additionally, as the Biopharma Division was historically part of the
Miza UK business but was an operation  not acquired by Inyx Pharma,  its results
of  operations  are  presented  as  discontinued  operations  in  the  Company's
financial statements.

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

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      a) Consolidated 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  transferred to a related party. As  consideration,
the related entity assumed all of the liabilities of Inyx Realty, Inc. including
a commitment of a ten year office space lease of approximately $1.5 million.


                                      F-6
<PAGE>

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

      b) Unaudited Consolidated Interim Financial Statements

      The accompanying  consolidated financial statements for the nine and three
months  ended  September  30,  2004,  for the period from March 7, 2003  through
September  30, 2003 and for the three month period ended  September 30, 2003 are
unaudited but, in the opinion of management,  include all necessary  adjustments
(consisting  of normal,  recurring  in 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 nine months ended September
30, 2004 are not necessarily  indicative of operating results to be expected for
a full year.

      c) 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 at
the date of the financial  statements,  and the reported amounts of revenues and
expenses during the reporting period.  The more significant  estimates are those
used by  management to measure the  recoverability  of  intangible  assets,  the
allowances for doubtful accounts and inventory reserves and the value of shares,
options  or  warrants  issued  for  services  or in  connection  with  financing
transactions. 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.

      d) Accounts Receivable

      Accounts  receivable are stated at 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 each  period end.  The
provision  for the  allowance  for doubtful  accounts is included in general and
administrative   expenses  in  the  accompanying   consolidated   statements  of
operations.

      e) Inventory

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

      f) 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 operations
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.

      g) Purchased Intangible assets

      The Company's  purchased  intangible assets consist of a customer list and
know-how. These intangible assets are accounted for in accordance with Statement
of  Financial  Accounting  Standards  No. 142,  "Goodwill  and Other  Intangible
Assets"("SFAS  No. 142") and are  amortized on a straight  line basis over their
estimated remaining useful lives in proportion to the underlying cash flows that
were used in determining the acquired  value.  Customer list is amortized over a
period of 12 years and know-how is amortized over 10 years.


                                      F-7
<PAGE>

      h) 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.  The  amortization  of deferred  financing  costs is  classified as
interest expense in the accompanying consolidated statements of operations.

      i) Business Combinations

      The  Company  accounts  for  business   combinations  in  accordance  with
Statement  of Financial  Accounting  Standard  No. 141  "Business  Combinations"
("SFAS No. 141").  SFAS No. 141 requires that the purchase  method of accounting
be used for all business  combinations.  SFAS No.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 No. 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, The Company has adopted the provisions of
SFAS 141 and SFAS 142 as of January 1, 2003.

      j) Impairment of Long Lived Assets and Intangible Assets

      The Company reviews the carrying value of its long lived assets  including
purchased intangible 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.

      k) 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 for any of the periods presented.  The carrying values of
these financial instruments approximated their fair market value as of September
30, 2004 and December 31, 2003.

      l) 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.

      As of September 30, 2004 and December 31, 2003, deferred revenues amounted
to $335,000 and $351,000  respectively  and 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.

      m) Convertible Debt

      Convertible  debt  with  beneficial   conversion  features,   whereby  the
conversion  feature is "in the  money"  are  accounted  for in  accordance  with
guidance  supplied by Emerging  Issues Task Force ("EITF") No. 98-5  "Accounting
for Convertible  Securities with Beneficial  Conversion Features or Contingently
Adjustable  Conversion  Ratios" and EITF No. 00-27 "Application of Issue 98-5 to
Certain  Convertible  Instruments."  The relative fair value of the warrants has
been recorded as a discount  against the debt and is amortized  over the term of
the debt.

      For convertible debt and related warrants, the recorded debt discount is
calculated at the issuance date as the difference between the conversion price
and the relative fair value of the warrants into which the security is
convertible or exercisable. It is recognized as interest expense at the time of
issuance.

                                      F-8
<PAGE>

      In addition since the debt is convertible into equity at the option of the
note holder at the date of issuance at beneficial  conversion rates, an embedded
Beneficial Conversion Feature ("BCF") has been charged to interest and financing
costs  in  the  accompanying  consolidated  statement  of  operations  and as an
increase to additional paid-in capital at the time of issuance.

      Notes 3, 11, 12 and 17 provide additional information on the valuation of
the warrants and the beneficial conversion feature.

      n) Net Loss per Share

      The Company  follows the  guidelines of Statement of Financial  Accounting
Standards No. 128,  "Earnings Per Share" ("SFAS No.128") in calculating its loss
per share.  SFAS No.128 states basic and diluted earnings per share are based on
the weighted average number of shares of common stock and potential common stock
outstanding  during the period.  Potential common stock equivalents for purposes
of determining  diluted earnings per share include the effects of dilutive stock
options, warrants and convertible securities.  The effect on number of shares of
such  potential  common stock  equivalents  is computed using the treasury stock
method or the if-converted  method, as applicable.  The Company has excluded all
outstanding  options and warrants as well as shares to be issued upon conversion
of convertible  debt from the  calculation of diluted net loss per share because
these  securities  are  anti-dilutive.  Accordingly as of September 30, 2004 and
December 31, 2003,  the Company had common stock  equivalents  of  approximately
23,481,687 and 10,345,000 shares respectively,  related to options and warrants;
and  approximately  18,375,000 and  10,880,952  shares  respectively  related to
shares to be issued upon the conversion of the convertible debt.

      o) 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.

      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.  This  standard  states that
compensation  cost is measured at the grant date based on the value of the award
and is recognized over the service period,  which is usually the vesting period.
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 vested options
granted has been charged to salaries,  wages,  and benefits in  accordance  with
SFAS No. 123.

      p) 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 nine months ended September 30, 2004 and for the period from March
7, 2003 through  September  30, 2003,  the  Company's  three  largest  customers
accounted for  approximately 47% and 42% of net revenues  respectively.  For the
three months ended  September  30, 2004 and 2003,  the  Company's  three largest
customers accounted for approximately 52% and 20% of net revenues, respectively.

      As of  September  30, 2004 and  December 31,  2003,  the  Company's  three
largest  customers  accounted for 24% and 42% of net receivables,  respectively.
The loss of any of these customers  could have a material  adverse effect on the
operations of the Company.

      q) Income Taxes

      The Company follows Statement of Financial Accounting Standards (SFAS) No.
109 "Accounting for Income Taxes" ("SFAS No. 109") Under the asset and liability
method of SFAS No. 109,  deferred tax assets and  liabilities are recognized for
the future tax  consequences  attributed  to  differences  between the financial
statements  carrying  amounts  of  existing  assets  and  liabilities  and their
respective  tax base.  Deferred tax assets and  liabilities  are measured  using
enacted  tax rates  expected  to apply to  taxable  income in the years in which
those temporary differences are expected to be recovered or settled.  Under SFAS
No. 109,  the effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date. If
it is more likely than not that some portion of a deferred tax asset will not be
realized, a valuation allowance is recognized.


                                      F-9
<PAGE>

      r) Translation of Foreign Currency

      The functional  currency of the Company's United Kingdom subsidiary is the
Great Britain Pound ("GBP").  The Company's financial statements are reported in
United  States  Dollars  (the  "USD" ) 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 the stockholders' equity. Realized gains and
losses  from  foreign  currency  transactions  are  included  in the  results of
operations for the period.

      s) Research and development

      All  research and  development  costs are expensed as incurred and include
salaries of, and expense  relating to,  employees  and  consultants  who conduct
research and development.

      t) Recently Issued Accounting Standards

      In January  2003,  the Company  adopted the  provisions  of  Statement  of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations"  ("SFAS No. 143"). SFAS No. 143 addresses  accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated asset  retirement  costs. As of the date of adoption of SFAS 143,
the Company  had no tangible  long-lived  assets.  During the second  quarter of
2003,  the  Company,  through the reverse  acquisition  of Inyx Pharma  acquired
property,  plant  and  equipment,   including  the  manufacturing  facility  for
CFC-based  inhalers.  The Company evaluates the carrying value of property plant
and equipment to determine whether there is any impairment. Our evaluations have
indicated no such  impairment to date.  Management  believes that as the Company
increases its marketing and commercial activities in the United States and Latin
America where the market for CFC-based  respiratory  inhalers still exists,  the
Company will be increasingly utilizing its production line for such products and
any idle capacity will be eliminated.

      In January  2003,  the Company  adopted the  provisions  of  Statement  of
Financial  Accounting  Standards No. 146,  "Accounting for Costs Associated with
Exit or Disposal  Activities"  ("SFAS No. 146").  This standard  requires that a
liability for a cost associated with an exit or disposal  activity be recognized
when the liability is incurred  rather than when a commitment to an exit plan is
made.  The  adoption  of SFAS No.  146 did not  have a  material  impact  on the
Company's consolidated financial statements.

      In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149,  "Amendment  of Statement  133 on  Derivative  Instruments  and Hedging
Activities"  ("SFAS No. 149"). SFAS No. 149 amends and clarifies  accounting for
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts,  and for hedging activities under SFAS No. 133 and is effective
for contracts entered into or modified after June 30, 2003. The adoption of SFAS
No. 149 did not have a material effect on the Company's  consolidated  financial
statements.  The Company  does not  currently  have  derivative  instruments  or
hedging  activities.  However,  the Company is  currently  in the  processes  of
setting  up an  arrangement  with a  financial  institution  to  participate  in
currency  forward  contracts  for the  purpose of  mitigating  foreign  exchange
fluctuations.

      In May 2003, the FASB issued Statement of Financial  Accounting  Standards
No. 150,  "Accounting for Certain Financial  Instruments with Characteristics of
both  Liabilities and Equity" ("SFAS No. 150").  SFAS No. 150 provides  guidance
with  respect  to  the  classification  and  measurement  of  certain  financial
instruments with  characteristics of both liabilities and equity. This statement
requires that an issuer classify a financial instrument that is within its scope
as a liability rather than, under previous guidance,  as equity. The adoption of
SFAS No.  150 did not  have a  material  effect  on the  Company's  consolidated
financial statements.


                                      F-10
<PAGE>

      u) Reclassifications

      Certain amounts from prior consolidated  financial  statements and related
notes have been reclassified to conform to the current period presentation.

NOTE 3: RESTATEMENT OF FINANCIAL STATEMENTS

      The  Company  determined  that the  previously  issued  interim  unaudited
consolidated  financial  statements  for the nine and three month  periods ended
September  30, 2004,  the period from March 7, 2003 through  September 30, 2003,
the three month period ended September 30, 2003 and the previously filed audited
consolidated  financial  statements  for the period  from March 7, 2003  through
December 31, 2003, contained errors that required restatement.

      The restatement  resulted  primarily from correction of accounting for the
following transactions: (1) accounting for the acquisition of the Miza UK assets
as a purchase  transaction rather than a reorganization of entities under common
control,  (2) the  recognition  and  amortization  of the fair value assigned to
beneficial  conversion  feature relating to convertible  debt, (3) correction to
classification  of amortization of deferred  financing  costs, (4) correction to
classification of various non recurring operating costs.

      The  components  of the  restatement  are explained in the notes below the
table.

<TABLE>
<CAPTION>
                                                                           Adjustment to
                                                                 As filed     restate      Restated
                                                                 --------     -------      --------
                                                          (Expressed in thousands, except per share amounts)
<S>                                                           <C>           <C>          <C>
BALANCE SHEET DATA AS OF SEPTEMBER 30, 2004
Deferred financing costs, net (b)                               $  1,281     $   (543)    $    738
Other assets (b)                                                      --           45           45
Purchased intangible assets, net (c)                                  --        1,614        1,614
Total assets                                                      18,416        1,116       19,532
Borrowings under revolving line of credit, net of discount         6,827         (833)       5,994
Long-term debt, net of current portion and debt discount           7,399         (786)       6,613
Accumulated deficit                                              (21,897)      (1,391)     (23,288)
Additional Paid-In Capital (a), (c)                               20,696        4,126       24,822
Total liabilities and stockholders' equity(a), (c)                18,416        1,116       19,532

BALANCE SHEET DATA AS AT DECEMBER 31, 2003
Deferred financing costs, net (b)                               $    905     $    (45)    $    860
Other assets (b)                                                      --           45           45
Purchased intangible assets, net (c)                                  --        1,739        1,739
Total assets (a), (c)                                             13,751        1,739       15,490
Borrowings under revolving line of credit, net of discount         3,133         (758)       2,375
Long-term debt, net of current portion and debt discount           7,439         (822)       6,617
Accumulated deficit (a), (c)                                     (12,696)        (696)     (13,392)
Additional paid in capital (d)                                    11,584        4,015       15,599
Total liabilities and stockholders' equity (a), (c)               13,751        1,739       15,490
</TABLE>


                                      F-11
<PAGE>

<TABLE>
<CAPTION>
                                                                          Adjustment to
                                                                 As filed    restate     Restated
                                                                 --------    -------     --------
                                                        (Expressed in thousands, except per share amounts)
<S>                                                               <C>         <C>        <C>
Statement of operations data for the nine month
period ended September 30, 2004
Amortization of intangible assets (c)                            $    --     $   125     $   125
Loss from continuing operations before interest and
  financing costs, reorganization items, income
  tax benefit and discontinued operations (a), (c)                (7,690)       (125)     (7,815)
Interest and financing costs  (a), (c), (e)                        1,287       1,187       2,474
Net loss (a), (c)                                                 (8,584)     (1,312)     (9,896)
Basic and fully diluted loss per share                             (0.28)      (0.04)      (0.32)

Statement of operations data for the period
  from March 7, 2003 through September
  30, 2003
General and administrative expenses (e)                          $ 4,722     $ 3,737     $ 8,459
Amortization of intangible assets (c), (e)                            --          97          97
Loss from continuing operations before interest                   (3,509)     (3,834)     (7,343)
  and financing costs, reorganization items,
  income tax benefit and discontinued operations
  (a), (c)
Other expenses (c), (e)                                            5,949      (5,949)         --
Interest and financing costs  (a), (c), (e)                           --         359         359
Net loss (a), (c)                                                 (8,973)      1,781      (7,192)
Basic and fully diluted loss per share                             (0.42)       0.08       (0.34)
</TABLE>

<TABLE>
<CAPTION>

                                                                          Adjustment to
                                                                 As filed    restate     Restated
                                                                 --------    -------     --------
                                                       (Expressed in thousands, except per share amounts)
<S>                                                              <C>         <C>        <C>
Statement of operations data for the three month
  period ended September 30, 2004
Amortization of intangible assets (c)                            $    --     $    42     $    42
Loss from continuing operations before interest and
  financing costs, reorganization items, income
  tax benefit and discontinued operations (a), (c)                (3,034)        (43)     (3,077)
Interest and financing costs  (a), (c), (e)                          595         155         750
Net loss (a), (c)                                                 (3,629)       (198)     (3,827)
Basic and fully diluted loss per share                             (0.11)      (0.01)      (0.12)

Statement of operations data for the three month
  period ended September 30, 2003
General and administrative expenses (e)                          $ 1,978     $   632     $ 2,610
Amortization of intangible assets (c)                                 --          42          42
Loss from continuing operations before interest and
  financing costs, reorganization items, income
  tax benefit and discontinued operations (a), (c)                (1,675)       (674)     (2,349)
Other expenses (e)                                                   781        (781)         --
Interest and financing costs  (a), (c), (e)                           --         149         149
Net loss (a), (c)                                                 (2,234)        (42)     (2,276)
Basic and fully diluted loss per share                             (0.09)         --       (0.09)
</TABLE>

      As a consequence of the changes made to the consolidated balance sheet and
statement of  operations,  as note above,  the  consolidated  statements on cash
flows and changes in stockholder's equity and other comprehensive loss have been
restated  accordingly.  Insert on page F-13 before paragraph  beginning with "In
addition"

      a) Valuation of Warrants and Beneficial conversion feature ("BCF")

      The Company  completed its analysis of the accounting for the  convertible
debt and  warrants  issued to Laurus  Master  Fund Ltd.  ("Laurus  Funds").  The
analysis  indicated  that the beneficial  conversion  feature and the fair value
assigned to the warrants relating to these instruments,  as previously  recorded
on  the  Company's  financial  statements,   were  understated  and  incorrectly
reclassified.  Accordingly the historical  financial statements presented herein
are restated to account for these items in accordance  with Emerging Issues Task
Force ("EITF") No. 98-5  "Accounting for Convertible  Securities with Beneficial
Conversion Features or Contingently  Adjustable  Conversion Ratios" and EITF No.
00-27 "Application of Issue 98-5 to Certain Convertible Instruments."


                                      F-12
<PAGE>

      These corrections increased additional paid-in capital by $4.0 million and
increased  debt  discount by $1.6 million as at December 31, 2003 and  increased
interest and financing  costs by $4.3 million,  including  interest  relating to
amortization of debt discount  amounting to approximately $48,000 for the period
from March 7, 2003 through December 31, 2003.

      These corrections  increased  additional  paid-in capital by approximately
$4.1 million and  increased  debt  discount by $1.6 million as at September  30,
2004 and  increased  interest and  financing  costs by $1.2  million,  including
interest  relating to amortization of debt discount  amounting to  approximately
$484,000 for the nine month period ended September 30, 2004.

      b) Reclassification of Other Assets

      The Company has revised its consolidated  balance sheet  classification to
separately  disclose long term deposits and other long term assets  amounting to
approximately  $45,000 as of September 30, 2004 and December 31, 2003, which had
previously been reported as deferred financing costs and other assets.

      c) Accounting for the purchase of Miza Pharmaceuticals (UK) Ltd.'s assets

      On March 7, 2003,  the  Company's  subsidiary,  Inyx  Pharma  Ltd.  ("Inyx
Pharma") had purchased  the majority of the  pharmaceutical  business  assets of
Miza  Pharmaceuticals  (UK) Ltd.  ("Miza  UK") out of  Administration  (a United
Kingdom   equivalent   of  bankruptcy   protection   and   reorganization)   for
approximately  $8.3 million,  consisting of an  approximately  $7.1 million cash
payment to the Administrator for the acquired Miza UK assets plus  approximately
$1.2 million in direct  transaction  costs.  This  transaction  was corrected to
account for the acquisition  value of the purchase  method of accounting  rather
than the original  method used to account for  reorganization  of entities under
common control.

      Under the purchase  method of accounting,  the purchase price is allocated
to the fair  value of the net  assets  acquired  with any  excess  allocated  to
identifiable  tangible and intangible  assets.  Accordingly,  the total purchase
price of  approximately  $8.3 million incurred by Inyx Pharma has been allocated
to the acquired identifiable tangible and intangible Miza UK assets. Based on an
independent  third-party fair value  valuation,  the tangible assets acquired by
Inyx Pharma,  which  consisted of fixed assets and  inventory,  were allocated a
fair value of approximately $5.1 million and $1.3 million, respectively, and the
intangible  assets,  consisting  of a  customer  list and  know-how,  have  been
allocated a fair value of approximately $1.3 million and approximately $600,000,
respectively.  As a consequence of such purchase price allocations,  no goodwill
was recorded.

      Previously under  reorganization  of entities under common control the net
assets of Miza UK were  transferred to Inyx Pharma at Miza UK's  historical book
basis  and the  results  of  operations  of Miza UK have  been  included  in the
consolidated  financial statements since the beginning of the periods presented.
The correction of the accounting for this transaction resulted in classification
of Miza UK results of  operations  for the period from  January 1, 2003  through
March 6, 2003 as  predecessor  company  results.  As the Biopharma  division was
historically part of Miza UK's business but was not acquired by Inyx Pharma, its
results  of  operations  are  presented  as   discontinued   operations  in  the
Predecessor Company financial statements.

      In addition  previously the Company charged  approximately $1.2 million of
transaction  related  costs and  approximately  $700,000  of  goodwill  to other
expenses.   These  amounts  have  now  been  reversed  and  capitalized  to  the
acquisition  cost of Miza UK's assets in accordance  with the purchase method of
accounting,  rather than the  reorganization  of entities under common  control.
This correction  decreased other expenses by approximately  $1.9 million for the
period from March 7, 2003 through September 30, 2003, decreasing net loss by the
same amount.

      The net  adjustment  to  purchased  intangible  assets  approximated  $1.6
million and $1.7  million as at September  30, 2004 and December 31, 2003.  This
correction  also  increased  amortization  of intangible  assets by $125,000 and
$42,000  for the  nine  and  three  month  periods  ended  September  30,  2004,
respectively  and by  $97,000  and  $42,000  for the  period  from March 7, 2003
through  September  30, 2003 and three month  period ended  September  30, 2003,
respectively, in the accompanying consolidated statements of operations.

      d) Additional paid-In capital

      At September 30, 2004 and December 31, 2003,  additional  paid-in  capital
was  increased by net amount of  approximately  $4.1  million and $4.0  million,
respectively  to reflect the net  adjustment  relating to the  correction of the
accounting  for the beneficial  conversion  feature of the Laurus Funds debt and
respective  warrants as detailed  above in Note 3(a).  In  addition,  management
determined that retained  earnings included  approximately  $196,000 relating to
accumulated  deficit of the thoroughbred  horse  operations,  this amount should
instead be  classified  as  additional  paid-in  capital,  therefore the Company
corrected the classification accordingly.

      e) Other Reclassifications

      Certain amounts in the restated consolidated  financial statements for the
nine and three month period ended September 30, 2004,  period from March 7, 2003
through September 30, 2003, and three month period ended September 30, 2003 have
been reclassified to conform with the current period presentation, as follows:

      i.    Management  has  evaluated  the  nature of the  expenses  previously
            classified  as  other  expenses  in the  consolidated  statement  of
            operations and determined  that although  certain items are one-time
            non-recurring   charges,   these  amounts   relate  to  the  ongoing
            operations  of the  Company.  Such  amounts  of  approximately  $2.6
            million  have now been  classified  as  general  and  administrative
            expenses  and  approximately   $304,000  and  $145,000  relating  to
            interest  expense  are now  presented  as a  separate  line  item as
            interest  and  financing  costs  in  the  accompanying  consolidated
            statements of operations.  For the period from March 7, 2003 through
            September 30, 2003 and for the month period ended September 30, 2003
            such amounts were  approximately  $5.9 million and $781,000 realting
            to  non-recurring  one time costs and $332,000  relating in interest
            expense.


                                      F-13
<PAGE>

      ii.   Approximately   $1.2  million  of  transaction   related  costs  and
            approximately  $700,000  of  goodwill  which  previously  have  been
            charged to other expenses,  have now been  capitalized as intangible
            assets (See Note 3 (c) above).


      iii.  Amortization   expense  related  to  deferred  financing  costs  had
            previously  been  classified  with   depreciation  and  amortization
            expenses.  The  amortization  of deferred  financing costs should be
            classified  as  interest  expense.   Accordingly,  the  Company  has
            corrected its  consolidated  statement of operations to reflect this
            change in classification. These corrections reduced depreciation and
            amortization  and  increased  interest  expense by  $40,000  for the
            period from March 7, 2003 through  September 30, 2003, and increased
            interest  expense by $483,000  and  $175,000  for the nine and three
            months ended September 30, 2004

      iv.   Expenses related to the thoroughbred  horse operations  amounting to
            approximately  $25,000 are  included  as general and  administrative
            expenses.

      v.    Management determined that the relative fair value of the detachable
            warrants issued to Laurus in relation to its  convertible  debt that
            had originally  been  classified as deferred  financing costs should
            instead be recorded as a discount against the debt, and the discount
            is amortized  over the term of the debt.  As of March 31, 2005,  the
            convertible  debt owed to Laurus Funds was repaid in full as part of
            the  acquisition  concluded  on March  31,  2005  which has not been
            reflected in these financial statements.

NOTE 4: ACQUISITION AND RECAPITALIZATION TRANSACTION

      Acquisition

      On March 7, 2003, Inyx Pharma acquired the business assets of Miza UK from
a  court-appointed  Administrator  in the United  Kingdom.  The  acquisition was
accounted for in accordance with the purchase  method of accounting.  Miza UK is
considered to be a predecessor  business and  accordingly  results of operations
included in these consolidated  financial statements prior to the acquisition of
Miza UK are those of Miza UK.  Effective  as of the  purchase  date the  Company
established  a  new  basis  in  the  acquired   assets  based  on  the  purchase
consideration and transaction costs totalling  approximately  $8.3 million.  The
results of the  operations  of the acquired  business  have been included in the
consolidated financial statements since the acquisition date. In connection with
this  acquisition,  Inyx  Pharma  paid cash of  approximately  $7.1  million and
incurred approximately $1.2 million in direct transaction costs.

      The purchase price was allocated to the  identifiable net assets purchased
based on their  estimated  fair  market  value  at the  date of  acquisition  as
follows:

Property, plant and equipment                         $5,136
Inventory                                              1,319
Intangible assets subject to amortization:
  Customer list                                        1,280
  Know-how                                               598
                                                      ------
                                                      $8,333
                                                      ======

      The fair values  assigned to the intangible  assets  acquired are based on
estimates and assumptions provided and other information compiled by management,
including independent valuations,  that utilize established valuation techniques
appropriate for the industry the Company operates in.


                                      F-14
<PAGE>

      Recapitalization Transaction

      On April 28,  2003,  the Company  acquired all of the  outstanding  common
shares of Inyx Pharma by issuing 16 million of the Company's  shares for all the
outstanding  and issued shares of Inyx Pharma.  As a result of the  transaction,
the  stockholders  of Inyx  Pharma  received  64% of the  Company's  outstanding
shares,  after the issuance of shares for finders' fees and consulting services.
The  transaction  was  accounted  for as a  recapitalization  of Inyx  using the
reverse acquisition method of accounting.  Consequently,  the assets transferred
were recorded at historical value.

NOTE 5: ACCOUNTS RECEIVABLE, NET

      Accounts receivable consist of the following:

                                    September 30, 2004      December 31, 2003
                                       (Unaudited)
                                    ------------------      -----------------
Trade receivables                         $ 2,810                $ 3,586
Less allowance for doubtful accounts         (162)                  (191)
                                          -------                -------
                                          $ 2,648                $ 3,395
                                          =======                =======

      There were no write-offs  during the nine months ended  September 30, 2004
and the period from March 7, 2003 through  September 30, 2003 and for the period
from January 1, 2003 through March 6, 2003.  For the nine and three months ended
September  30,  2004  there was bad debt  recoveries  of  $29,000  and  $140,000
respectively.

NOTE 6: INVENTORY, NET


                                      F-15
<PAGE>

      Inventory is comprised of the following:

                                    September 30, 2004      December 31, 2003
                                       (Unaudited)
                                    ------------------      -----------------
Finished goods                            $   172                $    15
Work in process                               126                    266
Raw materials                               1,837                  1,015
                                           -------               -------
                                            2,135                  1,296
Less provision for obsolescence              (323)                  (207)
                                           -------               -------
                                          $ 1,812                $ 1,089
                                           =======               =======

NOTE 7: PREPAID EXPENSES AND OTHER CURRENT ASSETS

      Prepaid expenses and other current assets consist of the following:

<TABLE>
<CAPTION>

                                                     September 30, 2004      December 31, 2003
                                                        (Unaudited)
                                                     ------------------      -----------------
<S>                                                         <C>                   <C>
Deposit for equipment and other costs(a)                    $1,205                $   --
Prepaid refundable deposit for business development (b)      1,296                    --
Deferred acquisition costs (c)                               1,285                    --
Prepaid vendor invoices                                        777                   347
Prepaid refundable deposit for acquisition candidate           320                    71
Deferred legal and consulting fees                             569                   152
Prepaid rent and property tax                                   --                   126
Prepaid insurance                                               10                   128
Sales tax receivable, net                                       88                   132
Other prepaid expenses                                          54                   133
                                                            ------                ------
                                                            $5,604                $1,089
                                                            ======                ======

</TABLE>

      (a)  The   Company's   subsidiaries   are  expected  to  begin   providing
manufacturing  technology  transition consulting services to the country of Cuba
on behalf of the  United  Nations  Development  Programme  ("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.  Because Inyx 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.


                                      F-16
<PAGE>

      (c)  The  Company  has  been  involved  in  a  transaction  to  acquire  a
pharmaceutical  manufacturing  operation.  Costs  incurred  in  relation to this
transaction  include  consulting  fees,  due diligence  costs and  manufacturing
equipment  deposits.  These costs have been  capitalized in  anticipation of the
completion of this transaction.

NOTE 8: PROPERTY, PLANT AND EQUIPMENT, NET

      Property, plant and equipment consist of the following:

                                      September 30, 2004      December 31, 2003
                                         (Unaudited)
                                      ------------------      -----------------

Land                                       $   546                  $   546
Buildings                                    1,059                    1,059
Machinery, equipment and office furniture    3,541                    3,524
Computer hardware and software                  99                       19
                                           -------                  -------
                                             5,245                    5,148
Less accumulated depreciation                 (724)                    (340)
                                           -------                  -------
                                             4,521                   4,808
                                           -------                  -------
Computer hardware and software
under capital lease                            382                     382
Less accumulated amortization                  (53)                     (7)
                                           -------                  -------
                                               329                     375
                                           -------                  -------
                                           $ 4,850                  $ 5,183
                                           =======                  =======

      For the nine months ended September 30, 2004 and for the period from March
7,  2003  through  September  30,  2003,  depreciation  of  property,  plant and
equipment was approximately  $385,000 and $225,000,  respectively.  Amortization
for equipment under capital leases was approximately $46,000 and $0 for the nine
months  ended  September  30, 2004 and for the period from March 7, 2003 through
September  30, 2003  respectively.  For the period from  January 1, 2003 through
March 6, 2003  depreciation of property,  plant and equipment was  approximately
$75,000

NOTE 9: PURCHASED INTANGIBLE ASSETS, NET

      Purchased intangible assets consist of the following:

                                 September 30, 2004      December 31, 2003
                                     Restated                 Restated
                                    (Unaudited)
                                 ------------------      -----------------
Customer list (12 year life)          $ 1,280                  $ 1,280
Know-how (10 year life)                   598                      598
                                      -------                  -------
                                        1,878                    1,878
Less accumulated amortization            (264)                    (139)
                                      -------                  -------
                                      $ 1,614                  $ 1,739
                                      =======                  =======

      Purchased   intangible   assets  are  carried  at  cost  less  accumulated
amortization.  For the nine months ended  September  30, 2004 and for the period
from March 7, 2003 through  September 30, 2003  amortization  expense related to
intangible assets totaled approximately $125,000 and $97,000,  respectively. The
aggregate estimated  amortization  expense for intangible assets as of September
30, 2004 for each of the following five years and thereafter is as follows:

        2005                                                             $166
        2006                                                              166
        2007                                                              166
        2008                                                              166
        2009                                                              166
        Thereafter                                                        784
                                                                       ------
        Total                                                          $1,614
                                                                       ======


                                      F-17
<PAGE>

NOTE 10: DEFERRED FINANCING COSTS, NET

      Deferred  financing  costs,  net  are  comprised  of fees  related  to the
issuance of long term  convertible debt issued to Laurus Funds These amounts are
amortized over the term of the loan.

      Deferred financing costs, net consist of the following:

                            September 30, 2004            December 31, 2003
                                   Restated                      Restated
                                 (Unaudited)
Deferred financing costs            $ 1,027                   $   900
Less accumulated amortization          (289)                      (40)
                                    -------                   -------
                                    $   738                   $   860
                                    =======                   =======

      For the nine months ended September 30, 2004 the  amortization of deferred
financing costs and debt discount approximated $249,000.

      For the period from March 7, 2003 through December 31, 2003,  amortization
of deferred financing costs and debt discount approximated $40,000.

      For the  period  from  January 1, 2003  through  March 6, 2003 and for the
period  from March 7, 2003  through  September  30,  2003 there were no deferred
financing costs and no respective amortization.

NOTE 11: BORROWINGS UNDER REVOLVING LINE OF CREDIT, NET OF DEBT DISCOUNT

      On  December  30,  2003,  the Company  issued to Laurus  Funds (i) Secured
Revolving Convertible Note in the maximum principle amount of up to $2.5 million
and (ii) Secured  Convertible  Minimum Borrowing Note in the original  principal
amount of $1.0 million.  In connection  with the issuance of the Revolving  Note
and the Minimum  Borrowing Note, the company issued 660,000 warrants to purchase
up to 660,000  shares of the  Company's  common  stock  having  exercise  prices
ranging from $1.84 to $2.57 per share.  The warrants expire on December 30, 2008
and  have a  cashless  exercise  provision.  The  relative  fair  value of these
warrants was  estimated at  approximately  $758,000  based on the  Black-Scholes
option pricing model with the following  assumptions;  a risk free interest rate
of 3.14%,  an expected  life of four years,  a  volatility  factor of 66%, and a
dividend yield of 0%. In accordance  with EITF 00-27,  the Company  recorded the
relative  fair value of the  warrants  as a discount  against  the debt,  and is
amortizing the discount over the term of the debt. In addition since the debt is
convertible into equity at the option of the note holder at the date of issuance
at beneficial  conversion rates, an embedded  conversion  feature was charged to
interest  and  financing  costs  amounting  to  approximately  $568,000  in  the
accompanying consolidated statement of operations.

      The Company can elect to pay the  outstanding  balance in shares of common
stock at a fixed  conversion price of $1.47 which was amended to $1.00 per share
on  February  27,  2004  and  amended   again  to  $0.80  on  August  31,  2004,
retroactively to the date of the original agreement. If the closing price of the
Company's  stock for any of the 10 trading days  preceding the repayment date is
less  than  110% of the  fixed  conversion  price,  the  Company  shall pay cash
instead.

      On February 27, 2004 the Company  issued  Amendment #1 and  increased  the
principle borrowing amount under the Secured Revolving  Convertible Note and the
Minimum Borrowing Note by $1.0 million,  respectively.  In addition, the Company
issued Laurus Funds 330,000 warrants to purchase 330,000 shares of the Company's
common stock at prices ranging between $1.25 and $1.75 per share. The fair value
assigned to these warrants was  approximately  $219,000 using the  Black-Scholes
option pricing model with the following  assumptions;  a risk free interest rate
of 3.14%,  an expected  life of four years,  a  volatility  factor of 57%, and a
dividend yield of 0%. In accordance  with EITF 00-27,  the Company  recorded the
relative  fair value of the  warrants  as a discount  against  the debt,  and is
amortizing the discount over the term of the debt. In addition since the debt is
convertible into equity at the option of the note holder at the date of issuance
at beneficial  conversion rates, an embedded  conversion  feature was charged to
interest  and  financing  costs  amounting  to  approximately  $380,000  in  the
accompanying consolidated statement of operations.


                                      F-18
<PAGE>

      On March 30, 2004, the aggregate  principle amount available for borrowing
under these two notes was  increased to $6.5 million by issuing  Amendment #2 to
the Secured Revolving  Convertible Note whereby the maximum principle amount was
increased  by $1.0  million to $4.5  million.  The Company  issued  Laurus Funds
165,000  warrants to purchase 165,000 of the Company's shares of common stock at
prices  ranging  between $1.25 and $1.75 per share.  The  additional  beneficial
conversion  feature  recorded on this  amendment was $209,000 and the fair value
allocated to the warrants was  approximately  $109,000  using the  Black-Scholes
option pricing model with the following  assumptions;  a risk free interest rate
of 3.14%,  an expected  life of four years,  a  volatility  factor of 57%, and a
dividend yield of 0%. In accordance  with EITF 00-27,  the Company  recorded the
relative  fair value of the  warrants  as a discount  against  the debt,  and is
amortizing  the discount  over the term of the debt and the embedded  beneficial
conversion   feature  was  charged  to  interest  and  financing  costs  in  the
accompanying consolidated statement of operations.

      On August 31, 2004,  the Company  issued  Amendment  #3 which  lowered the
fixed  conversion  price of the convertible  debt to $0.80  retroactively to the
date of the agreement and stipulated an automatic reset of the fixed  conversion
price under certain circumstances. In connection with this amendment and certain
waivers issued on the convertible term note, the Company issued 694,000 warrants
to Laurus Funds.

      For the nine and three months ended September 30, 2004 interest expense on
the  amortization  of debt  discount  was  approximately  $255,000  and  $92,000
respectively.  There was no similar  expense  for the period  from March 7, 2003
through September 30, 2003.

      As of  September  30,  2004,  advances  under this  facility,  amounted to
approximately  $6.8 million  which  includes an  over-advance  of  approximately
$300,000.  These advances are collateralized by accounts receivables based on an
agreed upon  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.  The  initial  advance  under  this
facility on December 30, 2003  amounted to  approximately  $3.1 million of which
approximately $2.6 million was used to repay the Company's factoring arrangement
with another lender.

      Laurus Funds shall not be entitled to be issued  shares of common stock in
repayment of any portion of the notes or upon exercise of either of the warrants
if and to the  extent  such  issuance  would  result  in  Laurus  Funds  and its
affiliates  beneficially  owning  more than 4.99% of the issued and  outstanding
common stock upon issuance,  unless Laurus Funds shall have provided at least 75
days prior written notice to the Company of its revocation of such  restriction.
To date, the Company has not received any such notice.

      The unamortized  debt discount at September 30, 2004 and December 31, 2003
amounted to $833,000 and $758,000 respectively.

NOTE 12: LONG TERM DEBT, NET OF CURRENT PORTION

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

<TABLE>
<CAPTION>
                                                                                         Successor
                                                                      -------------------------------------------
                                                                      September 30,              December 31, 2003
                                                                           2004
                                                                      (Unaudited)
                                                                      -----------
<C>                                                               <C>                                 <C>
7% convertible term note due to Laurus Funds,                           $ 4,215                       $ 3,678
     collateralized by accounts receivable and other assets
     of the Company, net of debt discount of $786,000 at
     September 30, 2004 and $822,000 at December 31, 2003
     (a)
Uncollateralized 6% convertible promissory note due to                    4,013                         4,013
     customer,(b)
Uncollateralized 7% to 18% demand notes due to a                            150                           100
     stockholder and an executive of the Company, principal
     and interest due on demand
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)                                           195                           309
                                                                      -------------------------------------------
                                                                          8,573                         8,100
Less current portion                                                     (1,959)                       (1,483)
                                                                      -------------------------------------------
Debt, net of current portion                                            $ 6,614                       $ 6,617
                                                                      ===========================================
</TABLE>


                                      F-19
<PAGE>

      (a) On October 29, 2003,  the Company issued to Laurus Funds a Convertible
Tem Note in the maximum principle amount of $4.5 million. In connection with the
issuance of the Convertible Term Note, the Company issued 1,350,000  warrants to
purchase up to 1,350,000  shares of the Company's  common stock having  exercise
prices ranging from $1.25 to $1.75 per share. The warrants expire on October 29,
2008 and have a cashless  exercise  provision.  The fair value of these warrants
was  estimated  at  approximately  $870,000  based on the  Black-Scholes  option
pricing  model with the  following  assumptions;  a risk free  interest  rate of
3.14%,  an  expected  life of four  years,  a  volatility  factor of 66%,  and a
dividend  yield of 0%. The  relative  fair value  allocated  to the warrants was
recognized as debt discount and amortized over the term of the mote.

      In addition,  since this debt is convertible  into equity at the option of
the  note  holder  at  beneficial   conversion  rates,  an  embedded  beneficial
conversion  feature  amounting to approximately  $3.2 million was recorded.  The
value of the  beneficial  conversion  feature has been  record to  interest  and
financing costs in accordance with EITF No. 00-27.

      The principal amount of this  collateralized  7% convertible term note was
increased by another $500,000 on May 27, 2004. As additional  consideration  for
the increase the Company  issued a five year Common  Stock  Purchase  Warrant to
Laurus Funds to purchase 82,500 shares of the Company's common stock at exercise
prices  ranging from $1.00 to $1.40 per share.  The  principal is due in monthly
installments  of  approximately  $17,000  commencing  in November  2004  through
November 2006. The Company recorded a beneficial  conversion feature of $184,000
and the relative fair value allocated to the warrants was approximately  $40,000
based on the Black-Scholes option pricing model with the following  assumptions;
a risk  free  interest  rate of  3.14%,  an  estimated  life of  four  years,  a
volatility  factor of 57%, and a dividend yield of 0%. The fair value  allocated
to the warrants was recorded as debt  discount and is being  amortized  over the
term of the  loan and the  beneficial  conversion  feature  was  charged  to the
statement of operations as interest and financing costs.

      In April 2004, the Company received a thirty day waiver from the holder on
the first principal payment due which was subsequently  further extended through
to  maturity In addition  the  Company  received a deferral on certain  interest
payments which have been subsequently paid to Laurus Funds. As consideration for
the deferrals,  the Company  issued five year Common Stock Purchase  Warrants to
Laurus Funds to purchase  694,000 shares of common stock at an exercise price of
$0.81 per share.  The fair value of these  warrants  was  $153,000  based on the
Black-Scholes option pricing model with the following  assumptions;  a risk free
interest rate of 3.14%, an estimated life of four years, a volatility  factor of
57%, and a dividend  yield of 0% and was allocated as debt discount and is being
amortized over the remaining term of the loan.

      The principal is due in monthly  installments  of  approximately  $141,000
starting in April 2004 through  November 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 per share based on an agreed upon conversion formula.

      Pursuant to the  Registration  Rights  Agreement  with Laurus  Funds,  the
Company is liable  for  certain  penalties  as a result of not  registering  the
securities within a specified time frame. However, to date Laurus has waived all
penalties.

      Laurus Funds shall not be entitled to be issued  shares of common stock in
repayment of any portion of the notes or upon exercise of either of the warrants
if and to the  extent  such  issuance  would  result  in  Laurus  Funds  and its
affiliates  beneficially  owning  more than 4.99% of the issued and  outstanding
common stock upon issuance,  unless Laurus Funds shall have provided at least 75
days prior written notice to the Company of its revocation of such  restriction.
To date, the Company has not received any such notice.

      (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.


                                      F-20
<PAGE>

      (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 rates range from 10% to 27%.

        As at September 30, 2004 the principal  installments payable on the debt
are as follows:

2005                                                                      $1,959
2006                                                                       1,982
2007                                                                       5,417
                                                                          ------
Total                                                                     $9,358
                                                                          ======

NOTE 13: SUBSEQUENT EVENTS

      On October 4, 2004, the Company granted 75,000 stock purchase  warrants to
a consultant in connection with two private placements  completed from August 3,
2004 through September 3, 2004. These five-year warrants allow the consultant to
purchase the Company's common stock at $1.08 per share.

      On October 7, 2004, the Company  announced that it had signed an agreement
in principle with a multinational  pharmaceutical  company to acquire the assets
and certain  business of that company's  subsidiary in Puerto Rico. A definitive
agreement  was signed on December  15, 2004 and  closing of the  acquisition  is
scheduled for March 31, 2005 subject to successful  transfer of a major customer
contract and successful  financing.  For the purchase price of $15 million,  the
Company will receive all of the plant, machinery, equipment, land and buildings,
tangible assets,  books and records,  permits and pharmaceutical,  technical and
regulatory  know-how and computer  software,  data and  documentation as well as
inventory  located in Manati,  Puerto Rico. In addition,  the Company expects to
incur  approximately  $3.0  million  to  $3.5  million  in  transaction  related
expenditures including legal,  accounting,  consulting and professional fees and
business  restructuring costs. As of December 31, 2004, the Company had incurred
approximately $1.7 million in such transaction-related costs.

      On November 8, 2004, the Company  announced that it had expanded a product
development agreement with one of its clients. Under the terms of the agreement,
the Company's  United  Kingdom  subsidiary,  Inyx Pharma,  will be assisting the
client in the  development  and supply of  additional  topical and foam  aerosol
products for dermatological applications.

      On November  19,  2004,  the Company  granted an  aggregate  of  1,150,000
five-year warrants to two of the Company's executives and an outside director to
purchase an  aggregate of 1,150,000  shares of the  Company's  common stock at a
price of $0.95 per share, 450,000 of these warrants related to services provided
in  connection  with  corporate  development  and  acquisition  activities.  The
remaining  700,000  warrants  were  granted  as  additional   consideration  for
extending  loans to the Company,  the  aggregate  amount of the loans amounts to
$700,000  bearing  interest  of 10% per annum and due to be repaid no later than
March 31, 2005.  Net proceeds  from these loans,  were used for working  capital
purposes.

      On November 26, 2004, the Company granted 300,000 five-year stock purchase
warrants to purchase  300,000 shares of the Company's common stock at a price of
$0.98 per share,  to a consultant for due diligence  services in relation to the
above agreement.

      On December 16, 2004, the Company granted 100,000 stock purchase  warrants
for services in  connection  with signing a definitive  agreement  for the asset
acquisition  in Puerto Rico.  These five year warrants  allow the  consultant to
purchase the Company's common stock at a price of $1.11 per share.

      On December  30,  2004,  the  Company  granted  five year  warrants to two
consultants  to purchase an aggregate of 50,000 shares of the  Company's  common
stock at $1.35 per share.


                                      F-21
<PAGE>

NOTE 14: STOCKHOLDERS' EQUITY

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

      On April 17, 2003 the Company issued 2,450,000 shares of restricted common
stock as a fee to five entities as finders' fees for their role in  facilitating
the  transaction  with  Inyx  Pharma.  The  value of the  common  stock was $1.3
million.

      On April 21, 2003 the Company issued 1,500,000 shares of restricted common
stock to an  individual  as  consideration  for business  advisory and financial
consulting services.  The value of the shares was $799,000.

      On April 28,  2003 the  Company  issued  16,000,000  shares of  restricted
common stock for 100% of the issued and  outstanding  shares of Inyx Pharma in a
reverse merger acquisition.

      On August 22, 2003 the Company  completed  a private  placement  financing
under which the Company  sold  500,000  shares of its common stock at a price of
$1.00 per  share,  and the  investors  also  received  a common  stock  purchase
warrant, with an exercise price of $1.50 per share, along with each common share
purchased. Neither the common shares nor the warrants are registered for trading
at this time.  As  announced by the Company on September 9, 2003 the proceeds of
the offering  were to be used to increase the  Company's  working  capital.  The
investors  in this private  placement  included  the  Company's  Chairman and an
Outside Director of the Company.

      During the period  from March 7, 2003  through  September  30,  2003,  the
Company recorded  approximately $504,000 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.

      During the period  from March 7, 2003  through  September  30,  2003,  the
Company recorded approximately $1,254,000 resulting from the issuance of 920,000
stock purchase  warrants as consideration  for services to consultants and stock
options to employees.  These amounts are included in general and  administrative
expenses in the consolidated statement of operations.

      On October 30,  2003,  the  Company  closed the  private  placement  of $3
million in common stock. The common stock private  placement has resulted in the
issuance of 3 million  shares,  par value $0.01 to a group of  institutions  and
other  accredited  investors.  Proceeds net of offering  costs of  approximately
$310,000 amounted to approximately $2,686,000. In addition to the common shares,
the purchasers  received a five-year Stock Purchase  Warrant to buy one share of
common stock for each two shares acquired in the placement,  at a price of $1.00
per  share for half of such  warrants  and $1.35  for the  remaining  half.  The
Company can call these  warrants for  redemption if the Company' stock price has
closed above 200% of the strike price for 20 consecutive days.

      On November  17,  2003,  pursuant  to an  exercise  of 75,000  options the
Company issued 75,000 shares of common stock for net proceeds of $90,000.

      For the period ended December 31, 2003, the Company recorded approximately
$1,009,000  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.

      On October 29, 2003 and December 30, 2003, the Company issued Laurus Funds
a Convertible Term Note and a Secured  Revolving  Convertible Note with attached
warrants.  The beneficial  conversion feature and the fair value of the warrants
were  recorded  to  additional  paid-in  capital.  The  value of the  beneficial
conversion  feature was $3.7 million and the fair value assigned to the warrants
was $1.6 million.

      In January 2004,  pursuant to an exercise of 265,000 options,  the Company
issued  200,000  shares of common stock at  approximately  $1.10 per share,  and
65,000 shares of common stock at approximately $1.20 per share.

      On July 1, 2004,  the Company  issued 31,579  restricted  shares of common
stock for  services  under a  strategic  collaboration  agreement  amounting  to
approximately $30,000. This amount is included in the general and administrative
expenses in the consolidated statement of operations.

      On August 3, 2004  through  September  3, 2004 the Company  completed  two
private  placements and issued an aggregate of 9,190,901  shares of common stock
at exercise prices ranging from $1.00 to $1.11 per share. The private  placement
resulted in proceeds of approximately $6.6 million net of offering related costs
amounting to approximately $768,000. All of the investors were granted five-year
non-detachable  warrants to purchase up to an additional 9,190,901 shares of our
common  stock in aggregate  at exercise  prices  ranging from $1.00 to $1.11 per
share.  During the term of such  warrants,  the exercise price shall be adjusted
based on an agreed upon formula.  The warrants also contain  certain  redemption
and anti-dilution provisions.


                                      F-22
<PAGE>

      During the nine  month  period  ended  September  30,  2004,  the  Company
recorded  approximately  $227,000 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.

      In addition,  during the period  ended  September  30,  2004,  the Company
recorded approximately $178,000 of additional paid-in capital resulting from the
issuance of 700,000  stock  purchase  warrants as additional  consideration  for
promissory  notes issued to two of its executives and one independent  director.
These amounts are included in interest expense in the consolidated  statement of
operations.

      During the nine  month  period  ended  September  30,  2004,  the  Company
recorded  approximately $521,000 as the fair value of warrants granted to Laurus
Funds as  consideration  for its  collateralized  7%  convertible  term note and
certain  amendments to the loan  agreement  thereafter.  The relative fair value
allocated to the warrants is recorded as debt discount and is amortized over the
remaining term of the loan. In addition,  the Company also recorded  $773,000 in
the  beneficial  conversion  feature on the  convertible  term note and  secured
revolver  note.  This amount was recorded as a charge to interest and  financing
costs in the accompanying statement of operations

      During the nine  month  period  ended  September  30,  2004,  the  Company
recorded approximately $580,000 of additional paid-in capital resulting from the
issuance of stock purchase warrants,  which included; (i) 100,000 stock purchase
warrants  granted 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.  (ii) 1,500,000  warrants granted to an entity related
to the 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.
These  amounts  are  included  in general  and  administrative  expenses  in the
consolidated statement of operations.

NOTE 15: ACCUMULATED COMPREHENSIVE LOSS

      The accumulated comprehensive loss reflected in the consolidated statement
of  changes in  Stockholders'  Equity  (deficit)  and other  comprehensive  loss
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 16: STOCK OPTION PLAN

      On May 1, 2003,  the Company's  Board of Directors  adopted the 2003 Stock
Option Plan,  which  provides for the  granting of incentive  stock  options and
non-qualified  stock options for the benefit of employees,  officers,  directors
and those 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 is
5,000,000.  The  exercise  price  per share  must be at least  equal to the fair
market price at the time of grant.  The term of each option is 10 years from the
date of grant. The predecessor Company had no stock option plan.

      The weighted  average fair value,  at the date of grant of the  individual
options  granted  during  2003 is  estimated  at $1.12.  The fair value of these
options was estimated using the  Black-Scholes  option-pricing  model,  with the
following assumptions for the nine month period ended September 30, 2004 and for
the period from March 7, 2003 through December 31, 2003,  volatility rate of 57%
and 66% respectively, risk free interest rate of 3.14%, an expected life of four
years and no dividend yield for all periods.

      Total net  compensation  expense relating to options granted to employees,
officers,  directors, and other persons approximated $ 227,000 in the nine-month
period ended  September 30, 2004 and $1,513,000  during the period March 7, 2003
through  December 31, 2003.  There were no stock  options  granted  during 2002.
These  amounts  are  included  in general  and  administrative  expenses  in the
consolidated  statement  of  operations,  as the  Company  expects  that it will
continue to issue stock  options to such persons.  There was no similar  expense
for options in the other periods presented.

      A summary of stock option activity under the plan is shown below:


                                      F-23
<PAGE>

                               Successor             Predecessor
                      --------------------------     -----------
                      For the Nine     For the         For the
                         Month        Period from    Period from
                      Period Ended      March 7,       March 7,
                       September         2003           2003
                        30, 2004        through        through
                                       September      September
                                        20, 2003      20, 2003

                      (Unaudited)    (Unaudited)
                      -----------    -----------     -----------
Beginning Balance        4,860            --                --
Granted                    553         4,725                --
Exercised                 (325)           --                --
Forfeited                 (410)         (250)               --
Cancelled                 (228)           --                --
                       -------       -------           -------
Ending Balance           4,450         4,475                --
                       =======       =======           =======
Exercisable              3,415         2,837                --
                       -------       -------           -------

      The following  table  summarizes  information  concerning  outstanding and
exercisable  options  at  September  30,  2004 and at  December  31,  2003;  the
predecessor Company had no stock option plan.

<TABLE>
<CAPTION>
                                   Options outstanding                                Options exercisable
----------------------------------------------------------------------------------- ------------------------
                                                         Weighted
                                                         Average        Weighted                   Weighted
                          Range of                      Remaining       Average                    Average
                          Exercise        Shares       Contractual     Exercise       Shares       Exercise
                            Price       Outstanding    Life (Years)      Price      Exercisable     Price
----------------------- -------------- --------------- ------------- -------------- ------------- ----------
<S>                      <C>                 <C>              <C>        <C>           <C>        <C>
September 30, 2004       $1.10 -$1.75        4,450            9          $1.11         3,415      $1.12
======================= ============== =============== ============= ============== ============= ==========
December 31, 2003        $1.10 -$1.75        4,860            9          $1.12         3,212      $1.12
======================= ============== =============== ============= ============== ============= ==========
</TABLE>

NOTE 17: WARRANTS

      During the three  month and nine month  period  ended  September  30, 2004
there were 12,075,187 and 12,175,187  warrants granted to purchase wholes shares
of the Company's  common stock.  Of the warrants  granted during the three month
period,  9,190,901  warrants were issued  pursuant to the issuance of equity and
are  non-detachable and 783,286 were granted to consultants as consideration for
services in  connection  with the  issuance of equity and  2,200,000  detachable
warrants issued pursuant to consulting and investment banking agreements.  These
warrants  allow the holders to purchase  the  Company's  common  stock at prices
ranging  from $0.80 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%,  an expected
life of four years, a volatility  factor of 57%, and a dividend yield of 0%. The
value assigned to these warrants was approximately  $758,000 and $44,000 for the
three months and nine months ended September 30, 2004 and was charged as general
and  administrative   expenses  to  the  Company's   consolidated  statement  of
operations.

      In addition, the Company also issued 1,271,500 warrants to Laurus Funds in
consideration  for increases to their  convertible  note and borrowing  facility
during the nine month period ended  September  30, 2004.  The value  assigned to
these warrants was approximately  $521,000 and was recorded as debt discount and
is being amortized as interest expense over the remaining term of the loan.

      For the period from March 7, 2003 through  September 30, 2003, the Company
granted  1,420,000  warrants to purchase a maximum of 1,420,000  whole shares of
common stock.  The warrants were issued  pursuant to consulting  and  investment
banking  agreements and allowed the holders to buy the Company's common stock at
prices ranging from $1.00 to $3.10 per share and expire at various dates between
July 1, 2006 and August 25, 2008. The fair value assigned to the warrants issued
for consulting and investment  banking fees was approximately $1.1 million based
on the  Black-Scholes  option pricing model with the following  weighted average
assumption: a risk free interest rate of 3.14%, an estimated life of four years,
a volatility factor of 66%, and a dividend yield of 0%. This amount was included
in  the  general  and  administrative  expenses  on the  Company's  consolidated
statement of operations for the period March 7, 2003 through September 30, 2003.


                                      F-24
<PAGE>

NOTE 18: SUPPLEMENTAL CASH FLOW INFORMATION

                                               Successor            Predecessor
                                   ------------------------------- -------------
                                                    For the Period
                                    For the Nine     from March 7,    For the
                                     month period   2003 through    Period from
                                   ended September  September 30,    January 1,
                                       30, 2004         2003        2003 through
                                     (Unaudited)     (Unaudited)   March 6, 2003
                                   ---------------  -------------- -------------
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for
   interest                             $      341      $      172     $      --
                                   ---------------  -------------- -------------
Supplemental Disclosure of
Non-Cash Financing  Activities:
Conversion of shareholder debt
   of $100,000 into shares of
   stock                                        --             100            --
                                   ---------------  -------------- -------------
Issuance of stock for services                  30             799            --
                                   ---------------  -------------- -------------
Issuance of stock for finders fees              --           1,302            --
                                   ---------------  -------------- -------------
Issuance of stock options                      227             504            --
                                   ---------------  -------------- -------------
Warrants issued for services                   758           1,254            --
                                   ---------------  -------------- -------------
Warrants issued for convertible
  debt                                         773              --            --
                                   ---------------  -------------- -------------

NOTE 19: DISCONTINUED OPERATIONS

      On March 7, 2003, Inyx Pharma acquired the majority of the  pharmaceutical
business  assets of Miza UK out of  Administration.  The business assets of Miza
UK's Biopharma  division were not purchased and therefore have been presented as
discontinued  operations  in the period from  January 1, 2003  through  March 6,
2003, the Biopharma Division  generated net revenues of approximately  $335,000,
costs  of  sales  of  approximately  $395,000  and a net  loss of  approximately
$558,000.

      All the assets and  liabilities  relating to the  Biopharma  division have
been included in the reorganization items as described in Note 5.

NOTE 20: RELATED PARTY TRANSACTIONS

      On April 14, 2004, Inyx Realty, Inc., which the Company established solely
to operate a corporate office lease in Miami Florida,  was acquired by a related
party. As consideration for the transfer, this related party assumed $100,000 of
Inyx Realty's liabilities. The acquirer is a family trust in which the Company's
Chairman/CEO  and his spouse are  beneficiaries.  The  acquirer  unconditionally
assumed all liabilities, thus terminating all of the Company's obligations under
that lease.

      During the nine month period ended  September 30, 2004 and the period from
March 7, 2003  through  September  30,  2003 the  Company  paid to an  affiliate
approximately  $9,000 and $0,  respectively for sublease of office furniture and
equipment.

      During the nine month period ended  September 30, 2004, the Company issued
three  promissory  notes  in  aggregate  amounting  to  $700,000  to  two of the
Company's  executives  and an  independent  director.  The  parties  were issued
warrants  with a fair value of $178,000  for the  issuance of the notes and this
expense was recorded to the statement of operations as interest expense.  During
2004,  the Company paid $600,000 of the notes,  and  subsequent to September 30,
2004  renewed the notes which are now due no later than March 31, 2005 and carry
interest of 10% per annum.  As  additional  consideration,  the Company  granted
fiver-year warrants to the lenders to purchase an aggregate of 700,000 shares of
its common stock at $0.95 per share.


                                      F-25
<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

Forward-Looking Statements

      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",  "we",  "us",  "our",  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.  Although  we perform  some  sales and  marketing
functions, we have limited product distribution capabilities and so 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
September 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 to
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,  we were in the  business  of  owning  and  racing
thoroughbred  horses at various major horse racing tracks  throughout the United
States.  In March  2003,  the assets of this  operation  were sold for cash to a
third party,  and the Company  discontinued  the business of breeding and racing
thoroughbred  race horses.  On March 26, 2003, we announced that our controlling
stockholder  had accepted an  unsolicited  offer to sell a controlling  block of
2,250,000  shares of our common  stock,  representing  approximately  45% of the
Company's  then  issued  and  outstanding  shares,  to Medira  Investments,  LLC
("Medira"),  which later conveyed such shares to its sole member,  Ms.  Viktoria
Benkovitch, our Chairman's (Dr. Jack Kachkar) spouse.


                                       26
<PAGE>

      At that time, we also announced that we would pursue strategic  investment
opportunities  in a number of sectors within the  pharmaceutical,  biotechnology
and medical devices industries.

The Inyx Pharma Transaction

      Concurrent  with  the  discontinuance  of our  thoroughbred  horse  racing
operations in the first half of 2003, we concluded a reverse acquisition of Inyx
Pharma, an aerosol  manufacturing company incorporated under the laws of England
and Wales and changed our name to Inyx.

      The  acquisition  of Inyx Pharma was  consummated  on April 28,  2003,  by
exchanging 16 million shares of the Company's  restricted  common stock for 100%
of the outstanding common stock of Inyx Pharma. As a result of the exchange, the
stockholders of Inyx Pharma became the Company's  controlling  stockholders,  in
the aggregate,  holding  approximately  64% of Inyx's  outstanding  shares.  The
transaction  was accounted for as a  recapitalization  of Inyx using the reverse
acquisition  method  of  accounting  and  therefore,  the  historical  financial
statements of Inyx Pharma are presented  herein as our own historical  financial
statements.  As a result of the Inyx Pharma  transaction,  we incurred  costs of
approximately $2.7 million consisting primarily of legal, accounting, consulting
and finders' fees. All such costs were expensed as incurred.

      Prior to its reverse  acquisition  by Inyx, on March 7, 2003,  Inyx Pharma
had  purchased  the  majority  of the  pharmaceutical  business  assets  of Miza
Pharmaceuticals  (UK) Ltd. ("Miza UK") out of  Administration  (a United Kingdom
equivalent of bankruptcy  protection and  reorganization) for approximately $8.3
million,  consisting  of an  approximately  $7.1  million  cash  payment  to the
Administrator for Miza UK's assets,  plus  approximately  $1.2 million in direct
transaction  costs.  The assets acquired by Inyx Pharma consisted of one aerosol
manufacturing site and a pharmaceutical  development  operation. A third Miza UK
operation,  the "Biopharma  Division",  was not acquired.  As such,  Inyx Pharma
received  all  of the  property,  plant,  machinery  and  equipment,  inventory,
customer  base,  employees,  and  know-how  to  continue to manage and run those
acquired parts of the Miza UK operation as a going concern.

      The Inyx Pharma acquisition of Miza UK's business assets was accounted for
utilizing the purchase  method of  accounting.  Accordingly,  the total purchase
price of $8.3 million  incurred by Inyx Pharma was allocated to the identifiable
net  tangible and  intangible  assets  acquired  based on their  estimated  fair
values. Based on an independent  third-party fair value valuation,  the tangible
assets acquired by Inyx Pharma,  consisting of fixed assets and inventory,  were
allocated  a  fair  value  of  approximately  $5.1  million  and  $1.3  million,
respectively,  and the  intangible  assets,  consisting  of a customer  list and
know-how,  were  allocated  a fair  value  of  approximately  $1.3  million  and
approximately $600,000,  respectively.  As a consequence of these purchase price
allocations, no goodwill was recorded.

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 are signed and initiated.

      It has taken time to start-up a number of new client  projects due to such
clients' own 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.  Such delays have been particularly
relevant in the transition of a  chlorofluorocarbon  ("CFC") aerosol respiratory
MDI to a CFC-free or hydrofluoralkane  ("HFA") MDI for one of our major clients.
This client,  a large  international  generic drug  marketing  and  distribution
company, has not yet received the necessary regulatory approvals to market their
CFC-free  MDI for the  treatment  of asthma  which has led to a decrease  in our
revenues and profitability  opportunities during 2004. This client believes that
they can complete the transition to a CFC-free MDI by mid-2005.


                                       27
<PAGE>

      We believe that in addition to the conversion of CFC inhalers to non-ozone
depleting  HFA  products,  a  second  major  area  of  potential  growth  in our
manufacturing  business is a result of our proprietary  hydrocarbon aerosol foam
expertise.

      Our business  strategy also includes the  development and marketing of our
own   proprietary   products,   including   both  drug   delivery   devices  and
pharmaceutical   products   that   are   complementary   to  our   manufacturing
technologies.   Although  we  have  started   developing  our  own   proprietary
pharmaceutical  products, we have not yet commenced the marketing or sale of any
such products.

      We believe that once we have  developed  and marketed our own  proprietary
pharmaceutical  product  lines,  consisting  of both drug  delivery  devices and
pharmaceutical   products   that   are   complementary   to  our   manufacturing
technologies, we can improve our revenue and profitability opportunities as such
products may offer greater  profit  margins than those  provided by our contract
manufacturing services.

      We are currently  focusing our own research and development  activities on
inhalation-therapy  drug delivery  devices and inhalation  methods,  and generic
prescription   and   over-the-counter   aerosol   pharmaceutical   products  for
respiratory,    dermatological,   topical   and   cardiovascular   applications.
Proprietary  products under  development  include generic versions of non-CFC or
HFA  single  molecule  and  combination  drug  respiratory  inhalants,   non-CFC
propelled  oral  sprays  for  cardiovascular   ailments,  wound  irrigation  and
cleansing sprays that utilize novel barrier technologies,  and anti-inflammatory
nasal pumps.

      It is  anticipated  that our first  proprietary  product  may be ready for
commercial  marketing by the second half of 2005,  and will involve the use of a
barrier  delivery  system that allows a hermetical  seal between the product and
the  aerosol  propellant  in  order  to  overcome  any  product  and  propellant
incompatibility issues.

      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 products
finalized.

      Another  material element of our growth strategy is to expand our existing
business  through  strategic  acquisitions of  pharmaceutical  products and drug
delivery  devices  that  are   complementary  to  our   pharmaceutical   aerosol
development  and  manufacturing  expertise.  As such,  on September 21, 2004, we
completed what we believe is significant  milestone in our  development  when we
acquired a patented,  novel drug delivery technology from Phares Technology B.V.
("Phares"), a European drug development company.

      The  Phares  technology  is based on the  utilization  of a  lipid-binding
matrix for delivering incompatible or unstable drug substances.  We believe that
this is an important development for our Company as we expect this technology to
enable us to more readily  develop and manufacture  inhalation-therapy  drugs in
user-friendly pulmonary metered dose inhalers (MDIs),  including combinations of
drugs  which  normally  cannot be  combined  in one drug  delivery  device.  For
example,  in November 2004, we received  positive results from a two-year Phares
stability  study  utilizing  the  lipid-binding  matrix  that we  acquired on an
HFA-propelled bronchodilator  ("Salbutamol") for use in an MDI. We intend to now
test the  Phares  technology  on other  types of  respiratory  drugs that we are
currently developing or planning to develop.

      We also continually evaluate  opportunities to make strategic acquisitions
of complementary pharmaceutical businesses including a U.S.-based, FDA-compliant
pharmaceutical  aerosol  manufacturing  operation  that will  allow us to better
serve the North American pharmaceutical market.

      Subject  to  receiving  all  necessary  U.S.  government  regulatory  body
approvals,  we hope that we can also soon commence our manufacturing  consulting
agreement under the United Nations Development  Programme ("UNDP").  On February
3, 2004,  we had  announced  that our Company was selected by the UNDP to assist
Cuba  to meet  the  requirements  of the  Montreal  Protocol  to  phase  out the
consumption of ozone-depleting  chorofluorocarbon  ("CFC") gases in metered dose
inhalers used in the treatment of asthma and other respiratory  conditions.  The
Montreal  Protocol is an  international  agreement signed by 180 countries (both
developed and  undeveloped  countries)  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.  With
funding for this project  provided by the United Nations  Multilateral  Fund for
the Implementation of the Montreal  Protocol,  we expect to commence our initial
consulting contract providing technology  transition consulting services to Cuba
upon receipt of all required  U.S.  Government  approvals.  These  services will
include assistance with the installation of manufacturing facilities, equipment,
and systems to manufacture  CFC-free (HFA)  aerosol-based  respiratory  inhalers
(MDIs) for the treatment of asthma and chronic  obstructive  respiratory disease
conditions.


                                       28
<PAGE>

      CRITICAL ACCOUNTING POLICIES

      Our  accounting  policies  are  disclosed  in Note 2 to the  Notes  to the
Consolidated  Financial  Statements  found  elsewhere  herein.  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 United Kingdom  subsidiary,  Inyx
Pharma, is the Great Britain Pound (GBP). Our Company's financial statements are
reported in United States  Dollars (USD) 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'  equity.  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  September  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 British pounds
sterling,  with some  revenues in  European  Euros,  we intend to begin  hedging
activities in 2005. We have established a commercial  banking  relationship with
J.P. Morgan-Chase Bank in New York to provide us with currency-hedging  advisory
services  including  our  participation  in  currency-forward  contracts for the
purpose of mitigating foreign exchange fluctuations following the effective date
of this offering.


                                       29
<PAGE>

RESULTS OF OPERATIONS

Three Months and Nine Months Ended September 30, 2004 and the three months ended
September 30, 2003 and the period from March 7, 2003 through September 2003

Consolidated Results

      The financial  information set forth in the following discussion should be
read  in  conjunction  with  and  qualified  in its  entirety  by the  financial
statements of our Company presented elsewhere herein.

      Inyx Pharma had acquired the majority of the business assets of Miza UK on
March 7, 2003.  Prior to its  acquisition  of the majority of Miza UK's business
assets,  Inyx Pharma was a non-operating  private  corporation  with nominal net
assets.  As the  historical  financial  statements  of Inyx Pharma are presented
herein as our own historical  financial  statements,  and because as of March 7,
2003 Inyx Pharma's sole operation was essentially  the  continuation of the Miza
UK business,  the Company's  historical financial statements for the period from
January  1, 2003  through  March 6, 2003 and prior are those of Miza UK, and are
therefore  presented  as  "Predecessor"  financial  statements.   The  Company's
financial statements for the periods commencing March 7, 2003 are referred to as
"Successor" financial  statements.  The financial statements for all periods are
collectively referred to as "Inyx" or the "Company".

      Additionally,  as the Biopharma Division was historically part the Miza UK
business  but was an  operation  not  acquired  by Inyx  Pharma,  its results of
operations are presented as discontinued  operations in the Company's  financial
statements.

      Prior to our reverse acquisition of Inyx Pharma, we had divested all prior
operations of our thoroughbred horse business and since then all of our revenues
have been generated by Inyx Pharma. As a result, the following discussion of our
results of  operations  for the period from March 7, 2003 through  September 30,
2003 focuses on  approximately  seven months of  operations  of our wholly owned
subsidiary,  Inyx Pharma, a pharmaceutical  manufacturing  operation we acquired
through a reverse  acquisition on April 28, 2003.  Subsequently,  our results of
operations  for the nine months  ended  September  30, 2004 are  compared to the
period  commencing on March 7, 2003,  the date of the  acquisition  of Miza UK's
assets by Inyx Pharma, and ending on September 30, 2003.

Combined Results of Operations

      For  comparative  purposes  and in order to present a full nine  months of
results for the nine months ended  September 30, 2003,  managements'  discussion
and analysis of results of operation will also focus on "combined" results. Such
combined  results  of  operations  include  the  results  of  the  Company  (the
"Successor  Company") for the period from March 7, 2003 through to September 30,
2003  combined  with the  results  of  operations  of Miza UK (the  "Predecessor
Company") for the period from January 1, 2003 through March 6, 2003.


                                       30
<PAGE>

       Unaudited Consolidated Pro Forma Combining Statement of Operations
                  For the Nine Months ended September 30, 2003
                    (Expressed in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                                   Pro forma
                                             Miza UK   Inyx, Inc.  Adjustment       Pro forma
                                            --------    --------    --------         --------
<S>                                         <C>         <C>         <C>              <C>
Net Revenues                                $  2,396    $  8,134    $     --         $ 10,530
Cost of sales                                  1,876       6,530          --            8,406
                                            --------    --------    --------         --------
                                                 520       1,604          --            2,124
Operating expenses:
      General and administrative expenses        568       8,459          --            9,027
      Selling expenses                            51         166          --              217
      Depreciation and amortization               75         225          11(3)           311
      Amortization of intangibles                 --          97          69(4)           166
                                            --------    --------    --------         --------
         Total operating expenses                694       8,947          80            9,721
Loss from continuing operations before
interest
 expense, reorganization items and income
tax benefit                                     (174)     (7,343)        (80)          (7,597)

      Interest expense                           176         359      (1,037)(1)(2)      (502)
                                            --------    --------    --------         --------
Loss from continuing operations before
 reorganization items and income tax
benefit                                         (350)     (7,702)        957           (7,095)
      Reorganization items                        --          --          --               --
                                            --------    --------    --------         --------
Loss from continuing operations before          (350)     (7,702)        957           (7,095)
income tax benefit
Income tax benefit                                --         510         000              510
                                            --------    --------    --------         --------
Loss from continuing operations             $   (350)   $ (7,192)   $     --         $ (6,585)
                                            ========    ========    ========         ========
</TABLE>

      The  adjustments to the unaudited pro forma  financial  information are as
follows:

      1)  Interest  expense was first  reduced by  approximately  $1,217,000  to
reflect a reduction  in interest  expense  assuming  the  repayment of Miza UK's
debt.  Upon  completion  of the asset sale to Inyx  Pharma,  approximately  $6.5
million  of the cash  paid to the  Administrator  was used to  repay  Miza  UK's
secured debt.

      2)  Interest  expense  was then  increased  by  approximately  $180,000 to
reflect the  interest on the debt issued by the Company in  connection  with the
acquisition of Miza UK.

      3)  Depreciation  expense was  adjusted to reflect the charges  related to
changes in value of the fixed  assets as of the  closing of the  acquisition  of
Miza UK's assets.

      4)  Amortization  of  intangible   assets  was  recorded  to  reflect  the
amortization  of  purchased  intangible  assets  subject to  amortization.  Such
intangible assets included Miza UK's customer list and know-how.

NET REVENUES

      Net  revenues  for  the  three  months  ended   September  30,  2004  were
approximately  $4.2 million,  as compared to  approximately  $3.1 million in net
revenues for the three months ended  September 30, 2003. Net revenues  increased
by approximately  1.1 million or approximately 39% between the comparative three
month  periods,  primarily  due to an  increase  in the  sale  and  delivery  of
customers' products and the initiation of the product commercialization phase of
two major client contracts. These include the manufacture and sale of nasal pump
sprays  for the  Merck  Generics  group of  companies  ("Merck  Generics"),  the
commercialization  of an  HFA  MDI  for  AstraZeneca  AB  ("AstraZeneca")  and a
dermatological  product for Stiefel  Laboratories,  Inc.  ("Stiefel'),  with the
AstraZeneca and Stiefel products planned for commercial launch in 2005 and 2007,
respectively.


                                       31
<PAGE>

      Total net  revenues  for the nine  months  ended  September  30, 2004 were
approximately  $11.5 million as compared to approximately  $8.1 million in total
net revenues for the period from March 7, 2003 through  September 30, 2003,  and
approximately  $10.5  million in  combined  net  revenues  for the two  periods,
January 1, 2003 through  March 6, 2003 and March 7, 2003 through  September  30,
2003.  Net  revenues  increased  between  the  comparative  nine-month  periods,
primarily due to an increase in the sale and delivery of customers' products and
the  initiation  of the  product  commercialization  phase of two  major  client
contracts.  These include the  manufacture and sale of nasal pump sprays for the
Merck Generics group of companies ("Merck Generics"),  the  commercialization of
an HFA MDI for AstraZeneca AB ("AstraZeneca")  and a dermatological  product for
Stiefel  Laboratories,  Inc.  ("Stiefel'),  with  the  AstraZeneca  and  Stiefel
products planned for commercial launch in 2005 and 2007, respectively.

      The  increase in total net  revenues  between the  comparative  nine-month
periods  would have been  greater had it not been for a number of delays  beyond
our control,  including customer required  regulatory and/or business approvals,
in the commencement of several multi-year contract development and manufacturing
contracts.

      Manufacturing  revenues were also delayed  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 period.  We are working with our vendors and
expect to resolve these issues during the fourth  quarter of 2004 so that we may
begin the manufacturing and delivery of delayed purchase orders.

      We also  continue to  experience  a delay in the  commencement  of a major
commercial  manufacturing  contract  with one of our major  clients.  Due to the
client's own product  formulation and processing  timelines and further required
clinical  studies,  whereby  this  client  has not yet  received  the  necessary
regulatory approvals for commercial marketing of the product, and hence allow us
to commence commercial  manufacturing on this contract. At this time, the client
believes  that it can secure the  required  regulatory  approvals  in the coming
months to enable us to proceed with the contract in 2005.

      For the nine months  ended  September  30, 2004,  our top three  customers
accounted for approximately $5.4 million in net revenues or approximately 47% of
total net revenues of approximately $11.5 million.  During the nine months ended
September 30, 2004, our top three customers were Merck Generics,  accounting for
approximately  $2.7  million in net revenues or  approximately  23% of total net
revenues  for  the  period;  SSL  International  Plc  ("SSL"),   accounting  for
approximately  $1.4  million in net revenues or  approximately  12% of total net
revenues;  and Genpharm Inc.  ("Genpharm"),  accounting for  approximately  $1.3
million in net revenues or approximately 12% of total net revenues.

      In  comparison,  for the period from March 7, 2003 through  September  30,
2003,  our top three  customers  accounted  for  approximately  $3.4  million or
approximately 42% of our total net revenues of approximately $8.1 million. These
customers were Merck Generics,  accounting for approximately $1.7 million in net
revenues or  approximately  21% of total net revenues for the reporting  period;
Genpharm,   accounting  for  approximately  $1.1  million  in  net  revenues  or
approximately 13% of total net revenues;  and SSL,  accounting for approximately
$617,000 in net revenues or approximately 8% of total net revenues.

      The  loss of any one of our top  three  customers  would  have a  material
adverse affect on our Company's revenues and profitability  opportunities in the
near term.  However,  we have recently received major multi-year  contracts from
new clients,  including from  AstraZeneca and Stiefel,  and we are continuing to
cultivate  new business  from other new clients that we expect to  consummate in
the coming  months,  which would both  increase our revenue base and broaden our
customer base,  thereby reducing our dependence on any one client.  In addition,
we also believe that by developing our own proprietary  products, we can further
increase our revenue base on a higher profit margin basis,  and 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  services,  including  product
stability,  commercial  scale-up,  and validation and regulatory support for our
clients'  products.  As noted above,  these contract revenues are very 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.


                                       32
<PAGE>

      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
continue 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  two  proprietary  products,  a  wound-care  spray  and an oral
inhalation product should be ready for commercial marketing, during 2005.

COST OF SALES

      Cost of  sales  for  the  three  months  ended  September  30,  2004  were
approximately  $3.6  million or  approximately  84% as a  percentage  of our net
revenues,  as  compared  to cost of  sales  of  approximately  $2.6  million  or
approximately 85% as a percentage of our net revenues for the three months ended
September 30, 2003.

      Total cost of sales for the nine  months  ended  September  30,  2004 were
approximately  $10.4 million or  approximately  90% as a percentage of total net
revenues,  as  compared  to cost of  sales  of  approximately  $6.5  million  or
approximately  81% as a  percentage  of total net  revenues  for the period from
March  7,  2003  through  September  30,  2003,  and  combined  cost of sales of
approximately  $8.4 million or approximately 80% as a percentage of combined net
revenues for the two periods, January 1, 2003 through March 6, 2003 and March 7,
2003 through September 30, 2003.

      The increase in the cost of sales for the nine months ended  September 30,
2004,  as  compared  to the costs of sales  for the  period  from  March 7, 2003
through  September  30,  2003,  is  primarily a result of the noted delay in the
commencement or completion of a number of  manufacturing  contracts and purchase
orders during the second quarter of 2004. These delays resulted in a significant
decrease  in  manufacturing  capacity  utilization  during the  period,  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 overall
production costs as a percentage of revenues for the nine months ended September
30, 2004.

      Our costs of sales  are  associated  with  manufacturing  and  development
revenues,  and include  materials,  labor,  factory overheads and other internal
costs such as 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  and now  commenced  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. We
are also  working  with a  multinational  pharmaceutical  company to establish a
purchasing  consortium and leverage their  purchasing  power in order to improve
vendor pricing and lead times.


                                       33
<PAGE>

      Along  with  the  reduction  of  unabsorbed  overhead  due  to  increasing
manufacturing  utilization,  we believe that these initiatives should materially
reduce our cost of sales on a per unit basis,  thereby  improving  our operating
margins and, in turn, overall profitability.

GROSS PROFIT

      For the three months ended  September  30, 2004,  we had a gross profit of
approximately  $700,000 or  approximately  16% as percentage of net revenues for
the three month period, as compared to a gross profit of approximately  $500,000
or approximately  15% as a percentage of net revenues for the three months ended
September 30, 2003. The gross profit  increased  between the  comparative  three
month periods by approximately  $200,000 or approximately  44%, primarily due to
the noted  increase in the sale and delivery of customers'  products and product
commercialization   services,   which  increased  our   manufacturing   capacity
utilization and thereby contributed to a decrease in unabsorbed overhead.

      Total  gross  profit for the nine  months  ended  September  30,  2004 was
approximately  $1.2  million  or  approximately  10% as a  percentage  of  total
revenues for the period,  as compared to a total gross  profit of  approximately
$1.6  million or  approximately  20% as a percentage  of total  revenues for the
period from March 7, 2003  through  September  30,  2003,  and a combined  gross
profit of  approximately  $2.1  million or  approximately  20% of  combined  net
revenues for the two periods, January 1, 2003 through March 6, 2003 and March 7,
2003 through September 30, 2003.

      We are  anticipating  improved  gross  profits as we  continue  to work to
increase  the  utilization  of our  manufacturing  capacity  through  additional
product  production  contracts and purchase orders. 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 continue to commence a number of new multi-year
manufacturing contracts 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
in 2005,  should  also offer  greater  profit  margins  than those  provided  by
contract  manufacturing  services.  We also expect that our gross profit margins
and our gross profit as a percentage  of our revenues  will improve once we have
commercialized our Company's 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.

OPERATING EXPENSES

      For the  three  months  ended  September  30,  2004,  operating  expenses,
consisting  of product  research and  development,  general and  administrative,
selling,  and depreciation and amortization  expenses  amounted to approximately
$3.7  million  or  approximately  87%  as  a  percentage  of  net  revenues.  In
comparison,  operating  expenses for the three months ended  September  30, 2003
amounted to approximately  $2.8 million or approximately  91% as a percentage of
net revenues.


                                       34
<PAGE>

      Although our operating  expenses as a percentage of net revenues decreased
between the comparative  three month periods as a result of increased sales, the
total  amount of  operating  expenses  increased  by  approximately  $940,000 or
approximately  34% for the three months ended  September 30, 2004 as a result of
the research and development  costs we have now commenced to incur in developing
our own proprietary pharmaceutical products.

      For  the  nine  months  ended  September  30,  2004,  operating  expenses,
consisting  of product  research and  development,  general and  administrative,
selling,  and depreciation and amortization  expenses  amounted to approximately
$9.0  million  or  approximately  78%  as  a  percentage  of  net  revenues.  In
comparison,  operating  expenses  for the  period  from  March 7,  2003  through
September 30, 2003 amounted to approximately  $8.9 million or approximately 108%
as  a  percentage  of  net  revenues,   and  combined   operating   expenses  of
approximately  $9.6 million or approximately 91% as a percentage of combined net
revenues for the two periods, January 1, 2003 through March 6, 2003 and March 7,
2003 through September 30, 2003.

      Although our operating  expenses  decreased  between the comparative  nine
month periods as a result of not having similar reorganization transaction costs
in 2004,  we have already  incurred  approximately  $1.3 million in research and
development  costs in the nine month period ended September 30, 2004. We did not
incur such  research and  development  costs during the  comparative  periods in
2003.

      The  reorganization  transaction  costs accounted for approximately 22% of
our operating  expenses for the period from March 7, 2003 through  September 30,
2003 and included approximately $1.9 million of legal,  accounting,  consulting,
and  travel  costs  associated  with  the  Inyx  Pharma/Miza  UK  reorganization
transaction  plus  approximately  an additional $2.0 million legal,  accounting,
consulting,  travel,  due diligence  costs and finders fees  associated with our
share exchange transaction with Inyx Pharma.

Research and Development Costs

      As noted above,  research and development costs for the three months ended
September  30,  2004 were  approximately  $940,000 or  approximately  25% of our
operating  expenses and 22% as a percentage of our net revenues.  In comparison,
we did not incur such research and development  costs for the three months ended
September 30, 2003.

      Total research and  development  costs for the nine months ended September
30, 2004 were  approximately  $1.3 million or approximately 15% of our operating
expenses and 12% as a percentage of our net revenues. In comparison,  we did not
incur such  research  and  development  costs for the period  from March 7, 2003
through September 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  operating  expenses.  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  research  and
development costs may increase our operating  expenses 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  plan to
distribute our  proprietary  products  through our own  customers'  distribution
channels or in collaboration with other strategic marketing partners.

      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   medication   applications  or  such  products  in  development,
including those through the acquisition of other  pharmaceutical  companies.  As
noted  above,  one such  example is our recent  acquisition  of a  lipid-binding
matrix for delivering  incompatible or unstable drug substances.  We plan to use
this  technology to develop our own proprietary  metered dose inhalers  ("MDIs")
for the treatment of asthma and other respiratory  diseases, as well as across a
broad-spectrum  of  other  inhalation-therapy  treatments  including  acute  and
chronic pain management.


                                       35
<PAGE>

      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-care 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.

General and Administrative Expenses

      For the three months ended September 30, 2004,  general and administrative
expenses were  approximately  $2.5 million or approximately 68% of our operating
expenses and 59% as a  percentage  of net  revenues,  as compared to general and
administrative  expenses of approximately  $2.6 million or approximately  94% of
our  operating  expenses and 85% as a  percentage  of net revenues for the three
months ended September 30, 2003.

      Total  general  and  administrative  expenses  for the nine  months  ended
September 30, 2004 were  approximately  $6.8 million or approximately 77% of our
operating  expenses  and 59% as a  percentage  of net  revenues,  as compared to
general  and   administrative   expenses  of   approximately   $8.5  million  or
approximately  97% of our  operating  expenses and 105% as a  percentage  of net
revenues  for the period  March 7, 2003 through  September  30,  2003.  Combined
general and administrative expenses for the two periods, January 1, 2003 through
March 6, 2003 and March 7, 2003 through  September 30, 2003, were  approximately
$9.0  million  or  approximately   93%  of  combined   operating   expenses  and
approximately 86% as a percentage of combined net revenues.

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

      Salaries and associated  benefits costs,  including stock option expenses,
for the three months ended September 30, 2004 amounted to approximately $880,000
(including stock option expenses of approximately $130,000) or approximately 35%
of our  general  administrative  expenses,  and  approximately  24% of our total
operating expenses for the respective three month period. In comparison, for the
three months ended  September 30, 2003,  salaries and  associated  benefit costs
amounted  to  approximately   $555,000  or  approximately  22%  of  our  general
administrative  expenses,  and approximately 20% of our total operating expenses
for the  respective  three month  period.  There were no stock  option  expenses
during the comparative  three months ended September 30, 2003. As a result of an
expanded  management  group and support staff,  we incurred  higher salaries and
associated benefit costs between the comparative three month periods.

      For the nine months  ended  September  30, 2004,  salaries and  associated
benefit  costs,  including  stock  option  expenses of  approximately  $225,000,
amounted  to  approximately  $2.6  million or  approximately  38% of our general
administrative  expenses,  and  29% of our  total  operating  expenses  for  the
respective nine month period.  In comparison,  for the period from March 7, 2003
through  September 30, 2003,  salaries and associated  benefit costs,  including
stock option expenses of approximately $750,000,  amounted to approximately $2.1
million or approximately  25% of our general and  administrative  expenses,  and
approximately  23% of our  total  operating  expenses.  As  noted  above,  as we
continue to grow and expand our business,  we are expanding our management  team
including  our business  development  staff and are therefore  incurring  higher
salaries and benefits costs, including the expensing of related stock options to
such employees.

      Consulting fees including  legal,  accounting and audit fees for the three
months  ended  September  30,  2004  amounted  to   approximately   $480,000  or
approximately 19% of our general and administrative  expenses, and approximately
13% of our total operating  expenses for the respective  three month period.  In
comparison,  for the three months ended September 30, 2003, such consulting fees
amounted  to  approximately  $136,000  or  approximately  5% of our  general and
administrative  expenses,  and approximately 5% of our total operating  expenses
for the respective  three month period.  As a result of increasing  business and
corporate  development  activities,  we have incurred  higher  consulting  costs
between the comparative three month periods.


                                       36
<PAGE>

      For the nine months ended  September 30, 2004,  consulting  fees including
legal,  accounting  and audit fees  amounted to  approximately  $1.0  million or
approximately 15% of our general and administrative  expenses, and approximately
12% of our total  operating  expenses for the respective  nine month period.  In
comparison,  for the  period  March 7,  2003  through  September  30,  2003 such
consulting fees amounted to approximately  $2.7 million or approximately  31% of
our general and  administrative  expenses,  and  approximately  30% of our total
operating  expenses for the period March 7, 2003 through September 30, 2003.. As
noted  above,  as a result of  increasing  business  and  corporate  development
activities,  we have incurred  higher  consulting  costs between the comparative
periods.

      Insurance costs, including property,  product liability and directors' and
officers'  insurance,  for the three months ended September 30, 2004 amounted to
approximately  $180,000 or  approximately  7% of our general and  administrative
expenses,  and  approximately  5%  of  our  total  operating  expenses  for  the
respective  three  month  period.  In  comparison,  for the three  months  ended
September  30,  2003,  insurance  costs  amounted to  approximately  $195,000 or
approximately 7% of our general and administrative  expenses,  and approximately
7% of our total operating  expenses for the respective three month period.  As a
result of decreased  premiums for our  directors' and officers'  insurance,  our
insurance costs have decreased between the comparative three month periods.

      For the nine months ended  September 30, 2004,  consulting  fees including
legal,  accounting  and audit fees  amounted to  approximately  $1.0  million or
approximately 15% of our general and administrative  expenses, and approximately
12% of our total  operating  expenses for the respective  nine month period.  In
comparison,  for the nine months ended  September 30, 2003 such  consulting fees
amounted  to  approximately  $710,000  or  approximately  10% of our general and
administrative  expenses,  and approximately 6% of our total operating  expenses
for the respective nine month period.  As noted above, as a result of increasing
business  and  corporate  development   activities,   we  have  incurred  higher
consulting costs between the comparative nine month periods.

      For the nine months ended  September 30, 2004,  insurance  costs including
property,  product liability and directors' and officers'  insurance amounted to
approximately  $590,000 or  approximately  9% of our general and  administrative
expenses,  and  approximately  7%  of  our  total  operating  expenses  for  the
respective  nine month  period.  In  comparison,  for the  period  March 7, 2003
through September 30, 2003,  insurance costs amounted to approximately  $480,000
or  approximately   6%  of  our  general  and   administrative   expenses,   and
approximately  5% of our total  operating  expenses for the period March 7, 2003
through September 30, 2003. As a result of our increased business activities and
general  market  conditions,  our  insurance  costs have  increased  between the
comparative periods.

      Other general and administrative expenses, including corporate development
and investor relations costs, directors fees, filing,  maintenance and financing
costs,  travel and  communications  expenses,  and other business overhead costs
including rent,  currency exchange losses, and bad debt provisions for the three
months  ended  September  30, 2004  amounted to  approximately  $1.0  million or
approximately 40% of our general and administrative  expenses, and approximately
27% of our total operating  expenses for the respective  three month period.  In
comparison,  for the three months  ended  September  30, 2003,  such general and
administrative  expenses amounted to approximately $1.7 million or approximately
65% of our general and  administrative  expenses,  and  approximately 61% of our
total  operating  expenses for the  respective  three month period.  The primary
result of the decrease in such general and  administrative  expenses between the
comparative periods is a result of the elimination of approximately $1.0 million
in corporate  development and investor relations expenses we incurred during the
respective three month period in 2003.

      For  the  nine  months  ended  September  30,  2004,   other  general  and
administrative  costs including  corporate  development  and investor  relations
costs,  directors  fees,  filing,  maintenance and financing  costs,  travel and
communications  expenses,  and other  business  overhead costs  including  rent,
currency exchange losses, and bad debt amounted to approximately $2.6 million or
approximately 38% of our general and administrative  expenses, and approximately
29% of our total  operating  expenses for the respective  nine month period.  In
comparison,  for the period March 7, 2003 through September 30, 2003, such other
general and  administrative  costs  amounted to  approximately  $3.8  million or
approximately 44% of our general and administrative  expenses, and approximately
43% of our  total  operating  expenses  for the  period  March 7,  2003  through
September  30,  2003.  The primary  result of the  decrease in such  general and
administrative expenses between the comparative periods is a result of the noted
elimination of corporate and investor  relations  expenses and a decrease in the
amount of warrants we issued during the period ended September 30, 2004.


                                       37
<PAGE>

      Although our general and  administrative  expenses as a percentage  of our
revenues have decreased between the comparative  periods, we continue to sustain
high general and administrative  costs as we continue to implement our corporate
development  and  growth  strategy.  These  include  higher  infrastructure  and
administrative  costs, an expanded management team and new corporate development
costs.  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 incremental administrative 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  $95,000 or  approximately  2.5% of our
total operating  expenses and  approximately  2% as a percentage of net revenues
for the three months ended September 30, 2004. In comparison,  selling  expenses
for the three months ended September 30, 2003 amounted to approximately  $70,000
or approximately  2.5% of our total operating expenses and approximately 2% as a
percentage of net revenues.

      Total selling  expenses for the nine months ended  September 30, 2004 were
approximately  $255,000 or approximately 3% of our total operating  expenses and
approximately  2% as a  percentage  of net  revenues,  as  compared  to  selling
expenses of  approximately  $166,000 or  approximately 2% of our total operating
expenses and  approximately  2% as a  percentage  of net revenues for the period
March 7, 2003 through September 30, 2003.  Combined selling expenses for the two
periods,  January  1, 2003  through  March 6,  2003 and  March 7,  2003  through
September 30, 2003, were approximately $217,000 or approximately 2% of our total
operating expenses and net revenues, respectively.

      Our  selling  expenses,  both as a  percentage  of our  overall  operating
expenses and as a percentage of our net revenues have remained fairly consistent
between the  comparative  periods.  Selling  expenses  for the nine months ended
September 30, 2004 have increased  slightly as compared to the period from March
7,  2003  through  September  30,  2003 as we hired a new  sales  and  marketing
executive, Mr. Ulrich Bartke during the second quarter of 2004.

      Initially,  Mr.  Bartke,  our first  senior  executive  in this  area,  is
focusing 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. We are targeting a 40-45% average capacity utilization rate in 2005, based
on new  production  business  commencing as a result of our increased  sales and
marketing efforts.

      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.  To help grow our revenues,
Mr. Bartke will also be aiming 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 in 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.
In the long run, we could  decide to still  utilize the sales force of strategic
industry  partners  for the  marketing  of a  majority  of our  own  proprietary
products.


                                       38
<PAGE>

Depreciation and Amortization Expenses

      Depreciation  and  amortization   expenses  for  the  three  months  ended
September 30, 2004 amounted to approximately $155,000 or approximately 4% of our
total operating  expenses and  approximately 4% as a percentage of net revenues,
as compared to depreciation and amortization  expenses of approximately  $97,000
or  approximately 3% of our total operating  expenses and  approximately 3% as a
percentage of net revenues for the three months ended September 30, 2003.

      Total  depreciation  expense for the nine months ended  September 30, 2004
were approximately  $430,000 or approximately 5% of our total operating expenses
and  approximately  4%  as  a  percentage  of  net  revenues,   as  compared  to
depreciation  expense of  approximately  $225,000 or  approximately  2.5% of our
total operating  expenses and approximately  2.8% of net revenues for the period
March 7, 2003 through September 30, 2003. Combined depreciation and amortization
expenses for the two periods, January 1, 2003 through March 6, 2003 and March 7,
2003 through September 30, 2003, were approximately $300,000 or approximately 3%
of our total operating expenses and net revenues, respectively.

      Our depreciation and amortization  expenses are attributable solely to the
depreciation  of our fixed  assets.  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.

Amortization of Intangible Assets

      The fair values  assigned to the intangible  assets  acquired are based on
estimates and assumptions provided and other information compiled by management,
including independent valuations,  that utilize established valuation techniques
appropriate for the industry the Company operates in.

      Amortization  of  intangible  assets  relates to the  Company's  purchased
intangible  assets related to the Inyx Pharma  transaction.  The amortization of
intangible  assets for the nine months  ended  September  30, 2004 was  $125,000
compared to  approximately  $97,000 for the period from March 7, 2003 through to
September 30, 2003.

      Our  amortization  expenses for intangible  assets relate to the Company's
purchased  intangible assets related to the Inyx Pharma acquisition of Miza UK's
assets; the intangible assets include Miza UK's customer list and know-how.  The
customer  list is amortized  over a period of 12 years and know-how is amortized
over 10 years.

      These intangible assets are amortized on a straight line method basis over
their  estimated  remaining  useful lives in proportion to the  underlying  cash
flows that were used in determining the acquired value.

OPERATING  LOSS BEFORE  INTEREST  AND  FINANCING  COSTS,  INCOME TAX BENEFIT AND
DISCONIINUED OPERATIONS

      For the three months ended  September 30, 2004,  our loss from  operations
before interest expenses amounted to approximately $3.1 million as compared to a
loss from operations before interest expenses of approximately  $2.3 million for
the three  months ended  September  30, 2003.  The loss from  operations  before
interest  expenses  increased by approximately  $700,000 between the comparative
periods primarily as a result of research and development costs of approximately
$940,000 that we incurred  during the three months ended  September 30, 2004. In
comparison,  we did not incur such research and development  costs for the three
months ended September 30, 2003.

      The addition of these research and development  costs was partially offset
by a higher gross profit of approximately $200,000 during the three months ended
September 30, 2004. This was as a result of an increase in the sale and delivery
of customers'  products and product  commercialization  services which increased
our manufacturing capacity utilization and thereby contributed to a dec`rease in
unabsorbed  overhead  during  these three months as compared to the three months
ended September 30, 2003.


                                       39
<PAGE>

      For the nine months ended September 30, 2004,  total operating losses from
operations before interest and financing costs, reorganization items, income tax
benefit and discontinued  operations  amounted to approximately  $7.8 million as
compared to a loss before other expenses of  approximately  $7.3 million for the
period March 7, 2003 through  September  30,  2003,  and a combined  loss before
other  expenses of  approximately  $7.5 million for the two periods,  January 1,
2003 through March 6, 2003 and March 7, 2003 through September 30, 2003.

      Excluding reorganization transaction costs amounting to approximately $2.0
million  incurred during 2003 as a result of Inyx Pharma's  reorganization  with
Miza UK and our subsequent reverse merger with Inyx Pharma, our operating losses
before interest expenses for the period from March 7, 2003 through September 30,
2003 would have  amounted to  approximately  $5.3  million.  On that basis,  the
resultant  increase in our operating losses before interest expenses between the
comparative  periods is attributable to  approximately  $1.3 million of research
and  development  costs  that we have  incurred  during  the nine  months  ended
September  30,  2004,  and a lower  gross  profit  margin  due to  delays in the
commencement  and/or  completion  of a number  of  manufacturing  contracts  and
purchase  orders during the second quarter of 2004. Such delays have resulted in
a decrease  in the  utilization  of our  manufacturing  capacity  and  therefore
reduced the  absorption  of fixed  overhead  costs,  thereby  reducing our gross
profit.

      During the three months ended September 30, 2004, we commenced the product
commercialization  phase  of two  major  client  contracts.  We  plan  to  start
manufacturing   these   clients'   products  in  2005  and  beyond   which  will
significantly improve the utilization of our manufacturing capacity.

      We  believe  that  as we  continue  to  improve  the  utilization  of  our
manufacturing capacity through the commencement of these newly signed multi-year
contracts and other  purchase  orders from existing and new  customers,  we will
continue to reduce our operating losses,  including  offsetting our research and
development costs and general and  administrative  expenses and start to produce
operating and net earnings.

      We also expect that the increased  business  derived from our expertise in
non-CFC aerosol pharmaceuticals  including HFA and hydrocarbon aerosol products,
and the marketing of our own proprietary pharmaceutical products, once developed
and  commercialized,  will also  significantly  improve  our gross  margins  and
increase our profitability and earnings. Although we do not currently derive any
revenues from the sale of our own products,  it is anticipated  that our initial
two proprietary  products should be ready for commercial  marketing by the first
half and second half, respectively, of 2005.

INTEREST AND FINANCING COSTS

      Interest and financing  costs consist of interest  expense  related to our
long-term  debt as well as the  amortization  of the  financing  charges and the
amortization of the debt discount associated with the fair value of the warrants
issued and the beneficial  conversion  feature  related to the  financings  with
Laurus Master Fund, Ltd. ("Laurus Funds").

      For the nine months ended September 30, 2004, interest and financing costs
amounted to approximately  $2.5 million and included  approximately  $484,000 in
amortization of debt discount, approximately $773,000 for the charge to interest
for the beneficial  conversion feature related to the convertible debt to Laurus
Funds,   approximately  $249,000  for  the  amortization  of  deferred  charges,
approximately  $563,000  in  interest  expense  for the notes  payable to Laurus
Funds, approximately $180,000 in interest payable under a convertible promissory
note payable to Stiefel,  and  approximately  $225,000 in interest  payments and
associated  issued warrant costs as a result of short term loans obtained by the
Company during the nine month period.

      For the three months ended  September  30,  2004,  interest and  financing
costs amounted to approximately  $750,000 and included approximately $175,000 in
amortization  of debt discount,  approximately  $87,000 for the  amortization of
deferred  charges,  approximately  $202,000  in  interest  expense for the notes
payable to Laurus  Funds,  approximately  $60,000 in  interest  payable  under a
convertible  promissory note payable to Stiefel,  and approximately  $226,000 in
interest  payments and associated issued warrant costs as a result of short term
loans obtained by the Company during the three month period.


                                       40
<PAGE>

      In  comparison  for the period March 7, 2003 through  September  30, 2003,
interest expenses amounted to approximately  $359,000,  and for the combined two
periods,  January  1, 2003  through  March 6,  2003 and  March 7,  2003  through
September 30, 2003, combined interest expenses totalled approximately  $535,000.
These  interest  expenses  were  primarily  related to term loans and  revolving
credit  facilities with Inyx Pharma's  lenders,  Venture Finance.  Inyx Pharma's
predecessor  company,  Miza UK  accounted  for  approximately  $176,000 of these
combined interest payments.

      Interest  expenses have  increased  between the  comparative  periods as a
result of our increasing  business  operations and working capital  requirements
after our reverse  merger with Inyx  Pharma.  We believe  that as we continue to
improve our revenue and profitability opportunities, we will be in a position to
commence reducing our outstanding debt thereby reducing the associated  interest
payments.

      We believe  that as we continue  to improve our revenue and  profitability
opportunities,  we will be in a position to commence  reducing  our  outstanding
debt thereby reducing the associated interest payments.

INCOME TAX BENEFIT

      For the three months and nine months  ended  September  30, 2004,  the tax
benefit  net  of  valuation   allowance  is  approximately  zero  and  $395,000,
respectively.  In comparison,  for the three months and the period from March 7,
2003 through  September 30, 2003, the tax benefit net of valuation  allowance is
approximately $220,000.

      As of September 30, 2004, our deferred tax asset amounted 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.

DISCONTINUED OPERATIONS

      The Biopharma  Division was historically part the Miza UK business but was
an  operation  not  acquired  by Inyx  Pharma on March 7, 2003.  Therefore,  its
results of operations are presented as discontinued  operations in the Company's
financial statements.

NET LOSS

      For the three months ended  September  30, 2004,  our net loss amounted to
approximately  $3.8  million,  as compared to a net loss of  approximately  $2.2
million for the three months ended September 30, 2003. The net loss increased by
approximately $1.6 million as a result of approximately $940,000 of research and
development costs plus  approximately  $450,000 of additional  interest expenses
during the three months ended  September  30, 2004.  In  comparison,  during the
three months ended September 30, 2003, we did not incur research and development
costs and our interest  expenses were lower as a result of lower working capital
requirements.

      For the nine months ended  September  30, 2004,  our net loss  amounted to
approximately  $9.9  million,  as compared to a net loss of  approximately  $7.2
million for the period from March 7, 2003 through  September  30, 2003 and a net
loss of approximately  $8.1 million for the combined period from January 1, 2003
through March 6, 2003 and from March 7, 2003 through September 30, 2003. The net
loss increased by approximately  $2.7 million as a result of approximately  $1.3
million of research and  development  costs plus  approximately  $1.4 million of
additional  interest  expenses  and warrant  costs  during the nine months ended
September 30, 2004. In comparison,  during the period from March 7, 2003 through
September  30, 2003,  we did not incur  research and  development  costs and our
interest expenses were lower as a result of lower working capital requirements.


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<PAGE>

      We believe  that we will  become  profitable  once we have  increased  the
utilization of our  manufacturing  capacity  through the  commencement  of newly
signed  multi-year  contracts  and other  purchase  orders from existing and new
customers during 2005. We also expect to improve our profitability opportunities
through the addition of our own proprietary  pharmaceutical product lines, which
should  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 two proprietary
products should be ready for commercial  marketing  during 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.

      For the remainder 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 to be marketed  and sold  through our
customers'  distribution  channels  or  with  strategic  partners.   Proprietary
products under  development  include  generic  versions of non-CFC or HFA single
molecule and combination drug respiratory  inhalants,  including those utilizing
the recently  acquired  Phares  technology,  non-CFC  propelled  oral sprays for
cardiovascular  ailments,  wound  irrigation  and cleansing  sprays that utilize
novel barrier technologies, and anti-inflammatory nasal pumps.

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 of equity securities,  credit facilities and
capital lease financing.

      As of September  30, 2004,  our current  assets,  including  cash and cash
equivalents, accounts receivable, inventory and other current assets amounted to
approximately $10.6 million. Current liabilities amounted to approximately $12.8
million and include  approximately  $4.0 in accounts  payable and other  current
liabilities,  $6.0  million,  net due  under a  revolving  line of  credit,  and
approximately  $2.0  million  for the  current  portion  of our  long-term  debt
obligations. The Company has the option of repaying the principal or interest on
its borrowings in cash or by issuing common stock.

      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.

      We also continue to incur operating  losses since our reverse  acquisition
of Inyx Pharma on April 28, 2003. For the three and nine months ended  September
30, 2004, such losses amounted to approximately  $3.8 million and  approximately
$9.9 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,  interest expenses and financing costs, and
a number of business and corporate  development  costs  including  added payroll
expenses,  and external consulting costs and fees 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.  As noted above,  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.


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<PAGE>

      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

      On July 30, 2004, we agreed to a deferral, from Laurus Funds, on the first
seven months of principal  payments due under the Laurus Note  (originally  $4.5
million and then amended to $5.0 million on May 27, 2004). Such payments are now
due upon  maturity of the Laurus Note in November,  2006. As  consideration  for
this principal payment  deferral,  on August 30, 2004, we issued to Laurus Funds
five-year warrants to purchase 694,000 shares of our common stock at an exercise
price of $0.81 per share.

      During  the  three  months   ended   September   30,  2004,   we  received
approximately  $695,000  in  combined  net  proceeds  in the form of  short-term
stockholder  loans provided by our Chairman,  a senior  executive of the Company
and an outside  director.  These  stockholder loans are due upon demand and bear
interest at seven percent annually. As additional consideration for these loans,
we granted these  individuals  five-year  warrants,  to purchase an aggregate of
700,000 shares of our common stock at an exercise price of $0.80 per share.  Net
proceeds from these loans were used for working capital purposes.

      From August 3, 2004 through  September 3, 2004,  we completed  two private
placements in which we sold an aggregate of 9,190,901 shares of our common stock
to institutional and other accredited investors, resulting in approximately $6.8
million in net proceeds to the Company. In the aggregate,  we also granted these
investors,  five year  non-detachable  warrants to purchase up to an  additional
9,190,901  shares of our common stock at exercise  prices  ranging from $1.00 to
$1.11 per share.

      We believe that the funding provided by these two recent equity placements
has  provided  us with the  necessary  capital to fund our  present  operations,
including  raw  material  and  component   purchases,   immediate  research  and
development and business  development  activities,  and capital expenditures and
debt servicing  requirements.  Over the longer term, we will require  additional
funding in the amount of  approximately  $6.0 million annually over three years,
to  complete  the  development  and   commercialization  of  additional  planned
proprietary products. We will also require an additional $3.6 million in funding
over three years for capital expenditures in order to improve our pharmaceutical
manufacturing  technologies,  production  capabilities,  and plant  quality  and
safety  systems so that we are able to pursue  expanding  commercial and product
manufacturing   opportunities   with   existing  and   potential   multinational
pharmaceutical and biotechnology clients.

      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
applications  or such  products  in  development,  including  those  through the
acquisition of other pharmaceutical  companies,  which we are actively pursuing.
In the event we make a significant  acquisition or change our capital  structure
in the  future,  we may be  required  to  raise  additional  capital  through  a
combination  of additional  borrowings  and the issuance of additional  debt and
equity securities to fund such activities.

      We are also 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.  To that extent,  we have recently  announced  that we had signed an
agreement  in  principle  with  Aventis  Pharmaceuticals,  Inc.,  a wholly owned
subsidiary  of the  sanofi-aventis  Group,  to acquire  the  assets and  certain
business of Aventis  Pharmaceuticals  Puerto Rico. To complete this transaction,
we may be required to obtain such additional financing.

Analysis of Cash Flows

      The net cash used in  operating  activities  for the three and nine months
ended  September  30,  2004,  amounted to  approximately  $6.5 million and $10.9
million, respectively.


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<PAGE>

      For the three months ended  September  30, 2004,  the net cash used in the
operations  was primarily the result of an  approximately  $3.8 million net loss
from  continuing  operations  of the  business.  This was  adjusted  by non-cash
charges,  including  depreciation  and the  amortization  of financing  costs of
approximately  $430,000,  amortization of intangibles of approximately  $42,000,
stock  option  compensation  for vested  options  and the  issuance of stock for
services approximating $66,000, warrants issued to consultants and for financing
fees of  approximately  $709,000,  a  subscription  receivable of  approximately
$50,000,  and a reserve for inventory  obsolescence of  approximately  $335,000.
These non-cash charges were offset by an increase in the provision for bad debts
amounting to approximately  $80,000 and deferred charges and debt discount.  For
the three months ended September 30, 2004, working capital changes reducing cash
flow from operations were primarily due to an increase in accounts receivable of
approximately  $1.1  million,  and increase in inventory of  approximately  $1.0
million,  an increase in prepaid  deposits and other current assets amounting to
approximately  $1.8 million.  Other working capital  changes  reducing cash flow
from  operations  included  a decrease  in  accounts  payable  of  approximately
$565,000, a decrease of a bank overdraft amounting to approximately  $50,000 and
a decrease in deferred  revenues of  approximately  $430,000.  All such  working
capital  changes were due to improved  business  operations  and activities as a
result of increasing sales and the equity financings  completed during the three
months ended September 30, 2004.

      For the nine  months  ended  September  30,  2004,  the net  cash  used in
operations  was primarily the result of an  approximately  $9.9 million net loss
from  continuing  operations  of the  business.  This was  adjusted  by non-cash
charges,  including  depreciation  and the  amortization  of financing  costs of
approximately  $1.9  million,   amortization  of  intangibles  of  approximately
$125,000,  stock option  compensation for vested options,  the issuance of stock
for  services  and the  issuance  of shares for the  exercise  of stock  options
approximating $550,000, warrants issued to consultants and for financing fees of
approximately  $750,000,  a reserve for inventory  obsolescence of approximately
$115,000, and a provision for bad debt amounting to approximately $30,000. These
non-cash  charges  were  offset  by a  decrease  in the  reserve  for  inventory
obsolescence   amounting  to   approximately   $395,000  and  a  decrease  in  a
subscription  receivable of  approximately  $245,000.  For the nine months ended
September 30, 2004,  working capital changes  reducing cash flow from operations
were  primarily due to an increase in inventory of  approximately  $840,000,  an
increase in prepaid deposits and other current assets amounting to approximately
$4.6 million.  Working  capital  changes  increasing  cash flow from  operations
included a decrease in accounts receivable  amounting to approximately  $720,000
and an increase in accounts payable of approximately  $840,000. All such working
capital  changes were due to improved  business  operations  and activities as a
result of increasing sales and completed equity financings  completed during the
three months ended September 30, 2004.

      The net cash used in  investing  activities  for the three and nine months
ended  September  30,  2004,  amounted to  approximately  $13,000 and  $100,000,
respectively.  These investing  activities  related to the acquisition of office
equipment and computers.

      The net cash  provided by financing  activities,  for the three months and
nine months ended September 30, 2004, amounted to approximately $7.0 million and
$10.7 million, respectively.

      For the three months ended  September 30, 2004, we borrowed  approximately
$1.0 million in the form of short-term loans and repaid  approximately  $700,000
in  capital  lease and loan  repayments.  We also  received  approximately  $6.6
million in net  proceeds  through the issuance of equity  securities  during the
three month period.

      For the nine months ended  September 30, 2004,  we borrowed  approximately
$3.7  million  under  a  revolving  line of  credit  and  the  issuance  of both
short-term  and  long-term  debt.  This was  partially  offset by  approximately
$765,000 in capital lease and loan  repayments.  We also received  approximately
$6.6 million in net proceeds  through the issuance of equity  securities  in the
form of two private placements from August 3, 2004 through September 3, 2004.

      For the three  months  and nine  months  ended  September  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 may be  required  to  continually  raise  capital  through
additional borrowings or the issuance of additional debt or equity securities in
order to  implement  our  business  growth  strategies,  which may also  include
significant  business  or  corporate  acquisitions  or  changes  to our  capital
structure.


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