SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
     1934. For the fiscal year ended: September 30, 2000

                                       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)


                             10-75 East Beaver Creek
                             Ontario L4B 1B8, Canada
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (905) 762-0745

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

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.001 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 ___

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained,  to the best of registrant's
knowledge,  in  definitive  proxy  or  information  statements  incorporated  by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[ ]
<PAGE>

Registrant's  revenues  for its fiscal year ended  September  30, 2000 (its most
recent fiscal year) were $0.00.

The aggregate market value of registrant's Common Stock (the only class of stock
outstanding) held by non-affiliates of the registrant on October 30, 2000, based
upon the closing  price of the Common  Stock on the NASD OTC  Bulletin  Board on
such date, was approximately $59,265,996.

The number of  outstanding  shares of  registrant's  Common Stock on October 30,
2000 was 49,388,330.

<PAGE>


                                  ALPHARx, INC.

                             2000 FORM 10-KSB REPORT

                                TABLE OF CONTENTS

PART I ....................................................................    1

   ITEM 1. BUSINESS .......................................................    1

   ITEM 2. PROPERTIES .....................................................   20

   ITEM 3. LEGAL PROCEEDINGS ..............................................   20

   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............   20


PART II ...................................................................   21

   ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
   STOCKHOLDER MATTERS ....................................................   21

   ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
   CONDITION AND RESULTS OF OPERATIONS ....................................   22

   ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ....................   24

   ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
   ACCOUNTING AND FINANCIAL DISCLOSURE ....................................   25


PART III ..................................................................   25

   ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .............   25

   ITEM 10. EXECUTIVE COMPENSATION ........................................   27

   ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
   AND MANAGEMENT .........................................................   28

   ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ................   29

   ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
   AND REPORTS ON FORM 8-K ................................................   29



"SAFE HARBOR"  STATEMENT UNDER THE PRIVATE  SECURITIES  LITIGATION REFORM ACT OF
1995:  This Annual  Report on Form 10-KSB  contains  forward-looking  statements
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of the  Securities  Exchange  Act of 1934 which are not  historical  facts,  and
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially  from those  expected  and  projected.  Such risks and  uncertainties
include the  following:  constraints  on our financial and personnel  resources,
competitive  factors,  receipt of FDA  approval  and/or  compliance  with United
States or foreign governmental regulations and our exposure to potential product
liability  risks,  and those set forth under  "Certain  Factors  that may Affect
Future Results" and elsewhere in this Annual Report on Form 10-KSB.  Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof.  We have no obligation to publicly release the
result  of  revisions  to  these  forward-looking  statements  as  a  result  of
occurrences  after the date hereof or to reflect the occurrence of unanticipated
events.

<PAGE>


                                     PART I

ITEM 1. BUSINESS
COMPANY OVERVIEW

     In this Annual Report on Form 10-KSB, the "company," "AlphaRx," "we," "us,"
and "our," refer to AlphaRx, Inc.

     We are a development stage drug delivery company  incorporated in the State
of Delaware on August 8, 1997. We formulate and commercialize controlled-release
therapeutic products using our proprietary drug delivery technologies,  which we
believe,  can be combined with a broad range of  therapeutic  products.  We have
applied our proprietary  drug delivery  technologies  and formulation  skills in
four applications:

     Pain Management - developing generic versions of select brand name oral and
topical NSAID pharmaceuticals;

     Oral Care Management - developing antimicrobial dental varnish,  controlled
release mouth rinse and toothpaste;

     Nutraceuticals  -  developing  bioavailable  specialized  supplements  with
therapeutic benefits; and

     Immnomodulators  - developing  heterocyclic  cyclopentene  derivatives with
immunostimulating and anti-inflammatory activities.

     We   believe    pharmaceutical    companies    are    increasingly    using
controlled-release   drug  delivery   technologies   to  improve  drug  therapy.
Controlled-release  drug delivery technologies generally provide more consistent
and appropriate  drug levels in the bloodstream  than  immediate-release  dosage
forms and thereby may  improve  drug  efficacy  and reduce side  effects.  These
technologies  also  allow  for  the  development  of  "patient-friendly"  dosage
formulations  by  reducing  the  number of times a drug  must be taken,  thereby
improving  patient   compliance.   Controlled-release   pharmaceuticals  can  be
especially beneficial for certain patient populations,  such as the elderly, who
often require several medications with differing dosing regimens.

     We believe  the  market for  advanced  drug  delivery  systems is large and
growing  rapidly.  Based on published  data, the market for  orally-administered
drugs that utilize  sustained and  controlled-release  drug delivery  systems is
expected to increase to approximately $50 billion in 2005 from approximately $10
billion in 1995.  We also  believe  that  pharmaceutical  companies  that do not
themselves have  controlled-release drug delivery technology expertise will rely
upon third parties, such as AlphaRx, to apply such technologies to their product
candidates.

     We  intend  to  use  our   proprietary   drug  delivery   technologies   in
collaborative   arrangements   with   pharmaceutical   companies   to  formulate
controlled-release  versions of


                                       1
<PAGE>


their existing  commercialized drugs as well as drugs under development by them.
By  improving  drug  efficacy  and reducing  side  effects,  we believe our drug
delivery technologies will provide pharmaceutical companies with the opportunity
to  enhance  the  commercial  value  of  their  existing  products  and new drug
candidates.  We also intend to develop either  independently  or jointly certain
off-patent and over-the-counter  ("OTC") products utilizing our proprietary drug
delivery technologies.

PRINCIPAL PRODUCT AND SERVICES AND PRINCIPAL MARKETS

     We are engaged in developing novel  formulations of existing drugs that are
insoluble or poorly  soluble in water,  utilizing  our  proprietary  Bioadhesive
Colloidal  Dispersion  (BCD) drug delivery  systems.  Our strategy is to develop
patentable  improved  formulations  of such drugs that are soluble in both human
and  veterinary  medicines.  Our  BCD  drug  delivery  technology  includes  two
different approaches to improve the effectiveness of insoluble drugs and provide
new methods of delivery, namely, (i) CLD (Colloidal Lipid Dispersion System) and
(ii) SECRET (Self Emulsifying Controlled Release Tablet System).

     Insoluble   or  poorly   soluble   drugs  are  a  major   problem  for  the
pharmaceutical  industry,  with over one-third of the drugs listed in the United
States'  Pharmacopoeia being insoluble or poorly soluble in water. Further, most
approaches used to overcome  insolubility  result in clinical  problems  ranging
from poor and erratic  bioavailability  to serious  side  effects.  The BCD drug
delivery  technology is designed to develop drugs with major medical advantages,
such as lower dosing,  fewer side effects and alternative  dosage forms, as well
as commercial advantages, such as extended patent protection and broader use.

     We have a number of drugs  under  development,  certain  of which have been
successfully reformulated, utilizing our BCD technology. Our central strategy is
to  seek  alliances  with  pharmaceutical  companies  which  will  assist  us in
completing  the  reformulation  and  development  of the drugs  and  which  will
initiate clinical trials and commercialize the products.

PRODUCT PIPLELINE

     The  following  is a list  of  some  of  our  products  in the  development
pipeline:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
BRAND NAME                  APPLICATION                    DELIVERY TECHNOLOGY     STAGE           MARKET SIZE
------------------------------------------------------------------------------------------------------------------
<S>                         <C>                            <C>                     <C>             <C>
PAIN MANAGEMENT                                                                                    US$ 3 BILLION
------------------------------------------------------------------------------------------------------------------
Flexigan cream              Arthritis                      Transdermal/CLD         Pre-clinical
------------------------------------------------------------------------------------------------------------------
Indoflex cream              Arthritis                      Transdermal/CLD         Pre-clinical
------------------------------------------------------------------------------------------------------------------
Flexigan IR & ER tablet     Arthritis                      Oral/SECRET             R&D
------------------------------------------------------------------------------------------------------------------
Indoflex IR & ER tablet     Arthritis                      Oral/SECRET             R&D
------------------------------------------------------------------------------------------------------------------
ORAL HEALTH                                                                                        US$ 1 BILLION
------------------------------------------------------------------------------------------------------------------
ChlorSM Mouth Rinse         Anti-gingivitis, Anti-plaque   Oral/CLD                Pre-clinical
------------------------------------------------------------------------------------------------------------------
ChlorSM Toothpaste          Anti-gingivitis, Anti-plaque   Oral/CLD                Pre-clinical
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       2
<PAGE>


<TABLE>
------------------------------------------------------------------------------------------------------------------
<S>                         <C>                            <C>                     <C>             <C>
OTC Mouth Rinse             Anti-plaque, Breath control    Oral/CLD                Pre-clinical
------------------------------------------------------------------------------------------------------------------
OraEase Lozenges            Periodontal Disease            Oral/SECRET             Available
------------------------------------------------------------------------------------------------------------------
NUTRACEUTICALS                                                                                     US$ 9 BILLION
------------------------------------------------------------------------------------------------------------------
Q10 ER                      Hearth Health                  Oral/SECRET             Available
------------------------------------------------------------------------------------------------------------------
Trivital C                  General Health                 Oral/SECRET             Available
------------------------------------------------------------------------------------------------------------------
Reishi Biosomes             Immune Health                  Oral/SECRET             Available
------------------------------------------------------------------------------------------------------------------
TetraPherol                 General Health                 Oral/SECRET             Available
------------------------------------------------------------------------------------------------------------------
ACE Biosomes                Antioxidant                    Oral/SECRET             R&D
------------------------------------------------------------------------------------------------------------------
LipoBloc                    Cholesterol Lowering           Oral/SECRET             Available
------------------------------------------------------------------------------------------------------------------
LipoLette                   Weight-loss                    Oral/SECRET             Available
------------------------------------------------------------------------------------------------------------------
IMMNOMODULATORS                                                                                    US$ 2 BILLION
------------------------------------------------------------------------------------------------------------------
ARX-2001                    AIDS                           Undetermined            R&D
------------------------------------------------------------------------------------------------------------------
ARX-2002                    Cancer                         Undetermined            R&D
------------------------------------------------------------------------------------------------------------------
ARX-2003                    Arthritis                      Undetermined            R&D
------------------------------------------------------------------------------------------------------------------
</TABLE>

OVERVIEW OF THE DRUG DELIVERY INDUSTRY

     Drug  delivery  companies  apply  proprietary  technologies  to create  new
pharmaceutical  products utilizing drugs developed by others. These products are
generally  novel,  cost-effective  dosage  forms that may provide any of several
benefits,  including better control of drug concentration in the blood, improved
safety and efficacy, and ease of use and improved patient compliance. We believe
drug delivery technologies can provide pharmaceutical  companies with a means of
developing new products as well as extending existing patents.

     The increasing need to deliver medication to patients  efficiently and with
fewer side effects has accelerated the development of new drug delivery systems.
Today,  medication can be delivered to a patient through many different means of
delivery,  including transdermal (through the skin), injection, implant and oral
methods. These delivery methods,  however, continue to have certain limitations.
Transdermal  patches are often  inconvenient to apply,  can be irritating to the
skin and the  rate of  release  can be  difficult  to  control.  Injections  are
uncomfortable  for most  patients.  Implants  generally  are  administered  in a
hospital or  physician's  office and  frequently  are not suitable for home use.
Oral  administration  remains the preferred method of administering  medication.
Conventional  oral drug  administration,  however,  also has limitations in that
capsules and tablets have limited  effectiveness  in providing  controlled  drug
delivery,  resulting  frequently  in drug  release  that is too  rapid  (causing
incomplete  absorption  of the drug),  irritation to the  gastrointestinal  (GI)
tract and other side effects.  In addition  capsules and tablets  cannot provide
localized therapy.

     In  recent  years,  drug  delivery  companies  have  been  able to  develop
innovative and efficient  solutions to some of the  limitations of  conventional
oral drug  administration.  For  example,  the  improved  oral  delivery  system
developed by ALZA in the 1980's reduced the side effects and dosing frequency of
the hypertension  drug,  Procardia(R).  The improved  product,  Procardia XL(R),
resulted in substantially  increased sales and the new formulation  extended the
patent life on  Procardia(R).  We believe our BCD Systems have the  potential to
offer  similar  opportunities  of improved  therapy and extended  patent life to
pharmaceutical and biotechnology companies.

                                       3
<PAGE>


BIOADHESIVE COLLODIAL DISPERSION (BCD) SYSTEMS

     Our proprietary Bioadhesive Colloidal Dispersion (BCD) oral and transdermal
drug delivery  technologies  permit  formulations of  drug-containing  polymeric
units  that allow  controlled  delivery  of an  incorporated  hydrophobic  drug.
Although our  formulations  are  proprietary,  the polymers  utilized in our BCD
Systems are commonly used in the food and drug  industries.  By using  different
formulations  of the  polymers,  we believe  our BCD Systems are able to provide
continuous,  controlled  delivery of drugs of varying  molecular  complexity and
solubility.

     The  BCD  Systems  are  designed  to  provide   orally  and   transdermally
administered,  conveniently dosed,  cost-effective drug therapy in a continuous,
controlled  delivery  over a  multihour  period.  We believe our BCD Systems may
provide one or more of the following  therapeutic  advantages over  conventional
methods of drug administration:

     1. Enhanced Safety and Efficacy. We believe our BCD Systems may improve the
ratio  of  therapeutic  effect  to  toxicity  by  decreasing  the  initial  peak
concentrations of a drug, associated with toxicity,  while maintaining levels of
the drug at therapeutic, subtoxic concentrations for an extended period of time.
Many drugs demonstrate  optimal efficacy when  concentrations  are maintained at
therapeutic  levels over an extended period of time. When a drug is administered
intermittently,  the therapeutic concentration is often exceeded for some period
of time,  and then  rapidly  drops  below  effective  levels.  Excessively  high
concentrations  are  a  major  cause  of  side  effects,   while  subtherapeutic
concentrations are ineffective.

     2. Greater  Patient and Caregiver  Convenience.  We believe our BCD Systems
may permit once-daily dosing for certain drugs that are currently required to be
administered  several  times daily,  thereby  promoting  compliance  with dosing
regimens.  Patient  noncompliance  with dosing regimens has been associated with
increased costs by prolonging  treatment duration,  increasing the likelihood of
secondary or tertiary disease manifestation and contributing to over-utilization
of medical personnel and facilities. By improving patient compliance,  providers
and  third-party  payors  may  reduce   unnecessary   expenditures  and  improve
therapeutic outcomes.

     3.  Expanding  the Types of Drugs  Capable of Oral  Delivery.  Some  drugs,
including  certain proteins  (complex organic compounds of high molecular weight
containing  numerous amino acids) and peptides (low molecular  weight  compounds
consisting of two or more amino acids),  because of their large  molecular  size
and   susceptibility   to  degradation  in  the  GI  tract,  must  currently  be
administered by injection or by continuous infusion,  which is typically done in
a hospital or other clinical setting. We believe our BCD Systems may permit some
of these drugs to be delivered orally and/or transdermally.

     4.  Proprietary  Reformulation  of Generic  Products.  We  believe  our BCD
Systems  offer the potential to produce  improved  proprietary  formulations  of
off-patent drugs,

                                       4
<PAGE>


differentiated   from  the   existing   generic   products  by  reduced   dosing
requirements, improved efficacy, decreased toxicity or additional indications.

BACKGROUND

     To be  effective,  drugs must  reach an  intended  site in the body,  at an
effective concentration,  for an appropriate length of time. Traditional methods
of drug  administration,  such as oral ingestion,  intramuscular and intravenous
injections and inhalation,  are effective for a wide variety of drugs. Depending
upon the drug, however, each method may have disadvantages. For example, in oral
administration,  a drug  must pass  through  the  gastrointestinal  system to be
absorbed and may be  metabolized  or broken down in the stomach,  intestines  or
liver, resulting in the therapeutic  availability of a lower amount of effective
drug.  As a  result,  higher  dosages  of the drug must be used to  produce  the
desired effect,  which may cause  irritation of the  gastrointestinal  tract and
systemic toxicity.

     Additionally, the rate at which an orally administered drug is absorbed may
vary depending on several factors, including the drug's chemical properties, the
length of time the drug remains in the gastrointestinal  tract and the patient's
meal patterns.  Although the pharmaceutical  industry has investigated a variety
of  alternative  approaches  for  addressing  drug  adverse  events  and loss of
efficacy following oral dosing, by enteric coating of tablets,  formulating with
various  waxes and  cellulosic  materials,  microencapsulation  and  compressing
tablets in various layers,  the beneficial  effects are not always  reproducible
from patient to patient or effective in modifying  metabolic effects produced in
the liver.

COLLOIDAL LIPID DISPERSION (CLD) SYSTEM

     Our  CLD  system  is  a  topical  drug  delivery  technology  which  permit
pharmaceutical  formulations (creams,  gels,  solutions,  etc.) that enhance the
transdermal  delivery  of  drugs  into the  skin or into  the  bloodstream.  CLD
compounds,  combined  with polymers and  adhesives,  can also be used with patch
formats to achieve the  transdermal  delivery of selected drugs. We believe that
CLD compounds enhance the diffusion of drugs into and through the skin by making
the  outer  layer of the  skin  (stratum  corneum)  more  permeable  to the drug
molecule.  Transdermal delivery provides an alternative to other methods of drug
administration (injection,  oral dosage forms, inhalation,  etc.), and may allow
selected drugs to be administered more  effectively,  at lower doses, with fewer
adverse events and improved patient compliance.

     Our CLD system  utilizes oil in water emulsions with a mean droplet size of
100-200 nm that are suitable for  incorporation of lipophilic  drugs.  Drugs are
dissolved in the liquid oil core or incorporated  into the oil/water  interface,
according  to the drug's  hydrophobicity.  We  believe  our CLD system is unique
compared  with other drug delivery  systems  because our utility is dependent on
the  physico-chemical  properties  of the drug (i.e.  insolubility  and  surface
properties) rather than the chemical structure and reactivity.

                                       5
<PAGE>


     We develop  specific  CLD  formulations  for use with  non-proprietary  and
proprietary  drugs,  which  we  plan  to  commercialize   through  partnerships,
strategic  alliances and license  agreements with the  pharmaceutical  companies
manufacturing these products.

SELF EMULSIFYING CONTROLLED RELEASE TABLET (SECRET) SYSTEMS

     Our SECRET system is a  self-emulsifying,  controlled release drug delivery
system for the systemic oral  administration of hydrophobic  (lipophilic) drugs.
Oral absorption improvement and bioavailability enhancement of hydrophobic drugs
are achieved using  self-emulsifying  oily  preparations.  In combination with a
biodegradable  polymeric matrix,  SECRET is capable of delivering these drugs to
the biological  target in a  sustained-release  manner over prolonged periods of
time without the loss of bioavailability.

     SECRET  presents  a novel way to  increase  the oral  bioavailability  of a
lipophilic  substance  over a desired  target site in a prolonged  and sustained
manner. More particularly,  SECRET consists of a solid dispersion comprising the
lipophilic substance,  a surfactant system having a melting point close to human
body  temperature  and  an  oil  component  in  a  biocompatible,  biodegradable
polymeric matrix that does not interact with the entrapped compositions.

     After the  polymeric  matrix  erodes at the desired  target site, it slowly
releases the entrapped  compositions  and, after mixing with body fluids,  these
compositions  undergo quick dissolution with resultant  emulsification,  thus an
oil-in-water  emulsion is formed,  the  droplets of which have a diameter  below
about 100 nm (0.1(mu)m).  Emulsions  having tiny droplets as those obtainable in
accordance  with  the  SECRET  formulations  were  hitherto  obtainable  only by
employing a complex  homogenization  procedure  involving  the use of  intricate
equipment.  Another feature of SECRET is the incorporation of a self-emulsifying
composition  in a  swellable  polymeric  matrix,  which is  suitable  for tablet
formation,  unlike  conventional  self  emulsifying oily  formulations  that are
preferably encapsulated in a sealed soft or hard gelatin capsule.

     SECRET is unique  compared  to other  drug  delivery  systems  because  our
utility  is  dependent  on the  physico-chemical  properties  of the drug  (i.e.
insolubility  and surface  properties)  rather than the chemical  structure  and
reactivity.

     Testing to date has demonstrated significant  pharmaceutical and biological
advantages for our SECRET  formulations as compared to standard Self Emulsifying
Drug Delivery System preparations.

     The  principal   excipients   used  in  SECRET   formulations   are  highly
biocompatible and acceptable to the FDA. SECRET formulated water-insoluble drugs
offer the following benefour: (i) lower toxicity  formulations;  (ii) controlled
absorption  with resultant  reduction in peak to trough  ratios;  (iii) targeted
release of the drug to specific areas within the  gastrointestinal  tract;  (iv)
absorption  irrespective  of the feeding state;  (v) minimal  potential for dose
dumping;  (vi) improved oral bioavailability;  (vii) enhanced

                                       6
<PAGE>


stability;   (viii)  improved  dissolution  rate;  (ix)  less  irritation;   (x)
bioadhesive  to  mucous  membranes  for  maximum  penetration;  (xi)  high  drug
payloads; and (xii) lower production cost.

DISTRIBUTION METHODS OF THE PRODUCTS AND SERVICES

     We intend to have the BCD Systems used with as many pharmaceutical products
as possible.  Our primary strategy is to establish  collaborative  relationships
with pharmaceutical and biotechnology  companies to develop improved therapeutic
products  utilizing  our BCD Systems  technology.  The products  will be jointly
developed,  with the  collaborative  partner  having primary  responsibility  to
clinically  test,  manufacture,  market and sell the  product,  and we retaining
ownership of our  technologies.  We believe that our  partnering  strategy  will
enable it to reduce our cash  requirements  while  developing a larger potential
product portfolio.  By providing new formulations of existing products using the
BCD Systems, We believes it will not only be able to offer our partners improved
products  but also may provide them with the ability to extend the life of their
patents on such  products,  especially  attractive to  pharmaceutical  companies
whose patents on existing products are close to expiration.  Collaborations with
pharmaceutical  and  biotechnology  companies are expected to provide  near-term
revenues from sponsored development  activities and future revenues from license
fees and royalties relating to the sale of products.

     We have  identified  as potential  partners  six  companies we believe have
drugs which can derive  potential  benefits  utilizing  the BCD Systems and have
initiated preliminary discussions with some of these companies.  There can be no
assurance  that  any of  these  discussions  will  lead to our  entering  into a
development  agreement  with a  collaborative  partner or, if such  agreement is
entered into, that such collaboration will lead to the successful development of
a product.

     We also intend to develop  over-the-counter  (OTC) and/or  off-patent  drug
products utilizing our BCD Systems,  either independently or jointly by entering
into  collaborative  partnerships  with  pharmaceutical,  biotechnology or other
healthcare  companies.  To reduce costs and time-to-market,  we intend to select
those products that treat  indications  with clear-cut  clinical  end-points and
that are  reformulations  of existing  compounds already approved by the FDA. We
believe that products  utilizing the BCD Systems will provide  favorable product
differentiation in the highly  competitive  generic and OTC drug product markets
at costs below those of other drug delivery systems, thereby enabling We and our
collaborative  partners  to  compete  more  effectively  in  marketing  improved
off-patent  and OTC drug  products.  We are also seeking to establish  alliances
with overseas  sales and  marketing  partners for the initial sale of our future
generic  products.  We  believe  that  due  to  the  more  favorable  regulatory
environments in some foreign countries, it may be able to generate revenues from
these markets while awaiting FDA approval in the United States.

                                       7
<PAGE>


PAIN MANAGEMENT

Arthritis Overview

     Arthritis is a condition in which one or more joints becomes  inflamed.  It
is the most common chronic  condition in North America.  Some forms of arthritis
(such as tendinitis  and bursitis)  can be cured  completely  but most forms are
chronic.  Current  treatment  and  therapy  can  only  alleviate  pain,  relieve
stiffness  and  prevent  the  disease  from  progressing  and  deformities  from
occurring.  Each of  these  diseases  has a  different  cause  and  may  require
different medications and treatments.

     Arthritis afflicts an estimated 10% of the world's population. With over 40
million people  afflicted by the disease in North America,  arthritis  costs the
U.S. economy between $54.6 and $64.8 billion per year in medical,  care and lost
wages .

     Osteoarthritis  (OA) is a degenerative joint disease in which the cartilage
that covers the ends of bones in the joint  deteriorates,  causing pain and loss
of movement as the bones begin to rub against each other.  OA is the most common
form of  arthritis.  The motion of the joint becomes more limited as the disease
progresses.  The joints most  commonly  hit by  osteoarthritis  are the fingers,
hips, and knees.  Rheumatoid  arthritis (RA) is a systemic autoimmune  disorder,
characterized  by  inflammation of the synovial lining of the joints leading not
only to joint damage but also to systemic symptoms such as fever,  anemia,  lack
of energy, and loss of appetite.

     NSAIDs are drugs employed for their anti-inflammatory  properties. They are
heterogeneous  in chemical  structure and diverse in  mechanisms of action,  but
they share the important property of inhibiting prostaglandin (PG) biosynthesis.
Although these drugs effectively inhibit inflammation, there is no evidence that
they alter the course of an arthritic disorder.

Products under Development

     We have two topical NSAID products under development:

           ---------------------------------------------------------------------
           BRAND NAME           ACTIVE INGREDIENT            STATUS
           ---------------------------------------------------------------------
           Flexigan             1.0% Diclofenac              Pre-clinical
           ---------------------------------------------------------------------
           Indoflex             2.0% Indomethacin            Pre-clinical
           ---------------------------------------------------------------------

     FLEXIGAN - Flexigan is a clear,  non-smelling  topical  formulation of CLD,
which  transports and delivers one of the most  effective and widely  prescribed
NSAIDs,  diclofenac,   through  the  skin  eliminating  the  problems  typically
associated with oral NSAIDs.

     Flexigan  does not  irritate  the skin when the cream is applied  topically
causing  Indomethaic to penetrate  rapidly and deeply into the affected parts of
the body due to the CLD formulation.  CLD are oil-in-water emulsions composed of
lipid phase,  emulsified in

                                       8
<PAGE>


aqueous  medium with the aid of natural  emulsifiers.  CLD do not  contain  such
chemical enhancers  propylene glycol,  alcohol or Azone and are therefore highly
acceptable and of low irritancy.


     INDOFLEX  - Like  Flexigan,  Indoflex  is a topical  NSAID  formulation  of
indomethacin in CLD.

Controlled Release NSAIDs in Self Emulsifying Tablets

     Oral  NSAIDs,  such  as  Indomethacin  and  Diclofenac  have  a  pronounced
irritating  action in the  gastrointestinal  (GI) level and  stomach.  Different
enteric-coated, extended-release,  delayed-release, buffered capsules or tablets
or oral suspension  formulations may reduce this side effect,  however, they are
often in an undesirable range and costly to produce.

     NSAIDs in emulsion are less  irritating to the GI and also  bioavailability
and absorption  kinetic of active  ingredient are also improved.  Currently,  we
have  developed  two oral NSAID  products  that utilize the SECRET drug delivery
system:

   --------------------------------------------------------------------------
   BRAND NAME          ACTIVE INGREDIENT         STATUS
   --------------------------------------------------------------------------
   Flexigan            25 & 50 mg Diclofenac     Research & development
   --------------------------------------------------------------------------
   Indoflex            25 & 50 mg Indomethacin   Pre-clinical
   --------------------------------------------------------------------------
   Flexigan ER         100 mg Diclofenac         Research & development
   --------------------------------------------------------------------------
   Indoflex ER         50 mg Indomethacin        Pre-clinical
   --------------------------------------------------------------------------


ORAL CARE MANAGEMENT

Overview

     The  worldwide  oral care market is  estimated  to exceed  $7.0  billion in
annual retail sales. Annual oral care sales in North America are estimated to be
$2.8  billion in 1999 and are  projected to reach $3.0 billion by the year 2000.
It is estimated  that the oral care  products will grow at an annual rate of 10%
internationally for the next 10 years with the highest growth rate in developing
countries such as China.

     We  intend  to  be  a  provider  of  proprietary   oral  care  products  to
international  consumers  using a scientific  approach  that will  significantly
reduce the  long-term  costs of dental care.  We are focused on  developing  and
marketing  proprietary  oral care products to treat the cause of tooth decay and
gum disease.  We seek to establish  distinctive  brand identity  emphasizing the
enhanced  therapeutic  benefits  of  our  oral  care  products,  which  will  be
communicated to both consumers and dental professionals.

     Traditional  dentistry  is  shifting  away  from  treating  symptoms  (i.e.
drilling and filling  cavities) and moving towards taking  preventive  action to
treat the cause of tooth decay and gum disease. This shift is caused by mounting
scientific  evidence  that tooth

                                       9
<PAGE>


decay  and gum  disease  are  medical  conditions  caused by  chronic  low-grade
bacterial infections that can be prevented and treated with antimicrobial agents
such as Chlorhexidine and Fluoride.

     Secondly,  in  response  to rising  costs and  decreasing  access to dental
treatments,  consumers' interest in self-diagnosis and preventive treatment have
grown dramatically.  Additionally,  consumers are becoming increasingly aware of
the  importance  of oral  hygiene.  Consumers  are looking for value and product
innovation that emphases therapeutic values.

     We are focused on developing and marketing  therapeutic  oral care products
based on  proprietary  formulations  and  technologies.  Our products  treat the
bacterial  infections that cause tooth decay and gingivitis.  Through scientific
studies it has been shown that our  formulations  stop the  demineralization  of
tooth enamel.

     We believe that the  effectiveness of oral care products depend on how long
our active agents stay in the mouth.  Most of the  commercially  available  oral
care  formulations  have suffered from a number of drawbacks,  including lack of
suitability   of  the  carrier  for  our  intended  use.  Most  of  these  known
formulations suffer an inability to carry a large amount of the active agent and
to ensure a controlled and prolonged  release  thereof at the desired site. This
inability is particularly  undesirable,  since most  biologically  active agents
must remain at the desired site for a prolonged period in order to be effective.

     Our oral care  products are based on the active  ingredients  chlorhexidine
and sodium fluoride in proprietary  formulations  that  effectively  control the
release of  chlorhexidine  in the oral cavity over an extended period of time to
provide a sustained  antimicrobial  activity  against  tooth  "demineralization"
(whereby  sodium  fluoride  induces the uptake of minerals,  such as calcium and
phosphate), which enhances tooth "remineralization".

Role of Bacteria in Dental Pathology

     Although  there are many  origins for the  conditions  commonly  treated by
dentists  (ranging  from  tumors  of the oral  cavity to  trauma  induced  tooth
injuries),  a common feature of the two major dental diseases is the role played
by bacteria.  In particular it is well established that tooth decay and most gum
diseases result from bacterial infections.

     Tooth  decay,  or caries,  refers to a hole or cavity in the surface of the
tooth.  Depending  on the  length  of time  from  our  inception,  the  hole may
penetrate  only the top surface of the tooth (the enamel) or may penetrate  past
the dentin (the bone-like  material which is the main  constituent of the tooth)
into the pulp. The scientific  literature has established quite clearly that one
species of bacteria, STREPTOCOCCUS MUTANS (S. MUTANS - actually a group of seven
closely  related  bacteria) is  responsible  for the onset of tooth decay.  This
bacterium  grows on the surface of the teeth in almost all  individuals.  In the
presence  of  sugars  and  starches  in the  diet,  S.  MUTANS  metabolizes  the
carbohydrate and

                                       10
<PAGE>


produces acids.  Acids  demineralize  the calcium  phosphates that are the major
mineral   constituent  of  tooth  enamel  and  the  decay  process  begins.  Our
proprietary oral care products,  kill S. MUTANS to prevent further cavities. The
evidence for the primary role of S. MUTANS in tooth decay is manifold, including
the following:  significant  correlation  between S. MUTANS counts in saliva and
plaque and the incidence of caries.(i)  the  correlation of S. MUTANS counts and
the  progression  of tooth decay;  (ii) S. MUTANS can be isolated from the tooth
surface before initiation of a cavity;  (iii) infection of experimental  animals
with S.  MUTANS  procedures  high  incidence  of caries;  (iv)  immunization  of
experimental  animals  with S. MUTANS  significantly  reduces the  incidence  of
caries; (v) S. MUTANS produces copious amounts of extracellular  polysaccharide,
a key component of plaque;(vi) S. MUTANS  metabolism of sucrose rapidly produces
an organic acid which demineralizes tooth enamel.

     Due  to the  aging  of the  population,  gum  disease  is  becoming  a more
prevalent  disease than tooth decay. It is  characterized by the pulling away of
the gums from the  teeth due to the  presence  of plaque on the  surface  of the
teeth.  Plaque is a mixture of bacteria,  bacterial products and saliva which is
the medium in which  bacteria  grow.  It is believed  that  bacterial  metabolic
products in plaque are toxic to the cells of the gum tissue (gingiva) leading to
inflammation  (gingivitis or the more severe  periodontitis) and the receding of
the gum tissue from the teeth. If left untreated,  the supporting  tissue of the
gums becomes so loose that the teeth are lost.

Chlorhexidine in Dentistry and Oral Health

     The bisbiguanide chlorhexidine (CHX) was first described more than 40 years
ago and is the most thoroughly studied antimicrobial  substance used orally. CHX
is bactericidal against gram-positive and gram-negative bacteria and yeasts.

     The antibacterial  activity of CHX is associated with the absorption by the
bacteria.  At neutral pH, the positively charged CHX molecule is absorbed on the
surface  of the  bacteria,  where it reacts  with  negatively  charged  membrane
components.  Under acid  conditions  the  absorption  decreases,  resulting in a
reduced antibacterial  effect. At low concentrations CHX causes  disorganisation
of the  cytoplasmic  membrane,  making the bacteria  permeable to the drug which
inhibour  essential  metabolic events. At higher  concentrations  CHX coagulates
cytoplasmic constituents and prevents the bacterial cells from recovering.

     Compared with other substances,  CHX shows our special effectiveness in the
fact  that  plaque is  considerably  reduced,  the  development  of  caries  and
gingivitis  is  interrupted,  effects  that  certainly  are  related to our high
substantively.  CHX is absorbed in sub-MIC concentrations for a few hours on the
outer  surface of the teeth,  as well as the oral mucous  membrane and is slowly
released.  Therefore the metabolism of the bacteria is effected. In vivo studies
show that acid  production  in the plaque is inhibited  for extended  periods of
time and the growth rate of bacteria reduced.

                                       11
<PAGE>


     In  patients   with  high  caries   activity  and  high  counts  of  mutans
streptococci,  CHX is  employed  as an  adjunct  to other  preventive  measures.
Combinations of chlorhexidine with fluoride is also possible.  The best clinical
effect,  resulting in a considerable  caries  reduction,  has been obtained when
persons highly  colonized with mutans  streptococci  have been treated with gels
and when the  results  of the  antimicrobial  measures  have  been  verified  by
microbiological  examination.  Sustained release devices, like varnishes, reduce
the  numbers  of  mutans  streptococci  in a  patient's  mouth to  levels  below
detection for long periods.

     Older  persons are at an  increased  risk of root caries  since they may be
impaired,  take multiple  medications  or have  partials.  Treatment  strategies
should  include  antimicrobial  agents  for both the  remineralization  of early
lesions and prevention of further root caries. In periodontal treatment,  CHX is
used  for  post-operative  rinsings  and  as an  adjunct  to  oral  hygiene  and
mechanical debridement.  This means that CHX has a significant inhibitory effect
on gingivitis, but that it cannot dissolve already formed plaque.

     People  who have  been  treated  with  chemotherapy  and  radiotherapy  for
neoplasms in the head and neck regions are more  vulnerable to dental  diseases.
In the long term,  however,  periodontal  diseases and caries can be  controlled
with appropriate use of CHX and fluoride.

     Scientific and clinical  studies have shown that children  treated with CHX
had 50% less  caries.  In those  children  with high  counts of S.  MUTANS,  the
incidence of caries was reduced by 80%. The treatment of first-time mothers with
CHX reduced the S. MUTANS level and incidence of caries in their children (It is
well established that young children pick up S. MUTANS from their parents).

Description of Products

     We have the following products to treat the bacterial infections that cause
tooth decay and gingivitis:

     --------------------------------------------------------------------
            PRODUCT DESCRIPTION              ACTIVE INGREDIENT(S)
     --------------------------------------------------------------------
     ChlorSM Mouth Rinse              Chlohexidine w/NaF
     --------------------------------------------------------------------
     ChlorSM Toothpaste               Chlorhexidine w/MFP
     --------------------------------------------------------------------

ChlorSM colloidal mouth rinse

     ChlorSM   colloidal  mouth  rinse  is  a  proprietary   sustained   release
formulation of chlorhexidine available by prescription in North America. ChlorSM
colloidal  mouth rinse is an advanced  mouth rinse  formulation  based on BCD, a
proprietary lipid based drug delivery technology which is highly mucoahesive and
capable of carrying a high load of active agents.  BCD effectively  controls the
release of  Chlorhexidine  in oral  cavity  over an  extended  period of time to
provide an effective and sustained protection.

                                       12
<PAGE>


SME (Sub Micron Emulsion) colloidal toothpaste and mouth rinse

     ChlorSM SME  toothpaste  is  aproprietary  controlled  release  therapeutic
toothpaste based on the BCD drug delivery  system.  The active agents in the SME
toothpaste are  Chlorhexidine  and Fluoride;  it has been proven clinically that
the combination of the two active agents has a positive  synergetic  effect. The
SME toothpaste will inhibit  demineralization of tooth enamel and provide cavity
prevention and pain relieving  properties  for  individuals  with exposed dentin
caused by receding gums. We,  utilizing the BCD formulation,  have  successfully
retained  the  antimicrobial  property  of the  active  agent  Chlorhexidine  in
toothpaste form under a stable and controlled  release  environment.  We believe
that  there  is no  Chlorhexidine  toothpaste  commercially  available  in North
America.

NUTRACEUTICALS

     The total United States retail market for nutritional supplements is highly
fragmented and  historically  has grown rapidly,  generating $12 billion in 1998
sales,  as compared to $5.0 billion in 1994.  AlphaRx  believes that this growth
was due to a number of factors,  including:  (i) increased interest in healthier
lifestyles;  (ii) the publication of research  findings  supporting the positive
health effects of certain  nutritional  supplements;  and (iii) the aging of the
"Baby  Boomer"  generation  combined  with the tendency of consumers to purchase
more nutritional supplements as they age.

     Various  publicly  traded  nutritional  supplement  companies have recently
announced, however, that there appears to be a slow-down in sales of nutritional
supplements.  We believe that this  slow-down  may be the result of, among other
things, the lack of any recent  industry-wide  "hit" products such as St. John's
Wort.  Our  controlled-release  drug delivery  technologies  can provide  patent
protection for a nutritional product that has not been patented or for which the
patent is expiring or has expired.  Patented methods of controlled drug delivery
may extend product life and provide a nutritional supplement manufacturer with a
competitive advantage over regular products delivered by conventional means. The
controlled  delivery  of certain  nutritional  products  can also  result in the
approval of new therapeutic  indications,  thereby  expanding the utility of and
the market for those products.

     Our enabling technology offers the following benefits:

     1. Broad Application to Health Maintenance  Regiments.  We believe that our
enabling  technology  is  applicable  to a broad  range  of  specialized  health
maintenance  products designed to address popular health issues such as elevated
LDL cholesterol, obesity, menopause and anti-aging.

     2. Low  Risk of  Adverse  Side  Effects.  Our  nutraceutical  products  are
designed to be highly bioavailable, non-toxic and well tolerated.

                                       13
<PAGE>


     3. Convenient Oral Dosage Form. Our nutraceutical  products are designed to
be potent at low dosage levels, thereby permitting oral administration either in
a convenient capsule or tablet form or transdermal administration in a lotion or
cream form.

Core Product Descriptions

     LipoLette  is  a  dual  weight  loss  system,  controlled  release  natural
supplement that promotes weight control through: (i) suppressing appetite;  (ii)
blocking the fat  absorption;  and (iii)  stimulating  thermogenesis.  LipoLette
contains certain  hydrophobic  active ingredients which are clinically proven to
be safe and non-toxic.  We believe that our BCD drug delivery  technologies  may
enhance the bioavailability of these active ingredients significantly.

     LipoBloc is a controlled release  formulation of hydrophobic  phytosterols.
Phytosterols  have been clinically proven to inhibit  cholesterol  absorption in
the  GI  Tract  and  lower  LDL  in  serum  levels.  The  therapeutic  usage  of
phytosterols has been limited because of its poor solubility in water as well as
in oil. The suggested therapeutic dosages are 2.5-5.0 grams per day for a 15-20%
reduction  in  serum  cholesterol  levels.  The  latest  clinical  studies  have
indicated that the same or even significantly better reduction could be achieved
with smaller dosages such as 100 - 300 mg per day using oil solubilized  form of
phytosterols.  In one clinical study 300 mg  phytosterols  formulation  with 29%
maximum water solubility within 180 minutes  demonstrated 38% reduction in serum
cholesterol levels. In vitro, LipoBloc with 100 mg phyosterols demonstrated 100%
solubility in water in 60 minutes using USP 24 (711) dissolution methodology. We
believe that LipoBloc is the most  bioavailable  phytosterol  formulation in the
market,   we  also  believe  that  LipoBloc  may  have  a  positive   effect  in
atherosclerotic plaque regression.

     Q10 ER is a controlled  release  formulation  of CoEnzyme Q10 and Vitamin E
which are clinically  proven to promote  cardiovascular  health. We believe that
our Q10 ER has better bioavailability than other commercially available CoEnzyme
Q10 products because of its superior water solubility.

IMMUNOMODULATORS

     Human  immune  systems are  designed  to protect  the body from  assault by
parasites. These pathogens include cellular virus and cellular parasites such as
bacteria,  mycoplasms,  fungi,  unicellular protozoa and multicellular protozoa.
The immune system also defends the organism against cancerous cells.

     Immunomodulators  offer a  powerful  tool  for the  control  of  infectious
diseases.  These chemicals modulate (stimulate or suppress) the immune system in
a non-specific  manner.  Stimulation of immunity is also important in the host's
defense  against  cancer.  The latter occurs,  for example,  upon  activation of
tumoricidal  macrophages in response to  immunomodulators.  Immunomodulators may
also be used in the treatment of diseases

                                       14
<PAGE>


caused by immune system  disorders  such as arthritis.  They may also be used in
the  treatment  of  individuals  with a  compromised  immune  system in order to
enhance their immune response. This group of patients includes surgery patients,
burn victims, patients undergoing radiotherapy or chemotherapy and patients with
immune disorders such as AIDS.

     Unfortunately,  most of the marketed immunomodulators show non-reproducible
and ambiguous results. Peptide and protein molecules (interferons, interleukins,
antibodies and vaccines) are very  expensive and  demonstrate  many  undesirable
side effects and uncertain activities.  Accordingly,  there is a need to develop
new  immunomodulators  which have  significant  immunomodulating  activity,  are
readily accessible, and possess less toxicity than the marketed agents.

     Our newly discovered  compounds  possessed high stimulation  properties for
immune   system   (either  in  normal  or  in  depressed   state).   Preliminary
investigations showed low toxicity,  fast onset of action and very high response
of immune system. Additionally,  some of the investigated compounds demonstrated
prominent anti-inflammatory activity in different models.

COMPETITION

     There are other  companies that have oral drug delivery  technologies  that
compete with the BCD Systems. The competitors have oral tablet products designed
to release  the  incorporated  drugs over time.  Each of these  companies  has a
patented  technology with  attributes  different from those of ours, and in some
cases with different  sites of delivery to the GI tract.  We believe that we are
the only drug delivery company that is currently using polymeric based colloidal
dispersion  controlled  release  technologies  to develop  products for oral and
transdermal drug delivery systems for enhanced solubility and bioavailability of
poorly  water  soluble  drugs.  We  believe  that this  combination  of oral and
transdermal drug delivery  technologies  differentiates  us from other oral drug
delivery  companies  and will enable us to attract  pharmaceutical  companies to
incorporate   their   proprietary  drugs  into  the  BCD  Systems  and  also  to
differentiate  any OTC and/or off-patent drugs that utilize the BCD Systems from
those of other drug delivery companies.

     Competition  in the  areas of  pharmaceutical  products  and drug  delivery
systems  is intense  and is  expected  to become  more  intense  in the  future.
Competing  technologies  may prove superior,  either  generally or in particular
market segments, in terms of factors such as cost, consumer satisfaction or drug
delivery  profile.  Our principal  competitors in the business of developing and
applying  drug  delivery  systems  all  have  substantially  greater  financial,
technological,  marketing, personnel and research and development resources than
us. In addition,  we may face competition from  pharmaceutical and biotechnology
companies  that may develop or acquire drug delivery  technologies.  Many of our
potential  collaborative  partners  have  devoted and are  continuing  to devote
significant  resources in the development of their own drug delivery systems and
technologies.  Products  incorporating  our technologies  will compete both with
products   employing  advanced  drug  delivery  systems  and  with  products  in
conventional  dosage

                                       15
<PAGE>


forms. New drugs or future developments in alternate drug delivery  technologies
may provide  therapeutic or cost  advantages  over any potential  products which
utilize the BCD Systems.  There can be no assurance that  developments by others
will not render any potential products utilizing the BCD Systems  noncompetitive
or  obsolete.  In  addition,  our  competitive  success  will depend  heavily on
entering  into  collaborative  relationships  on  reasonable  commercial  terms,
commercial  development of products  incorporating  the BCD Systems,  regulatory
approvals,  protection of  intellectual  property and market  acceptance of such
products.

PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS

     It is our  policy to file  patent  applications  in the  United  States and
foreign  jurisdictions.  We currently  have one issued  United States patent and
three United States patent pending  applications and have applied for patents in
two foreign  countries  which are still pending.  No assurance can be given that
our patent applications will be approved or that any issued patents will provide
competitive  advantages for the BCD Drug Delivery Systems or our technologies or
will not be  challenged  or  circumvented  by  competitors.  With respect to any
patents which may issue from our  applications,  there can be no assurance  that
claims  allowed  will  be  sufficient  to  protect  our   technologies.   Patent
applications  in the United  States  are  maintained  in secrecy  until a patent
issues, and we cannot be certain that others have not filed patent  applications
for technology covered by our pending  applications or that we were the first to
file  patent  applications  for such  technology.  Competitors  may  have  filed
applications for, or may have received patents and may obtain additional patents
and proprietary  rights  relating to,  compounds or processes that may block our
patent rights or compete  without  infringing  our patent  rights.  In addition,
there can be no assurance  that any patents issued to us will not be challenged,
invalidated or circumvented,  or that the rights granted thereunder will provide
proprietary protection or commercial advantage to us.

     We also relies on trade secrets and proprietary  know-how which it seeks to
protect,   in  part,   through   confidentiality   agreements   with  employees,
consultants,  collaborative  partners and others. There can be no assurance that
these agreements will not be breached,  that we will have adequate  remedies for
any such breach or that our trade secrets will not otherwise  become known or be
independently   developed  by  competitors.   Although  potential  collaborative
partners,  research  partners  and  consultants  are  not  given  access  to our
proprietary trade secrets and know-how until they have executed  confidentiality
agreements,  these  agreements may be breached by the other party thereto or may
otherwise be of limited effectiveness or enforceability.

Trademarks

     We have  filed  applications  in the  United  States  and China  Patent and
Trademark Office to register the word mark "ChlorSM" and "Oralife" for oral care
products,  such as medicated mouth rinse,  professional dental gels and varnish.
We also  registered the following  trademarks,  "Alpha-Source"  and "AlphaRx" in
Canada and "AlphaRx",

                                       16
<PAGE>


"LipoLette",   "LipoBloc"   and   "PhytoScience"   in  the  United   States  for
nutraceutical  products.  In  connection  with our  Internet  web site,  we have
registered with Network Solutions, Inc., the internet domain name "AlphaRx.com."
and "LTII.com" for our corporate website.

Proprietary Information

     Much of our  technology is dependent  upon the  knowledge,  experience  and
skills of key scientific and technical  personnel.  To protect the rights to our
proprietary  technology,  our policy  requires all employees and  consultants to
execute confidentiality  agreements that prohibit the disclosure of confidential
information to anyone outside AlphaRx.  These agreements also require disclosure
and  assignment to AlphaRx of discoveries  and  inventions  made by such persons
while devoted to Company activities.

MANUFACTURING, MARKETING AND SALES

     We do not have and do not intend to  establish  in the  foreseeable  future
internal manufacturing capabilities.  Rather, we intend to use the facilities of
our  collaborative  partners or those of contract  manufacturers  to manufacture
products  using  the BCD  Systems.  Our  dependence  on  third  parties  for the
manufacture of products  using the BCD Systems may adversely  affect our ability
to develop and deliver such products on a timely and  competitive  basis.  There
may not be sufficient  manufacturing  capacity available to us when, if ever, it
is  ready to seek  commercial  sales  of  products  using  the BCD  Systems.  In
addition,  we  expect  to  rely  on our  collaborative  partners  or to  develop
distributor  arrangements to market and sell products using the BCD Systems.  We
may not be able to enter into  manufacturing,  marketing or sales  agreements on
reasonable  commercial  terms,  or at all, with third parties.  Failure to do so
would have a material adverse effect on us.

     Applicable cGMP requirements and other rules and regulations  prescribed by
foreign  regulatory  authorities will apply to the manufacture of products using
the BCD Systems.  We will depend on the  manufacturers of products using the BCD
Systems to comply with cGMP and applicable foreign  standards.  Any failure by a
manufacturer  of products  using the BCD Systems to maintain cGMP or comply with
applicable  foreign standards could delay or prevent their commercial sale. This
could have a material adverse effect on us.


GOVERNMENT REGULATION

     We  are  subject  to  regulation   under  various  federal  laws  regarding
pharmaceutical products and also various federal and state laws regarding, among
other things, occupational safety, environmental protection, hazardous substance
control and product  advertising and promotion.  In connection with our research
and development activities, AlphaRx is subject to federal, state and local laws,
rules,  regulations  and policies  governing the use,  generation,  manufacture,
storage,  air  emission,  effluent  discharge,  handling and disposal of certain
materials  and  wastes.  We believe  that we have  complied

                                       17
<PAGE>


with these laws and  regulations  in all material  respects and we have not been
required to take any action to correct any material noncompliance.

     FDA  Approval  Process.  In the  United  States,  pharmaceutical  products,
including  any drugs  utilizing the BCD Drug  Delivery  Systems,  are subject to
rigorous  regulation  by the FDA. If a company  fails to comply with  applicable
requirements,  it  may  be  subject  to  administrative  or  judicially  imposed
sanctions such as civil  penalties,  criminal  prosecution of We or our officers
and employees, injunctions, product seizure or detention, product recalls, total
or partial suspension of production,  FDA withdrawal of approved applications or
FDA  refusal  to  approve  pending  new drug  applications,  premarket  approval
applications, or supplements to approved applications.

     Prior  to  commencement  of  clinical   studies   involving  human  beings,
preclinical  testing of new  pharmaceutical  products is generally  conducted on
animals in the  laboratory to evaluate the potential  efficacy and the safety of
the product.  The results of these studies are submitted to the FDA as a part of
an IND  application,  which must become  effective  before  clinical  testing in
humans can begin.  Typically,  clinical evaluation involves a time consuming and
costly  three-phase  process.  In Phase I, clinical  trials are conducted with a
small  number  of  subjects  to  determine  the  early  safety  profile  and the
pharmacokinetic  pattern of a drug. In Phase II,  clinical  trials are conducted
with groups of patients  afflicted with a specific disease in order to determine
preliminary efficacy,  optimal dosages and expanded evidence of safety. In Phase
III, large-scale,  multi-center,  comparative trials are conducted with patients
afflicted  with a target  disease in order to provide enough data to demonstrate
the  efficacy  and safety  required  by the FDA.  The FDA closely  monitors  the
progress  of each of the  three  phases  of  clinical  testing  and may,  at our
discretion,  re-evaluate, alter, suspend or terminate the testing based upon the
data  which  have  been  accumulated  to that  point and our  assessment  of the
risk/benefit ratio to the patient.

     The results of the preclinical and clinical  testing on drugs are submitted
to the  FDA  in the  form  of an NDA  for  approval  prior  to  commencement  of
commercial sales. In responding to an NDA, the FDA may grant marketing approval,
request  additional  information  or deny the  application if the FDA determines
that the application does not satisfy our regulatory  approval  criteria.  There
can be no assurance that approvals will be granted on a timely basis, if at all.
Failure to receive  approval for any products  utilizing  the BCD Drug  Delivery
Systems could have a material adverse effect on us.

     OTC products that comply with  monographs  issued by the FDA are subject to
various FDA  regulations  such as cGMP  requirements,  general and  specific OTC
labeling  requirements  (including warning statements),  the restriction against
advertising for conditions other than those stated in product labeling,  and the
requirement  that in addition to approved  active  ingredients OTC drugs contain
only safe and suitable  inactive  ingredients.  OTC  products and  manufacturing
facilities are subject to FDA inspection,  and failure to comply with applicable
regulatory  requirements  may  lead  to  administrative  or  judicially  imposed
penalties.  If an OTC product differs from the terms of a

                                       18
<PAGE>


monograph,  it will,  in most  cases,  require  FDA  approval  of an NDA for the
product to be marketed.

     Other  Regulations.  Even if required FDA approval has been  obtained  with
respect to a product,  foreign  regulatory  approval  of a product  must also be
obtained  prior to  marketing  the  product  internationally.  Foreign  approval
procedures  vary from country to country and the time  required for approval may
delay  or  prevent  marketing.  In  certain  instances  we or our  collaborative
partners may seek approval to market and sell certain of our products outside of
the U.S.  before  submitting an  application  for U.S.  approval to the FDA. The
regulatory   procedures  for  approval  of  new  pharmaceutical   products  vary
significantly among foreign countries. The clinical testing requirements and the
time  required  to obtain  foreign  regulatory  approvals  may differ  from that
required  for FDA  approval.  Although  there is now a  centralized  EU approval
mechanism in place,  each EU country may  nonetheless  impose our own procedures
and  requirements,  many of which are time consuming and expensive,  and some EU
countries require price approval as part of the regulatory process.  Thus, there
can be substantial  delays in obtaining  required approval from both the FDA and
foreign  regulatory  authorities after the relevant  applications are filed, and
approval  in any single  country  may not be a  meaningful  indication  that the
product will thereafter be approved in another country.

RESEARCH AND DEVELOPMENT

     We conduct our research and development  activities  through  collaborative
arrangements with universities,  contract research organizations and independent
consultants.  We are also  dependent  upon third  parties  to  conduct  clinical
studies,  obtain FDA and other regulatory approvals and manufacture and market a
finished product.

     We anticipate incurring significant development  expenditures in the future
as we  continue  our  efforts  to  develop  our  present  technologies  and  new
formulations  and as we begin  to  research  other  technologies  and to  expand
clinical studies of certain products. We plan to establish laboratory facilities
to conduct  research and development and manufacture of batch forms for clinical
evaluations.

PRODUCT LIABILITY

     Our business  involves  exposure to potential  product liability risks that
are inherent in the production and manufacture of pharmaceutical  products.  Any
such claims could have a material adverse effect on us. We do not currently have
any product  liability  insurance.  Although we will apply for product liability
insurance when it deems it appropriate, there can be no assurance that:

     o  we will be able to obtain or maintain  product  liability  insurance  on
        acceptable terms;

     o  we will be able to secure increased coverage as the commercialization of
        the BCD Systems proceeds; or

                                       19
<PAGE>


     o  any  insurance  will  provide  adequate   protection  against  potential
        liabilities.

EMPLOYEES

     As of September 30, 2000, we employed 4 people on a full-time basis and one
person  on a  part-time  basis.  None  of  our  employees  is  represented  by a
collective bargaining  agreement,  nor have we experienced any work stoppage. We
believe that our relations with our employees are excellent.

Item 2. Properties

     At  September  30,  2000,  we leased  approximately  1,100  square  feet in
Richmond  Hill,  Ontario,  under a lease which  expires on November 30, 2001. We
believe that our existing  properties  are  sufficient  for our  administrative,
research and development needs for the foreseeable future.

Item 3. Legal Proceedings

     Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

     No matters were  submitted to a vote of security  holders during the fourth
quarter  of  the  fiscal  year  ended   September  30,  2000,   whether  through
solicitation of proxies or otherwise.

                                       20
<PAGE>


                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

     Our Common Stock commenced  trading on the OTC Pink Sheets under the symbol
"AHRX" on July 25, 2000. On October 12, 2000, our Common Stock ceased trading on
the OTC Pink Sheets and began  trading on the OTC Bulletin  Board under the same
symbol. The following table sets forth, for the periods indicated,  the high and
low closing  prices of our Common  Stock as reported by the OTC Pink Sheets from
July 25, 2000 and by the OTC Bulletin Board from October 12, 2000.


YEAR ENDING SEPTEMBER 30, 2000                                HIGH     LOW
------------------------------                                -----    ---
4th Quarter (From July 25, 2000)                              $1.25    $1.15

     Records of our stock transfer agent indicate that as of September 30, 2000,
there were approximately 50 record holders of our common stock. We have not paid
any cash  dividends to date and do not  anticipate  or  contemplate  paying cash
dividends in the foreseeable  future.  We plan to retain any earnings for use in
the operation of our business and to fund future growth.

RECENT SALES OF UNREGISTERED SECURITIES

     In October 15, 1999,  we issued an  aggregate  of 315,333  shares of Common
Stock to  existing  shareholders  for a total  purchase  price of  $31,533.  The
proceeds were used for working capital.

     In December  31, 1999,  we issued an aggregate of 170,000  shares of Common
Stock for a total purchase price of $85,000.  The proceeds were used for working
capital.

     In June 30, 2000, we issued an aggregate of 196,000  shares of Common Stock
for a total  purchase  price of  $196,000.  The  proceeds  were used for working
capital.

     No  underwriting  commissions  or  discounts  were paid with respect to the
sales of the unregistered  securities described above. The above sales were made
to accredited investors in reliance on Rule 506 of Regulation D and Section 4(2)
under the  Securities  Act and to persons  outside the United  States within the
meaning of Regulation S of the Securities Act.

                                       21
<PAGE>


     ITEM 6.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS

     The following  discussion and analysis  should be read in conjunction  with
the Financial Statements and Notes included in Item 8 of this report. 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

     We are a development  stage company  engaged in the  development of new and
proprietary drug delivery products. We have developed two types of drug delivery
systems,  the Colloidal Lipid Dispersion  System (the "CLD System") and the Self
Emulsifying  Controlled Release Tablet System (the "SECRET System" and together,
the "BCD Systems"). The CLD System is designed to deliver drugs through the skin
in order to reduce the gastrointestinal irritation that is a side effect of many
orally  administered  drugs,  and the  SECRET  System  is  designed  to  provide
continuous,  controlled  delivery of an incorporated drug. In addition,  the BCD
Systems  are  designed to improve the  bioavailability  of poorly  water-soluble
drugs.

     Since our inception in August 1997, we have devoted  substantially  all our
efforts to research  and  development  conducted  on our own behalf with the BCD
Drug Delivery Systems.  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.

     We have experienced  significant operating losses since our inception,  and
expect to incur substantial and continuing losses for the foreseeable future. We
incurred a net loss of  approximately  $278,804 for the year ended September 30,
2000, resulting in an accumulated deficit of approximately  $1,286,653. To date,
we have  received  only  limited  revenue,  all of which has been from  interest
earned from invested funds.

     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
BCD 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.  We will  need to  make  additional  capital
investments in laboratories  and related  facilities,  including the purchase of
laboratory and pilot scale manufacturing  equipment. As additional personnel are
hired in 2001 and beyond,  expenses can be expected to increase  from their 2000
levels.

                                       22
<PAGE>


Results of Operations

Year ended September 30, 2000 compared to year ended September 30, 1999

     Losses for 2000 were  $278,804,  which is $518,313 less than the losses for
the fiscal year ended  September  30,  1999.  This  decrease is due to lower R&D
costs.

     Research and development expenses have decreased by nearly 707% to $74,990.
Our expenses  consist of legal and  professional  fees for preparation of patent
applications and laboratory service & supply expenses.

     General  and  administrative  expenses  in 2000 were  $205,182  compared to
$270,153  for the same  period  last year.  The  decrease  was due to  decreased
professional fees.

Liquidity and Capital Resources

     Since inception,  we have financed operations  principally from the sale of
Common  Stock  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  sometime 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

                                       23
<PAGE>


     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.

Impact of Year 2000

     Year 2000 ("Y2K")  exposure was the result of some computer  programs using
two instead of four digits to  represent  the year.  Computer  programs may have
erroneously  interpreted  dates beyond the year 1999 causing system  failures or
other computer errors, possibly leading to disruptions in operations.

     In response to this potentiality, we developed and implemented a program to
eliminate Y2K exposures. Computer systems and applications were reviewed for Y2K
compliance,  remedied as necessary and tested.  Third-party  relationships  were
reviewed and monitored for Y2K  compliance.  We developed a contingency  plan to
stockpile  materials  from any  vendors  that did not  meet  Y2K  compliance  by
year-end; however, we were sufficiently confident in our preparation, and in our
vendors',  that  we  did  not  implement  our  contingency  plan.  We  have  not
experienced any system failures,  errors or disruptions in our operations due to
Y2K and we do not expect any in the future.

Certain Factors that may Affect Future Results

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

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial  statements and supplementary data required by Item 7 are set
forth below on pages F-1 through F-11.

                                       24
<PAGE>


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     Not applicable.


                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following  table sets forth,  as of March 7, 2000,  the name,  age, and
position of each of our executive officers and directors:

  NAME                              AGE      POSITION
  ----                              ---      --------
  Michael M.  Lee                   37       Chairman of the Board,
                                             President & Director

  Sai Ming Wong, MD                 59       Executive Vice President & Director

  Tin Pui Lo                        56       Chief Financial Officer

  Joseph Schwarz, Ph.D              46       Chief Scientist & Director

  Michael Weisspapir, MD, Ph.D      43       Chief Medical Officer

  Sandro Persia                     31       Secretary/Treasurer and Director


     Michael M. Lee,  Mr. Lee is a founder of the  Company.  Mr. Lee has over 15
years of business  experience in the areas of high tech  development,  marketing
and  corporate  finance.  In 1984,  he  co-founded  Logic Tech Corp. in Toronto,
Canada where he co-developed  LogicDent Dental Practice  Management Software and
served as Logic Tech Corp's  Executive  Vice  President and Director until 1991.
From  1992 to 1995,  Mr.  Lee was a Vice  President,  Pacific  Region  of GeoFin
Partners LLC, a US merchant banking company engaged in project finance and funds
management.  From 1995 to 1996,  Mr.  Lee  served as  banking  consultant  for 2
international  commercial  banks based in Asia. Mr. Lee holds a B.Sc. in Applied
Mathematics from the University of Western Ontario.

     Sai Ming Wong, M.D., Dr. Wong practiced medical research in China from 1965
to 1980. Dr Wong was the chief surgeon of the medical unit that provided medical
and research services for the first China atomic testing. Dr. Wong served as the
Director of Product  Development  at the China Academy of Medical  Sciences from
1970 to 1980,  where he was the leader of a research team which  specialized  in
the  development  of drug  formulations.  From 1980 - 1992,  Dr.  Wong served as
General  Manager of China National Light  Industries  Corp., a China state owned
company  based in Hong  Kong,  where  Dr.  Wong was  responsible  for the  daily
operation  of the  company.  Dr.  Wong  earned his degree in  Medicine  from the
Beijing Capital University of Medical Sciences.

                                       25
<PAGE>


     Tin Pui Lo, Mr. Lo is the Chief  Financial  Officer of the Company.  Mr. Lo
has extensive  experience  in financial  resources  management.  He worked as an
executive  officer in various  departments in the Hong Kong Government from 1971
to 1994. His main tasks included preparation of departmental budgets and control
of expenditure of the department as well as of individual building projects. Mr.
Lo was a graduate of the Queen's College.

     Joseph  Schwarz,  Ph.D. Dr. Schwarz is the chief  scientist of the Company.
Dr.  Schwarz  has  extensive  experience  in the  research  and  development  of
controlled  release  drug  delivery  systems,   his  areas  of  expertise  cover
controlled   delivery   of  drugs,   targeted   drug   delivery,   biodegradable
nanoparticles and nanocapsules,  colloidal and  microcorpusculate  drug delivery
systems, submicron emulsions (SME), transdermal delivery (topical and systemic),
transdermal patches preformulation and technology  development.  Dr. Schwarz was
the  recipient of the Young  Scientist  Award in 1977 and 1978 and the Institute
Award in 1979, both from the Academy of Science,  Moscow and the Institute award
in 1986 from the  Biotechnology  Institute of Moscow.  Dr. Schwarz has published
more than 40 articles in various  scientific  journals  and has written  over 20
patents and patent applications. Dr. Schwarz was the senior scientist at Pharmos
Corp., a publicly traded U.S. Pharmaceuticals, prior to joining the Company.

     Michael  Weisspapir,  M.D., Ph.D. Dr. Weisspapir has 19 years of successful
experience   in    experimental    medicine   and   extensive    experience   in
interdisciplinary   research  and  development  in  experimental   pharmacology,
immunopharmacology,  toxicology and neuroscience. Dr. Weisspapir was a professor
at the Faculty of Medicine  at  Chelyabinsk  State  Medical  Institute  where he
taught  courses in  pharmacology,  toxicology and clinical  chemistry.  Prior to
joining the Company,  Dr. Weisspapir held a variety of research positions at the
University  of Tel Aviv and Rabin  Medical  Center,  Israel  and the  University
Health Network,  University of Toronto,  Canada. Dr. Weisspapir received a Ph.D.
in  Pharmacology,  Internship  in  Pediatrics  and degree in  Medicine  from the
Chelyabinsk State Medical Institute in Russia.

     Sandro  Persia,  Mr.  Persia  joined Logic Tech Corp.  in 1989 as Marketing
Manager  and  promoted  to Vice  President  in 1996.  Mr.  Persia has  extensive
business experience in high tech marketing and sales. Mr. Persia holds a diploma
in business administration from the Seneca College.

     All directors will hold office until the next annual stockholder's  meeting
and until their  successors have been elected or qualified or until their death,
resignation,  retirement,  removal, or disqualification.  Vacancies on the board
will be filled by a majority  vote of the remaining  directors.  Officers of the
Company serve at the discretion of the Board of Directors.

     No director, officer, significant employee or consultant has been convicted
in a criminal proceeding, exclusive of traffic violations.

                                       26
<PAGE>


     No  director,   officer,   significant  employee  or  consultant  has  been
permanently or temporarily enjoined, barred, suspended or otherwise limited from
involvement in any type of business, securities or banking activities.

     No director, officer, significant employee or consultant has been convicted
of  violating  a  federal  or state  securities  or  commodities  law.

ITEM 10. EXECUTIVE COMPENSATION

     No compensation has been paid to any officer prior to September 30, 2000.

Employment Agreements

     The Company has entered into an employment agreement with Michael M. Lee on
July 1, 2000, pursuant to which Mr. Lee is employed as President.  The agreement
provides  that Mr. Lee will  devote all of his  business  time to the Company in
consideration  of an annual  salary of $24,000  for the  period  July 1, 2000 to
December 31, 2000, and $36,000 for the period ending June 30, 2003. In addition.
Pursuant to the employment  agreement,  Mr. Lee was granted a ten-year option to
purchase  2,000,000  shares of Common Stock at an exercise  price equal to $1.00
per share,  immediately exercisable from the date of the grant, and expiring ten
years thereafter.

     The  Company has  entered  into an  employment  agreement  with Dr.  Joseph
Schwarz,  pursuant to which Dr. Schwarz is employed full-time as Chief Scientist
for a term of three years commencing on July 1, 2000. Pursuant to the employment
agreement,  effective as of July 1, 2000,  Dr. Schwarz will devote his full time
to the Company in  consideration  of an annual  salary of $24,000 for the period
July 1, 2000 to December  31, 2000,  and $96,000 for the period  ending June 30,
2003.  Dr.  Schwarz  was  granted  ten-year  options to  purchase  an  aggregate
1,250,000 shares of Common Stock at an exercise price equal to $1.00 per share.

     The Company has  entered  into an  employment  agreement  with Dr.  Michael
Weisspapir,  pursuant to which Dr.  Weisspapir  is employed  full-time as Senior
Scientist  for a term of three years  ending in June 30,  2003.  Pursuant to the
employment agreement, Dr. Weisspapir will devote his full time to the Company in
consideration  of an annual salary of $12,000 for the period ending December 31,
2000,  $72,000 for the period ended June 30, 2003.  Dr.  Weisspapir  was granted
ten-year options to purchase an aggregate 1,000,000 shares of Common Stock at an
exercise price equal to $1.00 per share.

     The Company  has entered  into an  employment  agreement  with Dr. Sai Ming
Wong,   pursuant  to  which  Dr.  Wong  is  employed   full-time   as  Executive
Vice-President  for a term of three years ending in June 30,  2003.  Pursuant to
the employment  agreement,  Dr. Wong will devote his full time to the Company in
consideration  of an annual salary of $12,000 for the period ending December 31,
2000,  $36,000 for the period ended June 30, 2003. Dr. Wong was granted ten-year
options to purchase an aggregate 1,500,000 shares of Common Stock at an exercise
price equal to $1.00 per share.

                                       27
<PAGE>


     The following table sets forth the individual  grants of stock options made
during the fiscal year ended  September 30, 2000 to each of the named  executive
officers.

------------------------------------------------------- ------------------------
Name                Options        % of Total Granted   Excrise    Expiratiopn
                    Granted # (1)  to Employees in      Price (3)  Date
                                   Fiscal Year (2)
------------------------------------------------------- ------------------------
Michael M. Lee      2,000,000      34.78%               $1.00      June 30, 2010
------------------------------------------------------- ------------------------
Joseph Schwarz      1,250,000      21.74%               $1.00      June 30, 2010
------------------------------------------------------- ------------------------
Michael Weisspapir  1,000,000      17.39%               $1.00      June 30, 2010
------------------------------------------------------- ------------------------
Sai Ming Wong       1,500,000      26.09%               $1.00      June 30, 2010
------------------------------------------------------- ------------------------

(1) The options  reflected  in this table were all granted  under the  Company's
2000 Stock Option Plan (the "Plan").  The date of grant is 10 years prior to the
expiration date listed.

(2) Based on an  aggregate  of  5,750,000  options  granted to  employees of the
Company in fiscal 1999.

(3) Exercise  price is the fair market value on the date of grant as  determined
in accordance with the Plan.

               AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                         FISCAL YEAR END OPTION VALUES

     The following table sets forth certain  information  regarding exercises of
stock  options  during the fiscal  year ended  September  30,  1999 by the named
executive  officers.  Value  of  unexercised  options  is  considered  to be the
difference  between  exercise  price  and  market  price of $1.20  per  share on
September 30, 2000. No options were  exercised by the named  executive  officers
during fiscal 1999.

------------------------------------------------------------ -------------------
Name                 Number of Exercisable         Value of Unexercised
                     Options at Fiscal             In-The-Money Options
                     Year-End (#)                  at Fiscal Year-End(#)
                     Exercisable/Unexercisable     Exercisable/Unexercisable
--------------------------------------------------------------------------------
Michael M. Lee       500,000/1,500,000             $100,000/$300,000
--------------------------------------------------------------------------------
Joseph Schwarz       312,500/937,500               $62,500/$187,500
--------------------------------------------------------------------------------
Michael Weisspapir   250,000/750,000               $50,000/$150,000
--------------------------------------------------------------------------------
Sai Ming Wong        375,000/1,125,000             $75,000/$225,000
--------------------------------------------------------------------------------

Item 11. Security Ownership Of Certain Beneficial Owners And Management

     The following table sets forth information with respect to ownership of the
Company's  securities by its officers and directors and by any person (including
any "group") who is the beneficial owner of more than 5% of the Company's Common
Stock.  The total number of shares  authorized is  100,000,000  shares of Common
Stock,  each of


                                       28
<PAGE>


which has a par value of  $0.001.  49,388,330  shares of Common  Stock have been
issued and are outstanding.

     NAME AND ADDRESS          AMOUNT AND NATURE OF       PERCENT OF
     OF OWNER                  BENEFICIAL OWNER           CLASS
     ------------------------------------------------------------------
     Michael Lee(1) (2) (3)    33,760,000 shares             68%
     Anna May Lee(1) (2)       4,000,000 shares               8%
     Sai Ming Wong (3)(4)      1,000,000 shares               2%
     Sandro Persia(3)          100,000 shares               0.2%
     Tin Pui Lo(3)             2,000 shares               0.004%


(1)  Related by blood or marriage

(2)  The address of Michael Lee and Anna May Lee is c/o AlphaRx,  Inc.,  75 East
     Beaver Creek, Unit 10, Richmond Hill, Ontario, Canada, L4B-1B8

(3)  Directors and/or Officers

(4)  The  address  of Sai  Ming  Wong is 7805  Bayview  Avenue,  Apartment  510,
     Thornhill, Ontario, Canada L3T 7N1

Item 12. Certain Relationships And Related Transactions

         In October 15, 1999,  the Company issued an aggregate of 315,333 shares
of Common Stock to existing  shareholders for a total purchase price of $31,533.
The proceeds were used for working capital.

     In December 31, 1999,  the Company issued an aggregate of 170,000 shares of
Common Stock for a total purchase  price of $85,000.  The proceeds were used for
working capital.

     In June 30, 2000,  the Company  issued an  aggregate  of 196,000  shares of
Common Stock for a total purchase price of $196,000.  The proceeds were used for
working capital.

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

a) EXHIBITS

     The exhibits to this Report are listed on the Exhibit  Index on pages xx-xx
below.  A copy of any of the  exhibits  listed  or  referred  to  below  will be
furnished at a reasonable  cost,  upon receipt from any such person of a written
request for any such  exhibit.  Such  request  should be sent to AlphaRx,  Inc.,
10-75 East Beaver Creek,  Richmond Hill,  Ontario,  Canada L4B 1B8:  Shareholder
Information.

     The following is a list of each management contract or compensatory plan or
arrangement  required  to be filed as an exhibit to this  Annual  Report on Form
10-KSB pursuant to Item 13(a):

                                       29
<PAGE>


A. 2000 Stock Option Plan.


(b) REPORTS ON FORM 8-K

     We did not file any  Current  Reports  on Form 8-K  during  the year  ended
September 30, 2000.


                                INDEX TO EXHIBITS

Exhibit Item No.    Item and Description

3.1                 Copy of Registrant's Articles of Incorporation (1)

3.1(a)              Copy of Registrant's Certificate of Amendment to Certificate
                    of Incorporation

3.2                 Copy of Registrant's By-Laws (1)

10.1                Copy of Stock Option Plan

10.2                Copy of Employment  Agreement between Registrant and Michael
                    Lee

10.3                Copy of  Employment  Agreement  between  Registrant  and Dr.
                    Joseph Schwarz

10.4                Copy of  Employment  Agreement  between  Registrant  and Dr.
                    Michael Weisspapir

10.5                Copy of Employment  Agreement between registrant and Dr. Sai
                    Ming Wong


(1)  Filed as an  exhibit  with  the  identical  exhibit  no.  to the  company's
     Registration Statement on Form 10-SB, No. 000-30813 and incorporated herein
     by reference.

                                       30
<PAGE>


                                  ALPHARX, INC.


               FINANCIAL STATEMENTS AND ACCOUNTANT'S AUDIT REPORT

                    SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999



                                TABLE OF CONTENTS


FINANCIAL STATEMENTS                                                      PAGE
--------------------

INDEPENDENT AUDITOR'S REPORT                                              F-1
BALANCE SHEET                                                             F-2
LIABILITY AND SHAREHOLDERS' EQUITY                                        F-3
STATEMENT OF OPERATIONS                                                   F-4
STATEMENT OF SHAREHOLDERS' EQUITY                                         F-5
STATEMENT OF RETAINED DEFICITS                                            F-6
STATEMENT OF CASH FLOWS                                                   F-7
NOTES TO FINANCIAL STATEMENTS                                             F-8-11

SUPPLEMENTARY INFORMATION

AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION                             F-12
SETLLING, GENERAL AND ADMINISTRATIVE EXPENSES                             F-13


<PAGE>


                          Independent Auditor's Report


Board of Directors
ALPHARX Inc.
Markham, Ontario, Canada


     We have  audited the  accompanying  balance  sheet of  AlphaRx,  Inc. as of
September 30, 2000 and September 30, 1999,  and the related  income  statements,
retained  deficits,  and cash flows for the years then  ended.  These  financial
statements   are  the   responsibility   of  the   company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial  position of ALPHARX Inc. at September
30, 2000 and September 30, 1999,  and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.


/s/ Philip K. Yeung, C.P.A.


November 27, 2000

                                      F-1
<PAGE>


                                  ALPHARX, INC.

                                  BALANCE SHEET

                               FOR THE YEARS ENDED
                           SEPTEMBER 30, 2000 AND 1999


                                     ASSETS


                                                                  SEPTEMBER,
                                                             -------------------

                                                               2000       1999
                                                             --------   --------
CURRENT ASSETS                                               $ 13,943      1,562

PROPERTY, PLANT & EQUIPMENT, at cost
    Less accumulated depreciation of $11,060 (note 3)          63,431      3,235

OTHER ASSETS
    Investment (note 4)                                        46,408     46,408
                                                             --------   --------

TOTAL ASSETS                                                 $123,782     51,205
                                                             ========   ========

                                      F-2
<PAGE>


                  LIABILITIES AND SHAREHOLDERS' EQUITY FOR THE
                     YEARS ENDED SEPTEMBER 30, 2000 AND 1999

CURRENT LIABILITIES                                         SEPTEMBER 30,
                                                    ---------------------------
                                                        2000            1999
                                                    -----------     -----------

Accounts payable and accrued liabilities            $    28,840          19,026
Loan From Shareholders                                    2,365
                                                    -----------

SHAREHOLDERS' EQUITY

Common Stock,common, $0.0001par value
Authorized100,000,000 shares, issues and
Outstanding 49,388,330 shares (note 5)              $     4,939           4,228
Additional paid-in capital                            1,374,291       1,035,800
Deficit                                              (1,286,653)     (1,007,849)

TOTAL SHAREHOLDERS'EQUITY                                92,577          32,179
                                                    -----------     -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
                                                        123,782          51,205
                                                    ===========     ===========


See independent auditor's report
The accompanying notes are an integral part of this statement

                                      F-3
<PAGE>


                                  ALPHARX, INC.

                             STATEMENT OF OPERATIONS

                 FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999


                                                             SEPTEMBER 30,
                                                       ------------------------
                                                          2000           1999
                                                       ---------      ---------

SALES                                                  $       0              0

SELLING, GENERAL & ADMINISTRATION EXPENSES               280,172        800,842
                                                       ---------      ---------

         LOSS FROMOPERATION                             (280,172)      (800,842)

OTHER INCOME

         Interest Income                               $     456      $     915
         Miscellaneous Income                                912
                                                       ---------
         Gain on sale of investment                                       2,810
                                                                      ---------

                                                           1,368          3,725

         LOSS BEFORE INCOME TAXES                       (278,804)     $ 797,117)

INCOME TAX                                                     0              0
                                                       ---------      ---------

NET LOSS                                               $(278,804)     $(797,117)
                                                       =========


See independent auditor's report
The accompanying notes are an integral part of this statement

                                      F-4
<PAGE>


                                  ALPHARX, INC.

                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                      FOR THE YEAR ENDED SEPTEMBER 30, 2000


                   COMMON STOCK                                         Total
                                            Additional    Retained      Share-
                     Number of               Paid-in      Earnings     holders'
                      Shares      Amount     Capital     (Deficits)     Equity
                     ---------   -------   -----------   ----------    -------

Balance at           4,082,500   $ 4,083   $  310,945     (213,732)  $  104,296
September30, 1998

Prior Period                                                 3,000
Adjustment (note
6)

Issuance of Stock      145,000       145      724,855                   725,000
Common (note5)

Net income for                                            (797,117)    (797,117)
The year Ending
September 30, 1999

Balance at           4,227,550   $ 4,228   $1,035,800  $(1,007,849)    $ 32,179
September 30, 1999

Issuances of           711,333       711      338,491                   339,202
stock - Common
(note 7)

Stock Split (note   44,449,497
5)

Net loss for The                                          (278,804)    (278,804)
year ending
September 30, 2000

                    49,388,330     4,939    1,374,291   (1,286,653)      92,557
                    ==========    ======    =========   ==========    =========


See independent auditor's report
The accompanying notes are an integral part of this statement

                                      F-5
<PAGE>


                                  ALPHARX, INC.

                         STATEMENT OF RETAINED DEFICITS

                 FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999



RETAINED DEFICITS                                  SEPTEMBER 30,
                                                   -------------

                                       2000                            1999
                                       ----                            ----

As previously reported                                             $  (213,732)

Adjustment for overstatement of
Research & Development expense
(note 6)                                                                 3,000
                                                                         -----

Beginning balance,October1,1999     $(1,007,849)    Oct 1,1998     $  (210,732)

Netloss for theperiod                  (278,804)                      (797,117)
                                    -----------                       --------

Ending balance,
September 30, 2000                  $(1,286,653)   Sept 30,1999    $(1,007,849)
                                    ===========


See independent auditor's report
The accompanying notes are an integral part of this statement

                                      F-6
<PAGE>


                                  ALPHARX, INC.

                            STATEMENTS OF CASH FLOWS

                     FOR THE YEARS ENDED SEPTEMBER 30, 2000


                                                              SEPTEMBER 30,
                                                        -----------------------
                                                           2000          1999
                                                        ---------     ---------
CASH FLOWSFROMOPERATING ACTIVITIES
Net Loss                                                $(278,804)    $(797,117)
Depreciation Amount                                         4,533         4,006
Prior Period Adjustment (note 6)                                          3,000

Adjustment to reconsile net income to net cash
   Cash provided by operating activities:
      Changes in assets and liaibilies:
      Increasein Accounts Payable
      Increase in loan from shareholder                     9,814        12,297
      Decrease in Sales Tax Receivable                      2,365         1,621
                                                        ---------     ---------

NET CASH USED BY OPERATION ACTIVITIES                   $(262,092)    $(776,133)

CASH FLOWS FROM INVESTING ACTIVITIES
      Acquisition of Equipment                            (64,729)
      Purchase of investment                                            (46,408)

CASH FLOWS FROM FINANCING ACTIVITES
      Proceeds from Issuance of Stock                         711           145
      Increase in Additional Paid-In Capital              338,491       724,855
                                                        ---------

      Repayment of shareholders'loan                                    (29,407)
                                                                      ---------

      NET CASH PROVIDED BY FINANCING                    $ 339,202     $ 695,593
                                                        ---------     ---------
      ACTIVITIES

NET INCREASE IN CASH                                       12,381

NET DECREASE IN CASH                                                   (126,948)

CASH AS OF SEPTEMBER 30, 1999                               1,562       128,510
                                                        ---------     ---------

CASH AS OF SEPTEMBER 30, 1999                           $  13,943     $   1,562
                                                        =========     =========

SUPPLEMENTARY DISCLOSURE

The statement of cash flows using indirect  method as defined under Statement of
Financial Accounting Standard of No. 95.

See independent auditor's report

                                      F-7
<PAGE>


                                  ALPHARX, INC.

                          NOTES TO FINANCIAL STATEMENTS

                           SEPTEMBER 30, 2000 AND 1999

NOTE 1. FORMATION AND ORGANIZATION OF BUSINESS

ALPHARX,  INC.  (the  Company) was  incorporated  under the laws of the State of
Delaware on August 8, 1997. The company is still in its developing stage and had
no active business  operation as of September 30, 2000. The company was formally
known as LOGIC TECH  INTERNATIONAL,  INC.,  and had its  corporate  name amended
during the fiscal year.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of ALPHARX, INC. is presented to
assist in  understanding  the  Company's  financial  statements.  The  financial
statements  and notes are  representations  of the Company's  management  who is
responsible  for their  integrity and  objectivity.  These  accounting  policies
conform to generally accepted  accounting  principles and have been consistently
applied in the preparation of the financial statements.

Cash and Cash Equivalent

For purpose of these statements,  cash equivalent included cash on hand, cash in
bank, and all short-term  debt  securities  purchased with a maturity  period of
three months or less.

Depreciation

The company's property,  plant, and equipment are depreciated using the Modified
Accelerated Cost Recovery System Method, with recovery period of 3 years.

Property and Equipment

Property and equipment are stated at cost.  Depreciation  is calculated by using
Modified Accelerated Cost Recovery System Method for financial reporting as well
as income tax  reporting  purposes  at rates  based on the  following  estimated
useful lives:

                 Funiture and Fixtures                7 years
                 Machinery and Equipment              3 years
                 Automobile                           5 years

The company capitalizes  expenditures that materially increase assets' lives and
expense ordinary  repairs and maintenance to operating as incurred.  When assets
are sold or  disposed  or  otherwise  fully  depreciated,  the cost and  related
accumulated  deprecation  are removed  from the accounts and any gain or loss is
included in the statement of income and related earnings.

See independent auditor's report

                                      F-8
<PAGE>


                                  ALPHARX, INC.

                          NOTES TO FINANCIAL STATEMENTS

                           SEPTEMBER 30, 2000 AND 1999


Income Taxes

The company is a C Corporation that subjects to accrual of federal tax according
to tax laws. There is no income tax for year ended since the company was under a
development  stage and did not have  active  business  operations.  The State of
Delaware does not impose tax on corporation net income.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued.)

Research and Development (R&D)

All research and development  cost were charged to expense for the period ended.
These  costs  included  traveling  to explore  and  evaluate  new  products  and
negotiating  marketing  rights,  products  licensing,   and  various  legal  and
professional  fees incurred for preparation of patent  applications.  A total of
$74,990 R&D expense had been spent during the twelve month ended  September  30,
2000.

NOTE 3. PROPERTY, PLANT & EQUIPMENT
                                                                       Life Year
Furniture & Fixtures                                   $  1,656            7
Machinery & Equipment                                    40,767            3
Automobile                                               22,067            5
                                                       --------
                                                         74,490
Less accumulated depreciation                           (11,060)
                                                       --------
                                                       $ 63,430
                                                       ========
NOTE 4. INVESTMENTS

The Company had  acquired  common  stocks of a foreign  company  located in Hong
Kong. The total amounted  invested is $46,408.  The securities  invested are not
publicly traded.

NOTE 5. COMMON STOCK

The Company is authorized  to issue  100,000,000  shares of common stock.  As of
September 30, 2000,  49,388,330  shares of such common stock had been issued and
outstanding, each share bears a par value of $0.0001.

                                      F-9
<PAGE>


On July 20, 2000 the Company's board of directors  declared a ten-for-one  stock
split,  effected in the form of a stock dividend, on the shares of the Company's
common stock. Each shareholder of record on July 20, 2000, received 9 additional
share of common  stock for each share of common  stock then held.  The stock was
issued on August 11,  2000.  The Company  amended the current par value of $.001
per share to  $.0001for  all  shares  of common  stock.  All  references  in the
financial statements to the number of shares outstanding, per share amounts, and
stock option data of the  Company's  common stock have been  restated to reflect
the effect of the stock split for all periods presented.

See independent auditor's report

                                      F-10
<PAGE>


                                  ALPHARX, INC.

                          NOTES TO FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999


NOTE 6. STOCK OPTION PLAN

The Company has a Stock Option Plan (Plan) under which officers,  key employees,
certain  independent  contractors,  and  non-employee  directors  may be granted
options to purchase  shares of the  Company's  authorized  but  unissued  common
stock.  The maximum number of shares of the Company's common stock available for
issuance  under the Plan is 8 million  shares.  As of September  30,  2000,  the
maximum number of shares available for future grants under the Plan is 5,750,000
shares.  Under the Plan, the option exercise price and its fair market value are
determined to be $US1.00.  Options  currently expire no later than 10 years from
the grant date and generally  vest within five years.  Proceeds  received by the
Company  from  exercises  of stock  options  are  credited  to common  stock and
additional  paid-in capital.  Additional  information with respect to the Plan's
stock option activity is as follows:

                                                                      WEIGHTED
                                                                       AVERAGE
                                                       NUMBER OF      EXERCISE
                                                         SHARES         PRICE
                                                       ---------      ---------
Outstanding at June 20, 200 (plan adoption)            5,750,000          $1.0
         Granted                                       1,400,000          $1.0
         Exercised                                             0          $1.0
         Cancelled                                             0          $1.0
                                                       ---------       -------
Outstanding at September30, 2000                       5,750,000          $1.0
                                                       =========       =======
Options exercisable at September30,2000                1,400,000          $1.0
                                                       =========       =======

The  Company has  elected to follow APB  Opinion  No. 25  (Accounting  for Stock
Issued to Employees) in accounting for its employee stock options.  Accordingly,
no  compensation  expense is recognized in the  Company's  financial  statements
because none of the vested options were exercised.


See independent auditor's report

                                      F-11
<PAGE>


            Independent Auditor's Report on Supplementary Information


Board of Directors
ALPHARX, Inc.
Markham, Ontario, Canada

     We have audited the accompanying  financial statements of AlphaRx,  Inc. as
of and for the years ended  September 30, 2000 and September 30, 1999,  and have
issue our report  thereon dated  November 27, 2000.  Our audit was conducted for
the purpose of forming an opinion on the basis financial  statements  taken as a
whole.  The  information  contained in Schedule I is  presented  for purposes of
additional  analysis  and  is  not  a  required  part  of  the  basic  financial
statements.  Such  information  has been  subjected to the  auditing  procedures
applied in the audit of the basic financial  statements and, in our opinion,  is
fairly  stated in all  material  respects  in  relation  to the basic  financial
statements taken as whole.




/s/ Philip K. Yeung, C.P.A.



November 27, 2000

                                      F-12
<PAGE>


                                  ALPHARX, INC.

            SCHEDULE OF SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

                 FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999


                                                             SEPTEMBER 30,
                                                     ---------------------------
                                                       2000               1999
                                                     --------           --------
Automobile                                           $  7,344              4,988
Bank charge                                               501                499
Contract Labbor                                         7,675
Delivery & postage                                      3,093              1,030
Depreciation                                            4,533              4,066
Dues & subscriptions                                      630                 27
Insurance                                               4,065                423
Interest expenses                                         693                169
License                                                 1,998                483
Meals & entertainment                                   1,324                850
Miscellaneous                                             368
Office expense                                          8,944              7,898
Professional fees                                     126,470            215,121
Research & Development                                 74,990            530,688
Rent Expense                                           11,016
Security                                                  394
Supplies                                                3,268
Telephone                                               5,573             15,001
Travel                                                 15,664             14,248
Utility                                                 1,629
Filing fees                                                                5,000
Medical expenses                                                             396

                                                     $280,271           $800,841
                                                     ========           ========


See independent auditor's report
The accompanying notes are an integral part of this statement

                                      F-13
<PAGE>


                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                                  ALPHARX, INC.



     The  undersigned,  the President of AlphaRx,  Inc., a Delaware  corporation
(the  "Corporation"),  does hereby  execute the  following  Amended and Restated
Certificate of Incorporation pursuant to Sections 242(b) and 245 of the Delaware
General Corporation Law:

     1.   The name of the Corporation is AlphaRx, Inc.

     2.   The Corporation was originally  incorporated  under the name of "Logic
Tech  International  Inc." and the original  Certificate of Incorporation of the
Corporation  was filed in the Office of the  Secretary  of State of  Delaware on
August 8, 1997.

     3.   The Certificate of  Incorporation of the Corporation is hereby amended
and restated to read in its entirety as follows:

               "FIRST. The name of the corporation is AlphaRx, Inc.

               SECOND.  The registered office of the corporation in the State of
Delaware is to be located at 1013 Centre Road, in the City of Wilmington, County
of New Castle,  19805,  and its  registered  agent at such  address is CORPORATE
AGENTS, INC.

               THIRD.  The purpose or purposes of the  corporation  shall be: To
engage in any lawful act or activity  for which  corporations  may be  organized
under the General Corporation Law of Delaware.

               FOURTH.   The  total   number  of  shares  of  stock  which  this
corporation is authorized to issue is one hundred million  (100,000,000)  shares
with a par value of one hundredth of one cent ($.0001) per share.

               FIFTH.  The name and mailing  address of the  incorporator  is as
follows:

                       Kathleen Crowley
                       Corporate Agents, Inc.
                       1013 Centre Road
                       Wilmington, DE 19605

               SIXTH.  The  Board of  Directors  shall  have the power to adopt,
amend or repeal the by-laws."

                                    1
<PAGE>


     4.   The four  million nine hundred and eight  thousand  eight  hundred and
thirty-three  (4,908,833)  shares  of common  stock,  $.001  par  value,  of the
Corporation  presently  issued and outstanding are hereby  converted and changed
into an aggregate of forty-nine million eighty- eight thousand three hundred and
thirty  (49,088,330)  issued and  outstanding  shares of the new class of common
stock,  $.0001 par  value,  of the  Corporation  at the rate of 10 new shares of
$.0001 par value for each outstanding share of $.001 par value.

     5.   The foregoing  amendment to the  Certificate of  Incorporation  of the
Corporation  was  adopted  by vote of the  Board of  Directors  and the  written
consent of the holders of a majority  of the  outstanding  capital  stock of the
Corporation  in  accordance  with  Sect ions  228,  242 and 245 of the  Delaware
General  Corporation  Law.  Prompt  notice  thereof  has  been  given  to  those
stockholders  who have not so consented in writing,  in accordance  with Section
228 of the Delaware General Corporation Law.

               IN WITNESS WHEREOF,  I have hereunto set my hand this 20th day of
July, 2000.

                                                         /s/ Michael M. Lee
                                                         ------------------
                                                         Michael M. Lee
                                                         President

Attest: /s/ Sandro Persia
        -----------------
            Sandro Persia
            Secretary

                                       2
<PAGE>


                                  ALPHARX, INC.
                             2000 STOCK OPTION PLAN

1.   Purposes.

     The  ALPHARX,  INC.  2000 STOCK  OPTION  PLAN (the  "Plan") is  intended to
provide the employees , directors,  independent  contractors  and consultants of
AlphaRx, Inc. (the "Company") with an added incentive to continue their services
to the  Company and to induce them to exert  their  maximum  efforts  toward the
Company's  success.  By  thus  encouraging  employees,  directors,   independent
contractors and consultants and promoting their continued  association  with the
Company,  the Plan may be expected to benefit the Company and its  Shareholders.
The Plan  allows the  Company to grant  Incentive  Stock  options  ("ISOs")  (as
defined in Section 422(b) of the Internal  Revenue Code of 1986, as amended [the
"Code"]),  Non-Qualified  Stock Options  ("NQSOs") not intended to qualify under
Section  422(b)  of the  Code,  Stock  Appreciation  Rights  ("SARs")  and Stock
Depreciation Rights ("SDRs") (collectively the "Options").

2.   Shares Subject to the Plan.

     The total number of shares of Common Stock of the Company,  $.001 par value
per share (the "Common Stock"), that may be subject to Options granted under the
Plan shall be 800,000 in the  aggregate,  subject to  adjustment  as provided in
Paragraph 8 of the Plan; however,  the grant of any NQSO to an employee together
with a tandem SAR or SDR shall only require one share of Common Stock  available
subject to the Plan to satisfy such joint Option. The Company shall at all times
while the Plan is in force reserve such number of shares of Common Stock as will
be sufficient to satisfy the  requirement of outstanding  Options  granted under
the Plan.  In the event  any  Option  granted  under  the Plan  shall  expire or
terminate for any reason  without  having been  exercised in full or shall cease
for any reason to be  exercisable in whole or in part,  the  unpurchased  shares
subject thereto shall again be available for granting of Options under the Plan.

3.   Eligibility.

     ISO's  may be  granted  from  time to time  under  the  Plan to one or more
employees of the Company or of a "subsidiary" or "parent" of the Company, as the
quoted  terms are  defined  within  Section  424 of the Code.  An  Officer is an
employee for the above purposes.  Options, other than ISO's, may be granted from
time to time under the Plan to one or more  employees of the Company,  Officers,
members of the Board of  Directors,  independent  contractors,  consultants  and
other  individuals  who are not employees of, but are involved in the continuing
development  and success of the Company  and/or of a subsidiary  of the Company,
including persons who have previously been granted Options under the Plan.

                                       1
<PAGE>


4.   Administration of the Plan.

     (a)  The Plan  shall be  administered  by the  Board  of  Directors  of the
Company as such Board of  Directors  may be  composed  from time to time or by a
Stock Option Committee (the "Committee") comprised of at least two disinterested
persons  (the term  "disinterested"  having the  meaning  ascribed to it by Rule
16b-3 of the Securities Exchange Act of 1934 [the "1934 Act"]) appointed by such
Board of Directors of the Company.  As and to the extent authorized by the Board
of Directors of the Company,  the Committee may exercise the power and authority
vested  in the Board of  Directors  under the  Plan.  Within  the  limits of the
express  provisions of the Plan, the Board of Directors or Committee  shall have
the authority, in its discretion,  to determine the individuals to whom, and the
time or times at which,  options shall be granted, the character of such Options
(whether  ISO,  NQSO  and/or SAR or SDR in tandem with a NQSO) and the number of
shares of Common Stock to be subject to each option,  and to interpret the Plan,
to prescribe,  amend and rescind rules and regulations  relating to the Plan, to
determine the terms and provisions of Option agreements that may be entered into
in  connection  with  Options  (which  need not be  identical),  subject  to the
limitation  that agreements  granting ISOs must be consistent with  requirements
for the ISOs being qualified as "incentive stock options" as provided in Section
422 of the Code, and to make all other determinations and take all other actions
necessary  or  advisable  for the  administration  of the Plan.  In making  such
determinations,  the Board of Directors  may take into account the nature of the
services rendered by such individuals, their present and potential contributions
to the Company's success,  and such other factors as the Board of Directors,  in
its discretion,  shall deem relevant. The Board of Directors'  determinations on
the matters referred to in this paragraph shall be conclusive.

     (b)  Notwithstanding   anything  contained  herein  to  the  contrary,  the
Committee  shall have the exclusive right to grant Options to persons subject to
Section 16 of the 1934 Act and set forth the terms and conditions thereof.  With
respect to persons subject to Section 16 of the 1934 Act, transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3 for its
successors under the 1934 Act. To the extent any provision of the Plan or action
by the Board of Directors or  Committee  fails to so comply,  it shall be deemed
null and void, to the extent  permitted by law and deemed advisable by the Board
of Directors.

5.   Terms of Options.

     Within the limits of the express  provisions of the Plan,  the Board or the
Committee  may grant  either  ISOs or NQSOs or SARs  and/or  SDRs in tandem with
NQSOs.  An ISO or an NQSO enables the optionee to purchase from the Company,  at
any time during a specified  exercise  period,  a specified  number of shares of
Common Stock at a specified price (the "Option Price"). The optionee, if granted
a SAR in tandem with a NQSO, may receive from the Company, in lieu of exercising
his  option to  purchase  shares  pursuant  to his NQSO,  at one of the  certain
specified  times during the  exercise  period of the NQSO as set by the Board or
the  Committee,  the  excess of the fair  market  value upon such  exercise  (as
determined in accordance with subparagraph (b) of this Paragraph 5) of one share
of Common  Stock over the  Option  Price per share  specified

                                       2
<PAGE>


upon grant of the  NQSO/SAR  multiplied  by the number of shares of Common Stock
covered by the SAR so exercised. The optionee, if qranted a SDR in tandem with a
NQSO, may receive from the Company at such date after the optionee's exercise of
the NQSO with which the SDR is in tandem and the SDR itself, which date shall be
determined by the Board or the Committee in its sole  discretion,  the excess of
the fair market value of one share of Common Stock upon the optionee's  exercise
of the NQSO with  which the SDR is in tandem  over the  greater  of the (i) fair
market  value on the date six months and one day after the exercise of such NQSO
and (ii) the option price paid on the exercise thereof, multiplied by the number
of shares of Common Stock  covered by the NQSO/SDR so  exercised.  The character
and terms of each Option granted under the Plan shall be determined by the Board
of  Directors  consistent  with  the  provisions  of  the  Plan,  including  the
following:

     (a)  An Option  granted under the Plan must be granted within 10 years from
the  date  the  Plan  is  adopted,  or the  date  the  Plan is  approved  by the
Shareholders of the Company, whichever is earlier.

     (b)  The  Option  Price of the shares of Common  Stock  subject to each ISO
shall not be less than the fair market  value of such shares of Common  Stock at
the time such ISO is granted.  Such fair market value shall be determined by the
Board of  Directors  and, if the shares of Common Stock are listed on a national
securities  exchange or traded on the  over-the-counter  market, the fair market
value shall be the closing  price on such  exchange,  or the mean of the closing
bid and asked  prices of the  shares  of  Common  Stock on the  over-the-counter
market, as reported by the National  Association of Securities Dealers Automated
Quotation System (NASDAQ),  the National  Association of Securities  Dealers OTC
Bulletin Board or the National  Quotation  Bureau,  Inc., as the case may be, on
the day on which the Option is granted  or, if there is no closing  price or bid
or asked  price on that day,  the  closing  price or mean of the closing bid and
asked  prices on the most  recent day  preceding  the day on which the Option is
granted  for which  such  prices  are  available.  If an ISO is  granted  to any
individual who,  immediately before the ISO is to be granted,  owns (directly or
through  attribution)  more than 10% of the total  combined  voting power of all
classes  of  capital  stock of the  Company  or a  subsidiary  or  parent of the
Company,  the  Option  Price of the shares of Common  Stock  subject to such ISO
shall not be less than 110% of the fair market  value per share of the shares of
Common Stock at the time such ISO is granted.

     (c)  The Option Price of the shares of Common Stock subject to an NQSO or a
SAR  or  SDR in  tandem  with a NQSO  granted  pursuant  to the  Plan  shall  be
determined by the Board of Directors or the Committee, in its sole discretion.

     (d)  In no event shall any Option granted under the Plan have an expiration
date later than 10 years from the date of its  grant,  and all  Options  granted
under the Plan shall be subject to earlier  termination as expressly provided in
Paragraph  6 hereof.  If an ISO is granted to any  individual  who,  immediately
before the ISO is granted,  owns (directly or through attribution) more that 10%
of the total  combined  voting  power of all  classes  of  capital  stock of the
Company or of a subsidiary or parent of the Company, such ISO shall


                                       3
<PAGE>


by its terms expire and shall not be  exercisable  after the  expiration of five
(5) years from the date of its grant.

     (e)  An SAR may be  exercised  at any time  after six months of the date of
the grant  thereof  during  the  exercise  period  of the NQSO with  which it is
granted in tandem and prior to the  exercise  of such NQSO,  but only within the
specified 10 business day period referred to in subsection  (e)(3) of Rule 16b-3
of the 1934 Act  (generally,  the 10 business  days  immediately  following  the
publication of the Company's quarterly financial  information).  The exercise of
an SAR  granted in tandem  with an NQSO shall be deemed to cancel such number of
shares subject to the  unexercised  Option as were subject to the exercised SAR.
An SDR may be  exercised  at any time prior to the  expiration  date of the NQSO
granted in tandem with the SDR and after 6 months from the  exercise of the NQSO
granted in tandem with the SDR. The Board or the  Committee  has  discretion  to
determine  and impose  conditions on SDRs such as setting the time of payment at
the date six months and one day following the date of exercise,  the date of the
sale of the  Common  Stock  received  upon the  exercise  of the NQSO  which was
granted  in tandem  with the SDR,  or some  other  date (but not later  than the
expiration date of the option),  and reducing the amount of the  distribution to
take into account  appreciation  in the fair market value of the  aforementioned
Common  Stock  prior  to the  payment  of the  distribution.  The  Board  or the
Committee also has the discretion to alter the terms of the SDRs if necessary to
comply with Federal or state  securities law.  Amounts to be paid by the Company
in  connection  with  an SAR or SDR  may,  in  the  Board's  or the  Committee's
discretion,  be made in cash,  Common Stock or a  combination  thereof.  An NQSO
granted in tandem with an SAR or SDR may not be  exercised  within six months of
the grant thereof.

     (f)  Unless  otherwise  provided in any Option agreement under the Plan, an
Option granted under the Plan shall become exercisable,  in whole at any time or
in part from time to time,  but in no case may an Option (i) be  exercised as to
less than one  hundred  (100)  shares of  Common  Stock at any one time,  or the
remaining  shares of Common Stock covered by the Option if less than one hundred
(100),  and (ii) become fully  exercisable more than five years from the date of
its grant nor shall less than 20% of the Option become exercisable in any of the
first five years of the Option.

     (g)  An Option granted under the Plan shall be exercised by the delivery by
the holder  thereof to the Company at its principal  office (to the attention of
the  Secretary)  of written  notice of the number of full shares of Common Stock
with respect to which the Option is being  exercised,  accompanied by payment in
full, in cash or by certified check payable to the order of the Company,  of the
Option  Price of such  shares of Common  Stock,  or,  at the  discretion  of the
Committee or the Board,  by the delivery of shares of Common Stock having a fair
market value equal to the Option Price (provided, in order to qualify as an ISO,
more than one year shall have  passed  since the date of grant and one year from
the date of  exercise),  or at the option of the  Committee  or the Board,  by a
combination of cash and such shares (subject to the  restriction  above) held by
the employee  that have a fair market value  together  with such cash that shall
equal the Option  Price,  and, in the case of a NQSO,  at the  discretion of the
Committee  or Board by having  the  Company  withhold  from the shares of Common
Stock to be issued upon


                                       4
<PAGE>


exercise of the Option that number of shares having a fair market value equal to
the exercise price and/or the tax withholding  amount due, otherwise provide for
withholding as set forth in Paragraph  9(c) hereof,  or in the event an employee
is granted a NQSO in tandem with an SAR and/or SDR and desires to exercise  such
SAR or SDR, such written notice shall so state such intention.

     (h)  The holder of an Option shall have none of the rights of a Shareholder
with respect to the shares of Common Stock covered by such holder's Option until
such shares of Common  Stock shall be issued to such holder upon the exercise of
the Option.

     (i)  An ISO granted under the Plan and any NQSO granted under the Plan with
an exercise price below the fair market value at the date of grant or other NQSO
which the Board or  Committee  so  designates  at the time of grant shall not be
transferable otherwise than by will or the laws of descent and distribution, and
any ISO  granted  under the Plan may be  exercised  during the  lifetime  of the
holder  thereof only by the holder.  No Option  granted  under the Plan shall be
subject to execution, attachment or other process.

     (j)  The aggregate fair market value,  determined as of the time any ISO is
granted and in the manner provided for by subparagraph  (b) of this Paragraph 5,
of the shares of Common Stock with respect to which ISOs granted  under the Plan
are  exercisable for the first time during any calendar year and under incentive
stock  options  qualifying  as such in  accordance  with Section 422 of the Code
granted under any other Incentive Stock Option plan maintained by the Company or
its parent or subsidiary  corporations,  shall not exceed $100,000. Any grant of
Options in excess of such amount shall be deemed a grant of a NQSO.

6.   Death or Termination of Employment.

     (a)  If the  employment  of a holder  of an ISO  under  the  Plan  shall be
terminated  voluntarily  by the employee or for cause,  such  holder's ISO shall
expire  thirty  (30) days  after  such  termination.  If such  employment  shall
terminate for any reason other than death, voluntary termination by the employee
or for cause, then such ISO may be exercised at any time within three (3) months
after such  termination,  subject to the provisions of subparagraph  (f) of this
Paragraph 6. For the purposes of this  subparagraph  (a), the  retirement  of an
individual  either  pursuant  to a pension  or  retirement  plan  adopted by the
Company or at the normal  retirement  date  prescribed  from time to time by the
Company  shall be deemed to be a  termination  of such  individual's  employment
other than voluntarily by the employee or for cause.

     (b)  If the holder of an ISO under the Plan dies (i) while  employed by the
Company or a subsidiary  or parent  corporation  or (ii) within three (3) months
after the termination of such holder's  employment other than voluntarily by the
employee or for cause,  such ISO may,  subject to the provisions of subparagraph
(f) of this  Paragraph  6, be  exercised by a legatee or legatees of such Option
under   such   individual's   last  will  or  by  such   individual's   personal
representatives   or  distributees  at  any  time  within  one  year  after  the
individual's death.

                                       5
<PAGE>


     (c)  If the  holder of an ISO under the Plan  becomes  disabled  within the
definition  of section  22(e)(3) of the Code while  employed by the Company or a
subsidiary or parent  corporation,  such ISO may,  subject to the  provisions of
subparagraph  (f) of this  Paragraph 6, be exercised at any time within one year
after such holder's termination of employment due to the disability.

     (d)  An ISO may not be exercised pursuant to this Paragraph 6 except to the
extent  that  the  holder  was  entitled  to  exercise  the  ISO at the  time of
termination of employment or death,  and in any event may not be exercised after
the original expiration date of the ISO.

7.   Leave of Absence.

     For the  purposes  of the Plan,  an  individual  who is on military or sick
leave or other bona fide leave of absence  (such as temporary  employment by the
Government)  shall be considered as remaining in the employ of the Company or of
a subsidiary or parent corporation for ninety (90) days or such longer period as
such  individual's  right to reemployment is guaranteed  either by statute or by
contract.

8.   Adjustment Upon Changes in Capitalization.

     (a)  In the event that the outstanding shares of Common Stock are hereafter
changed  by  reason  of  recapitalization,   reclassification,  stock  split-up,
combination  or  exchange  of  shares of  Common  Stock or the  like,  or by the
issuance  of  dividends  payable  in  shares  of Common  Stock,  an  appropriate
adjustment  shall be made by the Board of Directors,  as determined by the Board
of Directors,  in the aggregate number of shares of Common Stock available under
the Plan,  in the number of shares of Common  Stock  issuable  upon  exercise of
outstanding  Options,  and the  Option  Price  per  share.  In the  event of any
consolidation  or merger of the Company  with or into  another  company,  or the
conveyance of all or  substantially  all of the assets of the Company to another
company, each then outstanding Option shall upon exercise thereafter entitle the
holder  thereof to such number of shares of Common Stock or other  securities or
property to which a holder of shares of Common  Stock of the Company  would have
been entitled to upon such consolidation,  merger or conveyance; and in any such
case  appropriate  adjustment,  as  determined  by the Board of Directors of the
Company (or  successor  entity) shall be made as set forth above with respect to
any future changes in the capitalization of the Company or its successor entity.
In the event of the proposed  dissolution  or  liquidation  of the Company,  all
outstanding  Options  under  the  Plan  will  automatically  terminate,   unless
otherwise  provided by the Board of Directors  of the Company or any  authorized
committee thereof. Notwithstanding anything contained herein to the contrary, no
adjustment in the aggregate number of shares of Common Stock available under the
Plan (irrespective of any adjustments required in the number of shares of Common
Stock issuable upon exercise of outstanding  Options) or in the Option Price per
share,  provided the Option Price in any option  agreement issued under the Plan
is the initial  public  offering price of the Company's  Common Stock,  shall be
required,  except as otherwise  provided in any Option Agreement  evidencing the
Options,  in the  event  of a stock  split  or

                                       6
<PAGE>


other  re-capitalization  of the  Company,  as  described  above,  prior  to the
consummation of an initial public offering by the Company.

     (b)  Any  adjustment  in the number of shares of Common  Stock  shall apply
proportionately  to  only  the  unexercised   portion  of  the  Options  granted
hereunder.  If  fractions  of shares of Common  Stock would result from any such
adjustment,  the  adjustment  shall be revised to the next lower whole number of
shares of Common Stock.

9.   Further Conditions of Exercise.

     (a)  Unless the shares of Common  Stock  issuable  upon the  exercise of an
Option  under the Plan have been  registered  with the  Securities  and Exchange
Commission  pursuant to the  Securities  Act of 1933,  as amended,  prior to the
exercise  of the  Option,  the  notice of  exercise  shall be  accompanied  by a
representation  or  agreement  of the  individual  exercising  the Option to the
Company to the effect that such shares of Common  Stock are being  acquired  for
investment  and not with a view to the  resale or  distribution  thereof or such
other documentation as may be required by the Company,  unless in the opinion of
counsel to the Company such  representation,  agreement or  documentation is not
necessary to comply with said Act.

     (b)  The  Company  shall not be  obligated  to deliver any shares of Common
Stock  until  they have been  listed on each  securities  exchange  on which the
shares of Common Stock may then be listed or until there has been  qualification
under or compliance with such state or federal laws, rules or regulations as the
Company may deem applicable.  The Company shall use reasonable efforts to obtain
such listing, qualification and compliance.

     (c)  The Board or Committee may make such provisions and take such steps as
it may deem necessary or appropriate  for the  withholding of any taxes that the
Company is  required by any law or  regulation  of any  governmental  authority,
whether federal,  state or local, domestic or foreign, to withhold in connection
with  the  exercise  of any  Option,  including,  but not  limited  to,  (i) the
withholding  of payment of all or any portion of such  Option  and/or SAR and/or
SDR until the holder  reimburses  the  Company  for the  amount  the  Company is
required to withhold with respect to such taxes,  or (ii) the  cancelling of any
number of shares of Common Stock  issuable  upon  exercise of such Option and/or
SAR and/or SDR in an amount  sufficient  to reimburse the Company for the amount
it is required to so withhold,  (iii) the selling of any  property  contingently
credited by the Company for the purpose of exercising  such Option,  in order to
withhold or reimburse  the Company for the amount it is required to so withhold,
or (iv) withholding the amount due from such employee's wages if the employee is
employed by the Company or any subsidiary thereof.

10.  Termination, Modification and Amendment.

     The Plan  (but  not  Options  previously  granted  under  the  Plan)  shall
terminate  ten (10) years from the  earliest of the date of its  adoption by the
Board of Directors,  or the date the Plan is approved by the Shareholders of the
Company,  or such date of

                                       7
<PAGE>


termination,  as  hereinafter  provided,  and no Option  shall be granted  after
termination of the Plan.

     The Plan may from time to time be  terminated,  modified  or amended by the
affirmative  vote of the  holders of a  majority  of the  outstanding  shares of
capital stock of the Company entitled to vote thereon.

     The Board of  Directors  of the Company may at any time,  prior to ten (10)
years from the earlier of the date of the  adoption of the Plan by such Board of
Directors or the date the Plan is approved by the  Shareholders,  terminate  the
Plan or from time to time make such  modifications  or amendments of the Plan as
it may deem advisable; provided, however, that the Board of Directors shall not,
without  approval  by the  affirmative  vote of the holders of a majority of the
outstanding  shares of capital  stock of the Company  entitled to vote  thereon,
increase  (except as provided by  Paragraph  8) the maximum  number of shares of
Common  Stock as to which  Options  may be  granted  under the Plan,  materially
change the standards of  eligibility  under the Plan or materially  increase the
benefits which may accrue to  participants  under the Plan. Any amendment to the
Plan which,  in the opinion of counsel to the Company,  will be deemed to result
in the  adoption  of a new Plan,  will not be  effective  until  approved by the
affirmative  vote of the  holders of a  majority  of the  outstanding  shares of
capital stock of the Company entitled to vote thereon.

     No termination,  modification or amendment of the Plan may adversely affect
the rights under any outstanding Option without the consent of the individual to
whom such Option shall have been previously granted.

11.  Effective Date of the Plan.

     The Plan shall become  effective upon adoption by the Board of Directors of
the Company.  The Plan shall be subject to approval by the  affirmative  vote of
the  holders of a majority  of the  outstanding  shares of capital  stock of the
Company entitled to vote thereon within one year before or after adoption of the
Plan by the Board of Directors.

12.  Not a Contract of Employment.

     Nothing contained in the Plan or in any option agreement  executed pursuant
hereto shall be deemed to confer upon any individual to whom an Option is or may
be granted  hereunder  any right to remain in the employ of the  Company or of a
subsidiary  or  parent  of the  Company  or in any way  limit  the  right of the
Company,  or of any parent or subsidiary thereof, to terminate the employment of
any employee.

13.  Other Compensation Plans.

     The  adoption  of the Plan shall not affect any other  stock  option  plan,
incentive plan or any other compensation plan in effect for the employees of the
Company,  nor shall the Plan  preclude the Company from  establishing  any other
form of stock option plan,  incentive  plan or any other  compensation  plan for
employees of the Company.

                                       8
<PAGE>


                    EMPLOYMENT AGREEMENT WITH MICHAEL M. LEE

       EMPLOYMENT  AGREEMENT  ("Agreement")  made and entered into as of the 1st
day  of  July,  2000  by  and  between  AlphaRx  Inc.,  a  Delaware  corporation
("Company"), and Michael M. Lee ("Executive").

       WHEREAS,  Company  desires  to  employ  Executive  as its  President  and
Executive  desires to be  employed  by  Company,  upon the terms and  conditions
hereinafter set forth.

       NOW,  THEREFORE,  in consideration of the mutual covenants and agreements
set forth and the mutual  benefits to be derived  herefrom,  and intending to be
legally bound hereby, the Company and the Executive agree as follows:

1.     Employment  and Term.  Company  hereby  employs  Executive  and Executive
       hereby  accepts  employment  for a term  commencing on July 1st, 2000 and
       continuing  until June 30th, 2003,  unless sooner  terminated as provided
       for  in  this  Agreement.  Company  and  Executive  have  the  option  to
       renegotiate this Agreement beyond the three-year period. Executive hereby
       warrants  and  represents  to Company  that he is free to enter into this
       Agreement and is not a party to any agreement,  written or otherwise,  or
       bound by any restrictions, which limit or restrict him from entering into
       this  Agreement or performing the services,  duties and  responsibilities
       called for hereunder.

2.     Duties.

2.1    Executive  shall  perform the duties of the  President of the Company and
       such additional executive duties of Company and its affiliates as may be,
       from time to time,  requested of him by the Company's  Board of Directors
       or the  Chairman  and/or  Chief  Executive  Officer  of the  Company.  As
       President of the Company,  the Executive shall report to the Chairman/CEO
       of the Company.

2.1.1  The duties as President of the Company  shall  include but not be limited
       to (i)  having  general  and active  management  of the  business  of the
       Company  (ii)  seeing  that all orders and  resolutions  of the Board are
       carried into effect,  subject  however,  to the right of the directors to
       delegate  any  specific  powers,   except  such  as  may  be  by  statute
       exclusively conferred on the President,  to any other officer or officers
       of the Company  (iii)  executing  bonds,  mortgages  and other  contracts
       requiring  a seal,  under the seal of the  Company  (iv) be  Ex-Offico  a
       member  of all  committees  (v) have the  general  powers  and  duties of
       supervision and management usually vested in the office of President of a
       Company (vi) assist the Board of Directors,  Chairman/CEO  in formulating
       the business plan, goals and objectives for the Company's future growth.

2.2    Executive shall devote his full professional time and best efforts to the
       performance of his duties and  responsibilities  hereunder to advance the
       interests of the Company and shall not during the term of this  Agreement
       (as  defined in


                                       1
<PAGE>


       Section 1 hereof) be employed,  involved or otherwise  engaged in, either
       directly or indirectly,  any other  employment for gain,  profit or other
       pecuniary advantage, without prior written consent of Company. At no time
       shall  Executive  engage in any activity that conflicts with the business
       of the Company or its  affiliates.  Nothing set forth in this section 2.2
       shall be  construed to prevent  Executive  from (i) acting as a member of
       Board  of  Trustees  or a  member  of Board  of  Directors  of any  other
       corporation,  or as a member of the Board of Trustees of any organization
       or entity  which is not a competitor  of the Company or (ii)  devoting of
       such of  Executive's  time and  attention to  philanthropic,  charitable,
       civic,  community or other  activities  or  endeavors as Executive  shall
       reasonably determine but only to the extent that Executive's pursuance of
       any activities or endeavors does not materially and adversely  effect the
       Executive's  ability  to perform  and  discharge  Executive's  duties and
       objectives to the Company hereunder.

2.3    Except for required  travel on Company  business or unless Company agrees
       otherwise, Executive shall perform his duties and responsibilities at the
       Company's  principal  executive  offices  located in the greater  Toronto
       area. The Company shall furnish Executive with office space,  secretarial
       assistance,  a personal computer, a company car and such other facilities
       and  services as shall be suitable to  Executive's  position and adequate
       for the performance of his duties hereunder.

3.     Compensation.  For all duties and responsibilities to be performed and/or
       assumed by Executive hereunder, Executive shall be entitled to receive an
       annual salary as set forth below ("Base Salary").  The Base Salary,  less
       any sums  required  to be  withheld  by law,  shall be  payable  in equal
       monthly  installments or such other more frequent regular installments as
       the Company may, from time to time, determine.  For purposes hereof, Base
       Salary shall be:

3.1    For the six-month period commencing with the date hereof, the Base Salary
       shall be $24,000  per year which shall be  increased  to $36,000 per year
       after the first six months of employment.

3.2    For each year thereafter, the Base Salary shall be increased by an amount
       determined  by the Board of Directors  but in no event less than (i) five
       percent (5%) after the first year, six percent (6%) after the second year
       and each year thereafter  upon mutual  agreement to extend the term. Each
       percentage  increase  for a  particular  year  shall be based on the Base
       Salary for the immediately preceding year.

4.     Fringe  Benefits.  Company  shall pay for or provide  Executive  with the
       following benefits:

4.1    For the first year,  Executive  shall be entitled to three (3) weeks paid
       vacation to be used at the Executive's discretion.  Thereafter, Executive
       shall be entitled to four (4) weeks paid  vacation  during each full year
       of this Agreement to be used at

                                       2
<PAGE>


       the Executives discretion. Vacation time shall accrue on a pro-rata basis
       during  each  year  of this  Agreement.  Any  unused  vacation  shall  be
       cumulative from year to year unless otherwise agreed upon by the parties.
       ***

4.2    Health and  hospitalization  insurance  established and maintained by the
       Company for its senior executives and key management personnel. Since the
       Company  presently  does not  have,  in  effect,  a plan for  health  and
       hospitalization  insurance,  Company  shall  reimburse  Executive for all
       COBRA payments made by Executive to his previous  employer for health and
       hospitalization  coverage  for  Executive  and  his  family.  Thereafter,
       Company  shall  either  secure and  maintain  health and  hospitalization
       insurance  for Executive  and his  dependents or reimburse  Executive for
       coverage  comparable  to Blue  Shield/Blue  Cross for  Executive  and his
       dependents.

4.3    Such other  employee  benefits  maintained  by the Company for its senior
       executives and key management employees,  including,  all pension, profit
       sharing,  retirement,  stock bonus and stock option plans,  to the extent
       Executive is eligible to participate pursuant to the terms and conditions
       of such plans.

4.4    Executive shall be reimbursed in a timely manner for all items of travel,
       entertainment  and  miscellaneous  expenses  which  Executive  reasonably
       incurs  in  connection  with the  performance  of his  duties  hereunder,
       provided that the Executive  submits to the Company such  statements  and
       other  evidence  supporting  said  expenses as the Company my  reasonably
       require.   Executive,  when  traveling  on  Company  business,  shall  be
       permitted to fly first class on all domestic  flights and business  class
       on all international flights.

4.5    Executive  shall be  reimbursed  in a timely  manner  for all  reasonable
       moving  expenses   actually  incurred  by  Executive  in  relocating  the
       Executive  and his  family  to any  locations  required  by the  Company.
       ("Relocation  Expenses").  The Relocation Expenses shall include the cost
       of temporary residence,  a moving company and related expenses. The total
       Relocation  Expenses for which  Executive  shall be reimbursed  shall not
       exceed  $50,000  and shall be approved  in  writing,  in advance,  by the
       Company.

5.     Stock Options.

5.1    As  part  of  Executive's   compensation  for  services  to  be  rendered
       hereunder,  Executive  shall have the right and option to  purchase  from
       Company  voting common stock in Company  ("Option").  The total number of
       shares  available to Executive under this Option is Two Hundred  Thousand
       Shares  (200,000)  at a  purchase  price of Ten Cents  ($0.10)  per share
       (Option  Shares").  The  Option  Shares are  available  for  purchase  in
       installments  as  listed in  Column A below  and each  installment  shall
       become vested on the corresponding date listed in Column B, as follows:

                                       3
<PAGE>


       Column A             Column B
       Number of Shares     Date Option Shares Available for Purchase
                            Become Vested

       50,000               Upon the commencement of Executive's employment
                            pursuant to the terms of this Agreement

       50,000               First anniversary date of this Agreement

       50,000               Second anniversary date of this Agreement

       50,000               Third Anniversary date of this Agreement



In order for the Option Shares to become vested as provided for above, Executive
must be  employed  by the Company  under the terms of this  Agreement  as of the
vesting date set forth in Column B above.

5.2    Except as otherwise  provided for below,  the term of the Option  granted
       shall  remain in effect  for ten (10)  years  from the date on which such
       Option Shares  become  vested.  If the  Executive's  employment  with the
       Company is terminated by the Company for Cause (as defined  herein) or by
       the act of Executive,  the  Executive's  right to exercise  vested Option
       Shares  shall cease and become  null and void within  thirty (30) days of
       the date employment  terminated,  except as otherwise provided in Section
       5.3 hereof.  All unvested Option Shares will terminate  immediately as of
       the date of such  termination  of  employment.  In the event the  Company
       receives,  accepts  and  consummates  a  tender  offer  for  all  of  its
       outstanding  common stock prior to the vesting of the Option Shares,  the
       vesting rights shall be accelerated so as to allow  Executive to exercise
       the Option to purchase all of the Option Shares  immediately prior to the
       consummation of such tender offer.

5.3    Notwithstanding  anything  in  this  Section  5 to the  contrary,  if the
       Executive's  employment is terminated for Cause,  as set forth in Section
       6.3,  the Company  shall have the right to  terminate  and  withdraw  any
       vested or unvested Options under this Agreement.

5.4    The  purchase  price of the Option  Shares shall be paid in full upon the
       exercise  of the  Option,  and  Company  shall not be required to deliver
       certificates  for such Option  Shares  until  payment  has been made.  In
       addition  to, and at the time of payment of the  purchase  price for such
       Option Shares,  Executive  shall be responsible for all federal and state
       withholding or other employment taxes applicable to the taxable income of
       such  Executive  and any other fees  resulting  from the  exercise of the
       Executive.

                                       4
<PAGE>


5.5    Each share of Option Stock  purchased  pursuant to the terms hereof shall
       carry  all  appropriate  registration  and/or  restrictions  on sale  and
       notices as determined from time to time by Company's  securities counsel.
       Executive shall cooperate with Company and Company's counsel in complying
       with all applicable securities laws.

6.     Termination  of  Employment.  The  employment  of Executive and Company's
       liability and obligations hereunder shall terminate as follows:

6.1    This Agreement shall terminate  immediately  upon the death of Executive.
       In  such  event,  Company  shall  pay to such  person  as  Executive  may
       designate  in a written  notice  filed  with the  Company,  or if no such
       person  shall be  designated,  to  Executive's  estate,  a lump sum death
       benefit in an amount  equal to twelve  (12)  months of  Executive's  Base
       Salary as in effect on the date of Executive's death and double indemnity
       in event Executive's death occurs while traveling on Company business.

6.2    This  Agreement  shall  terminate  immediately  upon  the  Disability  of
       Executive.  Disability  shall  exist  if  due  to a  mental  or  physical
       condition, Executive is determined to be unable to perform his duties and
       responsibilities  hereunder  for a  continuous  period of two (2) months.
       Disability shall be conclusively  established by written certification by
       two (2) licensed,  disinterested  physicians  selected as mutually agreed
       upon between  Company and Executive.  In the event the two (2) physicians
       disagree,  a third  physician  shall be selected by the two physicians to
       break  such  impasse.  The costs  associated  with the  determination  of
       Disability  shall be borne equally between Company and Executive.  In the
       event of  Disability,  Executive  shall be  entitled  to receive his Base
       Salary  in  accordance  with  Section  3 for a period  of six (6)  months
       following the onset of Disability.

6.3    The Company may discharge the Executive for Cause and thereby immediately
       terminate  his  employment  under this  Agreement.  For  purposes of this
       Agreement,  Company  shall have  "Cause"  to  terminate  the  Executive's
       employment if the Executive, in the reasonable judgment of the Company:

6.3.1  Willfully  fails to perform any  reasonable  directive  of the  Company's
       Board of Directors, Chairman or Chief Executive Officer.

6.3.2  Materially  breaches any of the agreements,  duties,  responsibilities or
       obligations under this Agreement.

6.3.3  Embezzles or converts to his own use any funds or property of the Company
       or any client or customer of the Company.

6.3.4  Is convicted of a felony or any crime involving larceny,  embezzlement or
       moral turpitude.

6.4    In the event that  Executive's  employment  is  terminated by the Company
       without Cause, as defined in Section 6.3, above,  for a reason other than
       death or

                                       5
<PAGE>


       Disability,  or  Executive  shall  resign for "Good  Reason",  as defined
       below, then, in such event:

6.4.1  Executive's Base Salary, as defined in Section 3 as then in effect, shall
       continue to be paid for a period of twelve (12) months ("Payment Period")
       or balance of Agreement whichever is longer.

6.4.2  Company  shall  maintain  in effect  during the Payment  Period,  for the
       continued benefit of the Executive, all of the employee benefit plans and
       programs in which the Executive was entitled to  participate  immediately
       prior to the Executive's  termination provided same is possible under the
       general  terms  and  provisions  of  such  benefit  plans  and  programs.
       Moreover,  during  the  Payment  Period the  Company  shall  provide  the
       Executive with such reasonable  administrative  and  secretarial  support
       services as may be necessary or appropriate in order to assist  Executive
       in finding  new  employment  or  Executive  may  select an  out-placement
       service  to be paid  for by the  Company  at a cost  not to  exceed  Five
       Thousand Dollars ($5,000).

For purposes of this Section 6.4, "Good Reason" shall mean:

       (i)    An assignment to the Executive of any duties inconsistent with, or
              a  material  change  in  the  nature  or  scope  of,   Executive's
              responsibilities, authority or duties hereunder.

       (ii)   Failure  by the  Company  to comply  with the  provisions  of this
              Agreement.

       (iii)  Ill health of  Executive  or a member of his family,  or any other
              compelling  personal  circumstance which, in the mutual discretion
              of the  Executive  and the  Chairman  of the  Company,  makes  the
              Executive's   continued   employment  hereunder   impossible,   or
              inappropriate.

6.5    Executive may voluntarily  terminate his employment  under this Agreement
       without  Good  Reason,  as defined in  Section  6.4 above,  by giving the
       Company  ninety  (90) days prior  written  notice  thereof,  and upon the
       expiration of such ninety (90) day period,  Executive's  employment under
       this  Agreement  shall  terminate,  and  Company  shall  have no  further
       obligation  or  liabilities  under  this  Agreement  except  to  pay  the
       Executive the portion, if any, that remains unpaid of the Base Salary and
       unpaid  accrued  prorated  vacation  for  the  period  up to the  date of
       termination. Resignation as defined herein must be in written form to the
       Board, witnessed and signed by the Executive.

7.     Surrender of Books and Records.  Executive  acknowledges  that all lists,
       books,  records,  literature,  products and any other  materials owned by
       Company or its affiliates or used by them in connection  with the conduct
       of their business,  shall at all times remain the property of Company and
       its  affiliates  and  that  upon  termination  of  employment  hereunder,
       irrespective of the time, manner or cause

                                       6
<PAGE>


       of  said  termination,  Executive  will  surrender  to  Company  and  its
       affiliates all such lists, books, records, literature, products and other
       materials.

8.     Miscellaneous.

8.1    This Agreement constitutes the entire understanding and agreement between
       Company and Executive  regarding its subject  matter and  supersedes  all
       prior negotiations and agreements,  whether oral or written, between them
       with respect to its subject  matter.  This  Agreement may not be modified
       except by a written agreement signed by the Executive and the Company.

8.2    This  Agreement  shall be  binding  upon and inure to the  benefit of the
       parties and their respective  heirs,  executors,  successors and assigns,
       except that this Agreement may not be assigned by the Executive.

8.3    No waiver by either party of any  condition or of the breach by the other
       of any term or covenant  contained in this Agreement,  whether by conduct
       or otherwise,  in any one or more instances  shall be deemed or construed
       as a further or  continuing  waiver of any such  condition or breach or a
       waiver  of any  other  condition,  or the  breach  of any  other  term or
       covenant  set forth in this  Agreement.  Moreover,  the failure of either
       party to exercise any right  hereunder  shall not bar the later  exercise
       thereof.

8.4    This  Agreement  shall be governed by the statutes and common laws of the
       State of Delaware, excluding it's choice of law statutes or common law.

8.5      The headings of the various  sections and paragraphs have been included
         herein for convenience  only and shall not be construed in interpreting
         this Agreement.

8.6      If  any  provision  of  this   Agreement   shall  be  held  invalid  or
         unenforceable,  the remainder of this  Agreement  shall,  nevertheless,
         remain in full force and effect.  If any  provision  is held invalid or
         unenforceable  with  respect  to  particular  circumstances,  it shall,
         nevertheless,   remain  in  full   force   and   effect  in  all  other
         circumstances.

8.7      This Agreement may be executed in several  counterparts,  each of which
         shall  be  deemed  to be an  original  but all of which  together  will
         constitute one and the same instrument.

                                       7
<PAGE>


       IN WITNESS WHEREOF, this Agreement has been executed by the Executive and
on behalf of the Company by its duly authorized  officer on the date first above
written.


ALPHARMX INC.

By:     /s/ SANDRO PERSIAN                   By:    /S/ MICHAEL M. LEE
    ---------------------------                 ---------------------------
            Sandro Persia                               Michael M.Lee
            Secretary                                   Chairman/CEO



EXECUTIVE

By:    /s/ MICHAEL M.LEE
    --------------------------
           Michael M. Lee

                                       8
<PAGE>


                    EMPLOYMENT AGREEMENT WITH JOSEPH SCHWARZ

       EMPLOYMENT  AGREEMENT  ("Agreement")  made and entered into as of the 1st
day  of  July,  2000  by  and  between  AlphaRx  Inc.,  a  Delaware  corporation
("Company"), and Joseph Schwarz ("Executive").

       WHEREAS,  Company desires to employ  Executive as its Chief Scientist and
Executive  desires to be  employed  by  Company,  upon the terms and  conditions
hereinafter set forth.

       NOW,  THEREFORE,  in consideration of the mutual covenants and agreements
set forth and the mutual  benefits to be derived  herefrom,  and intending to be
legally bound hereby, the Company and the Executive agree as follows:


1.     EMPLOYMENT  AND TERM.  Company  hereby  employs  Executive  and Executive
       hereby  accepts  employment  for a term  commencing on July 1st, 2000 and
       continuing  until June 30th, 2003,  unless sooner  terminated as provided
       for  in  this  Agreement.  Company  and  Executive  have  the  option  to
       renegotiate this Agreement beyond the three-year period. Executive hereby
       warrants  and  represents  to Company  that he is free to enter into this
       Agreement and is not a party to any agreement,  written or otherwise,  or
       bound by any restrictions, which limit or restrict him from entering into
       this  Agreement or performing the services,  duties and  responsibilities
       called for hereunder.

2.     DUTIES.

2.1    Executive  shall perform the duties of the Chief Scientist of the Company
       and such additional executive duties of Company and its affiliates as may
       be,  from  time to  time,  requested  of him by the  Company's  Board  of
       Directors or the Chairman,  President  and/or Chief Executive  Officer of
       the Company.

2.2    Executive shall devote his full professional time and best efforts to the
       performance of his duties and  responsibilities  hereunder to advance the
       interests of the Company and shall not during the term of this  Agreement
       (as  defined in  Section 1 hereof) be  employed,  involved  or  otherwise
       engaged in, either directly or indirectly, any other employment for gain,
       profit or other  pecuniary  advantage,  without prior written  consent of
       Company. At no time shall Executive engage in any activity that conflicts
       with the business of the Company or its affiliates.  Nothing set forth in
       this section 2.2 shall be construed to prevent  Executive from (i) acting
       as a member of Board of Trustees or a member of Board of Directors of any
       other  corporation,  or as a  member  of the  Board  of  Trustees  of any
       organization  or entity which is not a competitor  of the Company or (ii)
       devoting of such of  Executive's  time and  attention  to  philanthropic,
       charitable,   civic,  community  or  other  activities  or  endeavors  as
       Executive  shall  reasonably  determine  but  only  to  the  extent  that
       Executive's  pursuance of any activities or endeavors does not materially
       and  adversely  effect the  Executive's  ability to

                                       1
<PAGE>


       perform and discharge  Executive's  duties and  objectives to the Company
       hereunder.

2.3    Except for required travel on Company  business,  Executive shall perform
       his duties and  responsibilities  at the  Company's  principal  executive
       offices  located in the greater  Toronto area.  The Company shall furnish
       Executive with office space, secretarial assistance, a personal computer,
       and  such  other   facilities  and  services  as  shall  be  suitable  to
       Executive's  position  and  adequate  for the  performance  of his duties
       hereunder.

3.     COMPENSATION.  For all duties and responsibilities to be performed and/or
       assumed by Executive hereunder, Executive shall be entitled to receive an
       annual salary as set forth below ("Base Salary").  The Base Salary,  less
       any sums  required  to be  withheld  by law,  shall be  payable  in equal
       monthly  installments or such other more frequent regular installments as
       the Company may, from time to time, determine.  For purposes hereof, Base
       Salary shall be:

3.1    For the  twelve-month  period  commencing with the date hereof,  the Base
       Salary  shall be $24,000 per year which shall be increased to $96,000 per
       year after the first six months of employment.

3.2    For each year thereafter, the Base Salary shall be increased by an amount
       determined  by the Board of Directors  but in no event less than (i) five
       percent (5%) after the first year, six percent (6%) after the second year
       and each year thereafter  upon mutual  agreement to extend the term. Each
       percentage  increase  for a  particular  year  shall be based on the Base
       Salary for the immediately preceding year.

4.     FRINGE  BENEFITS.  Company  shall pay for or provide  Executive  with the
       following benefits:

4.1    For the first  year,  Executive  shall be  entitled to two (2) weeks paid
       vacation to be used at the Executive's discretion.  Thereafter, Executive
       shall be entitled to three (3) weeks paid vacation  during each full year
       of this Agreement to be used at the Executives discretion.  Vacation time
       shall accrue on a pro-rata basis during each year of this Agreement.  Any
       unused  vacation  shall  not be  cumulative  from  year  to  year  unless
       otherwise agreed upon by the parties.

4.2    Such other  employee  benefits  maintained  by the Company for its senior
       executives and key management employees,  including,  all pension, profit
       sharing,  retirement,  stock bonus and stock option plans,  to the extent
       Executive is eligible to participate pursuant to the terms and conditions
       of such plans.

4.3    Executive shall be reimbursed in a timely manner for all items of travel,
       entertainment  and  miscellaneous  expenses  which  Executive  reasonably
       incurs  in  connection  with the  performance  of his  duties  hereunder,
       provided that the Executive  submits to the Company such  statements  and
       other  evidence  supporting  said  expenses as the Company my  reasonably
       require.   Executive,  when  traveling

                                       2
<PAGE>


       on Company  business,  shall be  permitted  to fly  economy  class on all
       domestic and international flights.

5.     STOCK OPTIONS.

5.1    As  part  of  Executive's   compensation  for  services  to  be  rendered
       hereunder,  Executive  shall have the right and option to  purchase  from
       Company  voting common stock in Company  ("Option").  The total number of
       shares  available to Executive  under this Option is One Hundred & Twenty
       Five Thousand  Shares  (125,000) at a purchase price of Ten Cents ($0.10)
       per share ("Option Shares"). The Option Shares are available for purchase
       in  installments as listed in Column A below and each  installment  shall
       become vested on the corresponding date listed in Column B, as follows:

       Column A            Column B
       Number of Shares    Date Option Shares Available for Purchase
                           Become Vested

       312,500             Upon the commencement of Executive's employment
                           pursuant to the terms of this Agreement

       312,500             First anniversary date of this Agreement

       312,500             Second anniversary date of this Agreement

       312,500             Third Anniversary date of this Agreement


In order for the Option Shares to become vested as provided for above, Executive
must be  employed  by the Company  under the terms of this  Agreement  as of the
vesting date set forth in Column B above.

5.2    Except as otherwise  provided for below,  the term of the Option  granted
       shall  remain in effect  for five (5) years  from the date on which  such
       Option Shares  become  vested.  If the  Executive's  employment  with the
       Company is terminated by the Company for Cause (as defined  herein) or by
       the act of Executive,  the  Executive's  right to exercise  vested Option
       Shares  shall cease and become  null and void within  thirty (30) days of
       the date employment  terminated,  except as otherwise provided in Section
       5.3 hereof.  All unvested Option Shares will terminate  immediately as of
       the date of such  termination  of  employment.  In the event the  Company
       receives,  accepts  and  consummates  a  tender  offer  for  all  of  its
       outstanding  common stock prior to the vesting of the Option Shares,  the
       vesting rights shall be accelerated so as to allow  Executive to exercise
       the Option to purchase all of the Option Shares  immediately prior to the
       consummation of such tender offer.

                                       3
<PAGE>


5.3    Notwithstanding  anything  in  this  Section  5 to the  contrary,  if the
       Executive's  employment is terminated for Cause,  as set forth in Section
       6.3,  the Company  shall have the right to  terminate  and  withdraw  any
       vested or unvested Options under this Agreement.

5.4    The  purchase  price of the Option  Shares shall be paid in full upon the
       exercise  of the  Option,  and  Company  shall not be required to deliver
       certificates  for such Option  Shares  until  payment  has been made.  In
       addition  to, and at the time of payment of the  purchase  price for such
       Option Shares,  Executive  shall be responsible for all federal and state
       withholding or other employment taxes applicable to the taxable income of
       such  Executive  and any other fees  resulting  from the  exercise of the
       Executive.

5.5    Each share of Option Stock  purchased  pursuant to the terms hereof shall
       carry  all  appropriate  registration  and/or  restrictions  on sale  and
       notices as determined from time to time by Company's  securities counsel.
       Executive shall cooperate with Company and Company's counsel in complying
       with all applicable securities laws.

6.     TERMINATION  OF  EMPLOYMENT.  The  employment  of Executive and Company's
       liability and obligations hereunder shall terminate as follows:

6.1    This Agreement shall terminate  immediately  upon the death of Executive.
       In  such  event,  Company  shall  pay to such  person  as  Executive  may
       designate  in a written  notice  filed  with the  Company,  or if no such
       person  shall be  designated,  to  Executive's  estate,  a lump sum death
       benefit in an amount equal to two (2) months of  Executive's  Base Salary
       as in effect on the date of  Executive's  death and double  indemnity  in
       event Executive's death occurs while traveling on Company business.

6.2    This  Agreement  shall  terminate  immediately  upon  the  Disability  of
       Executive.  Disability  shall  exist  if  due  to a  mental  or  physical
       condition, Executive is determined to be unable to perform his duties and
       responsibilities  hereunder  for a  continuous  period of two (2) months.
       Disability shall be conclusively  established by written certification by
       two (2) licensed,  disinterested  physicians  selected as mutually agreed
       upon between  Company and Executive.  In the event the two (2) physicians
       disagree,  a third  physician  shall be selected by the two physicians to
       break  such  impasse.  The costs  associated  with the  determination  of
       Disability  shall be borne equally between Company and Executive.  In the
       event of  Disability,  Executive  shall be  entitled  to receive his Base
       Salary  in  accordance  with  Section  3 for a period  of two (2)  months
       following the onset of Disability.

6.3    The Company may discharge the Executive for Cause and thereby immediately
       terminate  his  employment  under this  Agreement.  For  purposes of this
       Agreement,  Company  shall have  "Cause"  to  terminate  the  Executive's
       employment if the Executive, in the reasonable judgment of the Company:

                                       4
<PAGE>


6.3.1  Willfully  fails to perform any  reasonable  directive  of the  Company's
       Board of Directors, Chairman or Chief Executive Officer.

6.3.2  Materially  breaches any of the agreements,  duties,  responsibilities or
       obligations under this Agreement.

6.3.3  Embezzles or converts to his own use any funds or property of the Company
       or any client or customer of the Company.

6.3.4  Is convicted of a felony or any crime involving larceny,  embezzlement or
       moral turpitude.

6.4    In the event that  Executive's  employment  is  terminated by the Company
       without Cause, as defined in Section 6.3, above,  for a reason other than
       death or  Disability,  or Executive  shall resign for "Good  Reason",  as
       defined below, then, in such event:

6.4.1  Executive's Base Salary, as defined in Section 3 as then in effect, shall
       continue to be paid for a period of one (1) month ("Payment Period").

6.4.2  Company  shall  maintain  in effect  during the Payment  Period,  for the
       continued benefit of the Executive, all of the employee benefit plans and
       programs in which the Executive was entitled to  participate  immediately
       prior to the Executive's  termination provided same is possible under the
       general  terms  and  provisions  of  such  benefit  plans  and  programs.
       Moreover,  during  the  Payment  Period the  Company  shall  provide  the
       Executive with such reasonable  administrative  and  secretarial  support
       services as may be necessary or appropriate in order to assist  Executive
       in finding  new  employment  or  Executive  may  select an  out-placement
       service  to be  paid  for by the  Company  at a cost  not to  exceed  One
       Thousand Dollars ($1,000).

       For purposes of this Section 6.4, "Good Reason" shall mean:

       (i)    An assignment to the Executive of any duties inconsistent with, or
              a  material  change  in  the  nature  or  scope  of,   Executive's
              responsibilities, authority or duties hereunder.

       (ii)   Failure  by the  Company  to comply  with the  provisions  of this
              Agreement.

       (iii)  Ill health of  Executive  or a member of his family,  or any other
              compelling  personal  circumstance which, in the mutual discretion
              of the  Executive,  and the  Chairman  of the  Company  makes  the
              Executive's   continued   employment  hereunder   impossible,   or
              inappropriate.

6.5    Executive may voluntarily  terminate his employment  under this Agreement
       without  Good  Reason,  as defined in  Section  6.4 above,  by giving the
       Company  ninety  (90) days prior  written  notice  thereof,  and upon the
       expiration of such ninety (90) day period,  Executive's  employment under
       this  Agreement  shall


                                       5
<PAGE>


       terminate,  and Company shall have no further  obligation or  liabilities
       under this  Agreement  except to pay the Executive  the portion,  if any,
       that  remains  unpaid of the Base  Salary  and  unpaid  accrued  prorated
       vacation  for the period up to the date of  termination.  Resignation  as
       defined herein must be in written form to the Board, witnessed and signed
       by the Executive.

7.     SURRENDER OF BOOKS AND RECORDS.  Executive  acknowledges  that all lists,
       books,  records,  literature,  products and any other  materials owned by
       Company or its affiliates or used by them in connection  with the conduct
       of their business,  shall at all times remain the property of Company and
       its  affiliates  and  that  upon  termination  of  employment  hereunder,
       irrespective of the time, manner or cause of said termination,  Executive
       will  surrender  to Company and its  affiliates  all such  lists,  books,
       records, literature, products and other materials.

8.     CONFIDENTIAL  INFORMATION.  Executive  acknowledges that the confidential
       and  proprietary  information  and data (which shall mean  information or
       data not known or  generally  available  to the  public)  obtained by him
       during the course of his  performance  under this  Agreement (or his work
       prior  to the date  hereof  for the  Company)  concerning  the  Company's
       business,   affairs,   products,   inventions,   processes,   techniques,
       equipment,   machinery,   apparatus,   business   operations,   technical
       information, drawings, specifications, materials, know how, and the like,
       and any  knowledge or  information  developed by Executive as a result of
       performing   Services   hereunder   (collectively   referred  to  as  the
       "CONFIDENTIAL  INFORMATION"),  are all the sole  property of the Company.
       Executive agrees to hold all  Confidential  Information in confidence and
       not to  disclose  the same,  without  the prior  written  consent  of the
       Company,  to anyone for any reason at any time (unless so required by law
       or legal process, and then only after written notice to the Company and a
       reasonable  opportunity  for the Company to challenge,  at its cost, such
       disclosure).  Executive shall not, directly or indirectly,  use or permit
       the use of any  Confidential  Information  for any  purpose,  other  than
       performing  the  Services  hereunder,  without  the  written  consent  of
       Company.  Executive  shall use his best  efforts to prevent  publication,
       disclosure or other use or transmission of any Confidential  Information.
       Upon the  termination  or  expiration  of this  Agreement,  or earlier if
       requested by the Company,  Executive  agrees to return to the Company all
       Confidential  Information in the  possession of Executive,  regardless of
       the form of such Confidential Information.

9.     INTELLECTUAL PROPERTY RIGHTS.

       (a)    Without  limiting the Company's  rights  arising by law or custom,
              Executive acknowledges that the Company shall exclusively own, and
              Executive hereby assigns,  transfers,  and conveys to the Company,
              all discoveries,  work product,  trademarks,  service marks, trade
              names,   brand   names,    software,    copyrights,    inventions,
              improvements,  patents  and  other  intellectual  property  rights
              produced, created, developed or conceived by Executive prior to or
              during  the  Term  of  this  Agreement,

                                       6
<PAGE>


              whether registered or unregistered,  which relate to the Company's
              business  (collectively,   the  "INTELLECTUAL  PROPERTY  RIGHTS").
              Executive shall disclose all such Intellectual  Property Rights to
              the  Company,  and  Executive  agrees to execute  and  deliver all
              documents  required  by the  Company to  document  or perfect  the
              Company's exclusive ownership of the Intellectual Property Rights.

       (b)    Executive further agrees that all copyrightable works developed by
              the Executive, either alone or with others, prior to or during the
              Term of this  Agreement,  which relate in any way to the Company's
              business,  shall be  considered  to be works made for hire and the
              ownership  of and  the  copyrights  to  such  works  shall  be the
              exclusive  property of the Company.  Executive  shall disclose all
              such works to the  Company,  and  Executive  agrees to execute and
              deliver  all  documents  required  by the  Company to  document or
              perfect the Company's exclusive ownership of such works.

       (c)    Upon the termination or expiration of this  Agreement,  or earlier
              if  requested by the  Company,  Executive  agrees to return to the
              Company all tangible  (including  electronic  storage) elements of
              the  Intellectual  Property  Rights and works in the possession of
              Executive,  regardless of the form of such  Intellectual  Property
              Rights and works.

       (d)    Notwithstanding the foregoing, the provisions of Section 9(a) does
              not  apply  to any  Intellectual  Property  Rights  for  which  no
              equipment,  supplies,  facility  or trade  secret  information  of
              Company was used and which was developed  entirely on  Executive's
              own time, and which does not relate to the business of the Company
              or to the Company's  actual or demonstrably  anticipated  business
              activities.

10.    NONCOMPETITION  COVENANT.  Executive hereby agrees that,  during the Term
       and for a  period  of two (2)  years  thereafter,  Executive  shall  not,
       directly or indirectly,  own, manage,  operate,  control, be employed by,
       act as an advisor or consultant  to, or  participate  in, the  ownership,
       management,  operation,  or control of any business involving the design,
       development,  manufacture,  distribution or sale (whether at wholesale or
       retail) of drug delivery  technology or otherwise in competition with the
       businesses  of  the  Company,  as  now  or  hereafter  conducted,  in any
       geographic  market served by the Company during the  restriction  period;
       provided,  however, that nothing contained in this Section shall prohibit
       the Executive from owning stock in a publicly  traded company which is in
       competition  with the Company  provided  Executive's  aggregate  holdings
       therein do not exceed one percent  (1%) of the  capital of such  company.
       The   provisions  of  this  Section  shall  survive  the   expiration  or
       termination of this Agreement.

                                       7
<PAGE>


11.    MISCELLANEOUS.

11.1   Any notice,  demand or  communication  required or  permitted  under this
       Agreement  shall be in writing  and shall be  sufficient  when  delivered
       personally,  or three (3) days after  mailing by  registered or certified
       mail,  return  receipt  requested,  or the next day if sent by nationally
       recognized overnight courier with proof of delivery, in each case postage
       prepaid, addressed as follows:


       If to the Company:
       AlphaRx Inc.
       75 East Beaver Creek, Unit 10
       Richmond Hill, Ontario L4B 1B8
       Attn.: Michael M. Lee, President

       If to the Executive:
       Joseph Schwarz
       510-6020 Bathurst Street
       Toronto, Ontario M2R 1Z8

The  foregoing  addressees  may be  changed  at any time by notice  given in the
manner herein provided.

11.2   This Agreement constitutes the entire understanding and agreement between
       Company and Executive  regarding its subject  matter and  supersedes  all
       prior negotiations and agreements,  whether oral or written, between them
       with respect to its subject  matter.  This  Agreement may not be modified
       except by a written agreement signed by the Executive and the Company.

11.3   This  Agreement  shall be  binding  upon and inure to the  benefit of the
       parties and their respective  heirs,  executors,  successors and assigns,
       except that this Agreement may not be assigned by the Executive.

11.4   No waiver by either party of any  condition or of the breach by the other
       of any term or covenant  contained in this Agreement,  whether by conduct
       or otherwise,  in any one or more instances  shall be deemed or construed
       as a further or  continuing  waiver of any such  condition or breach or a
       waiver  of any  other  condition,  or the  breach  of any  other  term or
       covenant  set forth in this  Agreement.  Moreover,  the failure of either
       party to exercise any right  hereunder  shall not bar the later  exercise
       thereof.

11.5   This  Agreement  shall be governed by the statutes and common laws of the
       State of Delaware, excluding it's choice of law statutes or common law.

11.6   The headings of the various  sections and  paragraphs  have been included
       herein for  convenience  only and shall not be construed in  interpreting
       this Agreement.

                                       8
<PAGE>


11.7   If  any   provision   of  this   Agreement   shall  be  held  invalid  or
       unenforceable,  the  remainder  of this  Agreement  shall,  nevertheless,
       remain in full force and  effect.  If any  provision  is held  invalid or
       unenforceable  with  respect  to  particular  circumstances,   it  shall,
       nevertheless, remain in full force and effect in all other circumstances.

11.8   This  Agreement  may be executed in several  counterparts,  each of which
       shall  be  deemed  to be an  original  but  all of  which  together  will
       constitute one and the same instrument.

       IN WITNESS WHEREOF, this Agreement has been executed by the Executive and
on behalf of the Company by its duly authorized  officer on the date first above
written.


ALPHARMX INC.


By:     /s/ SANDRO PERSIAN               By:     /s/ MICHAEL M. LEE
    ---------------------------              ---------------------------
            Sandro Persia                            Michael M. Lee
            Secretary                                Chairman/CEO



EXECUTIVE

By:    /s/ JOSEPH SCHWARTZ
   ---------------------------
           Joseph Schwartz

                                       9
<PAGE>


                  EMPLOYMENT AGREEMENT WITH MICHAEL WEISSPAPIR

       EMPLOYMENT  AGREEMENT  ("Agreement")  made and entered into as of the 1st
day  of  July,  2000  by  and  between  AlphaRx  Inc.,  a  Delaware  corporation
("Company"), and Michael Weisspapir ("Executive").

       WHEREAS,  Company desires to employ Executive as its Senior Scientist and
Executive  desires to be  employed  by  Company,  upon the terms and  conditions
hereinafter set forth.

       NOW,  THEREFORE,  in consideration of the mutual covenants and agreements
set forth and the mutual  benefits to be derived  herefrom,  and intending to be
legally bound hereby, the Company and the Executive agree as follows:

1.     EMPLOYMENT  AND TERM.  Company  hereby  employs  Executive  and Executive
       hereby  accepts  employment  for a term  commencing on July 1st, 2000 and
       continuing  until June 30th, 2003,  unless sooner  terminated as provided
       for  in  this  Agreement.  Company  and  Executive  have  the  option  to
       renegotiate this Agreement beyond the three-year period. Executive hereby
       warrants  and  represents  to Company  that he is free to enter into this
       Agreement and is not a party to any agreement,  written or otherwise,  or
       bound by any restrictions, which limit or restrict him from entering into
       this  Agreement or performing the services,  duties and  responsibilities
       called for hereunder.

2.     DUTIES.

2.1    Executive shall perform the duties of the Senior Scientist of the Company
       and such additional executive duties of Company and its affiliates as may
       be,  from  time to  time,  requested  of him by the  Company's  Board  of
       Directors or the Chairman, President or Chief Scientist of the Company.

2.2    Executive shall devote his full professional time and best efforts to the
       performance of his duties and  responsibilities  hereunder to advance the
       interests of the Company and shall not during the term of this  Agreement
       (as  defined in  Section 1 hereof) be  employed,  involved  or  otherwise
       engaged in, either directly or indirectly, any other employment for gain,
       profit or other  pecuniary  advantage,  without prior written  consent of
       Company. At no time shall Executive engage in any activity that conflicts
       with the business of the Company or its affiliates.  Nothing set forth in
       this section 2.2 shall be construed to prevent  Executive from (i) acting
       as a member of Board of Trustees or a member of Board of Directors of any
       other  corporation,  or as a  member  of the  Board  of  Trustees  of any
       organization  or entity which is not a competitor  of the Company or (ii)
       devoting of such of  Executive's  time and  attention  to  philanthropic,
       charitable,   civic,  community  or  other  activities  or  endeavors  as
       Executive  shall  reasonably  determine  but  only  to  the  extent  that
       Executive's  pursuance of any activities or endeavors does not materially
       and  adversely  effect the  Executive's  ability to

                                       1
<PAGE>


       perform and discharge  Executive's  duties and  objectives to the Company
       hereunder.

2.3    Except for required travel on Company  business,  Executive shall perform
       his duties and  responsibilities  at the  Company's  principal  executive
       offices  located in the greater  Toronto area.  The Company shall furnish
       Executive with office space, secretarial assistance, a personal computer,
       and  such  other   facilities  and  services  as  shall  be  suitable  to
       Executive's  position  and  adequate  for the  performance  of his duties
       hereunder.

3.     COMPENSATION.  For all duties and responsibilities to be performed and/or
       assumed by Executive hereunder, Executive shall be entitled to receive an
       annual salary as set forth below ("Base Salary").  The Base Salary,  less
       any sums  required  to be  withheld  by law,  shall be  payable  in equal
       monthly  installments or such other more frequent regular installments as
       the Company may, from time to time, determine.  For purposes hereof, Base
       Salary shall be:

3.1.1  For the  twelve-month  period  commencing with the date hereof,  the Base
       Salary shall be US$12,000.00 per year which shall be increased to $72,000
       per year after the first six months of employment.

3.1.2  For each year thereafter, the Base Salary shall be increased by an amount
       determined  by the Board of Directors  but in no event less than (i) five
       percent (5%) after the first year, six percent (6%) after the second year
       and each year thereafter  upon mutual  agreement to extend the term. Each
       percentage  increase  for a  particular  year  shall be based on the Base
       Salary for the immediately preceding year.

4.     FRINGE  BENEFITS.  Company  shall pay for or provide  Executive  with the
       following benefits:

4.1    For the first  year,  Executive  shall be  entitled  to one (1) week paid
       vacation to be used at the Executive's discretion.  Thereafter, Executive
       shall be entitled to two (2) weeks paid vacation during each full year of
       this  Agreement to be used at the  Executives  discretion.  Vacation time
       shall accrue on a pro-rata basis during each year of this Agreement.  Any
       unused  vacation  shall  not be  cumulative  from  year  to  year  unless
       otherwise agreed upon by the parties.

4.2    Such other  employee  benefits  maintained  by the Company for its senior
       executives and key management employees,  including,  all pension, profit
       sharing,  retirement,  stock bonus and stock option plans,  to the extent
       Executive is eligible to participate pursuant to the terms and conditions
       of such plans.

4.3    Executive shall be reimbursed in a timely manner for all items of travel,
       entertainment  and  miscellaneous  expenses  which  Executive  reasonably
       incurs  in  connection  with the  performance  of his  duties  hereunder,
       provided that the Executive  submits to the Company such  statements  and
       other  evidence  supporting  said  expenses as the Company my  reasonably
       require.   Executive,  when  traveling


                                       2
<PAGE>


       on Company  business,  shall be  permitted  to fly  economy  class on all
       domestic and international flights.

5.     STOCK OPTIONS.

5.1    As  part  of  Executive's   compensation  for  services  to  be  rendered
       hereunder,  Executive  shall have the right and option to  purchase  from
       Company  voting common stock in Company  ("Option").  The total number of
       shares  available to Executive under this Option is One Hundred  Thousand
       Shares  (100,000)  at a  purchase  price of Ten Cents  ($0.10)  per share
       ("Option  Shares").  The Option  Shares are  available  for  purchase  in
       installments  as  listed in  Column A below  and each  installment  shall
       become vested on the corresponding date listed in Column B, as follows:


       Column A               Column B
       Number of Shares       Date Option Shares Available for Purchase
                              Become Vested

       25,000                 Upon the commencement of Executive's employment
                              pursuant to the terms of this Agreement

       25,000                 First anniversary date of this Agreement

       25,000                 Second anniversary date of this Agreement

       25,000                 Third Anniversary date of this Agreement


In order for the Option Shares to become vested as provided for above, Executive
must be  employed  by the Company  under the terms of this  Agreement  as of the
vesting date set forth in Column B above.

5.2    Except as otherwise  provided for below,  the term of the Option  granted
       shall  remain in effect  for five (5) years  from the date on which  such
       Option Shares  become  vested.  If the  Executive's  employment  with the
       Company is terminated by the Company for Cause (as defined  herein) or by
       the act of Executive,  the  Executive's  right to exercise  vested Option
       Shares  shall cease and become  null and void within  thirty (30) days of
       the date employment  terminated,  except as otherwise provided in Section
       5.3 hereof.  All unvested Option Shares will terminate  immediately as of
       the date of such  termination  of  employment.  In the event the  Company
       receives,  accepts  and  consummates  a  tender  offer  for  all  of  its
       outstanding  common stock prior to the vesting of the Option Shares,  the
       vesting rights shall be accelerated so as to allow  Executive to exercise
       the Option to purchase all of the Option Shares  immediately prior to the
       consummation of such tender offer.

                                       3
<PAGE>


5.3    Notwithstanding  anything  in  this  Section  5 to the  contrary,  if the
       Executive's  employment is terminated for Cause,  as set forth in Section
       6.3,  the Company  shall have the right to  terminate  and  withdraw  any
       vested or unvested Options under this Agreement.

5.4    The  purchase  price of the Option  Shares shall be paid in full upon the
       exercise  of the  Option,  and  Company  shall not be required to deliver
       certificates  for such Option  Shares  until  payment  has been made.  In
       addition  to, and at the time of payment of the  purchase  price for such
       Option Shares,  Executive  shall be responsible for all federal and state
       withholding or other employment taxes applicable to the taxable income of
       such  Executive  and any other fees  resulting  from the  exercise of the
       Executive.

5.5    Each share of Option Stock  purchased  pursuant to the terms hereof shall
       carry  all  appropriate  registration  and/or  restrictions  on sale  and
       notices as determined from time to time by Company's  securities counsel.
       Executive shall cooperate with Company and Company's counsel in complying
       with all applicable securities laws.

6.     TERMINATION  OF  EMPLOYMENT.  The  employment  of Executive and Company's
       liability and obligations hereunder shall terminate as follows:

6.1    This Agreement shall terminate  immediately  upon the death of Executive.
       In  such  event,  Company  shall  pay to such  person  as  Executive  may
       designate  in a written  notice  filed  with the  Company,  or if no such
       person  shall be  designated,  to  Executive's  estate,  a lump sum death
       benefit in an amount equal to two (2) months of  Executive's  Base Salary
       as in effect on the date of  Executive's  death and double  indemnity  in
       event Executive's death occurs while traveling on Company business.

6.2    This  Agreement  shall  terminate  immediately  upon  the  Disability  of
       Executive.  Disability  shall  exist  if  due  to a  mental  or  physical
       condition, Executive is determined to be unable to perform his duties and
       responsibilities  hereunder  for a  continuous  period of two (2) months.
       Disability shall be conclusively  established by written certification by
       two (2) licensed,  disinterested  physicians  selected as mutually agreed
       upon between  Company and Executive.  In the event the two (2) physicians
       disagree,  a third  physician  shall be selected by the two physicians to
       break  such  impasse.  The costs  associated  with the  determination  of
       Disability  shall be borne equally between Company and Executive.  In the
       event of  Disability,  Executive  shall be  entitled  to receive his Base
       Salary  in  accordance  with  Section  3 for a period  of two (2)  months
       following the onset of Disability.

6.3    The Company may discharge the Executive for Cause and thereby immediately
       terminate  his  employment  under this  Agreement.  For  purposes of this
       Agreement,  Company  shall have  "Cause"  to  terminate  the  Executive's
       employment if the Executive, in the reasonable judgment of the Company:

                                       4
<PAGE>


6.3.1  Willfully  fails to perform any  reasonable  directive  of the  Company's
       Board of Directors, Chairman or Chief Executive Officer.

6.3.2  Materially  breaches any of the agreements,  duties,  responsibilities or
       obligations under this Agreement.

6.3.3  Embezzles or converts to his own use any funds or property of the Company
       or any client or customer of the Company.

6.3.4  Is convicted of a felony or any crime involving larceny,  embezzlement or
       moral turpitude.

6.4    In the event that  Executive's  employment  is  terminated by the Company
       without Cause, as defined in Section 6.3, above,  for a reason other than
       death or  Disability,  or Executive  shall resign for "Good  Reason",  as
       defined below, then, in such event:

6.4.1  Executive's Base Salary, as defined in Section 3 as then in effect, shall
       continue to be paid for a period of one (1) month ("Payment Period").

6.4.2  Company  shall  maintain  in effect  during the Payment  Period,  for the
       continued benefit of the Executive, all of the employee benefit plans and
       programs in which the Executive was entitled to  participate  immediately
       prior to the Executive's  termination provided same is possible under the
       general  terms  and  provisions  of  such  benefit  plans  and  programs.
       Moreover,  during  the  Payment  Period the  Company  shall  provide  the
       Executive with such reasonable  administrative  and  secretarial  support
       services as may be necessary or appropriate in order to assist  Executive
       in finding  new  employment  or  Executive  may  select an  out-placement
       service  to be  paid  for by the  Company  at a cost  not to  exceed  One
       Thousand Dollars ($1,000).

       For purposes of this Section 6.4, "Good Reason" shall mean:

       (i)    An assignment to the Executive of any duties inconsistent with, or
              a  material  change  in  the  nature  or  scope  of,   Executive's
              responsibilities, authority or duties hereunder.

       (ii)   Failure  by the  Company  to comply  with the  provisions  of this
              Agreement.

       (iii)  Ill health of  Executive  or a member of his family,  or any other
              compelling  personal  circumstance which, in the mutual discretion
              of the  Executive,  and the  Chairman  of the  Company  makes  the
              Executive's   continued   employment  hereunder   impossible,   or
              inappropriate.

6.5    Executive may voluntarily  terminate his employment  under this Agreement
       without  Good  Reason,  as defined in  Section  6.4 above,  by giving the
       Company  ninety  (90) days prior  written  notice  thereof,  and upon the
       expiration of such ninety (90) day period,  Executive's  employment under
       this  Agreement  shall

                                       5
<PAGE>


       terminate,  and Company shall have no further  obligation or  liabilities
       under this  Agreement  except to pay the Executive  the portion,  if any,
       that  remains  unpaid of the Base  Salary  and  unpaid  accrued  prorated
       vacation  for the period up to the date of  termination.  Resignation  as
       defined herein must be in written form to the Board, witnessed and signed
       by the Executive.

7.     SURRENDER OF BOOKS AND RECORDS.  Executive  acknowledges  that all lists,
       books,  records,  literature,  products and any other  materials owned by
       Company or its affiliates or used by them in connection  with the conduct
       of their business,  shall at all times remain the property of Company and
       its  affiliates  and  that  upon  termination  of  employment  hereunder,
       irrespective of the time, manner or cause of said termination,  Executive
       will  surrender  to Company and its  affiliates  all such  lists,  books,
       records, literature, products and other materials.

8.     CONFIDENTIAL  INFORMATION.  Executive  acknowledges that the confidential
       and  proprietary  information  and data (which shall mean  information or
       data not known or  generally  available  to the  public)  obtained by him
       during the course of his  performance  under this  Agreement (or his work
       prior  to the date  hereof  for the  Company)  concerning  the  Company's
       business,   affairs,   products,   inventions,   processes,   techniques,
       equipment,   machinery,   apparatus,   business   operations,   technical
       information, drawings, specifications, materials, know how, and the like,
       and any  knowledge or  information  developed by Executive as a result of
       performing   Services   hereunder   (collectively   referred  to  as  the
       "CONFIDENTIAL  INFORMATION"),  are all the sole  property of the Company.
       Executive agrees to hold all  Confidential  Information in confidence and
       not to  disclose  the same,  without  the prior  written  consent  of the
       Company,  to anyone for any reason at any time (unless so required by law
       or legal process, and then only after written notice to the Company and a
       reasonable  opportunity  for the Company to challenge,  at its cost, such
       disclosure).  Executive shall not, directly or indirectly,  use or permit
       the use of any  Confidential  Information  for any  purpose,  other  than
       performing  the  Services  hereunder,  without  the  written  consent  of
       Company.  Executive  shall use his best  efforts to prevent  publication,
       disclosure or other use or transmission of any Confidential  Information.
       Upon the  termination  or  expiration  of this  Agreement,  or earlier if
       requested by the Company,  Executive  agrees to return to the Company all
       Confidential  Information in the  possession of Executive,  regardless of
       the form of such Confidential Information.

9.     INTELLECTUAL PROPERTY RIGHTS.

       (a)    Without  limiting the Company's  rights  arising by law or custom,
              Executive acknowledges that the Company shall exclusively own, and
              Executive hereby assigns,  transfers,  and conveys to the Company,
              all discoveries,  work product,  trademarks,  service marks, trade
              names,   brand   names,    software,    copyrights,    inventions,
              improvements,  patents  and  other  intellectual  property  rights
              produced, created, developed or conceived by Executive prior to or
              during  the  Term  of  this  Agreement,   whether


                                       6
<PAGE>


              registered or unregistered, which relate to the Company's business
              (collectively,  the  "INTELLECTUAL  PROPERTY  RIGHTS").  Executive
              shall  disclose  all  such  Intellectual  Property  Rights  to the
              Company, and Executive agrees to execute and deliver all documents
              required  by the  Company to  document  or perfect  the  Company's
              exclusive ownership of the Intellectual Property Rights.

       (b)    Executive further agrees that all copyrightable works developed by
              the Executive, either alone or with others, prior to or during the
              Term of this  Agreement,  which relate in any way to the Company's
              business,  shall be  considered  to be works made for hire and the
              ownership  of and  the  copyrights  to  such  works  shall  be the
              exclusive  property of the Company.  Executive  shall disclose all
              such works to the  Company,  and  Executive  agrees to execute and
              deliver  all  documents  required  by the  Company to  document or
              perfect the Company's exclusive ownership of such works.

       (c)    Upon the termination or expiration of this  Agreement,  or earlier
              if  requested by the  Company,  Executive  agrees to return to the
              Company all tangible  (including  electronic  storage) elements of
              the  Intellectual  Property  Rights and works in the possession of
              Executive,  regardless of the form of such  Intellectual  Property
              Rights and works.

       (d)    Notwithstanding the foregoing, the provisions of Section 9(a) does
              not  apply  to any  Intellectual  Property  Rights  for  which  no
              equipment,  supplies,  facility  or trade  secret  information  of
              Company was used and which was developed  entirely on  Executive's
              own time, and which does not relate to the business of the Company
              or to the Company's  actual or demonstrably  anticipated  business
              activities.

10.    NONCOMPETITION  COVENANT.  Executive hereby agrees that,  during the Term
       and for a  period  of two (2)  years  thereafter,  Executive  shall  not,
       directly or indirectly,  own, manage,  operate,  control, be employed by,
       act as an advisor or consultant  to, or  participate  in, the  ownership,
       management,  operation,  or control of any business involving the design,
       development,  manufacture,  distribution or sale (whether at wholesale or
       retail) of drug delivery  technology or otherwise in competition with the
       businesses  of  the  Company,  as  now  or  hereafter  conducted,  in any
       geographic  market served by the Company during the  restriction  period;
       provided,  however, that nothing contained in this Section shall prohibit
       the Executive from owning stock in a publicly  traded company which is in
       competition  with the Company  provided  Executive's  aggregate  holdings
       therein do not exceed one percent  (1%) of the  capital of such  company.
       The   provisions  of  this  Section  shall  survive  the   expiration  or
       termination of this Agreement.

11.    MISCELLANEOUS.

11.1   Any notice,  demand or  communication  required or  permitted  under this
       Agreement  shall be in writing  and shall be  sufficient  when  delivered
       personally,

                                       7
<PAGE>

       or three (3) days after mailing by registered or certified  mail,  return
       receipt  requested,  or the  next  day if sent by  nationally  recognized
       overnight  courier with proof of delivery,  in each case postage prepaid,
       addressed as follows:

       If to the Company:
       AlphaRx Inc.
       75 East Beaver Creek, Unit 10
       Richmond Hill, Ontario L4B 1B8
       Attn.: Michael M. Lee, President

       If to the Executive:
       Michael Weisspapir
       812-12 Goldfinch Court
       Toronto, Ontario M2R 2C4

       The  foregoing  addressees  may be changed at any time by notice given in
the manner herein provided.

11.2   This Agreement constitutes the entire understanding and agreement between
       Company and Executive  regarding its subject  matter and  supersedes  all
       prior negotiations and agreements,  whether oral or written, between them
       with respect to its subject  matter.  This  Agreement may not be modified
       except by a written agreement signed by the Executive and the Company.

11.3   This  Agreement  shall be  binding  upon and inure to the  benefit of the
       parties and their respective  heirs,  executors,  successors and assigns,
       except that this Agreement may not be assigned by the Executive.

11.4   No waiver by either party of any  condition or of the breach by the other
       of any term or covenant  contained in this Agreement,  whether by conduct
       or otherwise,  in any one or more instances  shall be deemed or construed
       as a further or  continuing  waiver of any such  condition or breach or a
       waiver  of any  other  condition,  or the  breach  of any  other  term or
       covenant  set forth in this  Agreement.  Moreover,  the failure of either
       party to exercise any right  hereunder  shall not bar the later  exercise
       thereof.

11.5   This  Agreement  shall be governed by the statutes and common laws of the
       State of Delaware,  excluding  it's choice of law statutes or common law.

11.6   The headings of the various  sections and  paragraphs  have been included
       herein for  convenience  only and shall not be construed in  interpreting
       this Agreement.

11.7   If  any   provision   of  this   Agreement   shall  be  held  invalid  or
       unenforceable,  the  remainder  of this  Agreement  shall,  nevertheless,
       remain in full force and  effect.  If any  provision  is held  invalid or
       unenforceable  with  respect  to  particular  circumstances,   it  shall,
       nevertheless, remain in full force and effect in all other circumstances.

                                       8

<PAGE>

11.8   This  Agreement  may be executed in several  counterparts,  each of which
       shall  be  deemed  to be an  original  but  all of  which  together  will
       constitute one and the same instrument.

       IN WITNESS WHEREOF, this Agreement has been executed by the Executive and
on behalf of the Company by its duly authorized  officer on the date first above
written.


ALPHARMX INC.

By:     /s/ SANDRO PERSIAN                 By:    /s/ MICHAEL M. LEE
    ---------------------------               ---------------------------
            Sandro Persia                             Michael M.Lee
            Secretary                                 Chairman/CEO


EXECUTIVE

By:   /s/ MICHAEL WEISSPAPIR
    ---------------------------
          Michael Weisspapir

                                       9
<PAGE>


                     EMPLOYMENT AGREEMENT WITH SAI MING WONG

       EMPLOYMENT  AGREEMENT  ("Agreement")  made and entered into as of the 1st
day  of  July,  2000  by  and  between  AlphaRx  Inc.,  a  Delaware  corporation
("Company"), and Sai Ming Wong ("Executive").

       WHEREAS,  Company  desires  to employ  Executive  as its  Executive  Vice
President  and Executive  desires to be employed by Company,  upon the terms and
conditions hereinafter set forth.

       NOW,  THEREFORE,  in consideration of the mutual covenants and agreements
set forth and the mutual  benefits to be derived  herefrom,  and intending to be
legally bound hereby, the Company and the Executive agree as follows:

1.     Employment  and Term.  Company  hereby  employs  Executive  and Executive
       hereby  accepts  employment  for a term  commencing on July 1st, 2000 and
       continuing  until June 30th, 2003,  unless sooner  terminated as provided
       for  in  this  Agreement.  Company  and  Executive  have  the  option  to
       renegotiate this Agreement beyond the three-year period. Executive hereby
       warrants  and  represents  to Company  that he is free to enter into this
       Agreement and is not a party to any agreement,  written or otherwise,  or
       bound by any restrictions, which limit or restrict him from entering into
       this  Agreement or performing the services,  duties and  responsibilities
       called for hereunder.

2.     Duties.

2.1    Executive shall perform the duties of the Executive Vice President of the
       Company  and  such  additional   executive  duties  of  Company  and  its
       affiliates  as  may  be,  from  time  to  time,  requested  of him by the
       Company's  Board of Directors  or the  Chairman,  President  and/or Chief
       Executive Officer of the Company.

2.2    Executive shall devote his full professional time and best efforts to the
       performance of his duties and  responsibilities  hereunder to advance the
       interests of the Company and shall not during the term of this  Agreement
       (as  defined in  Section 1 hereof) be  employed,  involved  or  otherwise
       engaged in, either directly or indirectly, any other employment for gain,
       profit or other  pecuniary  advantage,  without prior written  consent of
       Company. At no time shall Executive engage in any activity that conflicts
       with the business of the Company or its affiliates.  Nothing set forth in
       this section 2.2 shall be construed to prevent  Executive from (i) acting
       as a member of Board of Trustees or a member of Board of Directors of any
       other  corporation,  or as a  member  of the  Board  of  Trustees  of any
       organization  or entity which is not a competitor  of the Company or (ii)
       devoting of such of  Executive's  time and  attention  to  philanthropic,
       charitable,   civic,  community  or  other  activities  or  endeavors  as
       Executive  shall  reasonably  determine  but  only  to  the  extent  that
       Executive's  pursuance of any activities or endeavors does not materially
       and  adversely  effect the  Executive's  ability to

                                       1
<PAGE>


       perform and discharge  Executive's  duties and  objectives to the Company
       hereunder.

2.3    Except for required travel on Company  business,  Executive shall perform
       his duties and  responsibilities  at the Company's principal Asia offices
       located in Hong Kong.  The Company  shall furnish  Executive  with office
       space,  secretarial  assistance,  a  personal  computer,  and such  other
       facilities and services as shall be suitable to Executive's  position and
       adequate for the performance of his duties hereunder.

3.     Compensation.  For all duties and responsibilities to be performed and/or
       assumed by Executive hereunder, Executive shall be entitled to receive an
       annual salary as set forth below ("Base Salary").  The Base Salary,  less
       any sums  required  to be  withheld  by law,  shall be  payable  in equal
       monthly  installments or such other more frequent regular installments as
       the Company may, from time to time, determine.  For purposes hereof, Base
       Salary shall be:

3.1.1  For the six-month period commencing with the date hereof, the Base Salary
       shall be $12,000  per year which shall be  increased  to $36,000 per year
       after the first six months of employment

3.1.2  For each year thereafter, the Base Salary shall be increased by an amount
       determined  by the Board of Directors  but in no event less than (i) five
       percent (5%) after the first year, six percent (6%) after the second year
       and seven percent (7%) after the third year and each year thereafter upon
       mutual  agreement  to extend the term.  Each  percentage  increase  for a
       particular  year shall be based on the Base  Salary  for the  immediately
       preceding year.

4.     Fringe  Benefits.  Company  shall pay for or provide  Executive  with the
       following benefits:

4.1    For the first year,  Executive  shall be entitled to three (3) weeks paid
       vacation to be used at the Executive's discretion.  Thereafter, Executive
       shall be entitled to four (4) weeks paid  vacation  during each full year
       of this Agreement to be used at the Executives discretion.  Vacation time
       shall accrue on a pro-rata basis during each year of this Agreement.  Any
       unused  vacation shall be cumulative  from year to year unless  otherwise
       agreed upon by the parties.

4.2    Health and  hospitalization  insurance  established and maintained by the
       Company for its senior executives and key management personnel. Since the
       Company  presently  does not  have,  in  effect,  a plan for  health  and
       hospitalization  insurance,  Company  shall  reimburse  Executive for all
       medical  payments  made by Executive to his previous  employer for health
       and  hospitalization  coverage for Executive and his family.  Thereafter,
       Company  shall  either  secure and  maintain  health and  hospitalization
       insurance  for Executive  and his  dependents or reimburse  Executive for
       coverage  comparable  to Blue  Shield/Blue  Cross for  Executive  and his
       immediate family.

                                       2
<PAGE>


4.3    Such other  employee  benefits  maintained  by the Company for its senior
       executives and key management employees,  including,  all pension, profit
       sharing,  retirement,  stock bonus and stock option plans,  to the extent
       Executive is eligible to participate pursuant to the terms and conditions
       of such plans.

4.4    Executive shall be reimbursed in a timely manner for all items of travel,
       entertainment  and  miscellaneous  expenses  which  Executive  reasonably
       incurs  in  connection  with the  performance  of his  duties  hereunder,
       provided that the Executive  submits to the Company such  statements  and
       other  evidence  supporting  said  expenses as the Company my  reasonably
       require.   Executive,  when  traveling  on  Company  business,  shall  be
       permitted to fly economy class on all domestic flights and business class
       on all international flights with at least 4 hours of flight time.

5.     Stock Options.

5.1    As  part  of  Executive's   compensation  for  services  to  be  rendered
       hereunder,  Executive  shall have the right and option to  purchase  from
       Company  voting common stock in Company  ("Option").  The total number of
       shares  available to  Executive  under this Option is One Hundred & Fifty
       Thousand  Shares  (150,000) at a purchase  price of Ten Cents ($0.10) per
       share ("Option Shares").  The Option Shares are available for purchase in
       installments  as  listed in  Column A below  and each  installment  shall
       become vested on the corresponding date listed in Column B, as follows:

      Column A              Column B
      Number of Shares      Date Option Shares Available for Purchase
                            Become Vested

      37,500                Upon the commencement of Executive's employment
                            pursuant to the terms of this Agreement

      37,000                First anniversary date of this Agreement

      37,500                Second anniversary date of this Agreement

      37,500                Third Anniversary date of this Agreement


In order for the Option Shares to become vested as provided for above, Executive
must be  employed  by the Company  under the terms of this  Agreement  as of the
vesting date set forth in Column B above.

5.2    Except as otherwise  provided for below,  the term of the Option  granted
       shall  remain in effect  for ten (10)  years  from the date on which such
       Option Shares  become  vested.  If the  Executive's  employment  with the
       Company is terminated

                                       3
<PAGE>


       by the Company for Cause (as defined  herein) or by the act of Executive,
       the  Executive's  right to exercise  vested Option Shares shall cease and
       become  null and void  within  thirty  (30)  days of the date  employment
       terminated,  except as  otherwise  provided in Section  5.3  hereof.  All
       unvested Option Shares will terminate  immediately as of the date of such
       termination of employment. In the event the Company receives, accepts and
       consummates a tender offer for all of its outstanding  common stock prior
       to the  vesting  of the  Option  Shares,  the  vesting  rights  shall  be
       accelerated  so as to allow  Executive to exercise the Option to purchase
       all of the Option Shares  immediately  prior to the  consummation of such
       tender offer.

5.3    Notwithstanding  anything  in  this  Section  5 to the  contrary,  if the
       Executive's  employment is terminated for Cause,  as set forth in Section
       6.3,  the Company  shall have the right to  terminate  and  withdraw  any
       vested or unvested Options under this Agreement.

5.4    The  purchase  price of the Option  Shares shall be paid in full upon the
       exercise  of the  Option,  and  Company  shall not be required to deliver
       certificates  for such Option  Shares  until  payment  has been made.  In
       addition  to, and at the time of payment of the  purchase  price for such
       Option Shares,  Executive  shall be responsible for all federal and state
       withholding or other employment taxes applicable to the taxable income of
       such  Executive  and any other fees  resulting  from the  exercise of the
       Executive.

5.5    Each share of Option Stock  purchased  pursuant to the terms hereof shall
       carry  all  appropriate  registration  and/or  restrictions  on sale  and
       notices as determined from time to time by Company's  securities counsel.
       Executive shall cooperate with Company and Company's counsel in complying
       with all applicable securities laws.

6.     Termination  of  Employment.  The  employment  of Executive and Company's
       liability and obligations hereunder shall terminate as follows:

6.1    This Agreement shall terminate  immediately  upon the death of Executive.
       In  such  event,  Company  shall  pay to such  person  as  Executive  may
       designate  in a written  notice  filed  with the  Company,  or if no such
       person  shall be  designated,  to  Executive's  estate,  a lump sum death
       benefit in an amount  equal to twelve  (12)  months of  Executive's  Base
       Salary as in effect on the date of Executive's death and double indemnity
       in event Executive's death occurs while traveling on Company business.

6.2    This  Agreement  shall  terminate  immediately  upon  the  Disability  of
       Executive.  Disability  shall  exist  if  due  to a  mental  or  physical
       condition, Executive is determined to be unable to perform his duties and
       responsibilities  hereunder  for a  continuous  period of two (2) months.
       Disability shall be conclusively  established by written certification by
       two (2) licensed,  disinterested  physicians  selected as mutually agreed
       upon between Company and Executive. In the event the two (2)

                                       4
<PAGE>


       physicians  disagree,  a third  physician  shall be  selected  by the two
       physicians  to  break  such  impasse.   The  costs  associated  with  the
       determination  of Disability  shall be borne equally  between Company and
       Executive.  In the event of  Disability,  Executive  shall be entitled to
       receive his Base Salary in accordance  with Section 3 for a period of six
       (6) months following the onset of Disability.

6.3    The Company may discharge the Executive for Cause and thereby immediately
       terminate  his  employment  under this  Agreement.  For  purposes of this
       Agreement,  Company  shall have  "Cause"  to  terminate  the  Executive's
       employment if the Executive, in the reasonable judgment of the Company:

6.3.1  Willfully  fails to perform any  reasonable  directive  of the  Company's
       Board of Directors, Chairman or Chief Executive Officer.

6.3.2  Materially  breaches any of the agreements,  duties,  responsibilities or
       obligations under this Agreement.

6.3.3  Embezzles or converts to his own use any funds or property of the Company
       or any client or customer of the Company.

6.3.4  Is convicted of a felony or any crime involving larceny,  embezzlement or
       moral turpitude.

6.4    In the event that  Executive's  employment  is  terminated by the Company
       without Cause, as defined in Section 6.3, above,  for a reason other than
       death or  Disability,  or Executive  shall resign for "Good  Reason",  as
       defined below, then, in such event:

6.4.1  Executive's Base Salary, as defined in Section 3 as then in effect, shall
       continue to be paid for a period of six (6) months ("Payment Period").

6.4.2  Company  shall  maintain  in effect  during the Payment  Period,  for the
       continued benefit of the Executive, all of the employee benefit plans and
       programs in which the Executive was entitled to  participate  immediately
       prior to the Executive's  termination provided same is possible under the
       general  terms  and  provisions  of  such  benefit  plans  and  programs.
       Moreover,  during  the  Payment  Period the  Company  shall  provide  the
       Executive with such reasonable  administrative  and  secretarial  support
       services as may be necessary or appropriate in order to assist  Executive
       in finding  new  employment  or  Executive  may  select an  out-placement
       service  to be paid  for by the  Company  at a cost  not to  exceed  Five
       Thousand Dollars ($5,000).

       For purposes of this Section 6.4, "Good Reason" shall mean:

       (i)    An assignment to the Executive of any duties inconsistent with, or
              a  material  change  in  the  nature  or  scope  of,   Executive's
              responsibilities, authority or duties hereunder.

                                       5
<PAGE>


       (ii)   Failure  by the  Company  to comply  with the  provisions  of this
              Agreement.

       (iii)  Ill health of  Executive  or a member of his family,  or any other
              compelling  personal  circumstance which, in the mutual discretion
              of the  Executive,  and the  Chairman  of the  Company  makes  the
              Executive's   continued   employment  hereunder   impossible,   or
              inappropriate.

6.5    Executive may voluntarily  terminate his employment  under this Agreement
       without  Good  Reason,  as defined in  Section  6.4 above,  by giving the
       Company  ninety  (90) days prior  written  notice  thereof,  and upon the
       expiration of such ninety (90) day period,  Executive's  employment under
       this  Agreement  shall  terminate,  and  Company  shall  have no  further
       obligation  or  liabilities  under  this  Agreement  except  to  pay  the
       Executive the portion, if any, that remains unpaid of the Base Salary and
       unpaid  accrued  prorated  vacation  for  the  period  up to the  date of
       termination. Resignation as defined herein must be in written form to the
       Board, witnessed and signed by the Executive.

7.     Surrender of Books and Records.  Executive  acknowledges  that all lists,
       books,  records,  literature,  products and any other  materials owned by
       Company or its affiliates or used by them in connection  with the conduct
       of their business,  shall at all times remain the property of Company and
       its  affiliates  and  that  upon  termination  of  employment  hereunder,
       irrespective of the time, manner or cause of said termination,  Executive
       will  surrender  to Company and its  affiliates  all such  lists,  books,
       records, literature, products and other materials.

8.     Miscellaneous.

8.1    Any notice,  demand or  communication  required or  permitted  under this
       Agreement  shall be in writing  and shall be  sufficient  when  delivered
       personally,  or three (3) days after  mailing by  registered or certified
       mail,  return  receipt  requested,  or the next day if sent by nationally
       recognized overnight courier with proof of delivery, in each case postage
       prepaid, addressed as follows:


       If to the Company:
       AlphaRx Inc.
       75 East beaver Creek, Unit 10
       Richmond Hill, Ontario L4B 1B8
       Attn.: Michael M. Lee, President

       If to the Executive:
       Sai Ming Wong
       Room 1802, Choi Yuk House, Choi Yuen Estate
       Sheung Shui, Hong Kong

       The  foregoing  addressees  may be changed at any time by notice given in
the manner herein provided.

                                       6
<PAGE>


8.2    This Agreement constitutes the entire understanding and agreement between
       Company and Executive  regarding its subject  matter and  supersedes  all
       prior negotiations and agreements,  whether oral or written, between them
       with respect to its subject  matter.  This  Agreement may not be modified
       except by a written agreement signed by the Executive and the Company.

8.3    This  Agreement  shall be  binding  upon and inure to the  benefit of the
       parties and their respective  heirs,  executors,  successors and assigns,
       except that this Agreement may not be assigned by the Executive.

8.4    No waiver by either party of any  condition or of the breach by the other
       of any term or covenant  contained in this Agreement,  whether by conduct
       or otherwise,  in any one or more instances  shall be deemed or construed
       as a further or  continuing  waiver of any such  condition or breach or a
       waiver  of any  other  condition,  or the  breach  of any  other  term or
       covenant  set forth in this  Agreement.  Moreover,  the failure of either
       party to exercise any right  hereunder  shall not bar the later  exercise
       thereof.

8.5    This  Agreement  shall be governed by the statutes and common laws of the
       State of Delaware, excluding it's choice of law statutes or common law.

8.6    The headings of the various  sections and  paragraphs  have been included
       herein for  convenience  only and shall not be construed in  interpreting
       this Agreement.

8.7    If  any   provision   of  this   Agreement   shall  be  held  invalid  or
       unenforceable,  the  remainder  of this  Agreement  shall,  nevertheless,
       remain in full force and  effect.  If any  provision  is held  invalid or
       unenforceable  with  respect  to  particular  circumstances,   it  shall,
       nevertheless, remain in full force and effect in all other circumstances.

8.8    This  Agreement  may be executed in several  counterparts,  each of which
       shall  be  deemed  to be an  original  but  all of  which  together  will
       constitute one and the same instrument.

                                       7
<PAGE>


       IN WITNESS WHEREOF, this Agreement has been executed by the Executive and
on behalf of the Company by its duly authorized  officer on the date first above
written.


ALPHARMX INC.

By:     /s/ SANDRO PERSIAN                  By:      /s/ MICHAEL M. LEE
    ---------------------------                  ---------------------------
                   Sandro Persia                         Michael M. Lee
                   Secretary                             Chairman/CEO




EXECUTIVE

By:   /s/ SAI MING WONG
    --------------------
          Sai Ming Wong

                                       8
<PAGE>


                                   SIGNATURES:


       Pursuant to the requirements of Section 12 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: December 21, 2000

                                                ALPHARx, INC.

                                                By:   /S/ MICHAEL M. LEE
                                                   -----------------------------
                                                Michael M. Lee, President

                                                Directors:


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


                                                          /S/ SAI MING WONG
                                                       -------------------------
                                                    Sai Ming Wong, Director


                                                          /S/ JOSEPH SCHWARTZ
                                                       -------------------------
                                                    Joseph Schwartz, Director


                                                          /S/ SANDRO PERSIA
                                                       -------------------------
                                                    Sandro Persia, Director