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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB-A

[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the quarterly period ended: March 31, 2004

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 May 17, 2005 was 57,508,112.

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

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ALPHARX, INC.FORM 10-QSB-A
MARCH 31, 2004
TABLE OF CONTENTS

|Interim
    Consolidated Balance Sheets as of March 31, 2004 as restated,          |   
|---------------------------------------------------------------------------------- | --
|and
    September 30, 2003                                                         | 1 
|                                                                                   |   
|Interim
    Consolidated Statements of Operations for the six months ended March   |   
|31, 2004,
    as restated, and March 31, 2003                                      | 3 
|                                                                                   |   
|Interim
    Consolidated Statements of Operations for the three months ended       |   
|March 31,
    2004, as restated, and March 31, 2003                                | 4 
|                                                                                   |   
|Interim
    Consolidated Statements of Stockholders' Deficiency for the six months |   
|ended March
    31, 2004, as restated, and the year ended September 30, 2003       | 5 
|                                                                                   |   
|Interim
    Consolidated Statements of Cash Flow for the six months ended March    |   
|31, 2004,
    as restated, and March 31, 2003                                      | 6 
|                                                                                   |   
|Condensed
    Notes to Interim Consolidated Financial Statements as restated       | 7 
|                                                                                   |   
|Management's Discussion and Analysis of Financial Condition and Plan               | 10
|of
    Operation as restated                                                       |   
|                                                                                   |   
|Other
    Information as restated                                                  | 15

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ALPHARX, INC.
INTERIM CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2004 AS RESTATED, (NOTE 7)
AND SEPTEMBER 30, 2003(UNAUDITED)

ASSETS

|                                             |   | March 31, | September 30,
|-------------------------------------------- | - | --------- | -------------
|                                             |   | 2004      |              
|CURRENT ASSETS                               |   |           |              
|                                             |   |           |              
|Cash                                         | $ | 470,018   | $            
|Accounts Receivable                          |   | 12,737    |              
|Deferred financing costs                     |   | 86,100    |              
|Prepaid Expenses                             |   | 7,218     |              
|Inventory                                    |   | 84,599    |              
|                                             |   |           |              
|                                             |   |           |              
|TOTAL CURRENT ASSETS                         |   | 660,672   |              
|                                             |   |           |              
|                                             |   |           |              
|PROPERTY, PLANT & EQUIPMENT, at cost         |   |           |              
|                                             |   |           |              
|Less accumulated
    deprecation of $98,667  |   | 145,121   |              
|Less accumulated
    depreciation of $79,097 |   |           |              
|                                             |   |           |              
|OTHER ASSETS                                 |   |           |              
|                                             |   |           |              
|Licensing Rights                             |   | 1         |              
|                                             |   |           |              
|                                             |   |           |              
|                                             |   |           |              
|                                             |   |           |              
|                                             |   |           |              
|TOTAL ASSETS                                 | $ | 805,794   | $            

See condensed notes to the consolidated financial statements



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ALPHARX, INC.
INTERIM CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2004, AS RESTATED, AND
SEPTEMBER 30, 2003(UNAUDITED)

LIABILITIES AND SHAREHOLDERS' DEFICIENCY
March 31,
    September 30,2004
    
    2003CURRENT LIABILITIESAccounts
    Payable and Accrued Liabilities
    $
    502,859
    $
    254,724Notes
    Payable
    1,119,551
    
    474,837Litigation Liabilities
    
    25,000
    
    25,000TOTAL CURRENT
    LIABILITIES
    
    1,647,410
    
    754,561SHAREHOLDERS'
    DEFICIENCYCommon Stock, $ 0.0001
    par value,
    
    1,703
    
    1,692Authorized 100,000,000 shares, issued andoutstanding 17,020,082 shares (September30, 2003
    - 16,920,082)Additional paid-in
    capital
    4,915,029
    
    4,024,039Deficit
    
    (5,758,348)
    
    (4,225,980)TOTAL SHAREHOLDERS'
    DEFICIENCY
    
    (841,616)
    
    (200,249)TOTAL LIABILITIES AND
    SHAREHOLDERS'
    $
    805,794
    $
    554,312DEFICIENCYSee condensed notes to the consolidated financial statements2

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ALPHARX, INC.

INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS

FOR THE SIX MONTH PERIOD ENDED MARCH 31,
2004, AS RESTATED and 2003 
(UNAUDITED)

|Six Months Ended March
    31,            | 2004          |  | 2003       
|----------------------------------------- | ------------- |  | -----------
|                                          |               |  |            
|SALES                                     | $
    362,610 |  | $ 2,498    
|                                          |               |  |            
|COST OF SALES                             | 146,185       |  | 2,243      
|                                          |               |  |            
|GROSS MARGIN                              | 216,425       |  | 255        
|                                          |               |  |            
|GENERAL AND
    ADMINISTRATIVE, SALES AND | 597,987       |  | 642,962    
|MARKETING EXPENSES                        |               |  |            
|RESEARCH AND
    DEVELOPMENT EXPENSES     | 40,245        |  | 155,288    
|DEPRECIATION                              | 19,562        |  | 12,132     
|                                          |               |  |            
|LOSS FROM OPERATIONS                      | (441,369)     |  | (810,127)  
|                                          |               |  |            
|OTHER INCOME AND
    EXPENSES             |               |  |            
|Interest
    Income/(expense)             | (861,000)     |  | 2          
|Write down of
    licensing rights        | (229,999)     |  | -          
|                                          |               |  |            
|                                          |               |  |            
|LOSS BEFORE INCOME
    TAXES, AS RESTATED | (1,532,368)   |  | (810,125)  
|                                          |               |  |            
|INCOME TAX                                | -             |  | -          
|                                          |               |  |            
|                                          |               |  |            
|NET LOSS, AS RESTATED                     | $ (1,532,368) |  | $ (810,125)
|                                          |               |  |            
|NET LOSS PER COMMON
    SHARE, BASIC &    | (0.09)        |  | (0.05)     
|DILUTED                                   |               |  |            
|                                          |               |  |            
|WEIGHTED AVERAGE
    NUMBER OF COMMON     | 16,994,258    |  | 15,764,160 
|SHARES OUTSTANDING                        |               |  |            

See condensed notes to the consolidated financial statements



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ALPHARX, INC.
INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31,
2004, AS RESTATED AND 2003 
(UNAUDITED)
Three Months Ended
    March 31,
    2004
    
    2003SALES
    $
    315,441
    
    $ 644COST OF SALES
    128,669
    
    780GROSS MARGIN
    186,772
    
    (136)GENERAL AND
    ADMINISTRATIVE, SALES
    327,070
    
    485,473AND MARKETING EXPENSESRESEARCH AND
    DEVELOPMENT EXPENSES
    28,817
    
    51,645DEPRECIATION
    8,518
    
    6,159LOSS FROM OPERATIONS
    (177,633)
    
    (543,413)OTHER INCOME AND
    EXPENSESInterest Income
    /(expense)
    (861,000)
    
    -Write down of
    licensing rights
    (229,999)
    
    -LOSS BEFORE INCOME
    TAXES,AS RESTATED
    (1,268,632)
    
    (543,413)INCOME TAX
    -
    
    -NET LOSS, AS RESTATED
    $ (1,268,632)
    
    $ (543,413)NET LOSS PER COMMON
    SHARE, BASIC &
    (0.07)
    
    (0.04)DILUTEDWEIGHTED AVERAGE
    NUMBER OF COMMON
    17,020,082
    
    16,032,032SHARES OUTSTANDINGSee condensed notes to the consolidated financial statements

4

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ALPHARX, INC.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' DEFICIENCY AS RESTATED 
(UNAUDITED)

|                                    | Common Stock  | Additional | Retained  | Total      
|----------------------------------- | ------------- | ---------- | --------- | -----------
|                                    | Number
    of |            | Paid-in   | Earnings   
|                                    | Shares        | Amount     | Capital   | (Deficit)  
|                                    |               |            |           |            
|                                    |               |            |           |            
|Balance as of                       | 15,327,341    | 1,533      | 2,897,277 | (2,811,383)
|September 30,                       |               |            |           |            
|2002                                |               |            |           |            
|                                    |               |            |           |            
|Issuances of                        | 1,592,741     | 159        | 846,168   |            
|Common                              |               |            |           |            
|Stock                               |               |            |           |            
|                                    |               |            |           |            
|Issuance of Stock                   |               |            | 280,594   |            
|Options
    for consulting services |               |            |          
|                                    |               |            |           |            
|Net loss for the                    |               |            |           | (1,414,597)
|Year ending                         |               |            |           |            
|September 30,                       |               |            |           |            
|2003                                |               |            |           |            
|                                    |               |            |           |            
|Balance as of                       | 16,920,082    | 1,692      | 4,024,039 | (4,225,980)
|September 30,                       |               |            |           |            
|2003                                |               |            |           |            
|                                    |               |            |           |            
|Issuance of                         |               |            |           |            
|Common Stock                        | 100,000       | 11         | 29,990    |            
|                                    |               |            |           |            
|Issuance of                         |               |            |           |            
|Convertible Debt                    |               |            | 861,000   |            
|                                    |               |            |           |            
|Net loss,
    as restated, for the  |               |            |           |            
|Six month period                    |               |            |           |            
|Ending March                        |               |            |           |            
|31, 2004                            |               |            |           | (1,532,368)
|                                    |               |            |           |            
|Balance as of                       |               |            |           |            
|March 31, 2004                      | 17,020,082    | 1,703      | 4,915,029 | (5,758,348)

See condensed notes to the consolidated financial statements

5

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ALPHARX, INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR THE SIX MONTH 
PERIOD ENDED MARCH 31, 2004, AS RESTATED AND 2003(UNAUDITED)

|Six months ended March
    31,                            | 2004        |  | 2003     
|--------------------------------------------------------- | ----------- |  | ---------
|CASH FLOWS FROM
    OPERATING ACTIVITIES                  |             |  |          
|Net Loss, as restated                                     | (1,532,368) |  | (810,125)
|Adjustments to
    reconcile net loss to net cash used in |             |  |          
|operating activities:                                     |             |  |          
|Depreciation                                              | 19,562      |  | 12,132   
|Write
    down of licensing rights                        | 229,999     |  | -        
|Shares
    issued for services rendered                   | 30,000      |  | 280,594  
|Options
    issued for services rendered                  | -           |  | 246,472  
|Interest
    expense on convertible debt                  | 861,000     |  | -        
|Changes in assets and liabilities:                        |             |  |          
|(Increase) decrease in inventory                          | 57,306      |  | (45,277) 
|(Increase) decrease in accounts receivable                | 14,925      |  | (955)    
|Increase in prepaid expenses                              | (3,528)     |  | (242,017)
|Increase in deferred financing costs                      | (86,100)    |  | -        
|Increase (decrease) in accounts payable and accrued       | 248,135     |  | (832)    
|liabilities                                               |             |  |          
|NET CASH USED IN
    OPERATING ACTIVITIES                 | (161,069)   |  | (560,008)
|CASH FLOWS FROM
    INVESTING ACTIVITIES                  |             |  |          
|Purchase of
    investments                               | -           |  | (20,000) 
|Purchase of property,
    plant & equipment               | (38,147)    |  | (17,992) 
|NET CASH USED IN
    INVESTING ACTIVITIES                 | (38,147)    |  | (37,992) 
|CASH FLOWS FROM
    FINANCING ACTIVITIES                  |             |  |          
|Decrease in bank
    indebtedness                         | -           |  | (3,373)  
|Repayment of officer
    advance                          | -           |  | (83)     
|Issuance of notes
    payable                             | 644,714     |  | 56,164   
|Proceeds from issuance
    of common stock                | -           |  | 545,292  
|NET CASH PROVIDED BY
    FINANCING ACTIVITIES             | 644,714     |  | 598,000  
|                                                          |             |  |          
|NET INCREASE
    (DECREASE) IN CASH                       | 445,498     |  | -        
|                                                          |             |  |          
|CASH, beginning of
    period                             | 24,520      |  | -        
|                                                          |             |  |          
|CASH, end of period                                       | 470,018     |  | -        

See condensed notes to the consolidated financial statements

6

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ALPHARX, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS 
MARCH 31, 2004 AS RESTATED 
(UNAUDITED)

NOTE 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited 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, 2004. Interim
financial statements should be read in conjunction with the Company's annual
audited 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 amended
during the fiscal year of 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 consolidated financial statements reflect
the activities of the Company and of AlphaRx Canada Limited - its wholly owned
subsidiary. All material inter-company accounts and transactions have been
eliminated.

The accompanying 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 future profitability and on the on-going support of its shareholders,
affiliates and creditors.

7

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NOTE 3 PROMISSORY NOTES AND DEFERRED FINANCING COSTS

The Company issued senior secured convertible
promissory notes to 10 investors during February and March, 2004 in the
aggregate amount of $861,000. These promissory notes are subject to voluntary
conversion into common stock at any time at a price of $0.15 (fifteen cents) per
share. Under certain circumstances the promissory notes are convertible into
common stock at a lesser conversion price. In addition, holders of the
promissory notes are entitled to warrants, exercisable up to 3 years from
conversion date, to acquire an additional number of shares of common stock
varying from 50% of the common stock acquired upon conversion and up to 300% of
the common stock acquired upon conversion. These promissory notes are secured by
a lien on substantially all of the assets of the Company.

In connection with the promissory notes for
$861,000, and any funds raised in the future, the Company is liable for a fee to
its placement agent equal to 10% of the gross proceeds. Accordingly, $86,100 has
been recorded as deferred financing costs with respect to funds raised to date.

EITF 98-5 and EITF 00-27 requires recognition
of a conversion feature that is in-the-money at issuance as additional paid in
capital, measured by allocating a portion of the proceeds equal to the intrinsic
value of that feature. Accordingly, interest expense of $861,000 has been
recognized and additional paid in capital has been increased by the same amount.

Subsequent to March 31, 2004 the Company
issued an aggregate of $300,000 of unsecured promissory notes under terms and
conditions substantially the same as those described above, but such promissory
notes are unsecured and have an interest rate of 5%. The fees payable to our
placement agent in connection with these promissory notes are equal to 10% of
the gross proceeds received and are payable at the election of the placement
agent in cash or units consisting of one share of common stock and a warrant to
purchase an additional share of common stock at a stipulated value of $0.15 per
unit of common stock, together with warrants exercisable at $0.15 per share for
a number of shares of common stock equal to 10% of the shares of common stock
issued upon the conversion of such promissory notes.

NOTE 4 LICENSING RIGHTS

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 successfully 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 5. LITIGATION LIABILITY

8

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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. BANK INDEBTEDNESS

The Company has available credit facilities up to a maximum of
$23,000 ($30,000 Canadian), which bears interest at the bank's prime rate plus
3.5% and is guaranteed by a shareholder/director.

NOTE 7. RESTATEMENT

EITF 98-5 and EITF 00-27 requires recognition
of a conversion feature that is in-the-money at issuance as additional paid in
capital, measured by allocating a portion of the proceeds equal to the intrinsic
value of that feature including the value of the warrants, which was applicable
in this instance. The warrants were valued using the Black-Scholes Pricing
Method. The debt discount on the beneficial conversion has been limited to the
proceeds received and has been amortized over the term of the convertible debt.

Net loss for the six month period ended March
31, 2004 as previously reported was $671,368 and for the three month period
ended March 31, 2004 was $407,632. The additional expense related to the
issuance of senior convertible debt and detachable warrants totalled $861,000.
Net loss as restated for the six month period ended March 31, 2004 is now
$1,532,368 and for the three month period ended March 31, 2004 is now
$1,268,632. There is no change in Shareholders' deficiency nor is there any
affect on cash position as a result of this restatement.

9

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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-A. 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 G.I. 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 (August 7,
1997) have been, in addition to research and development, establishing our
offices and research facilities, recruiting personnel, filing patent
applications, developing a business strategy and raising capital. During 2003
and the first half of fiscal 2004 we have also started to focus on
commercialization of our products and to that extent Flexogan product sales have
started in the Canadian market.

We acquired the world-wide exclusive commercialization rights
of VT-1 from Select Therapeutics Inc. in January, 2003. Given our recent retail
launching of Flexogan, and our new focus on drug delivery products and plans to
evolve into a sales and marketing organization, we have determined that VT1 no
longer meets our strategic objective and the VT1 program has been terminated.
Resultingly, the VT-1 commercialization rights have been written down to a
nominal value.

We launched Flexogan, a series of
over-the-counter topical analgesics, in Canada during August, 2003. We expect
Flexogan to incur significant marketing expenditures in 2004 in order to promote
national sales and gain market share in Canada as well as a pre-launch in U.S.

We signed a licensing agreement with Andromaco Inc. in August,
2003 for the commercialization of our lead pharmaceutical products "Indaflex"
in Mexico. The Company will receive royalties from product sales. We do not
expect marketing approval from the Mexican health authority until at least the
fourth quarter of 2004. In order to market and sell Indaflex products in the US
and Canada, we will require successful completion of human and clinical trials
as well as FDA approval. We expect these trials to commence during the fourth
quarter ending September 30, 2004.

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

10

---



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.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004
AS RESTATED, AS COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2003

The Company incurred a net loss, as restated, of $1,532,368
for the six month period ended March 31, 2004 as compared to a loss of $810,125
incurred for the same period a year ago, an increase of $722,243 or
approximately 89%. Included in the net loss, as restated, was a one time write
down of VT-1 licensing rights in the amount of $229,999. Also included in the
net loss, as restated, was interest expense in the amount of $861,000 related to
the issuance of convertible debt.

The Company has generated noticeable gross margins for the
first time, derived from the sale of Flexogan products. Gross margins of
approximately 60% or $216,425 were generated from sales of $362,610 for the six
month period ended March 31, 2004. Loss from Operations was $441,369 for the six
month period ended March 31, 2004 as compared to Loss from Operations of
$810,127 incurred for the same period a year ago, a reduction of $368,758 or
approximately 45%.

Sales

Sales for the six months ended March 31, 2004 were $362,610 as
compared to $2,498 generated for the same period a year ago, an increase of
$360,112. During the first half of our fiscal year we placed our Flexogan
products with three national retail chains including Shoppers Drug Mart Ltd.,
and Loblaws Companies Ltd. With significant marketing expenditures commencing
during our second quarter ended March 31, 2004 we anticipate additional national
and regional retailers to start stocking Flexogan.

Gross Margin

Cost of Sales for the six month period ended March 31, 2004
was $146,185 as compared to $2,243 incurred for the same period a year ago.
Resulting Gross Margin increased to $216,425 or approximately 60% of sales as
compared to Gross Margin of $255 or approximately 10% of sales for the same
period a year ago. Deducted from Gross Sales for the six month period ended
March 31, 2004 were discounts provided to certain customers related to the
initial stocking of Flexogan products. We do not expect to continue providing
these discounts in the future for existing customers, but rather, we expect to
provide discounts in the future only in connection with the establishment of
initial relationships with certain new strategic customers.

Sales and Marketing, General and Administrative Expenses

11

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General and administrative expenses consist primarily of
personnel costs related to general management functions, finance, marketing,
inventory logistics, office overheads, as well as insurance costs and
professional fees related to legal, audit and tax matters. Sales and Marketing,
General and Administrative expenses for the six months ended March 31, 2004 were
$597,987 as compared to $642,962 incurred for the same period a year ago, a
decrease of $44,975 or approximately 7%.

Approximately $287,000 or 48% of these expenses incurred for
the six months ended March 31, 2004 related to sales and marketing of Flexogan
in Canada. We expect to continue with sales and marketing expenditures in order
to establish brand awareness, and increase sales of Flexogan, as well as
introduction of new products in the future.

The remainder of these expenses incurred for the six month
period ended March 31, 2004 related to legal expenses, professional fees,
finance charges, and other office overheads. We expect that general and
administrative expense will increase moderately over the near term.

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 six months ended
March 31, 2004 were $40,245 as compared to $155,288 incurred for the same period
a year ago, a decrease of $115,043 or approximately 74%. The decrease results
primarily from a reduction of science staff costs when compared to the same
period a year ago.

We expect to increase research and development expenses over
the remainder of 2004 related primarily to Indaflex development and testing.

Loss from Operations

Loss from operations were $441,369 for the six months ended
March 31, 2004 as compared to a loss of $810,125 incurred for the same period a
year ago, a decrease of $368,756 or approximately 45%. The reduction in our
operating loss results primarily from the increase in gross margins generated
when compared to the same period a year ago. Gross margin of $216,425 was
generated for the six months ended March 31, 2004 as compared to $255 generated
in the same period a year ago. We will continue to incur operating losses in the
future as the expenditures for new product research and development as well as
sales and marketing to establish new and to promote existing brands will
continue to exceed gross margins generated by product sales.

12

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Interest Expense

We issued $861,000 in convertible debt, convertible into
common stock and warrants to purchase common stock, during the three month
period ending March 31, 2004. At the time of issuance the trading price of our
stock exceeded the conversion price. This in turn required interest expense to
be reflected in the amount of $861,000 with no comparable expense in the same
period a year ago.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2004 the Company had a working capital
deficiency of $986,737 compared to $556,784 as at September 30, 2003. The bulk
of the deficiency relates to promissory notes issued and outstanding totalling
$1,119,551.

Since inception, we have financed operations principally from
the sale of Common Stock and issuance of promissory notes and expect to continue
this practice to fund our ongoing activities.

We currently do not have sufficient resources
to complete the commercialization of any of our proposed products or to carry
out our 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. Any additional equity
financings may 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. establishment of our own pilot scale
  manufacturing and marketing capabilities or a search for 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;
4. the time and cost necessary to establish our
  own sales and marketing capabilities or to seek 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 would have a material adverse
effect on the Company. We currently have no capital commitments other than the
payment of rent on our facilities lease.

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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
commercialized our first product, including 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 has re-evaluated
the effectiveness of the Company's disclosure controls and procedures as of
March 31, 2004. Despite the restatement of financial information reported in
this amended quarterly report, the Company's Chief Executive Officer and Chief
Financial 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

No shares were issued during the three months ended March 31,
2004.

The Company issued senior secured convertible
promissory notes to 10 investors during February and March, 2004 in the
aggregate amount of $861,000. These promissory notes are subject to voluntary
conversion into common stock at any time at a price of $0.15 (fifteen cents) per
share. Under certain circumstances the promissory notes are convertible into
common stock at a lesser conversion price. In addition, holders of the
promissory notes are entitled to warrants, exercisable up to 3 years from
conversion date, to acquire an additional number of shares of common stock
varying from 50% of the common stock acquired upon conversion and up to 300% of
the common stock acquired upon conversion. These promissory notes are secured by
a lien on substantially all of the assets of the Company. In connection with
these promissory notes, the Company is liable for a fee to its placement agent
equal to 10% of the gross proceeds. These securities were sold in reliance on
the exemption provided by Rules 506 of Regulation D under the Securities Act of
1933.

Between March 31, 2004 and April 6, 2004, the
Company issued an aggregate of $300,000 of unsecured promissory notes to 3
investors under terms and conditions substantially the same as those described
above, but such promissory notes are unsecured and have an interest rate of 5%.
The fees payable to our placement agent in connection with these promissory
notes are equal to 10% of the gross proceeds received and are payable at the
election of the placement agent in cash or units consisting of one share of
common stock and a warrant to purchase an additional share of common stock at a
stipulated value of $0.15 per unit of common stock, together with warrants
exercisable at $0.15 per share for a number of shares of common stock equal to
10% of the shares of common stock issued upon the conversion of such promissory
notes. These securities were sold in reliance on the exemption provided by Rules
506 of Regulation D under the Securities Act of 1933.

Pursuant to a letter agreement dated February
2, 2004 for the provision to the Company of financial advisory and business
development services, the Company agreed to issue to one investor a warrant to
purchase 3,000,000 unregistered shares of the outstanding stock of the Company,
exercisable at

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$0.05 per share. Such warrant will not be exercisable before
February 2, 2005 and is being issued in reliance of Section 4(2) on the
Securities Act of 1933.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

At the Company's Annual Meeting of Stockholders held on March
31, 2004 the stockholders of the Company elected the following persons as
directors of the Company to serve until the next annual meeting of stockholders
and until their successors are duly elected and qualified: Michael Lee, Dr.
David Milroy, and Dr. Ford Moore. The results of the voting were as follows:

|                 | Votes For  | Votes Withheld
|---------------- | ---------- | --------------
|Michael Lee      | 10,475,234 | NIL           
|Dr. David Milroy | 10,475,234 | NIL           
|Dr. Ford Moore   | 10,475,234 | NIL           

Also, at the Annual Meeting of Stockholders, the stockholders ratified the
Board's selection of Schwartz Levitsky Feldman LLP as the Company's independent
auditors for the fiscal year ending September 30, 2004 with 10,338,634 votes for
ratification, nil against, and 136,600 abstaining.

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS.

> 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) REPORTS ON FORM 8-K

On March 16, 2004, we filed a Current Report on Form 8-K
regarding completion of a private placement of senior convertible promissory
notes.

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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: May 18, 2005

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


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