SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X]  Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
     of 1934.

                 For the quarterly period ended: March 31, 2004

                                       OR

[_]  Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
     of 1934.

                For the transition period from:       to

                       Commission File Number: 000-030813

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

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

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

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

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

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

The number of outstanding shares of registrant's Common Stock on May 14, 2004
was 17,020,082.

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

<PAGE>

                                  ALPHARX, INC.
                                  -------------

                                   FORM 10-QSB
                                   -----------

                                 MARCH 31, 2004
                                 --------------

                                TABLE OF CONTENTS

Interim Consolidated Balance Sheets as of March 31, 2004
     and September 30, 2003                                                    1

Interim Consolidated Statements of Operations for the six months
     ended March 31, 2004 and March 31, 2003                                   3

Interim Consolidated Statements of Operations for the three months
     ended March 31, 2004 and March 31, 2003                                   4

Interim Consolidated Statements of Stockholders' Deficiency for
     the six months ended March 31, 2004 and the year ended
     September 30, 2003                                                        5

Interim Consolidated Statements of Cash Flow for the six months
     ended March 31, 2004 and March 31, 2003                                   6

Condensed Notes to Interim Consolidated Financial Statements                   7

Management's Discussion and Analysis of Financial Condition and
     Plan of Operation                                                        10


Other Information                                                             15

<PAGE>

                                  ALPHARX, INC.
                                  -------------

                       INTERIM CONSOLIDATED BALANCE SHEETS
                       -----------------------------------

                   AS OF MARCH 31, 2004 AND SEPTEMBER 30, 2003
                   -------------------------------------------
                                  (UNAUDITED)
                                  -----------

                                     ASSETS

                                                       March 31,   September 30,
                                                            2004            2003
CURRENT ASSETS

   Cash                                             $    470,018    $     24,520
   Accounts Receivable                                    12,737          27,662
   Deferred financing costs                               86,100              --
   Prepaid Expenses                                        7,218           3,690
   Inventory                                              84,599         141,905
                                                    ------------    ------------

       TOTAL CURRENT ASSETS                              660,672         197,777


PROPERTY, PLANT & EQUIPMENT, at cost

   Less accumulated deprecation of $98,667               145,121
   Less accumulated depreciation of $79,097                              126,535

OTHER ASSETS

   Licensing Rights                                            1         230,000
                                                    ------------    ------------

TOTAL ASSETS                                             805,794         554,312
                                                    ============    ============

See condensed notes to the consolidated financial statements

                                        1
<PAGE>

                                  ALPHARX, INC.
                                  -------------

                       INTERIM CONSOLIDATED BALANCE SHEETS
                       -----------------------------------

                   AS OF MARCH 31, 2004 AND SEPTEMBER 30, 2003
                   -------------------------------------------
                                   (UNAUDITED)
                                   -----------

                    LIABILITIES AND SHAREHOLDERS' DEFICIENCY

                                                     March 31,    September 30,
                                                          2004             2003
CURRENT LIABILITIES

   Accounts Payable and Accrued Liabilities       $    502,859     $    254,724
   Notes Payable                                     1,119,551          474,837
   Litigation Liabilities                               25,000           25,000
                                                  ------------     ------------
       TOTAL CURRENT LIABILITIES                     1,647,410          754,561
                                                  ------------     ------------

SHAREHOLDERS' DEFICIENCY

Common Stock, $ 0.0001 par value,                        1,703            1,692
   Authorized 100,000,000 shares, issued
   and outstanding 17,020,082 shares
   (September 30, 2003 - 16,920,082)
Additional paid-in capital                           4,054,029        4,024,039
Deficit                                             (4,897,348)      (4,225,980)
                                                  ------------     ------------

TOTAL SHAREHOLDERS' DEFICIENCY                        (841,616)        (200,249)
                                                  ------------     ------------

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY         805,794          554,312
                                                  ============     ============

See condensed notes to the consolidated financial statements

                                        2
<PAGE>

                                  ALPHARX, INC.
                                  -------------

                  INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS
                  --------------------------------------------

             FOR THE SIX MONTH PERIOD ENDED MARCH 31, 2004 AND 2003
             ------------------------------------------------------
                                  (UNAUDITED)
                                  -----------

Six Months Ended March 31,                                2004             2003

SALES                                             $    362,610     $      2,498

COST OF SALES                                          146,185            2,243
                                                  ------------     ------------

       GROSS MARGIN                                    216,425              255

GENERAL AND ADMINISTRATIVE, SALES AND
MARKETING EXPENSES                                     597,987          642,962
RESEARCH AND DEVELOPMENT EXPENSES                       40,245          155,288
DEPRECIATION                                            19,562           12,132
                                                  ------------     ------------

       LOSS FROM OPERATIONS                           (441,369)        (810,127)
                                                  ------------     ------------

OTHER INCOME AND EXPENSES
       Interest Income                                      --                2
       Write down of licensing rights                 (229,999)              --
                                                  ------------     ------------

LOSS BEFORE INCOME TAXES                              (671,368)        (810,125)

INCOME TAX                                                  --               --
                                                  ------------     ------------

NET LOSS                                          $   (671,368)    $   (810,125)
                                                  ============     ============

NET LOSS PER COMMON SHARE, BASIC &
DILUTED                                                  (0.04)           (0.05)
                                                  ============     ============

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                  16,994,258       15,764,160
                                                  ============     ============

See condensed notes to the consolidated financial statements

                                        3
<PAGE>

                                  ALPHARX, INC.
                                  -------------

                  INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS
                  --------------------------------------------

            FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2004 AND 2003
            --------------------------------------------------------
                                  (UNAUDITED)
                                  -----------

Three Months Ended March 31,                            2004               2003

SALES                                           $    315,441       $        644

COST OF SALES                                        128,669                780
                                                ------------       ------------

       GROSS MARGIN                                  186,772               (136)
                                                ------------       ------------

GENERAL AND ADMINISTRATIVE, SALES AND
MARKETING EXPENSES                                   327,070            485,473
RESEARCH AND DEVELOPMENT EXPENSES                     28,817             51,645
DEPRECIATION                                           8,518              6,159
                                                ------------       ------------

       LOSS FROM OPERATIONS                         (177,633)          (543,413)
                                                ------------       ------------

OTHER INCOME AND EXPENSES
       Interest Income                                    --                 --
       Write down of licensing rights               (229,999)                --
                                                ------------       ------------

LOSS BEFORE INCOME TAXES                            (407,632)          (543,413)

INCOME TAX                                                --                 --
                                                ------------       ------------

NET LOSS                                        $   (407,032)      $   (543,413)
                                                ============       ============

NET LOSS PER COMMON SHARE, BASIC &
DILUTED                                                (0.02)             (0.04)
                                                ============       ============

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                17,020,082         16,032,032
                                                ============       ============

See condensed notes to the consolidated financial statements

                                        4
<PAGE>

                                  ALPHARX, INC.
                                  -------------

     INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY
     ----------------------------------------------------------------------
                                   (UNAUDITED)
                                   -----------

<TABLE>
<CAPTION>
                           Common Stock         Additional     Retained            Total
                      Number of                  Paid-in       Earnings         Shareholders'
                       Shares        Amount      Capital       (Deficit)     Equity (Deficiency)
                       ------        ------      -------       ---------     -------------------
<S>                  <C>            <C>         <C>           <C>               <C>
Balance as of        15,327,341       1,533     2,897,277     (2,811,383)           87,427
September 30,
2002

Issuances of          1,592,741         159       846,168                          846,327
Common
Stock

Issuance of Stock                                 280,594                          280,594
Options for
consulting services

Net loss for the                                              (1,414,597)       (1,414,597)
Year ending
September 30,
2003
                    ----------------------------------------------------------------------
Balance as of        16,920,082       1,692     4,024,039     (4,225,980)         (200,249)
September 30,
2003

Issuance of
Common Stock            100,000          11        29,990                           30,001

Net loss for the
Six month period
Ending March
31, 2004                                                        (671,368)         (671,368)
                    ----------------------------------------------------------------------
Balance as of
March 31, 2004       17,020,082       1,703     4,054,029     (4,897,348)         (841,616)
</TABLE>

See condensed notes to the consolidated financial statements

                                        5
<PAGE>

                                  ALPHARX, INC.
                                  -------------

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

Six months ended March 31,                                  2004           2003

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss                                                (671,368)      (810,125)
Adjustments to reconcile net loss to net cash
used in operating activities:
    Depreciation                                          19,562         12,132
    Write down of licensing rights                       229,999             --
    Shares issued for services rendered                   30,000        280,594
    Options issued for services rendered                      --        246,472
        Changes in assets and liabilities:
        (Increase) decrease in inventory                  57,306        (45,277)
        (Increase) decrease in accounts receivable        14,925           (955)
        Increase in prepaid expenses                      (3,528)      (242,017)
        Increase in deferred financing costs             (86,100)            --
        Increase (decrease) in accounts payable
        and accrued liabilities                          248,135           (832)
                                                      ----------     ----------
NET CASH USED IN OPERATING ACTIVITIES                   (161,069)      (560,008)
                                                      ----------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments                                       --        (20,000)
Purchase of property, plant & equipment                  (38,147)       (17,992)
                                                      ----------     ----------
NET CASH USED IN INVESTING ACTIVITIES                    (38,147)       (37,992)
                                                      ----------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in bank indebtedness                                 --         (3,373)
Repayment of officer advance                                  --            (83)
Issuance of notes payable                                644,714         56,164
Proceeds from issuance of common stock                        --        545,292
                                                      ----------     ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                644,714        598,000
                                                      ----------     ----------

NET INCREASE (DECREASE) IN CASH                          445,498             --

CASH, beginning of period                                 24,520             --
                                                      ----------     ----------

CASH, end of period                                      470,018             --
                                                      ----------     ----------

See condensed notes to the consolidated financial statements

                                        6
<PAGE>

                                  ALPHARX, INC.
                                  -------------

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

NOTE 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of all recurring accruals) considered necessary for fair
presentation have been included. Operating results for the interim periods are
not necessarily indicative of the results that may be expected for the year
ended September 30, 2004. Interim financial statements should be read in
conjunction with the Company's annual audited financial statements.

NOTE 2. NATURE OF BUSINESS AND GOING CONCERN

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

Effective July 1, 2003 the Company acquired all of the shares of AlphaRx Canada
Limited for nominal value of $1. AlphaRx Canada Limited was dormant until this
time. AlphaRx Canada Limited was incorporated under the laws of Ontario in order
to streamline sales of the Company's products in the Canadian market. Prior to
this time AlphaRx Canada Limited had no material assets or any liabilities and
was wholly owned by the President & CEO of the Company. The consolidated
financial statements reflect the activities of the Company and of AlphaRx Canada
Limited - its wholly owned subsidiary. All material inter-company accounts and
transactions have been eliminated.

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

                                       7
<PAGE>

NOTE 3 PROMISSORY NOTES AND DEFERRED FINANCING COSTS

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

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

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

NOTE 4 LICENSING RIGHTS

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

NOTE 5. LITIGATION LIABILITY

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

                                       8
<PAGE>

NOTE 6.  BANK INDEBTEDNESS

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

                                       9
<PAGE>

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

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

GENERAL

AlphaRx is a drug delivery company specializing in the development of innovative
therapeutic products for the pharmaceutical and consumer health care market. Our
core competence is in the development of novel drug formulations for therapeutic
molecules or compounds that have exhibited poor G.I. absorption due to poor
solubility or have yet be administerable to the human body with an acceptable
delivery method. Our drug delivery system is versatile and offers significant
flexibility in the development of suitable dosage formulations (i.e. oral,
topical or parenteral) to meet the requirements of specific drug molecules. Our
primary activities since inception (August 7, 1997) have been, in addition to
research and development, establishing our offices and research facilities,
recruiting personnel, filing patent applications, developing a business strategy
and raising capital. During 2003 and the first half of fiscal 2004 we have also
started to focus on commercialization of our products and to that extent
Flexogan product sales have started in the Canadian market.

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

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

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

We intend to continue investing in the further development of our drug delivery
technologies and to actively seek collaborators and licensees to accelerate the
development and commercialization of

                                       10
<PAGE>

products incorporating our drug delivery systems. Depending upon a variety of
factors, including collaborative arrangements, available personnel and financial
resources, we will conduct or fund clinical trials on such products and will
undertake the associated regulatory activities.

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

The Company incurred a net loss of $671,368 for the six month period ended March
31, 2004 as compared to a loss of $810,125 incurred for the same period a year
ago, a reduction of $138,757 or approximately 17%. Included in the net loss was
a one time write down of VT-1 licensing rights in the amount of $229,999.

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

SALES

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

GROSS MARGIN

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

SALES AND MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist primarily of personnel costs related
to general management functions, finance, marketing, inventory logistics, office
overheads, as well as insurance costs and professional fees related to legal,
audit and tax matters. Sales and Marketing,

                                       11
<PAGE>

General and Administrative expenses for the six months ended March 31, 2004 were
$597,987 as compared to $642,962 incurred for the same period a year ago, a
decrease of $44,975 or approximately 7%.

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

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

RESEARCH AND DEVELOPMENT EXPENSES

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

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

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

LOSS FROM OPERATIONS

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

                                       12
<PAGE>

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

We expect to continue to spend capital on:

1. research and development programs;
2. preclinical studies and clinical trials;
3. regulatory processes; and
4. establishment of our own pilot scale manufacturing and marketing capabilities
or a search for third party manufacturers and marketing partners to manufacture
and market our products for us.

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

1. the progress, timing and scope of our research and development programs;
2. the progress, timing and scope of our preclinical studies and clinical
trials;
3. the time and cost necessary to obtain regulatory approvals;
4. the time and cost necessary to establish our own sales and marketing
capabilities or to seek marketing partners to market our products for us;
5. the time and cost necessary to respond to technological and market
developments; and
6. new collaborative, licensing and other commercial relationships that we may
establish.

The inability to raise capital would have a material adverse effect on the
Company. We currently have no capital commitments other than the payment of rent
on our facilities lease.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

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

                                       13
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

     The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer has evaluated the effectiveness of
the Company's disclosure controls and procedures as of March 31, 2004. Based on
this evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective for gathering, analyzing and disclosing the information the Company is
required to disclose in the reports it files under the Securities Exchange Act
of 1934, within the time periods specified in the SEC's rules and forms.

                                       14
<PAGE>

PART II: OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

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

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

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

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

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

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

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<PAGE>

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

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

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

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

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

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)  EXHIBITS.

     31.1 Certification of C.E.O. Pursuant to Section 302 of the Sarbanses-Oxley
          Act of 2002.

     31.2 Certification of C.F.O. Pursuant to Section 302 of the Sarbanses-Oxley
          Act of 2002.

     32.1 Certification of Michael Lee pursuant to Section 1350 of Chapter 63 of
          Title 18 United States Code.

     32.2 Certification of Marcel Urbanc pursuant to Section 1350 of Chapter 63
          of Title 18 United States Code.

(b)  REPORTS ON FORM 8-K

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

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<PAGE>

                                   SIGNATURES:

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

DATED: May 14, 2004


                                  ALPHARx, INC.

                                  By:  /S/ Michael M. Lee
                                       ------------------------------
                                       Michael M.  Lee, Chief Executive Officer


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

DATED: May 14, 2004

                                   Directors:


                                        /S/ Michael M. Lee
                                        ------------------------------
                                        Michael M.  Lee, Director


                                        /S/ David Milroy
                                        ------------------------------
                                        David Milroy, Director


                                        /S/ Ford Moore
                                        ------------------------------
                                        Ford Moore, Director

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