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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB-A

[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the quarterly period ended: June 30, 2004

OR

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

Commission File Number: 000-030813

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

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


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

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

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

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

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

The number of outstanding shares of registrant's Common Stock
on May 17, 2005 was 57,508,112.

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

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ALPHARX, INC.FORM 10-QSB-A
JUNE 30, 2004
TABLE OF CONTENTS

|Interim Consolidated
    Balance Sheets as of June 30, 2004, as restated, and September 30, 2003 1
|--------------------------------------------------------------------------------------------------
|                                                                                                  
|Interim Consolidated
    Statements of Operations for the nine months ended June                  
|30, 2004,
    as restated, and June 30, 2003                                                      
|                                                                                                  
|Interim Consolidated
    Statements of Operations for the three months ended                      
|June 30,
    2004, as restated, and June 30, 2003                                                 
|                                                                                                  
|Interim Consolidated
    Statements of Shareholders' Deficiency for the nine months               
|ended
    June 30, 2004, as restated, and the year ended September 30, 2003                       
|                                                                                                  
|Interim Consolidated
    Statements of Cash Flow for the nine months ended June 30, 2004          
|,as
    restated, and June 30, 2003                                                               
|                                                                                                  
|Condensed Notes to
    Interim Consolidated Financial Statements, as restated                     
|                                                                                                  
|Management's
    Discussion and Analysis of Financial Condition and Plan                          
|of
    Operation as restated                                                                      
|                                                                                                  
|Other Information as
    restated                                                                 

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ALPHARX, INC.
INTERIM CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2004, AS RESTATED, AND
SEPTEMBER 30, 2003 
(UNAUDITED)ASSETS
June
    30,
    
    September 30,2004
    
    2003CURRENT ASSETS$
    
    $Cash
    12,707
    
    24,520Accounts
    Receivable
    17,283
    
    27,662Deferred
    financing costs
    184,999
    
    -Prepaid
    Expenses
    123,653
    
    3,690Inventory
    121,392
    
    141,905TOTAL CURRENT ASSETS
    460,034
    
    197,777PROPERTY, PLANT &
    EQUIPMENT, at costLess
    accumulated deprecation of $110,476
    222,962Less
    accumulated depreciation of $79,097
    
    
    126,535OTHER ASSETSLicensing Rights
    1
    
    230,000TOTAL ASSETS
    682,997
    
    554,312See condensed notes to the consolidated financial statements
1ALPHARX, INC.
INTERIM CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2004,AS RESTATED, AND
SEPTEMBER 30, 2003(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' DEFICIENCY

|                                              | June
    30, |  | September 30,
|--------------------------------------------- | ------------ |  | -------------
|                                              | 2004         |  | 2003         
|CURRENT LIABILITIES                           |              |  |              
|                                              | $            |  | $            
|Accounts Payable and
    Accrued Liabilities  | 527,964      |  | 254,724      
|Notes Payable                                 | 1,475,810    |  | 474,837      
|Litigation Liabilities                        | 25,000       |  | 25,000       
|                                              |              |  |              
|TOTAL CURRENT
    LIABILITIES                 | 2,028,774    |  | 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                | 5,215,029    |  | 4,024,039    
|Deficit                                       | (6,562,509)  |  | (4,225,980)  
|                                              |              |  |              
|TOTAL SHAREHOLDERS'
    DEFICIENCY            | (1,345,777)  |  | (200,249)    
|                                              |              |  |              
|TOTAL LIABILITIES AND
    SHAREHOLDERS'       | 682,997      |  | 554,312      
|DEFICIENCY                                    |              |  |              

See condensed notes to the consolidated financial statements



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ALPHARX, INC.
INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED JUNE 30,
2004, AS RESTATED, and 2003 
(UNAUDITED)

|Nine Months Ended June
    30,            | 2004          |  | 2003       
|----------------------------------------- | ------------- |  | -----------
|                                          |               |  |            
|SALES                                     | $
    371,694 |  | $ 3,739    
|                                          |               |  |            
|COST OF SALES                             | 148,046       |  | 2,830      
|                                          |               |  |            
|GROSS MARGIN                              | 223,648       |  | 909        
|                                          |               |  |            
|GENERAL AND
    ADMINISTRATIVE, SALES AND | 975,381       |  | 804,524    
|MARKETING EXPENSES                        |               |  |            
|RESEARCH AND
    DEVELOPMENT EXPENSES     | 162,568       |  | 183,569    
|DEPRECIATION                              | 31,301        |  | 20,990     
|                                          |               |  |            
|LOSS FROM OPERATIONS                      | (945,602)     |  | (1,008,174)
|                                          |               |  |            
|OTHER INCOME AND
    EXPENSES             |               |  |            
|Interest Income/(expense),net             | (1,160,928)   |  | 2          
|Other Income                              | -             |  | 10,000     
|Write down of
    Licensing Rights        | (229,999)     |  | -          
|                                          |               |  |            
|LOSS BEFORE INCOME
    TAXES, AS RESTATED | (2,336,529)   |  | (998,172)  
|                                          |               |  |            
|INCOME TAX                                | -             |  | -          
|                                          |               |  |            
|                                          |               |  |            
|NET LOSS, AS RESTATED                     | $ (2,336,529) |  | $ (998,172)
|                                          |               |  |            
|NET LOSS PER COMMON
    SHARE, BASIC &    | (0.14)        |  | (0.06)     
|DILUTED                                   |               |  |            
|                                          |               |  |            
|WEIGHTED AVERAGE
    NUMBER OF COMMON     | 17,002,866    |  | 16,102,014 
|SHARES OUTSTANDING                        |               |  |            

See condensed notes to the consolidated financial statements

3

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ALPHARX, INC.
INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED JUNE 30,
2004, AS RESTATED, AND 2003 
(UNAUDITED)

|Three Months Ended
    June 30,           | 2004        |  | 2003       
|----------------------------------------- | ----------- |  | -----------
|                                          |             |  |            
|SALES                                     | $ 9,084     |  | $ 1,241    
|                                          |             |  |            
|COST OF SALES                             | 1,861       |  | 587        
|                                          |             |  |            
|GROSS MARGIN                              | 7,223       |  | 654        
|                                          |             |  |            
|GENERAL AND
    ADMINISTRATIVE, SALES AND | 377,394     |  | 161,562    
|MARKETING EXPENSES                        |             |  |            
|RESEARCH AND
    DEVELOPMENT EXPENSES     | 122,323     |  | 28,281     
|DEPRECIATION                              | 11,739      |  | 8,858      
|                                          |             |  |            
|LOSS FROM OPERATIONS                      | (504,233)   |  | (198,047)  
|                                          |             |  |            
|OTHER INCOME AND
    EXPENSES             |             |  |            
|Interest
    Income/(expense), net        | (299,928)   |  | -          
|Other Income                              | -           |  | 10,000     
|Write down of
    licensing rights        | -           |  | -          
|                                          |             |  |            
|                                          |             |  |            
|LOSS BEFORE INCOME
    TAXES,AS RESTATED  | (804,161)   |  | (188,047)  
|                                          |             |  |            
|INCOME TAX                                | -           |  | -          
|                                          |             |  |            
|NET LOSS, AS RESTATED                     | $ (804,161) |  | $ (188,047)
|                                          |             |  |            
|NET LOSS PER COMMON
    SHARE, BASIC &    | (0.05)      |  | (0.01)     
|DILUTED                                   |             |  |            
|                                          |             |  |            
|WEIGHTED AVERAGE
    NUMBER OF COMMON     | 17,020,082  |  | 16,632,770 
|SHARES OUTSTANDING                        |             |  |            

See condensed notes to the consolidated financial statements

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ALPHARX, INC.

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

|                                    | Common Stock  | Additional | Retained   | Total       
|----------------------------------- | ------------- | ---------- | ---------- | ------------
|                                    | Number
    of |            | Paid-in    | Earnings    
|                                    | Shares        | Amount     | Capital    | (Deficit)   
|                                    |               |            |            |             
|                                    |               |            |            |             
|Balance as of                       | 15,327,341    | $1,533     | $2,897,277 | $(2,811,383)
|September 30,                       |               |            |            |             
|2002                                |               |            |            |             
|                                    |               |            |            |             
|Issuances of                        | 1,592,741     | 159        | 846,168    |             
|Common                              |               |            |            |             
|Stock                               |               |            |            |             
|                                    |               |            |            |             
|Issuance of Stock                   |               |            | 280,594    |             
|Options
    for consulting services |               |            |           
|                                    |               |            |            |             
|Net loss for the                    |               |            |            | (1,414,597) 
|Year ending                         |               |            |            |             
|September 30,                       |               |            |            |             
|2003                                |               |            |            |             
|                                    |               |            |            |             
|Balance as of                       | 16,920,082    | 1,692      | 4,024,039  | (4,225,980) 
|September 30,                       |               |            |            |             
|2003                                |               |            |            |             
|                                    |               |            |            |             
|Issuance of                         |               |            |            |             
|Common Stock                        | 100,000       | 11         | 29,990     |             
|                                    |               |            |            |             
|Issuance of                         |               |            |            |             
|Convertible Debt                    |               |            | 1,161,000  |             
|                                    |               |            |            |             
|Net
    loss,as restated, for the   |               |            |            |             
|nine month
    period               |               |            |            |             
|ending June                         |               |            |            |             
|30, 2004                            |               |            |            | (2,336,529) 
|                                    |               |            |            |             
|Balance as of                       |               |            |            |             
|June 30, 2004                       | 17,020,082    | $1,703     | $5,215,029 | $(6,562,509)

See condensed notes to the consolidated financial statements

5

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ALPHARX, INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS 
FOR THE NINE MONTH PERIOD ENDED JUNE 30, 2004, AS RESTATED, AND 2003 
(UNAUDITED)

|Nine months ended June
    30,                            | 2004         |  | 2003      
|--------------------------------------------------------- | ------------ |  | ----------
|CASH FLOWS FROM
    OPERATING ACTIVITIES                  |              |  |           
|Net Loss, as restated                                     | $(2,326,529) |  | $(998,172)
|Adjustments to
    reconcile net loss to net cash used in |              |  |           
|operating activities:                                     |              |  |           
|Depreciation                                              | 31,301       |  | 20,990    
|Write
    down of licensing rights                        | 229,999      |  | -         
|Shares
    issued for services rendered                   | 30,001       |  | 273,436   
|Options
    issued for services rendered                  |              |  | 280,594   
|Interest
    expense on convertible debt                  | 1,161,000    |  | -         
|Changes in assets and liabilities:                        |              |  |           
|(Increase) decrease in inventory                          | 20,513       |  | (67,948)  
|(Increase) decrease in accounts receivable                | 10,379       |  | (1,702)   
|Increase in prepaid expenses                              | (119,963)    |  | (12,017)  
|Increase in deferred financing costs                      | (184,999)    |  | -         
|Increase (decrease) in accounts payable and accrued       | 273,240      |  | 25,933    
|liabilities                                               |              |  |           
|NET CASH USED IN
    OPERATING ACTIVITIES                 | (885,058)    |  | (478,886) 
|                                                          |              |  |           
|CASH FLOWS FROM
    INVESTING ACTIVITIES                  |              |  |           
|Purchase of
    investments                               | -            |  | (250,000) 
|Purchase of property,
    plant & equipment               | (127,728)    |  | (17,992)  
|NET CASH USED IN
    INVESTING ACTIVITIES                 | (127,728)    |  | (267,992) 
|                                                          |              |  |           
|CASH FLOWS FROM
    FINANCING ACTIVITIES                  |              |  |           
|Issuance (repayment)
    of notes payable                 | 1,000,973    |  | 216,682   
|Proceeds from issuance
    of common stock                | -            |  | 572,891   
|NET CASH PROVIDED BY
    FINANCING ACTIVITIES             | 1,000,973    |  | 789,573   
|                                                          |              |  |           
|NET INCREASE
    (DECREASE) IN CASH                       | (11,813)     |  | 42,695    
|                                                          |              |  |           
|CASH (bank
    indebtedness), beginning of period         | 24,520       |  | (9,202)   
|                                                          |              |  |           
|CASH, end of period                                       | 12,707       |  | 33,493    

See condensed notes to the consolidated financial statements

6

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ALPHARX, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS 
JUNE 30, 2004, AS RESTATED(UNAUDITED)

NOTE 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2. NATURE OF BUSINESS AND GOING CONCERN

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

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

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

7

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NOTE 3 PROMISSORY NOTES AND DEFERRED FINANCING COSTS

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

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.

During April, 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. See also subsequent event below.

EITF 98-5 and EITF 00-27 requires recognition
of a conversion feature that is in-the-money at issuance as additional paid in
capital, measured by allocating a portion of the proceeds equal to the intrinsic
value of that feature. Accordingly interest expense of $1,161,000 has been
recognized and additional paid in capital has been increased by the same amount
via a restatement of previously reported results. See also Note 7.

The remainder of the deferred financing costs
relate to legal fees, and escrow fees in connection with the private placement
completed in July, 2004. See subsequent events note below for further detail.

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

8

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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.

NOTE 6. SUBSEQUENT EVENTS

On July 21, 2004 the Company issued 20,000,700
shares of Common Stock at $0.15 per share for gross proceeds of $3,000,105. The
Company also issued, in connection with the private placement, warrants to
purchase 20,000,700 shares of Common Stock at $0.30 per share. The warrants have
an expiry date of July 21, 2007. The Warrant is subject to mandatory redemption
at a price of $0.01 per underlying share of Common Stock if the Common Stock
trades for 10 consecutive days at a price at or above $0.90 per share.

On July 21, 2004, in connection with the
private placement mentioned above, certain convertible promissory note holders
elected to convert their promissory notes into shares of Common Stock and
warrants to purchase shares of Common Stock at $0.30 per share. Promissory Notes
plus accrued interest totalling $375,234 were converted into 3,752,340 shares of
Common Stock plus warrants to purchase 7,504,678 shares of Common Stock. It is
anticipated that all remaining convertible promissory note holders, other than
those mentioned below, will convert their notes into Common Stock plus warrants
to purchase shares of Common Stock. There remains outstanding $500,000 in
convertible promissory notes plus accrued interest as at July 21, 2004.

During July, 2004, unsecured promissory notes plus accrued
interest totalling $304,708 were repaid from the proceeds of the private
placement of Common Stock mentioned above.

NOTE 7. RESTATEMENT

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

Previously reported results did not include recognition of a
conversion feature that is in-the-money at issuance as additional paid in
capital, measured by allocating a portion of the proceeds equal to the intrinsic
value of that feature. Net loss for the nine month period ended June 30, 2004 as
previously reported was $1,175,529 and for the three month period ended June 30,
2004 was $504,161. Net loss as restated for the nine month period ended June 30,
2004 is now $2,336,529

9

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and for the three month period ended June 30, 2004 is now
$804,161. There is no change in Shareholders' deficiency nor is there any affect
on cash position as a result of this restatement.

10

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

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

General

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

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

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

We signed a licensing agreement with Andromaco Inc. in August,
2003 for the commercialization of our lead pharmaceutical products "Indaflex"
in Mexico. The Company will receive royalties from product sales. We do not
expect marketing approval from the Mexican health authority until at least the
fourth quarter of 2004. In order to market and sell Indaflex products in the US
and Canada, we will require successful completion of human and clinical trials
as well as FDA approval. We expect these trials to commence in early 2005.

11

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

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2004,
AS RESTATED, AS COMPARED TO THE NINE MONTHS ENDED JUNE 30, 2003

The Company incurred a net loss of
$2,336,529for the nine month period ended June 30, 2004 as compared to a loss of
$998,172 incurred for the same period a year ago, an increase of $1,338,357 or
approximately 134%. Included in the net loss for the nine months ended June 30,
2004 was a one time write down of VT-1 licensing rights in the amount of
$229,999. 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. Also included in the net loss, as restated, was interest expense in the
amount of $1,161,000 related to the issuance of convertible debt.

The Company has generated noticeable gross margins for the
first time this year, derived from the sale of Flexogan products. Gross margins
of approximately 60% or $223,648 were generated from sales of $371,694 for the
nine month period ended June 30, 2004. Loss from Operations was $945,602 for the
nine month period ended June 30, 2004 as compared to $1,008,174 incurred for the
same period a year ago, a reduction of $62,572 or approximately 6%.

Sales

Sales for the nine months ended June 30, 2004 were $371,694 as
compared to $3,739 generated for the same period a year ago, an increase of
$367,955. During the first three quarters of our fiscal year we placed our
Flexogan products with three national retail chains including Shoppers Drug Mart
Ltd., and Loblaws Companies Ltd. The market for arthritic and muscle pain
creams, which Flexogan is addressing, is competitive, and additional marketing
expenditures will have to be incurred in order to increase revenue growth and
gain additional market share.

Gross Margin

Cost of Sales for the nine month period ended June 30, 2004
was $148,046 as compared to $2,830 incurred for the same period a year ago.
Resulting Gross Margin increased to $223,648 or approximately 60% of sales as
compared to Gross Margin of $909 or approximately 24% of sales for the same
period a year ago.

Sales and Marketing, General and Administrative Expenses

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Sales and Marketing, General and Administrative expenses
consist primarily of sales and marketing expenditures, personnel costs related
to general management functions, finance, inventory logistics, office overheads,
as well as insurance costs and professional fees related to legal, audit and tax
matters. Sales and Marketing, General and Administrative expenses for the nine
months ended June 30, 2004 were $975,381 as compared to $ 804,524 incurred for
the same period a year ago, an increase of $170,857 or approximately 21%.

Approximately $447,000 or 46% of these expenses incurred for
the nine months ended June 30, 2004 related to marketing of Flexogan in Canada.
We expect to continue with sales and marketing expenditures in order to
establish brand awareness, and increase market share, as well as introduction of
new products in the future.

The remainder of these expenses incurred for the nine month
period ended June 30, 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 nine months ended
June 30, 2004 were $162,568 as compared to $183,569 incurred for the same period
a year ago, a decrease of $21,001 or approximately 11%. 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 as we accelerate the development and testing of our
Indaflex drug candidate.

Loss from Operations

Loss from operations were $945,602 for the nine months ended
June 30, 2004 as compared to a loss of $1,008,174 incurred for the same period a
year ago, a decrease of $62,572 or approximately 6%. Gross margins of $223,648
as well as reduced staff costs helped to offset net increases in other operating
expenses. Those increases result primarily from increases in marketing
expenditures where approximately $447,000 was incurred for the nine months ended
June 30, 2004 as compared to approximately $17,000 incurred for the same period
a year ago.

Interest Expense, net

We issued $861,000 in senior convertible notes during the
three month period ended March 31, 2004 and we issued $300,000 in senior
convertible notes during the three months ended June 30, 2004. At the time of
issuance the trading price of our stock exceeded the conversion price. This in

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turn, required interest expense to be reflected in the amount
of $1,161,000 with no comparable expense in the same period a year ago.

LIQUIDITY AND CAPITAL RESOURCES

As at June 30, 2004 the Company had a working
capital deficiency of $1,568,740 compared to $556,784 as at September 30, 2003.
The bulk of the deficiency relates to promissory notes plus accrued interest
outstanding totalling $1,475,810.

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

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

We expect to continue to spend capital on:

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

The inability to raise capital 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, and for certain research
equipment.

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

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

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

The Company's management, with the participation of the
Company's Chief Executive Officer and Chief Financial Officer has evaluated the
effectiveness of the Company's disclosure controls and procedures as of June 30,
2004. Despite the restatement of financial information reported in this amended
quarterly report, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective for gathering, analyzing and disclosing the information the Company is
required to disclose in the reports it files under the Securities Exchange Act
of 1934, within the time periods specified in the SEC's rules and forms.

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PART II: OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

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

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

No shares of common stock were issued during the three months
ended June 30, 2004.

The Company issued senior secured convertible
promissory notes to 10 investors during February and March, 2004 in exchange for
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, payable in cash or in-kind securities at the
election of the placement agent. 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%.
These securities were sold in reliance on the exemption provided by Rules 506 of
Regulation D under the Securities Act of 1933. During July, 2004 the Company
repaid these promissory notes plus accrued interest totaling $304,708 in
aggregate, from proceeds of a private placement of Common Stock described below.
Commission in the amount of 10% of the principal is payable to the placement
agent in the form of cash or in-kind securities at the election of the placement
agent.

Following the end of the period covered by
this report, on July 21, 2004 the Company issued 20,000,700 shares of Common
Stock for gross proceeds of $3,000,105, plus warrants to purchase an additional
20,000,700 shares of Common Stock at $0.30 per share. These warrants expire July
21, 2007. These shares of Common Stock and warrants were issued pursuant to Rule
506 of Regulation D under the Securities Act of 1933. Gross proceeds were used
to repay promissory

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notes mentioned above and the remainder of the proceeds are to
be used for advancing Indaflex development, and other general corporate
purposes.

On July 21, 2004, certain note holders
converted $375,234 of promissory notes plus accrued interest into 3,752,340
shares of Common Stock. These note holders also received warrants to purchase
7,504,678 shares of Common Stock at $0.30 per share. These warrants expire July
21, 2007.

As a result of the above transactions the
Company had 40,773,122 shares of Common Stock outstanding as at July 21, 2004.
Additionally, there are warrants outstanding to purchase 31,501,177 shares of
Common Stock, ranging in price from $0.10 to $1.10 and expiring between the
period December 19, 2004 and July 21, 2007.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 - OTHER INFORMATION

None.

ITEM 5 - 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

Not applicable

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SIGNATURES:

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

DATED: May 18, 2005

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


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