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

                                  FORM 10-QSB/A
(Mark One)

[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 For the quarterly period ended June 30, 2004

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the
      transition period from _________________ to _________________

                        Commission file number 333-83152

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

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

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

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

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

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

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

<PAGE>

                                EXPLANATORY NOTE

      Inyx, Inc. (the "Company") is filing this Amended Form 10-QSB (the
"Amended Form 10-QSB/A") to restate Items 1 and 2 of Part I contained in the
Company's Quarterly Report on Form 10-QSB (the "Original Form 10-QSB") for the
second quarter ended June 30, 2004 as originally filed with the Securities and
Exchange Commission on August 16, 2004. This Amended Form 10-QSB/A reflects
restatements of the previously published unaudited consolidated financial
statements as of June 30, 2004 and related changes in the Management's
Discussion and Analysis of Financial Condition and Results of Operations
resulting from the matters discussed below.

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

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

<PAGE>


                                   INYX, INC.

ITEM 1: Financial Statements of Inyx, Inc.
------------------------------------------

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

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

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

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

      Notes to Consolidated Financial Statements ..........................  F-6


                                      F-1
<PAGE>

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

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

Property, plant and equipment, net                                  4,991         5,183
Deferred financing costs, net                                         824           860
Other assets                                                           45            45
Deferred tax asset                                                  1,687         1,294
Purchased intangible assets, net                                    1,656         1,739
                                                                 --------      --------
                                                                    9,203         9,121
                                                                 --------      --------

          Total assets                                           $ 15,584      $ 15,490
                                                                 ========      ========

                 Liabilities and Stockholders' Equity (Deficit)
                 ----------------------------------------------

Current liabilities:
    Bank overdraft                                               $     51      $     --
    Borrowings under revolving line of credit                       5,571         2,375
    Accounts payable                                                3,374         2,178
    Accrued expenses and other current liabilities                    924           996
    Current portion of long-term debt                               1,063         1,483
                                                                 --------      --------
          Total current liabilities                                10,983         7,032
                                                                 --------      --------
Long term debt, net of current portion                              7,568         6,617
                                                                 --------      --------
          Total liabilities                                        18,551        13,649
                                                                 --------      --------

Commitments and contingencies

Stockholders' equity (deficit):
    Preferred stock - $0.001 par value, 10,000,000 shares
      authorized -0- shares issued and outstanding                     --            --
    Common stock - $0.001 par value, 150,000,000 shares
      authorized, 28,790,000 shares issued and outstanding
      at June 30, 2004; 28,525,000 shares issued
      and outstanding at December 31, 2003                             29            29
    Additional paid-in capital                                     17,228        15,599
    Accumulated deficit                                           (19,462)      (13,392)
    Subscriptions receivable                                         (393)         (100)
    Accumulated other comprehensive loss -
       foreign currency translation adjustment                       (369)         (295)
                                                                 --------      --------
          Total stockholders' equity (deficit)                     (2,967)        1,841
                                                                 --------      --------

          Total liabilities and stockholders' equity (deficit)   $ 15,584      $ 15,490
                                                                 ========      ========
</TABLE>

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


                                      F-2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                Successor                           Predecessor
                                                        ---------------------------------------------------------   -----------
                                                        For the Six   For the Period    For the        For the      For the Period
                                                        Month Period  from March 7,   Three Month    Three Month    from January 1,
                                                           Ended      2003 through    Period Ended   Period Ended   2003 through
                                                        June 30,2004  June 30, 2003  June 30, 2004  June 30, 2003   March 6, 2003
                                                        ------------   ------------   ------------   ------------   ------------
                                                                  Restated                     Restated
                                                                 (Unaudited)                 (Unaudited)
                                                                 -----------                 -----------
<S>                                                     <C>            <C>            <C>            <C>            <C>
Net revenues                                            $      7,300   $      5,068   $      2,774   $      5,068   $      2,396
Cost of sales                                                  6,821          3,933          2,910          3,933          1,876
                                                        ------------   ------------   ------------   ------------   ------------
    Gross profit (loss)                                          479          1,135           (136)         1,135            520

Operating expenses:
    Research and development                                     399             --            112             --             --
    General and administrative                                 4,299          5,901          2,195          5,876            568
    Selling                                                      160             96             76             96             51
    Depreciation and amortization                                276            128            124            128             75
    Amortization of intangible assets                             84             55             42             55             --
                                                        ------------   ------------   ------------   ------------   ------------
               Total operating expenses                        5,218          6,180          2,549          6,155            694
                                                        ------------   ------------   ------------   ------------   ------------

Loss from continuing operations before interest and
  financing costs, income tax
  benefit and discontinued operations                         (4,739)        (5,045)        (2,685)        (5,020)          (174)

Interest and financing costs                                   1,724            159            698            159            176
                                                        ------------   ------------   ------------   ------------   ------------

Loss before income tax benefit and
 discontinued operations                                      (6,463)        (5,204)        (3,383)        (5,179)          (350)

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

Loss before discontinued operations                           (6,070)        (4,916)        (3,383)        (4,891)          (350)

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

Net loss                                                $     (6,070)  $     (4,916)  $     (3,383)  $     (4,891)  $       (908)
                                                        ============   ============   ============   ============   ============

Basic and fully diluted loss per share
    Loss before discontinued operations                 $      (0.21)  $      (0.25)  $      (0.12)  $      (0.25)            --

    Loss from discontinued operations,
       net of income taxes                                        --             --             --             --             --
                                                        ------------   ------------   ------------   ------------   ------------
                                                        $      (0.21)  $      (0.25)  $      (0.12)  $      (0.25)            --
                                                        ============   ============   ============   ============   ============
Weighted-average number of shares outstanding
  used in computing per share amounts                     28,747,582     19,322,099     28,747,582     19,322,099             --
</TABLE>

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


                                      F-3
<PAGE>

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


<TABLE>
<CAPTION>
                                                                                                 ACCUMU-
                                                                                                  LATED
                                                                                                  OTHER
                                                        COMMON STOCK     ADDITIONAL   STOCK       COMPRE-    ACCUMU-
                                                    NUMBER OF             PAID-IN  SUBSCRIPTION   HENSIVE     LATED
                                                     SHARES   PAR VALUE   CAPITAL   RECEIVABLE     LOSS      DEFICIT      TOTAL
                                                   ---------- ---------- ---------- ----------  ----------  ----------  ----------
<S>                                                <C>        <C>        <C>        <C>         <C>         <C>         <C>
Predecessor
Balances at January 1, 2003                             5,000 $    8,022 $       -- $       --  $   (1,503) $  (30,464) $  (23,945)
Net Loss for the period                                    --         --         --         --          --        (908)       (908)
Foreign currency translation adjustment                    --         --         --         --        (102)         --        (102)

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


SUCCESSOR
Balances at March 7, 2003                              16,000 $       16 $    2,081 $       --  $       --  $       --  $    2,097
Issuance of stock for reverse acquisition               5,000          5         18         --          --          --          23
Issuance of stock for finders fees (April 17)           2,450          2      1,302         --          --          --       1,304
Issuance of stock for services (April 21)               1,500          2        799         --          --          --         801
Issuance of stock options                                  --         --        747         --          --          --         747
Issuance of warrants for services                          --         --        305         --          --          --         305
Foreign currency translation adjustment                    --         --         --         --         (62)         --         (62)
Net loss for the period                                    --         --         --         --          --      (4,916)     (4,916)

                                                   ---------- ---------- ---------- ----------  ----------  ----------  ----------
Balances at June 30, 2003                              24,950         25      5,252         --         (62)     (4,916)        299
                                                   ---------- ---------- ---------- ----------  ----------  ----------  ----------

Issuance of stock on August 22 and November 4, net
    of offering costs of $11,800 and $310,702 resp      3,500          4      3,174      3,178
Issuance of stock for options exercised (Nov 17)           75         --         90         --          --          --          90
Issuance of stock options                                  --         --        766         --          --          --         766
Issuance of warrants for services                          --         --        956         --          --          --         956
Issuance of warrants with convertible debt and
  related beneficial conversion feature                    --         --      5,361         --          --          --       5,361
Subscriptions receivable                                   --         --         --       (100)         --          --        (100)
Foreign currency translation adjustment                    --         --         --         --        (233)         --        (233)
Net loss for the period                                    --         --         --         --          --      (8,476)     (8,476)

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

Issuance of stock for options exercised in
January 2004 (net of shares returned to treasury)         265         --        290         --          --          --         290
Issuance of stock options                                  --         --        162         --          --          --         162
Subscription receivable                                    --         --         --       (293)         --          --        (293)
Isuance of warrants for consulting fees                    --         --         50         --          --          --          50
Issuance of warrants with convertible debt and
  related beneficial conversion feature                    --         --      1,127         --          --          --       1,127
Foreign currency translation adjustment                    --         --         --         --         (74)         --         (74)
Net loss for the period                                    --         --         --         --          --      (6,070)     (6,070)

                                                   ---------- ---------- ---------- ----------  ----------  ----------  ----------
Balances at June 30, 2004                              28,790 $       29 $   17,228 $     (393) $     (369) $  (19,462) $   (2,967)
                                                   ========== ========== ========== ==========  ==========  ==========  ==========
</TABLE>

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


                                      F-4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                    SUCCESSOR                         PREDECESSOR
                                                               -----------------------------------------------------  ------------

                                                                For the       For the       For the      For the
                                                               Six Month    Period From   Three Month   Three Month     For the
                                                                Period        March 7      Period         Period      Period from
                                                                 Ended      2003 through    Ended          Ended     January 1, 2003
                                                                June 30,      June 30,     June 30,       June 30,      through
                                                                  2004          2003          2004          2003      March 6, 2003
                                                              ------------  ------------  ------------  ------------  ------------
                                                                      Restated                    Restated
                                                                     (Unaudited)                 (Unaudited)
                                                                     -----------                 -----------
<S>                                                           <C>           <C>           <C>           <C>           <C>
Cash flows from operating activities:
   Net loss for the period                                    $     (6,070) $     (4,916) $     (3,383) $     (4,891) $       (908)
     Add: loss from discontinued operations                             --            --            --            --           558
                                                              ------------  ------------  ------------  ------------  ------------
     Loss from continuing operations                                (6,070)       (4,916)       (3,383)       (4,891)         (350)
   Adjustments to reconcile net loss to net cash
     provided by (used in) operating activities:
     Depreciation and amortization                                     276           128           124           128            75
     Amortization of financing costs and debt discount               1,231            --           407            --            --
     Amortization of intangible assets                                  84            55            42            55            --
     Deferred tax asset                                               (393)         (288)           --          (288)           --
     Issuance of stock for services                                     --         2,105            --         2,105            --
     Reserve for inventory obsolescence                               (217)           --          (603)           --            --
     Provision for bad debts                                            53            --            52            --            --
     Stock option compensation                                         161           747            95           747            --
     Warrants issued for financing  fees                                --            --            --            --            --
     Warrants issued for consulting fees                                49           305            49           305            --
     Issuance of shares in recapitalization                             --            23            --            23            --
     Issuance of shares for exercise of stock options                  290            --            --            --            --
     Subscription receivable                                          (293)           --            --            --            --
   Changes in assets and liabilities
     Decrease (increase) in accounts receivables                     1,867        (3,127)        1,763        (3,127)         (215)
     Decrease in inventory                                             206           474           418           474           385
     Increase (decrease) in prepaid and other current assets        (2,681)          (72)       (1,373)          (72)          267
     Increase in deferred financing costs and debt discount           (126)           --           (19)           --            --
     Increase in bank overdraft                                         51            --            51            --            --
     Increase in accounts payable and accrued liabilities            1,399         1,632         1,265         1,632           640
     Decrease(increase) in deferred revenues                          (276)          274           (85)          274            --
     Increase in liabilities subject to compromise                      --            --            --            --           353
                                                              ------------  ------------  ------------  ------------  ------------

         Net cash (used in) provided by continuing operations       (4,389)       (2,660)       (1,197)       (2,635)        1,155
                                                              ------------  ------------  ------------  ------------  ------------

   Net cash provided by (used in) discontinued operations               --            50            --           (10)         (617)

                                                              ------------  ------------  ------------  ------------  ------------
         Net cash (used in) provided by operating activities        (4,389)       (2,610)       (1,197)       (2,645)          538
                                                              ------------  ------------  ------------  ------------  ------------

Cash flows from investing activities:
   Purchase of property, plant and equipment                           (84)           (5)          (26)           (5)          (18)
                                                              ------------  ------------  ------------  ------------  ------------

         Net cash  used in investing activities                        (84)           (5)          (26)           (5)          (18)
                                                              ------------  ------------  ------------  ------------  ------------

Cash flows from financing activities:
   Borrowings under revolving line of credit, net                     3363         2,241           157         2,241          (522)
   Advances by stockholder                                              --            50            --            50            --
   Repayment to stockholder                                             --           (60)           --            --            --
   Proceeds from issuance of long term debt                            500            19           500            19            --
   Repayment of long term debt                                          --            --            --            --           104
   Repayment of capital lease obligation                               (76)           --           (42)           --            --
                                                              ------------  ------------  ------------  ------------  ------------

         Net cash provided by (used in) financing activities         3,787         2,250           615         2,310          (418)
                                                              ------------  ------------  ------------  ------------  ------------

Effect of foreign exchange rate changes
   on cash and cash equivalents                                        (74)          (62)         (109)          (62)         (102)
                                                              ------------  ------------  ------------  ------------  ------------
Change in cash                                                        (760)         (427)         (717)         (402)           --

Cash at beginning of period                                            796           458           753           433            --
                                                              ------------  ------------  ------------  ------------  ------------

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

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


                                      F-5
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          (TABULAR AMOUNTS ARE EXPRESSED IN THOUSANDS OF U.S. DOLLARS)

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

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

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

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

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

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

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

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

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

      a)    Consolidated Financial Statements

      The accompanying consolidated financial statements include the accounts of
Inyx and its wholly  owned  subsidiaries:  Inyx  Pharma  Limited,  an  operating
company  formed  under the laws of  England  and Wales;  Inyx  Canada,  Inc.,  a
federally  incorporated Canadian  corporation;  and Inyx Realty, Inc., a Florida
corporation  through the date of  disposition  of April 14,  2004.  On April 14,
2004, Inyx Realty,  Inc. was  transferred to a related party. As  consideration,
the related entity assumed all of the liabilities of Inyx Realty, Inc. including
a commitment of a ten year office space lease of approximately $1.5 million.


                                      F-6
<PAGE>

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

      b)    Unaudited Consolidated Interim Financial Statements

      The accompanying  consolidated  financial statements for the six and three
months ended June 30,  2004,  for the period from March 7, 2003 through June 30,
2003 and for the three month  period ended June 30, 2003 are  unaudited  but, in
the opinion of  management,  include all necessary  adjustments  (consisting  of
normal,  recurring in nature) for a fair presentation of the financial position,
results of operations and cash flow for the interim periods  presented.  Interim
results are not  necessarily  indicative of results for a full year.  Therefore,
the  results  of  operations  for the six  months  ended  June 30,  2004 are not
necessarily indicative of operating results to be expected for a full year.

      c)    Use of Estimates

      The  consolidated  financial  statements  are prepared in conformity  with
accounting  principles  generally accepted in the United States of America.  The
preparation of consolidated  financial statements,  in conformity with generally
accepted  accounting  principles,  requires  management  to make  estimates  and
assumptions.  Those  estimates and  assumptions  affect the reported  amounts of
assets and liabilities,  the disclosure of contingent  assets and liabilities at
the date of the financial  statements,  and the reported amounts of revenues and
expenses during the reporting period.  The more significant  estimates are those
used by  management to measure the  recoverability  of  intangible  assets,  the
allowances for doubtful accounts and inventory reserves and the value of shares,
options  or  warrants  issued  for  services  or in  connection  with  financing
transactions. Actual results could differ from those estimates.

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

      d)    Accounts Receivable

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

      e)    Inventory

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

      f) Property, Plant and Equipment

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

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

      g)    Purchased Intangible assets

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


                                      F-7
<PAGE>

      h)    Deferred Financing Costs

      Costs directly  associated  with obtaining  financing are  capitalized and
amortized on a  straight-line  basis over the  estimated  life of the  financing
arrangement.  The  amortization  of deferred  financing  costs is  classified as
interest expense in the accompanying consolidated statements of operations.

      i)    Business Combinations

      The  Company  accounts  for  business   combinations  in  accordance  with
Statement  of Financial  Accounting  Standard  No. 141  "Business  Combinations"
("SFAS No.141").  SFAS No.141 requires that the purchase method of accounting be
used for all  business  combinations.  SFAS No.141  requires  that  goodwill and
intangible  assets with  indefinite  useful  lives no longer be  amortized,  but
instead be tested for impairment at least  annually by comparing  carrying value
to the respective  fair value in accordance  with the provisions of Statement of
Financial  Accounting  Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS No.142").  This  pronouncement  also requires that intangible assets with
estimable useful lives be amortized over their respective estimated useful lives
to their estimated residual values, and reviewed for impairment by assessing the
recoverability  of the carrying value, The Company has adopted the provisions of
SFAS 141 and SFAS 142 as of January 1, 2003.

      j)    Impairment of Long Lived Assets and Intangible Assets

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

      k)    Financial Instruments

      Financial  instruments  consist  of cash,  accounts  receivable,  accounts
payable, accrued liabilities,  borrowings under the revolving line of credit and
loans payable.  Non-derivative  financial instruments include letters of credit,
commitments  to extend credit and  guarantees of debt.  There were no derivative
financial  instruments for any of the periods presented.  The carrying values of
these financial instruments  approximated their fair market value as of June 30,
2004 and as of December 31, 2003.

      l)    Revenue Recognition

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

      As of June 30, 2004 and December 31, 2003,  deferred  revenues amounted to
$73,000 and  $351,000,  respectively  and are  included in accrued  expenses and
other liabilities.

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

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

      m)    Convertible Debt

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


                                      F-8
<PAGE>

of the  warrants  has  been  recorded  as a  discount  against  the  debt and is
amortized over the term of the debt.

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

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

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

      n)    Net Loss per Share

      The Company  follows the  guidelines of Statement of Financial  Accounting
Standards No. 128,  "Earnings Per Share" ("SFAS No.128") in calculating its loss
per share.  SFAS No.128 states basic and diluted earnings per share are based on
the weighted average number of shares of common stock and potential common stock
outstanding  during the period.  Potential common stock equivalents for purposes
of determining  diluted earnings per share include the effects of dilutive stock
options, warrants and convertible securities.  The effect on number of shares of
such  potential  common stock  equivalents  is computed using the treasury stock
method or the if-converted  method, as applicable.  The Company has excluded all
outstanding  options and warrants as well as shares to be issued upon conversion
of convertible  debt from the  calculation of diluted net loss per share because
these  securities  are  anti-dilutive.  Accordingly,  as of June 30,  2004,  and
December 31, 2003,  the Company had common stock  equivalents  of  approximately
10,547,000, and 10,345,000 shares respectively, related to options and warrants;
and  approximately  15,500,000 and  10,880,952  shares  respectively  related to
shares to be issued upon the conversion of the convertible debt.

      o)    Stock Based Compensation

      On May 1, 2003, the Company  adopted a Stock Option Plan that provides for
the granting of incentive  stock options and non qualified stock options for the
benefit of  employees,  officers,  consultants,  directors  and  persons who the
Company believes may have made a valuable contribution to the Company. The total
number of shares that may be issued  under the plan  amounts to  5,000,000.  The
exercise  price per share must be at least equal to the fair market price at the
time of grant.

      The  Company  applies  the fair value  method of  Statement  of  Financial
Accounting  Standards No. 123,  "Accounting for Stock Based Compensation" ("SFAS
No. 123") in accounting  for its stock option plan.  This  standard  states that
compensation  cost is measured at the grant date based on the value of the award
and is recognized over the service period,  which is usually the vesting period.
The fair value of each option  granted is  estimated  on the date of grant using
the  Black-Scholes  option pricing  model.  The fair value of all vested options
granted has been charged to salaries,  wages,  and benefits in  accordance  with
SFAS No. 123.

      p)    Concentration of Credit Risk

      The Company  obtains  detailed credit  evaluations of customers  generally
without  requiring  collateral,  and  establishes  credit  limits  as  required.
Exposure to losses on receivables is  principally  dependent on each  customer's
financial  condition.  The Company  monitors its exposure for credit risk losses
and maintains an allowance for anticipated losses.

      For the six and three months ended June 30, 2004, the period from March 7,
2003  through  June 30,  2003 and the three  months  ended  June 30,  2003,  the
Company's  three  largest  customers  accounted for 52%, 40%, 44% and 40% of net
revenues respectively.  As of June 30, 2004 and December 31, 2003, the Company's
three  largest  customers   accounted  for  53%  and  49%  of  net  receivables,
respectively.  The loss of any of these  customers  may have a material  adverse
effect on the operations of the Company.

      q)    Income Taxes

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


                                      F-9
<PAGE>

      r)    Translation of Foreign Currency

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

      s)    Research and development

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

      t)    Recently Issued Accounting Standards

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

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

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

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


                                      F-10
<PAGE>

      u)    Reclassifications

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

NOTE 3:  RESTATEMENT OF FINANCIAL STATEMENT
-------  ----------------------------------

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

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

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

<TABLE>
<CAPTION>
                                                                         Adjustment to
                                                               As filed      Restate      Restated
                                                               --------      -------      --------
                                                        (Expressed in thousands, except per share amounts)
<S>                                                           <C>          <C>          <C>
Balance sheet data as of June 30, 2004
Deferred financing costs, net (b)                             $  1,247     $   (423)    $    824
Other assets (b)                                                    --           45           45
Purchased intangible assets, net (c)                                --        1,656        1,656
Total assets                                                    14,306        1,278       15,584
Borrowings under revolving line of credit, net of discount (a)   4,496        1,075        5,571
Long-term debt, net of debt discount (a)                        10,283        2,715        7,568
Accumulated deficit (a), (c)                                   (17,651)      (1,811)     (19,462)
Additional paid-in capital                                      12,499        4,729       17,228
Total liabilities and stockholders' equity(deficit)(a)(c)       (5,885)       2,918       (2,967)

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

                                                                         Adjustment to
                                                               As filed      Restate      Restated
                                                               --------      -------      --------
                                                        (Expressed in thousands, except per share amounts)
Statement of operations data for the six month
  period ended June 30, 2004
General and administrative expenses (e)                       $  4,102     $    197     $  4,299
Amortization of intangible assets (c)                               --           84           84
Depreciation and amortization (e-iii)                              476         (200)         276
Loss from continuing operations before interest and
  financing costs, reorganization items, income
  tax benefit and discontinued operations (a), (c)              (4,658)         (81)      (4,739)
Other expenses (c), (e)                                            690         (690)          --
Interest and financing costs  (a), (c), (e)                         --        1,724        1,724
Net loss (a), (c)                                               (4,955)      (1,115)      (6,070)
Basic and fully diluted loss per share                           (0.17)       (0.04)       (0.21)

Statement of operations data for the period from
  March 7, 2003 through June 30, 2003
General and administrative expenses (e)                       $  2,745     $  3,156     $  5,901
Amortization of intangible assets (c)                               --           55           55
Loss from continuing operations before interest
  and financing costs, reorganization items,
  income tax benefit and discontinued operations (a), (c)       (1,834)      (3,211)      (5,045)
Other expenses (c), (e)                                          5,168       (5,168)          --
Interest and financing costs  (a), (c), (e)                         --          159          159
Discontinued operations (e-iii)                                   (25)          25           --
Net loss (a), (c)                                               (6,739)       1,823       (4,916)
Basic and fully diluted loss per share                           (0.35)        0.10        (0.25)

                                                                         Adjustment to
                                                               As filed      Restate      Restated
                                                               --------      -------      --------
                                                        (Expressed in thousands, except per share amounts)
Statement of operations for the three month
  period ended June 30, 2004
General and administrative expenses (e)                       $  1,998     $    197     $  2,195
Amortization of intangible assets (c)                               --           42           42
Depreciation and amortization (e-iii)                              242         (118)         124
Loss from continuing operations before interest and
  financing costs, reorganization items, income
  tax benefit and discontinued operations (a), (c)              (2,564)        (121)      (2,685)
Other expenses (c), (e)                                            470         (470)          --
Interest and financing costs  (a), (c), (e)                         --          698          698
Net loss (a), (c)                                               (3,034)        (349)      (3,383)
Basic and fully diluted loss per share                           (0.11)       (0.01)       (0.12)

Statement of operations data for the three month
  period ended June 30, 2003
General and administrative expenses (e)                       $  2,745     $  3,131     $  5,876
Amortization of intangible assets (c)                               --           55           55
Loss from continuing operations before interest and
  financing costs, reorganization items, income
  tax benefit and discontinued operations (a), (c)              (1,834)      (3,186)      (5,020)
Other expenses (c), (e)                                          5,168       (5,168)          --
Interest and financing costs  (a), (c), (e)                         --          159          159
Net loss (a), (c)                                               (6,714)       1,823       (4,891)
Basic and fully diluted loss per share                           (0.30)        0.05        (0.25)
</TABLE>

      As a consequence of the changes made to the consolidated balance sheet and
statement of operations as noted above, the consolidated statement of cash flows
and  changes  in  stockholders'  equity and other  comprehensive  loss have been
restated, accordingly.


                                      F-11
<PAGE>


      a)    Valuation  of warrants and  beneficial  conversion  feature  ("BCF")
            --------------------------------------------------------------------

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


                                      F-12
<PAGE>

      These corrections increased additional paid-in capital by $4.0 million and
increased  debt  discount by $1.6 million as of December 31, 2003 and  increased
interest and financing  costs by $4.3 million.

      These corrections  increased  additional  paid-in capital by approximately
$4.7 million and increased debt discount by $1.6 million as of June 30, 2004 and
increased  interest  and  financing  costs by $1.7  million  including  interest
relating to amortization of debt discount  amounting to  approximately  $308,000
for the six month period ended June 30, 2004.

      b)    Reclassification of other assets
            --------------------------------

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

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

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

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

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

      In addition,  previously the Company charged approximately $1.2 million of
transaction  related  costs and  approximately  $700,000  of  goodwill  to other
expenses.   These  amounts  have  now  been  reversed  and  capitalized  to  the
acquisition  cost of Miza UK's assets in accordance  with the purchase method of
accounting rather than the reorganization of entities under common control. This
correction  decreased other expenses by approximately $1.9 million.  As a result
net loss for the period from March 7, 2003 through June 30, 2003 was affected by
the same amount. The net adjustment to purchased  intangible assets approximated
$1.6  million  and $1.7  million  as of June 30,  2004 and  December  31,  2003,
respectively.  This correction also increased  amortization of intangible assets
by $84,000 and $42,000 for the six and three month  periods ended June 30, 2004,
respectively  and by $55,000 for the period from March 7, 2003  through June 30,
2003 and three month period ended June 30, 2003 in the accompanying consolidated
statements of operations.

      d)    Additional paid-in capital

      At June 30, 2004 and  December 31, 2003,  additional  paid-in  capital was
increased  by net  amount  of  approximately  $4.7  million  and  $4.0  million,
respectively,  to reflect the net  adjustment  relating to the correction of the
accounting  for the beneficial  conversion  feature of the Laurus Funds debt and
respective  warrants as  detailed  above in Note 3(a).  In  addition  management
determined that retained  earnings included  approximately  $196,000 relating to
accumulated  deficit of the thoroughbred  horse  operations,  this amount should
instead be  classified  as  additional  paid-in  capital,  therefore the Company
corrected the classification accordingly.


                                      F-13
<PAGE>

      e)    Other Reclassifications

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

            i.    Management has evaluated the nature of the expenses previously
                  classified as other expenses in the consolidated  statement of
                  operations  and  determined  that  although  certain items are
                  one-time  non-recurring  charges,  these amounts relate to the
                  ongoing   operations   of  the   Company.   Such   amounts  of
                  approximately  $197,000  for the six and three  month  periods
                  ended June 30,  2004 have now been  classified  as general and
                  administrative   expenses  and   approximately   $491,000  and
                  $273,000,  respectively  relating to interest  expense are now
                  presented  as  a  separate  line  item  in  the   accompanying
                  consolidated  statements  of  operations.  For the period from
                  March 7, 2003  through  June 30,  2003 and for the three month
                  period  ended June 30, 2003 such  amounts  were  approximately
                  $3.1  million  relating  to  non-recurring  one time costs and
                  $159,000 relating to interest expense.

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

            iii.  Amortization  expense related to deferred  financing costs had
                  previously been classified with  depreciation and amortization
                  expenses.  The amortization of deferred financing costs should
                  be classified as interest  expense.  Accordingly,  the Company
                  has  corrected  its  consolidated  statement of  operations to
                  reflect  this  change  in  classification.  These  corrections
                  reduced  depreciation and amortization and increased  interest
                  expense by $686,000  and  $353,000 for the six and three month
                  periods ended June 30, 2004.

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

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

NOTE 4:  ACQUISITION AND RECAPITALIZATION TRANSACTION
------   --------------------------------------------

      Acquisition
      -----------

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

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

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


                                      F-14
<PAGE>

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

      Recapitalization Transaction
      ----------------------------

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

NOTE 5:  ACCOUNTS RECEIVABLE, NET
-------  ------------------------

      Accounts receivable consist of the following:

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

    Trade receivables                  $1,777             $3,586
    Less allowance for
     doubtful accounts                   (302)              (191)
                                       ------             ------
                                       $1,475             $3,395
                                       ======             ======


                                      F-15
<PAGE>

      There were no write-offs during the six and three month periods ended June
30,  2004 and the period from March 7, 2003  through  June 30,  2003,  the three
month period ended June 30, 2003 and for the period from January 1, 2003 through
March 6, 2003. Bad debt expense for the six and three months ended June 30, 2004
was $111,000 and $52,000 respectively.

NOTE 6:  INVENTORY, NET
-------  --------------

      Inventory is comprised of the following:

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

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

NOTE 7:  PREPAID EXPENSES AND OTHER CURRENT ASSETS
-------  -----------------------------------------

      Prepaid expenses and other current assets consist of the following:

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

Deposit for equipment and other costs (a)                $1,205      $   --
Prepaid refundable deposit for business development (b)   1,542          --
Prepaid vendor invoices                                     133         347
Prepaid refundable deposit for acquisition candidate         --          71
Deferred legal and consulting fees                          530         152
Prepaid rent and property tax                                60         126
Prepaid insurance                                            13         128
Sales tax receivable, net                                   157         132
Other prepaid expenses                                      130         133
                                                         ------      ------
                                                         $3,770      $1,089
                                                         ======      ======

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


                                      F-16
<PAGE>

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

NOTE 8:  PROPERTY, PLANT AND EQUIPMENT, NET
-------  ----------------------------------

      Property, plant and equipment consist of the following:

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

Land                                                  $   546       $   546
Buildings                                               1,059         1,059
Machinery, equipment and office furniture               3,541         3,524
Computer hardware and software                             86            19
                                                      -------       -------
                                                        5,232         5,148
Less accumulated depreciation                            (588)         (340)
                                                      -------       -------
                                                        4,644         4,808
                                                      -------       -------
Computer hardware and software under capital lease        382           382
Less accumulated amortization                             (35)           (7)
                                                      -------       -------
                                                          347           375

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

      For the six months  ended June 30,  2004 and for the period  from March 7,
2003 through June 30, 2003,  depreciation  of property,  plant and equipment was
approximately  $239,000 and $128,000,  respectively.  Amortization for equipment
under capital leases was  approximately  $28,000 and $0 for the six months ended
June 30,  2004 and for the  period  from  March 7, 2003  through  June 30,  2003
respectively.  For the  period  from  January  1,  2003  through  March 6,  2003
depreciation of property, plant and equipment was approximately $75,000.

NOTE 9:  PURCHASED INTANGIBLE ASSETS, NET
-------  --------------------------------

      Purchased intangible assets consist of the following:

                                          June 30,         December 31, 2003
                                            2004               Restated
                                         Restated
                                        (Unaudited)
                                        -----------            --------

        Customer list (12 year life)       $1,280               $1,280
        Know-how (10 year life)               598                  598
                                           ------               ------
                                            1,878                1,878
        Less accumulated amortization        (222)                (139)
                                           ------               ------
                                           $1,656               $1,739
                                           ======               ======


                                      F-17
<PAGE>

      Purchased   intangible   assets  are  carried  at  cost  less  accumulated
amortization.  For the six months  ended June 30,  2004 and for the period  from
March 7,  2003  through  December  31,  2003  amortization  expense  related  to
intangible assets totaled approximately $84,000 and $139,000,  respectively. The
aggregate  estimated  amortization  expense for intangible assets as of June 30,
2004 for each of the following five years and thereafter is as follows:

        2005                               $  166
        2006                                  166
        2007                                  166
        2008                                  166
        2009                                  166
        Thereafter                            826
                                           ------
        Total                              $1,656
                                           ======

NOTE 10:  DEFERRED FINANCING COSTS, NET
--------  -----------------------------

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

      Deferred financing costs, net consist of the following:

                                         June 30,      December 31,
                                           2004            2003
                                         Restated       Restated
                                        (Unaudited)
                                        -----------     --------

        Deferred financing costs           $1,027       $  900
        Less accumulated amortization        (203)         (40)
                                           ------       ------
                                           $  824       $  860
                                           ======       ======

      For the six  months  ended  June 30,  2004 the  amortization  of  deferred
financing costs approximated $163,000.

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

NOTE 11: BORROWINGS UNDER REVOLVING LINE OF CREDIT
--------------------------------------------------

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

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


                                      F-18
<PAGE>

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

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

      For the six and three months ended June 30, 2004,  interest expense on the
amortization   of  debt  discount  was   approximately   $166,000  and  $92,000,
respectively.  There was no similar  expense  for the period  from March 7, 2003
through June 30, 2003.

      As  of  June  30,  2004,   advances  under  this  facility,   amounted  to
approximately  $6.5  million.  These  advances  are  collateralized  by accounts
receivables based on an agreed upon formula and all other assets of the Company.
The Company has the option of paying interest on these  borrowings in cash or by
issuing common stock.  Interest on these  borrowings is payable monthly at prime
plus 3% with a minimum of 7% on the outstanding balance. As of June 30, 2004 the
total  amount of interest  outstanding  on this note  amounted to  approximately
$156,000. Subsequent to June 30, 2004 the Company paid approximately $118,000 of
the interest and received a deferral from its lender for the  remaining  balance
of accrued  interest until August 2004. The initial  advance under this facility
on  December  30,  2003  amounted  to   approximately   $3.1  million  of  which
approximately $2.6 million was used to repay the Company's factoring arrangement
with another lender.

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

      The total unamortized debt discount at June 30, 2004 and December 31, 2003
amounted to $925,000 and $758,000, respectively.


                                      F-19
<PAGE>

NOTE 12:  LONG TERM DEBT, NET OF CURRENT PORTION
--------  --------------------------------------

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

<TABLE>
<CAPTION>
                                                                                     June 30,
                                                                                       2004     December 31,
                                                                                   (Unaudited)     2003
                                                                                     -------     -------
<S>                                                                                  <C>         <C>
7% convertible term note due to Laurus Funds,  collateralized  by accounts
 receivable  and other  assets of the Company net of discount of $715,000 at
 June 30, 2004, and $822,000 at December 31, 2003 (a)                                $ 4,285     $ 3,678
Uncollateralized 6% convertible promissory note due to customer,(b)                    4,013       4,013
Uncollateralized  7% to 18%    demand  notes  due to a  stockholder  and an
 executive of the Company, principal and interest due on demand                          100         100
Capital lease obligations,  due to financial institutions,  collateralized
 by software and  equipment,  due in monthly  installments  of $14,000
 including interest of 10% to 27%, through 2006 (c)                                      233         309
                                                                                     -------     -------
                                                                                       8,631       8,100
Less current portion                                                                  (1,063)     (1,483)
                                                                                     -------     -------
Debt, net of current portion                                                         $ 7,568     $ 6,617
                                                                                     =======     =======
</TABLE>

      (a) On  October  29,  2003,  the  Company  issued  to  Laurus  Funds  a 7%
convertible  term  note in the  maximum  principal  amount of $4.5  million.  In
connection  with the issuance of the  Convertible  Term Note, the Company issued
1,350,000  warrants to purchase up to 1,350,000  shares of the Company's  common
stock having exercise prices ranging from $1.25 to $1.75 per share. The warrants
expire on October  29,  2008 and have a cashless  exercise  provision.  The fair
value of these  warrants was estimated at  approximately  $870,000  based on the
Black-Scholes option pricing model with the following  assumptions;  a risk free
interest rate of 3.14%,  an expected life of four years, a volatility  factor of
66%,  and a dividend  yield of 0%. The  relative  fair  value  allocated  to the
warrants was  recognized  as debt  discount and  amortized  over the term of the
note.

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

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

      The interest expense for the amortization of debt discount for the six and
three month periods  ended June 30, 2004 was $146,000 and $74,000  respectively,
and there were no similar expenses for the period March 7, 2003 through June 30,
2003 and three months ended June 30, 2003.

      In April 2004, the Company received a thirty day waiver from the holder on
the first principal payment due which was subsequently  further extended through
to  maturity.  In addition the Company  received a deferral on certain  interest
payments which have been subsequently paid to Laurus Funds.

      The principal is due in monthly  installments  of  approximately  $141,000
starting in April 2004 through  November 2006, while interest on unpaid balances
is payable monthly.  The Company has the option to issue common stock in lieu of
debt service payments at the then-market price of the stock. In addition, at the
option of the holder,  the debt may be  converted  into common  stock at a fixed
conversion price of $0.80 per share based on an agreed upon conversion formula.

      Pursuant to the  Registration  Rights  Agreement  with Laurus  Funds,  the
Company is liable  for  certain  penalties  as a result of not  registering  the
securities within a specified time frame. However, as of August 16, 2004, Laurus
Funds had waived all penalties.

      Laurus Funds shall not be entitled to be issued  shares of common stock in
repayment of any portion of the notes or upon exercise of either of the warrants
if and to the  extent  such  issuance  would  result  in  Laurus  Funds  and its
affiliates  beneficially  owning  more than 4.99% of the issued and  outstanding
common stock upon issuance,


                                      F-20
<PAGE>

unless Laurus Funds shall have provided at least 75 days prior written notice to
the Company of its revocation of such restriction.  To date, the Company has not
received any such notice.

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

      (c) The Company leases  computers and furniture  under capital leases that
expire at various  dates  through  2006.  The  recognition  of these  assets and
liabilities  in the  accompanying  financial  statements  did not result in cash
payments by the Company. Interest rates range from 10% to 27%.

      As of June 30, 2004 the principal  installments payable on the debt are as
follows:

                 2004                          $1,063
                 2005                           1,787
                 2006                           2,483
                 2007                           4,013
                                               ------
                 Total                         $9,346
                                               ======

NOTE 13:  SUBSEQUENT EVENTS
--------  -----------------

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

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

      On July 1, 2004, subsequent to a cancellation of 227,500 stock options the
Company granted an aggregate of 292,500 incentive stock options.  The fair value
of these options was estimated  using the  Black-Scholes  option  pricing model,
with the  following  weighted  average  assumptions;  risk  free  rate of 3.14%,
volatility  factor of 57%, and dividend  yield of 0%. The fair value assigned to
these options approximated $139,000.

      On July 2, 2004, the Company  granted a total of 1,500,000  warrants to an
entity related to Company's Chairman,  and his spouse.  These five-year warrants
were granted pursuant to various business  development  services provided to the
Company  and allow the holder to purchase  our common  stock at a price of $0.90
per  share.   The  fair  value  of  these  warrants  was  estimated   using  the
Black-Scholes   option  pricing  model,  with  the  following  weighted  average
assumptions: risk free interest rate of 3.14%, a contractual life of four years,
volatility  factor of 57% and dividend  yield of 0%. The fair value  assigned to
these warrants approximated $367,000.

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

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


                                      F-21
<PAGE>

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

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

NOTE 14:  STOCKHOLDERS' EQUITY (DEFICIT)
--------  ------------------------------

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

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

      On April 21, 2003 the Company issued 1,500,000 shares of restricted common
stock to an  individual  as  consideration  for business  advisory and financial
consulting services, which were valued at approximately $799,000.

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

      During the period from March 7, 2003  through  June 30, 2003 and the three
month period ended June 30, 2003, the Company recorded approximately $750,000 of
additional  paid-in capital resulting from stock options which vested during the
period.  This amount is included in general and  administrative  expenses in the
consolidated statement of operations.

      During the period  from March 7, 2003  through  June 30,  2003 and for the
three  month  period  ended June 30,  2003 the  Company  recorded  approximately
$305,000  resulting  from the  issuance of 300,000  stock  purchase  warrants as
consideration for services to consultants and stock options to employees.  These
amounts are included in general and administrative  expenses in the consolidated
statement of operations.

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

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

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

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

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


                                      F-22
<PAGE>

      During  the six month  period  ended  June 30,  2004  there  were  577,500
warrants granted to a financial  institution in consideration for an increase in
its secured revolving line of credit and convertible debt to the Company.  These
five-year  warrants  allow the holder to purchase the Company's  common stock at
prices  ranging from $1.25 to $1.75 per share.  The fair value of these warrants
was estimated  using the  Black-Scholes  option pricing model with the following
weighted average  assumption:  a risk free interest rate of 3.14%, a contractual
life of four years, a volatility  factor of 57%, and a dividend yield of 0%. The
weighted-average  fair value of these warrants was $1.50.  The value assigned to
these warrants was approximately  $368,000,  which was recorded as debt discount
to be amortized over the remaining term of the secured  revolving line of credit
and convertible debt. In addition,  the Company recorded  approximately $773,000
in  beneficial  conversion  features  associated  with the debt.  There  were no
warrants granted during the same period in prior year.

      On May 11, 2004, the Company recorded  approximately $50,000 of additional
paid-in capital  resulting from the issuance of 100,000 stock purchase  warrants
to a  resigning  director  as an  exchange  for  cancellation  of 350,000  stock
options.  These Common Stock  Purchase  Warrants have an exercise price of $1.20
per  share.   The  fair  value  of  these  warrants  was  estimated   using  the
Black-Scholes   option  pricing  model,  with  the  following  weighted  average
assumptions: risk free interest rate of 3.14%, a contractual life of four years,
volatility  factor of 57% and  dividend  yield of 0%. This amount is included in
general and administrative expenses in the consolidated statement of operations.

NOTE 15:  ACCUMULATED COMPREHENSIVE LOSS
--------  ------------------------------

      The accumulated comprehensive loss reflected in the consolidated statement
of  changes in  Stockholders'  Equity  (deficit)  and other  comprehensive  loss
represents accumulated foreign currency translation  adjustments associated with
the  conversion  of the Company's  United  Kingdom  subsidiary's  accounts to US
dollars.  These  amounts are not  adjusted for income taxes as they relate to an
indefinite investment in a foreign subsidiary.

NOTE 16:  STOCK OPTION PLAN
--------  -----------------

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

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

      Total net  compensation  expense relating to options granted to employees,
officers,  directors,  and other  persons  approximated  $161,000 in the six and
three month periods ended June 30, 2004 and $305,000  during the period March 7,
2003 through  June 30, 2003 and three month  period  ended June 30, 2003.  These
amounts are included in general and administrative  expenses in the consolidated
statement of operations,  as the Company  expects that it will continue to issue
stock options to such persons.  There was no similar  expense for options in the
other periods presented.

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

                                      Successor                  Predecessor
                                      ---------                  -----------
                                            For the period      For the Period
                          For the Six        from March 7,      from January 1,
                          Months Ended       2003 through        2003 through
                          June 30, 2004      June 30,2003       March 6, 2003
                          -------------      ------------       -------------
Beginning Balance             4,475                 --                 --
Granted                         260              2,755                 --
Exercised                        --                 --                 --
Forfeited                      (350)                --                 --
Cancelled                        --                 --                 --
                              -----              -----              -----
Ending Balance                4,385              2,755                 --
                              =====              =====              =====


                                      F-23
<PAGE>

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

<TABLE>
<CAPTION>
        Options outstanding                                                                   Options exercisable
        -------------------                                                                   -------------------
                                                               Weighted
                                                                Average        Weighted                      Weighted
                                                               Remaining       Average                       Average
                           Range of            Shares         Contractual      Exercise       Shares         Exercise
                        Exercise Price      Outstanding       Life (Years)      Price       Exercisable      Price
                        --------------      -----------       ------------      -----       -----------      -----
    <S>                  <C>                    <C>               <C>           <C>            <C>            <C>
    June 30, 2004        $1.10 - $1.75         4,385               9            $1.11         3,390          $1.12
    --------------------------------------------------------------------------------------------------------------
    December 31, 2003    $1.10 - $1.75         4,860               9            $1.12         3,212          $1.12
    --------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 17:  WARRANTS
--------  --------

      For the period  from March 7, 2003  through  June 30,  2003,  the  Company
granted 300,000 warrants to purchase a maximum of 300,000 whole shares of common
stock pursuant to consulting and investment banking  agreements.  These warrants
allow the holders to buy the Company's common stock at prices ranging from $1.10
to $3.10 per share and expire on June 26, 2008.  The fair value  assigned to the
warrants  issued for consulting and  investment  banking fees was  approximately
$305,000  based on the  Black-Scholes  option  pricing  model with the following
weighted  average  assumption:  a risk free interest rate of 3.14%, an estimated
life of four years, a volatility factor of 66%, and a dividend yield of 0%. This
amount was included in the general and administrative  expenses on the Company's
consolidated  statement of operations  for the period March 7, 2003 through June
30, 2003.

      The  Company  issued  warrants  to Laurus  Funds in  conjunction  with the
issuance of debt over the period October 29, 2003 to December 31, 2003. The fair
value assigned to these warrants was approximately $1.6 million and was recorded
to deferred  financing  costs and debt discount and is being  amortized over the
period the debt is outstanding.  The amortization for the six month period ended
June 30, 2004 was approximately $271,000.

      In addition,  the Company also issued 577,500  warrants to Laurus Funds in
consideration  for increases to their  convertible  note and borrowing  facility
during the six month  period ended June 30,  2004.  The value  assigned to these
warrants was  approximately  $368,000  and was recorded to debt  discount and is
being amortized over the period the debt is outstanding.  The  amortization  for
the six months ended June 30, 2004 was approximately $70,000.

NOTE 18:  SUPPLEMENTAL CASH FLOW INFORMATION
--------  ----------------------------------
<TABLE>
<CAPTION>
                                                                  Successor                      Predecessor
                                                                  ---------                      -----------
                                                           For the            For the
                                                          Six month         Period from            For the
                                                        period ended       March 7, 2003         Period from
                                                        June 30, 2004      June 30, 2003        January 1,2003
                                                         (Unaudited)        (Unaudited)       through March 6, 2003
                                                         -----------        -----------       ---------------------
<S>                                                       <C>                 <C>              <C>
Supplemental    Disclosure    of    Cash    Flow
Information:

Cash paid during the period for interest                  $   32              $   88             $      --

Supplemental  Disclosure  of Non-Cash  Financing
Activities:

Issuance of stock for services                               161               1,104                    --

Issuance of stock for finders fees                            --               1,302                    --

Warrants issued for consulting services,
   financing fees and convertible debt                       773                 305                    --
</TABLE>


                                      F-24
<PAGE>

NOTE 19:  DISCONTINUED OPERATIONS
--------  -----------------------

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

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

NOTE 20:  RELATED PARTY TRANSACTIONS
--------  --------------------------

      During the period from March 7, 2003 through  June 30, 2003,  the Chairman
and his spouse provided working capital advances to the Company.  As of June 30,
2003,  such advances  amounted to  approximately  $110,000,  and are included in
accrued  expenses and other current  liabilities in the  accompanying  financial
statements. This advance is unsecured and does not bear interest.

      During the period  from March 7, 2003  through  June 30,  2003 the Company
paid rent to an affiliate  for a furnished  office  space  amounting to $22,000.
This amount is included in general and administrative expenses.

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

      During the six month  period ended June 30, 2004 and the period from March
7, 2003 through  June 30, 2003 the Company  paid to an  affiliate  approximately
$6,000 and $0, respectively for sublease of office furniture and equipment.


                                      F-25
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
------------------------------------------------------------------

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

CAUTION REGARDING FORWARD-LOOKING INFORMATION

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

GENERAL

THE INYX PHARMA TRANSACTION

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

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

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


                                       26
<PAGE>

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

RECENT DEVELOPMENTS

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

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

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

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

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

                                       27
<PAGE>

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

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

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

      Hydorcarbon aerosol foams are corticosteroids or similar anti-inflammatory
agents, which are kept under pressure in a can with liquid hydrocarbons
(normally a mixture of propane, iso-butane and butane). As the product is
dispensed and released from the can, the hydrocarbons spontaneously vaporize,
turning the resulting mixture into a foam or mousse, allowing the active drug to
be more readily absorbed into the skin. Hydrocarbon foam products can be
advantageous for dermatological and topical applications where rubbing a cream
or ointment into an affected skin area may cause further inflammation,
discomfort or spread the condition. In 2003, we signed a five-year exclusive
agreement with Stiefel Laboratories, Inc. ("Stiefel") to develop and manufacture
for them a number of hydrocarbon aerosol foam generic pharmaceutical products
for global markets. Headquartered in Coral Gables, Florida, Stiefel is one of
the largest privately-held dermatology companies in the world. Stiefel is
focused on branded generic pharmaceutical products, and markets and sells
products through its own sales force. Stiefel also markets generic
pharmaceuticals and consumer health products through its Glades Division, a
wholly-owned subsidiary. In addition to our exclusive agreements with Stiefel,
they also invested approximately $4 million into our company in the form of a
convertible loan.

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

      CRITICAL ACCOUNTING POLICIES

      Our accounting policies are disclosed in Note 2 to the Notes to the
Consolidated Financial Statements found elsewhere herein. We consider the
following policies to be important to our financial statements.


                                       28
<PAGE>

      REVENUE RECOGNITION

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

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

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

      TRANSLATION OF FOREIGN CURRENCY

      The functional currency of our Company's United Kingdom subsidiary, Inyx
Pharma, is the Great Britain Pound ("(GBP)"). Our Company's financial statements
are reported in United States Dollars (USD) and are translated in accordance
with Statement of Financial Accounting Standards No. 52, which requires that
foreign currency assets and liabilities be translated using the exchange rates
in effect at the balance sheet date. Results of operations are translated using
the average exchange rates prevailing during the period. For purposes of SFAS
No. 52, we consider the dollar to be the reporting currency. The effects of
unrealized exchange fluctuations on translating foreign currency assets and
liabilities into dollars are accumulated as a cumulative translation adjustment
in stockholders' deficit. Realized gains and losses from foreign currency
transactions are included in the results of operation for the period.
Fluctuations arising from inter-company transactions are of long term in nature
and are accumulated as cumulative translation adjustments. As of June 30, 2004,
we had not utilized any currency-hedging programs. However, as we intend to
continue to utilize US-based financing sources, and as the significant majority
of our revenues are in British pounds sterling, with some revenues in European
Euros, we intend to begin hedging activities in 2005. We have established a
commercial banking relationship with J.P. Morgan-Chase Bank in New York to
provide us with currency-hedging advisory services including our participation
in currency-forward contracts for the purpose of mitigating foreign exchange
fluctuations following the effective date of this offering.

RESULTS OF OPERATIONS

THREE MONTHS AND SIX MONTH PERIOD ENDED JUNE 30, 2004 AND THE THREE MONTH PERIOD
ENDED JUNE 30, 2003 AND THE PERIOD FROM MARCH 7, 2003 THROUGH JUNE 30, 2003

CONSOLIDATED RESULTS

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

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


                                       29
<PAGE>

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

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

COMBINED RESULTS OF OPERATIONS
------------------------------

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

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

<TABLE>
<CAPTION>
                                                             Miza UK   Inyx, Inc.    Adjustment Pro forma
                                                             -------     -------     -------     -------
<S>                                                          <C>         <C>         <C>         <C>
Net Revenues                                                 $ 2,396     $ 5,068     $    --     $ 7,464
Cost of sales                                                  1,876       3,933                   5,809
                                                             -------     -------     -------     -------
                                                                 520       1,135          --       1,655

Operating expenses:
   General and administrative expenses                           568       5,901                   6,469
   Selling expenses                                               51          96                     147
   Depreciation and amortization                                  75         128                     203
   Amortization of intangibles                                    --          55          28          83
                                                             -------     -------     -------     -------
         Total operating expenses                                694       6,180          28       6,902

Loss from continuing operations before interest
   expense, reorganization items and income tax benefit         (174)     (5,045)        (28)     (5,247)

Interest expense                                                 176         159                     335
                                                             -------     -------     -------     -------
Loss from continuing operations before
   reorganization items and income tax benefit                  (350)     (5,204)        (28)     (5,582)

      Reorganization items                                        --          --          --          --
                                                             -------     -------     -------     -------
Loss from continuing operations before income tax benefit       (350)     (5,204)        (28)     (5,582)

Income tax benefit                                                --         288                     288
                                                             -------     -------     -------     -------
Loss from continuing operations                              $  (350)    $(4,916)    $    --     $(5,294)
                                                             =======     =======     =======     =======
</TABLE>


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


                                       30
<PAGE>

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

NET REVENUES

      Total net revenues for the six months ended June 30, 2004 were
approximately $7.3 million as compared to approximately $5.1 million in net
revenues for the period from March 7, 2003 through June 30, 2003, and
approximately $7.5 million in net revenues for the combined operations for the
period January 1, 2003 through March 6, 2003 and March 7, 2003 through June 30,
2003.

      Net revenues for the six months ended June 30, 2004 increased by
approximately $2.2 million or by approximately 43%. This increase is
attributable to a full six months of operations during the six month reporting
period in 2004 as compared to approximately four months of operations
(Predecessor from January 1, 2003 through March 6, 2003 and Successor from April
28, 2003 through June 30, 2003) during the six month reporting period in 2003,
as we completed our reverse acquisition of Inyx Pharma on April 28, 2003 (after
it had completed its acquisition of the business assets of Miza UK on March 7,
2003). Prior to its acquisition of the business assets of Miza UK, Inyx Pharma
had no business operations, and during the period from March 7, 2003 to April
28, 2003, its operations were nominal.

      For the six months ended June 30, 2004, our three largest customers
accounted for approximately $3.7 million in net revenues or approximately 51% of
total net revenues. During the six months ended June 30, 2004, our top three
customers were the Merck Generics group of companies ("Merck Generics"), a large
international generic drug marketing and distribution company, accounting for
approximately $1.9 million in net revenues or approximately 26% of total net
revenues for the six month period; SSL International Plc ("SSL") accounting for
approximately $960,000 in net revenues or approximately 13% of total net
revenues for the six month period; and Genpharm Inc. ("Genpharm"), accounting
for approximately $873,000 in net revenues or approximately 12% of total net
revenues.

      In comparison, for the period from March 7, 2003 through June 30, 2003,
our top three customers accounted for approximately $2.2 million or
approximately 43% of our total net revenues. These customers were Merck Generics
accounting for approximately $1.3 million in net revenues or approximately 25%
of total net revenues for the reporting period; Genpharm accounting for
approximately $595,000 in net revenues or approximately 12% of total net
revenues for the reporting period; and Convatec Limited accounting for $345,000
in net revenues or approximately 7% of total net revenues for the reporting
period.

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

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

      During the six months ended June 30, 2004, we experienced delays totaling
approximately $1.7 million in expected customer revenues, which have been
delayed into the second half of 2004. This includes approximately $800,000 in
development revenues because two of our major customers did not receive the
regulatory and business approvals they required to commence their HFA metered
dose inhaler commercialization projects until July 2004, while a third major
customer experienced technical delays in


                                       31
<PAGE>

      the introduction of a new dermatological product formulation that have now
been rectified. Additionally, approximately $900,000 of expected manufacturing
revenues were delayed into the second half of 2004 because vendor production
lead times and quality issues caused delays in the receipt of critical product
components (including specific types of cans, valves and actuators) that were
required for nasal pump and nitrogen-propelled aerosol products planned for
production and delivery during the second half of the six months ended June 30,
2004. We have now resolved the majority of these issues with our vendors, and
have commenced manufacturing these products for our customers.

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

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

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

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

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

COST OF SALES

      The total cost of sales for the six months ended June 30, 2004 were
approximately $6.8 million or approximately 93% of total net revenues as
compared to cost of sales of approximately $3.9 million or approximately 78% of
net revenues for the period from March 7, 2003 through June 30, 2003, and
approximately $5.8 million or approximately 78% of net revenues for the
comparative combined six month period ended June 30, 2003.

      The increase of the cost of sales for the six months ended June 30, 2004,
as compared to the costs of sales for the period from March 7, 2003 through June
30, 2003, is primarily a result of the noted delay in the commencement or
completion of a number of manufacturing contracts and purchase orders during the
reporting periods. These delays resulted in a significant decrease in
manufacturing capacity utilization, thereby reducing fixed overhead cost
absorption (such as labor and plant maintenance, operating and quality support
costs) at our Inyx Pharma manufacturing and development facilities, and
therefore concomitantly increasing our production costs as a percentage of
revenues.


                                       32
<PAGE>

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

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

GROSS PROFIT

      Gross profit for the six months ended June 30, 2004 amounted to
approximately $480,000 as compared to approximately $1.1 million in gross profit
for the period from March 7, 2003 through June 30, 2003, and approximately $1.7
million in gross profit for the comparative combined six month period ended June
30, 2003.

      As a result of the noted delays of a number of customer contracts and
purchase orders and concomitant increase in our cost of sales as a result of the
reduced fixed overhead absorption during the three months ended June 30, 2004,
the gross profit for the six months ended June 30, 2004 decreased by
approximately $700,000 or approximately 58% as compared to the period from March
7, 2003 through June 30, 2003. In comparison to the combined six months ended
June 30, 2003, the gross profit decreased by approximately $1.1 million or 71%.

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

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

OPERATING EXPENSES

      Total operating expenses for the six months ended June 30, 2004 were
approximately $5.2 million or approximately 72% of total net revenues as
compared to operating expenses of approximately $6.2 million or approximately
121% of net revenues for the period from March 7, 2003 through June 30, 2003,
and approximately $6.9 million or approximately 93% of net revenues for the
comparative combined six month period ended June 30, 2003.

      Our operating expenses for the six months ended June 30, 2004 have
increased after adjusting for the transaction costs of $2.0 million related to
the acquisition of Inyx Pharma during the period march 7, 2003 through June 30,
2003 as a percentage of net revenues primarily due to an increase in general and
administrative expenses. We have had increasing salary and benefit, insurance
and corporate and business development costs as a result of our growing business
operations, although for the period from March 7, 2003 through June 30, 2003, we
expensed approximately $750,000 in employee stock options as compared to
approximately $94,000 in stock option costs for the six months ended June 30,
2004.


                                       33
<PAGE>

RESEARCH AND DEVELOPMENT COSTS

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

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

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

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

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

GENERAL AND ADMINISTRATIVE EXPENSES

      Total general and administrative expenses for the six months ended June
30, 2004 were approximately $4.3 million or approximately 59% of net revenues as
compared to general and administrative expenses of approximately $5.9 million or
approximately 115% of net revenues for the period March 7, 2003 through June 30,
2003, and approximately $6.5 million or approximately 87% of net revenues for
the combined six month period ended June 30, 2003.

      For the three months ended June 30, 2004, general and administrative
expenses were approximately $2.2 million or approximately 79% of net revenues,
as compared to general and administrative expenses of approximately $5.9 million
or approximately 115% of net revenues for the three months ended June 30, 2003.

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


                                       34
<PAGE>

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

      For the six months ended June 30, 2004, salaries and associated benefit
costs amounted to approximately $1.7 million or approximately 23% of our net
revenues as compared to approximately $1.4 million or approximately 28% of net
revenues for the period from March 7, 2003 through June 30, 2003.

      For the three months ended June 30, 2004, salaries and associated benefit
costs amounted to approximately $868,000 or approximately 31% of our net
revenues as compared to $1.4 million or approximately 28% of net revenues for
the three months ended June 30, 2003.

      Excluding employee stock options that were expensed during the comparative
three and six months, salaries and benefit costs for the three months ended June
30, 2004 increased by approximately $231,000 or approximately 27% as compared to
the three months ended June 30, 2003, and increased by approximately $1 million
or approximately 170% for the six months ended June 30, 2004 as compared to the
six month period ended June 30, 2003 due to the addition of an expanded staff
and growth in our business during the six months ended June 30, 2003. Salary and
benefit costs for the comparative six months in 2003 consisted of a combined
four months of operations only January 1 2003 to March 6, 2003 and April 28,
2003 to June 30, 2003.

      Other general and administrative expenses that contributed to an increase
in our general and administrative expenses for the three and six months ended
June 30, 2004 amounted to approximately $1.1 million or approximately 41% of net
revenues and $2.3 million or 32% of net revenues, respectively. These other
general and administrative expenses consisted of insurance costs of
approximately $200,000 for the three months ended June 30, 2004 and $411,000 for
the six months ended June 30, 2004; consulting fees including legal and
accounting costs of approximately $233,000 for the three months ended June 30,
2004 and $560,000 for the six months ended June 30, 2004; corporate and business
development costs, including travel, communication and investor relations costs,
of approximately $343,000 for the three months ended June 30, 2004 and $868,000
for the six months ended June 30, 2004; and other business overhead costs
including rent, currency exchange losses, and bad debt provisions of
approximately $355,000 for the three months ended June 30, 2004 and $515,000 for
the six months ended June 30, 2004.

      In comparison, for the three and six months ended June 30, 2003, general
and administrative costs, exclusive of salaries and associated benefit costs,
amounted to approximately $1.4 million or approximately 27% of net revenues and
transaction costs related to the reverse merger of Inyx Pharma including legal
and accounting costs accounted for $2 million or approximately 33% of total
operating expenses.

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

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


                                      35
<PAGE>

SELLING EXPENSES

      Total selling expenses for the six months ended June 30, 2004 were
approximately $160,000 or approximately 2% of total net revenues as compared to
selling expenses of approximately $96,000 or approximately 2% of net revenues
for the period from March 7, 2003 through June 30, 2003, and approximately
$147,000 or approximately 2% of net revenues for the comparative combined period
ended June 30, 2003.

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

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

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

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

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

DEPRECIATION AND AMORTIZATION EXPENSES

      Total depreciation and amortization expenses for the six months ended June
30, 2004 were approximately $276,000 or approximately 5% of net revenues as
compared to depreciation and amortization expenses of approximately $128,000 or
approximately 3% of net revenues for the period from March 7, 2003 through June
30, 2003, and approximately $203,000 or approximately 3% of net revenues for the
combined six month period ended June 30, 2003.

      Depreciation and amortization expenses for the three months ended June 30,
2004 amounted to approximately $124,000 or approximately 5% of net revenues, as
compared to depreciation and amortization expenses of approximately $128,000 or
approximately 3% of net revenues for the three months ended June 30, 2003.

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

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


                                       36
<PAGE>

AMORTIZATION OF INTANGIBLE ASSETS

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

      Amortization of intangible assets relates to the Company's purchased
intangible assets related to the Inyx Pharma transaction. The amortization of
intangible assets for the six months ended June 30, 2004 was $84,000 compared to
approximately $55,000 for the period from March 7, 2003 through to June 30,
2003.

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

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

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

      For the six months ended June 30, 2004, our loss from operations before
interest and financing costs, income tax benefit and discontinued operations
amounted to approximately $4.8 million as compared to a loss of approximately
$5.0 million for the period from March 7, 2003 through June 30, 2003 and a loss
of approximately $5.2 million for the combined period from January 1, 2003
through March 6, 2003 and March 7, 2003 through June 30, 2003.

      For the three months ended June 30, 2004, our loss from operations before
interest and financing costs, income tax benefit and discontinued operations
amounted to approximately $2.7 million as compared to a loss of approximately
$5.0 million for the three months ended June 30, 2003.

      The loss from operations before interest and financing costs, income tax
benefit and discontinued operations decreased by approximately $300,000 or
approximately 6% and $2.3 million or approximately 46% for the six and three
month periods ended June 30, 2004 primarily as a result of the noted delays in
the commencement or completion of a number of booked development and
manufacturing contracts, and purchase orders.

      During the three months ended June 30, 2004, our total operating expenses
decreased from approximately $6.2 million to $2.5 million, however as a result
of the noted revenue delays, we had a gross loss of approximately $136,000 as
compared to a gross profit of approximately $1.1 million during the three months
ended June 30, 2003, which therefore resulted in an increased loss from
operations.

      In addition to the noted revenue delays during the three months ended June
30, 2004, our operating loss from operations increased during the six months
ended June 30, 2004, as compared to the period from March 7, 2003 through June
30, 2003, as a result of a full six months of operations as compared to combined
four months of such costs during the comparative six months in 2003.

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

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


                                       37
<PAGE>

INTEREST AND FINANCING COSTS

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

      For the six months ended June 30, 2004, interest and financing costs
amounted to approximately $1.7 million and included approximately $308,000 in
amortization of debt discount related to the convertible debt to Laurus Funds,
approximately $773,000 in beneficial conversion feature recognition,
approximately $162,000 in amortization of deferred charges and approximately
$189,000 in interest expense for the notes payable to Laurus Funds,
approximately $120,000 in interest payable under a convertible promissory note
payable to Stiefel, and approximately $172,000 in interest payments and
associated warrant costs as a result of short term loans obtained by the Company
during the six month period.

      In comparison for the period March 7, 2003 through June 30, 2003, interest
expenses amounted to approximately $159,000, and for the combined two periods,
January 1, 2003 through March 6, 2003 and March 7, 2003 through June 30, 2003,
combined interest expenses totalled approximately $335,000. These interest
expenses were primarily related to term loans and revolving credit facilities
with Inyx Pharma's lender, Venture Finance. Inyx Pharma's predecessor company,
Miza UK accounted for approximately $176,000 of these combined interest charges.

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

INCOME TAX BENEFIT

      For the three and six months ended June 30, 2004, the tax benefit net of
valuation allowance is approximately $393,000, as compared to a tax benefit of
approximately $288,000 for the three months ended June 30, 2003 and the period
from March 7, 2003 through June 30, 2003. As of June 30, 2004, our deferred tax
asset amounts to approximately $1.7 million.

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

DISCONTINUED OPERATIONS

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


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<PAGE>

NET LOSS

      The total net loss for the six months ended June 30, 2004 amounted to
approximately $6.1 million as compared to a net loss of approximately $4.9
million for the period from March 7, 2003 through June 30, 2003, and a net loss
of approximately $5.8 million for the combined six month period ended June 30,
2003.

      For the three months ended June 30, 2004, our net loss amounted to
approximately $3.4 million as compared to a net loss of approximately $4.9
million for the three months ended June 30, 2003. The net loss decreased by
approximately $1.5 million or approximately 30% between the comparative periods.

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

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

      As of June 30, 2004, the current portion of our long-term debt obligations
amounted to approximately $1.1 million. Additionally, we continue to incur
operating losses since our reverse acquisition of Inyx Pharma on April 28, 2003.
For the three and six months ended June 30, 2004, such losses amounted to
approximately $3.4 million and approximately $6.1 million, respectively. These
losses are primarily as a result of low gross profit margins due to the
underutilization of our manufacturing capacity, research and development costs
as we continue the development of our own proprietary pharmaceutical products,
and a number of business and corporate development costs, including expanding
wage costs, associated with our efforts to grow our Company and evolve into an
integrated pharmaceutical company.

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


                                       39
<PAGE>

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

CAPITAL RESOURCES

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

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

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

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

      During the three months ended June 30, 2004, the Stiefel and Laurus Funds
financing transactions were sufficient to assist our funding and working capital
requirements for the period. For the next twelve months, we believe that we will
require approximately $7.1 million in additional funding to meet our working
capital, capital expenditure and product development requirements (see
Subsequent Events and Other Information below). On a longer-term basis, we
believe that we will require funding in the amount of approximately $5 million
annually for a further two years to assist in the development of planned
proprietary aerosol products and drug delivery technologies.

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


                                       40
<PAGE>

ANALYSIS OF CASH FLOWS

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

      For the six months ended June 30, 2004, the net cash used in operations
was primarily the result of an approximately $6.1 million net loss from
continuing operations of the business. This was adjusted by non-cash charges
including depreciation and amortization of approximately $1.6 million, a reserve
for bad debts amounting to approximately $111,000, reserve for inventory
obsolescence of approximately $217,000 and issuance of warrants for consulting
of approximately $49,000. These non-cash charges were offset by an increase in a
deferred income tax asset of approximately $393,000. For the six months ended
June 30, 2004, working capital changes reducing cash flow from operations were
primarily due to an increase in our prepaid deposits and other current assets
amounting to approximately $2.7 million, resulting from increasing new sales and
business development activities. Working capital changes increasing cash flow
from operations were due primarily to a decrease of accounts receivable of
approximately $1.8 million, and an increase in accounts payable and accrued
liabilities of approximately $1.4 million which was offset by a decrease in
deferred revenue amounting to approximately $276,000 and an increase in
inventory of $228,000.

      For the three months ended June 30, 2004, the net cash used in the
operations was primarily the result of an approximately $3.4 million net loss
from continuing operations of the business. This was adjusted by non-cash
charges, including depreciation and amortization of financing costs and
intangible assets of approximately $573,000, a reserve for bad debts amounting
to approximately $52,000, stock option compensation for vested options,
approximating $95,000, and warrants issued to a consultant of approximately
$49,000. These non-cash charges were offset by an increase in the reserve for
inventory obsolescence amounting to approximately $603,000. For the three months
ended June 30, 2004, working capital changes reducing cash flow from operations
were primarily due to an increase in our prepaid deposits and other current
assets amounting to approximately $1.4 million, resulting from increasing new
sales and business development activities. Working capital changes increasing
cash flow from operations were due primarily to a decrease of accounts
receivable of approximately $1.7 million, a decrease in inventory of
approximately $418,000, an increase in accounts payable and accrued liabilities
of approximately $1.3 million, an increase in bank overdraft of $51,000 and a
decrease in deferred revenue amounting to approximately $85,000.

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

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

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

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


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