---

SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549

FORM 10-QSB

[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934. 
For the quarterly period ended: June 30, 2005

OR

[_] Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934. 
For the transition period from:       to

Commission File Number: 000-030813

AlphaRx, Inc.(Name of Small Business Issuer in its Charter)

|Delaware                        | 98-0177440                              
|------------------------------- | ----------------------------------------
|(State or other jurisdiction of | (I.R.S.
    Employer Identification No.)
|incorporation or organization)  |                                         

168 Konrad Crescent, Suite 200 
Markham, Ontario, 
Canada L3R 9T9
(Address of principal executive offices)

Registrant's telephone number, including area
code: (905) 479-3245

Securities registered pursuant to Section 12(b)
of the Act: None

Securities registered pursuant to Section 12(g)
of the Act: Common Stock, $.0001 par value
(Title of Class)

Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 [  ]

The number of outstanding shares of registrant's
Common Stock on August 12, 2005 was 57,508,112.

Transitional Small Business Disclosure Format.
Yes [ ] No [X]

1

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ALPHARX, INC.

FORM 10-QSB

JUNE 30, 2005

TABLE OF CONTENTS

|Unaudited Interim Consolidated Balance Sheets as of June 30, 2005 and
    September 30, 2004                               | 3 
|-------------------------------------------------------------------------------------------------------------------------- | --
|Unaudited Interim Consolidated Statements of Operations for the nine months
    ended June 30, 2005 and June 30, 2004      | 4 
|Unaudited Interim
    Consolidated Statements of Operations for the three months ended June 30,
    2005 and June 30, 2004 | 5 
|Unaudited Interim Consolidated Statements of Changes in Shareholders' Equity
    (Deficiency)                              | 6 
|Unaudited Interim Consolidated Statements of Cash Flow for the nine months
    ended June 30, 2005 and June 30, 2004       | 7 
|Condensed Notes to Unaudited Interim Consolidated Financial Statements                                                     | 8 
|Management's Discussion and Analysis of Financial Condition and Plan of
    Operation                                      | 13
|Other
    Information                                                                                                      | 18

2

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ALPHARx, INC. INTERIM CONSOLIDATED BALANCE
SHEETS
AS AT JUNE 30, 2005 AND SEPTEMBER 30,2004 
(UNAUDITED)

|                                                                    |   | June 30,     | September 30,
|------------------------------------------------------------------- | - | ------------ | -------------
|                                                                    |   | 2005         |              
|CURRENT ASSETS                                                      |   |              |              
|                                                                    |   |              |              
|Cash and Cash Equivalents                                           | $ | 527,390      | $            
|Accounts Receivable, net                                            |   | 82,938       |              
|Prepaid Expenses                                                    |   | 26,106       |              
|Inventory                                                           |   | 176,862      |              
|                                                                    |   |              |              
|TOTAL CURRENT ASSETS                                                |   | 813,296      |              
|                                                                    |   |              |              
|PROPERTY, PLANT & EQUIPMENT, net                                    |   | 240,899      |              
|OTHER ASSETS                                                        |   |              |              
|Licensing Right (Note 3)                                            |   | 1            |              
|                                                                    |   |              |              
|TOTAL ASSETS                                                        |   | 1,054,196    |              
|                                                                    |   |              |              
|CURRENT LIABILITIES                                                 |   |              |              
|Accounts Payable and Accrued Liabilities                            |   | 173,570      |              
|Notes Payable (Note 4)                                              |   | -            |              
|Litigation Liability (Note 5)                                       |   | 25,000       |              
|TOTAL CURRENT LIABILITIES                                           |   | 198,570      |              
|                                                                    |   |              |              
|CONTINGENCIES AND COMMITMENTS (Note 9)                              |   |              |              
|                                                                    |   |              |              
|SHAREHOLDERS' EQUITY                                                |   |              |              
|Common Stock: $ 0.0001 par value,                                   |   |              |              
|Authorized 250,000,000 shares; issued and                           |   |              |              
|outstanding 57,508,112 shares (September 30, 2004
    - 52,304,642) |   | 5,752        |              
|Additional paid-in capital                                          |   | 11,534,820   |              
|Deficit                                                             |   | (10,684,946) |              
|                                                                    |   |              |              
|TOTAL SHAREHOLDERS' EQUITY                                          |   | 855,626      |              
|                                                                    |   |              |              
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          | $ | 1,054,196    | $            

See condensed notes to consolidated financial statements

3

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ALPHARx, INC. INTERIM CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 2005 AND 2004 
(UNAUDITED)

|Nine months ended
    June 30,                           |   | 2005        |   | 2004       
|-------------------------------------------------------- | - | ----------- | - | -----------
|                                                         |   |             |   |            
|SALES                                                    | $ | 43,283      | $ | 371,694    
|                                                         |   |             |   |            
|COST OF SALES                                            |   | 19,179      |   | 148,046    
|                                                         |   |             |   |            
|GROSS MARGIN                                             |   | 24,104      |   | 233,648    
|                                                         |   |             |   |            
|SELLING AND
    ADMINISTRATIVE EXPENSES                  |   | 2,576,409   |   | 975,381    
|RESEARCH AND
    DEVELOPMENT EXPENSES                    |   | 953,521     |   | 162,568    
|DEPRECIATION AND
    AMORTIZATION                        |   | 41,092      |   | 31,301     
|LOSS FROM
    OPERATIONS                                 |   | (3,546,918) |   | (945,062)  
|                                                         |   |             |   |            
|OTHER INCOME AND
    EXPENSES                            |   |             |   |            
|                                                         |   |             |   |            
|Interest Income/(expense)                                |   | 21,792      |   | (1,160,928)
|Write down of licensing rights                           |   | -           |   | (229,999)  
|                                                         |   |             |   |            
|LOSS BEFORE INCOME TAXES                                 |   | (3,525,126) |   | (2,336,529)
|                                                         |   |             |   |            
|INCOME TAX                                               |   | -           |   | -          
|                                                         |   |             |   |            
|NET LOSS                                                 | $ | (3,525,126) | $ | (2,336,529)
|                                                         |   |             |   |            
|NET LOSS PER
    COMMON SHARE, BASIC & DILUTED           | $ | (0.06)      | $ | (0.14)     
|                                                         |   |             |   |            
|WEIGHTED AVERAGE
    NUMBER OF COMMON SHARES OUTSTANDING |   | 57,165,051  |   | 17,002,866 

See condensed notes to consolidated financial statements

4

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ALPHARx, INC. INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004 
(UNAUDITED)

|                                                         |   |             |   |            
|-------------------------------------------------------- | - | ----------- | - | -----------
|Three months
    ended June 30,                          |   | 2005        |   | 2004       
|                                                         |   |             |   |            
|SALES                                                    | $ | 18,137      | $ | 9,084      
|                                                         |   |             |   |            
|COST OF SALES                                            |   | 8,100       |   | 1,861      
|                                                         |   |             |   |            
|GROSS MARGIN                                             |   | 10,037      |   | 7,223      
|                                                         |   |             |   |            
|SELLING AND
    ADMINISTRATIVE EXPENSES                  |   | 1,794,883   |   | 377,394    
|RESEARCH AND
    DEVELOPMENT EXPENSES                    |   | 472,133     |   | 122,323    
|DEPRECIATION AND
    AMORTIZATION                        |   | 16,074      |   | 11,739     
|LOSS FROM
    OPERATIONS                                 |   | (2,273,053) |   | (504,233)  
|                                                         |   |             |   |            
|OTHER INCOME AND
    EXPENSES                            |   |             |   |            
|                                                         |   |             |   |            
|Interest Income/(expense)                                |   | 3,705       |   | (299,928)  
|                                                         |   |             |   |            
|LOSS BEFORE INCOME TAXES                                 |   | (2,269,348) |   | (804,161)  
|                                                         |   |             |   |            
|INCOME TAX                                               |   | -           |   | -          
|                                                         |   |             |   |            
|NET LOSS                                                 | $ | (2,269,348) |   | $ (804,161)
|                                                         |   |             |   |            
|NET LOSS PER
    COMMON SHARE, BASIC & DILUTED           | $ | (0.04)      | $ | (0.05)     
|                                                         |   |             |   |            
|WEIGHTED AVERAGE
    NUMBER OF COMMON SHARES OUTSTANDING |   | 57,508,112  |   | 17,020,082 

See condensed notes to consolidated financial statements

5

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ALPHARx, INC. INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)

|                            | Common Stock | Additional | Retained    | Total        
|--------------------------- | ------------ | ---------- | ----------- | -------------
|                            | Number of    |            | Paid-in     | Earnings     
|                            | Shares       | Amount     | Capital     | (Deficit)    
|                            |              |            |             |              
|Balance at                  |              |            |             |              
|September 30, 2003          | 16,920,082   | 1,692      | 4,024,039   | (4,225,980)  
|                            |              |            |             |              
|Issuances of                |              |            |             |              
|Common Stock                |              |            |             |              
|for consulting,             |              |            |             |              
|legal services              | 100,000      | 11         | 29,990      |              
|                            |              |            |             |              
|Conversion of               |              |            |             |              
|Promissory Notes            | 3,752,340    | 375        | 1,535,859   |              
|                            |              |            |             |              
|Commission on               |              |            |             |              
|Promissory Notes            |              |            |             |              
|and Common                  |              |            |             |              
|Stock Issued                | 4,308,186    | 431        | 580,120     |              
|                            |              |            |             |              
|Issuances of                |              |            |             |              
|Common Stock                | 27,224,034   | 2,723      | 3,410,027   |              
|                            |              |            |             |              
|Net Loss for the            |              |            |             |              
|Year ending                 |              |            |             |              
|September 30,2004           |              |            |             | (2,933,840)  
|                            |              |            |             |              
|Balance at                  |              |            |             |              
|September 30, 2004          | 52,304,642   | $5,232     | $9,580,035  | $(7,159,820) 
|                            |              |            |             |              
|Conversion of               |              |            |             |              
|Promissory Notes            | 5,203,470    | 520        | 510,988     |              
|                            |              |            |             |              
|Issuance of                 |              |            |             |              
|Stock Options               |              |            |             |              
|for consulting
    services |              |            | 62,300      |              
|                            |              |            |             |              
|Stock based                 |              |            |             |              
|compensationexpense         |              |            | 1,381,497   |              
|                            |              |            |             |              
|Net loss for                |              |            |             |              
|the period                  |              |            |             | (3,525,126)  
|                            |              |            |             |              
|Balance at                  |              |            |             |              
|June 30, 2005               | 57,508,112   | $5,752     | $11,534,820 | $(10,684,946)

See condensed notes to consolidated financial statements

6

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ALPHARx, INC. INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2005 AND 2004 
(UNAUDITED)

|Nine months ended
    June 30,                                      |   | 2005        |   | 2004       
|------------------------------------------------------------------- | - | ----------- | - | -----------
|                                                                    |   |             |   |            
|CASH FLOWS FROM
    OPERATING ACTIVITIES                            |   |             |   |            
|Net Loss                                                            | $ | (3,525,126) | $ | (2,326,529)
|Adjustments to reconcile net loss to net cash
    used in operating |   |             |   |            
|activities:                                                         |   |             |   |            
|Depreciation and amortization                                       |   | 41,092      |   | 31,301     
|Options issued for services rendered                                |   | 62,300      |   | -          
|Write down of licensing rights                                      |   | -           |   | 229,999    
|Shares Issued For Services Rendered                                 |   | -           |   | 30,001     
|Stock based compensation expense                                    |   | 1,381,497   |   | -          
|Interest expense on convertible debt                                |   | -           |   | 1,161,000  
|Changes in assets and liabilities:                                  |   |             |   |            
|Decrease in Inventory                                               |   | 3,410       |   | 20,513     
|(Increase) decrease in Accounts Receivable                          |   | (33,008)    |   | 10,379     
|(Increase) decrease in Prepaid Expenses                             |   | 41,534      |   | (119,963)  
|Increase in deferred financing costs                                |   | -           |   | (184,999)  
|Increase(decrease) in Accounts Payable and
    Accrued Liabilities  |   | (105,501)   |   | 273,240    
|                                                                    |   |             |   |            
|NET CASH USED IN
    OPERATING ACTIVITIES                           |   | (2,133,802) |   | (885,058)  
|                                                                    |   |             |   |            
|CASH FLOWS FROM
    INVESTING ACTIVITIES                            |   |             |   |            
|                                                                    |   |             |   |            
|Purchase of Machinery & Equipment                                   |   | (40,458)    |   | (127,728)  
|                                                                    |   |             |   |            
|NET CASH USED IN
    INVESTING ACTIVITIES                           |   | (40,458)    |   | (127,728)  
|                                                                    |   |             |   |            
|CASH FLOWS FROM
    FINANCING ACTIVITIES                            |   |             |   |            
|                                                                    |   |             |   |            
|Issuance (repayment) of Notes Payable                               |   | (665,900)   |   | 1,000,973  
|Proceeds from issuance of common stock (net)                        |   | 511,508     |   | -          
|                                                                    |   |             |   |            
|NET CASH PROVIDED
    BY (USED IN) FINANCING ACTIVITIES             |   | (154,392)   |   | 1,000,973  
|                                                                    |   |             |   |            
|NET (DECREASE)
    INCREASE IN CASH                                 |   | (2,328,652) |   | (11,813)   
|                                                                    |   |             |   |            
|CASH, and cash
    equivalents, beginning of period                 |   | 2,856,042   |   | 24,520     
|                                                                    |   |             |   |            
|CASH, and cash
    equivalents, end of period                       | $ | 527,390     | $ | 12,707     

See condensed notes to consolidated financial statements

7

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ALPHARX INC. CONDENSED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005 
(UNAUDITED)

NOTE 1. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with the instructions to Form 10-QSB
and do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of all recurring accruals) considered
necessary for fair presentation have been included. Operating results for the
interim periods are not necessarily indicative of the results that may be
expected for the year ended September 30, 2005. Interim consolidated financial
statements should be read in conjunction with the Company's annual audited
consolidated financial statements.

NOTE 2. NATURE OF BUSINESS AND GOING CONCERN

ALPHARX, INC. (the Company) was incorporated under the laws
of the State of Delaware on August 7, 1997. The company is an emerging
pharmaceutical company specializing in the formulation of therapeutic products
using proprietary drug delivery technologies. The company was formally known as
LOGIC TECH INTERNATIONAL, INC., and had its corporate name changed during fiscal
year 2000.

Effective July 1, 2003 the Company acquired all of the shares
of AlphaRx Canada Limited for nominal value of $1. AlphaRx Canada Limited was
dormant until this time. AlphaRx Canada Limited was incorporated under the laws
of Ontario in order to streamline sales of the Company's products in the
Canadian market. Prior to this time AlphaRx Canada Limited had no material
assets or any liabilities and was wholly owned by the President & CEO of the
Company. The interim consolidated financial statements reflect the activities of
the Company and of AlphaRx Canada Limited - its wholly owned subsidiary. The
Company also owns 100% of AlphaRx International Holdings Limited ("AIH"),
incorporated in the British Virgin Islands, for the purposes of pursuing a Joint
Venture and other distribution activities in the Asia Pacific region. All
material inter-company accounts and transactions have been eliminated.

The accompanying unaudited interim consolidated financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. Accordingly, they do not include any adjustments relating to the
realization of the carrying value of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern. Continuance of the Company as a going concern is dependent on
its ability to raise additional capital, future profitability and on the
on-going support of its shareholders, affiliates and creditors.

NOTE 3. LICENSING RIGHT

The Company acquired world-wide exclusive commercialization rights for VT-1
from Select Therapeutics Inc. in January 2003 with the intention of
commercializing this drug. Subsequent to this acquisition the Company launched
Flexogan in Canada, and shifted focus on drug delivery products, and related
sales and marketing. Having unsuccessfully attempted to resell these
commercialization rights, they have been written down to a nominal value due
primarily to prohibitive development costs, and the fact that there is no market
for these rights.

NOTE 4. NOTES PAYABLE

8

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During October, 2004, the Company converted $520,347 in convertible
promissory notes into 5,203,470 shares of common stock plus warrants to purchase
10,406,940 shares of common stock at an exercise price of $0.30 per share. These
warrants expire during September and October, 2007.

The remainder of the promissory notes totalling $154,932, which included
accrued interest, were repaid to officers and directors of the Company. As a
result of the repayments and conversions, the Company has no outstanding debt
other than trade and accrued accounts payable as of June 30, 2005.

NOTE 5. LITIGATION LIABILITY

The Company is a defendant in a lawsuit filed by a prospective investor
alleging breach of contract, which seeks damages totalling $25,000. The Company
believes the suit is without merit, however, to remain conservative, the entire
claim has been accrued in the financial statements.

NOTE 6. COMMON STOCK

The Company is authorized to issue 250,000,000 shares of common stock. As of
June 30, 2005, there remains issued and outstanding 57,508,112 shares of such
common stock which has a stated par value of $0.0001 per share.

During the three months ended December 31, 2004, $520,347 of convertible
promissory notes were converted into 5,203,470 shares of common stock at $0.10
per share and 10,406,940 warrants to purchase shares of common stock at an
exercise price of $0.30 per share.

During the six months ended June 30, 2005 the Company did not issue any
common stock.

NOTE 7. STOCK OPTION PLANS

The Company has a Stock Option Plan (Plan) under which officers, key
employees, certain independent contractors, and non-employee directors may be
granted options to purchase shares of the Company's authorized but unissued
common stock. Since fiscal 2001, the option plan was terminated. Under this
Plan, the option exercise price is US$0.10. Outstanding stock options granted
under the Plan will remain in effect until the expiration date specified in
those options. Options currently expire no later than 10 years from the grant
date and generally vest within five years. Proceeds received by the Company from
exercises of stock options are credited to common stock and additional paid-in
capital. Additional information with respect to the Plan's stock option activity
is as follows:

|                                         | Number of | Weighted
|---------------------------------------- | --------- | --------
|                                         | Shares    | Average 
|                                         |           | Exercise
|                                         |           | Price   
|Options exercisable at June 30,
    2005 | 1,150,000 | $0.10   

The Company adopted a new option plan on February 10, 2003 under which
options to purchase 1,500,000 common shares will be granted to certain key
employees and directors. Under the Plan, the option exercise price and its fair
market value are determined to be US$0.50 -US$0.69. All options will expire on
February 10, 2008 and will vest, and become exercisable in three instalments.
Proceeds received by the Company from exercises of stock options are credited to
common stock and additional paid-in capital. Additional information with respect
to the Plan's stock option activity is as follows:

9

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|                                                           | Number of | Weighted
|---------------------------------------------------------- | --------- | --------
|                                                           | Shares    | Average 
|                                                           |           | Exercise
|                                                           |           | Price   
|Outstanding at February 10, 2003
    (plan adoption)       | 0         |         
|Granted during fiscal 2003                                 | 645,000   | $0.63   
|Exercised                                                  | 0         | $0.00   
|Cancelled during fiscal 2003                               | 75,000    | $0.63   
|Outstanding as of September 30,
    2004 and June 30, 2005 | 570,000   | $0.63   
|Options exercisable at June 30,
    2005                   | 570,000   | $0.63   

The Company granted 645,000 options to consultants during fiscal 2003. The
fair value of each option granted during 2003 was recorded as consulting expense
totaling $280,594, using the Black-Scholes option pricing model. No further
options will be granted under the two plans mentioned above.

No stock options were granted during the year ended September 30, 2004.

The Company, via written consent from a majority of the holders of common
stock, approved the adoption of a new option plan during July, 2004. Under this
plan the Company can issue up to 24,000,000 options to purchase common stock. As
of September 30, 2004 no options under this plan had been formally allocated.
During the nine months ended June 30, 2005 the Company granted 20,710,000
options under this new plan. Of these options, 600,000 were granted to
consultants causing a stock based compensation expense of $62,300 using the
Black-Sholes option pricing model. Additional information with respect to the
Plan's stock option activity is as follows:

|                                                   | Number of  | Weighted
|-------------------------------------------------- | ---------- | --------
|                                                   | Shares     | Average 
|                                                   |            | Exercise
|                                                   |            | Price   
|Outstanding at July 24, 2004
    (plan adoption)   | 0          |         
|Granted during fiscal 2004                         | 0          |         
|Granted during nine months ended
    June 30, 2005 | 20,710,000 | $0.16   
|Exercised                                          | 0          | $0.00   
|Cancelled                                          | 0          | $0.00   
|Outstanding as of June 30, 2005                    | 20,710,000 | $0.16   
|Options exercisable at June 30,
    2005           | 600,000    | $0.37   

The following options were granted to employees during the nine months ended
June 30, 2005:

|Date     | Quantity   | Price | Expiry   | Fair Value | Risk  | Expected | Expected   | Expected 
|-------- | ---------- | ----- | -------- | ---------- | ----- | -------- | ---------- | ---------
|         |            |       |          |            | Free  | Life in  | Volatility | Dividends
|         |            |       |          |            | Rate  | Years    |            |          
|Nov.15,  | 12,720,000 | $0.15 | Nov. 14, | 1,394,249  | 2.32% | 10       | 185%       | NIL      
|2004     |            |       | 2014     |            |       |          |            |          
|Jan. 10, | 7,000,000  | $0.16 | Jan. 9,  | 1,045,056  | 2.02% | 10       | 177%       | NIL      
|2005     |            |       | 2015     |            |       |          |            |          
|Feb. 8,  | 390,000    | $0.15 | Feb. 7,  | 53,894     | 1.93% | 10       | 156%       | NIL      
|2005     |            |       | 2015     |            |       |          |            |          
|         | 20,110,000 |       |          | $2,493,199 |       |          |            |          

10

---

All of the options issued to employees disclosed above vest over one year.
The Company has adopted fair value accounting for employee stock options as
per SFAS 123(R) using the modified retrospective application method, effective
April 1, 2005. Resultingly a stock based compensation expense of $1,381,497 has
been reflected in selling and administrative expenses in regards to employee
options during the three months ended June 30, 2005. There remains $1,111,702 to
be expensed in regards to the employee options mentioned above.
Had the Company continued to use APB 25, and not reflect employee stock based
compensation expense, net loss and net loss per share both pre-tax and after tax
basis would have been as follows:

|                                     | As
    reported using | As
    reported usimg
|------------------------------------ | --------------------- | ---------------------
|                                     | SFAS 123(R)           | APB
    25           
|                                     |                       |                      
|Stock based
    compensation         | $
    1,381,497       | $7,627               
|                                     |                       |                      
|Net Loss (pre
    tax/after tax)     | $(3,526,126)          | $(2,144,629)         
|                                     |                       |                      
|Basic and Diluted
    loss per share | $(0.06)               | $(0.04)              

NOTE 8. WARRANTS

The Company has the following warrants outstanding to purchase common stock
at June 30, 2005:

|Warrants issued in conjunction
    with financing costs whereby one warrant
    entitles the holder to purchase one share of common stock at an exercise
    price of $1.10, expiring December 19, 2005.                                                                                                                                                                                     | 670,275   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------
|Warrants issued in conjunction
    with financing costs whereby one warrant
    entitles the holder to purchase one share of common stock at an exercise
    price of $0.65 expiring June 17, 2006.                                                                                                                                                                                          | 75,524    
|Warrants issued in return for
    financial advisory services whereby one
    warrant entitles the holder to purchase one share of common stock at an
    exercise price of $0.05, expiring September 1, 2007.                                                                                                                                                                               | 3,000,000 
|Warrants issued in conjunction
    with financing costs whereby one warrant
    entitles the holder to purchase one share of common stock at an exercise
    price of $0.15, expiring September 1, 2007.                                                                                                                                                                                     | 2,994,642 
|Warrants issued in conjunction
    with financing costs whereby one warrant
    entitles the holder to purchase one share of common stock at an exercise
    price of $0.30, expiring September 1, 2007.                                                                                                                                                                                     | 2,287,669 
|Warrants issued in conjunction
    with conversion of promissory notes and in
    conjunction with the private placement completed during July and September,
    2004. One warrant entitles the holder to purchase one share of common stock
    at an exercise price of $0.30. Expiry dates: July 21, 2007 - 27,505,378;
    September 1, 2007 - 12,426,114; October 13, 2007 - 5,204,160. | 45,135,652
|                                                                                                                                                                                                                                                                                                                                                                                             | 54,163,762

NOTE 9. COMMITMENTS

Leases

Effective December 1, 2004 the Company entered into an operating lease for
research equipment. Minimum annual lease payments total $10,932 commencing
December 1, 2004 and ending November 1, 2009.

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Effective April 1, 2005 the Company entered into two operating leases for
research equipment. Minimum annual lease payments total $27,797 commencing on
April 1, 2005 and ending March 1, 2008.

The Company leases its premises, automobile, and computer equipment. The
aggregate minimum annual payments due under these leases, including the new ones
entered into as described above, is as follows:

|Fiscal Year | Amount 
|----------- | -------
|            |        
|2005        | $56,795
|2006        | $72,507
|2007        | $68,707
|2008        | $54,463
|2009        | $18,244

Services

The Company has entered into an agreement with a third party for the
provision of financial advisory services in exchange for 800,000 shares of
common stock, to be issued and delivered upon completion of the services, in
February, 2006. The common stock was valued at $0.15 per share for the purposes
of this agreement. The Company accrues $10,000 per month in connection with
these services. As at June 30, 2005, $50,000 has been accrued.

NOTE 10. ALPHARX INTERNATIONAL HOLDINGS LIMITED

During the three months ended June 30, 2005 our wholly-owned
subsidiary - AlphaRx International Holdings Limited ("AIH") which was previously
inactive, entered into a Manufacturing and Distribution License agreement with
Basin Industrial Limited, a Hong Kong based corporation, to manufacture and sell
our Flexogan line and certain other products in the areas of Hong Kong, the
Peoples' Republic of China, the Republic of Korea and Japan. The Manufacturing
and Distribution License agreement will be executed through a 50:50 joint
venture - AlphaAP Inc., a company to be established.

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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION

The following discussion and analysis should be read in conjunction with the
Financial Statements, including the Notes thereto, appearing in this Form
10-QSB. Except for the historical information contained herein the foregoing
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those projected
in the forward-looking statements discussed herein.

General

AlphaRx is a drug delivery company specializing in the development of
innovative therapeutic products for the pharmaceutical and consumer health care
market. Our core competence is in the development of novel drug formulations for
therapeutic molecules or compounds that have exhibited poor gastro intestinal
absorption due to poor solubility or have yet be administerable to the human
body with an acceptable delivery method. Our drug delivery system is versatile
and offers significant flexibility in the development of suitable dosage
formulations (i.e. oral, topical or parenteral) to meet the requirements of
specific drug molecules. Our primary activities since inception have included
research and development, establishing our offices and research facilities,
recruiting personnel, filing patent applications, developing a business strategy
and raising capital.

We acquired the world-wide exclusive commercialization rights of VT-1 from
Select Therapeutics Inc. in January, 2003. Given our recent national launch with
Flexogan in Canada and our new focus on drug delivery products and plans to
evolve into a sales and marketing organization during 2003 - 2005, we have
decided VT-1 no longer meets our strategic objective and the VT-1 program has
been terminated.

We launched Flexogan, a series of over-the-counter topical analgesics, in
Canada during August, 2003. We have incurred significant marketing expenditures
since that time in order to promote national sales of Flexogan. Further
significant marketing expenditures will only be incurred pending receipt of
additional funding, which may not be adequate to address our marketing needs or
which may not occur at all.

We signed a licensing agreement with Andromaco Inc. in August, 2003 for the
commercialization of our lead pharmaceutical products "Indaflex" in Mexico. The
Company received nominal initial royalties from product sales during the three
months ended June 30, 2005. In order to market and sell Indaflex products in the
US and Canada, we will require successful completion of human and clinical
trials and FDA approval. These trials commenced during our second fiscal quarter
ended March 31, 2005.

During the three months ended June 30, 2005 we established a
wholly-owned foreign subsidiary - AlphaRx International Holdings Limited ("AIH")-
in order to pursue sales activities in the Asia Pacific region. AIH has entered
into a Manufacturing and Distribution License agreement with AlphaAP Inc. We
will receive royalties from future product sales. AIH also entered into a joint
venture agreement with Basin Industrial Limited (a Hong Kong based corporation)
whereby AIH and Basin Industrial Limited will be equal holders of AlphaAP Inc.,
a company to be established in order to manufacture and sell our existing and
certain future products.

We have one pharmaceutical drug - 2.5% Indaflex, in the clinical trial stage
(Phase 1 completed in March, 2005), and two pharmaceutical drugs in the
preclinical stage - Rifampicin and Gentamicin. We also have two over the counter
topical drugs in the preclinical stage - NuProm and V-Relief.

The costs incurred for each of these initiatives to date cannot be readily
determined because (i) there is no clear distinction between initiatives in
order to be able to differentiate between them; (ii) all initiatives have a
common goal and that is to adopt our Bioadhesive Colloidal Dispersion drug
delivery system to the specific drug in order to improve that drug's
effectiveness; and (iii) we do not maintain a time control system to
differentiate research and development activities.

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The nature, timing and estimated costs to complete a project and anticipated
completion dates cannot be estimated because: (i) the nature of research is
experimental and we could encounter unforeseen situations which could
significantly delay project completion or require us to abandon the project;
(ii) timing to complete a project depends, to a certain extent, on financial
resources and we cannot predict with any degree of certainty that financial
resources will be available when needed to complete any specific project and
(iii) cost estimates cannot be predicted with any acceptable degree of accuracy
due to unforeseen issues arising during the clinical stages or the approval
stages of any specific initiative.

If we cannot complete our research and development initiatives on a timely
basis consequences to our operations could be significant to the point where the
initiative would be delayed or even abandoned. We would also face the risk of
competitors developing the same or similar products and being first to market.
Finally, our failure to develop products on a timely basis could substantially
impair our ability to generate revenues and materially harm our financial
position.

We cannot predict the timing of material net cash inflows from significant
projects due to a number of factors including (i) availability of financial
resources required to market a new product, (ii) our lack of experience in
bringing a new product to market successfully and gaining market share; (iii)
competitors' products and the nature and timing of their marketing initiatives.

We intend to continue investing in the further development of our drug
delivery technologies and to actively seek collaborators and licensees to
accelerate the development and commercialization of products incorporating our
drug delivery systems. Depending upon a variety of factors, including
collaborative arrangements, available personnel and financial resources, we will
conduct or fund clinical trials on such products and will undertake the
associated regulatory activities.

NINE MONTHS ENDED JUNE 30, 2005, AS COMPARED TO THE NINE MONTHS ENDED JUNE
30, 2004

RESULTS OF OPERATIONS

The Company incurred a net loss of $3,526,126 for the nine month period ended
June 30, 2005 as compared to a loss of $2,336,529 incurred for the same period a
year ago, an increase of $1,189,597 or 51%.

Loss from operations totalled $3,546,918 for the nine month period ended June
30, 2005 as compared to a loss of $945,062 for the same period a year ago, an
increase of $2,601,856 or 275%. The increased loss from operations relates
primarily to stock based compensation expense of $1,389,124 with no comparable
expense in the previous period. Secondly, the initiation of Phase 1 trials for
Indaflex during the nine months ended June 30, 2005, incurred $953,521 in
research and development expense as compared to $162,568 in this expense during
the same period a year ago. Finally, a reduction in gross sales to $43,283 for
the nine month period ended June 30, 2005 from $371,694 generated for the same
period a year ago, a decrease of $328,411 or 88%, led to a reduced gross margin
and hence an increase in loss from operations.

Sales

Sales for the nine months ended June 30, 2005 were $43,283 as compared to
sales of $371,694 generated for the same period a year ago, a decrease of
$328,411 or 88%. Initial stocking orders during 2004 caused a significant uplift
in sales when compared to other periods. We have not received any further
initial orders from new customers during the nine months ended June 30, 2005.
All sales for fiscal 2005 to date represent over the counter sales of our
Flexogan line of analgesics.

Marketing expenditures are presently being curtailed due to
financial constraints. This, in turn, will make it more challenging to increase
or even maintain sales in the future. Distribution partners are also being
sought to provide more opportunity for sales of Flexogan.

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Gross Margin

Cost of Sales for nine months ended June 30, 2005 was $19,179 as compared to
$148,046 incurred for the same period a year ago. Resulting Gross Margin
decreased to $24,104 or approximately 56% of sales as compared to Gross Margin
of $233,648 or approximately 63% of sales for the same period a year ago. Price
reductions to customers commencing during our first quarter of fiscal 2005 have
translated into lower gross margins when compared to the same period a year ago.

Selling and Administrative Expenses

Selling and administrative expenses consist primarily of sales and marketing
expenditures, stock based compensation expense, personnel costs related to
general management functions, finance, inventory logistics, office overheads,
insurance and professional fees related to legal, audit and tax matters. Selling
and administrative expenses for the nine months ended June 30, 2005 were
$2,576,409 as compared to $975,381 incurred for the same period a year ago, an
increase of $1,601,028 or 164%.

We have reflected stock based compensation expense related to the granting of
options to employees in the financial statements effective June 30, 2005. We
disclosed this expense on a pro-forma basis in previous periods. Accordingly,
selling and administrative expenses include $1,443,797 in total stock based
compensation for the nine months ended June 30, 2005 as compared to $30,001
incurred for the same period a year ago. This expense accounts for the majority
of the increase in selling and administrative expenses when compared to the
prior period.

Approximately $550,000 of selling and administrative expenses
incurred for the nine months ended June 30, 2005 related to sales and marketing
of Flexogan in Canada as compared to approximately $447,000 incurred for the
same period a year ago. In addition we incurred approximately $21,000 for
marketing in the U.S. and other parts of the world during the nine months ended
June 30, 2005. Sales and marketing expenditures are presently being curtailed
due to financial constraints.

Approximately $561,000 of selling and administrative expenses incurred for
the nine month period ended June 30, 2005 related to administrative expenses,
other than stock based compensation expense, as compared to approximately
$498,000 incurred for the same period a year ago, an increase of about $63,000
or 13%. Increase in legal fees and insurance were primarily responsible for the
increase in administrative expenses, excluding stock based compensation expense.

Research and Development Expenses

Research and development expenses include costs for scientific personnel,
supplies, equipment, outsourced clinical and other research activities.

Research and development expenses for the nine months ended June 30, 2005
were $953,521 as compared to $162,568 incurred for the same period a year ago,
an increase of $790,953 or 487%. The increase relates primarily to the
completion of Phase 1 Indaflex clinical trials, and ongoing research and
development of other products. Phase 1 trials commenced during the nine months
ended June 30, 2005 with no comparable expense in the same period a year ago.
Phase 2 trials can only commence upon receipt of additional funding, which may
not occur.

Depreciation and Amortization

Depreciation and amortization totalled $41,092 for the nine months ended June
30, 2005 as compared to $31,301 incurred for the same period a year ago, an
increase of $9,791 or 31%. Additional capital expenditures totalling $40,458
during the nine months ended June 30, 2005 were responsible for the increase in
depreciation and amortization.

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Interest income/expense

Interest income totalled $21,792 for the nine months ended June 30, 2005 as
compared to net interest expense of $1,160,928 incurred during the same period a
year ago. We issued convertible debt during the nine months ended June 30, 2004,
which had a conversion feature that was in-the-money on date of issuance. The
debt discount was amortized into income during 2004, causing $1,161,000 of
interest expense. No such expense was incurred during the nine months ended June
30, 2005.

Interest income during the nine months ended June 30, 2005 was generated from
term deposits. The funds used for deposit were received in September 2004 from a
private placement.

Write down of Licensing Rights

During the nine months ended June 30, 2004 we wrote off VT-1 licensing rights
as the cost to develop VT-1 was prohibitive and no market existed for these
rights. There was no similar expense in the nine months ended June 30, 2005.

Net Loss

For the nine months ended June 30, 2005, our net loss was $3,525,126 as
compared to a net loss of $2,336,529 incurred during the same period a year ago.

LIQUIDITY AND CAPITAL RESOURCES

As at June 30, 2005 the Company had working capital of $614,726 compared to
working capital of $2,183,913 as at September 30, 2004. The reduction of working
capital relates primarily to losses incurred during the nine month period ended
June 30, 2005.

During the nine months ended June 30, 2005 we repaid or converted all
remaining term debt such that we have no debt other than normal trade payables
and accruals related to ongoing business activities. We do not have sufficient
working capital to fund ongoing activities beyond December 31, 2005 and are
presently actively seeking funding via private placement or debt financing.

Since our inception, we have financed operations principally from the sale of
our common stock and the issuance of promissory notes. We expect to continue
this practice to fund our ongoing activities. The exercise of certain of our
warrants will also provide a potential additional source of funding.

We currently do not have sufficient resources to complete the
commercialization of any of our proposed products or to carry out our entire
business strategy. Therefore, we will likely need to raise substantial
additional capital to fund our operations in the future. We cannot be certain
that any financing will be available when needed on acceptable terms or at all.
Any additional equity financings will be dilutive to our existing shareholders,
and debt financing, if available, may involve restrictive covenants on our
business.

We expect to continue to spend capital on:

1. research and development programs; 
2. preclinical studies and clinical trials; 
3. regulatory processes; and 
4. third party manufacturers and marketing partners to manufacture and market
our products for us.

The amount of capital we may need will depend on many factors, including:

1. the progress, timing and scope of our research and
development programs; 
2. the progress, timing and scope of our preclinical studies and clinical
trials; 
3. the time and cost necessary to obtain regulatory approvals;

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4. the time and cost necessary to establish sales and marketing capabilities
or to retain sales and marketing partners to market our products for us; 
5. the time and cost necessary to respond to technological and market
developments; and 
6. new collaborative, licensing and other commercial relationships that we may
establish.

The inability to raise capital by December 31, 2005 will have
a material adverse effect on the Company. We currently have no capital
commitments other than the payment of rent on our facilities lease, and for
certain research and other equipment leases.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

Certain of the information contained in this document constitutes
"forward-looking statements", including but not limited to those with respect to
the future revenues, our development strategy, involve known and unknown risks,
uncertainties, and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the risks and uncertainties associated with a
drug delivery company which has not successfully commercialized its first
product, and includes: a history of net losses, unproven technology, lack of
manufacturing experience, current and potential competitors with significant
technical and marketing resources, need for future capital and dependence on
collaborative partners and on key personnel. Additionally, we are subject to the
risks and uncertainties associated with all drug delivery companies, including
compliance with government regulations and the possibility of patent
infringement litigation, as well as those factors disclosed in our documents
filed from time to time with the United States Securities and Exchange
Commission.

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer/Principal Accounting Officer, has
evaluated the effectiveness of the Company's disclosure controls and procedures
as of June 30, 2005. Based on this evaluation, the Company's Chief Executive
Officer and Chief Financial Officer/Principal Accounting Officer concluded that
the Company's disclosure controls and procedures are effective for gathering,
analyzing and disclosing the information the Company is required to disclose in
the reports it files under the Securities Exchange Act of 1934, within the time
periods specified in the SEC's rules and forms.

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PART II: OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

Farhad Walji vs. AlphaRx, Inc. and AlphaRx Canada Limited filed in the
Supreme Court of British Columbia on August 23, 2002. Farhad Walji has filed a
claim asking for $25,000 plus interest for allegedly providing $20,000 pursuant
to a subscription agreement to purchase common shares of AlphaRx's stock and
damages resulting from lost opportunity. The Company has denied any liability in
this case and is currently defending this action vigorously. Nonetheless, the
value of the entire claim has been accrued in our financial statements as a
current liability.

ITEM 2 - CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES

There were no issuances of stock during the six month period ended June 30,
2005.

During the three months ended December 31, 2004 we issued 5,203,470 shares of
common stock pursuant to the conversion of $520,347 in convertible debt. We also
issued warrants to purchase 10,406,940 shares of common stock at $0.30 per share
in connection with the conversion of debt.

As a result of the above transactions the Company had 57,508,112 shares of
Common Stock outstanding as at June 30, 2005. Additionally, there are warrants
outstanding to purchase 54,163,762 shares of Common Stock, ranging in price from
$0.05 to $1.10 and expiring between the period December 19, 2005 and October 13,
2007.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)

31.1    
Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2    
Certification of C.F.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1    
Certification of Michael Lee pursuant to Section 1350 of Chapter 63 of Title 18
United States Code.32.2    
Certification of Marcel Urbanc pursuant to Section 1350 of Chapter 63 of Title
18 United States Code.

(b)

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On May 13, 2005 we informed the SEC of the necessity to
restate certain prior periods based on the beneficial conversion feature related
to the issuance of senior convertible debt during the period February to April,
2004.

On May 16, 2005 we filed an amended 8K regarding the original 8K filed May
13, 2005.

On May 18, 2005 we filed an 8K regarding the entry into a material definitive
agreement between AlphaRx International Holdings Limited ("AIH"), a wholly owned
subsidiary, and Basin Industrial Ltd., an independent, wholly owned subsidiary
of Advanced Pharmaceutical Ltd..

On June 3, 2005 we filed an 8K regarding a press release issued on June 2,
2005 commenting on Indaflex Phase 1 clinical trial results.

On June 6, 2005 we filed an 8K regarding a Joint Venture established between
AIH and Basin Industrial Ltd. AlphaAP Inc., the Joint Venture to be established,
will be used to market certain products in the Asia Pacific Region.

On June 17, 2005 we filed an 8K regarding the official launch of Indaflex in
Mexico. Indaflex must complete further clinical trials in Canada and the United
States to be able to market Indaflex in those countries.

On June 22, 2005 we filed an 8K describing in more detail, the Joint Venture
agreement between AIH (our wholly owned subsidiary) and Basin Industrial Ltd. (a
wholly owned subsidiary of Advanced Pharmaceutical Ltd.). Both parties will own
50% of AlphaAP Inc., a company to be established.

On July 13, 2005 we released an 8K indicating that Health Canada provided
approval for Phase 2 human trials with Indaflex.

On July 14, 2005 we filed an 8K regarding board approval to allow AlphaAP
Inc. (50% owned Joint Venture) to buy up to 10% of our outstanding common stock
in the open market.

On July 18, 2005 we filed an 8K regarding a press release, providing an
update on our antibiotic development program.

SIGNATURES:

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

DATED: August 12, 2005

ALPHARx, INC.By:/S/ Michael M. LeeMichael M. Lee, Chief
      Executive Officer


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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant, in
the capacities, and on the dates, indicated.

DATED: August 12, 2005

Directors:

/S/ Michael M. LeeMichael M. Lee, Director/S/ David MilroyDavid Milroy, Director/S/ Ford MooreFord Moore, Director


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