|                                                                                             
|---------------------------------------------------------------------------------------------
|UNITED STATES                                                                                
|SECURITIES AND EXCHANGE COMMISSION                                                           
|WASHINGTON, D.C. 20549                                                                       
|                                                                                             
|FORM 10-Q                                                                                    
|                                                                                             
|QUARTERLY
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934     
|                                                                                             
|For
 the quarterly period ended: July 31, 2009                                               
|                                                                                             
|or                                                                                           
|                                                                                             
|TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE OF SECURITIES EXCHANGE ACT OF
 1934
|                                                                                             
|For the transition period
 from ______________________ to _______________________            
|                                                                                             
|Commission
 File Number:0-22011                                                              
|                                                                                             
|SYNOVICS PHARMACEUTICALS, INC.                                                               
|(EXACT NAME OF COMPANY AS SPECIFIED IN ITS CHARTER)                                          

|                                                  |                       |           
|------------------------------------------------- | --------------------- | ----------
|                                                  | NEVADA                | 86-0760991
|                                                  |                       |           
|(STATE OR
 OTHER JURISDICTION OF                  | I.R.S. EMPLOYER      
|INCORPORATION
 OR ORGANIZATION)                   | IDENTIFICATION NUMBER
|                                                  |                       |           
|5360
 NORTHWEST 35TH AVENUE, FT. LAUDERDALE, FL   | 33309                
|(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)          | (ZIP CODE)           
|                                                  |                       |           
|(954) 486-4590                                   
|                                                 
|(COMPANYS TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark
whether the Company (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x No o

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer o
     Accelerated filer o
     Non-accelerated filer x
     Smaller reporting company o

Indicate by check mark
whether the Company is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No x

Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of the
latest practicable date:

As of September 15, 2009
there were 29,827,357 shares of common stock outstanding (including 4,000,000
shares of common stock that the Company is obligated to issue).

---



SYNOVICS PHARMACEUTICALS, INC.INDEX TO
QUARTERLY REPORTON FORM 10-Q

|                                |                                                                                         |     
|------------------------------- | --------------------------------------------------------------------------------------- | ----
|                                |                                                                                         | PAGE
|PART I -
 FINANCIAL INFORMATION |                                                                                        
|                                |                                                                                         |     
|ITEM I.                         | Financial Statements.                                                                   |     
|                                |                                                                                         |     
|                                | (UNAUDITED)                                                                             |     
|                                | Condensed
 Consolidated Balance Sheets                                                  | 3   
|                                | Condensed Consolidated
 Statements of Operations                                        | 4   
|                                | Condensed
 Consolidated Statements of Cash Flows                                        | 6   
|                                | Notes to Condensed
 Consolidated Financial Statements                                   |     
|                                |                                                                                         |     
|ITEM 2.                         | Managements
 Discussion and Analysis of Financial Condition and Results of Operations. | 15  
|                                |                                                                                         |     
|ITEM 3.                         | Quantitative
 and Qualitative Disclosures About Market Risk.                            | 20  
|                                |                                                                                         |     
|ITEM 4T.                        | Controls
 and Procedures.                                                               | 20  
|                                |                                                                                         |     
|PART II - OTHER INFORMATION     |                                                                                        
|                                |                                                                                        
|ITEM 1.                         | Legal
 Proceedings.                                                                     | 22  
|                                |                                                                                         |     
|ITEM 1A.                        | Risk
 Factors.                                                                          | 23  
|                                |                                                                                         |     
|ITEM 2.                         | Unregistered
 Sales of Equity Securities and Use of Proceeds.                           | 24  
|                                |                                                                                         |     
|ITEM 3.                         | Defaults
 upon Senior Securities.                                                       | 24  
|                                |                                                                                         |     
|ITEM 4.                         | Submission
 of Matters to a Vote of Security Holders.                                   | 24  
|                                |                                                                                         |     
|ITEM 5.                         | Other
 Information.                                                                     | 24  
|                                |                                                                                         |     
|ITEM 6.                         | Exhibits.                                                                               | 24  
|                                |                                                                                         |     
|SIGNATURES                      | 25                                                                                     

2

---



|                                                  
|--------------------------------------------------
|SYNOVICS PHARMACEUTICALS, INC. AND SUBSIDIARIES   
|                                                  
|CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)

|                                                                                                                                                                         |  |                |             |                   |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ----------- | ----------------- | - | ----------- | -
|                                                                                                                                                                         |  | July 31,
 2009 |             | October 31,
 2008 |  
|                                                                                                                                                                         |  |                |             |                   |  
|ASSETS                                                                                                                                                                   |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|CURRENT ASSETS:                                                                                                                                                          |  |                |             |                   |   |             |  
|Cash and cash equivalents                                                                                                                                                |  | $              | 129,860     |                   | $ | 65,986      |  
|Trade receivables, net                                                                                                                                                   |  |                | 1,543,381   |                   |   | 3,820,465   |  
|Inventory                                                                                                                                                                |  |                | 2,319,184   |                   |   | 2,901,664   |  
|Prepaid expenses and other current assets                                                                                                                                |  |                | 683,974     |                   |   | 377,269     |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|Total Current Assets                                                                                                                                                     |  |                | 4,676,398   |                   |   | 7,165,384   |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|PROPERTY - Net of accumulated depreciation
 of $1,285,971 and $911,452, respectively                                                                                     |  |                | 2,199,730   |                   |   | 2,483,577   |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|OTHER ASSETS:                                                                                                                                                            |  |                |             |                   |   |             |  
|Security deposits                                                                                                                                                        |  |                | 87,548      |                   |   | 87,548      |  
|Deferred financing fees                                                                                                                                                  |  |                | 19,511      |                   |   | 698,449     |  
|Intangible assets - net of accumulated amortization of
 $1,590,996 and $1,463,877, respectively                                                                          |  |                | 336,335     |                   |   | 463,454     |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|Goodwill                                                                                                                                                                 |  |                | 11,447,698  |                   |   | 11,447,698  |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|Total Other Assets                                                                                                                                                       |  |                | 11,891,092  |                   |   | 12,697,149  |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|TOTAL ASSETS                                                                                                                                                             |  | $              | 18,767,220  |                   | $ | 22,346,110  |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY
 (DEFICIT)                                                                                                                          |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|CURRENT LIABILITIES:                                                                                                                                                     |  |                |             |                   |   |             |  
|Accounts payable                                                                                                                                                         |  | $              | 7,543,739   |                   | $ | 5,978,002   |  
|Accrued interest                                                                                                                                                         |  |                | 495,654     |                   |   | 374,864     |  
|Accrued liabilities                                                                                                                                                      |  |                | 4,314,352   |                   |   | 4,054,739   |  
|Dividend Payable                                                                                                                                                         |  |                | 1,041,374   |                   |   | 382,649     |  
|Notes payable - shareholders and others                                                                                                                                  |  |                | 1,606,250   |                   |   | 500,000     |  
|Notes payable                                                                                                                                                            |  |                | 40,000      |                   |   | 40,000      |  
|Current portion of Capital Leases                                                                                                                                        |  |                | 106,335     |                   |   | 70,291      |  
|Current portion of note payable - bank                                                                                                                                   |  |                | 2,400,000   |                   |   | 2,100,000   |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|Total current liabilities                                                                                                                                                |  |                | 17,547,703  |                   |   | 13,500,545  |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|LONG-TERM LIABILITIES:                                                                                                                                                   |  |                |             |                   |   |             |  
|Note payable bank, net of current portion                                                                                                                                |  |                | 1,700,000   |                   |   | 3,550,000   |  
|Capital lease obligation, net of current
 portion                                                                                                                        |  |                | 292,550     |                   |   | 294,071     |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|Total Liabilities                                                                                                                                                        |  |                | 19,540,253  |                   |   | 17,344,616  |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|STOCKHOLDERS EQUITY:                                                                                                                                                    |  |                |             |                   |   |             |  
|Series A preferred stock - $.001 par value
 - authorized, 600,000 shares; 591,850 and 591,850 issued and outstanding,
 respectively (liquidation preference of $798,998) |  |                | 798,998     |                   |   | 798,998     |  
|Series C preferred stock - $.001 par value
 - authorized, 100,000 shares; 28,955 and 0 issued and outstanding,
 respectively                                             |  |                | 28,955      |                   |   | 28,955      |  
|Common stock - $.001 par value -
 authorized, 45,000,000 shares; 28,944,012 and 27,619,015 issued and
 outstanding, respectively                                         |  |                | 39,654      |                   |   | 38,280      |  
|Additional paid-in capital                                                                                                                                               |  |                | 85,367,253  |                   |   | 84,759,876  |  
|Warrants                                                                                                                                                                 |  |                | 9,127,392   |                   |   | 9,127,392   |  
|Accumulated deficit                                                                                                                                                      |  |                | (85,032,876 | )                 |   | (78,649,597 | )
|Common Stock in Treasury                                                                                                                                                 |  |                | (10,952,410 | )                 |   | (10,952,410 | )
|Subscription receivable                                                                                                                                                  |  |                | (150,000    | )                 |   | (150,000    | )
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|Total stockholders equity                                                                                                                                               |  |                | (773,033    | )                 |   | 5,001,494   |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                               |  | $              | 18,767,220  |                   | $ | 22,346,110  |  
|                                                                                                                                                                         |  |                |             |                   |   |             |  

See notes to the consolidated
financial statements.

3

---



|                                                            
|------------------------------------------------------------
|SYNOVICS PHARMACEUTICALS, INC. AND SUBSIDIARIES             
|                                                            
|CONDENSED CONSOLIDATED STATEMENTS OF
 OPERATIONS (UNAUDITED)

|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|---------------------------------------------------- |  | ------------------ | ---------- | ----------------- | - | --------------- | - | --------------- | ---------- | - | - | ---------- | -
|                                                     |  | Three Months Ended |            | Nine Months Ended |  
|                                                     |  |                    |            |                   |  
|                                                     |  | July 31,
 2009     |            | July
 31,
 2008   |   | July
 31,
 2009 |   | July
 31,
 2008 |           
|                                                     |  |                    |            |                   |   |                 |   |                 |           
|REVENUES, net                                        |  | $                  | 1,578,332  |                   | $ | 7,715,370       |   | $               | 11,224,041 |   | $ | 18,092,122 |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|COST OF REVENUES                                     |  |                    | 2,158,091  |                   |   | 4,708,609       |   |                 | 9,434,671  |   |   | 11,796,506 |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|GROSS PROFIT                                         |  |                    | (579,759   | )                 |   | 3,006,761       |   |                 | 1,789,370  |   |   | 6,295,616  |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|OPERATING EXPENSES                                   |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|Research and development                             |  |                    | 213,992    |                   |   | 207,247         |   |                 | 849,519    |   |   | 859,291    |  
|Selling, general, and administrative                 |  |                    | 1,065,279  |                   |   | 3,570,238       |   |                 | 5,523,118  |   |   | 8,185,309  |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|Total expenses                                       |  |                    | 1,279,271  |                   |   | 3,777,485       |   |                 | 6,372,637  |   |   | 9,044,600  |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|OPERATING LOSS                                       |  |                    | (1,859,030 | )                 |   | (770,724        | ) |                 | (4,583,267 | ) |   | (2,748,984 | )
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|OTHER INCOME (EXPENSES):                             |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|Impairment loss                                      |  |                    |           |                   |   | (660,919        | ) |                 |           |   |   | (660,919   | )
|Other income                                         |  |                    | 1,451      |                   |   |                |   |                 | 1,451      |   |   |           |  
|Forgiveness of interest                              |  |                    |           |                   |   | 3,325,747       |   |                 |           |   |   | 3,325,747  |  
|Interest expense, net                                |  |                    | (163,308   | )                 |   | (1,404,434      | ) |                 | (1,132,743 | ) |   | (4,592,003 | )
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|Total other (expenses) income                        |  |                    | (161,857   | )                 |   | 1,260,394       |   |                 | (1,131,292 | ) |   | (1,927,175 | )
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|NET LOSS                                             |  | $                  | (2,020,887 | )                 | $ | 489,670         |   | $               | (5,714,559 | ) | $ | (4,676,159 | )
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|BASIC AND DILUTED NET LOSS
 PER COMMON SHARE         |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|NET INCOME (LOSS) PER SHARE                          |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|NET INCOME (LOSS) PER SHARE                          |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|BASIC                                                |  | $                  | (0.07      | )                 | $ | 0.02            |   | $               | (0.20      | ) | $ | (0.21      | )
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|FULLY DILUTED                                        |  | $                  | (0.07      | )                 | $ | 0.01            |   | $               | (0.20      | ) | $ | (0.21      | )
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|BASIC                                                |  |                    | 29,885,196 |                   |   | 28,482,770      |   |                 | 28,638,702 |   |   | 22,744,073 |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  
|FULLY DILUTED                                        |  |                    | 29,885,196 |                   |   | 43,482,770      |   |                 | 28,638,702 |   |   | 22,744,073 |  
|                                                     |  |                    |            |                   |   |                 |   |                 |            |   |   |            |  

See notes to the condensed consolidated
financial statements.

4

---



SYNOVICS
PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

|                                                                             |  |                |            |                |   |            |  
|---------------------------------------------------------------------------- |  | -------------- | ---------- | -------------- | - | ---------- | -
|                                                                             |  | July 31,
 2009 |            | July 31,
 2008 |  
|                                                                             |  |                |           
|OPERATING ACTIVITIES:                                                        |  |                |            |                |   |            |  
|Net loss                                                                     |  | $              | (5,714,559 | )              | $ | (4,676,159 | )
|Adjustments to reconcile
 net loss to net cash used in operating activities: |  |                |            |                |   |            |  
|Impairment of definite life intangible
asset                                 |  |                |           |                |   | 660,919    |  
|Depreciation and amortization                                                |  |                | 501,638    |                |   | 438,882    |  
|Amortization of deferred financing fees                                      |  |                | 678,938    |                |   | 2,569,321  |  
|Forgiveness of accrued interest                                              |  |                |            |                |   | (3,325,000 | )
|Stock based compensation and financing
fees                                  |  |                | 608,750    |                |   | 6,303,854  |  
|Changes in operating assets and
liabilities:                                 |  |                |            |                |   |            |  
|Accounts receivable                                                          |  |                | 2,277,085  |                |   | (375,737   | )
|Inventory                                                                    |  |                | 582,480    |                |   | (270,266   | )
|Prepaids and other current assets                                            |  |                | (306,705   | )              |   | (207,720   | )
|Accounts payable                                                             |  |                | 1,743,738  |                |   | 1,144,222  |  
|Accrued interest                                                             |  |                | 120,790    |                |   | (307,803   | )
|Accrued liabilities                                                          |  |                | 249,618    |                |   | 662,608    |  
|                                                                             |  |                |            |                |   |            |  
|Net cash provided in
 operating activities                                   |  |                | 741,773    |                |   | 2,617,121  |  
|                                                                             |  |                |            |                |   |            |  
|                                                                             |  |                |            |                |   |            |  
|INVESTING ACTIVITIES:                                                        |  |                |            |                |   |            |  
|Purchase of machinery and
 equipment                                         |  |                | (90,672    | )              |   | (586,061   | )
|                                                                             |  |                |            |                |   |            |  
|Net cash used in investing
 activities                                       |  |                | (90,672    | )              |   | (586,061   | )
|                                                                             |  |                |            |                |   |            |  
|                                                                             |  |                |            |                |   |            |  
|FINANCING ACTIVITIES:                                                        |  |                |            |                |   |            |  
|Sale of common stock and Series C Preferred
Stock                            |  |                |           |                |   | 6,000,000  |  
|Proceeds from debt                                                           |  |                | 1,250,000  |                |   | 1,300,000  |  
|Repayment of debt                                                            |  |                | (1,693,750 | )              |   | (8,905,000 | )
|Repayment of capital leases                                                  |  |                | (143,477   | )              |   |           |  
|                                                                             |  |                |            |                |   |            |  
|                                                                             |  |                |            |                |   |            |  
|Net cash used in financing activities                                        |  |                | (587,227   | )              |   | (1,605,000 | )
|                                                                             |  |                |            |                |   |            |  
|                                                                             |  |                |            |                |   |            |  
|NET INCREASE IN
 CASH AND CASH EQUIVALENTS                                   |  |                | 63,874     |                |   | 426,060    |  
|                                                                             |  |                |            |                |   |            |  
|CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD                              |  |                | 65,986     |                |   |           |  
|                                                                             |  |                |            |                |   |            |  
|                                                                             |  |                |            |                |   |            |  
|                                                                             |  |                |            |                |   |            |  
|CASH AND CASH EQUIVALENTS,
 END OF PERIOD                                    |  | $              | 129,860    |                | $ | 426,060    |  
|                                                                             |  |                |            |                |   |            |  
|                                                                             |  |                |            |                |   |            |  
|SUPPLEMENTAL DISCLOSURES OF NONCASH
 FINANCING AND INVESTING ACTIVITIES:     |  |                |            |                |   |            |  
|                                                                             |  |                |            |                |   |            |  
|Purchase of equipment through capital
leases                                 |  |                | 178,000    |                |   |           |  
|Cash paid for interest                                                       |  |                | 316,706    |                |   | 445,234    |  
|                                                                             |  |                |            |                |   |            |  
|                                                                             |  | $              | 494,706    |                | $ | 445,234    |  
|                                                                             |  |                |            |                |   |            |  

See notes to the consolidated financial statements.

5

---



NOTE 1 - BASIS OF PRESENTATION AND
SIGNIFICANT ACCOUNTING POLICIES

The
accompanying unaudited Condensed Consolidated Financial Statements of Synovics
Pharmaceuticals, Inc. (Synovics) have been prepared in
accordance with accounting principles generally accepted in the United States
of America and with the instructions to Form 10-Q for interim financial
information. Accordingly, they do not include all the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (which include normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows for all
periods presented have been made. The results of operations for the three and
nine month period ended July 31, 2009 are not necessarily indicative of the
operating results that may be achieved for the entire fiscal year ending
October 31, 2009. These unaudited condensed consolidated financial statements
should be read in conjunction with Synovics financial statements and
accompanying notes thereto as of and for the fiscal year ended October 31,
2008.

Going Concern

The
accompanying Condensed Consolidated Financial Statements have been prepared on
a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Synovics has
incurred accumulated operating losses of $85,032,876 through July 31, 2009
which have been funded through the issuance of stock and debt. The losses
incurred to date, the uncertainty regarding the ability to raise additional
capital and Synovics inability to generate operating profits and positive cash
flows from operations indicate that Synovics may not be able to continue as a
going concern for a reasonable period of time.

In particular,
as a result of the Drug Enforcement Administration (DEA) related
proceedings discussed elsewhere in this Quarterly Report on Form 10-Q, Synovics
has ceased almost all of its manufacture and sale of ephedrine and guaifenesin
products which have historically comprised approximately 50% of Synovicss
sales over the past three years. This has resulted in a significant reduction
in revenue which in turn has caused Synovics to scale back its operations, cut
its workforce by approximately 50% since the beginning of 2009, become delinquent
in the payment of our payroll tax obligations of approximately $477,000 and attempt
to reach arrangements with its creditors in an effort to continue as a going
concern. Synovics is attempting to reverse the downward trend in the reduction
of revenue by refocusing its sales efforts on higher volume, higher margin customers,
launching new generic RX products, executing upon its so-called front-end
strategy, expanding sales to is existing customer base and bringing the DEA
proceedings to a conclusion. The impact of the loss of revenue from the
ephedrine and guifaenisin products has had a material adverse impact on the
business, prospects, financial condition and results of operation of Synovics
and no assurance can be given that even if Synovics has increased sales from
higher volume, higher margin customers, launches new products, executes upon
its front-end strategy, expands sales to its existing
customer base and satisfactorily concludes the DEA proceedings that it will be
able to continue as a going concern.

Principles of Consolidation

The Condensed
Consolidated Financial Statements include the accounts of Synovics
Pharmaceuticals, Inc. and its wholly owned subsidiaries, (collectively the Company).
All significant inter-company accounts and transactions have been eliminated in
consolidation.

Concentrations of Credit Risk

Accounts
receivable are reported net of an allowance for doubtful accounts. The
allowance is based on managements estimate of the amount of receivables that
will be actually collected. Management performs on-going credit evaluations of
its customers and provides an allowance based on credit history and worthiness
of its customers. Receivables are written off when deemed uncollectible.

Revenue Recognition

The Company
recognizes revenue upon shipment of product.

6

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Inventory

Inventories
are stated at the lower of cost (first-in, first-out method) or market.

Intangible Assets

Goodwill and
intangible assets with indefinite lives are reviewed at least annually for
impairments. Due to the recent developments relating to the cessation of sale
of almost all ephedrine and guaifenesin products, an impairment of goodwill may
    be required in the future.

Share-Based
Compensation

The Company
accounts for share-based compensation using the fair value based method of
accounting.

Income Taxes

The Company
accounts for income taxes using the liability method. The liability method
measures deferred income taxes by applying enacted statutory rates in effect at
the balance sheet due to the differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements. Any
resulting deferred tax assets or liabilities are adjusted to reflect changes in
tax laws as they occur.

Effective
November 1, 2007, the Company adopted the provisions of FASBs Interpretation
(FIN) No 48, Accounting for uncertainly in Income
Taxes — an
interpretation of FASB No.109. FIN 48 prescribes a recognition
threshold and measurement attribute for how a company should recognize,
measure, present, and disclose uncertain tax positions that the company has
taken or expects to take on a tax return in its financial statements. FIN 48
requires that the financial statements reflect expected future tax consequences
of such positions presuming the taxing authorities full knowledge of the
position and all relevant facts, but without considering time values. No such
amounts were accrued for at November 1, 2008. Additionally, no adjustments
related to uncertain tax positions were recognized during the nine months ended
July 31, 2009.

The Company
recognizes interest and penalties related to uncertain tax positions as a
reduction of the income tax benefit. No interest and penalties related to
uncertain tax positions were accrued as of July 31, 2009.

The Company
operates in multiple tax jurisdictions within the United States of America.
Although the Company does not believe that it is currently under examination in
any of its major tax jurisdictions, it remains subject to examination in all of
its tax jurisdictions until the applicable statutes of limitation expire. As of
July 31, 2009, the tax returns for years ended 2005 onwards remain subject to
examination for our federal and major state tax jurisdictions. The Company does
not expect to have a material change to unrecognized tax positions within the
next twelve months.

Change in Accounting
Principles

In June 2008,
the FASB issued EITF Issue No. 07-05, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entitys Own Stock (EITF
07-05). Equity-linked
instruments (or embedded features) that otherwise meet the definition of a
derivative as outlined in SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, are not accounted for as
derivatives if certain criteria are met, one of which is that the instrument
(or embedded feature) must be indexed to the entitys own stock. EITF 07-05
provides guidance on how to determine if equity-linked instruments (or embedded
features) such as warrants to purchase Company stock are considered indexed to
its stock. The Company is in the process of evaluating the impact of EITF 07-05.

NOTE 2 PER SHARE INFORMATION

In accordance
with SFAS No. 128, Earnings Per Share, basic earnings per
share of common stock (Basic EPS) is computed by dividing the
net income by the weighted-average number of shares of common stock
outstanding.

7

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Diluted
earnings per share of common stock (Diluted EPS) is computed by dividing the
net income by the weighted-average number of shares of common stock, and
dilutive common stock equivalents and convertible securities then
outstanding. SFAS No. 128 requires the presentation of both Basic EPS and
Diluted EPS on the face of the Companys Condensed Consolidated Statements of
Operations. Common stock equivalents totaling 58,567,765 and 9,438,765 were excluded
from the computation of Diluted EPS for the three months ended July 31, 2009
and 2008, respectively, and 58,567,765 and 13,344,165 were excluded for the nine months ended
July 31, 2009 and 2008 respectively, as their effect on the computation of
Diluted EPS would have been anti-dilutive.

The following
table sets forth the computation of basic and diluted per share information:

|                                                                        |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|----------------------------------------------------------------------- |  | ------------------------------------- | ---------- | ------------------------------------ | - | ---------- |  | ---- | ---------- | - | - | ---------- | -
|                                                                        |  | For the
 Three Months
 Ended July 31, |            | For the
 Nine Months
 Ended July 31, |  
|                                                                        |  |                                       |            |                                      |  
|                                                                        |  | 2009                                  |            | 2008                                 |   | 2009       |  | 2008 |           
|                                                                        |  |                                       |            |                                      |   |            |  |      |           
|Numerator:                                                              |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|                                                                        |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|Net income (in thousands):                                              |  | $                                     | (2,020,887 | )                                    | $ | 489,670    |  | $    | (5,714,559 | ) | $ | (4,676,159 | )
|                                                                        |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|Denominator:                                                            |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|Weighted-average shares of common stock
 outstanding                    |  |                                       | 29,885,196 |                                      |   | 28,482,770 |  |      | 28,638,702 |   |   | 22,744,073 |  
|Anti-dilutive effect of stock options,
 warrants and restricted stock   |  |                                       |            |                                      |   | 15,000,000 |  |      |            |   |   |            |  
|                                                                        |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|Weighted-average shares of common stock
 outstanding, assuming dilution |  |                                       | 29,885,196 |                                      |   | 43,482,770 |  |      | 28,638,702 |   |   | 22,744,073 |  
|                                                                        |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|                                                                        |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|Net income per share:                                                   |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|Basic                                                                   |  | $                                     | (0.07      | )                                    | $ | 0.02       |  | $    | (0.20      | ) | $ | (0.21      | )
|                                                                        |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  
|Diluted                                                                 |  | $                                     | (0.07      | )                                    | $ | 0.01       |  | $    | (0.20      | ) | $ | (0.21      | )
|                                                                        |  |                                       |            |                                      |   |            |  |      |            |   |   |            |  

NOTE 3  NOSTRUM SETTLEMENT AND
RELEASE OF NOSTRUM GUARANTEE

Synovics and
its subsidiary Synovics Laboratories, Inc. (Synovics
Labs), were involved in a legal dispute with Nostrum
Pharmaceuticals, Inc. (Nostrum)
and Nirmal Mulye, Ph.D. (Mulye).
As disclosed in the Companys previous periodic reports, these parties were
among the parties to pending actions and proceedings before the Federal
District Court of the Southern District of New York and the District of New
Jersey as well as arbitration before the American Arbitration Association. As
part of the legal dispute, the Company alleged, among other things, that (i)
Mulye breached fiduciary duties and usurped corporate opportunities as a member
of the board and Chief Scientific Officer and that Anil Anand (a confessed
felon in a $700 million bank fraud) and Nostrum aided and abetted Mulye in such
actions, (ii) Mulye, Anand and Nostrum tortiously interfered with prospective
contractual relationships of the Company, (iii) Mulye fraudulently induced the
Company to enter into certain financial transactions, and (iv) Mulye, Anand and
Nostrum conspired to breach fiduciary duties and steal valuable corporate
opportunities.

On July 31,
2007, the Company together with Synovics Labs entered into a settlement
agreement with all parties to the various actions. Under the terms of the
settlement agreement, all pending actions and proceedings between the parties
were dismissed with prejudice, the parties mutually released one another and
all pre-settlement agreements were terminated, including the Technology License
Agreement between the Company and Nostrum and the ANDA Ownership Transfer and
Product License Agreement (ANDA Agreement)
between Synovics Labs and Nostrum. In connection with the termination of the
ANDA Agreement, Synovics and Synovics Labs assigned to Nostrum the Abbreviated
New Drug Application for Metformin Extended Release 500mg. As part of the
settlement, 10,661,000 shares of common stock of the Company that were owned by
Nostrum were placed in escrow pursuant to a separate escrow agreement (the Escrow Shares). The escrow agreement
provided, among other things, that if the guarantees of Mulye and Nostrum to
the Bank of India and the related undertakings in connection with the BOI
Credit Facility were extinguished in full or in part by May 1, 2008, the Escrow
Shares were to be released to Synovics in an amount proportionate to the amount
by which the

8

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guarantees
have been extinguished. Further, if the Escrow Shares were released to Nostrum
and during the escrow period the Company issued additional shares of common
stock or common stock equivalents to cause the Escrow Shares to represent less
than 32% of the outstanding shares of the Company on a fully diluted basis,
then the Company was required to issue to Nostrum additional shares of common
stock so that the Escrow Shares together with the additional shares constitute
32% of the outstanding shares of the Company on a fully diluted basis.

On April 29,
2008, the guarantees given by Nostrum and Mulye were replaced with a letter of
credit issued by an affiliate of Maneesh Pharmaceuticals Ltd. (Maneesh)
in favor of BOI securing the BOI
Loan. Maneesh is an affiliate of the Company and two of its designees presently
serve on the Companys board of directors. Consequently, the Company delivered
a notice to the escrow agent, pursuant to the terms of the escrow agreement
demanding release to the Company of the Escrow Shares. Nostrum is currently
contesting the release of the Escrow Shares and the Company commenced an action
in the Federal District Court of the Southern District of New York (the Court). (See
Note 8)

The Escrow
Shares are being treated as treasury stock. The cost of the shares included in
treasury stock at July 31, 2009 was $10,767,610. In the event that the Court
orders the release of any Escrow Shares to Nostrum from escrow, the Company may
recognize an additional charge at that time.

As an
inducement for replacing the guarantees, the Company issued 4,000,000 shares of
its common stock to Maneesh and provided anti-dilution protection in the event
that all or part of the Escrow Shares are ultimately released to Nostrum. These
shares were valued at $1,040,000 and were expensed during fiscal year ended
2008.

NOTE 4 - NOTE PAYABLE
- BANK

In May 2006, the Company entered into a bank financing with the Bank of
India (BOI) as senior secured
debt in the principal amount $10,500,000 (the BOI
Credit Facility). Of the principal, $5,250,000 could only be
utilized for working capital purposes, the amount borrowed to equal 70% of the
value of fully paid inventory and the accounts receivable and 100% of the cash
in the accounts maintained by the borrower at the bank. The interest rate is 1%
above the banks prime rate (7.5% at July 31, 2009). Interest is payable
monthly. In September, 2007, the amount of the loan was reduced by $5,250,000
held back for working capital purposes. As of July 31, 2009, the outstanding
principal balance due under the BOI Credit Facility was $4,100,000.

Future maturities of notes payable - bank are as follows:

|                    |  |   |           | 
|------------------- |  | - | --------- | 
|Year ended July 31, |  |   |           | 
|                    |  |   |           | 
|2010                |  | $ | 2,500,000 | 
|                    |  |   |           | 
|2011                |  | $ | 1,600,000 | 
|                    |  |   |           | 
|                    |  | $ | 4,100,000 | 
|                    |  |   |           | 

Interest expense under the note payable was $98,521 and $131,013 for
the three months ended July 31, 2009 and 2008, respectively and $314,433 and
$434,669 for the nine months ended July 31, 2009 and 2008, respectively.

NOTE 5 - NOTES
PAYABLE - SHAREHOLDERS AND OTHER RELATED PARTIES

Copanos Note

The Company entered into a promissory note (the Copanos
      Note) in the principal
amount of
$3,000,000 with the seller, John Copanos, as partial consideration for the
acquisition of Kirk Pharmaceuticals LLC (Kirk) and ANDAPharm
LLC (ANDAPharm). The terms of the Copanos Note have been
subsequently renegotiated.

During the year ended October 31, 2007, $1,000,000 of principal
    was paid to the seller and during the year ended October 31, 2008, a further
    $1,500,00 of principal was paid to the seller.

9

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During the nine months ended July 31, 2009, the Company paid
    a further $184,000 of principal. The Copanos Note bore
interest of 12% per annum from October 3, 2007 to January 14, 2008 and 15% per
annum from January 15, 2008 to May 1, 2008. From May 2, 2008 to August 31,
2008, the note bore an interest rate of 18% per annum and from September 1,
2008 onwards it bears an interest rate of 24% per annum with interest payments
payable monthly.

As of July 31, 2009, the principal outstanding due on the Copanos
    Note was $316,000, there was unpaid interest of $81,850, which has been included
    in these financial statements. Interest expense under the Copanos Note was
    $23,000 and $66,250 for the three months ended July 31, 2009 and 2008, respectively
    and $77,650 and $186,875 for the nine months ended July 31, 2009 and 2008,
respectively. In connection with renegotiation of the repayment terms of the
Copanos Note, the Company consented, in the case of default, to the seller
obtaining a final judgment without necessity of a further hearing. In addition,
    as of July 30, 2009 John Copanos resigned as Vice President of Special Projects
    and his salary is being applied to the payment of amounts due under the Copanos
    Note until the payment of all amounts due thereunder. Furthermore, the Company
    assigned half of the receivable due from Body Dynamics, Inc.(approximately
    $362,341) solely to pay down any outstanding amounts due under the Copanos
    Note. The Company has previously commenced legal action against Body Dynamics
for the payment of the receivable due. (See Note 8)

In addition, in connection with the renegotiation of the repayment
terms of the Copanos Note, on March 19, 2008, the Company issued to the seller
a seven year warrant to acquire 2,100,000 shares of the Companys common stock
exercisable at $1.00 per share (the Seller
Warrant). As a
result of the Companys Series C Preferred Stock offering that initially closed
on May 9, 2008, the exercise price of the Seller Warrant automatically reduced
to $0.75. The Company also agreed to include the shares issuable upon exercise
of the Seller Warrant in the Companys next registration statement subject to
reasonable adjustments as may be required by the investor or investor group
whose shares are also being registered.

The per share weighted value of the warrants to purchase 2,100,000
shares of common stock at $0.75 per share is $0.35. The warrants were valued
using the Black-Scholes option pricing model with the following weighted
average assumptions: no dividend yield; expected volatility of 80%; risk free
interest rate of 2.25%; and expected life of seven years. The Company has fully
    recognized a charge of $761,361 for the issuance and repricing of these warrants.

Maneesh Notes

During the quarter ended July 31, 2009, the
  Company issued to Maneesh two senior promissory notes (collectively the Maneesh
  Notes) in the
  principal
  amounts of $700,000 and $550,000 respectively, in consideration of proceeds
  equal to the face value of the notes. The proceeds of the Maneesh Notes were
  used primarily to pay principal and interest due on the BOI Credit Facility.
  The Maneesh Notes both bear interest at the rate of 15% per annum and are payable
  upon the earlier of December 31, 2009 or the Companys
  receipt of an investment of at least $1,000,000.00. Maneesh is an affiliate
  of the Company and two of its designees presently serve on the Companys
  board of directors.

NOTE 6 - 2007 PRIVATE
PLACEMENT

During January
and February 2007, the Company completed closings of a private placement (2007 Private
Placement), whereby the Company sold an aggregate of 1,575,000
units (Units)
to accredited investors. Of the 1,575,000 Units sold, 450,000 Units were
exchanged in lieu of repayment of notes issued in the 2006 Bridge Note
Financing in the principal amount of $450,000.

The price per
Unit was $1.00 and each Unit consisted of (i) one share of common stock of the
Company; and (ii) a warrant to purchase, at any time prior to the third
anniversary following the final closing of the Private Placement, one share of
common stock at an exercise price of $3.00 per share, subject to adjustment in
certain instances; except that with respect to 290,000 Units, the warrant is
exercisable for half a share of common stock at an exercise price of $1.50. The
warrants are also redeemable by the Company where the exercise price exceeds a
certain amount.

The per share
weighted value of the warrants to purchase 1,575,000 shares of common stock at
$3.00 per share was between $0.98 and $1.32. The warrants were valued using the
Black-Scholes option pricing model with the following weighted average
assumptions: no dividend yield; expected volatility between 153% and 155%; risk
free interest rate of between 4.63% and 4.9%; and expected life of three years.

10

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The
subscription agreement requires the Company to file a registration statement
covering the securities sold in the 2007 Private Placement within 30 days of
final closing of the 2007 Private Placement and to use its best efforts to cause
the registration statement to become effective within 90 days of final closing.
If the registration statement has not been declared effective within 150 days
following final closing, the Company has agreed to pay to the investors
liquidated damages, payable in cash or common stock, of 1.5% of the purchase
    price paid by the investor in the 2007 Private Placement and 1% of the purchase
    price paid by the investor in the 2007 Private Placement for each subsequent
    30 day period, with the total of the foregoing capped at 9%. The Company
    has recognized $164,475 of penalties as of July 31, 2009, which is reflected
    as interest expense.

NOTE 7 - RELATED
PARTY TRANSACTIONS

Singh Strategic
Alliance

On April 20,
2007, the Company entered into a strategic alliance with Harcharan Singh. In
connection with this strategic alliance, the Company and Kirk entered into a
Consulting Agreement with Mr. Singh (the Consulting
Agreement), and Kirk issued to an affiliate of Mr. Singh, a note in
the principal amount of $1,250,000 (the Singh
Note). Mr. Singh was appointed to the Corporations board on May
23, 2008.

During the
term of the Consulting Agreement, Mr. Singh is being retained to provide
strategic consulting services to the Company. In consideration for these
services, Mr. Singh receives a $10,000 monthly retainer and was issued
2,000,000 shares of the Companys common stock and warrants to purchase a
further 1,000,000 shares of the Companys common stock. In addition, if the
Company achieves annual earnings before interest, taxes, depreciation and
amortization (EBITA) of at least $20,000,000, then Mr. Singh will be entitled
to a further grant of 1,000,000 shares of Companys common stock and warrants
to purchase 500,000 shares of the Companys common stock. The warrants were
exercisable for a period of seven years from the date of grant at an initial
exercise price of $2.00, subject to adjustment in certain circumstances, and
contain a cashless or net issuance component. In connection with the Series C
Preferred Stock Offering, the Company reduced the exercise price of the warrants
to acquire 1,000,000 shares of the Companys common stock to $0.75 and
eliminated the cashless or net issuance component. The per share weighted value
of the warrants to purchase 1,000,000 shares of common stock at $0.75 is $0.36.
The warrants were valued using the Black-Scholes option pricing model with the
following weighted average assumptions: no dividend yield; expected volatility
of 84%; risk free interest rate of 2% and expected life of seven years. The
Company recorded a charge of $1,192,153 for the fiscal year ended October 31,
2007 to recognize the agreement.

On April 3,
2008, accrued consulting fees of $120,000 converted into a 2008 Bridge Note.
Consulting fees amounting to $60,000 for the year ended October 31, 2008 are
included in the accompanying financial statements.

On November
11, 2008, the Companys board of directors authorized the grant of 125,000
shares of common stock to Harry Singh in consideration for his deferral in
payment of certain fees due to him under the Consulting Agreement.

Maneesh Joint Venture

On June 6, 2008, the Company entered into a Joint Venture Agreement
with Maneesh. Under the terms of the joint venture agreement, Maneesh has
agreed to provide consulting services to the Company and its subsidiaries for
an initial term of one year, which term shall automatically renew for
additional one year terms absent notice of non-renewal. Pursuant to the joint
venture agreement, the Company has agreed to pay Maneesh a consulting fee of
$25,000 per month, plus reimbursement of reasonable and accountable expenses.
The joint venture agreement further provides that Maneesh and Kirk may in the
future agree to the license by Maneesh to Kirk of the non-exclusive right to
manufacture and distribute pharmaceutical products proprietary to Maneesh.

On November
11, 2008, the Companys board of directors authorized the grant of 500,000
shares of its common stock to Maneesh in consideration for its deferral in
payment of certain fees due to it under the Joint Venture Agreement.

11

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Lane Compensation

On July 3,
2008, Dr. Lane resigned as the Companys Chief Executive Officer and currently
serves as the Companys Chairman of the Board. On November 11, 2008, the
Company agreed to compensate Dr. Lanes services as Chairman of the Board
pursuant to which he is to receive a salary of $120,000 per annum. In addition,
the Company agreed to pay Dr. Lane severance of $400,000 of which $344,616 is
outstanding at July 31, 2009 as well as pay down Dr. Lanes deferred
compensation which was $161,024 at July 31, 2009 and reimburse Dr. Lane for
expenses incurred by him which were $54,846 at July 31, 2009.

Getraer Separation Agreement

On January 27, 2009, the Company entered into a separation agreement
with Mr. Getraer pursuant to which the Company agreed to pay Mr. Getraer
severance of $175,000 less applicable withholding and deductions payable over
ten months, unpaid salary of $8,154 less applicable withholdings
and deductions as well as expense reimbursement of $1,658. In addition, the
Company issued to Mr. Getraer warrants to acquire 200,000 fully vested shares
of the Companys common stock at an exercise price of $0.75 per share
exercisable at any time prior to July 31, 2012, it being acknowledged that Mr.
Getraer holds no additional options, warrants or other rights to purchase the
Companys common stock. The per share weighted value of the warrants was $0.31
or $62,000 which was charged to general and administrative expense. The
warrants were valued using the Black-Scholes option pricing model with the
following weighted average assumptions: no dividend yield; expected volatility
of 84% risk free interest rate of 2%; and expected life of 5 years.

Gerald Price
Engagement

On July 1,
2009, the Company entered into an Independent Contractor Interim CEO Agreement
with Gerald Price to act as the Companys interim Chief Executive Officer
(the
Price Agreement) on a month-to-month basis. Pursuant to the
terms of the Price Agreement, Price is entitled to $10,000 per month plus expense
reimbursement. Simultaneous with the execution of the Price Agreement, on July
1, 2009 Jyotindra Gange resigned as Interim Principal Executive Officer and director
of the Company and Mahendra Desai resigned as Chief Financial Officer.

Contract
Manufacturing Agreement

The Companys
subsidiaries Kirk and ANDAPharm entered into a Contract Manufacturing Agreement
dated July 1, 2009 (the Contract Manufacturing Agreement)
with an affiliate of Maneesh, Svizera USA LLC (Svizera USA).
Pursuant to the terms of the Contract Manufacturing Agreement, Kirk and ANDAPharm
agreed to manufacture finished dose forms of product for Svizera USA from time
to time. In accordance with the terms of the agreement, Svizera USA made a prepayment
of $350,000 to be offset against future product orders. The term of the agreement
is one year, renewable for further twelve month periods. Subsequently, in August
2009, Svizera USA made a further prepayment of $194,674.

NOTE 8 - LITIGATION

DEA Administrative Proceeding

On September
15, 2008, the DEA commenced an administrative proceeding with the U.S.
Department of Justice against Kirk to revoke its DEA license to manufacture and
distribute controlled substances in schedules III-V and deny any amendment to
Kirks application to add specific List I chemical manufacturing codes to its
controlled substance registration. The DEA alleges in the administrative
proceedings that Kirk shipped ephedrine guaifenesin products to a contract
packager for repackaging and relabeling that did not have the requisite DEA
license. In addition, the DEA alleges that Kirk failed to maintain an effective
system of controls to guard against and prevent a theft of approximately 1.3
million ephedrine guaifenesin tablets, which occurred at Kirk in July 2008. The
DEA also alleges that Kirk failed to maintain appropriate recordkeeping
practices. Subsequently, in March 2009, the DEA seized finished ephedrine
guaifenesin product supplied by Kirk to Kirks major customer and as a result
Kirk has ceased manufacturing ephedrine guaifenesin products for such customer.
As discussed elsewhere in this Quarterly Report on Form 10-Q, this is having a
material adverse effect on the Companys business, prospects, financial
condition and results of operation.

12

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In addition,
in December 2007 and June 2008, Kirk applied to the DEA for a 2008 ephedrine
and pseudoephedrine manufacturing procurement quota and a 2009 ephedrine and
pseudoephedrine manufacturing procurement quota. In April 2008 and April 2009,
the DEA rejected Kirks application for its 2008 quota and 2009 quota
respectively, and Kirk is challenging its rejection which has been consolidated
with the administrative proceeding commenced by the DEA as described in the
preceding paragraph.

During
February, March and June 2009, hearings on the merits of the case were held
before an administrative judge and the parties have been requested to submit
their proposed findings of fact and conclusions of law by October 1, 2009.
Based on the allegations made by the DEA, and the Companys understanding of
relevant facts and circumstances, the Company believes that the action
commenced by the DEA is without merit and the Company intends to vigorously
defend against this.

In a separate
but related action, the United States of America commenced an action in the
United States District Court District of New Jersey on July 3, 2008 to forfeit
and condemn ephedrine guaifenesin products shipped to Kirks contract packager
referenced above at an appraised value of approximately $680,000 and which were
seized by the DEA. On September 2, 2008, the Company filed its answer and
counterclaimed seeking an award of damages for wrongful seizure of the seized
property as well as a declaratory judgment that the United States acted
unlawfully, arbitrarily and capriciously in implementing the quota system. This
case is currently in the discovery phase.

There can be
no assurance that the Company will prevail in these actions or that they will
be resolved upon terms favorable to the Company. If the Companys registration
were revoked, denied or suspended, or if its quota application is rejected, the
Company could no longer lawfully possess or distribute controlled substances or
manufacture and distribute products containing the disallowed controlled
substance which could have a further material adverse effect on the Companys
business, prospects, financial condition and results of operation.

Nostrum

On June 27,
2008, the Company commenced a lawsuit in the United States District Court for
the Southern District of New York against Mulye and Nostrum (Case No.
08-Civ-5861) seeking declaratory judgment for the immediate release to the
Company of the Escrow Shares as well as damages for breach of contract and
implied covenant of good faith and dealing. On August 13, 2008, Nostrum and
Mulye filed an answer and counterclaim to the Companys complaint and on
August 26, 2008 they amended their answer and counterclaim. The counterclaim
sought declaratory judgment for the immediate release to Nostrum of the Escrow
Shares and the issuance to Nostrum of additional shares of common stock such
that, under Nostrums theory, together with the Escrow Shares will represent
32% of the Companys outstanding shares on a fully diluted basis. Both parties
filed motions for summary judgment seeking a ruling from the Court regarding
the return of the Escrow Shares and on September 15, 2009, the Court found in
favor of the Company and ordered Nostrum and Mulye to instruct the escrow agent
to transfer the Escrow Shares to the Company. The Court also dismissed the Nostrum
and Mulye counterclaim and directed the parties to contact the Court to set
a trial date on the sole remaining issue, whether the Company is entitled to
damages for Nostrum’s and Mulye’s breach of contract. The Company
intends to vigorously prosecute this case and believes its claims against Nostrum
and Mulye are meritorious.

Stockbridge

On June 9,
2008, an action was commenced by Stockbridge Capital Investors, Inc. (Stockbridge)
against the Company in the Superior Court of the State of Arizona in the County
of Maricopa. The complaint alleges that the Company breached a letter agreement
with Stockbridge by not paying Stockbridge a success fee to which it claims
entitlement. The complaint seeks damages to be proven at trial together with
attorneys fees and costs. On September 2, 2008 the Company filed its answer.
This case is currently in the discovery phase. Based on the allegations in the
amended complaint, and the Companys understanding of relevant facts and
circumstances, it believes that the claims made by the plaintiff in this
lawsuit are without merit and it intends to vigorously defend against them.

Body Dynamics

On
December 19, 2008, Kirk commenced an action against Body Dynamics, Inc. (Body
Dynamics) in the Circuit Court of the 17th Judicial District in Broward
County, Florida. Body Dynamics is a customer to whom Kirk delivered goods and
for which Kirk has not been paid. The Company is seeking judgment in the amount
of $362,341 plus court costs and pre-

13

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judgment interest. On February 6, 2009, the
case was moved by Body Dynamics to the United States District Court Southern
District of Florida and on the same day Body Dynamics filed its answer to the
complaint. Mediation hearings were scheduled for April 2009 but have since been
cancelled and the case is now in the discovery phase.

|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS
 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The
following discussion and analysis should be read in conjunction with the
Condensed Consolidated Financial Statements, the related Notes to Consolidated
Financial Statements and Managements Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual Report on Form 10-K
for the fiscal year ended October 31, 2008 (the 10-K) and the Unaudited Condensed Consolidated Financial
Statements and related Notes to Condensed Consolidated Financial Statements
included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

We
have included in this Quarterly Report certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
concerning our business, operations and financial condition. Forward-looking
statements consist of all non-historical information, and the analysis of
historical information, including the references in this Quarterly Report to
future revenue growth, future expense growth, future credit exposure, earnings
before interest, taxes, depreciation and amortization, future profitability,
anticipated cash resources, anticipated capital expenditures, capital
requirements, and the Companys plans for future periods. In addition, the
words could, expects, anticipates, objective, plan, may affect,
may depend, believes, estimates, projects and similar words and phrases
are also intended to identify such forward-looking statements.

Actual
results could differ materially from those projected in our forward-looking
statements due to numerous known and unknown risks and uncertainties,
including, among other things, unanticipated technological difficulties, the
volatile and competitive environment for drug products, changes in domestic and
foreign economic, market and regulatory conditions, the results of development
agreements with pharmaceutical companies, the inherent uncertainty of financial
estimates and projections, the uncertainties involved in certain legal
proceedings, including our DEA related proceedings, instabilities arising from
    terrorist actions and responses thereto, and other considerations described
    as Risk
    Factors in
    other filings by us with the SEC including our Annual Report on Form 10-K.
    Such factors may also cause substantial volatility in the market price of
    our common stock. All such forward-looking statements are current only as
    of the date on which such statements were made. We do not undertake any obligation
    to publicly update any forward-looking statement to reflect events or circumstances
    after the date on which any such statement is made or to reflect the occurrence
    of unanticipated events.

Our Business

We
are a specialty pharmaceutical company implementing what is referred to as a
global Front-End growth strategy - the core of our business model. This
strategy incorporates targeting a series of partnering relationships with
international pharmaceutical companies to supply us with low-cost competitive
pharmaceutical products, both active pharmaceutical ingredients (APIs) and finished dosage forms. As a
result of the acquisition of Kirk Pharmaceuticals LLC (Kirk) and ANDAPharm LLC (ANDAPharm) in May 2006, we have
facilities in Fort Lauderdale operating under cGMP (current good manufacturing
practices) guidelines for the manufacturing and distribution of
over-the-counter (OTC) private
label drugs and prescription drugs (Rx).

We
have initiated our Front-End strategy, which sources low cost, high-quality
products developed and manufactured internationally, and packages and
distributes to our customers through our Florida operation. Our access to
low-cost raw materials and manufacturing is the cornerstone of the Front-End
strategy and key to our dual objectives of growing our OTC business and
introducing a pipeline of Rx generic drugs. A critical key to this strategy and
its implementation is our alliance with Maneesh Pharmaceuticals Ltd. (Maneesh) and Harcharan (Harry) Singh of
Glopec International. Maneesh is an international pharmaceutical company with
its headquarters located in Mumbai, India. Harry Singh is a pharmaceutical
industry veteran with a 20 year proven track record of sourcing competitive
pharmaceuticals products for North America from Asia and Europe

14

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| |                                       |                                                                                                           
| | ------------------------------------- | ----------------------------------------------------------------------------------------------------------
| | Our key
 assets can be summarized as:
| |                                      
| |                                      | Private
 label OTC drug manufacturer - Kirk Pharmaceuticals Fort Lauderdale, Florida;                     
| |                                       |                                                                                                           
| |                                      | Rx
 prescription drug manufacturer  AndaPharm, Fort Lauderdale, Florida;                                 
| |                                       |                                                                                                           
| |                                      | DEA license
 for controlled substances, Schedule III, IIIN, IV, V and List I
 Chemicals;                  
| |                                       |                                                                                                           
| |                                      | Containment
 suites for manufacture of highly regulated/toxic substances (e.g. hormones
 and anti-cancer);
| |                                       |                                                                                                           
| |                                      | Access to
 difficult to source price competitive APIs;                                                    
| |                                       |                                                                                                           
| |                                      | Manufacture
 in both U.S. and India - package and distribute in U.S;                                      

From
2005 to mid-2007, our focus for revenue growth was the development of oral
controlled-release generic drug formulations utilizing proprietary drug
formulations and delivery technologies under license from Nostrum. During 2007,
we amended our focus and business model as a result of the impact of two
factors: first, our disassociation from Nostrum following the July 2007
settlement of the Nostrum legal actions; second, our new strategic alliances
with Maneesh and Harry Singh established in May 2008 and April, 2007,
respectively. These alliances are principally designed to assist us in sourcing
low-cost APIs and generic drug applications (abbreviated new drug applications
- ANDAs), submitted by international pharmaceutical companies to the FDA and
    approved for sale in the United States drug market and is the foundation
of our current business model.

We
are firstly a manufacturer, packager and distributor of private label, or store
brand, OTC products to chain drug stores, wholesalers and distributors
throughout the United States. The U.S. market for manufacturing and
distribution of OTC drugs, is approaching $4 billion in size and is dominated
by Perrigo Company, with sales approximating 50% of the total store brand or
private label market. The private label market is growing substantially with
the drug stores continuing to develop and expand their store brands to
compete with the traditional national brands.

Our
OTC product categories include analgesics, cough and cold, antihistamines,
asthma relief and laxatives. Executing our Front-End strategy, Kirk has
initiated the shifting of manufacturing of its high-volume commodity OTC drugs
internationally to affect cost savings and maintain competitiveness. These
products are manufactured internationally and shipped in bulk to Fort
Lauderdale for packaging and distribution to our customers. We do manufacture
certain OTC products in our Fort Lauderdale facilities for reasons of size of
    a given production, cost or convenience. Some of our OTC products are subject
    to control by the DEA and we are presently the subject of DEA related proceedings
    as further described elsewhere in this Quarterly Report on Form 10-Q.

In
addition to the OTC business, we are a manufacturer, packager and distributor
of private label solid dosage Rx products. These products are sold through
several distribution channels under exclusive or semi-exclusive agreements.
These agreements include minimum sales requirements.

Our
Front-End strategy is the source of a developing pipeline of targeted
in-licensed generic Rx drug (FDA approved or to be filed) candidates. The
Front-End strategy is founded on the fact that a variety of first-quality small
to medium international pharmaceutical companies, well financed with state of
the art manufacturing facilities, have developed and in many cases filed ANDAs
with the FDA for the U.S. market, but have no marketing or distribution
presence in the US market, i.e. no front-end. We have entered into a joint
venture agreement with Maneesh that provided development and manufacturing of
both OTC and Rx drugs, resources of personnel, operating and IT systems as
well as consulting on facilities build-out and equipment procurement. More
recently, we have entered into a contract manufacturing agreement with an
affiliate of Maneesh for the manufacture and sale of finish dose forms of
product. Maneesh has a variety of drug development and manufacturing facilities
in various locations throughout the world, although we are coordinating
principally with the operations in India. Harry Singh has a long standing
business relationships with numerous other pharmaceutical companies in India
(and their owners) and is directing many of our steps in arranging agreements
for ANDA in-licensing, low-cost APIs and specialty contract manufacturing. We
source finished product internationally, then package and distribute through
Florida; the customer belongs to Synovics.

15

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As
a result of historical events as well as the costs incurred in the acquisition
of Kirk in 2006 and the disputes with Dr. Mulye and Nostrum, we have not been
able to adequately generate enough cash to support our ongoing operations and
to service our debt. As a result, we have suffered from chronic working capital
deficiency and there has been a continuing need for financing activities which
have also been adversely affected by the disputes with Dr. Mulye and Nostrum.

During
the fiscal year ended October 31, 2008, we completed a series of closings of
    a Series C Preferred Stock Offering that resulted in the issuance of 28,955
shares of Series C Preferred Stock, convertible into 28,955,000 shares of our
common stock, subject to adjustment, and warrants to acquire 18,780,200 shares
of our common stock. The incremental gross proceeds to us from the Series C
Preferred Stock Offering were $7,780,000 and together with a bridge note
offering that immediately preceded the Series C Preferred Stock Offering, the
incremental gross proceeds to us were $9,335,000. We principally used this
infusion of cash to reduce our debt.

As
a result of the DEA related proceedings discussed elsewhere in this Quarterly
    Report on Form 10-Q, we have ceased almost all of our manufacture and sale
    of ephedrine and guaifenesin products which have historically comprised over
    50% of our sales over the past three years. This has resulted in a significant
    reduction in revenue which in turn has caused us to scale back our operations,
    cut our workforce by over 50% since the beginning of 2009, become delinquent
in the payment of our payroll tax obligations of approximately $477,000 and
    attempt to reach arrangements with our creditors in an effort to continue
    as a going concern. We are attempting to reverse the downward trend in the
    reduction of revenue by refocusing our sales efforts on higher volume, higher
    margin customers, launching new generic RX products, executing upon our so-called front-end
strategy, expanding sales to our existing customer base and bringing the DEA
proceedings to a conclusion. The impact of the loss of revenue from the
ephedrine and guifaenisin products has had a material adverse impact on our
business, prospects, financial condition and results of operation and no
assurance can be given that even if we have increased sales from higher volume,
higher margin customers, launch new products, execute upon our front-end
strategy, expand sales to our existing customer base and satisfactorily conclude
the DEA proceedings that we will be able to continue as a going concern.

Since
our inception through the current fiscal year, we have received an opinion
noting the substantial doubt about our ability to continue as a going concern
from our independent auditors due to the significant recurring operating
losses.

Results of Operations

The
following tables set forth, for the periods indicated, financial information
related to operations, as well as expressed as a percentage of our net revenue:

|                                    |  |                             |            |                            |  |      |   |      |           |   |  |     |   |   |            |   |  |     |   |   |            |   |  |     |  
|----------------------------------- |  | --------------------------- | ---------- | -------------------------- |  | ---- | - | ---- | --------- | - |  | --- | - | - | ---------- | - |  | --- | - | - | ---------- | - |  | --- | -
|                                    |  | THREE MONTHS ENDED JULY 31, |            | NINE MONTHS ENDED JULY 31, | 
|                                    |  |                             |            |                            | 
|                                    |  | 2009                        |            | 2008                       |  | 2009 |   | 2008 |          
|                                    |  |                             |            |                            |  |      |   |      |           |   |  |     |   |   |            |   | 
|Net Revenues                        |  | $                           | 1,578,332  |                            |  |      |   | $    | 7,715,370 |   |  |     |   | $ | 11,224,041 |   |  |     |   | $ | 18,092,122 |   |  |     |  
|Cost of Revenues                    |  |                             | 2,158,091  |                            |  | 137  | % |      | 4,708,609 |   |  | 61  | % |   | 9,434,671  |   |  | 84  | % |   | 11,796,506 |   |  | 65  | %
|                                    |  |                             |            |                            |  |      |   |      |           |   |  |     |   |   |            |   |  |     |   |   |            |   |  |     |  
|Gross Profit                        |  |                             | (579,759   | )                          |  | -37  | % |      | 3,006,761 |   |  | 39  | % |   | 1,789,370  |   |  | 16  | % |   | 6,296,616  |   |  | 35  | %
|Operating Expenses                  |  |                             |            |                            |  |      |   |      |           |   |  |     |   |   |            |   |  |     |   |   |            |   |  |     |  
|Research and development            |  |                             | 213,992    |                            |  | 14   | % |      | 207,247   |   |  | 3   | % |   | 849,519    |   |  | 8   | % |   | 859,291    |   |  | 5   | %
|Selling, general and administrative |  |                             | 1,065,279  |                            |  | 67   | % |      | 3,570,238 |   |  | 46  | % |   | 5,523,118  |   |  | 49  | % |   | 8,185,309  |   |  | 45  | %
|Total Operating Expenses            |  |                             | 1,279,271  |                            |  | 81   | % |      | 3,777,485 |   |  | 49  | % |   | 6,372,637  |   |  | 57  | % |   | 9,044,600  |   |  | 50  | %
|                                    |  |                             |            |                            |  |      |   |      |           |   |  |     |   |   |            |   |  |     |   |   |            |   |  |     |  
|Loss from Operations                |  |                             | (1,859,030 | )                          |  | -118 | % |      | (770,724  | ) |  | -10 | % |   | (4,583,267 | ) |  | -41 | % |   | (2,748,984 | ) |  | -15 | %
|Other Expenses                      |  |                             | (161,857   | )                          |  | -10  | % |      | 1,260,394 |   |  | 16  | % |   | (1,131,292 | ) |  | -10 | % |   | (1,927,175 | ) |  | -11 | %
|Provision (Benefit) for Income Tax  |  |                             |           |                            |  | 0    | % |      |          |   |  | 0   | % |   |           |   |  | 0   | % |   |           |   |  | 0   | %
|                                    |  |                             |            |                            |  |      |   |      |           |   |  |     |   |   |            |   |  |     |   |   |            |   |  |     |  
|Net Loss                            |  | $                           | (2,020,887 | )                          |  | -94  | % | $    | 489,670   |   |  | 10  | % | $ | (5,714,559 | ) |  | -61 | % | $ | (4,676,159 | ) |  | -40 | %
|                                    |  |                             |            |                            |  |      |   |      |           |   |  |     |   |   |            |   |  |     |   |   |            |   |  |     |  

16

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| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Results of Operations for Three Months Ended July 31, 2009 compared
 to Three Months Ended July 31, 2008

Consolidated
revenues for the three months ended July 31, 2009 were $1,578,332 compared to
$7,715,370 for the same period in 2008, a decrease of approximately 80% over
the prior fiscal quarter. This decrease results from the  cessation of
sales of almost all of our products containing ephedrine and guaifenesin as well
    as decreases in sales of the Rx product line and our scaling back of our
    manufacturing operations due to lack of working capital. As discussed elsewhere
    in this Quarterly Report on Form 10-Q, we are the subject of administrative
    and related proceedings involving the DEA against us to, among other things,
    revoke our DEA license to manufacture and distribute controlled substances.
    As a result of these proceedings and in particular recent developments, since
    the end of March 2009, we have ceased sales of any products containing ephedrine
    and guaifenesin for a major customer of ours and are now only generating
    negligible revenues from the sales of a product containing ephedrine and
    guaifenesin. Over the past three years, sales of products containing
    ephedrine and guaifenesin have accounted for approximately half of our sales.
    This has had a material adverse effect on our business, prospects, financial
    condition and results of operation.

During
the three months ended July 31, 2009, sales of products containing ephedrine
and guaifenesin accounted for approximately 1% of sales as compared to
approximately 49% for the same period in 2008. We continue to be limited by
both contractual restrictions and our inability to procure ephedrine and
guaifenesin and accordingly do not expect to recommence selling ephedrine and
guaifenesin products unless a favorable outcome is reached in our DEA proceedings
for which there can be no assurances and which are expected to continue into
the next fiscal year. As a result, we expect a continued decrease in sales as
we address this decline in sales and product mix with new non-controlled
substance products. To address the reduction in sales we have refocused our
sales efforts on higher volume, higher margin customers and are seeking to
expand sales of our current products to our existing customer base. In
addition, we are expanding our product line and are in late development stages
of several products and expect to launch one of these products in
the fourth fiscal quarter and the other two in the first quarter of our next
fiscal year, subject to the receipt of any applicable regulatory approvals.
There can be no assurances that we will be able to launch such products or that
they will be launched in a timely manner.

Our
three largest customers represented approximately 46% of the sales for the
three months ended July 31, 2009. Although we believe Kirk has good working
relationships with each of these customers, Kirk is working to further
relationships with these and other entities in order to continue to broaden its
sales base.

Cost
of revenues for the three months ended July 31, 2009 was $2,158,091 compared
    to $4,708,609 for the three months ended July 31, 2008. This decrease is
    directly attributable to our decrease in sales revenue. Our gross profit
    percentage decreased to -37% from 39% as a result of negligible sales of
    our products containing ephedrine and guaifenesin and decreases in sales
    of our high gross margin Rx product line.

Research
and development expenses for the three months ended July 31, 2009 were $213,992
compared to $207,247 for the three months ended July 31, 2008. The research and
development expenses are in line with our historical norms. Research and
development expense consists of direct costs which include salaries and related
costs of research and development personnel, and the costs of consultants,
materials and supplies associated with research and development projects, as
well as clinical studies. Indirect research and development costs include
facilities, depreciation, and other indirect overhead costs.

Selling,
general, and administrative expenses for the three months ended July 31, 2009
were $1,065,279 as compared to $3,570,238 for the three months ended July 31,
2008. The decrease in selling, general and administrative expenses was a result
of a reduction in personnel costs due to layoffs of a significant portion of
our workforce and reduction in legal expenses.

Interest
expense for the three months ended July 31, 2009 was $163,308 as compared to
$1,404,434 for the three months ended July 31, 2008. The reason for this reduction
is a result of the significant reduction in outstanding debt during the
previous fiscal year and amortization of financing fees relating to prior
financing rounds.

As
a result of the foregoing, the net loss for the three months ended July 31,
2009 was $2,020,887 or ($0.07) per share, as compared to a net gain of $489,670
or $0.02 per share for the three months ended July 31, 2008.

17

---



Results
      of Operations for Nine Months Ended July 31, 2009 compared to Nine Months
      Ended July 31, 2008

Consolidated
revenues for the nine months ended July 31, 2009 were $11,224,041 compared to
$18,092,122 for the same period in 2008, a decrease of approximately 38% over
the prior fiscal period. This decrease results from the cessation of
sales of almost all of our products containing ephedrine and guaifenesin as well
    as decreases in sales of the Rx product line and our scaling back of our
    manufacturing operations due to lack of working capital. As discussed elsewhere
    in this Quarterly Report on Form 10-Q, we are the subject of administrative
    and related proceedings involving the DEA against us, among other things,
    revoke our DEA license to manufacture and distribute controlled substances.
    As a result of the these proceedings and in particular recent developments,
    since the end of March 2009, we have ceased sales of any products containing
    ephedrine and guaifenesin for a major customer of ours and are now only generating
    negligible revenues from the sales of a product containing ephedrine and
    guaifenesin. Over the past three years, sales of products containing
    ephedrine and guaifenesin have accounted for approximately half of our sales.
    This has had a material adverse effect on our business, prospects, financial
    condition and results of operation.

During
the nine months ended July 31, 2009, sales of products containing ephedrine and
guaifenesin accounted for approximately 27% of sales as compared to
approximately 47% for the same period. We continue to be limited by both
contractual restrictions and our inability to procure ephedrine and guaifenesin
and accordingly do not expect to recommence selling ephedrine and guaifenesin
products unless a favorable outcome is reached in our DEA proceedings for which
there can be no assurances and which are expected to continue into the next
fiscal year. As a result, we expect a continued decrease in sales as we address
this decline in sales and product mix with new non-controlled substance
products. To address the reduction in sales we have refocused our sales efforts
on higher volume, higher margin customers and are seeking to expand sales of
our current products to our existing customer base. In addition, we are
expanding our product line and are in late development stages of several
products and expect to launch one of these products in the fourth
fiscal quarter and the other two in the first quarter of our next fiscal year,
subject to the receipt of any applicable regulatory approvals. There can be no
assurances that we will be able to launch such products or that they will be
launched in a timely manner.

Our
three largest customers represented approximately 53% of the sales for the nine
months ended July 31, 2009. Although we believe Kirk has good working
relationships with each of these customers, Kirk is working to further
relationships with these and other entities in order to continue to broaden its
sales base.

Cost
of revenues for the nine months ended July 31, 2009 were $9,434,671 compared
    to $11,796,506 for the nine months ended July 31, 2008. This decrease is
    directly attributable to our decrease in sales revenue. Our gross profit
    percentage decreased to 16% from 35% as a result of negligible sales our
    products containing ephedrine and guaifenesin and decreases in sales of our
    high gross margin Rx product line.

Research
and development expenses for the nine months ended July 31, 2009 were $849,519
compared to $859,291 for the nine months ended July 31, 2008. The research and
development expenses are in line with our historical norms. Research and
development expense consists of direct costs which include salaries and related
costs of research and development personnel, and the costs of consultants,
materials and supplies associated with research and development projects, as
well as clinical studies. Indirect research and development costs include
facilities, depreciation, and other indirect overhead costs.

Selling,
general, and administrative expenses for the nine months ended July 31, 2009
was $5,523,118 as compared to $8,185,309 for the nine months ended July 31,
2008. The decrease in selling, general and administrative expenses was a result
of a reduction in personnel costs due to layoffs of a significant portion of
our workforce and reduction in legal expenses.

Interest
expense for the nine months ended July 31, 2009 was $1,132,743 as compared to
$4,592,003 for the nine months ended July 31, 2008. The reason for this
reduction is a result of the significant reduction in outstanding debt during
the previous fiscal year and amortization of financing fees relating to prior
financing rounds.

18

---



As a result
of the foregoing, the net loss for the nine months ended July 31, 2009 was
$5,714,559 or ($0.20) per share, as compared to a net loss of $4,676,159 or
($0.21) per share for the nine months ended July 31, 2008.

Liquidity and Capital
Resources

To
    date, our operations have not generated sufficient cash flow to satisfy our
    capital needs. We have financed our operations primarily through the private
    sale of common stock, warrants and debt. We had a working capital deficit
    of $12,871,305 at July 31, 2009 as compared with $6,335,161 at October 31,
    2008. Cash and cash equivalents were $129,860 at July 31, 2009, as compared
with $426,000 at July 31, 2008.

During
    the nine months ended July 31, 2009 net cash provided by operating activities
    was $741,773.

Net
cash used in investing activities during the nine month period ended July 31,
2009 was $90,672. These funds were used for capital expenditures on machinery
    and equipment necessary for use in our operations. Net cash used in financing
    activities during the nine month period ended July 31, 2009 was $587,227.
    During the period, we received proceeds from borrowings of $1,250,000 from
    our affiliate, Maneesh. These funds were used to repay approximately $1,837,000
    of outstanding debt and capital lease obligations resulting in net use of
    cash of approximately $587,000.

As
a result of the DEA proceedings discussed elsewhere in this Quarterly Report
    on Form 10-Q, we have ceased almost all of our manufacture and sale of ephedrine
and guaifenesin products which have historically comprised approximately 50%
    of our sales over the past three years. This has resulted in a significant
    reduction in revenue which in turn has caused us to scale back our operations,
    cut our workforce by over 50% since the beginning of 2009, become delinquent
in the payment of our payroll tax obligations of approximately $477,000  and
    attempt to reach arrangements with our creditors in an effort to continue
    as a going concern. We are attempting to reverse the downward trend in the
    reduction of revenue by refocusing our sales efforts on higher volume, higher
    margin customers, launching new generic RX products, executing upon our so-called front-end
strategy, expanding sales to our existing customer base and bringing the DEA
proceedings to a conclusion. The impact of the loss of revenue from the
ephedrine and guifaenisin products has had a material adverse impact on our
business, prospects, financial condition and results of operation and no
assurance can be given that even if we have increased sales from higher volume,
higher margin customers, launch new products, execute upon our front-end
strategy, expand sales to our existing customer base and satisfactorily conclude
the DEA proceedings that we will be able to continue as a going concern.

We will
require additional equity and/or debt financing for fiscal year 2009 to fund
our operations and to satisfy our debt service obligations. There can be no
assurance given that we will be successful in the sale of our equity or
obtaining additional capital from other sources or means.

Our
auditors have emphasized the uncertainty related to our ability to continue as
a going concern in their audit report for the year ended October 31, 2008.

We have not
entered into any material capital expenditure agreements or engaged in any off
balance sheet financing.

|        |                                                             
|------- | ------------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES
 ABOUT MARKET RISK.

We
do not invest in or own any market risk sensitive instruments entered into for
trading purposes or for purposes other than trading purposes. All loans to us
have been made with fixed interest rates, and, accordingly, the market risk to
us prior to the maturity of those instruments is minimal.

|         |                         
|-------- | ------------------------
|ITEM 4T. | CONTROLS AND PROCEDURES.

Evaluation
of Disclosure Controls and Procedures

Our
management, with the participation of our Interim Chief Executive Officer and
Interim Chief Financial Officer, have evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of the end of the period covered by this
report. Based on that evaluation,

19

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our Interim Chief Executive Officer and Interim Chief Financial
    Officer have concluded that, as of the end of such period, our disclosure
    controls and procedures are not effective to ensure that information required
    to be disclosed by us in the reports that we file or submit under the Exchange
    Act is (i) recorded, processed, summarized and reported, within the time
    periods specified in the SECs rules and forms; and (ii) accumulated
    and communicated to management, including our Principal Executive Officer
    and Chief Financial Officer, as appropriate to allow timely decisions regarding
    required disclosure.

Changes
in Internal Control Over Financial Reporting

Except as
set forth below, there were no changes in our internal controls over financial
reporting which occurred during the most recent fiscal quarter covered by this
report that has materially affected, or is reasonably likely to materially
affect, our internal controls over financial reporting. During the most recent
fiscal quarter, we were forced to scale back our operations including the
layoff of a significant portion of our staff including in our financing
department which impacts our internal controls over financial reporting. In
addition, on July 1, 2009, our Chief Financial Officer, Mahendra Desai resigned
and our Interim Chief Executive Officer is acting also as our Interim Chief
Financial Officer until we have sufficient working capital to hire a
replacement Chief Financial Officer.

20

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PART II - OTHER INFORMATION

|        |                   
|------- | ------------------
|ITEM 1. | LEGAL PROCEEDINGS.

DEA Administrative Proceeding

On
September 15, 2008, the DEA commenced an administrative proceeding with the
U.S. Department of Justice against Kirk to revoke its DEA license to
manufacture and distribute controlled substances in schedules III-V and deny
any amendment to Kirks application to add specific List I chemical
manufacturing codes to its controlled substance registration. The DEA alleges
in the administrative proceedings that Kirk shipped ephedrine guaifenesin
products to a contract packager for repackaging and relabeling that did not
have the requisite DEA license. In addition, the DEA alleges that Kirk failed
to maintain an effective system of controls to guard against and prevent a
theft of approximately 1.3 million ephedrine guaifenesin tablets, which
occurred at Kirk in July 2008. The DEA also alleges that Kirk failed to
maintain appropriate recordkeeping practices. Subsequently, in March 2009, the
DEA seized finished ephedrine guaifenesin product supplied by Kirk to Kirks
major customer and as a result Kirk has ceased manufacturing ephedrine
guaifenesin products for such customer. As discussed elsewhere in this
Quarterly Report on Form 10-Q, this is having a material adverse effect on our
business, prospects, financial condition and results of operation.

In
addition, in December 2007 and June 2008, Kirk applied to the DEA for a 2008
ephedrine and pseudoephedrine manufacturing procurement quota and a 2009
ephedrine and pseudoephedrine manufacturing procurement quota. In April 2008
and April 2009, the DEA rejected Kirks application for its 2008 quota and 2009
quota respectively, and Kirk is challenging its rejection which has been
consolidated with the administrative proceeding commenced by the DEA.

During
February, March and June 2009 hearings on the merits of the case were held
before an administrative judge and the parties have been requested to submit
their proposed findings of fact and conclusions of law by October 1, 2009.
Based on the allegations made by the DEA, and our understanding of relevant
facts and circumstances, we believe that the action commenced by the DEA is
without merit and it intends to vigorously defend against this.

In
a separate but related action, the United States of America commenced an action
in the United States District Court District of New Jersey on July 3, 2008 to
forfeit and condemn ephedrine guaifenesin products shipped to Kirks contract
packager referenced above at an appraised value of approximately $680,000 and
which were seized by the DEA. On September 2, 2008, Kirk filed its answer and
counterclaimed seeking an award of damages for wrongful seizure of the seized
property as well as a declaratory judgment that the United States acted
unlawfully, arbitrarily and capriciously in implementing the quota system. This
case is currently in the discovery phase.

There
can be no assurance that we will prevail in these actions or that they will be
resolved upon terms favorable to us. If our registration were revoked, denied
or suspended, or if our quota application is rejected, we could no longer
lawfully possess or distribute controlled substances or manufacture and
distribute products containing the disallowed controlled substance which could
have a further material adverse effect on our business prospects, financial
condition and results of operation.

Nostrum

As
previously reported, on June 27, 2008, we commenced a lawsuit in the United
States District Court for the Southern District of New York against Nirmal
Mulye (Mulye) and Nostrum
Pharmaceuticals, Inc. (Nostrum)
(Case No. 08-Civ-5861). On July 31, 2007, the Company, Mulye and Nostrum
entered into a global settlement of disputes which were the subject of four
prior contested legal proceedings between the parties. Previously, Nostrum was
our largest shareholder and Mulye served as our Chief Scientific Officer and
was a member of our Board of Directors.

Pursuant
to the terms of the settlement agreement and a related escrow agreement,
certain contested intellectual property, products and corporate opportunities
allegedly stolen by Mulye and Nostrum were assigned to Mulye and Nostrum, while
10,661,000 shares of our common stock (the Escrow
Shares), then owned by Nostrum, were placed in

21

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escrow to be
returned to us subject to the release and discharge of guarantees and a related
undertaking given by Mulye and Nostrum securing our credit facility with the
Bank of India (the BOI Loan) by
April 30, 2008.

On
April 28, 2008, the guarantees and undertaking given by Nostrum and Mulye were
released and discharged and replaced with a letter of credit issued by Maneesh
in favor of the Bank of India securing the BOI Loan. Maneesh is an affiliate of
the Company and three of its designees presently serve on our Board of
Directors. In response to our demand to the escrow agent to release the Escrow
Shares to us pursuant to the terms of the escrow agreement, Nostrum objected to
the release of the Escrow Shares for reasons we believe lack merit, and
consequently we commenced a lawsuit against Nostrum and Mulye seeking
declaratory judgment for the immediate release to us of the Escrow Shares as
well as damages for breach of contract and implied covenant of good faith and
dealing.

On
August 13, 2008, Nostrum and Mulye filed an answer and counterclaim to our
complaint and on August 26, 2008 they amended their answer and counterclaim.
    The counterclaim sought declaratory judgment for the immediate release
    to Nostrum of the Escrow Shares and the issuance to Nostrum of additional
    shares of common stock such that, under Nostrums theory, together with
    the Escrow Shares will represent 32% of our outstanding shares on a fully
    diluted basis. Both parties filed motions for summary judgment seeking
    a ruling from the Court regarding the return of the Escrow Shares and on
    September 15, 2009, the Court found in favor of the Company and ordered Nostrum
    and Mulye to instruct the escrow agent to transfer the Escrow Shares to the
    Company. The Court also dismissed the Nostrum and Mulye counterclaim
    and directed the parties the Court to set a trial date on the sole remaining
    issue, whether we are entitled to damages for Nostrum and Mulye’s breach
    of contract. We intend to vigorously prosecute this case and believe its
    claims against Nostrum and Mulyes are meritorious.

Stockbridge

On
June 9, 2008, an action was commenced by Stockbridge Capital Investors, Inc.
    (Stockbridge)
against us in the Superior
Court of the State of Arizona in the County of Maricopa. The complaint alleges
that we breached a letter agreement with Stockbridge by not paying Stockbridge
a success fee to which it claims entitlement. The complaint seeks
damages to be proven at trial together with attorneys fees and costs. On
September 2, 2008 we filed our answer. This case is currently in the discovery
phase. Based on the allegations in the amended complaint, and our understanding
of relevant facts and circumstances, we believe that the claims made by the plaintiff
in this lawsuit are without merit and we intend to vigorously defend against
them.

Body Dynamics

On
December 19, 2008, Kirk commenced an action against Body Dynamics, Inc. (Body Dynamics) in the
Circuit Court of
the 17th Judicial District in Broward County, Florida. Body Dynamics is a
customer to whom we delivered goods and for which we have not been paid. We are
seeking judgment in the amount of $362,341 plus court costs and prejudgment
interest. On February 6, 2009, the case was moved by Body Dynamics to the
United States District Court Southern District of Florida and on the same day
Body Dynamics filed its answer to our complaint. Mediation hearings were
scheduled for April 2009 but have since been cancelled and the case is now in
the discovery phase.

Capricorn
      Pharma



On
    September 9, 2009, an action was commenced by Capricorn Pharma, Inc. (Capricorn)
    against Kirk in the Circuit Court for Frederick County, Maryland. The complaint
    alleges that Kirk failed to pay for an order of tablets purchased from Capricorn.
    The complaint seeks judgment in the amount of $103,627 plus interest and
    costs. Kirk has not been served with the complaint and is currently in discussions
    with Capricorn to settle this matter without the action proceeding any further.

|         |              
|-------- | -------------
|ITEM 1A. | RISK FACTORS.

Except
as set forth below, we had no material changes to our risk factors as
previously disclosed in its Form 10-K for the year ended October 31, 2008 filed
with the Securities and Exchange Commission on February 5, 2009.

We
have been forced to scale back our operations due to lack of working capital
and significant losses and unless our sales revenue increases, we will not be
able to continue as a going concern.

As
a result of recent developments in connection with the administrative and
related proceedings involving the DEA against us to, among other things, revoke
our DEA license to manufacture and distribute controlled substances, we have
ceased almost all of our manufacture and sale of ephedrine and guaifenesin
products which have historically comprised over 50% of our sales over the past
three years. This has resulted in a significant reduction in revenue which in
turn has caused us to scale back our operations, cut our workforce
    by approximately 50% since the beginning of 2009, become delinquent
in the payment of our payroll tax obligations of approximately $477,000 and
    attempt to

22

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reach
arrangements with our creditors in an effort to continue as a going concern.
    We are attempting to reverse the downward trend in the reduction of revenue
    by refocusing our sales efforts on higher volume, higher margin customers,
launching new generic RX products, executing upon our so-called front-end
strategy, expanding sales to our existing customer base and bringing the DEA
proceedings to a conclusion. The impact of the loss of revenue from the ephedrine
and guifaenisin products has resulted in significant losses and had a material
adverse impact on our business, prospects, financial condition and results of
operation and no assurance can be given that even if we have increased sales
from higher volume, higher margin customers, launch new products, execute upon
our front-end strategy, expand sales to our existing customer base
and satisfactorily conclude the DEA proceedings that we will be able to continue
as a going concern.

|        |                                                              
|------- | -------------------------------------------------------------
|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND
 USE OF PROCEEDS.

None
that were not previously disclosed in Form 8-K filings during the quarter ended
July 31, 2009.

|        |                                 
|------- | --------------------------------
|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

|        |                   
|------- | ------------------
|ITEM 5. | OTHER INFORMATION.

Appointment of Gerald Price; Resignations of Jyotindra
Gange and Mahendra Desai

The
  following disclosure would have otherwise been filed on Form 8-K under the
  heading Item 5.02 Departure of Directors or Certain Officers; Election
  of Directors; Appointment of Certain Officers; Compensatory Arrangement of
  Certain Officers:

On
    July 1, 2009, Jyotindra Gange resigned as our Interim Principal Executive
    Officer and director and Mahendra Desai resigned as our Chief Financial Officer.
    On the same day, Gerald Price was appointed as Interim Chief Executive Officer
and Interim Chief Financial Officer.

Prior
    to joining us, Mr. Price  served as Senior Vice President of Business
    Development for KV Pharmaceuticals from 2006 until 2009 where he was responsible
    for Global Development which encompassed both strategic and tactical endeavors
    including Product Selection, Product Prioritization, Supply Agreements, In-licensing
and Out-licensing, and all M&A activities. From
    2002 until 2006, prior to joining KV, Mr. Price was Vice President of Business
Development for Ivax Corporation. From
    2000 until 2002, Mr. Price held the post of President and Chief Operating
    Officer and was a member of the Board of Directors at Halsey Pharmaceuticals,
    a research company specializing in the development of controlled substance
    active ingredients and the accompanying dosage forms. Prior
    to that, Mr. Price enjoyed a successful 10 year career at Barr Laboratories.
    Initially hired as Corporate VP of Operations, Mr. Price also held the position
    of Executive VP of the Manufacturing Group which operated as a separate subsidiary.
    After five years of leading Operations at Barr, Mr. Price transitioned into
    Business Development as Vice President of Strategic Business Development
    for Barr with responsibilities for mergers and acquisitions, partnerships,
    and in-licensing. Before
    joining Barr, Mr. Price held a number of operations positions with larger
    OTC and consumer products companies. Mr. Price holds a BSIE degree for the
University of Michigan and an MBA from the Siedman Business School.



In
    connection with Mr. Prices appointment, we have entered into an Independent
    Contractor Interim CEO Agreement pursuant to which Mr. Price is retained
    on a month-to-month basis as Interim Chief Executive Officer in consideration
for $10,000 per month plus expense reimburse



Maneesh
      Notes



The
    following disclosure would have otherwise been filed on Form 8-K under the
    heading Item 1.01 Entry into a Material Definitive Agreement and Item
    2.03 Creation of a Direct Financial Obligation or an Obligation under an
    Off-Balance Sheet Arrangement of a Registrant:



On
    July 17 and July 20,
    2009, we issued two senior promissory notes (the Maneesh
    Notes) to Maneesh Pharmaceuticals Ltd. (Maneesh)
    in the principal amount of $700,000 and $550,000, respectively, in consideration
    of proceeds equal to the face value of the notes. The proceeds of the Maneesh
    Notes were used primarily to pay principal and interest due on our credit
    facility with the Bank of India. The Maneesh Notes both bear interest at
    the rate of 15% per annum and are each payable upon the earlier of December
    31, 2009 or our receipt of an investment of at least $1,000,000. Maneesh
    is an affiliate of ours and two of its designees presently serve on our board
    of directors.



The
    foregoing description is qualified in its entirety by the Maneesh Notes which
    are attached as Exhibits 10.1 and 10.2 and incorporated by reference hereto.



Scaling
      Back of our Operations



The
    following disclosure would have otherwise been filed on Form 8-K under the
    heading Item 8.01 Other Events:



As
    a result of recent developments in connection with the administrative and
    related proceedings involving the DEA against us to, among other things,
    revoke our DEA
    license to manufacture and distribute controlled substances, we have ceased
    almost all of our manufacture and sale of ephedrine and guaifenesin products
    which have historically comprised approximately 50% of our sales over the
    past three years. This has resulted in a significant reduction in revenue
    which in turn has caused us to scale back operations, cut our workforce by
    over 50% since the beginning of 2009 and attempt to reach arrangements with
    our creditors in an effort to continue as a going concern. We are attempting
    to reverse the downward trend in the reduction of revenue by refocusing our
    sales efforts on higher volume, higher margin customers, launching new generic
    RX products, executing upon our so-called front-end strategy,
    expanding sales to our existing customer base and bringing the DEA proceedings
    to a conclusion. The impact of the loss of revenue from the ephedrine and
    guaifenesin products has resulted in significant losses and had a material
    adverse impact on our business, prospects, financial condition and results
    of operation and no assurance can be given that even if we have increased
    sales from higher volume, higher margin customers, launch new products, execute
    upon our front end strategy, expand sales to our existing customer
    base and satisfactorily conclude the DEA related proceedings that we will
be able to continue as a going concern.

Contract
Manufacturing Agreement



The
    following disclosure would have otherwise been filed on Form 8-K under the
    heading Item 1.01 Entry into a Material Definitive Agreement:



Our
    subsidiaries Kirk and ANDAPharm entered into a Contract Manufacturing Agreement
    dated July 1, 2009 (the Contract Manufacturing
    Agreement) with an affiliate of Maneesh, Svizera
    USA LLC (Svizera USA).
    Pursuant to the terms of the Contract Manufacturing Agreement, Kirk and ANDAPharm
    agreed to manufacture finished dose forms of product for Svizera USA from
    time to time. In accordance with the terms of the agreement, Svizera USA
    made a prepayment of $350,000 to be offset against future product orders
    and the term of the agreement is one year, renewable for further twelve month periods.
    Svizera USA has since made a further prepayment of $194,667.



Maneesh
    is an affiliate of ours and two of its designees presently serve on our board
    of directors.



The
    foregoing description is qualified in its entirety by the Contract Manufacturing
    Agreement which is attached as Exhibit 10.3 hereto and incorporated by reference
    hereto.

|        |          
|------- | ---------
|ITEM 6. | EXHIBITS.

| |          |                                                                                                                                                    
| | -------- | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | Exhibits |                                                                                                                                                    
| |          |                                                                                                                                                    
| | 10.1     | Senior Promissory Note dated July 17, 2009 issued to Maneesh
     Pharmaceuticals Ltd                                                              
| |          |                                                                                                                                                    
| | 10.2     | Senior Promissory Note dated July 20, 2009 issued to Maneesh
     Pharmaceuticals Ltd                                                              
| |          |                                                                                                                                                    
| | 10.3     | Contract Manufacturing Agreement dated as of July 1, 2009 between
     Kirk Pharmaceuticals, LLC, AndaPharm, LLC and Svizera USA LLC.              
| |          |                                                                                                                                                    
| | 31.1     | Certification
 of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the
 Securities Exchange Act                                
| |          |                                                                                                                                                    
| | 31.2     | Certification
 of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the
 Securities Exchange Act                                
| |          |                                                                                                                                                    
| | 32.1     | Certification
 of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| |          |                                                                                                                                                    
| | 32.2     | Certification
 of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

23

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SYNOVICS PHARMACEUTICALS, INC.

SIGNATURE

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

Date:
September 21, 2009

| |     |                                 
| | --- | --------------------------------
| | By: | /s/ Gerald Price                
| |     |                                 
| |     | Gerald Price                    
| |     | Interim
 Chief Executive Officer
| |     |                                 
| | By: | /s/ Gerald Price                
| |     |                                 
| |     | Gerald Price                    
| |     | Interim
 Chief Financial Officer

24

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