|                                       
|---------------------------------------
|U.S. SECURITIES AND EXCHANGE COMMISSION
|Washington,
 D.C. 20549                
|                                       
|Form 10-K                              

(Mark One)

xANNUAL
REPORT UNDER SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal years ended            
                            
                October 31, 2008

oTRANSITION
REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 0-22011

|                                                        
|--------------------------------------------------------
|                                                        
|                                                        
|Synovics
Pharmaceuticals, Inc.                          
|                                                        
|(Exact
 name of the Company as specified in its charter)
|                                                        
|                                                        

|                                                 |             |                    
|------------------------------------------------ | ----------- | -------------------
|Nevada                                           |             | 86-0760991         
|(State or other
 jurisdiction of                 |             | (I.R.S. Employer   
|incorporation or
 organization)                  |             | Identification No.)
|                                                 |             |                    
|5360 Northwest 35th
 Avenue, Fort Lauderdale, FL | 33309      
|                                                 |             |                    
|(Address
 of principal executive offices)        | (zip
 code)

The Companys telephone number, including area code: 
(954) 486-4590

|                                                               
|---------------------------------------------------------------
|                                                               
|                                                               
|Securities
 registered under Section 12(b) of the Exchange Act:
|                                                               
|None.                                                          
|                                                               
|Securities
 registered under Section 12(g) of the Exchange Act:
|                                                               
|Common
 Stock, $0.001 par value per share                      
|                                                               
|(Title
 of Class)                                              

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Indicate by check mark
whether the Company is a well-known seasoned issuer, as defined by Rule 405 of
the Securities Act.
Yes o
No x.

Indicate by check mark if
the Company is not required to file reports pursuant to Section 13 or Section
15(d) of the Act. 
Yes o
No x.

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 if
disclosure of delinquent filers in response to Item 405 of Regulation S-K
(§229.405 of this chapter) is not contained herein, and will not be contained,
to the best of the Companys knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o.

Indicate by check mark
whether the Company is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of accelerated file and larger
accelerated filer 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 registrant is a shell company (as defined in Rule 12b-2 of the
Act). 
Yes o
No x

The
aggregate market value of the voting common equity held by non-affiliates of
the registrant as of April 30, 2008 was approximately $3,985,025 based upon the
closing price of the registrants Common Stock on the OTC Bulletin Board, on
April 30, 2008. (For purposes of determining this amount, only directors, executive
officers, and, based on Schedule 13(d) filings on April 30, 2008 10% or greater
stockholders and their respective affiliates have been deemed affiliates).

As of January 23, 2009,
there were 29,827,357 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None

2

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FORWARD-LOOKING STATEMENTS

Certain
statements made in this Annual Report on Form 10-K are forward-looking
statements (within the meaning of the Private Securities Litigation Reform Act
of 1995) regarding the plans and objectives of management for future
operations. Such statements involve known and unknown risks, uncertainties and
other factors that may cause actual results, performance or achievements of
Synovics Pharmaceuticals, Inc., a Nevada corporation (the Company), to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements included herein are
based on current expectations that involve numerous risks and uncertainties.
The Companys plans and objectives are based, in part, on assumptions involving
the continued expansion of business. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic, competitive
and market conditions and future business decisions, all of which are difficult
or impossible to predict accurately and many of which are beyond the control of
the Company. Although the Company believes its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance the forward-looking
statements included in this Report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.

3

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Table of Contents

Form 10-K Index

|         |                                                                                                 |  |     
|-------- | ----------------------------------------------------------------------------------------------- |  | ----
|         |                                                                                                 |  | PAGE
|PART I  
|        
|Item 1.  | Business                                                                                        |  | 5   
|Item 1A. | Risk Factors                                                                                    |  | 17  
|Item 1B. | Unresolved
 Staff Comments                                                                      |  | 31  
|Item 2.  | Properties                                                                                      |  | 31  
|Item 3.  | Legal Proceedings                                                                               |  | 31  
|Item 4.  | Submission of Matters to a Vote of Security
 Holders                                            |  | 33  
|         |                                                                                                 |  |     
|PART II 
|         |                                                                                                 |  |     
|Item 5.  | Market
      for the Companys Common Equity
 and Related Stockholder Matters                   |  | 34  
|Item 6.  | Selected Financial Data                                                                         |  | 37  
|Item 7.  | Managements
      Discussion and Analysis of Financial Condition and Results of Operation      |  | 38  
|Item 7A. | Quantitative and Qualitative Disclosures
 about Market Risk                                     |  | 45  
|Item 8.  | Financial Statements and Supplementary
Data                                                     |  | 46  
|Item 9.  | Changes in and Disagreements with
 Accountants on Accounting and Financial Disclosure           |  | 46  
|Item 9A. | Controls and Procedures                                                                         |  | 46  
|Item 9B  | Other Information                                                                               |  | 47  
|         |                                                                                                 |  |     
|PART III
|         |                                                                                                 |  |     
|Item 10. | Directors and Executive Officers of the
 Registrant                                             |  | 49  
|Item 12. | Security Ownership of Certain Beneficial
 Owners and Management and Related Stockholder Matters |  | 63  
|Item 13. | Certain Relationships and Related
 Transactions                                                 |  | 67  
|Item 14. | Principal
 Accountant Fees and Services.                                                        |  | 75  
|         |                                                                                                 |  |     
|PART IV 
|         |                                                                                                 |  |     
|Item 15. | Exhibits                                                                                        |  | 76  

4

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PART I

|        |         
|------- | --------
|ITEM 1. | BUSINESS

General

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 its affiliate, ANDAPharm, LLC
(ANDAPharm) in May 2006, we
have a facility in Fort Lauderdale, Florida 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 in India, 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 integrated pharmaceuticals company from 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. Each of Maneesh and Harry Singh is an affiliate of ours.

Our
key assets can be summarized as:

| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | Private label OTC drug
 manufacturer - Kirk Pharmaceuticals, Fort Lauderdale, Florida;                                           
| |   |                                                                                                                                  
| |  | United States Drug Enforcement Agency (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);                       
| |   |                                                                                                                                  
| |  | Robust pipeline of
 prescription Rx and OTC generic drug products;                                                               
| |   |                                                                                                                                  
| |  | Access to difficult to source
 price competitive APIs; and                                                                       
| |   |                                                                                                                                  
| |  | 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
Pharmaceuticals, Inc. (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;

5

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second, our new strategic
alliances with Maneesh and Harry Singh established in May 2008 and April 2007,
respectively. This alliance is principally designed to assist us in sourcing
low-cost APIs and generic drug applications (abbreviated new drug applications
- ANDAs), submitted by Indian 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. Presently, in the categories
in which we are supplying products, store brands exceed approximately 35% of
our total sales and we expect this to reach more than 50% over the next few years.
We believe that this growth provides us with a great opportunity to grow our
OTC sales and that with our focus on competitive pricing and customer service,
we believe that we can, with adequate capitalization and assuming certain DEA
actions, as described  below, are resolved in a manner favorable to us, continue
to grow our OTC business in the U.S. substantially.

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 effect 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 for reasons of size of a given production, cost or
convenience. Our OTC products are subject to control by the DEA
and will continue to be manufactured (as well as packaged and distributed)
through our Fort Lauderdale facilities (See “BusinessU.S. Drug Enforcement
Agency” and
the “Risk Factors” section for a further description of DEA controls
and actions commenced against us).

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 targeted to
in-licensed generic OTC and 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 Indian pharmaceutical companies, well financed with state of
the art manufacturing facilities, have developed and in many cases filed ANDAs
with the FDA for the US market, but have no marketing or distribution presence
in the US market, i.e. no front-end. We entered into a joint venture agreement
with Maneesh that not only provides development and manufacturing of both OTC
and Rx drugs, but resources of personnel, operating and IT systems as well as
consulting on engineering build-out and equipment procurement. Maneesh has a
variety of drug development and manufacturing facilities in various locations
throughout the world, although we are coordinating principally with its
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 initial

6

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steps in arranging agreements
for ANDA in-licensing, low-cost APIs and specialty contract manufacturing. We
will generally source the finished product from abroad, then package and distribute
    through Florida - the customer belongs to Synovics.

Our
operations in Fort Lauderdale, Florida are highly scalable, in three separate
leased facilities encompassing approximately 80,000 square feet. Our facilities
contain manufacturing, warehousing, laboratory and administrative spaces in
these facilities. We employ an aggregate of approximately 155 people in our
facilities.

Our OTC Products

The
products that Kirk develops for store brands are considered National Brand
Equivalent (NBE) and either meet or exceed the quality standards of the
comparable brands.

|                                             |  |                    
|-------------------------------------------- |  | -------------------
|Product
 Description                         |  | National
 Brand    
|                                             |  |                    
|                                             |  |                    
|ANALGESICS                                   |  |                    
|Acetaminophen
 500mg Caplets                 |  | Tylenol®           
|Acetaminophen
 PM Caplets                    |  | Tylenol®PM         
|Acetaminophen
 325mg Tablets                 |  | Tylenol®           
|Acetaminophen
 500mg Tablets                 |  | Tylenol®           
|Child
 Chew 81mg Aspirin Tab  Orange/Cherry |  | Bayer® St. Joseph® 
|Enteric
 Coated 81mg Aspirin Tab             |  | Bayer®Enteric 81mg 
|Ibuprofen
 200mg White Caplet                |  |                    
|Ibuprofen
 200mg White Tablet                |  |                    
|Ibuprofen
 200mg Brown Caplet                |  | Advil®             
|Ibuprofen
 200mg Brown Tablet                |  | Advil®             
|Ibuprofen
 200mg Orange Tablet               |  | Motrin®            
|Ibuprofen
 200mg Orange Caplet               |  | Motrin®            
|                                             |  |                    
|COUGH/COLD/ALLERGY                           |  |                    
|Asthma
 Aid Tablets                          |  | Bronkaid®          
|Bronchial
 Asthma Tablets                    |  | Primatene®         
|Chlorpheniramine
 4mg Tablets                |  | Chlor-Trimeton®    
|Cough
 & Cold HBP Tablets                    |  | Coricidin HBP®     
|Diphenhydramine
 25mg Caplets                |  | Benadryl®Ultra-Tabs
|Diphenhydramine
 25mg Capsules               |  | Benadryl®          
|Diphenhydramine
 50mg Capsules               |  |                    
|Phenylephrine
 10mg Tablets                  |  | Sudafed PE        
|Sinus
 Caplet PE (325mg APAP, 5mg PE)        |  | Tylenol® Sinus     

7

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|                                           |  |              
|------------------------------------------ |  | -------------
|LAXATIVES
 & ANTACIDS                      |  |              
|Senna
 8.6mg Tablets                       |  | Senokot®     
|Senna
 8.6mg + Doc Sodium Tablets - Orange |  | Senokot-S®   
|Senna
 8.6mg + Doc Sodium Tablets  Rd     |  | Peri-Colace® 
|Docusage
 Sodium 100mg Softgel             |  | Colace®      
|Antacid
 Softchew  Cherry                 |  | Rolaids®     
|                                           |  |              
|SLEEP/ALERT
 REMEDIES                      |  |              
|APAP
 PM Caplets                           |  | Tylenol®PM   
|Rest
 Simply Tablets                       |  | Simply Sleep
|Sleep
 Tablets                             |  | Sominex®     
|Stay
 Awake Tab                            |  | Vivarin®     
|                                           |  |              

Our Rx Products

Presently,
we are selling under contract one Rx product: a generic version of the brand
Estratest®, a combination esterified estragen-methylated testosterone hormonal
product used by post-menopausal women. We are currently awaiting ANDA approval
for additional Rx products.

Research and Development

On
July 31, 2007, both the Technology License Agreement and ANDA Agreement,
agreements we entered into with Nostrum Pharmaceuticals, Inc. (Nostrum)
terminated as a result of the settlement of the then pending litigation with
Nostrum (See Legal
    Proceedings below).
Up until that
date, the drug candidates under development pursuant to those agreements were
our primary drug candidates in development.

We
currently have agreements with several companies for the development of a
number of OTC and prescription pharmaceutical products. Our role in these drugs
varies depending on the agreement from development to transfer of existing FDA
approved products for manufacture in our facilities. Some of these projects
will require further filings, with and approval by, the FDA.

We
plan to continue to enter into agreements for the development of products and
plan on especially focusing on those products that provide a unique opportunity
    in the market that provide leverage of our Front-End strategy.

Kirk
is expanding its OTC line by growing the categories it is currently producing
with new generic versions of OTC brands in those categories. There are also
plans to expand products by adding doses and container counts to existing
products.

In
addition, we filed an Abbreviated New Drug Application for approval of a
formulation of a 10mg, 25mg and 50mg dose of hydroxyzine HCL as well as a
formulation for Estrodial.

We
also plan to continue to execute our Front-End strategy by
in-licensing targeted ANDAs owned by international pharmaceutical companies and
approved by the FDA. Licensing

8

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and marketing of these products
will be subject to capital available to us over the next 18 months and, if such
capital is available, of which there can be no assurances we would not expect
to have these products in the US market prior to 2010.

Patents and Trademarks

Prior
to the enactment in the United States of new laws adopting certain changes
mandated by the General Agreement on Tariffs and Trade (GATT), the exclusive rights afforded
by a
U.S. Patent were for a period of 17 years measured from the date of grant.
Under GATT, the term of any U.S. Patent granted on an application filed
subsequent to June 8, 1995 terminates 20 years from the date on which the
patent application was filed in the United States or the first priority date,
whichever occurs first. Future patents granted on an application filed before
June 8, 1995 will have a term that terminates 20 years from such date, or 17
years from the date of grant, whichever date is later.

Under
the Drug Price Competition and Patent Term Restoration Act, a U.S. product
patent or use patent may be extended for up to five years under certain
circumstances to compensate the patent holder for the time required for FDA
regulatory review of the product. The benefits of this Act are available only
to the first approved use of the active ingredient in the drug product and may
be applied only to one patent per drug product. There can be no assurance that
we will be able to take advantage of this law. Though we own a number of
patents, at this time, we are not relying on any patented products for our
operations. We rely upon unpatented proprietary and trade secret technology
that we seek to protect, in part, by confidentiality agreements with our
collaborative partners, employees, consultants, outside scientific
collaborators, sponsored researchers, and other advisors. There can be no
assurance that these agreements provide meaningful protection or that they will
not be breached, that we will have adequate remedies for any such breach, or
that our trade secrets, proprietary know-how, and technological advances will
not otherwise become known to others. In addition, there can be no assurance
that, despite precautions taken by us, others have not and will not obtain
access to our proprietary technology.

Government Regulation and Approval

The
manufacturing, processing, formulation, packaging, labeling, testing, storing,
distributing and sale of our products are subject to regulation by numerous U.S.
    agencies, including the FDA and the DEA, as well as several state and local
    agencies. In addition, we manufacture and market certain products in accordance
    with standards set by the United States Pharmacopoeial Convention, Inc. (the USP).
We believe that our policies,
operations and products comply in all material respects with existing
regulations.

U.S. Food and Drug Administration

The
FDA has jurisdiction over our marketing of our drug products. The FDAs
jurisdiction extends to the manufacturing, testing, labeling, packaging,
storage and distribution of these products.

9

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Some
of our OTC pharmaceuticals are regulated under the OTC Monograph System and
subject to certain FDA regulations. Under the OTC Monograph System, selected
OTC drugs are generally recognized as safe and effective and do not require the
submission and approval of an ANDA or NDA prior to marketing. The FDA OTC
Monograph System includes well-known ingredients and specifies requirements for
permitted indications, required warnings and precautions, allowable
combinations of ingredients and dosage levels. Drug products marketed under the
OTC Monograph System must conform to specific quality and labeling requirements;
however, these products generally can be developed with fewer regulatory
hurdles than those products that require the filing of an ANDA or NDA. It is,
in general, less costly to develop and bring to market a product produced under
the OTC Monograph System. From time to time, adequate information may become
available to the FDA regarding certain ANDA or NDA drug products that will
allow the reclassification of those products as no longer requiring the
approval of an ANDA or NDA prior to marketing. For this reason, there may be
increased competition and lower profitability related to a particular product
should it be reclassified to the OTC Monograph System. In addition, regulations
may change from time to time, requiring formulation, packaging or labeling
changes for certain products.

A
number of our other products are marketed without approved applications. These
products must meet certain manufacturing and labeling standards established by
the FDA. The FDAs policy with respect to the continued marketing of unapproved
products is stated in the FDAs June 2006 compliance policy guide, titled
Marketed New Drugs without Approved NDAs or ANDAs. Under this policy, the FDA
has stated that it will follow a risk-based approach with regard to enforcement
against such unapproved products. The FDA evaluates whether to initiate
enforcement action on a case-by-case basis, but gives higher priority to
enforcement action against unapproved drugs in certain categories, such as
those marketed unapproved drugs with potential safety risks or that lack
evidence of effectiveness. The FDA recognizes that certain unapproved products,
based on the introduction date of their active ingredients and the lack of
safety concerns, among other things, have been marketed for many years and, at
this time, might not be subject to immediate enforcement action.

We
also have submitted two drug candidates that require approval by the FDA through
its ANDA process before they can be commercialized. Based on current FDA regulations,
ANDAs and NDAs provide information on chemistry, manufacturing and control
issues, bioequivalence, packaging and labeling. The ANDA process generally
requires less time and expense for FDA approval than the NDA process. For
approval of an ANDA, we must demonstrate that the product is bioequivalent to
    a marketed product that has previously been approved by the FDA and that
    our manufacturing process meets FDA standards. This approval process for
    an ANDA may require that bioequivalence and/or efficacy studies be performed
    using a small number of subjects in a controlled clinical environment and,
    for certain topical generic products, full clinical studies. Approval time
    currently averages seventeen months from the date the ANDA is submitted.
    Changes to a product marketed under an ANDA or NDA are governed by specific
    FDA regulations and guidelines that define when proposed changes, if approved
by the FDA, can be implemented.

All
of our products that are manufactured, tested, packaged, stored or distributed
    by us must comply with FDA cGMPs. The FDA performs periodic audits to ensure
    that our facilities remain

10

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in compliance with all
appropriate regulations. The failure of a facility to be in compliance may lead
to a breach of representations made to store brand customers or to regulatory
action against the products made in that facility, including seizure,
injunction or recall.

During
fiscal year 2007, we had inspections by the FDA, one for Kirk and one for
ANDAPharm. In each case, the FDA issued a Form 483 advising us of three
observations in our operations. We have responded to the FDA and have taken
measures to make corrections to our operations to ensure continued compliance
with the regulations of the FDA and cGMPs. To date, we have not had any company
initiated recalls or have had any punitive actions taken by the FDA.

U.S. Drug Enforcement Agency

The
DEA regulates certain drug products containing controlled substances and List I
chemicals pursuant to the federal Controlled Substances Act (the CSA). The
CSA and DEA regulations impose specific requirements on manufacturers and other
entities that handle these substances including registration, recordkeeping,
reporting, storage, security and distribution.

Recordkeeping
requirements include accounting for the amount of product received,
manufactured, stored and distributed. Companies handling either controlled
substances or List I chemicals are also required to maintain adequate security
and to report suspicious orders, thefts and significant losses. The DEA
periodically inspects facilities for compliance with its rules and regulations.
Failure to comply with current and future regulations of the DEA could lead to
a variety of sanctions, including revocation or denial of renewal of DEA
registrations, injunctions, or civil or criminal penalties. Kirk currently
holds a Schedule III, IIIN, IV, and V controlled substance license which
permits it to manufacture these substances as well as List I chemicals.

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 guiafenesin tablets, which
occurred at Kirk in July 2008. The DEA also alleges that Kirk failed to
maintain appropriate recordkeeping practices. A hearing has been scheduled
before an administrative law judge to commence February 18, 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 we intend 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 valued at approximately $800,000 and which were
seized by the DEA. On September 2, 2008, we filed our answer and counterclaimed
seeking an award of damages for wrongful seizure of the seized

11

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property as well as a declaratory judgment that the United States acted
unlawfully, arbitrarily and capriciously in implementing its quota system.

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, we could no longer lawfully possess or distribute controlled
substances or manufacture and distribute products containing the disallowed
controlled substance which would have a material adverse effect on our business,
prospects, financial condition and results of operation.

We
are subject to the requirements of the CSA and DEA regulations in the handling
    of any controlled substances in schedules III - V or certain of the List
    I chemicals identified in the CSA. As a result of series of amendments to
    the CSA, the DEA has imposed increased restrictions on the manufacture and
    distribution of certain products used by us. For example, the Comprehensive
    Methamphetamine Control Act of 1996 (the Combat Meth Act) was enacted to authorize the DEA
    to monitor transactions involving chemicals that may be used illegally in
    the production of methamphetamine. The Comprehensive Methamphetamine Control
    Act of 1996 establishes certain registration and recordkeeping requirements
    for manufacturers of OTC cold, allergy, asthma and diet medicines that contain
ephedrine, pseudoephedrine or phenylpropanolamine (PPA).

More
recently, the Reauthorization Act of 2005 was signed into law on March 9, 2006.
The Reauthorization Act of 2005 prevented the existing provisions of the
Patriot Act from expiring and also included the Combat Meth Act. This law
further amended the CSA and provided additional requirements on the sale of
pseudoephedrine products. Among the various provisions, this national
legislation places certain restrictions on the purchase and sale of all
products that contain ephedrine, pseudoephedrine, or phenylpropanolamine (List
I Chemical Products). Effective April 7, 2006, the Act imposed quotas on
manufacturers which limits the amount of product that can be manufactured. On
July 10, 2007, the DEA published an Interim Rule establishing regulations to
implement the import and production quotas for List I Chemicals.

In
December 2007, Kirk applied to the DEA for a 2008 ephedrine and pseudoephedrine
manufacturing procurement quota. In April 2008, the DEA rejected Kirks
application and Kirk is challenging its rejection of its procurement quota
application which has been consolidated with the administrative proceeding that
was commenced by the DEA on September 15, 2008. Until Kirks quota is approved
by the DEA, we are unable to procure ephedrine and pseudoephedrine for
manufacturing and in the meantime are using up supplies of ephedrine and
pseudoephedrine in our inventory, which we estimate will last approximately six
months from the date hereof based on current demand for our products. If we do
not resolve our needs for ephedrine and pseudoephedrine in the near future, we
will not be able to manufacture and sell products that use ephedrine and
pseudoephedrine as a raw material, which constitute about 47% of our product
mix as of October 31, 2008, and which will have a material adverse effect on
our business, prospects, financial condition and results of operation. Even if
Kirks quota for 2008 is ultimately approved, our ability to acquire the
List I chemicals ephedrine, pseudoephedrine, or phenylpropanolamine for manufacturing
products has been and will be limited by any future quota limits imposed by the
DEA.

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The
CSA, as amended, also imposed daily restrictions on the amount of List I
Chemical Products a retailer may sell to a consumer (3.6 grams per day) and
limitations on the amount of List I Chemical Products a consumer may purchase
(9.0 grams) over a 30-day period. Further, effective September 30, 2006, the
Act requires that (a) retail sellers place all List I Chemical Products behind
the counter and maintain a logbook that tracks the sales of List I Chemical
Products to individuals, and (b) purchasers provide valid identification in
order to purchase List I Chemical Products. Many states have also enacted
legislation regulating the manufacture and distribution of List I Chemicals. We
are subject to these state requirements as well.

Consumer Product Safety Commission

Under
the Poison Prevention Packaging Act, the CPSC has authority to designate that
pharmaceuticals require child resistant closures to help reduce the incidence
of accidental poisonings. The CPSC has published regulations requiring various
products to have these closures and established rules for testing the
effectiveness of child resistant closures and for ensuring senior adult
effectiveness.

Federal Trade Commission

The
FTC exercises primary jurisdiction over the advertising and other promotional
practices of marketers of OTC pharmaceuticals and often works with the FDA
regarding these practices. The FTC considers whether a products claims are
substantiated, truthful and not misleading. The FTC is also responsible for
reviewing mergers between pharmaceutical companies exceeding specified
thresholds and investigating certain business practices relevant to the
healthcare industry. For example, in accordance with the Medicare Prescription
Drug Improvement and Modernization Act of 2003, agreements between NDA and ANDA
holders relating to settlements of patent litigation involving paragraph IV
certifications under the Hatch-Waxman Act, as well as agreements between
generic applicants that have submitted ANDAs containing paragraph IV
certifications where the agreement concerns either companys 180-day
exclusivity, must be submitted to the FTC (and the United States Department of
Justice) for review. The FTC could challenge these business practices in
administrative or judicial proceedings.

State Regulation

Most
states regulate foods and drugs under laws that generally parallel federal
statutes. We are also subject to other state consumer health and safety
regulations which could have a material impact on our business if we were ever
found to be non-compliant.

United States Pharmacopoeial Convention

The
USP is a non-governmental, standard-setting organization. Its drug monographs
and standards are incorporated by reference into the Federal Food, Drug and
Cosmetic Act as the standards that must be met for the listed drugs, unless
compliance with those standards is

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specifically disclaimed. USP
standards exist for most Rx and OTC pharmaceuticals. The FDA typically requires
USP compliance as part of cGMP compliance.

Compliance with Environmental Laws

We
are subject to comprehensive federal, state and local environmental laws and
regulations that govern, among other things, air polluting emissions, waste
water discharges, solid and hazardous waste disposal, and the remediation of
contamination associated with current or past generation handling and disposal
activities, including the past practices of corporations as to which we are the
successor legally or in possession. We do not expect that compliance with such
environmental laws will have a material effect on our capital expenditures,
earnings or competitive position in the foreseeable future. There can be no
assurance, however, that future changes in environmental laws or regulations,
administrative actions or enforcement actions, or remediation obligations
arising under environmental laws will not have a material adverse effect on our
capital expenditures, earnings or competitive position.

Sources and Availability of Raw Materials and
Suppliers

The
active pharmaceutical ingredients and other materials and supplies used in
Kirks manufacturing operation and to be used in our pharmaceutical
manufacturing operations are generally available and purchased from many
different foreign and domestic suppliers. However, in some cases, the raw
materials used to manufacture products may be only available from a single
FDA-approved supplier. For our products previously approved by the FDA, any
change in a supplier not previously approved must be submitted through a formal
approval process with the FDA. A delay of six months or more in the manufacture
and marketing of the drug involved while a new supplier becomes qualified by
the FDA and its manufacturing process is determined to meet FDA standards
could, depending on the particular product, have a material adverse effect on
our business, prospects, financial condition and results of operations and financial condition. We will attempt to mitigate
the potential effects of any such situation by providing for, where
economically and otherwise feasible, two or more suppliers of raw materials for
the drugs we manufacture. In addition, we may attempt to enter into a contract
with a raw material supplier in an effort to ensure adequate supply for our
products.

During
the fiscal year ended October 31, 2008, we experienced a major disruption in our supply of ephedrine and pseudoephedrine
as a result in part of our application for a 2008 manufacturing procurement quota and related actions taken by the DEA as described above.

Competition

We
compete in the OTC and generic prescription drug markets. These markets are
highly competitive and are characterized by the frequent introduction of new
products. Our competitors include large and small pharmaceutical companies such
as Perrigo Company and Teva, many of which have considerably greater financial
and other resources and are not as highly leveraged as we are. Our competitors
may be better positioned to spend more on research and development, employ more
aggressive pricing strategies, utilize greater purchasing power, build stronger
vendor relationships and develop broader distribution channels than us. The
private label or

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generic category has also become
increasingly more competitive in certain of our product markets.

The
principal competitive factors in the our markets include: (i) introduction of
other manufacturers products in direct competition with our products, (ii)
introduction of authorized products in direct competition with our products,
particularly during exclusivity periods, (iii) consolidation among distribution
outlets through mergers and acquisitions and the formation of buying groups, (iv)
ability of competitors to quickly enter the market after the expiration of
patents or exclusivity periods, diminishing the amount and duration of
significant products, (v) the willingness of customers, including wholesale and
retail customers, to switch among manufacturers, (vi) pricing pressures and
product deletions by competitors, (vii) a companys reputation as a
manufacturer and distributor of quality products, (viii) a companys level of
service (including maintaining sufficient inventory levels for timely
deliveries), (ix) product appearance and labeling and (x) a companys breadth
of product offerings. We believe that these factors and others will impact our
product selection, development decisions and research plans.

Dependence on One or A Few Major Customers

No
customer of Kirk was responsible for more than 25% of our sales revenues for
the twelve months ended October 31, 2008. Sales to the three largest customers
accounted in the aggregate for approximately 51% of our revenues.

Employees

On
December 31, 2008, we had approximately 155 employees. On July 3, 2008, Ronald
H. Lane, Ph.D. resigned as our Chief Executive Officer (although he continues
to serve as Chairman of our Board) and Jyotindra Gange replaced Dr. Lanes place
as our Principal Executive Officer on an interim basis. We are actively
searching for a permanent replacement to Dr. Lane as Chief Executive Officer.
No assurance can be given that we will be successful in locating and hiring a
suitable permanent Chief Executive Officer in the reasonable future. Failure to
do so could have a material adverse effect on our operations and financial
results. In addition, on October 6, 2008, we replaced our prior Chief Financial
Officer, Steven Getraer, with Mahendra (Manny) Desai.

In
addition, we intend to hire for our developmental operations additional
personnel with experience in clinical testing, government regulation, marketing
and business development when the business warrants the expansion. Currently,
our developmental operations fulfill several of its management functions
through the use of independent contractors. These functions include scientific,
regulatory, legal and investor relations.

We
believe our relationship with employees is generally good. However, our ability
to achieve our financial and operational objectives depends in large part upon
our ability to attract, integrate, retain and motivate a qualified person to
direct our research operations and other highly qualified personnel, when need
for such personnel arises, and upon the continued service of our senior
management and key personnel.

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Website Access to Filings with the Securities
and Exchange Commission

We
file periodic and current reports, proxy statements and other materials with
the Securities and Exchange Commission. You may read and copy any materials we
file with the SEC at the SECs Public Reference Room at 100 F Street, NE,
Washington DC 20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a web
site at www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC,
including our filings.

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

In
addition to the other information contained in this report, the following risk
factors should be considered carefully in evaluating an investment in us and in
analyzing our forward-looking statements.

Risks Related To Our
Business

We will
require additional capital, and if additional capital is not available, we may
have to curtail or cease operations.

To
fund research and development on an ongoing basis and fund the expansion of our
manufacturing and distribution operations we will require substantial capital,
which we may do through public or private equity or debt financing. No
representation can be made that we will be able to obtain additional financing
or if obtained it will be on favorable terms, on a timely basis or at all. No
assurance can be given that any offering if undertaken will be successfully
concluded or that if concluded the proceeds will be material. Our inability to
obtain additional financing when needed would impair our ability to continue
our business.

If
any future financing involves the further sale of our securities, our
then-existing stockholders equity could be substantially diluted. On the other
hand, if we incurred debt, we would be subject to risks associated with
indebtedness, including the risk that interest rates might fluctuate and cash
flow would be insufficient to pay principal and interest on such indebtedness.

We
have not been profitable and expect future losses.

Since
our inception in 1990, we have not been profitable. We may never be profitable
or, if we become profitable, we may be unable to sustain profitability. We have
sustained losses in each year since our incorporation in 1990. We incurred net
losses of $4,005,831, $20,857,884, $8,571,021, $2,911,260 and $1,124,336, for
the years ended October 31, 2008, 2007, 2006, 2005 and 2004. As of October 31,
2008, our accumulated deficit was $78,649,597. We expect to realize significant
losses for the current year of operation and to continue to incur losses until
we are able to raise additional capital and generate sufficient revenues to
reduce our level of indebtedness and support our operations and offset
operating costs.

Our
independent registered public accounting firm has expressed substantial doubt
about our ability to continue as a going concern.

Our
independent registered public accounting firm in its audit opinion issued in
connection with our consolidated balance sheet as of October 31, 2008 and 2007 and
our consolidated statements of operations, stockholders equity and cash flows
for the years ended October 31, 2008, 2007 and 2006, has expressed substantial
doubt about our ability to continue as a going concern given our net losses and
negative cash flows. The accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business.

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Many of the
products manufactured by us contain controlled substances, the supply of which
is regulated.

The
raw materials used in many of our products are controlled substances and are
regulated by the DEA. Consequently, their manufacture, shipment (including import
and export), storage, sale and use are subject to the highest degree of
regulation and accountability. In particular, the DEA limits the availability
of the active ingredients used in certain of our products and, as a result our
procurement quota of these active ingredients may not be sufficient to meet
commercial demand. We must annually apply to the DEA for a procurement quota in
order to obtain these substances.

In
December 2007, Kirk applied to the DEA for a 2008 ephedrine and pseudoephedrine
manufacturing procurement quota. In April 2008, the DEA rejected Kirks
application and Kirk is challenging its rejection in the administrative
proceeding described below. Until Kirks quota is approved by the DEA, we are
unable to import and manufacture ephedrine and pseudoephedrine and are using up
supplies of ephedrine and pseudoephedrine that we have in stock, which we
estimate will last approximately six months from the date hereof based on
current demand for our products. If we do not resolve our needs for ephedrine
and pseudoephedrine in the near future, we will not be able to manufacture and
sell products that use ephedrine and pseudoephedrine as a raw material, which
constitute about 47% of our product mix as of October 31, 2008, and which will
have a material adverse effect on our business, prospects, financial condition
and results of operation. Even if Kirks quota for 2008 is ultimately approved,
our ability to import and manufacture ephedrine, pseudoephedrine, or
phenylpropanolamine products has been and will be limited by any future quota
limits imposed by the DEA.

On
September 15, 2008, the DEA commenced an administrative proceeding within 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 guiafenesin tablets, which
occurred at Kirk in July 2008. The DEA also alleges that Kirk failed to
maintain appropriate recordkeeping practices. A hearing has been scheduled
before an administrative law judge to commence February 18, 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 we intend 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, we filed our 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 its quota system.

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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 would
have a material adverse effect on our business, prospects, financial condition
and results of operation.

We are
dependent on a small number of suppliers for our raw materials and any delay or
unavailability of raw materials can materially adversely affect our ability to
produce products.

The
FDA and DEA requires identification of raw material suppliers in applications
for approval of drug products. If raw materials were unavailable from a
specified supplier, FDA and DEA approval of a new supplier could delay the manufacture
of the drug involved. In addition, some materials used in our products are
currently available from only one supplier or a limited number of suppliers.
During the fiscal year ended October 31, 2008, we experienced a major
disruption in our supply of ephedrine and pseudoephedrine as a result in part
    of the denial of our application for a 2008 manufacturing procurement quota
and related actions taken by the DEA as further described above.

Further,
 our Front End strategy contemplates that a significant portion
 of our raw materials may be available only from foreign sources. Foreign sources
 can be subject to the special risks of doing business abroad, including:

| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | greater
 possibility for disruption due to transportation or communication problems;                                                                                                      
| |   |                                                                                                                                                                                           
| |  | the relative
 instability of some foreign governments and economies;                                                                                                                      
| |   |                                                                                                                                                                                           
| |  | interim
 price volatility based on labor unrest, materials or equipment shortages,
 export duties, restrictions on the transfer of funds, or fluctuations in
 currency exchange rates; and
| |   |                                                                                                                                                                                           
| |  | uncertainty
 regarding recourse to a dependable legal system for the enforcement of
 contracts and other rights.                                                                          

In
addition, recent changes in patent laws in certain foreign jurisdictions
(primarily in Europe) may make it increasingly difficult to obtain raw
materials for research and development prior to expiration of applicable United
States or foreign patents. Any delay or inability to obtain raw materials on a
timely basis, or any significant price increases that cannot be passed on to
customers, can materially adversely affect our ability to produce products.
This can materially adversely affect our business, prospects, financial condition and results of operation.

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Our failure
to prevail in our pending litigation against Dr. Mulye and Nostrum would result
in dilution of existing shareholders and further disagreements between
management and Dr. Mulye and Nostrum.

On
June 27, 2008, we commenced a lawsuit against Dr. Mulye and Nostrum seeking
declaratory judgment for the release of 10,661,000 shares being held in escrow
pursuant to a settlement agreement and related escrow agreement. While we
believe that we are entitled to these shares (because certain guarantees and
    an undertaking given by Dr. Mulye and Nostrum were released and discharged
    (the Nostrum
Guarantee) in accordance with the
terms of the settlement agreement and related escrow agreement), Dr. Mulye and
Nostrum objected to their release to us, and instead are seeking the immediate
release to Nostrum of the escrow shares and the issuance to Nostrum of
additional shares of common stock such that, together with the escrow shares,
will represent 32% of our outstanding shares on a fully diluted basis. If Dr.
Mulye and Nostrum were to prevail, then Nostrum would become one of our major
shareholders and we would also be required to gross-up 4,000,000
shares of common stock issued to Maneesh in consideration of the release of the
Nostrum Guarantee to maintain the percentage of common stock represented by such
shares. The release of the escrow shares would not only dilute the
shareholdings of existing shareholders but also, given the disagreements that
management and Nostrum and Dr. Mulye had in the past, likely result in further
disagreements in the procedural and substantive decision-making and operations
of our business, which in turn could have a material adverse effect on our
business, prospects, financial condition and results of operation.

We have a
relatively limited operating history, which makes it difficult to evaluate our
future prospects and are implementing a new business model, an off-shore Front
End growth strategy.

Although
we have been in operation since 1990, our business model has evolved
substantially over time. Since the acquisition of Kirk in May 2006, our primary
line of business is the manufacturing and distribution of OTC and prescription
drugs and accordingly we have a relatively short operating history and limited
financial data upon which you may evaluate our business and prospects. In
addition, our business model is likely to continue to evolve as we attempt to
expand our product offerings. In particular, we recently began to implement an
off-shore Front-End growth strategy that incorporates targeting a series of
partnering relationships with international pharmaceutical companies to supply
us with low-cost competitive pharmaceutical products. As a result, our
potential for future profitability must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies
that are attempting to implement new business models, move into new markets and
continue to innovate with new and unproven technologies. Some of these risks
relate to our potential inability to:

| |   |                                             
| | - | --------------------------------------------
| |  | develop new
 products;                      
| |   |                                             
| |  | obtain
 regulatory approval of our products;

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| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | manage our
 growth, control expenditures and align costs with revenues;
| |   |                                                                        
| |  | attract,
 retain and motivate qualified personnel; and                 
| |   |                                                                        
| |  | respond to
 competitive developments.                                  

If
we do not effectively address the risks we face, our business model may become
unworkable and we may not achieve or sustain profitability or successfully
develop any products.

A failure to
locate and hire a suitable permanent Chief Executive Officer could have a
material adverse effect on our operations and financial results.

On
July 3, 2008, Dr. Ronald Lane resigned as our Chief Executive Officer (although
he continues to serve as Chairman of our Board) and Jyotindra Gange took Dr.
Lanes place as our Principal Executive Officer on an interim basis. We
are actively searching for a permanent Chief Executive Officer and Chairman of
our Board. No assurance can be given that we will be successful in locating and
hiring a suitable permanent Chief Executive Officer in the near future.
Failure to do so will have a material adverse effect on our business, prospects,
financial condition and results of operation.

Our failure
to compete effectively may limit our ability to achieve profitability.

Competition
in the pharmaceutical area is intense, and our competitors have substantially
greater resources than us. Competition is based primarily on price, quality and
assortment of products, customer service, marketing support and availability of
new products. Competition also comes from national brand companies and brand
pharmaceutical companies. That competition could be intensified should those
companies lower prices or manufacture their own store brand or generic
equivalent products. Kirks competition consists of many companies who are
independent pharmaceutical drug manufacturers on a contractual basis and the
pharmaceutical companies, which have manufacturing capabilities, and
facilities, many of which have substantially greater financials and other
resources. See Business  Competition.

We may fail
to establish or cultivate strategic partnerships to expand our business.

We
have developed our business model and built our business in part through
strategic partnerships such as the strategic relationships we have established
with Maneesh and Glopec International. We may not be able to successfully form
or manage such other partnerships, and if not, our ability to
execute our business plan, which could have a material adverse
effect on our business, prospects, financial condition and results of operation.

We may
become subject to increased governmental regulation, which could increase the
costs or cause us to revise certain product claims.

The
design, development, manufacturing and marketing of pharmaceutical compounds,
on which our success depends, is subject to extensive regulation by the federal
government,

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principally
the FDA, and to a lesser extent, other federal and state government agencies.
The Controlled Substances Act and other federal statutes and regulations govern
the development, testing, manufacture, safety/effectiveness, labeling, storage,
record keeping, approval, advertising and promotion of our products.
Non-compliance with applicable regulations can result in judicially and/or
administratively imposed sanctions, including the initiation of product
seizures, injunction actions, fines and criminal prosecutions.

Administrative
enforcement measures may involve the recall of products, as well as the refusal
of an applicable government authority to enter into supply contracts or to
approve new drug applications. The FDA also has the authority to withdraw its
approval of drugs in accordance with regulatory due process procedures. The
cost of complying with government regulations substantially increases the cost
of producing our products.

We can
provide no assurance of the successful and timely development of our new
products.

We
are endeavoring to identify additional OTC and Rx products which we can
manufacture or further develop. Further development and extensive testing will
be required to determine their technical feasibility and commercial viability.
Our success will depend on our ability to achieve scientific and technological
advances and to translate such advances into reliable, commercially competitive
products on a timely basis. An inventory of the products that we have developed
    and may in the future develop are not likely to be commercially available
    for some time. The proposed development schedules for our products may be
    affected by a variety of factors, including technological difficulties, proprietary
    technology of others, and changes in governmental regulation, many of which
    will not be within our control. Any delay in the development, introduction,
    or marketing of our products could result either in such products being marketed
    at a time when their cost and performance characteristics would not be competitive
    in the marketplace or in the shortening of their commercial lives. In light
    of the long-term nature of our projects, the nature technology involved,
    and the other factors, described elsewhere in Risk Factors, there
    can be no assurance that we will be able to compete successfully the development
    or marketing of any new products.

We face
product liability risks and may not be able to obtain adequate insurance to
protect us against losses.

As
a manufacturer and distributor of products that are intended to be ingested by
consumers, even if sold to the consumer by a third party company and/or
formulated in a third partys facility, we may be subject to various product
liability claims, including, among others, that our products contain
contaminants or include inadequate instructions as to use or inadequate
warnings concerning side effects and interactions with other substances. While
no such claims have been made to date, any future product liability claims and
the resulting adverse publicity could harm our business. If a successful
product liability claim or series of claims is brought against us for uninsured
liabilities or in excess of insured liabilities, our assets may not be
sufficient to cover such claims and our business operations could be impaired
which could have a material adverse effect on our business, prospects, financial
condition and results of operation.

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If key
personnel were to leave us or if we are unsuccessful in attracting qualified
personnel, our ability to develop products could be materially harmed.

Our
success depends in large part on our ability to attract and retain highly
qualified scientific, technical and business personnel experienced in the
development, manufacture and distribution of OTC and prescription drugs. The loss
of the services of key personnel could have a material adverse effect on our
business, prospects, financial condition and results of operation.

We rely on
trade secrets, unpatented proprietary expertise and continuing innovation to
protect our proprietary interests.

We
rely particularly on trade secrets, unpatented proprietary expertise and
continuing innovation that we seek to protect, in part, by entering into
confidentiality agreements with licensees, suppliers, employees and
consultants. We cannot provide assurance that these agreements will not be
breached or circumvented. We also cannot be certain that there will be adequate
remedies in the event of a breach. Disputes may arise concerning the ownership
of intellectual property or the applicability of confidentiality agreements. We
cannot be sure that our trade secrets and proprietary technology will not
otherwise become known or be independently developed by our competitors or, if
patents are not issued with respect to products arising from research, that we
will be able to maintain the confidentiality of information relating to these
products. In addition, efforts to ensure our intellectual property rights can
be costly, time-consuming and/or ultimately unsuccessful. Our success also
depends in part on our continued ability to obtain patents, licenses and other
intellectual property rights covering our products. There can be no assurance
that our licenses, patents and patent applications are or will be sufficiently
comprehensive to protect these products. The process of seeking further patent
protection can be long and expensive, and there can be no assurance that we
will have sufficient capital reserves to cover the expense of patent
prosecution for any future applications or that all or even any patents will
issue from any future patent applications or that any of the patents when
issued will be of sufficient scope or strength to provide meaningful protection
or any commercial advantage to us.

We
may receive communications alleging possible infringement of patents or other
intellectual property rights of others. We believe that in most cases we could
obtain necessary licenses or other rights on commercially reasonable terms, but
we may be unable to do so. In addition, litigation could ensue or damages for
any past infringements could be assessed. Litigation, which could result in
substantial cost to and diversion of efforts by us, may be necessary to enforce
patents or other intellectual property rights of us or to defend us against
claimed infringement of the rights of others. The failure to obtain necessary
licenses or other rights or litigation arising out of infringement claims could
have a material adverse effect on our business, prospects, financial condition
and results of operation.

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Risks Related to Our
Industry

The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. We may be unable
to compete with more substantial enterprises.

The
generic pharmaceutical industry is characterized by rapid technological
developments and a high degree of competition. As a result, our actual or
proposed products could become obsolete before we recoup any portion of our
related research and development and commercialization expenses. Our industry
is highly competitive, and this competition comes from both from biotechnology
firms and from major pharmaceutical and chemical companies. Many of these
companies have substantially greater financial, marketing and human resources
than we do (including, in some cases, substantially greater experience in
clinical testing, manufacturing and marketing of pharmaceutical products). We
also experience competition in the development of our products from universities
and other research institutions and compete with others in acquiring technology
from such universities and institutions. In addition, certain of our products
may be subject to competition from products developed using other technologies.
See Business  Competition.

The industry
in which we operate is highly competitive.

Numerous
well-known companies, which have substantially greater capital, research and
development capabilities and experience than we have, are presently engaged in
the research and development efforts with respect to our target indications. By
virtue of having or introducing competitive products on the market before us,
these entities may gain a competitive advantage. Further future technological
developments may render some or all of our current or future products
noncompetitive or obsolete, and we may not be able to make the enhancements to
our products necessary to compete successfully with newly emerging
technologies. If we are unable to successfully compete in our chosen markets,
our business, prospects, financial condition, and results of operations would be
materially adversely affected. See Business
 Competition.

The
government regulatory approval process is time consuming and expensive.

We
have filed an Abbreviated New Drug Application (ANDA) for approval of a
formulation of a 10mg, 25mg & 50mg dose of hydroxyzine HCL as well as an
ANDA for Estrodial and plan on filing applications for other product candidates
in the future. Prior to commercialization, each product candidate will be
subject to an extensive and lengthy governmental regulatory approval process in
the United States and in other countries. We may not be able to obtain
regulatory approval for any product candidate we develop or, even if approval
is obtained, the labeling for such products may place restrictions on their use
that could materially impact the marketability and profitability of the product
subject to such restrictions. We have limited experience in designing, conducting
and managing the clinical testing necessary to obtain such regulatory approval.
Satisfaction of these regulatory requirements, which includes satisfying the
FDA and foreign regulatory authorities that the product is both safe and
effective for its intended therapeutic uses, typically takes several years
depending upon the type, complexity and novelty of the product and requires the
expenditure of substantial resources.

24

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Any
        manufacturer producing our products will be required to comply with extensive
government regulation.

Before
we can begin to commercially manufacture any of our product candidates, we must
either secure manufacturing in an approved manufacturing facility or obtain
regulatory approval of our own manufacturing facility and processes. In
addition, the manufacturing of our product candidates must comply with cGMP
and/or other requirements of the FDA and requirements by regulatory agencies in
other countries. These requirements govern, among other things, quality control
and documentation procedures. We or any third-party manufacturer of our product
candidates, may not be able to comply with these requirements, which would
prevent us from selling such products and would have a material adverse effect
on our business, prospects, financial condition and results of operation.
Material changes to the manufacturing processes of our products after approvals
have been granted are also subject to review and approval by the FDA or other
regulatory agencies.

The commercial success of any
newly-introduced pharmaceutical product depends in part upon the ability of
patients to obtain adequate reimbursement.

If
we succeed in bringing our product candidates to market, they may not be
considered cost-effective, and coverage and adequate payments may not be
available or may not be sufficient to allow us to sell our products on a
competitive basis. In both the United States and elsewhere, sales of medical
products, diagnostics, and therapeutics are dependent, in part, on the
availability of reimbursement from third party payors, such as health
maintenance organizations and other private insurance plans and governmental
programs such as Medicare. Third party payors are increasingly challenging the
prices charged for pharmaceutical products and services. We anticipate that our
business, prospects, financial results and results of operation will be affected
by the efforts of government and third party payors to contain or reduce the
cost of health care through various means. In the United States, there have
been and will continue to be a number of federal and state proposals to
implement government controls on pricing. Similar government pricing controls
exist in varying degrees in other countries. In addition, the emphasis on
managed care in the United States has increased and will continue to increase
the pressure on the pricing of pharmaceutical products. We cannot predict
whether any legislative or regulatory proposals will be adopted or the effect
these proposals or managed care efforts may have on our business, prospects,
financial condition and results of operation.

Risks Related To Our Common Stock

The securities markets have recently
been highly volatile.

The
market prices for securities of small public companies have historically
experienced a high degree of volatility. The securities markets in the United
States and abroad have experienced significant extraordinary price and volume fluctuations
that are wholly unrelated or disproportionate to the operating performance of
individual companies, especially since September 2008. As a result, the market
prices for many securities have decreased materially or fluctuated materially
for reasons wholly unrelated to the merits of the issuer of the securities. In
addition, future announcements concerning us or our competitors, including
operating results,

25

---



technological
innovations, government regulations, or foreign and other competition, could
have a significant impact on the market prices of the common stock.

Our common stock is thinly traded
and may experience price volatility, which could affect a stockholders ability
to sell our stock or the price for which it can be sold.

There
has been and may continues to be, at least for the immediate future, a limited
public market for our common stock. The market price for our common stock, and
for the stock of pharmaceutical companies generally, has been highly volatile.
The market price of our common stock may be affected by the following among other things:

| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | results of
 our clinical trials;                                                       
| |   |                                                                                        
| |  | approval or
 disapproval of abbreviated new drug applications or new drug applications;
| |   |                                                                                        
| |  | announcements
 of innovations, new products or new patents by us or by our competitors;
| |   |                                                                                        
| |  | governmental
 regulation;                                                              
| |   |                                                                                        
| |  | patent or
 proprietary rights developments;                                            
| |   |                                                                                        
| |  | proxy
 contests or litigation;                                                         
| |   |                                                                                        
| |  | news
 regarding the efficacy of, safety of or demand for drugs or drug
 technologies;  
| |   |                                                                                        
| |  | economic and
 market conditions, generally and related to the pharmaceutical industry; 
| |   |                                                                                        
| |  | healthcare
 legislation;                                                               
| |   |                                                                                        
| |  | changes in
 third-party reimbursement policies for drugs; and                          
| |   |                                                                                        
| |  | fluctuations
 in our operating results.                                                

As
a result of these fluctuations, you may experience difficulty selling shares of
our common stock when desired or at acceptable prices.

Future
sales of substantial amounts of our common stock or other equity-related
securities in the public market or privately, or the perception that such sales
could occur, could adversely affect prevailing trading prices of our common
stock and could impair our ability to raise capital through future offerings of
equity or other equity-related securities. We can make no prediction as to the
effect, if any, that future sales of shares of our common stock or
equity-related securities, or the availability of shares of common stock for
future sale, will have on the trading price of our common stock.

26

---



Rights to acquire shares of our
common stock may have a negative effect on the trading prices of our common
stock as well as a dilutive effect.

We
have issued and may continue to issue warrants, options and other convertible
securities at or below the current market price. As of October 31, 2008, we had
outstanding warrants to acquire 29,020,915 shares of our common stock as well
as 591,850 shares of our Series A Preferred Stock, convertible into an
aggregate of 118,370 shares of our common stock, subject to adjustment as
provided in accordance with the terms of such shares, and 28,955 shares of our
Series C Preferred Stock, convertible into an aggregate of 28,955,000 shares of
our common stock, subject to adjustment as provided in accordance with the
terms of such securities. During the terms of such warrants and convertible
securities, the holders thereof will have the opportunity to profit from an
increase in the market price of the common stock with resulting dilution in the
interests of holders of common stock. The existence of such warrants and
convertible securities could materially adversely affect the terms on which we
can obtain additional financing, and the holders can be expected to exercise
those warrants and conversion rights at a time when we, in all likelihood,
would be able to obtain additional capital by offering shares of our common
stock on terms more favorable to us than those provided by the exercise or
conversions of the securities. We also have the authority to issue additional
shares of common stock and shares of one or more series of convertible
preferred stock. The issuance of those shares could result in the dilution of
the voting power of outstanding shares of common stock and could have a
dilutive effect on earnings per share.

If penny stock regulations become
applicable to our common stock they will impose restrictions on the
marketability of our common stock and the ability of our stockholders to sell
shares of our stock could be impaired.

The
SEC has adopted regulations that generally define a penny stock to be an
equity security that has a market price of less than $5.00 per share or an
exercise price of less than $5.00 per share subject to certain exceptions.
Exceptions include equity securities issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in continuous
operation for more than three years, or (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average revenue of at least $6,000,000 for the preceding three
years. Unless an exception is available, the regulations require that prior to
any transaction involving a penny stock, a risk of disclosure schedule must be
delivered to the buyer explaining the penny stock market and its risks. Our
common stock is currently trading at under $5.00 per share. Although we
currently fall under one of the exceptions, if at a later time we fail to meet
one of the exceptions, our common stock will be considered a penny stock. As
such the market liquidity for our common stock will be limited to the ability
of broker-dealers to sell it in compliance with the above-mentioned disclosure
requirements.

You
should be aware that, according to the SEC, the market for penny stocks has
suffered in recent years from patterns of fraud and abuse. Such patterns
include:

| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | control of
 the market for the security by one or a few broker-dealers;

27

---



| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | boiler
 room practices involving high-pressure sales tactics;                                                                                                          
| |   |                                                                                                                                                                          
| |  | manipulation
 of prices through prearranged matching of purchases and sales;                                                                                             
| |   |                                                                                                                                                                          
| |  | the release
 of misleading information;                                                                                                                                  
| |   |                                                                                                                                                                          
| |  | excessive
 and undisclosed bid-ask differentials and markups by selling broker- dealers;
 and                                                                            
| |   |                                                                                                                                                                          
| |  | dumping of
 securities by broker-dealers after prices have been manipulated to a desired
 level, which hurts the price of the stock and causes investors to suffer
 loss.

We
are aware of the abuses that have occurred in the penny stock market. Although
we do not expect to be in a position to dictate the behavior of the market or
of broker-dealers who participate in the market, we intend to endeavor within
the confines of practical limitations to prevent such abuses with respect to
our common stock.

It may be difficult for a third
party to gain control of us, even if the acquisition of control would be in the
best interests of our stockholders.

Our
Restated Articles of Incorporation and the Nevada General Corporation Law
contain provisions that may have the effect of making more difficult or
delaying attempts by others to obtain control of us, even when those attempts
may be in the best interest of our stockholders. Nevada law also imposes
conditions on certain business combination transactions with interested
stockholders (as defined therein). The Restated Articles provide for a
staggered board, which makes it more difficult for the stockholders to change
the majority of our directors. In addition, our Restated Articles authorize the
Board of Directors, without stockholder approval, to issue one or more series
of preferred stock, which could have voting and conversion rights that
adversely affect the voting power of the holders of our common stock.

On
September 8, 2006, our Board of Directors adopted a Rights Plan, the effect of
which is to grant stockholders of record as of September 8, 2006, in the event
of a transaction which is not an exchange or tender offer to all the
stockholders and is on terms and price which a majority of certain members of
the Board does not determine to be adequate and in the best interests of the
Company, its stockholders and other constituencies the right to acquire during
the period ending September 8, 2011 for each share held of record one
additional share of common stock at a price equal to 33 1/3% of the then market
price. The transaction is the acquisition by an Acquiring Person or group of
such shares which would result in the person or group beneficially owing in
excess of 20% of the outstanding shares of our common stock or the acquisition
of by a 20% or more owner or group of owners of an additional 1% of the
outstanding shares of common stock. The Plan also provides that in the event of
a merger or other business combination in which the owners of all the
outstanding shares prior to the transaction are not the owners of all the
voting powers of the surviving corporation or in the event of a sale or
transfer of more than 50% of our assets or earning power our stockholders of
are to receive upon payment of the purchase price of $1,200 per share, shares
of common stock of the
acquiring company having a value equal to two times the purchase price. The
existence of

28

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such Plan will have the effect of making us less attractive in the
market to candidates not approved by certain members of the Board and thus
reduce the possibility of a transaction being effected for the sale of our
common stock or an asset or stock transaction which would result at a higher
price than if the Rights Plan did not exist.

As
a result of our recent Series C financing that initially closed on May 9, 2008,
Maneesh beneficially owns approximately 57.3% of our outstanding shares of
common stock and its three designees constitute a majority on the five-member
board, one of whom is acting as our interim Principal Executive Officer. In
addition, Maneesh together with Dr. Lane and Harcharan Singh and their
respective affiliates are among principal parties to a Voting Agreement dated
as of May 9, 2008 which contains an agreement as to the identity of the
designees of the board, a majority of whom are Maneesh designees, and limits
the size of the board. Consequently, Maneesh controls the operations of the
Company and will have the ability to control substantially all matters
submitted to stockholders for approval, including the election of directors,
removal of directors, amendment of our Articles of Incorporation or bylaws and
the adoption of measures that could delay or prevent a change in control or
impede a merger, takeover or other business combination. Maneesh thus has
substantial influence over our management and affairs and our other
stockholders of the Company have limited ability to remove management or effect
the operations of the business of the Company. Accordingly, this concentration
of ownership by itself may have the effect of impeding a merger, consolidation,
takeover or other business consolidation, or discouraging a potential acquiror
from making a tender offer for the common stock.

Our by-laws have been amended to
restrict the ability of stockholders to participate in the election of
directors and the presentation of matters at stockholder meetings.

On
September 8, 2006, our By-laws were amended to provide that: (i) nominees for
director at the annual meeting by stockholders other than by the Board can be
made only by written notice to the Board delivered within a designated period
prior to the meeting and provided certain information as to the nominee and the
stockholder making such nomination is given to the Board in such notice, and
(ii) business at the annual meeting can be introduced by a member of the Board
or only by those stockholders who provide written notice not less than 40 nor
more than 90 days prior to the annual meeting, containing a description of the
business and reasons therefore and certain information as to the stockholders.
Such provisions restrict the ability of stockholders to nominate directors and
to introduce business as to the Company for consideration of the stockholders.

We will have insufficient authorized
capital to issue common stock to all of our holders of warrants and other
convertible securities.

We
have authorized 40,000,000 shares of our common stock with a par value of
$0.001 per share, of which 29,202,357 shares of our common stock are outstanding
    as of October 31, 2008, after giving effect to 3,375,000 shares of our common
stock that we are obligated to issue. As of October 31, 2008, 58,094,285 shares
are issuable upon the exercise and conversion of warrants and preferred stock
of the Company, respectively, subject to adjustment as provided in accordance
with the terms of such shares. If holders of such warrants and preferred stock
were to

29

---



exercise and convert their derivative securities, then we would have
insufficient shares of common stock to issue to such holders and may be subject
to adverse claims from holders due to the inability to issue shares of common
stock. We plan on taking steps to increase the authorized capital of the
Company to provide for sufficient authorized capital.

30

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|         |                          
|-------- | -------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS

None.

|        |           
|------- | ----------
|ITEM 2. | PROPERTIES

Facilities and Equipment

We
currently lease our principal offices and manufacturing and distribution
facilities of approximately 82,672 square feet, in Fort Lauderdale, Florida.
These leases expire in December 31, 2010 and April 30, 2012, respectively.

Our
total rental expense for fiscal year 2006, 2007 and 2008 was $91,246, $753,760
and $863,970 respectively.

|        |                   
|------- | ------------------
|ITEM 3. | LEGAL PROCEEDINGS.

DEA Actions

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 guiafenesin tablets, which occurred at Kirk in July 2008. The
DEA also alleges that Kirk failed to maintain appropriate recordkeeping
practices.

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

A
hearing has been scheduled before an administrative law judge to commence
February 18, 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 we intend 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, we filed our answer and counterclaimed
seeking an award of damages for wrongful seizure of the seized

31

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property as
well as a declaratory judgment that the United States acted unlawfully,
arbitrarily and capriciously in implementing its quota system.

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 would
have a material adverse effect on our business, prospects, financial condition
and results of operation. (See Risk Factors above)

Nostrum Lawsuit

On
June 27, 2008, we commenced a lawsuit in the United States District Court for
the Southern District of New York against Dr. Nirmal Mulye and Nostrum (Case
No. 08-Civ-5861). On July 31, 2007, the Company, Dr. 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 Dr. 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 Dr. Mulye
and Nostrum were assigned to Dr. Mulye and Nostrum, while 10,661,000 shares of
our common stock (the Escrow Shares), then owned by Nostrum, were placed in
escrow to be returned to us subject to the release and discharge of guarantees
and a related undertaking given by Dr. 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 Dr. Mulye
were released and discharged and replaced with a letter of credit issued by
Maneesh Pharmaceuticals Ltd. (Maneesh) in favor of the Bank of India securing
the BOI Loan. 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. The counterclaim
    is seeking 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. On
    September 5, 2008, Nostrum and Mulye made a motion to the Court to dismiss
    our breach of contract and breach of implied covenant of good faith and fair
    dealing claims. Synovics opposed the motion and, on October 14, 2008, the
    Court denied the motion in part and granted the motion in part. At this time,
    Synovics maintains and continues to pursue its claims for the return of the
    escrowed shares as well as a claim for breach of contract that seeks damages
    against Nostrum and Mulye for their refusal to agree to the immediate return
    of the Escrow Shares in or around April of 2008. Both parties have recently
    filed motions for summary judgment seeking a

32

---



ruling from
the Judge regarding the return of the Escrow Shares and the Court has scheduled
a hearing for February 5, 2009. Synovics 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 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. 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, we 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
$375,637 plus court costs and pre-judgment interest.

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

None.

33

---



PART II

|        |                                                                                                                
|------- | ---------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR THE COMPANYS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
 AND ISSUER PURCHASES OF EQUITY SECURITIES.

On
July 18, 2001, our common stock was delisted from quotation on the NASDAQ Small
Cap Market due to non-compliance with certain continuing listing requirements.
From July 19, 2001 to February 28, 2003, our common stock was quoted on the OTC
Bulletin Board under the symbol BNRX.OB. Our common stock was quoted on the on
the Pink Sheets from March 1, 2003 to July 12, 2005. On July 13, 2005 our
common stock was approved by the NASD and appeared on the OTCBB with an
unpriced quote. Three business days later, on July 18, 2005, HDSN showed a
priced quote for BNRX.OB. Thirty days later, on August 15, 2005 all other
market makers were eligible to appear on the Nasdaq OTCBB with their quotes,
and have been quoted there through the present. Our common stock is currently
traded under the symbol SYVC.OB.

|                                                                 |  |           |      |          |  |      | 
|---------------------------------------------------------------- |  | --------- | ---- | -------- |  | ---- | 
|                                                                 |  | High
 ($) |      | Low
 ($) | 
|                                                                 |  |           |      |          |  |      | 
|Fiscal Year ended October 31, 2009                               |  |           |      |          |  |      | 
|                                                                 |  |           |      |          |  |      | 
|Three months
 ending January 31, 2009 (through January 23, 2009) |  |           | 0.37 |          |  | 0.17 | 
|                                                                 |  |           |      |          |  |      | 
|Fiscal Year ended October 31, 2008                               |  |           |      |          |  |      | 
|                                                                 |  |           |      |          |  |      | 
|Three months
 ended January 31, 2008                             |  |           | 0.85 |          |  | 0.45 | 
|Three months
 ended April 30, 2008                               |  |           | 0.75 |          |  | 0.25 | 
|Three months
 ended July 31, 2008                                |  |           | 0.75 |          |  | 0.35 | 
|Three months
 ended October 31, 2008                             |  |           | 0.60 |          |  | 0.20 | 
|                                                                 |  |           |      |          |  |      | 
|Fiscal Year Ended October 31, 2007                               |  |           |      |          |  |      | 
|                                                                 |  |           |      |          |  |      | 
|Three months
 ended January 31, 2007                             |  |           | 2.00 |          |  | 1.30 | 
|Three months
 ended April 30, 2007                               |  |           | 1.60 |          |  | 1.01 | 
|Three months
 ended July 31, 2007                                |  |           | 1.55 |          |  | 0.85 | 
|Three months
 ended October 31, 2007                             |  |           | 1.01 |          |  | 0.65 | 

The  foregoing  quotations  were  provided by AOL
Finance and the  quotations  reflect  inter-dealer  prices,  without  retail
mark-up, mark-down or commission and may not represent actual transactions.

34

---



The
last reported sale price per share of common stock as quoted on the OTCBB was
$0.23 on January 23, 2009.

As
of January 23, 2009, there were 223 holders of record of our common stock. This
figure does not represent the actual beneficial owners of our common stock
because shares are held in street name by securities dealers and others for
the benefit of individual owners.

Dividend Policy

We
have not paid any cash dividends on our common stock and do not currently
anticipate paying cash dividends in the foreseeable future except to the extent
cash dividends are required to be paid on outstanding shares of our Series C
Preferred Stock.

Holders
of Series C Preferred Stock are entitled to receive cumulative dividends at the
rate of 6% of the stated value of $500 per annum on each outstanding share of
Series C Preferred Stock accruing from May 9, 2008 until the earlier of May 9,
2011 or the conversion thereof into shares of common stock, payable quarterly
on March 31, June 30, September 30 and December 31, with the first payment due
June 30, 2008, and payable in cash or shares of Series C Preferred Stock in
accordance with the terms of the Amended and Restated Certificate of
Designations, Preferences and Rights of Series C Convertible Redeemable
Preferred Stock. Holders of Series C Preferred Stock shall also be entitled to
participate on a pro-rata basis in any dividends paid on our common stock on an
as-converted basis. As of October 31, 2008, we have accrued $382,649 in
dividend expense which are in arrears.

The
agreements, into which we may enter in the future, including indebtedness, may
impose limitations on our ability to pay dividends or make other distributions
on our capital stock.

Future dividends on our common stock, if any, will be at the discretion of our
Board of Directors and will depend on, among other things, our results of
operations, cash requirements and surplus, financial condition, contractual
restrictions and other factors that our Board of Directors may deem relevant.
We intend to retain future earnings, if any, for reinvestment in the
development and expansion of our business.

Further,
our Credit Agreement with Bank of India prohibits the payment of dividends
without the consent of the Bank.

Recent Sales of Unregistered Securities

None
other than previously reported in a Current Report on Form 8-K or a Quarterly
Report on Form 10-Q.

35

---



Purchases
of Equity Securities by the Issuer and Affiliated Purchasers

We
did not purchase any of our shares of common stock during the year ended
October 31, 2008.

Stock Performance
Graph

The
following performance graph compares the cumulative total stockholder return
    on our common stock to the cumulative total return on the NASDAQ Composite
    Index, the NASDAQ Pharmaceutical Index, the NASDAQ Biotechnology Index and
    the Russell 2000 Index  for the five years
    ended October 31, 2008, assuming an initial investment of $100 and the reinvestment
    of all dividends. We did not
pay any dividends during the period reflected in the graph. We are
including the NASDAQ Biotechnology Index and Russell 2000 Index solely because
we used those indexes in our Annual Report on Form 10-K last fiscal year.

Our common
stock price performance shown below should not be viewed as being indicative of
future performance.











|                                |          | Oct-2003 | Oct-2004 | Oct-2005 | Oct-2006 | Oct-2007 | Oct-2008
|------------------------------- | -------- | -------- | -------- | -------- | -------- | -------- | --------
|                                |          |          |          |          |          |          |         
|Synovics Pharmaceuticals, Inc.  | Return % |          | -20.00   | 1,050.00 | -13.04   | -60.00   | -56.25  
|                                | Cum $    | 100.00   | 80.00    | 920.00   | 800.00   | 320.00   | 140.00  
|NASDAQ Composite-Total Returns  | Return % |          | 2.69     | 8.15     | 12.48    | 21.75    | -37.54  
|                                | Cum $    | 100.00   | 102.69   | 111.06   | 124.92   | 152.09   | 95.00   
|NASDAQ Pharmaceutical Index     | Return % |          | 0.02     | 15.44    | 5.96     | 9.34     | -13.85  
|                                | Cum $    | 100.00   | 100.02   | 115.46   | 122.34   | 133.76   | 115.23  
|NASDAQ Biotechnology Index      | Return % |          | -2.83    | 8.57     | 7.95     | 9.45     | -17.35  
|                                | Cum $    | 100.00   | 97.17    | 105.50   | 113.89   | 124.66   | 103.03  
|Russell 2000 Index Total Return | Return % |          | 11.73    | 12.10    | 19.95    | 9.28     | -34.16  
|                                | Cum $    | 100.00   | 111.73   | 125.24   | 150.23   | 164.18   | 108.09  
|                                |          |          |          |          |          |          |         

36

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|        |                         
|------- | ------------------------
|ITEM 6. | SELECTED FINANCIAL DATA.

The
following selected financial data should be read in conjunction with our
consolidated financial statements and the related notes and with our
managements discussion and analysis of financial condition and results of
operations, provided elsewhere herein and attached to this Report commencing on
page F-1.

|                                        |  |                         |            |      |    |            |   |      |            |      |    |            |   |    |           |  
|--------------------------------------- |  | ----------------------- | ---------- | ---- | -- | ---------- | - | ---- | ---------- | ---- | -- | ---------- | - | -- | --------- | -
|                                        |  | Year Ended
 October 31, |           
|                                        |  |                         |           
|                                        |  | 2008                    |            | 2007 |    | 2006       |   | 2005 |            | 2004 |   
|Gross Revenues                          |  | $                       | 26,395,077 |      | $  | 25,236,325 |   | $    | 10,516,398 |      | $  | 8,192      |   | $  | 98,767    |  
|Net Revenues                            |  | $                       | 25,959,579 |      | $  | 23,466,311 |   | $    | 10,516,398 |      | $  | 8,192      |   | $  | 98,767    |  
|Cost of Sales                           |  | $                       | 16,988,322 |      | $  | 16,837,126 |   | $    | 8,158,727  |      | $  | 45,289     |   | $  | 18,269    |  
|Gross Profit (Loss)                     |  | $                       | 8,971,257  |      | $  | 6,629,185  |   | $    | 2,357,671  |      | ($ | 37,097     | ) | $  | 80,498    |  
|Operating Expenses                      |  | $                       | 11,454,723 |      | $  | 16,893,656 |   | $    | 5,976,857  |      | $  | 1,874,468  |   | $  | 866,913   |  
|Other Income (Expense)                  |  | ($                      | 1,522,366  | )    | ($ | 10,593,413 | ) | ($   | 3,909,716  | )    | ($ | 999,695    | ) | ($ | 337,921   | )
|Net Loss                                |  | ($                      | 4,005,831  | )    | ($ | 20,857,884 | ) | ($   | 8,571,021  | )    | ($ | 2,911,260  | ) | ($ | 1,124,336 | )
|Basic and Diluted Loss Per Share        |  | ($                      | 0.17       | )    | ($ | 1.09       | ) | ($   | 0.33       | )    | ($ | 0.14       | ) | ($ | 0.14      | )
|                                       
|Weighted Average Shares Outstanding (1) |  |                         | 23,547,066 |      |    | 19,070,573 |   |      | 26,044,630 |      |    | 20,094,784 |   |    | 7,840,496 |  
|Balance Sheet Data:                     |  |                         |            |      |    |            |   |      |            |      |    |            |   |    |           |  
|Working Capital (Deficit)               |  | ($                      | 6,335,161  | )    | ($ | 19,458,269 | ) | ($   | 5,289,000  | )    | ($ | 3,713,386  | ) | ($ | 3,079,327 | )
|Total Assets                            |  | ($                      | 22,346,110 | )    | $  | 23,333,897 |   | $    | 38,882,650 |      | $  | 16,911,555 |   | $  | 2,875,306 |  
|Total Liabilities                       |  | ($                      | 17,344,616 | )    | $  | 31,438,023 |   | $    | 25,779,163 |      | $  | 5,607,804  |   | $  | 3,779,939 |  
|Stockholders equity (deficit)           |  |                         | (5,001,494 | )    | ($ | 8,104,126  | ) | $    | 13,103,487 |      | $  | 11,303,751 |   | ($ | 904,633   | )

|    |                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | These shares do not
 include 57,394,285, 8,701,915, 1,947,751,
 620,472 and 910,370 shares of common stock for the years ended October 31,
 2008, 2007, 2006, 2005 and 2004, respectively, that may be issued upon exercise
     of outstanding stock options, warrants and convertible preferred stock as
     they are antidilutive.

37

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|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATION.

The
following discussion of our financial condition and results of operations as
well as certain statements and information under Item 1 Business include
certain forward looking statements. When used in this report, the words
expects, intends, plans and anticipates and similar terms are intended
to identify forward looking statements that relate to our future performance.
Such statements involve risks and uncertainties. Our actual results may differ
materially from the results discussed here.

Overview

We
were incorporated on December 22, 1990 under the laws of the State of Nevada.
On April 11, 2006, we name changed our corporate name from Bionutrics Inc. to
our current name. Since our incorporation, we engaged in various lines of
business in pharmaceutical and dietary supplement products. In May 2006, we
acquired Kirk and its affiliate, ANDAPharm, both Florida limited liability
companies. We have one additional operating subsidiary, Synovics Labs. Inc. Our
principal offices are located at 5360 NW 35 Avenue, Fort Lauderdale, Florida
33309. During fiscal year ended October 31, 2007, we relocated our principal
offices to Fort Lauderdale, Florida from Phoenix, Arizona.

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 and ANDAPharm
in May 2006, we have a facility 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 and Harcharan (Harry) Singh, of
Glopec International. Maneesh is an international pharmaceutical company with
its headquarters located in Mumbai, India. Harry Singh a pharmaceutical
industry veteran with a 20 year proven track record of sourcing competitive
pharmaceuticals products for North America from Asia and Europe.

Our
key assets can be summarized as:

| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | Private
 label OTC drug manufacturer - Kirk Pharmaceuticals, Fort Lauderdale, Florida;

38

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| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | 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);
| |   |                                                                                                           
| |  | Robust
 pipeline of prescription Rx and OTC generic drug products;                                        
| |   |                                                                                                           
| |  | 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. This alliance is 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. Presently, in the categories
in which we are supplying products, store brands exceed approximately 35% of
our total sales and we expect this to reach more than 50% over the next few years.
We believe that this growth provides us with a great opportunity to grow our
OTC sales and that with our focus on competitive pricing and customer service,
we believe that we can, with adequate capitalization and assuming certain DEA
actions, as described in the Legal Proceedings and Risk Factors,
are resolved in a manner favorable to us, continue to grow our OTC business in
the U.S. substantially.

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 effect 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. Our OTC products are subject to
    control by the DEA and will continue to be manufactured (as well as packaged
    and distributed) through our Fort Lauderdale facilities and assuming certain
    DEA actions, as described in the Legal Proceedings and Risk
    Factors,
are resolved in a manner favorable to us (see Business - US Drug
Enforcement Agency for a further description of DEA controls and actions
commenced against us).

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

39

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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 not only provides development and manufacturing
    of both OTC and Rx drugs, but resources of personnel, operating and IT systems
    as well as consulting on facilities build-out and equipment procurement.
    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 will source finished
product internationally, then package and distribute through Florida; the
customer belongs to Synovics.

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 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 28,138 shares of Series C Preferred Stock, convertible into 28,138,000
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 from $18,625,000 on October 31,
2007 to the sum of $6,190,000 as of December 31, 2008. Management believes that
the restructuring of our balance sheet and the reduction of our short term and
long term debt will provide management with greater flexibility to make
operational decisions for growth and focus on implementing our Front-End
strategy.

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.

Critical Accounting Policies

The
section herein entitled Managements Discussion and Analysis of Financial
Condition and Results of Operation addresses our consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States

40

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of America.
The preparation of these statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the
reporting period. On an ongoing basis, management evaluates its estimates and
judgment, including those related to revenue recognition, goodwill, bad debts,
income taxes, and contingent liabilities. Management bases its estimates and judgments
on historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments as to the carrying value of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions and conditions.

The SEC defines critical accounting policies as those that require
application of managements most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effect of matters
that are inherently uncertain and may change in subsequent periods. The
following discussion of critical accounting policies represents our attempt to
report on those accounting policies which we believe are critical to our
consolidated financial statements and other financial disclosure. It is not
intended to be a comprehensive list of all of our significant accounting
policies, which are more fully described in Note 1 of the Notes to the
Consolidated Financial Statements included in the registration statement of
which this prospectus constitutes a part.

We have identified the following as critical accounting policies affecting us:
Revenue Recognition and Income Taxes.

Revenue Recognition

We generally recognize product revenue at the time of shipment to the customer.
Revenues from the sale of consignment inventory are recognized upon the sale of
the inventory by third parties. Revenues from services are recorded at the time
the service is rendered and/or reimbursable expenses are incurred.

Income Taxes

We have a history of losses. These losses generated sizeable federal net
operating loss (NOL)
carryforwards as of October 31, 2008 of approximately $27,200,592.

Generally accepted accounting principles require that we record a valuation
allowance against the deferred income tax asset associated with these NOL
carryforwards and other deferred tax assets if it is more likely than not
that we will not be able to utilize them to offset future income taxes.
Therefore, due to our history of unprofitable operations, we have not
recognized any deferred tax assets. We currently provide for income taxes only
to the extent that we expect to pay cash taxes on current income.

It is possible, however, that we could be profitable in the future at levels
which cause management to conclude that it may realize a portion of the NOL
carryforwards and other deferred tax assets. However, the realization of such
NOL carryforwards may be significantly

41

---



limited if it
is deemed that a change in ownership has occurred. For tax purposes, a change
in ownership has occurred if an entity or group of entities that previously did
not own 50% or more of us acquires enough new equity to raise its interest to
more than 50% over a three year period. Subsequent revisions to the estimated
net realizable value of the deferred tax assets could cause our provision for
income taxes to vary significantly from period-to-period.

Results of Operation

Results
of Operations for Year Ended October 31, 2008 compared to Year Ended October
31, 2007

Consolidated
revenues for the year ended October 31, 2008 were $25,959,579 compared to
$23,466,311 for the same period in 2007, an increase of approximately 10.6% over
    the prior fiscal year. The increase results from a continued strong growth
    of the OTC product line as well as increases in sales of the Rx product line.
    The increase in revenue was negatively impacted by the continued decline
    in sales of ephedrine and pseudoephedrine products caused in part by the
    rejection of our application to the DEA for our 2008 procurement quota. In
    addition, on September 15, 2008, the DEA commenced an administrative proceeding
    against us to, among other things, revoke our DEA license to manufacture
    and distribute controlled substances. If we do not prevail in this action,
    this will have a material adverse effect on our business, prospects, financial
    condition and results of operation. See Item 3 Legal
Proceedings and Risk Factors for further information.

During
fiscal year 2008, sales of products containing ephedrine and guaifenesin
accounted for approximately 47% of sales as compared to approximately 63% for
    the same period in 2007.

Our
three largest customers represented approximately 51.4% of the sales for fiscal
year 2008. 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 year ended October 31, 2008 was $16,988,322 compared to
$16,837,126 for the year ended October 31, 2007. Our gross profit percentage
increased to 34.6% from 28.2%. This increase primarily relates to a shift in
product mix resulting from the increases in sales of Rx products which have a
higher profit margin than some of our non-controlled substance private label
OTC products.

Research
and development expenses for the year ended October 31, 2008 was $1,177,313
compared to $1,289,833 for the year ended October 31, 2007. 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 year ended October 31, 2008 was
$10,277,409 as compared to $15,603,823 for the year ended October 31, 2007. The
reduction in selling, general and administrative expenses is a result of the
    incurrence of less consulting expense which in fiscal year ended 2008 was
    $1,760,613 as compared to $6,818,602 for the same period in 2007. In addition,
    this reduction is the result of reduced spending in an effort to conserve
    cash. The operating expenses are in line with historical norms and also
    include consulting and compensation expense as discussed in the accompanying
    notes to the financial statements.

42

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During
     the year ended October 31, 2008, we incurred an impairment loss of $660,919
    as compared to $4,006,386 for the prior fiscal year.  The decrease is attributable
    to the non-recurrence of a one time impairment loss incurred by us  during
    fiscal year ended 2007 in connection with the termination of the Technology
    License Agreement and  ANDA Agreement pursuant to the terms of the settlement
    agreement with Dr. Mubye and Nostrum.

Interest
expense for the year ended October 31, 2008 was $4,166,852 as compared to
$6,400,962 for the year ended October 31, 2007. The reason for this reduction
in interest expense is as a result of our repayment of outstanding indebtedness
during the fiscal year that at October 31, 2007 was $18,625,000 and at October
31, 2008 was $6,190,000. In
addition, during the year ended October 31, 2008, there was interest forgiveness
of $3,325,747 relating to the repayment and settlement of outstanding debt.

As
a result of the foregoing, the net loss for the year ended October 31, 2008 was
$4,005,831 or ($0.17) per share, as compared to a net loss of $20,857,884 or
$1.09 per share for the year ended October 31, 2007.

Results
of Operations for Year Ended October 31, 2007 compared to Year Ended October
31, 2006

Total
revenues for the year ended October 31, 2007 were $23,466,311, compared to
$10,516,398 for the year ended October 31, 2006, an increase in excess of 123%
over the prior year. Gross profit was $6,629,185 for the year
ended October 31, 2007, as compared with $2,357,671 for the year ended October
31, 2006, an increase of $4,271,514 or 180%. These increases result from
several factors. First, is the inclusion in our financial statements of a full
year of the results of Kirk and ANDAPharm. These entities were acquired in May
2006 and partial year results were included in the prior years financial
statements. Both of these operating entities had growth in their year on year
sales resulting from price increases, new customers and additional products.
Sales of our ephedrine and pseudoephedrine product group were negatively impacted
by the interruption of supply during the fourth quarter of fiscal year 2007.
Gross margin was impacted by changes in prices and costs. In
addition, increased production and product mix positively impacted margins. We
had increases in materials attributed to increases in the cost of petroleum.

Our
three largest customers represented approximately 54% of the sales for the year
ended October 31, 2007 as compared to 68% in the prior year. Although we believe
    we have good working relationships with each of these customers, we are continuing
    to work to further relationships with these and other entities in order to
broaden our sales base.

Sales
of products containing pseudoephedrine, ephedrine and/or guaifenesen accounted
for approximately 63% of sales. These products have come under increasing
government regulation due to the concern of these products in the production of
methamphetamine.

Total
expenses for the year ended October 31, 2007 were $16,893,656 as compared with
$5,976,857 for the year ended October 31, 2006. The increases in year to year
expenses were primarily caused by the inclusion of Kirk and ANDAPharm in our
financial statements for the full year ended October 31,2007, as well as the
cost of consulting agreements entered into in the normal course of business by
the Company. In addition, expenses were higher due to the granting of options,
and to the higher legal expenses in connection with the financing and legal
activity of the Company. Our consulting expense was $6,818,602, the cost to the
Company of

43

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granting
options was $759,762, and legal fees incurred by us were, $1,900,003, for the
twelve months ended October 31, 2007. The operating expenses of Kirk and
ANDAPharm are in line with historical norms of Kirk and ANDAPharm. Increases were
in line with normal operating conditions and the increase in revenues. There
were no significant unusual expenses.

The
increase in interest expense to $6,400,962 from $3,909,716 relates to the
increased debt that we incurred during the year as discussed elsewhere in this
Annual Report on Form 10-K. In addition, increased interest rates and other
penalties relating to non-payment of debt negatively impacted the total for the
year.

The
impairment loss of $4,006,386 relates to the settlement agreement with Dr.
Mulye and Nostrum whereby the Technology License Agreement and ANDA Agreement
were terminated.

As
a result of the aforesaid, the net loss for the year ended October 31, 2007 was
$20,857,884 as compared with $8,571,021 for the year ended October 31, 2006.
The net loss per share was $1.09 for the year ended October 31, 2007  as compared
    with a loss of $.33 for the year ended October 31, 2006.

Liquidity and Capital
Resources

Year
Ended October 31, 2008, 2007, and 2006

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 securities. We had a working capital
deficit of $6,335,161 at October 31,
2008, as compared with $19,458,268 and $5,289,000 at October 31, 2007 and 2006,
respectively. Cash and cash equivalents were $65,987, $0 and $2,393,437 at
October 31, 2008, 2007 and 2006, respectively.

Net
cash provided (used in) operating activities during the years ended October 31,
2008, 2007 and 2006 was $3,862,575, ($2,408,514) and ($5,165,425),
respectively. The approximately $3,900,000 in net cash provided by operating
activities during the year ended October 31, 2008 was the result of our net loss
of $4,005,831 offset by non cash expenses of stock based compensation as well
as deferred financing fees offset by changes in working capital levels. The
approximately $2,400,000 in net cash used by operating activities during the
year ended October 31, 2007 was the result of our net loss of $20,857,884
offset by non cash expenses as well as changes in working capital. The
approximately $5,200,000 in net cash used by operating activities during the
year ended October 31, 2006 was the result of our net loss of $8,571,021 offset
by non cash expenses including the loss in the joint ventures of $1,042,119.

Net
cash used in investing activities during the years ended October 31, 2008, 2007
and 2006, was $708,305, $709,593 and $10,392,751, primarily the result of the purchase of
equipment and fees associated with acquisition activities.

Net
cash (used) provided by financing activities during the years ended October 31,
2008, 2007, and 2006, was ($3,088,284), $724,670 and $17,822,794, respectively.
The cash

44

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provided in 2008, 2007, and
2006 reflects approximately $8,096,716, $6,801,785 and $19,240,000 from the proceeds
from the private placement of our securities.

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. See Note 2 of the Notes to the
Consolidated Financial Statements regarding our plans to address this concern.

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

The
following table depicts our obligations and commitments as of October 31, 2008
to make future payments under existing contracts or contingent commitments.

|                                     |  |       |           |                   |                        |           |  |           |           |                 |   |        |  |  |   | 
|------------------------------------ |  | ----- | --------- | ----------------- | ---------------------- | --------- |  | --------- | --------- | --------------- | - | ------ |  |  | - | 
|                                     |  |       |           |                   | Payments Due by Period |           |  |          
|Contractual Obligations              |  | Total |           | Less than 1
 Year |                        | 1-3 years |  | 4-5 years |           | After 5 
 Years |  
|Note payable  bank                  |  | $     | 5,600,000 |                   | $                      | 1,850,000 |  | $         | 3,800,000 |                 |   |       |  |  |  | 
|Note payable  shareholders & others |  | $     | 540,000   |                   | $                      | 540,000   |  |           |          |                 |   |       |  |  |  | 
|                                     |  |       |           |                   |                        |           |  |           |           |                 |   |        |  |  |   | 
|Capital lease obligations            |  | $     | 294,070   |                   | $                      | 70,291    |  | $         | 149,658   |                 | $ | 74,121 |  |  |  | 
|                                     |  |       |           |                   |                        |           |  |           |           |                 |   |        |  |  |   | 
|                                     |  |       |           |                   |                        |           |  |           |           |                 |   |        |  |  |   | 
|                                     |  | $     | 6,434,070 |                   | $                      | 2,460,291 |  | $         | 3,949,658 |                 | $ | 74,121 |  |  |  | 
|                                     |  |       |           |                   |                        |           |  |           |           |                 |   |        |  |  |   | 

|         |                                                             
|-------- | ------------------------------------------------------------
|ITEM 7A. | 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 made to
us have been for fixed interest rates and accordingly, the market risk to us
prior to maturity is minimal.

45

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|        |                                             
|------- | --------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Reference
is made to the Consolidated Financial Statements for the fiscal year ended
October 31, 2008, the Notes thereto and Independent Auditors Report thereon
commencing at Page F-1 of this Report.

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
 FINANCIAL DISCLOSURE.

None.

|            |                         
|----------- | ------------------------
|ITEM 9A(T). | CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and
Procedures

Our
management, with the participation of our Principal Executive Officer and 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, our Principal Executive Officer and Chief Financial Officer
have concluded that, as of the end of such period, our disclosure controls and
procedures are 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.

Managements Report on Internal Control over
Financial Reporting

Management
is responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control over financial reporting has been
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the United States
of America.

Our
internal control over financial reporting includes policies and procedures that
pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect transactions and dispositions of our assets; provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, that receipts and
expenditures are being made only in accordance with authorization of our
management and directors; and provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on our financial statements.

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Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

Management
evaluated the effectiveness of our internal control over financial reporting at
October 31, 2008. In making this assessment, management based its evaluation on
the report of the Committee of Sponsoring Organizations of the Treadway
Commission entitled Internal ControlIntegrated Framework (the COSO Framework). Based on its evaluation
under the COSO Framework, management has determined that, at October 31, 2008,
our internal control over financial reporting was effective.

This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to
provide only managements report in this annual report.

Changes in Internal Control over Financial
Reporting

There
have been no changes in our internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the fourth quarter of fiscal year 2008 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.

|         |                   
|-------- | ------------------
|ITEM 9B. | OTHER INFORMATION.

DEA
Action

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

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 guiafenesin tablets, which
occurred at Kirk in July 2008. The DEA also alleges that Kirk failed to
maintain appropriate recordkeeping practices.

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

A
hearing has been scheduled before an administrative law judge to commence
February 18, 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 we intend 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, we filed our 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 its quota system.

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 would
    have a material adverse effect on our business, prospects, financial condition
    and results of operation. (See Risk Factors
above)

Maneesh
and Singh Grant

The
following disclosure would have otherwise been filed on Form 8-K under the
heading Item 3.02  Unregistered Sale of Equity Securities:

On
November 11, 2008, our Board of Directors authorized the grant of 500,000
shares of our common stock to Maneesh and 125,000 shares of our common stock
    to Harry Singh, both affiliates of the Company, in consideration for their
deferral in payment of certain fees due to them under a joint venture agreement
in the case of Maneesh and a consulting agreement in the case of Harry Singh.
We have not issued these shares although are treating them, for the purposes
    of this Annual Report on Form 10-K, as if they were issued and outstanding.

Upon
issuance, these securities will be offered and sold in reliance upon exemptions
from registration pursuant to Section 4(2) under the Securities Act of 1933, as
amended.

Steven
Getraer

The
following disclosure would have otherwise been filed on Form 8-K under the
heading Item 3.02  Unregistered Sale of Equity Securities:

On
January 27, 2009 we agreed to issue to Steven Getraer, our former Chief
Financial Officer, warrants to acquire 200,000 fully vested shares of our
common stock at an exercise price

48

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of $0.75 per
share exercisable at any time prior to July 31, 2012 in connection with a
separation agreement entered into with Mr. Getraer.

These
securities were offered and sold in reliance upon exemptions from registration
pursuant to Section 4(2) under the Securities Act of 1933, as amended.

PART III

|         |                                                 
|-------- | ------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

The
following table sets forth certain information regarding our current directors,
executive officers and key employees:

|                       |  |     |  |                                                        
|---------------------- |  | --- |  | -------------------------------------------------------
|Name                   |  | Age |  | Position                                               
|                       |  |     |  |                                                        
|Ronald H.
 Lane, Ph.D. |  | 63  |  | Chairman of
 the Board and Secretary                   
|Jyotindra
 Gange       |  | 60  |  | Interim
 Principal Executive Officer and Director      
|Vinay Sapte            |  | 52  |  | Director                                               
|Maneesh
 Sapte         |  | 36  |  | Director                                               
|Harcharan
 Singh       |  | 58  |  | Director                                               
|Manny Desai            |  | 60  |  | Chief
 Financial Officer                               
|John S.
 Copanos       |  | 37  |  | VP of
 Business Development of Kirk Pharmaceuticals LLC

Business Experience

The
following is a brief account of the education and business experience during at
least the past five years of our current directors, executive officers and key
employees, indicating the principal occupation during that period, and the name
and principal business of the organization in which such occupation and
employment were carried out.

Ronald
Howard Lane, Ph.D.has served as Chairman of the Board
since December 2004 and served as Chief Executive Officer of Synovics from
December 1994 until June 2008, and Chairman and Chief Executive Officer of our
predecessor, NutraGenics (Delaware), since April 1994. He also served as our
President from inception to April 18, 2007. Dr. Lane is responsible for
directing Synovics corporate development and growth. He received a Ph.D. and
post-doctorate NIH fellowship from the University of Wisconsin (Madison) in
Neurophysiology. Dr. Lane had been employed previously by Norcap Financial
Corporation, The National Western Group, Inc. (an investment company), and
Taylor Pearson Corporation.

Jyotindra
Gange has served as a Director since May 2008 and has
served as Interim Principal Executive Officer since July 2008. Mr. Gange
currently serves as Chief Financial Officer of Maneesh, a pharmaceuticals
manufacturing and distribution company based in India. From 2001 until joining
Maneesh in November 2007, Mr. Gange was Chief Financial Officer of Multi Arc
India Ltd., a provider of industrial coatings. From 2000 to 2001, Mr. Gange was
Chief Finance Officer at Bharat Serums and Vaccines Ltd., an Indian
pharmaceuticals company, and

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from 1997 to
2000, he was Vice President - Finance at Universal Ferrous Ltd., a producer of
ferro alloys. Mr. Gange has trained for Chartered Accountancy having received a
Bachelors degree in Accounting and Finance from Mumbai University, India.

Vinay
Sapte has served as a Director since April 2008. Mr.
Sapte serves as Chairman and Managing Director of Maneesh, a pharmaceuticals
manufacturing and distribution company based in India, which he founded in
1975. Mr. Sapte has an Electrical Engineering Degree from the University of
Mumbai. Vinay Sapte is the brother of Maneesh Sapte.

Maneesh
Sapte has served as a Director since May 2008. Mr.
Sapte serves as a director of Maneesh, a pharmaceuticals manufacturing and
distribution company based in India, which he joined in 1989. Mr. Sapte assists
Mr. Vinay Sapte, his brother, in running the business of Maneesh both in India
and abroad. Mr. Sapte has a B.S. degree in chemistry from the University of
Mumbai.

Harcharan
Singh has served as a Director since May 2008. Mr.
Singh has acted as a consultant to us and prior to becoming a member of our
board, held observer rights since April 2007. Mr. Singh serves as President and
Chief Executive Officer of Glopec International Inc., an asset trading company
specializing in pharmaceutical active ingredients, fine chemicals and
intermediates and custom synthesis which he founded in 1989. From 1987 until
1989, he served as Director, Cyanamid India, and later in area operations at
Lederle International Division; from 1980 until 1987, he served as General
Manager and Chief Executive Officer of Tata Pharma; and from 1972 until 1980,
he worked in various positions at Warner Lambert Co. Mr. Singh holds a B. Tech.
from the India Institute of Technology, Madras, and an MBA from the Indian
Institute of Management, Ahmedabad.

Mahendra
(Manny) Desai has served as Chief Financial Officer
since October 2008. Prior to that he served from January 2004 until September
2008 as Vice President, Finance of Citi Prepaid Services (formerly Ecount Inc.)
in Philadelphia and as a financial and tax advisor for Chernow, Kurtzman &
Co., a Certified Public Accountants firm in Philadelphia. From August 2000
until December 2003, Mr. Desai served as Senior Manager and Tax Advisor for
Creative Management Concepts, Inc., a Certified Public Accountants firm and Tax
Consultants in New Jersey. Prior to this, Mr. Desai spent 19 years in various
management, financial and accounting roles. Mr. Desai holds a Chartered
Accountants degree from India and received a Bachelors degree in Accounting
and Finance from Mumbai University, India.

John
S. Copanos is the founder of Kirk and its affiliate,
ANDAPharm, which he founded in 1999. Mr. Copanos currently serves as VP of
Business Development of Kirk and heads business development for Kirk and
ANDAPharm. Previously Mr. Copanos served as President, Chief Executive Officer,
Treasurer and Secretary of Kirk and ANDAPharm.

There
have been no events under any bankruptcy act, no criminal proceedings and no
judgments, injunctions, orders or decrees material to the evaluation of the
ability and integrity of any of our directors, executive officers, promoters or
control persons during the past five years.

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The Board of Directors

Our
Board is divided into three classes with each class of director elected for a
staggered term of three years and until their respective successors are duly
elected and qualified. Class II directors will serve until our next annual
meeting of stockholders. Class III directors will serve until the second
succeeding annual meeting of stockholders and Class I directors will serve
until the third succeeding annual meeting of stockholders.

Vinay
Sapte, Ronald Lane and Harcharan Singh and their respective affiliates are
among principal parties to a Voting Agreement dated as of May 9, 2008 entered
into upon the initial closing of the Series C Preferred Stock Offering. Under
the terms of the Voting Agreement, each of the parties agrees to vote all of
its shares to ensure that the size of our Board will be five directors (or
seven if the Board resolves to expand its size to seven). Further, each of the
parties agrees to vote its shares in favor of the following designations: (i)
one director designated by Ronald Lane and his affiliates (to initially be Dr.
Lane), (ii) one director designated by Harcharan Singh and his affiliates (to
initially be Mr. Singh), (iii) three directors designated by Maneesh and its
affiliates (to initially be Vinay Sapte, Maneesh Sapte and Jyotindra Gange).
The Voting Agreement further provides that if the Board is expanded to seven
directors, then Maneesh and its affiliates shall be entitled to one further
designee and Axiom Captial Management LLC (Axiom)
and Indigo Securities LLC (Indigo)
shall be entitled to designate one director. If certain of the parties to the
Voting Agreement cease to beneficially own at least 4% of the outstanding
shares of common stock of the Company determined immediately after giving
effect to the initial closing of the Series C Offering, then the right of
designation applicable to such party shall terminate and the right shall vest
in the entire board.

Committees of the Board

Since
the resignation of Richard Feldheim and William McCormick in April 2008 and the
subsequent appointment of Vinay Sapte, Maneesh Sapte, Jyotindra Gange and
Harcharan Singh to the Board in connection with the Series C Preferred Stock
Offering, we do not currently have a standing audit committee, compensation
committee and nominating committee. None of our directors would be considered
independent under Rule 4200(a)(15) of the Nasdaq Marketplace Rules, even though
such definition does not currently apply to us because we are not listed on
Nasdaq. Mr. Gange has experience in accounting and finance and has been
designated as an audit committee financial expert.

We
intend to expand the Board in the future to appoint one or more independent
directors. Until that time, the entire Board will perform the duties of the
audit committee, the compensation committee and the nominating
committee.

Code of Ethics

We
have not yet adopted a code of ethics applicable to our principal executive
officer, principal financial officer, principal accounting officer or
controller. Our examination of our corporate governance and other policies and
procedures have been interrupted by the time and effort required by the Nostrum
dispute and our capital raising efforts. Shortly following

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conclusion of
these matters, we expect to adopt a code of ethics applicable to all directors,
officers and employees.

Stockholder Communications

Stockholders
and other interested parties may contact the Board of Directors at the following
address: Board of Directors 5360 NW 35 Avenue, Fort
Lauderdale, FL 33309. All communications received at the above address will be
relayed to the Board of Directors. Communications regarding accounting,
internal accounting controls or auditing matters may also be reported to the
Board of Directors using the above address.

Typically,
we do not forward to our directors communications from our stockholders or
other communications which are of a personal nature or not related to the
duties and responsibilities of the Board, including:

| |   |                                           
| | - | ------------------------------------------
| |  | Junk mail
 and mass mailings;             
| |   |                                           
| |  | New product
 suggestions;                 
| |   |                                           
| |  | Resumes and
 other forms of job inquiries;
| |   |                                           
| |  | Opinion
 surveys and polls;               
| |   |                                           
| |  | Business
 solicitations or advertisements.

Section 16(a) Beneficial Ownership Reporting
Compliance

Section
16(a) of the Exchange Act requires our directors and officers, and persons who
own more than 10% of a registered class of our equity securities, to file
reports of ownership and changes in ownership with the SEC. Officers, directors
and greater than 10% stockholders are required by SEC regulation to furnish us
with copies of all Section 16(a) forms they file.

Based
solely upon a review of Forms 3, 4 and 5, and amendments thereto, furnished to
us during fiscal year 2008, we believe that during fiscal year 2008, our
executive officers, directors and all persons who own more than ten percent of
a registered class of our equity securities complied with all Section 16(a)
filing requirements except with respect to the following: Form 4 filings have
not been made by Ronald H. Lane, Richard Feldheim, William McCormick, Harcharan
Singh and late filings of Forms 3 and 4 have been made by Vinay Sapte, Maneesh
Sapte, Svizera Holdings BV and Maneesh Pharmaceuticals Ltd.

Executive Compensation

Compensation Discussion and Analysis

Philosophy
and Objectives of our Compensation Program. Our
approach to executive compensation, one of the most important and also most
complex aspects of corporate

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governance, is
influenced by our belief in rewarding people for consistently strong execution
and performance. We believe that the ability to attract and retain qualified
executive officers and other key employees is essential to our long term
success.

Our
plan to obtain and retain highly skilled employees is to provide significant
incentive compensation opportunities and market competitive salaries. The plan
was intended to link individual employee objectives with overall company
strategies and results, and to reward executive officers and significant
employees for their individual contributions to those strategies and results.
Furthermore, we believe that equity awards serve to align the interests of our
executives with those of our stockholders. As such, equity is a key component
of our compensation program.

The
named executive officers for fiscal year ended October 31, 2008 are Ronald
Lane, Chairman of the Board and former Chief Executive Officer; Jyotindra
Gange, our current interim Principal Executive Officer; Steven Getraer, our
former Chief Financial Officer; Mahendra Desai, our current Chief Financial
Officer; David Coffin-Beach, our former Chief Operating Officer; John Copanos,
our VP of Business Development of Kirk; Joe Esposito, our Director of Technical
Operations of Kirk and Aldo Rodriguez, our Controller. These individuals are
referred to collectively in this prospectus as the Named Executive Officers.

Administration
of our Compensation Program.Our compensation
committee was previously responsible for the administration of our compensation
program. With the resignation of our two independent directors from the Board
and the subsequent appointment of four non-independent directors, we do not
currently have a compensation committee. Until such time that we reconstitute
the compensation committee, compensation matters are handled by our board.

The
compensation committee had previously retained the services of Charas Consulting
for the purposes of assisting the compensation committee in ensuring that they
are competitive and appropriately linked to our long term success and creation
of stockholders value. The compensation committee also periodically sought
input from Charas Consulting on a range of external market factors, including
evolving compensation trends, appropriate peer group companies and market
survey data. Although the compensation committee reviewed the compensation
practices of its peer companies, due to shortage of cash it did not adhere to
strict formulas or survey data to determine the mix of compensation elements.

Elements
of our Compensation Program and How We Determine the Amount for Each Element

Overview.
The primary elements of our executive compensation program are base salary,
bonus and stock and long term compensation typically in the form of stock
option grants. Although we may in the future provide other types of
compensation, these three elements are the principal means by which we endeavor
to provide the Named Executive Officers with compensation opportunities.

We
have not had any formal or informal policy or target for allocating
compensation between long-term and short-term compensation, between cash and
non-cash compensation or

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among the
different forms of non-cash compensation. Instead, after reviewing information
provided by compensation surveys and publicly available filings of peer
companies, we determined subjectively what we believe to be the appropriate level
and mix of the various compensation components. Ultimately, the objective in
allocating between long-term and currently paid compensation is to ensure
adequate base compensation to attract and retain personnel, while providing
incentives to maximize long-term value for us and our stockholders.

We
do not have formal employment agreements with any of our Named Executive
Officers other than those entered into with our former employees Dr. Lane,
Steven Getraer and David Coffin-Beach.

Base Salary.We pay a base salary to our Named
Executive Officers. In general, base salaries for the Named Executive Officers
are determined by evaluating the responsibilities of the executives position,
the executives experience and the competitive marketplace. As appropriate,
base salary adjustments will be considered and would take into account changes
in the executives responsibilities, the executives performance and changes in
the competitive marketplace.

The
base salary for our former Chief Executive Officer was established pursuant to
recommendations given to the compensation committee by the third party
consultant, Charas Consulting, and the other Named Executive Officers (other
than in the case of Mr. Desai) were established by the compensation committee
based upon the recommendation of our senior management team. We believe that
the base salaries of the Named Executive Officers are appropriate within the
context of the compensation elements provided to the executives and because
they are at a level which remains competitive in the marketplace.

Bonuses.The Board of Directors may authorize us to give
discretionary bonuses, payable in cash or shares of common stock, to the Named
Executive Officers and other key employees. Such bonuses are designed to
motivate the Named Executive Officers and other employees to achieve specified
corporate, business unit and/or individual, strategic, operational and other
performance objectives. Due to lack of adequate financial resources, no bonuses
were awarded to Named Executive Officers during the fiscal year ended October
31, 2008 except to Mr. Esposito who was awarded a stock grant of 100,000 shares
of our common stock.

Stock
Options.Compensation for executive officers also
includes the long-term incentives afforded by stock options. Our stock option
award program is designed to motivate our Named Executive Officers and assist
in their retention. The size of the stock option grant is generally intended to
reflect the executives position with us and we generally grant stock options
upon commencement of employment with us with an annual vesting schedule of
three years to encourage key employees to continue their employment with us.

Other
Compensation.Our Named Executive Officers are
eligible for the same level and offering of benefits that we may make available
to other employees from time to time.

We
do not have any defined benefit pension or retirement plans.

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Post-Termination/
Change of Control Compensation.We have arrangements
with certain of the Named Executive Officers that may provide them with
compensation following termination of employment. These arrangements are
discussed below under Agreements with Named Executive Officers.

Tax
Implications of Executive Compensation.Our aggregate
deductions for each Named Executive Officer compensation are potentially
limited by Section 162(m) of the Internal Revenue Code to the extent the
aggregate amount paid to an executive officer exceeds $1 million, unless it is
paid under a predetermined objective performance plan meeting certain
requirements, or satisfies one of various other exceptions specified in the
Internal Revenue Code. At our 2008 Named Executive Officer compensation levels,
we did not believe that Section 162(m) of the Internal Revenue Code would be
applicable, and accordingly, we did not consider its impact in determining
compensation levels for our Named Executive Officers in 2008.

Agreements with Named Executive Officers

Ronald
H. Lane, Ph.D., Chairman of the Board of Directors and
Former Chief Executive Officer. On May 17, 2007, we entered into an employment
agreement, dated as of January 30, 2007, with Ronald Lane for serving as the
Companys Chief Executive Officer through January 30, 2010, renewable for
an additional one year unless either we or Dr. Lane provides written notice of
termination at least 60 days prior to the end of the term. On July 10, 2008,
Dr. Lane resigned as Chief Executive Officer and his employment agreement was
terminated.

The
employment agreement provided for an annual base salary of $400,000 and, solely
at the discretion of the Board of Directors, based on his performance and the
Companys financial condition and operating results, a bonus payable in
cash or shares of common stock. The agreement further provided that the Board
may grant him options under any equity compensation plan in which he is eligible
to participate. The agreement further provided that we owe Dr. Lane an amount
to be mutually agreed upon (the Deferred
Obligation) which amount was determined to be $214,102 as of
October 31, 2008 after giving effect to the conversion of $100,000 into 200
shares of Series C Preferred Stock and warrants to acquire 100,000 shares of
our common stock at an initial exercise price of $0.75.

The
agreement provided that if Dr. Lanes employment by us is terminated without
cause, by his death, or by Lane for good reason (which includes a change of
control), Dr. Lane will be entitled in addition to unpaid salary through the
date of termination, payment of the Deferred Obligation and a severance amount
of all or a portion (not less than one-half) of his base salary for one year
based on the number of completed years of service under the Agreement. Change
of Control is defined as a (i) change of holders of more than 50% of the voting
stock by means of a consolidation or merger, (ii) the sale of all or
substantially all of the assets or capital stock of the Company or (iii) the acquisition
by a person or group of persons in one or a series of related transactions of
more than 50% of the voting stock. Further the agreement provided that if we
terminate Dr. Lanes employment for cause or Dr. Lane terminates his employment
with us without good reason, Dr. Lane shall be entitled to any earned but
unpaid base salary, the Deferred Obligation plus any unpaid reimbursable
expenses through the date of termination of his employment.

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As
compensation for Dr. Lanes services as Chairman of the Board, Dr. Lane
receives a salary of $120,000 per annum. In addition, we agreed to pay Dr. Lane
severance of $400,000 as well as pay Dr. Lane deferred compensation under his
former employment agreement which was $214,102 at October 31, 2008 and
reimburse Dr. Lane for expenses incurred by him which was $77,147 at October
31, 2008.

Steven Getraer. Former Chief Financial Officer. On
July 10, 2007, we entered into an employment agreement with Mr. Steven Getraer
employing him as our Executive Vice President and Chief Financial Officer. On
October 6, 2008, we terminated Mr. Getraers employment. The agreement provided
that Mr. Getraers employment with us is for a three year term ending July 9,
2010, renewable for subsequent terms unless earlier terminated by either party.
Under the agreement, Mr. Getraer was entitled to a base salary of $265,000 per
annum, increasing to $280,000 per annum commencing on August 10, 2008 and to
$295,000 commencing on August 10, 2009. In addition, Mr. Getraer was entitled
to a discretionary fiscal year-end bonus payable in cash and/or shares of our
common stock and was granted options to acquire an aggregate of 600,000 shares
of our common stock exercisable for seven years at an initial exercise price of
$2.00 per share and vesting annually in three equal installments, with the
first installment vesting on July 10, 2008. The agreement also provided that we
may also in our discretion grant Mr. Getraer options pursuant to any eligible
equity compensation plan.

If
we terminated Mr. Getraers employment without cause, upon Mr. Getraers death,
or if Mr. Getraer terminates his employment for good reasons including a change
of control event, he would be entitled to the following severance: (i) Mr.
Getraers current base salary for one year; and (ii) any earned but unpaid base
salary plus any unpaid reimbursable expenses through the date of termination of
his employment. In the event that we terminated Mr. Getraers employment for
cause or Mr. Getraer terminates his employment with us without good reason, Mr.
Getraer would be entitled to any earned but unpaid base salary, unpaid bonus
approved by the Board plus any unpaid reimbursable expenses through the date of
termination of his employment.

On
January 27, 2009, we entered into a separation agreement with Mr. Getraer
pursuant to which we 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, we agreed to issue warrants to acquire
200,000 fully vested shares of our 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 our common stock.

David Coffin Beach. Former Chief Operating Officer. On
April 18, 2007, we entered into an employment agreement with Mr. David Coffin-Beach
employing him as our Chief Operating Officer. On February 11, 2008, Mr.
Coffin-Beach resigned from this position and his employment agreement
terminated. Mr. Coffin Beachs employment agreement provided for a three year
term ending April 18, 2010 and may be automatically renewed for additional one
year periods. He was entitled to a base salary of $300,000 per annum and a
discretionary year end bonus payable in cash and/or shares of our common stock.
In addition, Mr. Coffin-Beach was granted options to acquire an aggregate of
1,500,000 shares of the registrants common stock

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exercisable
for seven years at an initial exercise price of $2.00 per share and vesting
annually in three equal installments, with the first installment vesting on
April 18, 2008. At the date of Mr. Coffin-Beachs resignation, none of his
options vested. We also had the discretion to grant Mr. Coffin-Beach options
pursuant to any eligible equity compensation plan.

If
we terminated Mr. Coffin-Beachs employment without cause, upon Mr.
Coffin-Beachs death or if Mr. Coffin Beach terminated his employment for good
reasons including a change of control event, Mr. Coffin-Beach would have been
entitled to the following severance: (i) Mr. Coffin-Beachs current base salary
for one year plus any accrued bonus prior to termination; and (ii) any earned
but unpaid base salary plus any unpaid reimbursable expenses through the date
of termination of his employment. If we terminated Mr. Coffin-Beachs
employment for cause or Mr. Coffin-Beach terminates his employment with us
without good reason, Mr. Coffin-Beach would be entitled to any earned but
unpaid base salary plus any unpaid reimbursable expenses through the date of
termination of his employment. Mr. Coffin-Beachs resignation constituted
termination by Mr. Coffin-Beach without good reason and he was paid
accordingly.

57

---



Summary Compensation Table

The
table below summarizes the compensation information in respect of the Named
Executive Officers for the fiscal years ended October 31, 2008, 2007 and 2006.

|                                                                     |  |         |                  |           |         |                           |          |                     |         |  |                      |             |                                              |  |                                                                                    |                   |                                |  |            |  |  |         |  |      |                  |  |          |                         | 
|-------------------------------------------------------------------- |  | ------- | ---------------- | --------- | ------- | ------------------------- | -------- | ------------------- | ------- |  | -------------------- | ----------- | -------------------------------------------- |  | ---------------------------------------------------------------------------------- | ----------------- | ------------------------------ |  | ---------- |  |  | ------- |  | ---- | ---------------- |  | -------- | ----------------------- | 
|Name andPrincipal Position                                           |  | Year(1) |                  | Salary($) |         | Bonus ($)                 |          | Stock
 Awards(2)($) |         |  | Option
 Awards(3)($) |             | Non-Equity
 Incentive Plan
 Compensation ($) |  | Change in
 Pension Value
 and
 Nonqualified
 Deferred
 Compensation
 Earnings
 ($) |                   | All Other
 Compensation(4) ($) |  | Total
 ($) | 
|                                                                     |  |         |                  |           |         |                           |          |                     |         |  |                      |             |                                              |  |                                                                                    |                   |                                |  |            |  |  |         |  |      |                  |  |          |                         | 
|Ronald LaneChairman of theBoard and FormerChief
 ExecutiveOfficer(5) |  |         | 2008
 2007
 2006 |           | $
 $
 $ | 326,752
 400,000
 353,846 | (6)
 (7) |                     | 
 
  |  | $                    | 245,556
  |                                              |  |                                                                                    | 
 
            |                                |  | 
 
     |  |  | 
 
  |  | $    | 9,855
 11,000
  |  | $
 $
 $  | 582,163411,000
 353,846 | 
|                                                                     |  |         |                  |           |         |                           |          |                     |         |  |                      |             |                                              |  |                                                                                    |                   |                                |  |            |  |  |         |  |      |                  |  |          |                         | 
|Jyotindra GangeChairman of thePrincipalExecutive
Officer(8)          |  |         | 2008
 20072006   |           |         | 
 
                    |          |                     | 
 
  |  |                      | 
 
      |                                              |  |                                                                                    | 
 
            |                                |  | 
 
     |  |  | 
 
  |  |      | 
 
           |  |          | 
 
                  | 
|                                                                     |  |         |                  |           |         |                           |          |                     |         |  |                      |             |                                              |  |                                                                                    |                   |                                |  |            |  |  |         |  |      |                  |  |          |                         | 
|Mahendra DesaiChief FinancialOfficer(9)                              |  |         | 2008
 20072006   |           | $       | 10,834
 
               |          |                     | 
 
  |  |                      | 
 
      |                                              |  |                                                                                    | 
 
            |                                |  | 
 
     |  |  | 
 
  |  |      | 
 
           |  | $        | 10,834
 
             | 
|                                                                     |  |         |                  |           |         |                           |          |                     |         |  |                      |             |                                              |  |                                                                                    |                   |                                |  |            |  |  |         |  |      |                  |  |          |                         | 
|Steven GetraerFormer Chief
 FinancialOfficer(10)                     |  |         | 2008
 20072006   |           | $
 $    | 249,712
 250,000
        | (11)     |                     | 
 
  |  |                      | 
 
      |                                              |  | $
$                                                                                | 204,697552,215
  |                                |  | 
 
     |  |  | 
 
  |  | $    | 3,527
 
       |  | $
  $
 $ | 457,936802,215
        | 
|                                                                     |  |         |                  |           |         |                           |          |                     |         |  |                      |             |                                              |  |                                                                                    |                   |                                |  |            |  |  |         |  |      |                  |  |          |                         | 
|David Coffin-BeachFormer
President(12)                               |  |         | 20082007         |           | $
 $    | 30,417
 161,600           |          |                     | 
     |  | $                    | 87,500     | (13)                                         |  | $
$                                                                                | 39,0221,788,230   | (13)                           |  | 
        |  |  | 
     |  | $
 $ | 828
 4,400       |  | $$       | 157,767
 1,952,230      | 

58

---



|                                                                 |  |  |                |  |         |                           |  |   |              |  |   |              |  |  |         |  |  |         |  |  |         |  |      |                 |  |         |                          | 
|---------------------------------------------------------------- |  |  | -------------- |  | ------- | ------------------------- |  | - | ------------ |  | - | ------------ |  |  | ------- |  |  | ------- |  |  | ------- |  | ---- | --------------- |  | ------- | ------------------------ | 
|John CopanosVP Business
 Development of Kirk Pharmaceuticals LLC |  |  | 2008
 20072006 |  | $
 $
 $ | 225,000
 225,000
 112,115 |  | $ | 
 25,000
  |  |   | 
 
       |  |  | 
    |  |  | 
 
  |  |  | 
 
  |  | $
 $ | 7,932
 3,900
  |  | $
 $
 $ | 232,932253,900
 112,115  | 
|                                                                 |  |  |                |  |         |                           |  |   |              |  |   |              |  |  |         |  |  |         |  |  |         |  |      |                 |  |         |                          | 
|Joe EspositoDirector ofTechnicalOperations                       |  |  | 2008
 20072006 |  | $
 $
 $ | 122,500
 117,000
 43,076  |  |   | 
 
       |  | $ | 68,000
 
  |  |  | 
 
  |  |  | 
 
  |  |  | 
 
  |  | $    | 
 2,700
      |  | $
 $
 $ | 190,500
 119,700
 43,076 | 
|                                                                 |  |  |                |  |         |                           |  |   |              |  |   |              |  |  |         |  |  |         |  |  |         |  |      |                 |  |         |                          | 
|Aldo RodriguezController                                         |  |  | 2008
 20072006 |  | $
 $
 $ | 120,000
 114,000
 8,426   |  |   | 
 
       |  |   | 
 
       |  |  | 
 
  |  |  | 
 
  |  |  | 
 
  |  |      | 
 
          |  | $
 $
 $ | 120,000
 114,000
 8,426  | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | The information is provided
 for each fiscal year which begins on November 1 and ends on October 31.                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(2) | The amounts reflect the
 compensation expense in accordance with FAS 123(R) of these stock awards. The
 assumptions used to determine the fair value of the option awards for the
 fiscal year ended October 31, 2008 is set forth in note 15 of our financial
 statements for the year ended October 31, 2008.                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(3) | The amounts reflect the
 compensation expense in accordance with FAS 123(R) of these option awards.
 The assumptions used to determine the fair value of the option awards for the
 fiscal year ended October 31, 2008 is set forth in note 15 of our financial
 statements for the year ended October 31, 2008. Our Named Executive Officers
 will not realize the value of these awards in cash unless and until these
 awards are exercised and the underlying shares subsequently sold.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(4) | Represents amounts paid for
 health insurance premium.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(5) | Dr. Lane resigned as Chief
 Executive Officer on July 3, 2008 although he continued to serve as Chairman
 of the Board.                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(6) | Does not include
 accumulated deferred compensation of $241,196 which amount excludes $100,000
 of accumulated deferred compensation that previously converted into 200
 shares of Series C Preferred Stock and warrants to acquire 100,000 shares of
 our common stock.                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(7) | Does not include
 accumulated deferred compensation of $267,948.                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(8) | Mr. Gange has been acting
 as interim Principal Executive Officer since July 3, 2008.                                                                                                                                                                                                                                                                                                                                                                                                      

59

---



|     |                                                                                                                                                                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(9)  | Mr. Desai
 was appointed Chief Financial Officer on October 6, 2008.                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                         
|(10) | Mr. Getraer was appointed Chief Financial Officer on July 10, 2007.
 Prior to that from September 2006 until July 2007 he served as Chief
 Executive Officer of Kirk and President of ANDAPharm. Mr.
 Getraer was terminated as our Chief Financial Officer effective November 6,
 2008.
|     |                                                                                                                                                                                                                                                                                         
|(11) | $90,000
 represents amount paid as an employee and $160,000 represents amount paid as
 a consultant.                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                         
|(12) | Mr.
 Coffin-Beach was appointed Chief Operating Officer on April 18, 2007 and
 resigned from this position on February 11, 2008.                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                         
|(13) | Represents grant made to Mr. Coffin-Beach upon
    his resignation as our President. At the date of Mr. Coffin-Beachs
    resignation, none of the options to acquire up to 1,500,000 shares of our
    common stock previously granted to him vested.                                 

Grants of Plan-Based Awards

The
following table sets forth information regarding grants of plan based awards to
the Named Executive Officers during the fiscal year ended October 31, 2008.

|                   |  |             |         |              |                                                                     |           |                                                              |            |                                                                      |              |                                                                            |           |                                                  |              |                                                          |  |           |     |  |   |  |         |     |         |     |   |      |  |   |         | 
|------------------ |  | ----------- | ------- | ------------ | ------------------------------------------------------------------- | --------- | ------------------------------------------------------------ | ---------- | -------------------------------------------------------------------- | ------------ | -------------------------------------------------------------------------- | --------- | ------------------------------------------------ | ------------ | -------------------------------------------------------- |  | --------- | --- |  | - |  | ------- | --- | ------- | --- | - | ---- |  | - | ------- | 
|                   |  |             |         |              | Estimated Possible Payouts
 Under Non-Equity Incentive
 Plan Awards |           | Estimated Future Payouts
 UnderEquity Incentive Plan
 Awards |            | All Other
 Stock
 Awards:
 Number of
 Shares of
 Stock or
 Units (#) |              | All Other
 Option
 Awards:
 Number of
 Securities
 Underlying
 Options (#) |           | Exercise or
 Base Price
 of Option
 Awards($/Sh) |              | Grant
 Date Fair
 Value of
 Stock and
 Option
 Awards(1) | 
|                   |  |             |         |              |                                                                     |           |                                                              |            |                                                                      |             
|                   |  |             |         |              |                                                                     |           |                                                              |            |                                                                      |             
|                   |  |             |         |              |                                                                     |           |                                                              |            |                                                                      |             
|                   |  |             |         |              |                                                                     |           |                                                              |            |                                                                      |             
|                   |  |             |         |              |                                                                     |           |                                                              |            |                                                                      |              |                                                                            |          
|Name               |  | Grant
 Date |         | Threshold($) |                                                                     | Target($) |                                                              | Maximum($) |                                                                      | Threshold(#) |                                                                            | Target(#) |                                                  | Maximum
 (#) |                                                          |  |           |     | 
|                   |  |             |         |              |                                                                     |           |                                                              |            |                                                                      |              |                                                                            |           |                                                  |              |                                                          |  |           |     |  |   |  |         |    
|Ronald H. Lane     |  |             | 5/9/08  |              |                                                                    |           |                                                              |           |                                                                      |              |                                                                           |           |                                                  |             |                                                          |  | 1,000,000 | (2) |  |  |  |        |     |        |     |   |     |  | $ | 245,556 | 
|Joe Esposito       |  |             | 6/13/08 |              |                                                                     |           |                                                              |            |                                                                      |              |                                                                           |           |                                                  |             |                                                          |  |          |     |  |  |  | 100,000 |     |        |     |   |     |  | $ | 68,000  | 
|David Coffin-Beach |  |             | 2/11/08 |              |                                                                    |           |                                                              |           |                                                                      |              |                                                                           |           |                                                  |             |                                                          |  |          |     |  |  |  | 125,000 | (3) | 125,000 | (3) | $ | 1.00 |  | $ | 126,522 | 



---

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The amounts
 reflect the compensation expense in accordance with FAS 123(R) of these
 option awards. The assumptions used to determine the fair value of the option
 awards for the fiscal year ended October 31, 2008 are set forth in note 15 of
 our financial statements for the year ended October 31, 2008. Our Named
 Executive Officers will not realize the value of these awards in cash unless
 and until these awards are exercised and the underlying shares subsequently
 sold.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(2) | Represents
 restrictive stock grant award that vests one third on May 9, 2008, May 9,
 2009 and May 9, 2010.                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(3) | Represents
 grant made to Mr. Coffin-Beach upon his resignation as our President. At the
 date of Mr. Coffin-Beachs resignation, none of the options to acquire up to
 1,500,000 shares of our common stock previously granted to him vested.                                                                                                                                                                                                                                               

60

---



Outstanding Equity Awards at Fiscal Year-End

The
following table sets forth information concerning stock options and stock
awards held by the Named Executive Officers as of October 31, 2008.

|                    |  |                                                                         |         |                                                                           |  |                                                                                                      |  |                            |   |                          |   |                                                                      |  |                                                                            |          |                                                                                                                 |  |                                                                                                                                  |  |  |   |  |  |         |     |   |         | 
|------------------- |  | ----------------------------------------------------------------------- | ------- | ------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | -------------------------- | - | ------------------------ | - | -------------------------------------------------------------------- |  | -------------------------------------------------------------------------- | -------- | --------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------- |  |  | - |  |  | ------- | --- | - | ------- | 
|                    |  | Option Awards                                                           |         | Stock Awards                                                              | 
|                    |  |                                                                         |         |                                                                           | 
|Name                |  | Number of
 Securities
 Underlying
 Unexercised
 Options(#)
 Exercisable |         | Number of
 Securities
 Underlying
 Unexercised
 Options(#)
 Unexercisable |  | Equity
 Incentive Plan
 Awards
 Number of
 Securities
 Underlying
 Unexercised
 Unearned
 Options(#) |  | Option
 Exercise
 Price($) |   | Option
 Expiration
 Date |   | Number of
 Shares or
 Units of
 Stock Held
 That Have
 Not Vested(#) |  | Market Value
 of Shares or
 Units of
 Stock Held
 That Have
 Not Vested($) |          | Equity
 Incentive Plan
 Awards:
 Number of
 Unearned
 Shares, Units
 or Other
 Rights That
 Have Not
 Vested(#) |  | Equity Incentive
 Plan Awards:
 Market or
 Payout Value of
 Unearned
 Shares, Units or
 Other Rights
 That Have Not
 Vested
 ($) | 
|                    |  |                                                                         |         |                                                                           |  |                                                                                                      |  |                            |   |                          |   |                                                                      |  |                                                                            |          |                                                                                                                 |  |                                                                                                                                  | 
|Ronald H. Lane      |  |                                                                         |        |                                                                           |  |                                                                                                     |  |                            |  |                          |   |                                                                     |  |                                                                            |         |                                                                                                                 |  |                                                                                                                                 |  |  |  |  |  | 666,667 | (1) | $ | 233,333 | 
|David Coffin- Beach |  |                                                                         | 125,000 | (2)                                                                       |  |                                                                                                     |  |                            |  |                          | $ | 1.00                                                                 |  |                                                                            | 02/11/13 |                                                                                                                 |  |                                                                                                                                 |  |  |  |  |  |        |     |   |        | 
|Steven Getraer      |  |                                                                         | 200,000 | (2)                                                                       |  |                                                                                                     |  |                            |  |                          | $ | 0.75                                                                 |  |                                                                            | 7/10/13  |                                                                                                                 |  |                                                                                                                                 |  |  |  |  |  |        |     |   |        | 

---

|    |                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------
|(1) | Represents restricted stock
 award grant that vests one half on May 9, 2009 and one half on May 9, 2010.
|    |                                                                                                         
|(2) | Represents shares of common
 stock underlying fully-vested warrants.                                    

Option Exercises and Stock Vested

The
following table sets forth information concerning options exercised and stock
awards vested held by the Named Executive Officers during fiscal year ended
October 31, 2008.

|               |  |                                          |   |                               |  |                                           |  |                              |            |  |  |          | 
|-------------- |  | ---------------------------------------- | - | ----------------------------- |  | ----------------------------------------- |  | ---------------------------- | ---------- |  |  | -------- | 
|               |  | Option Awards                            |   | Stock Awards                  | 
|               |  |                                          |   |                               | 
|Name           |  | Number of Shares Acquired on Exercise(#) |   | Value Realized on Exercise($) |  | Number of Shares Acquired 
 on Vesting(#) |  | Value Realized on Vesting($) |           
|Ronald H. Lane |  |                                          |  |                               |  |                                          |  |                              | 333,333(1) |  |  | $173,333 | 

---

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | Represents restricted stock
 award grant that vested upon grant on May 9, 2008.

61

---



Pension Benefits

We
do not provide pension benefits to the Named Executive Officers.

Nonqualified Deferred Compensation

We
do not have any defined contribution or other plan that provides for the
deferral of compensation on a basis that is not tax-qualified.

Potential Payments Upon Termination or Change
of Control

Please
see the discussion under Compensation Discussion and Analysis  Agreements
with Named Executive Officers.

Director Compensation

The
following table sets forth director compensation for the year ended October 31,
2008.

|                     |  |                                   |   |                        |   |                         |  |                                              |        |                                          |  |                              |  |            |   |  |  |   |  |   |         | 
|-------------------- |  | --------------------------------- | - | ---------------------- | - | ----------------------- |  | -------------------------------------------- | ------ | ---------------------------------------- |  | ---------------------------- |  | ---------- | - |  |  | - |  | - | ------- | 
|Name of Director     |  | Fees Earned or
 Paid in Cash
 ($) |   | Stock Awards
 (1)
 ($) |   | Option Awards
 (2)
 ($) |  | Non-Equity
 Incentive Plan Compensation
 ($) |        | Nonqualified
 Deferred Compensation
 ($) |  | All Other
 Compensation
 ($) |  | Total
 ($) |  
|                     |  |                                   |   |                        |   |                         |  |                                              |        |                                          |  |                              |  |            |  
|Ronald H. Lane (3)   |  |                                   |  |                        |   |                        |  |                                              |       |                                          |  |                             |  |            |  |  |  |  |  |   |        | 
|Jyotindra Gange(3)   |  |                                   |  |                        |   |                        |  |                                              |       |                                          |  |                             |  |            |  |  |  |  |  |   |        | 
|Vinay Sapte          |  |                                   |  |                        |   |                        |  |                                              |       |                                          |  |                             |  |            |  |  |  |  |  |   |        | 
|Maneesh Sapte        |  |                                   |  |                        |   |                        |  |                                              |       |                                          |  |                             |  |            |  |  |  |  |  |   |        | 
|Harcharan Singh(4)   |  |                                   |  |                        | $ | 491,111                 |  |                                              |       |                                          |  |                             |  |            |  |  |  |  |  | $ | 491,111 | 
|William McCormick(5) |  |                                   |  |                        | $ | 65,000                  |  | $                                            | 78,382 |                                          |  |                             |  |            |  |  |  |  |  | $ | 143,382 | 
|Richard Feldheim(5)  |  |                                   |  |                        | $ | 65,000                  |  | $                                            | 78,382 |                                          |  |                             |  |            |  |  |  |  |  | $ | 143,382 | 

---

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The amounts reflect the
 compensation expense in accordance with FAS 123(R) of these stock awards. The
 assumptions used to determine the fair value of the option awards for the
 fiscal year ended October 31, 2008 is set forth in note 15 of our financial
 statements for the year ended October 31, 2008.                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2) | The amounts reflect the
 compensation expense in accordance with FAS 123(R) of these option awards.
 The assumptions used to determine the fair value of the option awards for the
 fiscal year ended October 31, 2008 is set forth in note 15 of our financial
 statements for the year ended October 31, 2008. The named persons will not
 realize the value of these awards in cash unless and until these awards are
 exercised and the underlying shares subsequently sold.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3) | Please refer to the summary
 compensation table for executive compensation with respect to the named
 individual.                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4) | At the time of the grant of
 the referenced stock award, Mr. Singh was not a member of our Board of
 Directors.                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(5) | The named person resigned
 from our Board on April 29, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                    

62

---



Compensation Committee Interlocks and Insider
Participation

During
the fiscal year ended October 31, 2008, Messrs Feldheim and McCormick served on
our compensation committee until their resignation from the Board on April 29,
2008. Except as set forth below, no member of our compensation committee has
ever been an officer or employee of ours. During the fiscal year ended October
31, 2008, none of our executive officers served on the Board of Directors or on
the compensation committee of any other entity, any officers of which served
either on our Board or on our compensation committee.

From
July 1992 until October 1996 Mr. Feldheim served as a Director, Secretary and
Chief Financial Officer of LipoGenics, Inc., a now non-operating subsidiary of
ours.

Compensation Committee Report

Our
Board does not have a compensation committee. Our Board reviewed and discussed
with management the Compensation Discussion and Analysis set forth above for
the 2008 fiscal year. As a result of this review and discussion, the Board
approved the Compensation Discussion and Analysis for inclusion in this annual
report.

| |                          
| | -------------------------
| | Ronald H. Lane (Chairman)
| | Vinay Sapte              
| | Jyotindra Gange          
| | Maneesh Sapte            
| | Harcharan Singh          

|         |                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
 RELATED STOCKHOLDER MATTERS.

The
following table sets forth certain information regarding beneficial ownership
of our common stock as of December 31, 2008 by (i) each person who is known by
us to own beneficially more than 5% of our common stock, (ii) each of our Named
Executive Officers, and (iii) all our directors and executive officers as a
group. On such date, we had 29,827,357 shares of our common stock outstanding,
after giving effect to 4,000,000 shares of our common stock that we are
obligated to issue.

As
used in the table below and elsewhere in this prospectus, the term beneficial
ownership with respect to a security consists of sole or shared voting power,
including the power to vote or direct the vote and/or sole or shared investment
power, including the power to dispose or direct the disposition, with respect
to the security through any contract, arrangement, understanding, relationship,
or otherwise, including a right to acquire such power(s) during the next 60
days following December 31, 2008.

Except
as indicated, and subject to community property laws when applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
Except as otherwise noted, the

63

---



address of the
persons named in the table above is c/o Synovics Pharmaceuticals Inc., 5360
Northwest 35th Avenue, Ft. Lauderdale, Florida 33309.

|                                                                                                   |  |                                            |            |                                       |  |      |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | ---------- | ------------------------------------- |  | ---- | -
|Name and Address of Beneficial Owner                                                               |  | Shares of
 Common Stock Beneficially Owned |            | Percentage
 ofClass BeneficiallyOwned | 
|Ronald H.
 Lane, Ph.D.(1)(3)                                                                       |  |                                            | 5,239,668  | (4)                                   |  | 17.4 | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Jyotindra
 Gange(1)(2)                                                                             |  |                                            | 0          |                                       |  | 0    | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Vinay R.
 Sapte(1)                                                                                 |  |                                            | 31,644,700 | (5)                                   |  | 57.3 | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Maneesh
 Sapte(1)                                                                                  |  |                                            | 31,644,700 | (5)                                   |  | 57.3 | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Harcharan
 Singh(1)                                                                                |  |                                            | 15,401,858 | (6)                                   |  | 37.8 | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Mahendra
 Desai(2)                                                                                 |  |                                            | 0          |                                       |  | 0    | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|David
 Coffin-Beach(3)                                                                             |  |                                            | 250,000    | (7)                                   |  |      | *
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Steven
 Getraer(3)                                                                                 |  |                                            | 200,000    | (8)                                   |  |      | *
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Joe Esposito                                                                                       |  |                                            | 100,000    |                                       |  |      | *
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Aldo
 Rodriguez                                                                                    |  |                                            | 0          |                                       |  | 0    | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|John Copanos                                                                                       |  |                                            | 2,100,000  | (8)                                   |  | 6.6  | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Maneesh
 Pharmaceuticals Ltd. 
 23-24 Kalpatru Court
 C.G. Road, Chembour
 Mumbai 7 400 074 India  |  |                                            | 31,644,700 | (5)                                   |  | 57.3 | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|2133820
 Ontario Inc.265
 Rimrock Road, Suite 1, North York, 
 Ontario, M3J 3C6, Canada            |  |                                            | 10,276,858 | (9)                                   |  | 25.8 | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Lionheart
 Investments Ltd.
 Heston Business Court 
 19 Camp Rd 
 London SW19 4UW 
 United Kingdom |  |                                            | 9,298,300  | (10)(13)                              |  | 24   | %
|                                                                                                  
|NalinKant
 Amratlal Rathod 
 JL. Teregong Kecil A/1
 Pondok Indah
 Jakarta, Indonesia              |  |                                            | 2,698,018  | (11)                                  |  | 9    | %
|                                                                                                   |  |                                            |            |                                       |  |      |  
|Executive 
 Officers and Directors
 as a Group
 (six persons)                                      |  |                                            | 52,286,226 | (12)                                  |  | 78.6 | %

64

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Denotes less
 than a 1% interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(1) | Indicates
 director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(2) | Indicates
 officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(3) | Indicates
 former officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(4) | Represents (i) 3,403,638
 shares of common stock held of record by R.H. Lane Limited Partnership of
 which Dr. Lane is a general partner. He shares voting power over these shares
 with Richard M. Feldheim, a general partner, (ii) 1,000,000 shares of common
 stock sold by Dr. Lane in 2006 on a three year note at $3.00 per share,
 wherein Lane continues to have beneficial ownership and voting rights until
 the note is repaid or stock returned and note cancelled, (iii) 100,000 shares
 of common stock issuable upon exercise of warrants issued in the Series C
 Offering, (iv) 200,000 shares of common stock issuable upon conversion of
 Series C Preferred Stock, and (v) 1,000,000 shares of restricted stock that
 we have authorized to be issued to Dr. Lane (but which have not been issued
 as of the date hereof). Dr. Lane disclaims beneficial ownership of 60,000
 shares of common stock held by such partnership for the benefit of other
 partners and 180,000 shares of common stock held by the partnership for the
 benefit of his wife.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(5) | Represents (i) 1,700,000
 shares of common stock owned by Svizera Holdings BV (Svizera), a wholly-owned subsidiary of
 Maneesh, (ii) 4,000,000 shares of common stock issued to Maneesh for the
 replacement of the Nostrum Guarantee, (iii) 9,071,700 shares of common stock
 issuable upon exercise of warrants issued to Svizera in the Series C
 Offering, and (iv) 16,373,000 shares of common stock issuable upon conversion
 of Series C Preferred Stock issued to Svizera in the Series C Offering.
 Maneesh and Messrs. Vinay and Maneesh Sapte share the power to vote or to
 direct the vote or to dispose or direct the disposition of the 31,644,700
 shares of common stock because Messrs. Vinay and Maneesh Sapte, as the
 directors authorized to act on behalf of Maneesh and Svizera, respectively,
 with respect to the 31,644,700, and 27,644,700 shares of common stock,
 respectively, may act on behalf of Maneesh and Svizera to vote or to direct
 the vote or to dispose or direct the disposition of the 4,000,000 shares and
 27,644,700 shares of common stock titled in the name of Maneesh and Svizera,
 respectively. Neither Maneesh, Vinay or Maneesh Sapte hold sole power to vote
 or to direct the vote or to dispose or direct the disposition of any of the
 31,144,700 shares of common stock. The aforesaid is based partially on
 information provided in Schedule 13D/A filed with the Commission on May 7,
 2008, as subsequently amended on May 19, 2008, August 28, 2008 and September
 24, 2008.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(6) | Represents (i) 2,330,458
 shares of common stock owned by Mr. Singh, (ii) 2,125,000 shares of common
 stock that we have authorized to be issued to Mr. Singh (but which have not
 been issued as of the date hereo), (iii) 1,000,000 shares of common stock
 issuable upon exercise of warrants issued to Mr. Singh, (iv) 4,290,400 shares
 of common stock issuable upon exercise of warrants issued to 2133820 Ontario
 Inc. (Ontario) in the Series
 C Offering, (v) 5,656,000 shares of common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

65

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|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | issuable upon conversion
 of Series C Preferred Stock issued to Ontario in the Series C Offering. Mrs.
 Prembala Singh, Mr. Singhs wife, is the sole director, officer and
 shareholder of Ontario. Mr. Singh disclaims beneficial ownership of the
 securities beneficially owned by Mrs. Singh and Ontario.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(7)  | Represents (i) 125,000
 shares of common stock that we have agreed to issue (but which have not been
 issued as of the date hereof) to Mr. Coffin-Beach, and (ii) 125,000 shares of
 common stock issuable upon exercise of warrants which we have agreed to issue
 to Mr. Coffin-Beach (but which have not been issued as of the date hereof).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(8)  | Represents shares of
 common stock issuable upon exercise of a warrant exercisable within 60 days
 following January 23, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(9)  | Represents (i) 330,458
 shares of common stock owned by Ontario, (ii) 4,290,400 shares of common
 stock issuable upon exercise of warrants issued to Ontario Inc. in the Series
 C Offering, and (iii) 5,656,000 shares of common stock issuable upon
 conversion of Series C Preferred Stock issued to Ontario in the Series C
 Offering. Mrs. Prembala Singh is the sole director, officer and shareholder
 of Ontario. Mrs. Singh is the wife of Mr. Harcharan Singh. Mr. Singh
 disclaims beneficial ownership of the securities beneficially owned by Mrs.
 Singh and Ontario.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(10) | Includes 4,191,300 shares
 of common stock issuable upon exercise of warrants and 4,657,000 shares of
 common stock issuable upon conversion of Series C Preferred Stock issued in
 the Series C Offering. Photon Gobal Limited is the beneficial owner of the
 referenced shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(11) | Includes
 212,806 shares of common stock beneficially owned by Mr. Rathod, which includes
 116,156 shares of common stock that were purportedly transferred to Mr.
 Rathod in 2006 by Bali Holdings Limited (but for which Mr. Rathod has yet to
 receive share certificates from the Companys transfer agent) and 96,650
 shares of common stock that are held for the benefit of Mr. Rathod by Merrill
 Lynch. The above referenced shares of common stock also include 1,720,926
 shares of common stock beneficially owned by Asia Pacific Investment Holdings
 Limited (Asia
 Pacific), of which Mr. Rathod is the owner and sole director, and
 250,000 shares of common stock acquirable by Asia Pacific under the terms of a
 Common Stock Purchase Warrant, dated as of April 17, 2006. These shares of
 common stock beneficially owned by Asia Pacific include (i) 216,018 shares of
 common stock that are held for the benefit of Asia Pacific by Royal Bank of
 Canada, (ii) 60,875 shares of common stock that are held for the benefit of
 Asia Pacific by Great Asian Holdings Limited, and (iii) 94,533 shares of
 common stock that are held by James M. Belcher, since Asia Pacific may be
 deemed to have shared voting power over those shares as a consequence of Mr.
 Belchers inclusion on Asia Pacifics slate of nominees. The above referenced
 shares of common stock also include 14,286 shares of common stock
 beneficially owned by Technology Resources & Investments Limited (Technology
 Resources), of which Mr. Rathod is the owner and sole director.
 Mr. Rathod shares the power to vote or to direct the vote or to dispose or
 direct the disposition of the 1,735,212 shares of common stock held in the
 aggregate (including 250,000 shares of common stock acquirable by Asia
 Pacific under the terms of a Common Stock Purchase Warrant, dated as of April
 17, 2006) by Asia Pacific and Technology Resources because Mr. Rathod, as the
 100% owner, controls each of those entities and, in his capacity as sole
 director, may act on behalf of each of those entities to vote or to direct
 the vote or to dispose or direct the disposition of the 1,735,212 shares of
 common stock they collectively hold (including 250,000 shares of common stock
 acquirable by Asia Pacific under the terms of a Common Stock Purchase
 Warrant, dated as of April 17, 2006). In the course of his business, Mr.
 Rathod also provides investment advice and consulting services to certain
 business associates who to his knowledge hold, collectively, approximately
 310,000 shares of common stock (including certain shares of common stock held
 by Macro Power Ltd that are reflected as beneficially owned by Mr. Rathod in
 recent filings by the Company). Mr. Rathod disclaims beneficial ownership of
 those shares of common stock. The foregoing information is based upon a
 Schedule 13D/A filed with the Commission on July 3, 2007.

66

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|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(12) | Includes (i) 3,000,000
 shares of restricted stock that we have authorized to be issued (but have not
 been issued as of the date hereof), (ii) 14,462,100 shares of common stock
 issuable upon exercise of warrants of which 13,462,100 shares of common stock
 are issuable upon exercise of warrants issued in the Series C Offering, (iii)
 22,229,000 shares of common stock issuable upon conversion of Series C
 Preferred Stock issued in the Series C Offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(13) | Notwithstanding the
 inclusion of the warrants and shares of Series C Preferred Stock beneficially
 owned by the referenced investor in the beneficial ownership calculation, the
 referenced investor and the Company agreed that the holder of the warrants
 and Series C Preferred Stock shall not have the right to exercise any portion
 of such securities and that we shall not affect any exercise or conversion
 thereof to the extent that after giving effect to such issuance after
 exercise such holder of the warrants together with his, her or its
 affiliates, would beneficially own in excess of 4.99% of the number of shares
 of common stock outstanding immediately after giving effect to such issuance.
 Such 4.99% limitation may be waived by the holder upon not less than 61 days
 prior notice to change such limitation to 9.99% of the number of shares of
 common stock outstanding immediately after giving effect to such issuance.

Securities Authorized for Issuance under
Equity Compensation Plans

We
do not currently have any equity compensation plans. We are planning to adopt
such a plan in the future.

|         |                                                
|-------- | -----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

All
related person transactions are reviewed and, as appropriate, may be approved
or ratified by our Board of Directors. If a director is involved in the
transaction, he or she may not participate in any review, approval or
ratification of such transaction. Related person transactions are approved our
Board of Directors only if, based on all of the facts and circumstances, they
are in, or not inconsistent with, our best interests and our stockholders, as
the Board of Directors determines in good faith. The Board of Directors takes
into account, among other factors it deems appropriate, whether the transaction
is on terms generally available to an unaffiliated third-party under the same
or similar circumstances and the extent of the related persons interest in the
transaction. The Board of Directors may also impose such conditions as it deems
necessary and appropriate on us or the related person in connection with the
transaction.

In
the case of a transaction presented to the Board of Directors for ratification,
the Board of Directors may ratify the transaction or determine whether
rescission of the transaction is appropriate.

Copanos Note
Amendment

As
previously reported we entered into a promissory note in the principal amount
of $3,000,000 with John Copanos (the Copanos
Note) as partial consideration for the acquisition by us of Kirk and
ANDAPharm. Subsequently, on December 13, 2006 and on May 21, 2007, the

67

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Copanos Note was amended. John Copanos currently
serves as VP of Business Development and was a founder of Kirk.

On November
30, 2007, we entered into a further agreement amending the Copanos Note, as
amended, according to which the interest rate on the outstanding principal of
$2,000,000 and accrued and unpaid interest of $258,041.51 was increased to 12%
per annum retroactively to October 3, 2007 and the payment schedule for the
payment of such principal and accrued and unpaid interest was adjusted. In
connection with the agreement, the parties executed mutual releases and we
consented, in the case of default, to John Copanos obtaining a final judgment
without necessity of a further hearing.

On March
19, 2008, we entered into an agreement amending the Copanos Note, as amended,
according to which the interest rate on the outstanding principal of $2,000,000
and accrued and unpaid interest was increased to 15% per annum retroactively
from January 15, 2008 and the payment schedule for the payment of such
principal and accrued and unpaid interest was further adjusted. From May 2,
2008, to August 31, 2008 the Copanos Note bore interest at 18% per annum and
increased further to 24% per annum from September 1, 2008. In addition, Copanos
was given the right to convert up to $500,000 of the principal amount due to
him into our Series C Preferred Stock, at the same price that Series C
Preferred Stock is sold to other investors. In connection with the agreement,
the parties consented, in the case of default, to Mr. Copanos obtaining a final
judgment without necessity of a further hearing.

In
addition, on March 19, 2008, we issued to Mr. Copanos a seven year warrant to
acquire 2,100,000 shares of our common stock exercisable at $1.00 per share
(the Copanos Warrant) in connection with the renegotiation
of the repayment terms of the Copanos Note. Of the shares issuable upon exercise
of the warrant, 1,400,000 were immediately exercisable and the remaining 700,000
are exercisable if Mr. Copanos is employed by us or our subsidiary on March 19,
2009 except that if Dr. Lane is removed or resigns from our Board of Directors,
then such 700,000 shares shall become immediately exercisable. As a result of
the Series C Preferred Stock Offering, the exercise price of the Copanos Warrant
automatically reduced to $0.75. In addition, we agreed to include the shares
issuable upon exercise of the Copanos Warrant in our next registration statement
subject to reasonable cutbacks as may be required by the investor or investor
group whose shares are also being registered.

The foregoing
description is a summary and is qualified in its entirety by the agreements,
which are attached as an exhibit hereto and incorporated by reference herein.

Resignation of David
Coffin-Beach

On February
11, 2008, David Coffin-Beach resigned as our President and Chief Operating
Officer. No options granted under Mr. Coffin-Beachs employment agreement
vested and by separate agreement Mr. Coffin-Beach was retained as a consultant
and granted (i) a five year option to acquire 125,000 shares of our common
stock at an exercise price of $1.00 per share, and (ii) 125,000 shares of our
common stock.

68

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2008 Bridge Notes

On April 3,
2008, the Company and Kirk completed an initial closing of a bridge round of
debt financing (the 2008 Bridge Note
Offering), whereby Kirk issued convertible bridge notes (the 2008 Bridge Notes) in
the principal
amount of $6,592,292 to accredited investors as defined by Rule 501 under the
Securities Act of 1933, as amended (the Securities
Act). Subsequently, we completed an additional closing and issued a
further 2008 Bridge Note in the principal amount of $200,000 to an accredited
investor.

Of the 2008
Bridge Notes issued, notes in the principal amount of $5,227,292 were issued in
exchange for (i) 2008 Bridge Notes in the principal amount equal to the unpaid
principal of convertible bridge notes issued by Kirk in a bridge note offering
conducted during 2007 (the 2007 Bridge Note
Offering), and (ii) 2008 Bridge Notes in the principal amount equal
to (1) the unpaid principal and accrued and unpaid interest of a bridge note
held by Ontario, an affiliate of Harcharan Singh, a beneficial owner of more
than 10% of our outstanding common stock and member of our board, that was
issued by Kirk in April 2007 (the Singh
Note), and (2) accrued and outstanding consulting fees due to Mr.
Singh. The incremental gross proceeds to us were $1,552,292.

The lead
investor in the 2008 Bridge Note Offering was Svizera which invested an
aggregate of $1 million in the 2008 Bridge Note Offering. Svizera is a
wholly-owned subsidiary of Maneesh which is controlled by Vinay Sapte and his
brother Maneesh Sapte. As a result of this transaction and subsequent related
transactions, Maneesh became our largest shareholder and three of its
designees, Jyotindra Gange, Vinay Sapte and Maneesh Sapte, became members of
our five-member board. In addition, Ontario invested an aggregate of $1,652,292
in the 2008 Bridge Note Offering (including $1,552,292 of unpaid principal and
accrued and unpaid interest of a promissory note issued by Kirk which rolled
over into the 2008 Bridge Note Offering plus accrued and unpaid consulting
fees).

The
    2008 Bridge Notes bore interest at 6% per annum increasing to 18% in the
    case of an event of default and mature on June 30, 2008, unless earlier converted.
    Upon the closing of a qualified equity financing (as defined therein), the
    2008 Bridge Notes were convertible at the option of the holder into our Series
    C Preferred Stock and warrants to acquire shares of common stock to be issued
    in a qualified equity financing at a premium of 10% of the unpaid principal
    and interest of the 2008 Bridge Notes. In addition, upon closing of the qualified
    equity financing, holders of the 2008 Bridge Notes were entitled to receive
    bridge warrants to acquire our common stock at an exercise price and upon
    other terms identical to the warrants to be issued in the qualified equity
financing. The number of shares of common stock into which the bridge warrants
were exercisable ranged from 40% to 50% of the number of shares of common stock
issuable to holders upon conversion of the Series C Preferred Stock receivable
upon conversion of the 2008 Bridge Notes, with the range depending on the
timing of the initial closing of the qualified equity financing.

69

---



In
connection with the 2008 Bridge Note Offering, we issued an aggregate of
1,358,458 shares of its common stock to holders of the 2008 Bridge Notes
including 200,000 and 330,458 shares to Svizera and Ontario, respectively.

To
    secure Kirks obligations under the 2008 Bridge Notes, we issued 1,000,000
    shares of Series B Convertible Preferred Stock to Axiom Capital Management,
    Inc. (Axiom), the placement agent of the 2008
Bridge Note Offering, acting as collateral agent of holders of the 2008 Bridge
Notes. The shares of Series B Convertible Preferred voted together with the
shares of common stock and other preferred stock entitled to vote on an as-converted
basis. In the event of default under the 2008 Bridge Notes, the Series B
Convertible Preferred Stock were convertible into our common stock on a 1:15
basis for the purpose of utilizing the proceeds thereof to satisfy the obligations
under the 2008 Bridge Notes. In an event of default, we were obligated to file
a registration statement under the Securities Act covering the resale of shares
of common stock issuable upon conversion of the Series B Convertible Preferred
Stock. If we did not file a registration statement within 15 days following an
event of default, the 2008 Bridge Notes would be deemed to increase in
principal amount by 1% every month up to 10% in the aggregate. The 1,000,000
    shares of Series B Convertible Preferred Stock have subsequently been redeemed
    by us for a redemption price of $1,000.

The 2008
Bridge Notes were also secured by a pledge by an affiliate of Dr. Lane, our
Chairman of the Board and former Chief Executive Officer, of 2,000,000 shares
of common stock. As an inducement to the pledge by Dr. Lanes affiliate, we
agreed to issue to Dr. Lanes affiliate one share of our common stock for every
pledged share of common stock sold in an event of default under the 2008 Bridge
Notes.

The
foregoing description is a summary and is qualified in its entirety by the
transaction documents attached as an exhibit hereto and incorporated by
reference herein.

Series C Preferred
Stock Offering

On May 9,
2008, we completed an initial closing of a Series C Preferred Stock offering
(the Series C Offering) whereby
we sold an aggregate of 23,978 shares of our newly created Series C Convertible
Redeemable Preferred Stock (the Series C
Preferred Stock) together with detachable warrants to acquire an
aggregate of 16,700,200 shares of our common stock to accredited investors as
defined by Rule 501 under the Securities Act of 1933, as amended (the Securities Act). We
subsequently
completed a series of additional closings and sold in the aggregate an
additional 4,160 shares of Series C Preferred Stock and additional warrants to
acquire an aggregate of 2,080,000 shares of our common stock.

Pursuant
to the Amended and Restated Certificate of Designations, Preferences and Rights
of Series C Convertible Redeemable Preferred Stock (the Certificate
of Designation)
the shares of Series C Preferred Stock are convertible, both at the option of
the holder and the Company according to the terms of the Certificate of
Designation, at the initial rate of 1,000 shares of common stock for each share
of Series C Preferred Stock (based on a stated value of $500 per share and an
initial conversion price of $0.50) subject to adjustment for, among other
things, stock splits, stock dividends, distributions, reclassifications and
sales below the conversion price. The Series C Preferred Stock votes on an
as-converted basis together with our shares of common stock and any class of preferred
stock entitled to vote with our common stock at any annual or special

70

---



meeting of
ours. Holders of Series C Preferred Stock are entitled to receive cumulative
dividends at the rate of 6% of the stated value per annum on each outstanding
share of Series C Preferred Stock accruing from May 9, 2008 until the earlier
of May 9, 2011 or the conversion thereof into shares of common stock, payable
quarterly on March 31, June 30, September 30 and December 31, with the first
payment due June 30, 2008, and payable in cash or shares of Series C Preferred
Stock in accordance with the terms of the Certificate of Designation. Holders
of Series C Preferred Stock are also entitled to participate on a pro-rata
basis in any dividends paid on the Registrants common stock on an as-converted
basis. The Certificate of Designation further provides that each
share of Series C Preferred Stock will also be entitled to a preference equal
to 125% of the sum of the stated value plus accrued but unpaid cash dividends
upon the merger, acquisition, sale of voting control or sale of all or
substantially all of our assets, upon our liquidation, dissolution or
winding-up or upon an event of bankruptcy. On May 9, 2011, the shares of Series
C Preferred Stock are subject to redemption at our option at a redemption price
of the stated value plus accrued but unpaid dividends on the shares of Series C
Preferred Stock.

The
Warrants are exercisable for a period of five years from the date of grant at
an initial exercise price of $0.75 per share, subject to adjustment for, among
other things, stock splits, stock dividends, distributions, reclassifications
and sales below the exercise price.

Of
    the Series C Preferred Stock and Warrants sold, 2008 Bridge Notes in the
    principal amount of $5,202,292 plus accrued interest thereon, which were
    issued by Kirk in the 2008 Bridge Note Offering, were exchanged at a premium
    of 10% into (i) an aggregate of 11,778 shares of Series C Preferred Stock
    and Warrants to acquire an aggregate of 5,889,000 shares of common stock,
    and (ii) bridge Warrants to acquire an aggregate of 4,711,200 shares of common
    stock (equal to 40% of the number of shares of common stock issuable upon
    conversion of the Series C Preferred Stock received upon conversion of the
    2008 Bridge Notes). In addition, Dr. Lane converted $100,000 of deferred
    compensation due under his employment agreement for an investment of like
    amount in the Series C Offering resulting in the issuance to him of 200 shares
    of Series C Preferred Stock and Warrants to acquire 100,000 shares of common
    stock.

Pursuant
    to a registration rights agreement entered into with purchasers of the Series
    C Preferred Stock, we agreed to use our best efforts to file, within 45 days
    of the final closing of the Series C Offering, with the Securities and Exchange
Commission a registration statement (the Mandatory
Registration Statement) covering the registration of (i) securities
issuable upon exercise of the Warrants and placement agent warrants, (ii)
securities issued by way of liquidated damages under the registration rights
agreement, (iii) up to 1,000,000 shares of common stock owned by Maneesh prior
to May 8, 2008, (iv) 1,000,000 shares of common stock beneficially owned by Mr.
Singh as of May 8, 2008, and (v) 1,000,000 shares of common stock beneficially
owned by Dr. Lane as of May 8, 2008 (collectively the Registrable Securities).
The registration rights agreement provided that if the Mandatory Registration
Statement has not been filed within 45 days of final closing of the Series C
Offering or declared effective within 195 days following final closing, we agreed
to pay to the purchasers liquidated damages, payable in cash or Series C Preferred
Stock, of 1% of the purchase price paid by the purchaser in the Series C Offering
for each month until the registration statement is declared effective, with the
total of the foregoing capped at 10%. If the Mandatory Registration Statement
has not been declared effective and we receive a request between October 6, 2008
and May 9, 2010 from purchasers who invested at

71

---



least $500,000 in the Series C Offering that we file a registration
statement, then we are obligated, subject to certain limitations, to file a
registration covering the Registrable Securities requested to be registered.
Further, if the Mandatory Registration Statement has not been declared
effective and we file a registration statement for our own account or the
account of others then we shall, subject to customary cutbacks and restrictions,
include in such registration statement the Registrable Securities of the
purchasers of the Series C Preferred Stock that request to be included. We have
    timely filed a Mandatory Registration Statement which is currently pending.

Pursuant
    to a letter agreement entered into with our placement agent, Axiom, as
subsequently amended, Axiom is entitled to a cash fee of $255,000
plus expenses of $34,509 for services rendered in our 2007 Bridge Note
    Offering, 2008 Bridge Note Offering and the Series C Offering. In addition,
    we are negotiating the number of number of warrants to which Axiom
    is entitled to in connection with the aforesaid financings.

The
incremental gross proceeds to us from the Series C Offering were $7,780,000 and,
together with the 2008 Bridge Note Offering, the incremental gross proceeds to
us were $9,335,000.

With
the new infusion of capital from the Series C Offering, we used the proceeds
from the Series C Offering to pay down our credit facility with the Bank of
India in the current principal amount of $5,650,000 (the BOI Loan) and retire our remaining
outstanding material indebtedness. On or around May 12, 2008, we repaid an
aggregate of $2,445,000 to holders of delinquent convertible promissory notes
in like principal amount issued by us in a bridge note offering that initially
closed in October 2005 (the 2005 Bridge
Notes). In addition, we repriced warrants to purchase an aggregate
of 407,493 shares of common stock, issued to holders of the 2005 Bridge Notes,
to $0.75 per share and extended the term of such warrants by one year. We
further issued an aggregate of 817 shares of Series C Preferred Stock and
1,091,813 shares of common stock in lieu of payment of accrued and unpaid
interest under the 2005 Bridge Notes. In consideration of the aforesaid, we
obtained a full release from such holders of the 2005 Bridge Notes in
connection with the 2005 Bridge Notes and related transactions.

We
further used proceeds from the Series C Offering to retire additional
indebtedness including, without limitation, indebtedness under the 2008 Bridge
Notes in the principal amount of $1,590,000 (that did not convert into the
Series C Offering), $1,500,000 of indebtedness under a promissory note held by
John Copanos, the VP of Business Development of Kirk and founder of Kirk and
$725,893 of indebtedness under a remaining 2005 Bridge Note held by a holder
that commenced a lawsuit against us.

In
connection with the Series C Offering, our Board authorized the following
issuances: (i) 2,000,000 shares of restricted common stock to Mr. Singh,
vesting over twenty four months, with one-third vesting on each of May 9, 2008,
May 9, 2009 and May 9, 2010; (ii) 1,000,000 shares of restricted common stock
to Dr. Lane, vesting over twenty-four months, with one-third vesting on each
    of May 9, 2008, May 9, 2009 and May 9, 2010; and (iii) 125,000 shares of
    common stock and five-year warrants to acquire 250,000 shares of common stock
    at an initial exercise price of $0.75 per share to our former directors,
    William McCormick and Richard Feldheim, who resigned on April 29, 2008.
Further, in addition to the repricing of the

72

---



2005 Bridge Note warrants, our Board authorized the repricing of
additional warrants to acquire an aggregate of 875,263 shares of common stock
to $0.75 per share. We also agreed to reprice warrants to acquire
1,000,000 shares of common stock held by Harcharan Singh that were issued to
him in April, 2007 to $0.75.

The lead
investor in the Series C Offering was Svizera, which invested an aggregate of
$8,086,000 in the Series C Offering (including the roll-over of a 2008 Bridge
Note in the principal amount of $1 million and the exchange of $300,000 expense
reimbursement due to Svizera) from its working capital, purchased an aggregate
of 16,373 shares of Series C Preferred Stock and warrants exercisable for an
aggregate of 9,071,700 shares of our common stock. As stated previously,
Svizera is a wholly-owned subsidiary of Maneesh, which is controlled by Vinay
Sapte and his brother Maneesh Sapte. Vinay Sapte who was appointed to our Board
on April 29, 2008, and Maneesh Sapte, together with Jyotindra Gange, both
Maneesh designees, became members of our Board on May 23, 2008.

In
addition, Ontario, an affiliate of Mr. Harcharan Singh, invested an aggregate
of $2,661,930 in the Series C Offering (including the roll-over of a 2008
Bridge Note in the principal amount of $1,652,292) from its working capital
and, together with the Maneesh designees, became a member of our Board on May
23, 2008.

Vinay
Sapte, Dr. Lane and Mr. Singh and their respective affiliates were among
principal parties to a Voting Agreement dated as of May 8, 2008 entered into
upon the initial closing of the Series C Offering. Under the terms of the
Voting Agreement, each of the parties agreed to vote all of its shares to
ensure that the size of our Board will be five directors (or seven if the Board
resolves to expand its size to seven). Further, each of the parties agreed to
vote its shares in favor of the following designations: (i) one director
designated by Dr. Lane and his affiliates (to initially be Dr. Lane), (ii) one
director designated by Mr. Singh and his affiliates (to initially be Mr.
Singh), (iii) three directors designated by Maneesh and its affiliates (to
initially be Vinay Sapte, Maneesh Sapte and Jyotindra Gange). The Voting Agreement
further provided that if the Board is expanded to seven directors, then Maneesh
and its affiliates shall be entitled to one further designee and Axiom and
Indigo Securities LLC (Indigo) shall be entitled to designate
one director. If certain of the parties to the Voting Agreement cease to
beneficially own at least 4% of the outstanding shares of our common stock
determined immediately after giving effect to the initial closing of the Series
C Offering, then the right of designation applicable to such party shall
terminate and the right shall vest in the entire Board.

Svizera
    and the Company have also executed a side letter agreement dated May 8, 2008
whereby we agreed, among other things, to become a party to the Voting
Agreement, to gross-up 4,000,000 shares of common stock issued to
Maneesh in consideration of the release of Nostrum Guarantee in the event that
10,661,000 shares of common stock are ultimately returned or released to
Nostrum and to the subrogation of Maneesh to BOI in the event that Maneesh
becomes a guarantor of the credit facility. Further, Svizera agreed that
neither it nor its affiliates would engage Nostrum, Dr. Mulye or Anil Anand or
any of their affiliates in connection with us except to resolve outstanding disputes
between the Registrant and Dr. Mulye and his affiliates.

73

---



To ensure
that the investment by Maneesh and the related transactions were effected as
contemplated, we entered into an amendment to the Rights Agreement, dated as of
September 8, 2006, pursuant to which Maneesh and its affiliates as well as Dr.
Lane, Mr. Singh, Axiom and Indigo and their affiliates will not be considered
an Acquiring Person as a result of the transactions described herein.

The
foregoing description is a summary and is qualified in its entirety by the
transaction documents attached as an exhibit hereto and incorporated by
reference herein.

Joint Venture
Agreement

On June 6,
2008, we entered into a Joint Venture Agreement with Maneesh. Under the terms
of the agreement, Maneesh 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 agreement, we agreed to pay Maneesh a consulting fee of $25,000
per month, commencing June 2008, plus reimbursement of reasonable and
accountable expenses. The agreement further provided 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.

The
foregoing description is a summary and is qualified in its entirety by the
Joint Venture Agreement attached as an exhibit hereto and incorporated by
reference herein.

Maneesh and Singh
Grant

On
November 11, 2008, our Board of Directors authorized the grant of 500,000
shares of our common stock to Maneesh and 125,000 shares of our common stock
    to Harry Singh, both affiliates of the Company, in consideration for their
deferral in payment of certain fees due to them under a joint venture agreement
in the case of Maneesh and a consulting agreement in the case of Harry Singh.
We have not issued these shares although we are treating them for the purposes
    of this Annual Report on Form 10-K as if they were issued and outstanding.

Lane Compensation

On
November 11, 2008, we 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, we agreed to pay Dr. Lane severance of $400,000 as well as pay down
Dr. Lanes deferred compensation which was $214,102 at October 31, 2008 and
reimburse Dr. Lane for expenses incurred by him which were $77,147 at October
31, 2008.

Steven Getraer
Separation

On
January 27, 2009, we entered into a separation agreement with Mr. Getraer
pursuant to which we 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, we agreed to issue warrants

74

---



to acquire
200,000 fully vested shares of our 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 our common stock.

|         |                                        
|-------- | ---------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The
following table presents fees, including reimbursements for expenses, for
professional audit services rendered by Miller Ellin & Company, LLP. (Miller Ellin) for the
audits of our annual financial statements and interim reviews of our quarterly
financial statements for the years ended October 31, 2008 and October 31, 2007
and fees billed for other services rendered by Miller Ellin during those
periods.

|                    |  |      |         |      |   |        | 
|------------------- |  | ---- | ------- | ---- | - | ------ | 
|                    |  | 2008 |         | 2007 |  
|                    |  |      |         |      |  
|Audit
 Fees(1)      |  | $    | 121,966 |      | $ | 70,000 | 
|Audit-Related
 Fees |  |      |        |      |   |       | 
|Tax
 Fees           |  |      |        |      |   |       | 
|All
 Other Fees     |  |      |        |      |   |       | 

|    |                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Audit fees
 consist of fees billed for professional services rendered for the audit of
 our consolidated annual financial statements and review of the interim
 consolidated financial statements included in quarterly reports and services
 that are normally provided by Rosen Seymour in connection with statutory and
 regulatory filings or engagements.

75

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PART IV

|         |                                              
|-------- | ---------------------------------------------
|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES.

|                                                                                                                         |                                                                           | 
|------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------- | 
|(a)
 Documents filed as part of this Report                                                                             
|                                                                                                                         |                                                                           | 
|(1)
 The financial statements listed in the Index to Consolidated Financial
 Statements are filed as part of this report
|                                                                                                                         |                                                                           | 
|(2)
 The financial statements listed in the Index are filed a part of this report.                                      
|                                                                                                                         |                                                                           | 
|(3)
 List of Exhibits                                                                                                   
|                                                                                                                         |                                                                           | 
|                                                                                                                         | See Index to
 Exhibits in paragraph (c) below.                           
|                                                                                                                         |                                                                           | 
|                                                                                                                         | The Exhibits
 are filed with or incorporated by reference in this report.
|                                                                                                                         |                                                                           | 
|(b)
 Financial Statement Schedules                                                                                      
|                                                                                                                         |                                                                           | 
|                                                                                                                         | None.                                                                    
|                                                                                                                         |                                                                           | 
|(c) Exhibits
 required by Item 601 of Regulation S-K.                                                                   

|        |  |                                                                                                                                                           |             | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | 
|Exhibit |  |                                                                                                                                                           | Description | 
|        |  |                                                                                                                                                           |             | 
|        |  |                                                                                                                                                          
|3.1     |  | Restated
 Articles of Incorporation (1)                                                                                                                  
|        |  |                                                                                                                                                          
|3.2     |  | Articles of
 Amendment to the Articles of Incorporation (1)                                                                                              
|        |  |                                                                                                                                                          
|3.3     |  | Amendment to
 the Restated Articles of Incorporation (2)                                                                                                 
|        |  |                                                                                                                                                          
|3.4     |  | Certificate
 of Designations, Preferences and Rights of Series B Preferred Stock (33)                                                                    
|        |  |                                                                                                                                                          
|3.5     |  | Amended and Restated Certificate
        of Designations, Preferences and Rights of Series C Preferred Stock (31)                                        
|        |  |                                                                                                                                                          
|3.6     |  | Bylaws (1)                                                                                                                                               
|        |  |                                                                                                                                                          
|3.7     |  | Bylaws, as
 amended through September 20, 2006 (3)                                                                                                       
|        |  |                                                                                                                                                          
|4.1     |  | Form of
 Certificate evidencing shares of common stock (1)                                                                                               
|        |  |                                                                                                                                                          
|10.1    |  | Form of
 Rights Agreement, effective as of September 8, 2006, between the Registrant
 and Continental Stock Transfer & Trust Company, as rights agent (4)
|        |  |                                                                                                                                                          
|10.2    |  | Amendment
 No. 1 to Technology License Agreement, by and between the Company and Nostrum
 Pharmaceuticals, Inc., dated June 30, 2005 (5)                 

76

---



|      |  |                                                                                                                                                                                                                                                                                                               
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.3  |  | Amendment
 No. 2 to Technology License Agreement, by and between the Company and Nostrum
 Pharmaceuticals, Inc., dated August 31, 2005 (5)                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                                                               
|10.4  |  | Amendment
 No. 3 to Technology License Agreement, by and between the Company and Nostrum
 Pharmaceuticals, Inc., dated October 3, 2005 (6)                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                                                               
|10.5  |  | ANDA
 Ownership Transfer and Product License Agreement, dated as of May 17, 2006,
 by and between Nostrum Pharmaceuticals, Inc. and Synovics Laboratories, Inc.
 (7)                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                               
|10.6  |  | Letter
 Agreement, by and between the Company, Nostrum Pharmaceuticals, Inc. and
 Enem Nostrum Remedies Pvt. Ltd, dated September 27, 2005 (8)                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                               
|10.7  |  | Placement
 Agency Agreement, by and between the Company and Indigo Securities LLC, dated
 September 27, 2005 with respect to the Bridge Financing (6)                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                               
|10.8  |  | Form of
 Subscription Agreement associated with the Bridge Financing (6)                                                                                                                                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                               
|10.9  |  | Form of 9%
 Convertible Bridge Notes (6)                                                                                                                                                                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                               
|10.10 |  | Form of Note
 offered in exchange for Convertible Bridge Note (4)                                                                                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                               
|10.11 |  | Form of
 Bridge Warrants associated with the Bridge Financing (6)                                                                                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                               
|10.12 |  | Form of
 Registration Rights Agreement associated with the Bridge Financing (6)                                                                                                                                                                                                                               
|      |  |                                                                                                                                                                                                                                                                                                               
|10.13 |  | Credit
 Agreement, dated as of May 22, 2006, between the Registrant and Bank of
 India, New York Branch (9)                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                               
|10.14 |  | Promissory
 Note, dated May 22, 2006, by the Registrant in favor of Bank of India, in the
 principal amount of $10,500,000 (9)                                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                               
|10.15 |  | Security
 Agreement, dated May 22, 2006, by the Registrant in favor of Bank of India
 (9)                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                               
|10.16 |  | Corporate
 Guaranty, dated May 22, 2006, by ANDAPharm, Inc., ANDAPharm, LLC, Bionutrics
 Health Products, Inc., Incon Technologies, Inc., Kirk Pharmaceuticals, LLC,
 Kirk Pharmaceuticals, Inc., Lipogenics, Inc., Synovics Laboratories, Inc.,
 and Nutrition Technology Corp. in favor of Bank of India (9)
|      |  |                                                                                                                                                                                                                                                                                                               
|10.17 |  | Corporate
 Guaranty, dated May 22, 2006 by Nostrum Pharmaceuticals, Inc. in favor of
 Bank of India (9)                                                                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                               
|10.18 |  | Individual
 Guaranty, dated May 22, 2006, by Dr. Nirmal Mulye in favor of Bank of India
 (9)                                                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                               
|10.19 |  | Promissory
 Note, dated May 23, 2006, by the Registrant in favor of John S. Copanos (10)                                                                                                                                                                                                                      

77

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|      |  |                                                                                                                                                                                                                                                                              
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.20 |  | Form of Purchase
 and Sale Agreement by and among the Company, Asia Pacific Investment Holdings
 Limited, InCon Technologies, Inc., Bali Holdings, LLC, InCon Processing, LLC,
 InCon International, Inc., N.P. Shaikh and John R. Palmer, dated as of
 October 31, 2005 (11)
|      |  |                                                                                                                                                                                                                                                                              
|10.21 |  | Form of
 Consent of Noteholders to purchase (11)                                                                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                              
|10.22 |  | ANDAPharm
 Purchase Agreement, dated as of July 28, 2005, between the Registrant and
 John S. Copanos (9)                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                              
|10.23 |  | Form of
 Warrant for investors in private placement that initially closed on January
 26, 2007 (12)                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                              
|10.24 |  | Consulting
 Agreement between the Registrant and Saggi Capital Corp. dated February 1,
 2007 (13)                                                                                                                                                                            
|      |  |                                                                                                                                                                                                                                                                              
|10.25 |  | Consulting
 Agreement between the Registrant and Bridge Ventures, Inc. dated February 1,
 2007 (13)                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                              
|10.26 |  | Consulting
 Agreement between the Registrant and VCG&A, Inc. effective as of February
 1, 2007 (14)                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                              
|10.27 |  | Employment
 Agreement dated as of April 18, 2007 between the Registrant and David
 Coffin-Beach (15)                                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                              
|10.28 |  | Consulting
 Agreement dated April 20, 2007 between the Registrant and Harcharan Singh
 (16)                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                              
|10.29 |  | Promissory
 Note dated April 20, 2007 of Kirk Pharmaceuticals, LLC issued to 2138820
 Ontario, Inc.(16)                                                                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                              
|10.30 |  | License and
 Supply Agreement between the Registrant and Fluid Air, Inc. (17)                                                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                              
|10.31 |  | Employment
 Agreement dated as of January 30, 2007 between the Registrant and Ronald H.
 Lane, Ph.D. (18)                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                              
|10.32 |  | Employment
 Agreement dated July 10, 2007 between the Registrant and Steven Getraer (19)                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                              
|10.33 |  | Form of
 Convertible Bridge Note for 2007 convertible bridge note financing (20)                                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                              
|10.34 |  | Settlement
 Agreement dated July 31, 2007 (21)                                                                                                                                                                                                                               
|      |  |                                                                                                                                                                                                                                                                              
|10.35 |  | Promissory
 Note Dated August 31, 2007 in the principal amount of $1,500,000 issued by
 Kirk Pharmaceuticals, LLC in favor of CB Distributors, Inc. (22)                                                                                                                     

78

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|      |  |                                                                                                                                                                  
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.36 |  | Purchase
 Agreement, dated as of August 31, 2007 between Kirk Pharmaceuticals, Inc. and
 CB Distributors, Inc. (22)                                              
|      |  |                                                                                                                                                                  
|10.37 |  | Agreement
 between Registrant and John Copanos dated as of November 30, 2007 (23)                                                                                
|      |  |                                                                                                                                                                  
|10.38 |  | Letter
 agreement between the Registrant and Axiom Capital Management, Inc. dated
 June 5, 2007 (24)                                                             
|      |  |                                                                                                                                                                  
|10.39 |  | Form of
 Agreement between John Copanos and the Registrant (25)                                                                                                  
|      |  |                                                                                                                                                                  
|10.40 |  | Form of
 Warrant issued to John Copanos (25)                                                                                                                     
|      |  |                                                                                                                                                                  
|10.41 |  | Second Supply
 Agreement dated as of February 1, 2008 between Breckenridge Pharmaceutical,
 Inc. and ANDApharm LLC (25)(26)                                      
|      |  |                                                                                                                                                                  
|10.42 |  | Side Letter
 dated April 3, 2008 among the Registrant and Svizera Holdings BV, as amended
 on April 24, 2008 (27)                                                
|      |  |                                                                                                                                                                  
|10.43 |  | Amendment
 dated April 24, 2008 to Side Letter (27)                                                                                                              
|      |  |                                                                                                                                                                  
|10.44 |  | Form of
 Convertible Bridge Note (28)                                                                                                                            
|      |  |                                                                                                                                                                  
|10.45 |  | Side Letter
 dated April 3, 2008 among the Registrant, Kirk and Holders of the Convertible
 Promissory Note (28)                                                 
|      |  |                                                                                                                                                                  
|10.46 |  | Joint
 Venture Agreement dated as of June 6, 2008 by and between the Registrant and
 Maneesh Pharmaceuticals, Ltd. (29)                                          
|      |  |                                                                                                                                                                  
|10.47 |  | Complaint
 filed June 27, 2008 in the United States District Court for the Southern
 District of New York (30)                                                   
|      |  |                                                                                                                                                                  
|10.48 |  | Voting
 Agreement dated as of May 8, 2008 (31)                                                                                                                   
|      |  |                                                                                                                                                                  
|10.49 |  | Amendment
 No. 1 to Rights Agreement dated as of May 9, 2008 between the Registrant and
 Continental Transfer Company (31)                                       
|      |  |                                                                                                                                                                  
|10.50 |  | Form of
 Subscription Agreement in Series C Offering (32)                                                                                                        
|      |  |                                                                                                                                                                  
|10.51 |  | Form of
 Registration Rights Agreement in Series C Offering (32)                                                                                                 
|      |  |                                                                                                                                                                  
|10.52 |  | Form of
 Warrant in Series C Offering (32)                                                                                                                       
|      |  |                                                                                                                                                                  
|10.53 |  | Side Letter
 dated May 8, 2008 between Synovics Pharmaceuticals Inc. and Svizera Holdings
 BV                                                                    
|      |  |                                                                                                                                                                  
|21.1  |  | Subsidiaries
 of the Company*                                                                                                                                    
|      |  |                                                                                                                                                                  
|31.1  |  | Certification
 of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
 2002 and Securities and Exchange Commission Release 34-46427*

79

---



|     |  |                                                                                                                                                                   | 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|31.2 |  | Certification
 of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002 and Securities and Exchange Commission Release 34-46427*
|     |  |                                                                                                                                                                   | 
|32.1 |  | Certification
 of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002*                                                        
|     |  |                                                                                                                                                                   | 
|32.2 |  | Certification
 of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002*                                                        
|     |  |                                                                                                                                                                   | 
|     | 

* Filed
herewith


 See Item 13
of the Companys Report on Form 10-K for the year ended October 31, 2005 for a
list of other material agreements executed prior to October 1, 2005.

|    |                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated
 by reference to Registrants Form 10 filed with the Commission on or about
 January 21, 1997.                       
|    |                                                                                                                                   
|(2) | Incorporated
 by reference to Registrants Form 10-K filed with the Commission on February
 13, 2007.                             
|    |                                                                                                                                   
|(3) | Incorporated
 by reference to Registrants Form 8-K filed with the Commission on September
 21, 2006.                             
|    |                                                                                                                                   
|(4) | Incorporated
 by reference to Registrants Form 8-K filed with the Commission on September
 14, 2006.                             
|    |                                                                                                                                   
|(5) | Incorporated
 by reference to Registrants Form 10-K filed with the Commission on January
 30, 2006.                              
|    |                                                                                                                                   
|(6) | Incorporated
 by reference to Registrants Form 8-K filed with the Commission on October 7,
 2005, as amended on October 11, 2005.
|    |                                                                                                                                   
|(7) | Incorporated
 by reference to Registrants Form 8-K filed with the Commission on May 19,
 2006.                                   
|    |                                                                                                                                   
|(8) | Incorporated
 by reference to Registrants Form 8-K filed with the Commission on October 3,
 2005.                                
|    |                                                                                                                                   
|(9) | Incorporated
 by reference to Registrants Form 8-K filed with the Commission on May 26,
 2006.                                   

80

---



|     |                                                                                                                                                                                                                                                                                                                     
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated
 by reference to Registrants Form 8-K/A (amendment to 8-K filed on May 26,
 2006) filed May 31, 2006                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                     
|(11) | Incorporated
 by reference to Registrants Form 10-Q filed with the Commission on March 16,
 2006                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                     
|(12) | Incorporated
 by reference to Registrants Form 8-K/A filed February 2, 2007                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                     
|(13) | Incorporated
 by reference to Registrants Form 8-K filed February 6, 2007                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                     
|(14) | Incorporated
 by reference to Registrants Form 8-K filed February 8, 2007                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                     
|(15) | Incorporated
 by reference to Registrants Form 8-K filed April 24, 2007                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                     
|(16) | Incorporated
 by reference to Registrants Form 8-K filed April 26, 2007                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                     
|(17) | Incorporated
 by reference to Registrants Form 8-K filed May 7, 2007                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                     
|(18) | Incorporated
 by reference to Registrants Form 8-K filed May 17, 2007                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                     
|(19) | Incorporated
 by reference to Registrants Form 8-K filed July 11, 2007                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                     
|(20) | Incorporated
 by reference to Registrants Form 8-K filed July 11, 2007                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                     
|(21) | Incorporated
 by reference to Registrants Form 8-K filed August 6, 2007                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                     
|(22) | Incorporated
 by reference to Registrants Form 8-K filed September 7, 2007                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                     
|(23) | Incorporated
 by reference to Registrants Form 8-K filed December 6, 2007                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                     
|(24) | Incorporated
 by reference to Registrants Form 10-K filed February 13, 2008                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                     
|(25) | Incorporated
 by reference to Registrants Form 10-Q filed with the Commission on March 21,
 2008                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                     
|(26) | We have
 requested confidential treatment with respect to this exhibit. In the event
 that the Commission should deny such request in whole or in part, such
 exhibit or the relevant portions thereof shall be filed by amendment to the
 Quarterly Report on Form 10-Q filed with the Commission on March 21, 2008
|     |                                                                                                                                                                                                                                                                                                                     
|(27) | Incorporated
 by reference to Registrants Form 8-K filed May 5, 2008                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                     
|(28) | Incorporated
 by reference to Registrants Form 8-K/A filed May 15, 2008                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                     
|(29) | Incorporated
 by reference to Registrants Form 8-K filed June 12, 2008                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                     
|(30) | Incorporated
 by reference to Registrants Form 8-K filed July 3, 2008                                                                                                                                                                                                                                              

81

---



|     |                                                                                 
|---- | --------------------------------------------------------------------------------
|(31) | Incorporated
 by reference to Registrants Form 10-Q filed September 15, 2008   
|     |                                                                                 
|(32) | Incorporated
 by reference to Registrants Form 8-K filed January 29, 2009.     
|     |                                                                                 
|(33) | Incorporated by reference to Registrants
        Form 8-K filed April 16, 2008.

82

---



SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) 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.

|                         |                                     |                              
|------------------------ | ----------------------------------- | -----------------------------
|                         | SYNOVICS
PHARMACEUTICALS INC.      
|                         |                                    
|Dated:
 February 4, 2009 | By:                                 | /s/          Jyotindra
 Gange
|                         |                                     |                              
|                         | Name:
 Jyotindra Gange             
|                         | Title:
 Principal Executive Officer

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

|                     |  |                                 |  |                  
|-------------------- |  | ------------------------------- |  | -----------------
|Title                |  |                                 |  | Date             
|                     |  |                                 |  |                  
|/s/
 Jyotindra Gange |  | Principal
 Executive Officer,   |  | February 4,
 2009
|                     |  | Director                        |  |                  
|Jyotindra
 Gange     |  | (Principal
 Executive Officer)  |  |                  
|                     |  |                                 |  |                  
|                     |  |                                 |  |                  
|/s/ Mahendra
 Desai  |  | Chief
 Financial Officer        |  | February 4,
 2009
|                     |  | (Principal
 Accounting Officer) |  |                  
|Mahendra
 Desai      |  |                                 |  |                  
|                     |  |                                 |  |                  
|/s/ Ronald
 H. Lane  |  | Chairman of
 the Board          |  | February 4,
 2009
|                     |  |                                 |  |                  
|Ronald H.
 Lane      |  |                                 |  |                  
|                     |  |                                 |  |                  
|/s/ Vinay
 Sapte     |  | Director                        |  | February 4,
 2009
|                     |  |                                 |  |                  
|Vinay Sapte          |  |                                 |  |                  
|                     |  |                                 |  |                  
|/s/ Maneesh
 Sapte   |  | Director                        |  | February 4,
 2009
|                     |  |                                 |  |                  
|Maneesh
 Sapte       |  |                                 |  |                  
|                     |  |                                 |  |                  
|/s/
 Harcharan Singh |  | Director                        |  | February 4,
 2009
|                     |  |                                 |  |                  
|Harcharan
 Singh     |  |                                 |  |                  

83

---



SYNOVICS PHARMACEUTICALS, INC. AND
SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2008 AND 2007

CONTENTS

|                                                                    |  |     
|------------------------------------------------------------------- |  | ----
|                                                                    |  | PAGE
|                                                                    |  |     
|                                                                    |  |     
|REPORT OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM             |  | F-1 
|                                                                    |  |     
|CONSOLIDATED BALANCE
SHEETS                                         |  | F-2 
|                                                                    |  |     
|CONSOLIDATED STATEMENTS OF
OPERATIONS                               |  | F-3 
|                                                                    |  |     
|CONSOLIDATED STATEMENTS OF
CHANGES IN
STOCKHOLDERS EQUITY (DEFICIT) |  | F-4 
|                                                                    |  |     
|CONSOLIDATED STATEMENTS OF CASH
FLOWS                               |  | F-5 
|                                                                    |  |     
|NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS                          |  | F-6 

84

---



REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

To Synovics
Pharmaceuticals, Inc.

We have
audited the accompanying consolidated balance sheets of Synovics Pharmaceuticals,
Inc. and Subsidiaries as of October 31, 2008 and 2007 and the related
consolidated statements of operations, stockholders equity (deficit) and cash
flows for the years ended October 31, 2008, 2007, and 2006. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Synovics
Pharmaceuticals, Inc. and Subsidiaries as of October 31, 2008 and 2007 and the
results of their operations and their cash flows for each of the three years in
the period ended October 31, 2008, 2007, and 2006 in conformity with accounting
principles generally accepted in the United States of America.

The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As shown in the consolidated
financial statements, the Company has negative working capital of $6,540,018
and has experienced significant losses and negative cash flows. These facts
raise substantial doubt about the Companys ability to continue as a going
concern. Managements plans in this regard are described in Note 2.

|                   |                                
|------------------ | -------------------------------
|                   | /s/ Miller Ellin & Company, LLP
|                   |                                
|                   | CERTIFIED PUBLIC ACCOUNTANTS   
|                   |                                
|New York, New York |                                
|January 29, 2009   |                                

F-1

---



SYNOVICS PHARMACEUTICALS,
INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                                                 |  |   | October
            31, |   |  |   | October
            31, |  
|-------------------------------------------------------------------------------- |  | - | ----------------------- | - |  | - | ----------------------- | -
|                                                                                 |  |   | 2008                    |   |  |   | 2007                    |  
|ASSETS                                                                           |  |   |                         |   |  |   |                         |  
|                                                                                
|CURRENT
        ASSETS:                                                          |  |   |                         |   |  |   |                         |  
|Cash
        and cash equivalents                                                |  | $ | 65,986                  |   |  | $ | -                       |  
|Trade
        receivables, net                                                   |  |   | 3,820,465               |   |  |   | 3,328,951               |  
|Inventory                                                                        |  |   | 2,901,664               |   |  |   | 1,928,009               |  
|Prepaid
        expenses and other current assets                                |  |   | 377,269                 |   |  |   | 302,937                 |  
|                                                                                
|Total
        Current Assets                                                     |  |   | 7,165,384               |   |  |   | 5,559,897               |  
|                                                                                
|PROPERTY
        - Net of accumulated depreciation of $911,452                   |  |   |                         |   |  |   |                         |  
|and $490,771,
        respectively                                               |  |   | 2,483,577               |   |  |   | 2,024,407               |  
|                                                                                
|OTHER
        ASSETS:                                                            |  |   |                         |   |  |   |                         |  
|Security
        deposits                                                        |  |   | 87,548                  |   |  |   | 87,548                  |  
|Deferred
        financing fees                                                  |  |   | 698,449                 |   |  |   | 2,899,296               |  
|Intangible
        assets - net of accumulated amortization of                   |  |   |                         |   |  |   |                         |  
|$1,463,877
        and $612,279, respectively                                    |  |   | 463,454                 |   |  |   | 1,315,051               |  
|                                                                                
|Goodwill                                                                         |  |   | 11,447,698              |   |  |   | 11,447,698              |  
|Total
        Other Assets                                                       |  |   | 12,697,149              |   |  |   | 15,749,593              |  
|                                                                                
|TOTAL
          ASSETS                                                           |  | $ | 22,346,110              |   |  | $ | 23,333,897              |  
|                                                                                
|LIABILITIES
          AND STOCKHOLDERS' EQUITY (DEFICIT)                         |  |   |                         |   |  |   |                         |  
|                                                                                
|CURRENT
        LIABILITIES:                                                     |  |   |                         |   |  |   |                         |  
|Accounts
        payable                                                         |  | $ | 5,978,002               |   |  | $ | 4,716,702               |  
|Accrued
        interest                                                         |  |   | 374,864                 |   |  |   | 4,529,342               |  
|Accrued
        liabilities                                                      |  |   | 4,054,739               |   |  |   | 2,544,825               |  
|Dividends
        payable                                                        |  |   | 382,649                 |   |  |   |                        |  
|Notes
        payable - shareholders and others                                  |  |   | 500,000                 |   |  |   | 3,250,000               |  
|Notes
        payable                                                            |  |   | 40,000                  |   |  |   | 8,175,000               |  
|Current
        portion of Capital Leases                                        |  |   | 70,291                  |   |  |   | 52,297                  |  
|Current
        portion of note payable - bank                                   |  |   | 2,100,000               |   |  |   | 1,750,000               |  
|                                                                                
|Total
        current liabilities                                                |  |   | 13,500,545              |   |  |   | 25,018,166              |  
|                                                                                
|LONG-TERM
        LIABILITIES:                                                   |  |   |                         |   |  |   |                         |  
|Deferred
        revenue                                                         |  |   | -                       |   |  |   | 847,334                 |  
|Note
        payable bank, net of current portion                                |  |   | 3,550,000               |   |  |   | 5,450,000               |  
|Capital
        lease obligation, net of current portion                         |  |   | 294,071                 |   |  |   | 122,523                 |  
|                                                                                
|Total
        Liabilities                                                        |  |   | 17,344,616              |   |  |   | 31,438,023              |  
|                                                                                
|STOCKHOLDERS'
        EQUITY (DEFICIT):                                          |  |   |                         |   |  |   |                         |  
|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                  |   |  |   | -                       |  
|Common
        stock - $.001 par value - authorized, 45,000,000 shares;          |  |   |                         |   |  |   |                         |  
|27,619,015
        and 19,118,133 issued and outstanding, respectively           |  |   | 38,280                  |   |  |   | 29,838                  |  
|Additional
        paid-in capital                                               |  |   | 84,759,876              |   |  |   | 71,537,568              |  
|Warrants                                                                         |  |   | 9,127,392               |   |  |   | 4,892,997               |  
|Accumulated
        deficit                                                      |  |   | (78,649,597             | ) |  |   | (74,261,117             | )
|Common
        Stock in Treasury                                                 |  |   | (10,952,410             | ) |  |   | (10,952,410             | )
|Subscription
        receivable                                                  |  |   | (150,000                | ) |  |   | (150,000                | )
|Total
        stockholders' equity (deficit)                                     |  |   | 5,001,494               |   |  |   | (8,104,126              | )
|                                                                                
|TOTAL
          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                   |  | $ | 22,346,110              |   |  | $ | 23,333,897              |  

See
notes to the consolidated financial statements.

F-2

---



SYNOVICS PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                     |  |   | YEARS
            ENDED OCTOBER 31, |  
|---------------------------------------------------- |  | - | ----------------------------------- | -
|                                                     |  |   | 2008                                |  
|                                                    
|REVENUES,
        net                                |  | $ | 25,959,579                          |  
|                                                    
|                                                    
|COST
        OF REVENUES                             |  |   | 16,988,322                          |  
|                                                    
|GROSS
        PROFIT                                 |  |   | 8,971,257                           |  
|                                                    
|                                                    
|OPERATING
        EXPENSES                           |  |   |                                     |  
|Research
        and development                     |  |   | 1,177,313                           |  
|Selling,
        general, and administrative         |  |   | 10,277,409                          |  
|Total
        expenses                               |  |   | 11,454,722                          |  
|                                                    
|OPERATING
        LOSS                               |  |   | (2,483,465                          | )
|                                                    
|                                                    
|OTHER
        INCOME (EXPENSES):                     |  |   |                                     |  
|Other
        income                                 |  |   | -                                   |  
|Impairment
        loss                              |  |   | (660,919                            | )
|Loss
        on disposal of assets                   |  |   | (20,342                             | )
|Settlement
        registration rights liabilty      |  |   | 3,325,747                           |  
|Interest
        expense, net                        |  |   | (4,166,852                          | )
|                                                    
|Total
        other (expenses) income                |  |   | (1,522,366                          | )
|                                                    
|NET
        LOSS BEFORE PROVISION FOR                |  |   |                                     |  
|INCOME
        TAX                                   |  |   | (4,005,831                          | )
|                                                    
|PROVISION
        FOR INCOME TAXES                   |  |   | -                                   |  
|                                                    
|NET
        LOSS FROM CONTINUING OPERATIONS          |  |   | (4,005,831                          | )
|Equity
        in the loss of InCon Processing, LLC. |  |   | -                                   |  
|                                                    
|NET
        LOSS                                     |  | $ | (4,005,831                          | )
|                                                    
|BASIC
        AND DILUTED NET LOSS PER COMMON SHARE  |  |   |                                     |  
|FROM
        CONTINUING OPERATIONS                   |  |   | (0.17                               | )
|FROM
        DISCONTINUED OPERATIONS                 |  |   | -                                   |  
|                                                    
|NET
        LOSS PER SHARE                           |  |   | (0.17                               | )
|                                                    
|WEIGHTED
        AVERAGE NUMBER OF COMMON SHARES     |  |   |                                     |  
|OUTSTANDING                                          |  |   | 23,547,066                          |  

See
notes to the condensed consolidated financial statements.

F-3

---



SYNOVICS PHARMACEUTICALS, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY (DEFICIT)

|                                                    |                          |  |                          |         |              |        |          |   |        |  |             |   |  |   |             |  |            |                |  |   |              |   |  |   |               |   |  |   |             |   |  |            |  |   |             |   |  |   |            |   |  |   |                  |  
|--------------------------------------------------- | ------------------------ |  | ------------------------ | ------- | ------------ | ------ | -------- | - | ------ |  | ----------- | - |  | - | ----------- |  | ---------- | -------------- |  | - | ------------ | - |  | - | ------------- | - |  | - | ----------- | - |  | ---------- |  | - | ----------- | - |  | - | ---------- | - |  | - | ---------------- | -
|                                                    | Series A Preferred Stock |  | Series C Preferred Stock |         | Common Stock |        | Warrants |   |        |  | Paid in     |   |  |   | Accumulated |  |            | Treasury stock |  |   | Subscription |   |  |   | Stockholders' |  
|                                                    | Shares                   |  |                          | Amount  |              | Shares |          |   | Amount |  | Shares      |   |  |   | Amount      |  | Number     |                |  |   | Amount       |   |  |   | Capital       |   |  |   | Deficit     |   |  | Shares     |  |   | Amount      |   |  |   | Receivable |   |  |   | Equity (Deficit) |  
|Balances, October 31, 2005                          | 591,850                  |  | $                        | 798,998 |              | -      |          | $ | -      |  | 22,681,775  |   |  | $ | 22,681      |  | 431,896    |                |  | $ | 511,650      |   |  | $ | 54,802,633    |   |  | $ | (44,832,212 | ) |  | -          |  | $ | -           |   |  | $ | -          |   |  | $ | 11,303,750       |  
|Issuance of common stock                            | -                        |  |                          | -       |              | -      |          |   | -      |  | 3,362,902   |   |  |   | 3,363       |  | -          |                |  |   | -            |   |  |   | 7,499,542     |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 7,502,905        |  
|Warrants issued                                     | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | 564,996    |                |  |   | 300,326      |   |  |   | (300,326      | ) |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | -                |  
|Warrants expired                                    | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | (10,000    | )              |  |   | (405         | ) |  |   | 405           |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | -                |  
|Warrants issued in connection with convertible      |                          |  |                          |         |              |        |          |   |        |  |             |   |  |   |             |  |            |                |  |   |              |   |  |   |               |   |  |   |             |   |  |            |  |   |             |   |  |   |            |   |  |   |                  |  
|bridge notes                                        | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | 883,526    |                |  |   | 3,328,401    |   |  |   | (3,328,401    | ) |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | -                |  
|Beneficial conversion feature of convertible bridge |                          |  |                          |         |              |        |          |   |        |  |             |   |  |   |             |  |            |                |  |   |              |   |  |   |               |   |  |   |             |   |  |            |  |   |             |   |  |   |            |   |  |   |                  |  
|notes                                               | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | -          |                |  |   | -            |   |  |   | 3,202,653     |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 3,202,653        |  
|Options issued                                      | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | -          |                |  |   | -            |   |  |   | -             |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | -                |  
|Options canceled                                    | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | (6,000     | )              |  |   | -            |   |  |   | -             |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | -                |  
|Net Loss                                            | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | -          |                |  |   | -            |   |  |   | -             |   |  |   | (8,571,021  | ) |  | -          |  |   | -           |   |  |   | -          |   |  |   | (8,571,021       | )
|Subscription receivable on sale of warrants         | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | -          |                |  |   | -            |   |  |   | -             |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | (150,000   | ) |  |   | (150,000         | )
|Acquisition of treasury stock                       | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | -          |                |  |   | -            |   |  |   | -             |   |  |   | -           |   |  | 59,000     |  |   | (184,800    | ) |  |   | -          |   |  |   | (184,800         | )
|Balances, October 31, 2006                          | 591,850                  |  |                          | 798,998 |              | -      |          |   | -      |  | 26,044,677  |   |  |   | 26,044      |  | 1,864,418  |                |  |   | 4,139,972    |   |  |   | 61,876,506    |   |  |   | (53,403,233 | ) |  | 59,000     |  |   | (184,800    | ) |  |   | (150,000   | ) |  |   | 13,103,487       |  
|Issuance of common stock                            | -                        |  |                          | -       |              | -      |          |   | -      |  | 1,095,000   |   |  |   | 1,095       |  | -          |                |  |   | -            |   |  |   | 550,690       |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 551,785          |  
|Stocks and warrants issued                          | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | 1,712,500  |                |  |   | 324,473      |   |  |   | 1,501,114     |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 1,825,587        |  
|Stocks and warrants issued in connection with       |                          |  |                          |         |              |        |          |   |        |  |             |   |  |   |             |  |            |                |  |   |              |   |  |   |               |   |  |   |             |   |  |            |  |   |             |   |  |   |            |   |  |   |                  |  
|convertible debt                                    | -                        |  |                          | -       |              | -      |          |   | -      |  | 648,506     |   |  |   | 649         |  | 366,664    |                |  |   | 251,088      |   |  |   | -             |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 251,737          |  
|Warrants issued in connection with note             |                          |  |                          |         |              |        |          |   |        |  |             |   |  |   |             |  |            |                |  |   |              |   |  |   |               |   |  |   |             |   |  |            |  |   |             |   |  |   |            |   |  |   |                  |  
|conversion                                          | -                        |  |                          | -       |              | -      |          |   | -      |  |             |   |  |   |             |  | 525,000    |                |  |   | 177,464      |   |  |   | 2,270,735     |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 2,448,199        |  
|Stock and warrants issued for sevices               | -                        |  |                          | -       |              | -      |          |   | -      |  | 2,000,000   |   |  |   | 2,000       |  | 4,378,333  |                |  |   | -            |   |  |   | 5,249,195     |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 5,251,195        |  
|Stocks and warrants issued for interest             | -                        |  |                          | -       |              | -      |          |   | -      |  | 50,000      |   |  |   | 50          |  | -          |                |  |   | -            |   |  |   | 89,324        |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 89,374           |  
|Net Loss                                            | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | -          |                |  |   | -            |   |  |   | -             |   |  |   | (20,857,884 | ) |  | -          |  |   | -           |   |  |   | -          |   |  |   | (20,857,884      | )
|Acquisition of treasury stock                       | -                        |  |                          | -       |              | -      |          |   | -      |  | (10,661,000 | ) |  |   | -           |  | -          |                |  |   | -            |   |  |   | -             |   |  |   | -           |   |  | 10,661,000 |  |   | (10,767,610 | ) |  |   | -          |   |  |   | (10,767,610      | )
|Balances, October 31, 2007                          | 591,850                  |  |                          | 798,998 |              | -      |          |   | -      |  | 19,177,183  |   |  |   | 29,838      |  | 8,846,915  |                |  |   | 4,892,997    |   |  |   | 71,537,564    |   |  |   | (74,261,117 | ) |  | 10,720,000 |  |   | (10,952,410 | ) |  |   | (150,000   | ) |  |   | (8,104,130       | )
|Stock for loan gaurantee                            | -                        |  |                          | -       |              | -      |          |   | -      |  | 4,000,000   |   |  |   | 4,000       |  | -          |                |  |   | -            |   |  |   | 1,036,000     |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 1,040,000        |  
|Warrants issued or repriced                         | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | 4,180,000  |                |  |   | 1,467,925    |   |  |   | 1,548,465     |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 3,016,390        |  
|Warrants cancelled or expired                       | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | (3,920,000 | )              |  |   | (932,191     | ) |  |   |               |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | (932,191         | )
|Stocks and warrants issued in connection with       |                          |  |                          |         |              |        |          |   |        |  |             |   |  |   |             |  |            |                |  |   |              |   |  |   |               |   |  |   |             |   |  |            |  |   |             |   |  |   |            |   |  |   |                  |  
|convertible debt                                    | -                        |  |                          | -       |              | 28,955 |          |   | 28,955 |  | 3,394,712   |   |  |   | 3,395       |  | 18,500,200 |                |  |   | 3,263,837    |   |  |   | 9,956,277     |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 13,252,464       |  
|Stock and warrants issued for sevices               | -                        |  |                          | -       |              | -      |          |   | -      |  | 1,047,120   |   |  |   | 1,047       |  | 1,413,800  |                |  |   | 434,824      |   |  |   | 681,570       |   |  |   | -           |   |  | -          |  |   | -           |   |  |   | -          |   |  |   | 1,117,441        |  
|Series C Preferred dividend                         | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | -          |                |  |   | -            |   |  |   | -             |   |  |   | (382,649    | ) |  | -          |  |   | -           |   |  |   | -          |   |  |   | (382,649         | )
|Net Loss                                            | -                        |  |                          | -       |              | -      |          |   | -      |  | -           |   |  |   | -           |  | -          |                |  |   | -            |   |  |   | -             |   |  |   | (4,005,831  | ) |  | -          |  |   | -           |   |  |   | -          |   |  |   | (4,005,831       | )
|Balances, October 31, 2008                          | 591,850                  |  | $                        | 798,998 |              | 28,955 |          | $ | 28,955 |  | 27,619,015  |   |  | $ | 38,280      |  | 29,020,915 |                |  | $ | 9,127,392    |   |  | $ | 84,759,876    |   |  | $ | (78,649,597 | ) |  | 10,720,000 |  | $ | (10,952,410 | ) |  | $ | (150,000   | ) |  | $ | 5,001,494        | )
|See notes to the consolidated financial statements. |                          |  |                          |         |              |        |          |   |        |  |             |   |  |   |             |  |            |                |  |   |              |   |  |   |               |   |  |   |             |   |  |            |  |   |             |   |  |   |            |   |  |   |                  |  

See notes to the consolidated financial statements.

F-4

---



SYNOVICS PHARMACEUTICALS, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                    | YEARS
    ENDED OCTOBER 31,
|----------------------------------------------------------------------------------- | ---------------------------
|                                                                                    |                            
|OPERATING
        ACTIVITIES:                                                       |                            
|Net
        loss                                                                    | $                          
|Adjustments
        to reconcile net loss to net cash used in operating activities: |                            
|Impairment
        of definite life intangible asset                                |                            
|Depreciation
        and amortization                                               |                            
|Equity
        in the loss of joint venture                                         |                            
|Amortization
        of deferred financing fees                                     |                            
|Stock
        based compensation and financing fees                                 |                            
|Stock
        issued for interest                                                   |                            
|Stock
        and warrants issued from note conversion                              |                            
|Forgiveness
        of interest                                                     |                            
|Expenses
        satisfied with issuance of common stock                            |                            
|Changes
        in operating assets and liabilities:                                |                            
|Accounts
        receivable                                                         |                            
|Inventory                                                                           |                            
|Prepaids
        and other current assets                                           |                            
|Accounts
        payable                                                            |                            
|Accrued
        interest                                                            |                            
|Accrued
        liabilities                                                         |                            
|Deferred
        Revenues                                                           |                            
|Net
        cash provided (used in) in operating activities                         |                            
|                                                                                    |                            
|INVESTING
        ACTIVITIES:                                                       |                            
|Capital
        expenditures                                                        |                            
|Acquisition
        activities                                                      |                            
|Patent
        acquisitions                                                         |                            
|                                                                                    |                            
|Net
        cash used in investing activities                                       |                            
|                                                                                    |                            
|FINANCING
        ACTIVITIES:                                                       |                            
|Sale
        of common and preferred stock                                          |                            
|Proceeds
        from debt                                                          |                            
|Repayment
        of debt                                                           |                            
|Renegotiation
        of bank note                                                  |                            
|Payment
        of deferred financing                                               |                            
|Repayment
        of capital leases                                                 |                            
|                                                                                    |                            
|Net
        cash (used in) provided by financing activities                         |                            
|                                                                                    |                            
|                                                                                    |                            
|NET
        INCREASE (DECREASE) IN CASH AND                                         |                            
|CASH
        EQUIVALENTS                                                            |                            
|                                                                                    |                            
|CASH
        AND CASH EQUIVALENTS, BEGINNING OF PERIOD                              |                            
|                                                                                    |                            
|CASH
        AND CASH EQUIVALENTS, END OF PERIOD                                    | $                          
|                                                                                    |                            
|                                                                                    |                            
|SUPPLEMENTAL
        DISCLOSURES OF NONCASH FINANCING                               |                            
|AND
        INVESTING ACTIVITIES:                                                   |                            
|Forgiveness
        of interest                                                     |                            
|Purchase
        of equipment through capital leases                                |                            
|Equity
        issued in exchange for settlement of fees                            |                            
|Settlement
        of debt through issuance of equity                               |                            
|                                                                                    | $                          

See notes to the
consolidated financial statements.

F-5

---



|         |                                                                                 
|-------- | --------------------------------------------------------------------------------
|NOTE 1 - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
ORGANIZATION, AND NATURE OF BUSINESS

Principles of Consolidation

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

Organization and Nature of Business

Synovics Pharmaceuticals,
Inc. is a specialty pharmaceutical company engaged in the development,
manufacturing and commercialization of generic over the counter pharmaceutical
products and generic prescription drug products. Synovics Pharmaceuticals, Inc.
previously called Bionutrics, Inc. was incorporated in Nevada in 1990. The
Company has two primary subsidiaries, Kirk Pharmaceuticals, LLC (Kirk), and ANDAPharm, LLC
(ANDAPharm). Kirk manufactures and
distributes OTC products developed by or licensed to the Company. ANDAPharm
serves as the product research and RX manufacturing arm of the Company with a
focus on the development of active compounds for drugs.

Cash and Cash Equivalents

The Company considers all
liquid investments with an original maturity of three months or less to be cash
equivalents. At October 31, 2008, and 2007 cash consisted of cash on deposit
with banks and the Company had no cash equivalents.

Inventory

The Companys inventory is
stated at the lower of cost or market. Cost is determined using the first in
first out method.

Property and Depreciation

Property and equipment are
stated at cost. Major renewals and improvements are capitalized and
replacements, maintenance and repairs, which do not improve or extend the lives
of the respective assets, are charged to expense when incurred. When items of
property and equipment are retired or otherwise disposed of, the original cost
and related accumulated depreciation to date are removed from the accounts and
any gain or losses upon retirement or sale is recognized in income. The
Companys property consists of, manufacturing equipment, computer equipment
leasehold improvements, and furniture and fixtures, which are depreciated for
financial reporting purposes using the straight-line method over the estimated
useful life of the assets.

Patents

Costs incurred for the
application of patents are capitalized and amortized on the straight-line method
for 17 years, which is their estimated useful life. These costs are charged to
expense if the patent is unsuccessful. The Company continually reviews patents
for impairment. If conditions indicate that the carrying value is not
recoverable an impairment charge is recognized to reduce the carrying amount to
the estimated fair value of the asset. Patents currently capitalized relate to
both the processes and products associated with the Companys business.

Impairment of Long-Lived Tangible Assets

The Company continually
evaluates the fair value of long-lived tangible assets for impairment whenever
    events or changes in circumstances indicate that the carrying amount of an
    asset may not be recoverable. There was no impairment of long-lived tangible
    assets during the years ended October 31, 2008, 2007 and 2006.

F-6

---



|         |                                                                                              
|-------- | ---------------------------------------------------------------------------------------------
|NOTE 1 - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
 ORGANIZATION, AND NATURE OF BUSINESS (CONTINUED)

Revenue Recognition

The Company generally
recognizes product revenue at the time of shipment to the customer. Revenues
from services are recorded at the time the service is rendered and/or
reimbursable expenses are incurred.

Revenues for the years ended
October 31, 2008, 2007 and 2006 were derived primarily from services and
product sales.

Research and Development

The cost of research and
development is charged to expense as incurred.

Loan Closing Costs

In the year ended October
31, 2006, the Company incurred various expenses in connection with obtaining a
line of credit bank facility to finance the Kirk and ANDAPharm acquisitions.
These costs are being amortized over 36 months. Amortization expense charged to
operations for the years ended October 31, 2008, 2007 and 2006, were $159,346,
$159,346 and $79,867, respectively.

Intangible Assets

Goodwill and intangible
assets with indefinite lives are reviewed at least annually for impairment.
Management performed its review of the carrying value of the Companys goodwill
and other intangible assets and recognized impairments during the years ended
October 31, 2008, 2007 and 2006 of $660,919, $4,006,386 and $0, respectively.

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
date 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 Uncertainty 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, 2007. Additionally, no adjustments related to uncertain tax
positions were recognized during the year ended October 31, 2008.

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 October 31, 2008.

The Company operates in
multiple tax jurisdictions within the United States of America. Although we do
not believe that we are currently under examination in any of our major tax
jurisdictions, we remain subject to examination in all of our tax jurisdictions
until the applicable statutes of limitation expire. As of October 31, 2008, 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.

F-7

---



|         |                                                                                              
|-------- | ---------------------------------------------------------------------------------------------
|NOTE 1 - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
 ORGANIZATION, AND NATURE OF BUSINESS (CONTINUED)

Use of Estimates

The preparation of financial
statements in conformity with generally accepted accounting principles in the
United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Significant estimates include the allowance for doubtful accounts.

Concentrations of Credit Risk

Cash

The Company maintains cash
balances in banks, which, at times, may exceed the limits of amounts insured by
the Federal Deposit Insurance Corporation (FDIC); however, management does not
believe that there is a significant risk of loss of uninsured amounts.

Sales and Receivables

The
Company has customers that accounted for over 10% of revenues in the years
ended October 31, 2008, 2007, and 2006. The percentages by customer are as follows:

| |            |  |       |   |      |   |      |  
| | ---------- |  | ----- | - | ---- | - | ---- | -
| |            |  | 2008  |   | 2007 |   | 2006 |  
| |            |  |       |   |      |   |      |  
| |            |  |       |   |      |   |      |  
| | Customer A |  | 24.7  | % | 21.9 | % | 33.4 | %
| | Customer B |  | 17.2  | % | 21.3 | % | 27.5 | %
| | Customer C |  | 9.5   | % | 11.0 | % | 6.8  | %
| |            |  |       |   |      |   |      |  
| |            |  | 51.40 | % | 54.2 | % | 67.7 | %

The concentration of accounts receivables
with customers owing more than 10% is:

| |            |  |      |   |      |   |      |  
| | ---------- |  | ---- | - | ---- | - | ---- | -
| |            |  | 2008 |   | 2007 |   | 2006 |  
| |            |  |      |   |      |   |      |  
| |            |  |      |   |      |   |      |  
| | Customer A |  | 19.9 | % | 24.1 | % | 30.8 | %
| | Customer B |  | 11.6 | % | 21.0 | % | 26.2 | %
| | Customer C |  | 0.0  | % | 10.4 | % | 0.0  | %
| |            |  |      |   |      |   |      |  
| |            |  | 41.5 | % | 55.5 | % | 57.0 | %

F-8

---



NOTE 2 - BASIS OF PRESENTATION

Going Concern and Operating Plans

The accompanying
consolidated financial statements have been prepared assuming the Company will
continue to operate as a going concern. Under that assumption, it is expected
that assets will be realized and liabilities will be satisfied in the normal
course of business. However, the Company has experienced significant operating
losses and negative cash flows from operations in each of the last three fiscal
years as shown in the accompanying financial statements. The Company has
sustained cumulative losses of approximately $80 million through October 31,
2008 and has a working capital deficit of approximately $6.5 million at that
date. Therefore, substantial doubts have been raised about the Companys
ability to continue as a going concern. Management is currently in the process
of evaluating several funding alternatives it believes will address its current
financial requirements to enable it to stabilize its financial condition. The
accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of assets and liabilities as
might be necessary if the Company is unable to continue as a going concern.

The Companys continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis, to maintain adequate financing,
and ultimately to attain successful operations.

NOTE 3 - ACQUISITION

In July 2005, the Company
entered into a Purchase Agreement (the Kirk
Purchase Agreement) to acquire Kirk and its affiliate, ANDAPharm
for $12,000,000. The acquisition was consummated on May 22, 2006. Kirk is a
Florida based pharmaceutical company that manufactures over-the-counter (OTC) and generic
prescription drugs in
its FDA and DEA approved facility. ANDAPharm serves as the product research and
RX manufacturing arm of the Company with a focus on the development of active
compounds for drugs.

The Company has accounted for this
acquisition using the purchase method. The purchase price of the acquisition is
set forth below:

| |                                                                          |  |   |            |  
| | ------------------------------------------------------------------------ |  | - | ---------- | -
| | Cash on closing                                                          |  | $ | 9,000,000  |  
| | Note payable to sellers                                                  |  |   | 3,000,000  |  
| | Estimated transaction
 costs incurred                                    |  |   | 552,000    |  
| |                                                                          |  |   |            |  
| | Total purchase price                                                     |  | $ | 12,552,000 |  
| |                                                                          |  |   |            |  
| | Assets Acquired:                                                         |  |   |            |  
| | Current assets                                                           |  | $ | 5,437,675  |  
| | Non-current assets                                                       |  |   | 1,378,655  |  
| | Liabilities assumed                                                      |  |   | (5,712,028 | )
| |                                                                          |  |   |            |  
| | Net assets acquired                                                      |  |   | 1,104,302  |  
| |                                                                          |  |   |            |  
| | Cost in excess of net assets acquired (recorded
goodwill)                |  |   | 11,447,698 |  
| |                                                                          |  |   |            |  
| | Total estimated fair value of net assets acquired
and recorded
 goodwill |  | $ | 12,552,000 |  
| |                                                                          |  |   |            |  

F-9

---



NOTE 4 - INVENTORY

As of October
31, 2008, and 2007 inventory consists of:

|                 |  |      |           |      |   |           | 
|---------------- |  | ---- | --------- | ---- | - | --------- | 
|                 |  | 2008 |           | 2007 |  
|                 |  |      |           |      |  
|Finished
 goods  |  | $    | 712,849   |      | $ | 203,409   | 
|Work in
 Process |  |      | 495,384   |      |   | 515,120   | 
|Raw
 materials   |  |      | 1,693,431 |      |   | 1,209,480 | 
|                 |  |      |           |      |   |           | 
|                
|                 |  | $    | 2,901,664 |      | $ | 1,928,009 | 
|                 |  |      |           |      |   |           | 

NOTE 5 - INTANGIBLE ASSETS

Intangible
Assets consists of long term rights to profits on revenues from sales of one
    of the Companys products. These rights were purchased in May, 2006
    from a company that was in partnership for the specific product. This asset
    is being amortized over the estimated life of the product (five years). As
    of October 31, 2008 the unamortized balance is $463,454.

Amortization
expense was $190,680, $190,680 and $76,807 for the years ended October 31,
2008, 2007 and 2006, respectively.

NOTE 6 - PROPERTY AND EQUIPMENT

Property and
equipment at October 31, 2008 and 2007 consists of the following:

|                               |  |      |           |      |   |           |  
|------------------------------ |  | ---- | --------- | ---- | - | --------- | -
|                               |  | 2008 |           | 2007 |  
|                               |  |      |           |      |  
|Leasehold
 Improvements        |  | $    | 656,143   |      | $ | 415,443   |  
|Machinery
 & Equipment         |  |      | 2,449,089 |      |   | 1,879,699 |  
|Computers
 and Software        |  |      | 289,798   |      |   | 220,036   |  
|                               |  |      |           |      |   |           |  
|                               |  | $    | 3,395,030 |      | $ | 2,515,178 |  
|Less
 Accumulated Depreciation |  |      | (911,452  | )    |   | (490,771  | )
|                               |  |      |           |      |   |           |  
|                               |  | $    | 2,483,577 |      | $ | 2,024,407 |  
|                               |  |      |           |      |   |           |  

Depreciation
expense was $319,297, $327,468 and $92,614 for the years ended October 31,
2008, 2007 and 2006, respectively.

NOTE 7 - 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 (8% at October 31, 2008). 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 October 31, 2008, the outstanding
principal balance due under the BOI Credit Facility was $5,650,000.

F-10

---



NOTE 7 - NOTE PAYABLE  BANK (CONTINUED)

Future
maturities of notes payable - bank are as follows:

|     |  |   |           | 
|---- |  | - | --------- | 
|2009 |  | $ | 2,100,000 | 
|2010 |  |   | 2,650,000 | 
|2011 |  |   | 900,000   | 
|     |  | $ | 5,650,000 | 
|     |  |   |           | 

Interest
expense under the note payable was $550,847, $931,829, $143,347 for the years
ended October 31, 2008, 2007 and 2006, respectively.

NOTE
8  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 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.

F-11

---



NOTE
8  NOSTRUM SETTLEMENT AND RELEASE OF NOSTRUM GUARANTEE (CONTINUED)

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 three 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).

The Escrow Shares are being treated as treasury stock. The cost of the
shares included in treasury stock at October 31, 2008 was $10,767,610. In the
event that the Court decides to order 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 included
in the accompanying statement of operations for year ended October 31, 2008.

NOTE 9 - 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 and ANDAPharm.

During the
year ended October 31, 2007, $1,000,000 was repaid to the seller. The Copanos
Note was subsequently amended in 2007 and 2008. As a result of the most recent
amendment, the then outstanding principal on the note ($2,000,000) was due in
two payments, one in the amount of $1,500,000 due on or before May 1, 2008 and
$500,000 on or before August 1, 2008. During the year ended October 31, 2008,
the Company repaid a further $1,500,000 to the seller with a principal balance
    of $500,000 remaining outstanding. The Company is currently in negotiation
    to extend the balance due. 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 to October 31,
    2008 it was 24% per annum with interest payments payable monthly. As of October
    31, 2008, there was unpaid interest of $20,333, which has been included in
    these financial statements. Interest expense under the Copanos Note was $167,250,
    $201,042 and $99,798 for the years ended October 31, 2008, 2007 and 2006.
    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,
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).
Of the shares issuable upon exercise of the warrant, 1,400,000 are immediately
exercisable and the remaining 700,000 are exercisable if the seller is employed
by the Company or its subsidiary on March 19, 2009 except that if Ronald Lane
is removed or resigns from the Companys board of directors, then such 700,000
shares shall become immediately exercisable. As a result of the Series C
Preferred Stock Offering (as described in Note 12 below), 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.

F-12

---



NOTE 9 - NOTES PAYABLE - SHAREHOLDERS AND
OTHER RELATED PARTIES (CONTINUED)

Singh Note

On April 20,
2007, the Company entered into a Consulting Agreement with Harcharan Singh.
Additionally, Kirk issued a promissory note to an affiliate of Mr. Singh
(the Singh Note), in the
principal amount of $1,250,000 in exchange for cash. The note bore interest at
the rate of 15% per annum. On April 3, 2008, the principal and unpaid interest
of the Singh Note in addition to the accrued consulting fees payable pursuant
to the Consulting Agreement were exchanged for a 2008 Bridge Note in the
aggregate principal amount of $1,652,292 (including the purchase of a 2008
Bridge Note by an affiliate of Singh in the principal amount of $100,000). The
2008 Bridge Note was part of a series of an aggregate of $6,792,292 in
aggregate principal amount of 2008 Bridge Notes issued by Kirk to accredited
investors and described further below in Note 10. The Company also issued to
Mr. Singhs
affiliate 330,458 shares of common stock of the Company valued at $115,660 in
consideration of its purchase of the 2008 Bridge Note. Interest expense of $8,553
is reflected in the accompanying financial statements.

Maneesh Note

On April 3,
2008, an affiliate of Maneesh purchased a 2008 Bridge Note in the principal amount
of $1,000,000 and the Company issued an aggregate of 200,000 shares of common
stock valued at $70,000 in consideration of its purchase of the 2008 Bridge
Note. Interest expense of $6,000 is
reflected in the accompanying financial statements.

The outstanding
principal and accrued and unpaid interest on the 2008 Bridge Notes issued to
Mr. Singhs affiliate and Maneesh were subsequently converted into securities
issued in the Companys Series C Preferred Stock Offering as described in Note
12 below.

NOTE 10 
OTHER NOTES PAYABLE

Other notes
payable consists of the following:

|                               |  |                   |        |                   |   |           | 
|------------------------------ |  | ----------------- | ------ | ----------------- | - | --------- | 
|                               |  | October 31,
 2008 |        | October 31,
 2007 |  
|                               |  |                   |        |                   |  
|                              
|2005
 Convertible Bridge Notes |  | $                 |       |                   | $ | 2,945,000 | 
|2007 Bridge
 Notes             |  |                   |       |                   |   | 3,450,000 | 
|Customer
 Note                 |  |                   |       |                   |   | 1,500,000 | 
|Other                          |  |                   | 40,000 |                   |   | 280,000   | 
|                               |  |                   |        |                   |   |           | 
|                              
|Total                          |  | $                 | 40,000 |                   | $ | 8,175,000 | 
|                               |  |                   |        |                   |   |           | 

F-13

---



NOTE 10  OTHER NOTES PAYABLE (CONTINUED)

2005 Convertible Bridge Notes

In October
2005, the Company commenced the issuance of convertible bridge notes (2005 Bridge Notes) in the aggregate
principal amount of $4,845,000. The
2005 Bridge Notes initially had a maturity date of 18 months from the date of
issuance. In connection with the issuance of the 2005 Bridge Notes, the Company
also issued detachable stock purchase warrants to purchase 807,493 shares of
common stock at $4.00 per share. The warrants initially expired three years
from the date of issuance. Based on the relative fair values, the Company
attributed $1,429,540 of the total proceeds to the warrants and recorded the
warrants as additional paid-in capital and discount to the 2005 Bridge Notes.
The per share weighted value of the warrants to purchase 807,493 shares of
common stock at $4.00 per share is $4.47. The warrants were valued using the
Black-Scholes option pricing model with the following weighted average
assumptions: no dividend yield, expected volatility of between 198% and 550%;
risk free interest rate of 4.9%; and expected life of three years. In
connection with the issuance of the 2005 Bridge Notes, the Company paid a cash
commission of $301,050 to Indigo Securities, LLC and issued to it three year
warrants to purchase 500,000 shares of common stock at $5.00 per share and
75,263 at $4.00 per share for its role as placement agent of a portion of the
2005 Bridge Notes sold. The per share weighted value of the warrants to
purchase the combined total of 575,263 shares of common stock is $4.87. The
warrants were valued using the Black-Scholes option pricing model with the
following weighted average assumptions: no dividend yield, expected volatility
of 198%, risk free interest rate of 4.9%; and expected life of three years. As
a result of the consummation of the acquisition of Kirk and ANDAPharm, the 2005
Bridge Notes were revised (the Revised
Notes). The Revised Notes were to mature on April 3, 2009 and
constituted unsecured indebtedness of the Company. Of the $4,845,000,
$2,150,000 aggregate principal amount converted to the Revised Notes. Of the
remaining $2,695,000 aggregate principal amount of 2005 Bridge Notes, $300,000
was repaid on July 6, 2006 and an aggregate principal amount of $2,395,000 and
all accrued and unpaid interest thereon matured and became payable on September
1, 2006.

The Company did not repay any amounts due to the holders of 2005 Bridge
Notes on September 1, 2006 and requested that the holders agree to extend the
maturity date to November 1, 2006. In exchange, the Company offered to increase
the interest rate on the outstanding principal amount to 18% per annum for the
period of such extension, as well as to reduce the exercise price of the
warrants issued with the sale of the 2005 Bridge Notes to $2.50 per share. The
Company also did not repay back the principal to holders of the 2005 Bridge
Notes on November 1, 2006. The Company was accruing the aforementioned 18%
default interest retroactively to the date of issuance of the notes on the
unpaid principal.

On March 6, 2007, the Company concluded the renegotiation of the terms
of one of the 2005 Bridge Notes in the principal amount of $100,000 and during
the year ended October 31, 2007, the entire note was exchanged for 168,556
shares of the Companys common stock. In September 2007, the Company repaid all
principal and interest owing on a 2005 Bridge Note issued to Asia Pacific
Investments Holdings Limited totaling $1,855,125.

In connection with the Series C Preferred Stock Offering (as
described in Note 12 below), on May
12, 2008, the then outstanding 2005 Bridge Notes and Revised Notes in the
principal amount of $2,945,000 were repaid in full.

F-14

---



NOTE 10  OTHER NOTES PAYABLE (CONTINUED)

2005 Convertible Bridge Notes (Continued)

The Company
entered into a registration rights agreement in connection with the sale of
2005 Bridge Notes. The agreement provided that the Company file a registration
statement with the SEC that covers the resale of 125% of the registerable
securities (the shares issuable upon conversion at the initial current
conversion price and upon exercise of related warrants at the initial exercise
price) (the Mandatory Registration
Statement). According to the registration rights agreement, if the
Mandatory Registration Statement has not been declared or ordered effective
within one hundred twenty (120) days after the closing of the offering, the
Company is to pay each investor a fee equal to 1% of the purchase price paid by
such investor for the securities purchased plus the aggregate exercise price of
the warrants and the placement agent warrants for the first two thirty (30) day
periods after such failure and 2.5% of such amount for each subsequent thirty
(30) day period (pro rata, in each case, for partial months). Any such payments
are to be made at the end of each calendar month until the date that the
Mandatory Registration Statement is declared effective. There is no cap on the
maximum amount of the penalties that could be payable under the agreement. The registration rights agreement
was terminated with respect to most holders of the 2005 Bridge Notes and
Revised Notes. Although the Company filed a Mandatory Registration Statement,
the Company failed to have the Mandatory Registration Statement declared
effective and recognized $896,246, $2,195,064, $914,549 of penalties for the
years ended October 31, 2008, 2007, and 2006 of which $3,325,747 was waived and
forgiven.

2007 Convertible Bridge Notes

Beginning on
July 5, 2007, Kirk issued convertible bridge notes (the 2007 Bridge Notes) in the principal
amount of $3,450,000 to accredited investors as defined by Rule 501 under the
Securities Act of 1933, as amended (the Securities
Act).

The bridge
notes bore interest at 6% per annum increasing to 18% in the case of an event
of default and had a maturity date of six months from the issuance date, unless
earlier converted. Upon the closing of a qualified equity financing, the bridge
notes were automatically convertible into the Companys Series C Preferred
Stock to be issued in a qualified equity financing at a premium of 10% of the
unpaid principal and interest of the bridge notes. In addition, upon closing of
the qualified equity financing, holders of the bridge notes were entitled to
receive common stock purchase warrants of the Company at an exercise price and
other terms identical to the warrants to be issued in the qualified equity
financing. The amount of common stock into which the common stock purchase
warrants were exercisable ranged from 40% to 50% of the number of shares of
common stock issuable to bridge note holders upon conversion of the Series C
Preferred Stock receivable upon conversion of the bridge notes, with the range
depending on the timing of the initial closing of the qualified equity
financing.

The bridge
notes were secured by a pledge by Ronald H. Lane, the Companys Chairman
of the board and former Chief Executive Officer, of 2,000,000 shares of common
stock of the Company beneficially owned by Dr. Lane. In addition, the Company
agreed to issue 1,000,000 shares of its Series B Convertible Preferred
Stock to be held by Axiom Capital Management, Inc. (Axiom)
as nominee of the bridge note holders. Axiom acted as placement agent in the
2007 Bridge Note offering.

As further
described below, on April 3, 2008, the 2007 Bridge Notes were exchanged for
2008 Bridge Notes.

F-15

---



NOTE 10  OTHER NOTES PAYABLE (CONTINUED)

2008 Convertible Bridge Notes

Beginning on
April 3, 2008, Kirk issued convertible bridge notes (the 2008 Bridge Notes) in the principal
amount of $6,792,292 to accredited investors as defined by Rule 501 under the
Securities Act. Of the 2008 Bridge Notes issued, notes in the principal amount of
$5,227,292 were issued in exchange for (i) 2008 Bridge Notes in the principal
amount equal to the unpaid principal of the 2007 Bridge Notes, and (ii) 2008
Bridge Notes in the principal amount equal to the unpaid principal and accrued
and unpaid interest of the Singh Note and accrued and outstanding consulting
fees due to Mr. Singh.

The 2008
Bridge Notes bore interest at 6% per annum increasing to 18% in the case of an
event of default and matured on June 30, 2008, unless earlier converted. Upon
the closing of a qualified equity financing (as defined therein), the 2008
Bridge Notes were convertible at the option of the holder into the Companys
Series C Preferred Stock and warrants to acquire shares of common stock to be
issued in a qualified equity financing at a premium of 10% of the unpaid
principal and interest of the 2008 Bridge Notes. In addition, upon closing of
the qualified equity financing, holders of the 2008 Bridge Notes were entitled
to receive bridge warrants to acquire the Companys common stock at an exercise
price and upon other terms identical to the warrants to be issued in the
qualified equity financing. The number of shares of common stock into which the
bridge warrants were exercisable ranged from 40% to 50% of the number of shares
of common stock issuable to holders upon conversion of the Series C Preferred
Stock receivable upon conversion of the 2008 Bridge Notes, with the range
depending on the timing of the initial closing of the qualified equity
financing.

In connection
with the issuance of the 2008 Bridge Notes, the Company issued an aggregate of
1,358,458 shares of its common stock to holders of the 2008 Bridge Notes.

To secure
Kirks obligations under the 2008 Bridge Notes, the Company issued 1,000,000
shares of Series B Convertible Preferred Stock to Axiom, the placement agent of
the 2008 Bridge Note offering, acting as collateral agent of holders of the
2008 Bridge Notes. According to the Series B Certificate of Designations,
Preferences and Rights of Series B Convertible Preferred Stock, the shares of
Series B Convertible Preferred Stock vote together with the common stock and
other preferred stock entitled to vote on an as-converted basis. In the event
of default under the 2008 Bridge Notes, the Series B Convertible Preferred
Stock is convertible into the Companys common stock on a 1:15 basis for the
purpose of utilizing the proceeds thereof to satisfy the obligations under the
2008 Bridge Notes. In an event of default, the Company may be obligated to file
a registration statement under the Securities Act covering the resale of shares
of common stock issuable upon conversion of the Series B Convertible Preferred
Stock. If the Company does not file a registration statement within 15 days
following an event of default, the 2008 Bridge Notes will be deemed to increase
in principal amount by 1% every month up to 10% in the aggregate. The then
outstanding shares of Series B Preferred Stock are redeemable on a pro-rata
basis by the Company at a redemption price of $0.001 per share in the event of
conversion of the 2008 Bridge Notes pursuant to the terms thereof or in the
event of payment of any portion of the principal outstanding under such
convertible bridge notes. The Company has subsequently redeemed the 1,000,000
shares of Series B Convertible Preferred Stock for a total redemption price of
$1,000.

F-16

---



NOTE 10  OTHER NOTES PAYABLE (CONTINUED)

2008 Convertible Bridge Notes (Continued)

The 2008
Bridge Notes were also secured by a pledge by an affiliate of Ronald H. Lane,
the Companys Chairman of the board and former Chief Executive Officer,
of 2,000,000 shares of common stock of the Company. As an inducement to the pledge
by Dr. Lanes affiliate, the Company agreed to issue to Dr. Lanes
affiliate one share of the Companys common stock for every pledged share
of common stock sold in an event of default under the 2008 Bridge Notes.

2008 Bridge
Notes in the principal amount of $5,202,292 plus accrued interest thereon
converted into securities sold in the Companys Series C Preferred Stock
Offering (as described in Note 12 below). Of the remaining 2008 Bridge Notes
that did not convert into securities sold, the Company repaid the entire
outstanding principal amount of $1,590,000 during the year ended October 31,
2008. Interest expense of $125,186 was recognized, which was converted into
the Series C Preferred Stock offering.

Customer Note

On August 31,
2007, Kirk issued an unsecured Promissory Note in favor of CB Distributors,
Inc. in the amount of $1,500,000 together with interest per annum equal to
8%. With extensions, this note was due January, 31, 2008. On June 17, 2008, the
Company repaid in full all outstanding principal and accrued and unpaid
interest totalling $1,608,116. The Company recognized interest expense of $20,667,
    $82,642 and $0 for the years ended October 31, 2008, 2007, and 2006, respectfully.

NOTE 11 - 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 as defined by Rule 501 under the Securities Act. Of the
1,575,000 Units sold, 450,000 Units were exchanged in lieu of repayment of
notes issued in a bridge financing conducted during the fiscal year ended
October 31, 2007 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, half a share
    of common stock at an exercise price of $1.50 per share, subject to adjustment
    in certain instances; except that with respect to 290,000 Units, the warrant
    is exercisable for one share of common stock at an exercise price of $3.00.
    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.

F-17

---



NOTE 11 - 2007 PRIVATE PLACEMENT (CONTINUED)

The
subscription agreement required 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 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 filed
a pending registration statement covering shares issuable upon exercise of the
warrants issued in the 2007 Private Placement and has recognized $164,700 of
penalties as of October 31, 2008.

NOTE 12  SERIES C PREFERRED STOCK OFFERING

From May to
September 2008, the Company completed a series of closings of a Series C
Preferred Stock offering (the Series C
Preferred Stock Offering) whereby the Company sold an aggregate of
28,138 shares of its Series C Convertible Redeemable Preferred
Stock (the Series C Preferred Stock)
together with detachable warrants (Warrants)
to acquire an aggregate of 18,780,200 shares of its common stock to accredited
investors as defined by Rule 501 under the Securities Act.

According to
the terms of the Amended and Restated Certificate of Designations, Preferences
and Rights of Series C Convertible Redeemable Preferred Stock (Certificate
of Designation), the Series C
Preferred Stock is convertible into shares of the Companys common stock
both at the option of the holder and the Company according to the terms of the
Certificate of Designation at an initial rate of 1,000 shares of common stock
for each share of Series C Preferred Stock (based on a stated value of $500 per
share and an initial conversion price of $0.50 per share) subject to adjustment
for, among other things, stock splits, stock dividends, distributions, reclassifications
and sales below the conversion price. The Series C Preferred Stock votes on an
as-converted basis together with the Companys
common stock and any class of preferred stock entitled to vote with the Companys
common stock at any annual or special meeting of the Registrant. Holders of Series
C Preferred Stock are entitled to receive cumulative dividends at the rate of
6% of the stated value per annum on each outstanding share of Series C Preferred
Stock accruing from May 9, 2008 until the earlier of May 9, 2011 or the conversion
thereof into shares of common stock, payable quarterly on March 31, June 30,
September 30 and December 31, with the first payment due June 30, 2008, and payable
in cash or shares of Series C Preferred Stock in accordance with the terms of
the Certificate of Designation. Holders of Series C Preferred Stock are also
entitled to participate on a pro-rata basis in any dividends paid on the
Registrants common stock on an as-converted basis. The Company has accrued
$382,649 in dividend expense.

The
Certificate of Designation further provides that each share of Series C
Preferred Stock will also be entitled to a preference equal to 125% of the sum
of the stated value plus accrued but unpaid cash dividends upon the merger,
acquisition, sale of voting control or sale of all or substantially all of the
assets of the Company, upon the liquidation, dissolution or winding-up of the Registrant
or upon an event of bankruptcy of the Registrant. On May 9, 2011, the then
outstanding shares of Series C Preferred Stock may be redeemed by the Company
at its option at a redemption price of the stated value plus accrued but unpaid
dividends on the shares of Series C Preferred Stock.

Warrants are
exercisable for a period of five years from the date of grant at an initial
exercise price of $0.75 per share, subject to adjustment for, among other
things, stock splits, stock dividends, distributions, reclassifications and
sales below the exercise price. The per share weighted value of the Warrants to
purchase 18,780,200 shares of common stock at $0.75 per share is $0.31. 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.

F-18

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NOTE 12  SERIES C PREFERRED STOCK OFFERING
(CONTINUED)

Of the Series
C Preferred Stock and Warrants sold, 2008 Bridge Notes in the principal amount
of $5,202,292 plus accrued interest thereon were exchanged at a premium of 10%
into (i) an aggregate of 11,778 shares of Series C Preferred Stock and Warrants
to acquire an aggregate of 5,889,000 shares of common stock, and (ii) bridge
Warrants to acquire an aggregate of 4,711,200 shares of common stock (equal to
40% of the number of shares of common stock issuable upon conversion of the
Series C Preferred Stock receivable upon conversion of the 2008 Bridge Notes).

In addition,
Ronald H. Lane, Ph.D., the Companys Chairman of the board and former Chief
Executive Officer, converted $100,000 of deferred compensation due under his
employment agreement for an investment of like amount in the Series C Preferred
Stock Offering resulting in the issuance to him of 200 shares of Series C Preferred
Stock and Warrants to acquire 100,000 shares of common stock.

Pursuant to a
registration rights agreement entered into with purchasers of the Series C
Preferred Stock, the Company agreed to use its best efforts to file, within 45
days of the final closing of the Series C Preferred Stock Offering, with the
Securities and Exchange Commission a registration statement (the Mandatory
Registration Statement)
covering the registration of (i) securities issuable upon exercise of the
Warrants and placement agent warrants, (ii) securities issued by way of
liquidated damages under the registration rights agreement, (iii) up to
1,000,000 shares of common stock owned by Maneesh prior to May 8, 2008, (iv)
1,000,000 shares of common stock beneficially owned by Mr. Singh as of
May 8, 2008, and (v) 1,000,000 shares of common stock beneficially owned by
Dr. Lane as of May 8, 2008 (collectively the Registrable Securities).
If the Mandatory Registration Statement has not been filed within 45 days of
final closing of the Series C Preferred Stock Offering or declared effective
within 195 days following final closing, the Company has agreed to pay to the
purchasers liquidated damages, payable in cash or Series C Preferred Stock, of
1% of the purchase price paid by the purchaser in the Series C Preferred Stock
Offering for each month until the registration statement is declared effective,
with the total of the foregoing capped at 10%. If the Mandatory Registration
Statement has not been declared effective and the Company receives a request
between October 6, 2008 and May 9, 2010 from purchasers who invested at least
$500,000 in the Series C Preferred Stock Offering that the Company file a registration
statement, then the Company shall, subject to certain limitations, file a registration
covering the Registrable Securities requested to be registered. Further, if the
Mandatory Registration Statement has not been declared effective and the Company
files a registration statement for its own account or the account of others then
the Company shall, subject to customary cutbacks and restrictions, include in
such registration statement the Registrable Securities of the purchasers of the
Series C Preferred Stock that request to be included. The Company has timely
filed a Mandatory Registration Statement which is currently pending.

Pursuant to a
letter agreement entered into with the Companys placement agent, Axiom,
as subsequently amended, Axiom is entitled to a cash fee of $255,000 plus expenses
of $34,509 for services rendered in the 2007 Bridge Note Offering, the 2008 Bridge
Note Offering and the Series C Preferred Stock Offering. In addition, the Company
is negotiating the number of number of warrants  which Axiom is entitled to
in connection with the aforesaid financings. To date the Company has recognized
$215,874 as the value of the warrants which Axiom may be entitled to.

F-19

---



NOTE 12  SERIES C PREFERRED STOCK OFFERING
(CONTINUED)

The
incremental gross proceeds to the Company from the Series C Preferred Stock
Offering were $7,780,000 and, together with the 2008 Bridge Note offering, the
incremental gross proceeds to the Company were $9,335,000.

The Company
used the proceeds from the Series C Preferred Stock Offering to pay down the
BOI Credit Facility and retire its remaining material indebtedness. On or
around May 12, 2008, the Company repaid an aggregate of $2,445,000 to holders
of 2005 Bridge Notes and Revised Notes. In addition, the Registrant repriced
warrants to purchase an aggregate of 407,493 shares of common stock, issued to
holders of the 2005 Bridge Notes and Revised Notes, to $0.75 per share and extended
    the term of such warrants by one year. The Company further issued an aggregate
    of 817 shares of Series C Preferred Stock and 1,091,813 shares of common
    stock in lieu of payment of accrued and unpaid interest under said notes.
    In consideration of the aforesaid, the Company has obtained a full release
    from such holders of the 2005 Bridge Notes and Revised Notes in connection
    with the 2005 Bridge Notes and Revised Notes and related transactions.

The Company
further used proceeds from the Series C Preferred Stock Offering to retire
additional indebtedness including, without limitation, indebtedness under the
2008 Bridge Notes in the principal amount of $1,590,000 (that did not convert
into the Series C Preferred Stock Offering), $1,500,000 of indebtedness under
    a promissory note held by John Copanos, and $725,893 of indebtedness under
    a remaining 2005 Bridge Note held by a holder that commenced a lawsuit against
the Registrant.

In connection
with the Series C Preferred Stock Offering, the Companys board authorized
the following issuances: (i) 2,000,000 shares of restricted common stock to
Mr. Singh, vesting over twenty four months, with one-third vesting on
each of May 9, 2008, May 9, 2009 and May 9, 2010; (ii) 1,000,000 shares of
restricted common stock to Dr. Lane, vesting over twenty-four months, with
one-third vesting on each of May 9, 2008, May 9, 2009 and May 9, 2010; and
(iii) 125,000 shares of common stock and five-year warrants to acquire 250,000
shares of common stock at an initial exercise price of $0.75 per share to each
of the Companys former directors, William McCormick and Richard Feldheim,
who resigned on April 29, 2008. Further, in addition to the repricing of the
2005 Bridge Note warrants, the Companys board authorized the repricing
of additional warrants to acquire an aggregate of 875,263 shares of common stock
to $0.75 per share. The Registrant has also agreed to reprice options to
acquire 200,000 shares of common stock held by Steven Getraer, the Companys
former Chief Financial Officer to $0.75 and warrants to acquire 1,000,000
shares of common stock held by Harcharan Singh that were issued to him in
April 2007 to $0.75.

The lead
investor in the Series C Preferred Stock Offering was Svizera Holdings BV, (Svizera)
which invested an aggregate of $8,086,000 in the Series C Preferred Stock Offering
(including the roll-over of a 2008 Bridge Note in the principal
amount of $1 million and the exchange of $300,000 of expense reimbursement due
to Svizera) from its working capital, to purchase an aggregate of 16,373 shares
of Series C Preferred Stock and Warrants exercisable for an aggregate of 9,071,700
shares of common stock. Svizera is a wholly-owned subsidiary of Maneesh, which
is controlled by Vinay Sapte and his brother Maneesh Sapte. Vinay Sapte was appointed
to the Companys
board on April 29, 2008 and Maneesh Sapte, together with Jyotindra Gange, both
Maneesh designees, became members of the Companys board on May 23, 2008.
In addition, an affiliate of Mr. Harcharan Singh invested an aggregate of $2,661,930
in the Series C Preferred Stock Offering (including the roll-over of
a 2008 Bridge Note in the principal amount of $1,652,292) from its working capital
and, together with the Maneesh designees, became a member of the Registrants
board on May 23, 2008.

F-20

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NOTE 13 - CONSULTING AND STRATEGIC ALLIANCE
AGREEMENTS

Saggi and Bridge Ventures Consulting
Agreements

On February 1,
2007, the Company entered into consulting agreements with each of Saggi Capital
Corp. and Bridge Ventures, Inc. (each, a Consultant)
for the provision of consulting services (including investor relations and
strategic consulting) by the Consultants. Under the consulting agreements, each
Consultant is entitled to receive $5,000 per month during the term of the
agreement and five-year warrants to acquire 200,000 shares of the Companys
common stock, par value $0.001 per share, at an exercise price of $2.00 per
share, subject to adjustment in certain circumstances, or on a cashless or net
issuance basis. The per share weighted value of the warrants to purchase
400,000 shares of common stock at $2.00 per share is $1.37. The warrants were
valued using the Black-Scholes option pricing model with the following weighted
average assumptions: no dividend yield; expected volatility of 153%; risk free
interest rate of 4.84%; and expected life of five years. In the fiscal year
ended October 31, 2007, the Company recorded a charge of $273,212 for each
consultant, to recognize the agreement.

VCG Consulting Agreement

On February 1,
2007, the Company entered into a consulting agreement (the VCG Agreement) with VCG & A, Inc.
(VCG) for the provision of consulting
services by VCG that include assisting the Company in its capital raising
efforts, the development of an overall business strategy and the purchase of an
over-the-counter generic version of Omeprazole (the Target Product) as well as to assist the Company in ongoing
management, sales and marketing support. Under the VCG Agreement, the Company
agreed to pay VCG cash fees and royalties based upon the net sales of the
Target Product. In addition, VCG was entitled to receive stock options to
purchase 300,000 shares of the Companys common stock, par value $0.001 per
share, at an exercise price of $1.40. The stock options vested immediately upon
execution of the VCG Agreement. The per share weighted value of the options to
purchase 300,000 shares of common stock at $1.40 per share is $1.39. The
options were valued using the Black-Scholes option pricing model with the
following weighted average assumptions: no dividend yield; expected volatility
of 153%; risk free interest rate of 4.84%; and expected life of five years. In
the fiscal year ended October 31, 2007, the Company recorded a charge of
$416,475 to recognize the agreement.

On May 1,
2007, the Company issued 1,300,000 share options exercisable for five (5) years
at a price equal to the closing share price as at the day prior to the
execution of a licensing agreement by the Company to acquire the rights to an
Omeprazole type product with the assistance of VCG. The stock options vested
immediately upon execution of the VCG Agreement. The per share weighted value
of the options to purchase 1,300,000 shares of common stock at $1.35 per share
is $1.17. The options were valued using the Black-Scholes option pricing model
with the following weighted average assumptions: no dividend yield; expected
volatility of 130%; risk free interest rate of 4.67%; and expected life of five
years. In the fiscal year ended October 31, 2007, the Company recorded a charge
of $1,527,000 to recognize the agreement.

In connection
with the VCG Agreement, the Company granted to VCG and its designees five-year
warrants to acquire an aggregate of 1,600,000 shares of its common stock at an
exercise price of $1.36 per share. Such warrants were issued in lieu of any
options issuable under the VCG Agreement described above. The Company
recognized $1,943,482 of expense charges to income during the fiscal year ended
October 31, 2007.

F-21

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NOTE 13 - CONSULTING AND STRATEGIC ALLIANCE
AGREEMENTS (CONTINUED)

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. Subsequent to the end of fiscal year ended
October 31, 2008, in connection with the Consulting Agreement, the Companys
board of directors authorized the grant of 125,000 shares of common stock to
Mr. Singh. (See Note 20)

Omeprazole
License Agreement

On May 1, 2007, the Companys
subsidiary, Synovics Labs, entered into a License and Supply Agreement dated as
of April 11, 2007 with Fluid Air Inc. doing business as PharmPro (FAI) for the development and
commercialization of the over-the-counter generic version of Omeprazole (the License Agreement). According to the
License Agreement, FAI granted Synovics Labs, under FAIs patent rights, an
exclusive worldwide license to develop, commercialize and sublicense capsules
containing the generic version of over-the-counter Omeprazole (the Drug Product). The agreement provided
that FAI is to be responsible for developing the Drug Product in accordance
with the Drug Product development plan while Synovics Labs is to be responsible
for research and development activities and will file in the Companys name,
the appropriate regulatory filings with FAI being responsible for the
chemistry, manufacturing and controls review portion of such filings. Once
developed and necessary regulatory approvals have been obtained, Synovics Labs
is to be responsible for promoting, marketing and distributing the Drug Product
supplied exclusively by FAI.

As partial consideration for
the rights granted, Synovics Labs paid FAI a license of $500,000 with further
payments due upon the completion of certain milestones. Commencing upon the
first commercial sale of the Drug Product, the Company is also required to pay
to FAI royalties on the net product sales of the Drug Product until the later
of (i) the expiration of the last to expire FAI patent rights covering the Drug
Product; and (ii) ten years from the first commercial sale of the Drug Product.
Unless terminated sooner for cause, the License Agreement will expire on a
country by country basis on the expiration of Synovics Labs obligation to make
royalty payments with respect to such country.

Presently, the Company does not
anticipate that it will be proceeding forward with the development and
commercialization of Omeprazole with FAI. The Company has been in discussion
with FAI and no final resolution has been reached.

F-22

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NOTE 13 - CONSULTING AND
STRATEGIC ALLIANCE AGREEMENTS (CONTINUED)

Michaels Consulting Agreement

On January 28, 2008, the Company
entered into a consulting agreement with Paul Michaels (Michaels). In
consideration for the consulting services rendered by Michaels, the Company
issued an aggregate of 99,990 shares of the Companys common stock. These
shares were valued at $74,925 and were included in the accompanying statement
of operations for year ended October 31, 2008.

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.

Voting Agreement

Vinay Sapte, Dr, Lane and
Mr. Singh and their respective affiliates are among principal parties to
a Voting Agreement dated as of May 8, 2008 entered into upon the initial
closing of the Series C Preferred Stock Offering. Under the terms of the Voting
Agreement, each of the parties agrees to vote all of its shares to ensure that
the size of the Companys board will be five directors (or seven if the
board resolves to expand its size to seven). Further, each of the parties agrees
to vote its shares in favor of the following designations: (i) one director
designated by Dr. Lane and his affiliates (to initially be Dr. Lane),
(ii) one director designated by Mr. Singh and his affiliates (to
initially be Mr. Singh), (iii) three directors designated by Maneesh and
its affiliates (to initially be Vinay Sapte, Maneesh Sapte and Jyotindra
Gange). The Voting Agreement further provides that if the board is expanded to
seven directors, then Maneesh and its affiliates shall be entitled to one
further designee and Axiom and Indigo Securities LLC (Indigo)
shall be entitled to designate one director. If certain of the parties to the
Voting Agreement cease to beneficially own at least 4% of the outstanding shares
of common stock of the Company determined immediately after giving effect to
the initial closing of the Series C Preferred Stock Offering, then the right
of designation applicable to such party shall terminate and the right shall vest
in the entire board.

NOTE 14 - EMPLOYMENT AGREEMENTS

Ronald H. Lane

On May 17, 2007, the Company
executed an employment agreement dated as of January 30, 2007 with Dr. Lane
providing for Dr. Lane to serve as the Companys Chief Executive Officer
through January 30, 2010, renewable for an additional one year unless either
the Company or Lane provides written notice of termination at least 60 days
prior to the end of the term. According to the Lane employment agreement, Lane
was to receive an annual base salary of $400,000 and, solely at the discretion
of the Board, based on his performance and the Companys financial condition
and operating results, a bonus payable in cash or shares of the Companys
common stock. The employment agreement further provided that the Board may
grant him options under any equity compensation plan in which he is eligible to
participate. The employment agreement provided that the Company owes Lane an
amount to be mutually agreed by them, representing, among other things,
accrued, but unpaid salary. Upon the initial closing of the Series C Preferred
Stock Offering, $100,000 of the deferred compensation was converted for an
investment of like amount in the Series C Preferred Stock Offering.

On July 3, 2008, Dr. Lane resigned
as the Companys Chief Executive Officer and his employment agreement
terminated. Dr. Lane currently serves as the Companys Chairman of the Board
and subsequent to the end of the fiscal year, the Company entered into a new
agreement with Dr. Lane compensating him for his services as Chairman of the
Board. (See Note 20)

F-23

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NOTE 14 - EMPLOYMENT AGREEMENTS
(CONTINUED)

Steven Getraer

On July 9, 2007 the Company entered
into an employment agreement with Steven Getraer as the Companys Executive
Vice President and Chief Financial Officer. On October 6, 2008, the Company terminated
Mr. Getraers employment. Mr. Getraers
employment agreement provided for a three year term ending July 9, 2010, renewable
for subsequent terms unless earlier terminated by either party. Mr. Getraer
was entitled to a base salary of $265,000 per annum, increasing to $280,000 per
annum commencing on July 10, 2008 and to $295,000 commencing on July 10, 2009.
In addition, Mr. Getraer was entitled to a minimum 10% bonus plus a
discretionary fiscal year-end bonus payable in cash and/or shares of the
Companys common stock and was granted options to acquire an aggregate of
600,000 shares of the Companys common stock exercisable for seven years
at an initial exercise price of $2.00 per share and vesting annually in three
equal installments, with the first installment vesting on July 10, 2008. The
per share weighted value of the options to purchase 600,000 shares of common
stock at $2.00 was $0.92. The options were valued using the Black-Scholes option
pricing model with the following weighted average assumptions: no dividend
yield; expected volatility of 122%; risk free interest rate of 4.97%; and expected
life of seven years.

In connection with the Series C Preferred Stock Offering, the
    Companys
    board authorized the repricing of options to acquire the 600,000 shares of
    common stock held by Mr. Getraer
to $0.75 per share. The per share weighted value of the options to purchase
600,000 shares of common stock at $0.75 per share is $0.34. The options 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 six years.

Subsequent to the end of the fiscal
year ended October 31, 2008, the Company entered into a separation agreement
with Mr. Getraer. (See Note 20)

Manny Desai

The Company has agreed to employ
Mahendra (Manny) Desai as its Chief Financial Officer to replace Mr. Getraer
    at a salary of $135,000 per annum. Mr. Desai is entitled to a discretionary
    bonus based on his performance and the approval of the Companys board.
    Mr. Desai is also entitled to contributions to medical and dental insurance,
    long term disability insurance and a pension plan in accordance with the
    Companys
practices for its other management personnel.

F-24

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NOTE 15 - STOCKHOLDERS DEFICIT

Common Stock

The Company has authorized
45,000,000 shares of common stock, with a par value of $0.001 per share. During
the year ended October 31, 2008, the Company issued 9,497,394 shares of its
common stock.

Preferred Stock

The Company has authorized
5,000,000 shares of Preferred Stock, with a par value of $0.001 per share of
    which 591,850 shares of Series A Preferred Stock are outstanding and 28,955
    shares of Series C Preferred Stock are outstanding.

The
  591,850 shares of Series A Preferred Stock were issued prior
    to November 1, 2001 as consideration for the cancellation of $798,998 of
    debt and accrued interest thereon that was owed to a director. The shares
    have a cumulative annual dividend of $0.108 per share and a liquidation value
    of $6.75 per share, and each share is convertible into one-fifth of a share
    of common stock. The preferred shares have a dividend and a liquidation preference
    over common shares. No dividend on the preferred shares outstanding has ever
    been declared or paid and dividends in arrears amounted to $515,912 at October
    31, 2008.

The 28,955 shares of Series C Preferred Stock are described elsewhere
  in Note 12.

Stock Based Compensation

On October 31, 1996 the Company
adopted its 1996 Stock Option Plan (the 1996 Plan) authorizing
570,000 common shares for issuance to key personnel, consultants, and independent
contractors. Under the 1996 Plan, incentive stock options may be granted to purchase
its common stock at 100% (110% for an optionee
who is a 10% stockholder) of the fair market value of the stock on the date of
grant. Stock options are exercisable for a period of up to ten years from the
date of grant (five years for an option granted to a 10% stockholder). All participants
are eligible to receive stock awards and stock appreciation rights, as to be
determined by the Companys board of directors. No stock awards or stock
appreciation rights are outstanding under the Plan. As of October 31, 2008,
the 1996 Plan expired.

A summary of transactions for non-employee stock options and warrants for the years ended October 31, 2008, 2007 and 2006 is as follows:

|                     |  |            |  |               |  | Weighted  |  | Average 
|-------------------- |  | ---------- |  | ------------- |  | --------- |  | --------
|                     |  | Number of  |  | Option Price  |  | Remaining |  | Exercise
|                     |  | Shares     |  | Range         |  | Life      |  | Price   
|                     |  |            |  |               |  |           |  |         
|OPTIONS AND WARRANTS |  | 311,896    |  | $3.00 - $5.00 |  | 2.9       |  | $3.99   
|OUTSTANDING, AS OF   |  |            |  |               |  |           |  |         
|October 31, 2005     |  |            |  |               |  |           |  |         
|Warrants issued      |  | 1,448,522  |  | $4.00 - $6.00 |  | 2.5       |  | $3.99   
|Warrants canceled    |  | 10,000     |  | $3.00 - $3.13 |  |           |  | $5.00   
|Options issued       |  |            |  |               |  |           |  |         
|Options canceled     |  | 6,000      |  | $5.00         |  |           |  | $5.00   
|OPTIONS AND WARRANTS |  | 1,744,418  |  | $3.00 - $6.00 |  | 2.4       |  | $4.60   
|OUTSTANDING, AS OF   |  |            |  |               |  |           |  |         
|October 31, 2006     |  |            |  |               |  |           |  |         
|Warrants issued      |  | 4,882,497  |  | $.075 - $3.00 |  | 3.26      |  | $1.58   
|Warrants canceled    |  |            |  |               |  |           |  |         
|Options issued       |  |            |  |               |  |           |  |         
|Options canceled     |  |            |  |               |  |           |  |         
|OPTIONS AND WARRANTS |  | 6,626,915  |  | $0.75 - $4.00 |  | 2.56      |  | $1.42   
|OUTSTANDING, AS OF   |  |            |  |               |  |           |  |         
|October 31, 2007     |  |            |  |               |  |           |  |         
|Warrants issued      |  | 22,194,000 |  | $0.75         |  | 4.58      |  | $0.75   
|Warrants canceled    |  |            |  |               |  |           |  |         
|Options issued       |  |            |  |               |  |           |  |         
|Options canceled     |  |            |  |               |  |           |  |         
|OPTIONS AND WARRANTS |  |            |  |               |  |           |  |         
|OUTSTANDING, AS OF   |  |            |  |               |  |           |  |         
|October 31, 2008     |  | 28,820,915 |  | $0.75 - $4.00 |  | 4.12      |  | $1.25   

F-25

---



NOTE 15 - STOCKHOLDERS DEFICIT
(CONTINUED)

Stock Based Compensation
(Continued)

|                                                                 |  |      |            |      |   |           |  |   |           | 
|---------------------------------------------------------------- |  | ---- | ---------- | ---- | - | --------- |  | - | --------- | 
|                                                                 |  | 2008 |            | 2007 |   | 2006      | 
|                                                                 |  |      |            |      |   |           | 
|Options exercisable, end of fiscal year                          |  |      |            |      |   | 0         |  |   | 0         | 
|Warrants exercisable, end of fiscal year                         |  |      | 28,120,915 |      |   | 6,626,915 |  |   | 1,744,418 | 
|Weighted average fair value of options granted during the
 year  |  | $    | 0.00       |      | $ | 0.00      |  | $ | 0.00      | 
|Weighted average fair value of warrants granted during the
 year |  | $    | 0.31       |      | $ | 0.47      |  | $ | 0.63      | 

Additional information regarding
options and warrants outstanding as of October 31, 2008 is as follows:

|                           |  |                     |  |                                    |  |                                                        |  |             |  | 
|-------------------------- |  | ------------------- |  | ---------------------------------- |  | ------------------------------------------------------ |  | ----------- |  | 
|RANGE OF
 EXERCISE
 PRICES |  | NUMBER
 OUTSTANDING |  | WEIGHTED
 AVERAGE
 EXERCISE
 PRICE |  | WEIGHTED AVERAGE
 REMAINING
 CONTRACTUAL LIFE
 (YEARS) |  | EXERCISABLE
|                           |  |                     |  |                                    |  |                                                        |  |            
|$0.75  $4.00              |  | 28,820,915          |  | $1.25                              |  | 4.37                                                   |  | 28,120,915 

The Company accounts for
stock-based compensation in accordance with the provisions of SFAS No. 123, Accounting
for Stock-Based Compensation, which provides guidance for the recognition
of compensation expense as it related to the issuance of stock options and
warrants. In addition, the Company adopted the provisions of SFAS No. 148, Accounting
for Stock-Based Compensation  Transition and Disclosure  an amendment of SFAS
No. 123. SFAS No. 148 amended SFAS No. 123 to provide alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation provided by SFAS No. 123. As
permitted by SFAS No. 148, the Company has adopted the fair value method
recommended by SFAS No. 123 to effect a change in accounting for stock-based
employee compensation. In addition, the Company adopted the provisions of SFAS
No. 123R, Share-Based Payment, which revised SFAS No. 123 to require
all share-based payments to employees, including grants of employee stock
options, to be recognized based on their fair values.

The Company determined the fair
value of options and warrants issued using the Black-Scholes option pricing
model with the following assumptions: 3 to 6 year expected lives; risk-free
interest rate ranging from 2.00% to 3.00%, stock price volatility ranging from
80% to 84%, with no dividends over the expected life.

The Company recognized stock-based
compensation expenses of approximately $353,717, $414,205, and $0 related to
the issuance of stock options to certain employees. Such expenses are reflected
in selling, general and administrative expenses on the accompanying
Consolidated Statement of Income for the years ended October 31, 2008, 2007 and
2006, respectively.

The Company
recognized stock-based compensation expense of approximately $172,180, $0,
and $0 related to its issuance of stock-based compensation to non-employees.
Such expense is reflected in selling, general and administrative expenses on
the accompanying Consolidated Statements of Income for the years ended October
31, 2008, 2007 and 2006, respectively.

F-26

---



NOTE 15 - STOCKHOLDERS DEFICIT (CONTINUED)

Stock Based Compensation (Continued)

The fair value
of each employee-nonemployee option and warrant was calculated on the date of
grant using the Black-Scholes model with the following weighted average
assumptions:

|                      |  |                    |      |                  |  |                 |   |  |   | 
|--------------------- |  | ------------------ | ---- | ---------------- |  | --------------- | - |  | - | 
|YEAR ENDED OCTOBER 31 |  | RISK FREE INTEREST |      | VOLATILITY
 RATE |  | DIVIDEND
 YIELD |  
|                      |  |                    |      |                  |  |                 |  
|2008                  |  |                    | 2.00 | %                |  | 85              | % |  | 0 | 
|2007                  |  |                    | 4.97 | %                |  | 135             | % |  | 0 | 
|2006                  |  |                    | 4.48 | %                |  | 225             | % |  | 0 | 

Employee Stock Based
Compensation

A summary of
transactions for employee stock options and warrants for the years ended
October 31, 2008, 2007, and 2006 is as follows:

|                                            |  |                   |           |                      |  |                           |  |                         |      |  |  |   |       |  | 
|------------------------------------------- |  | ----------------- | --------- | -------------------- |  | ------------------------- |  | ----------------------- | ---- |  |  | - | ----- |  | 
|EMPLOYEE
 OPTIONS AND 
 WARRANTS            |  | NUMBER OF
 SHARES |           | OPTION
 PRICE
 RANGE |  | WEIGHTED
 REMAINING
 LIFE |  | AVERAGE
 EXERCISE PRICE |     
|                                            |  |                   |           |                      |  |                           |  |                         |     
|OPTIONS AND WARRANTS OUTSTANDING,
    AS OF |  |                   |           |                      |  |                           |  |                         |      |  |  |   |       |  | 
|October
        31, 2005                    |  |                   | 120,000   |                      |  | $16.25                    |  |                         | 2.75 |  |  | $ | 16.25 |  | 
|Options
        granted                     |  |                   |           |                      |  |                           |  |                         |      |  |  |   |       |  | 
|Options
        canceled                    |  |                   |           |                      |  |                           |  |                         |      |  |  |   |       |  | 
|OPTIONS AND WARRANTS OUTSTANDING, AS OF     |  |                   |           |                      |  |                           |  |                         |      |  |  |   |       |  | 
|October 31, 2006                            |  |                   | 120,000   |                      |  | $16.25                    |  |                         | 1.75 |  |  | $ | 16.25 |  | 
|Options granted                             |  |                   | 2,100,000 |                      |  | $2.00                     |  |                         | 6.75 |  |  | $ | 2.00  |  | 
|Options canceled                            |  |                   |           |                      |  |                           |  |                         |      |  |  |   |       |  | 
|OPTIONS AND WARRANTS OUTSTANDING, AS OF     |  |                   |           |                      |  |                           |  |                         |      |  |  |   |       |  | 
|October 31, 2007                            |  |                   | 2,220,000 |                      |  | $2.00 - $16.25            |  |                         | 6.5  |  |  | $ | 2.79  |  | 
|Options granted                             |  |                   |           |                      |  |                           |  |                         |      |  |  |   |       |  | 
|Options canceled                            |  |                   | 2,020,000 |                      |  | $2.00 - $16.25            |  |                         |      |  |  | $ | 5.60  |  | 
|OPTIONS AND WARRANTS OUTSTANDING, AS OF     |  |                   |           |                      |  |                           |  |                         |      |  |  |   |       |  | 
|October 31, 2008                            |  |                   | 200,000   |                      |  | $0.75                     |  |                         | 5.7  |  |  | $ | 0.75  |  | 

|                                                                |  |      |         |      |  |         |  |  |         | 
|--------------------------------------------------------------- |  | ---- | ------- | ---- |  | ------- |  |  | ------- | 
|                                                                |  | 2008 |         | 2007 |  | 2006    | 
|                                                                |  |      |         |      |  |         | 
|Options exercisable, end of year                                |  |      | 200.000 |      |  | 0       |  |  | 0       | 
|Warrants exercisable, end of year                               |  |      |        |      |  | 120,000 |  |  | 120,000 | 
|Weighted average fair value of options
 granted during the year |  |      |        |      |  |        |  |  |        | 
|Options available for future grant under
 the 1996 Plan         |  |      |         |      |  |         |  |  |         | 
|                                                                |  |      |         |      |  |         |  |  |         | 

F-27

---



NOTE 15 - STOCKHOLDERS DEFICIT (CONTINUED)

Employee Stock Based Compensation (Continued)

Additional
information regarding options and warrants outstanding as of October 31, 2008
is as follows:

|                            |  |                     |  |                                    |  |                                                         |  |             |  |                                      
|--------------------------- |  | ------------------- |  | ---------------------------------- |  | ------------------------------------------------------- |  | ----------- |  | -------------------------------------
|                            |  | OUTSTANDING         |  |                                    |  |                                                         |  | EXERCISABLE |  |                                      
|                            |  |                     |  |                                    |  |                                                         |  |             |  |                                      
|RANGE
 OF
 EXERCISE
 PRICES |  | NUMBER
 OUTSTANDING |  | WEIGHTED
 AVERAGE
 EXERCISE
 PRICE |  | WEIGHTED
 AVERAGE
 REMAINING
 CONTRACTUAL
 LIFE (YEARS) |  | EXERCISABLE |  | WEIGHTED
 AVERAGE
 EXERCISABLE
 PRICE
|                            |  |                     |  |                                    |  |                                                         |  |             |  |                                      
|$0.75                       |  | 200,000             |  | $0.75                              |  | 6.75                                                    |  | 200,000     |  | $0.75                                

Loss per Common Share

Net loss per
common share is calculated by dividing net loss by the weighted average number
of shares outstanding during each period presented. Common stock equivalents,
consisting of options and warrants have not been included in the calculation
for any of the three years ended October 31, 2008, 2007, and 2006, because
their effect would be anti-dilutive. The following potentially dilutive
securities were not included in the computation of diluted loss per share:

|         |  |      |            |      |  |           |  |  |           | 
|-------- |  | ---- | ---------- | ---- |  | --------- |  |  | --------- | 
|         |  | 2008 |            | 2007 |  | 2006      | 
|         |  |      |            |      |  |           | 
|Options  |  |      | 200,000    |      |  | 120,000   |  |  | 120,000   | 
|Warrants |  |      | 28,120,915 |      |  | 6,481,915 |  |  | 1,827,751 | 

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

|                                                  |  |      |            |      |   |             |   |   |            |  
|------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------- | - | - | ---------- | -
|                                                  |  | 2008 |            | 2007 |   | 2006        |  
|                                                  |  |      |            |      |   |             |  
|Numerator
 for basic and diluted loss per share   |  |      |            |      |   |             |   |   |            |  
|Net Loss                                          |  | $    | (4,005,831 | )    | $ | (20,857,884 | ) | $ | (8,025,402 | )
|Denominator
 for basic and diluted loss per share |  |      |            |      |   |             |   |   |            |  
|Weighted-average
 shares outstanding              |  |      | 23,547,066 |      |   | 29,782,703  |   |   | 26,044,630 |  

F-28

---



NOTE 16 - INCOME TAXES

Federal and
state income tax expense (benefit) for the years ended October 31, 2008, 2007
and 2006 and a reconciliation of income taxes computed at the United States
federal statutory income tax rate to the provision for income taxes reflected
in the Statements of Operations is presented below:

|                            |  |      |            |      |   |            |   |   |            |  
|--------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                            |  | 2008 |            | 2007 |   | 2006       |  
|                            |  |      |            |      |   |            |  
|Current:                    |  |      |            |      |   |            |   |   |            |  
|Federal                     |  | $    | (1,464,773 | )    | $ | (6,867,395 | ) | $ | (2,367,015 | )
|State                       |  |      | (258,489   | )    |   | (1,511,894 | ) |   | (417,708   | )
|Deferred:                   |  |      |            |      |   |            |   |   |            |  
|Federal                     |  |      | 772,051    |      |   | 107,826    |   |   | 300,905    |  
|State                       |  |      | 136,244    |      |   | 19,028     |   |   | 53,101     |  
|                            |  |      |            |      |   |            |   |   |            |  
|Valuation
 allowance        |  | $    | 814,967    |      | $ | 7,952,438  |   | $ | 2,430,717  |  
|                            |  |      |            |      |   |            |   |   |            |  
|                            |  |      |            |      |   |            |   |   |            |  
|Provision
 for Income Taxes |  |      |           |      |   |           |   |   |           |  

Deferred
income taxes reflect the net tax effect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Deferred tax assets result primarily
from net operating loss carry-forwards. The components of the Companys
deferred tax assets and liabilities at October 31, 2008, 2007, and 2006 are as
follows:

|                              |  |      |             |      |   |             |   |   |             |  
|----------------------------- |  | ---- | ----------- | ---- | - | ----------- | - | - | ----------- | -
|                              |  | 2008 |             | 2007 |   | 2006        |  
|                              |  |      |             |      |   |             |  
|DEFERRED TAX ASSETS           |  |      |             |      |   |             |   |   |             |  
|Operating
 loss carryforwards |  | $    | 27,200,592  |      | $ | 26,140,547  |   | $ | 18,479,296  |  
|Stock option
 compensation    |  |      | 176,013     |      |   | 176,013     |   |   | 262,706     |  
|Deferred
 loss on inventory   |  |      | 63,100      |      |   | 79,965      |   |   | 17,600      |  
|Reserve
 accounts             |  |      | 87,302      |      |   | 75,515      |   |   |            |  
|Other                         |  |      |             |      |   |             |   |   |             |  
|                              |  |      |             |      |   |             |   |   |             |  
|Total
 Deferred Tax Asset     |  |      | 27,527,007  |      |   | 26,472,040  |   |   | 18,759,602  |  
|                              |  |      |             |      |   |             |   |   |             |  
|Valuation
 Allowance          |  | $    | (27,527,007 | )    | $ | (26,472,040 | ) | $ | (18,759,602 | )
|                              |  |      |             |      |   |             |   |   |             |  

A full
valuation allowance is provided against all deferred tax assets due to the
uncertainty as to their future realization. In addition, the realization of
such NOL carryforwards may be significantly limited if it is deemed that a
change in ownership has occurred. For tax purposes, a change in ownership has
occurred if an entity or group of entities that previously did not own 50% or
more of a Company acquires enough new equity to raise its interest to more than
50% over a three-year period.

As of October
31, 2008, the Company has federal net operating loss carry forwards totaling
approximately $27,200,592 available to offset future federal taxable income.
The federal net operating loss carry-forwards expire in varying amounts through
2008. In addition, the Company has state net operating loss carry forwards of
approximately $43,343,857 available to offset future state taxable income.

The Company is in the process
of filing its tax returns for the current and all applicable prior years and
may be subject to late filing penalties the amount of which cannot be
determined at this time.

F-29

---



NOTE 17 - COMMITMENTS AND CONTINGENCIES

Regulation

The Company is
required to obtain certain licenses in connection with the manufacture of its
products. These licenses require compliance with certain licensing
stipulations, as well as the FDA, DEA and other regulation bodies rules
and regulations. If the Company were to be out of compliance with any of these
rules or regulations, there could be a material adverse effect on the Companys
business, prospects, financial condition and results of operation, which could
have an adverse effect on the Companys
financial statements. See Note 18 below for a description of certain actions
commenced by the DEA.

Operating Leases

Rent expense
for the years ended October 31, 2008, 2007, and 2006 was $863,970, $753,760 and
$91,246, respectively. Kirk and ANDAPharm have commitments for office and
manufacturing space. The leases for rent expense annually are $898,282. Minimum
future rent payments under the operating leases at October 31, 2008 are as
follows:

|                                 |  |        |         | 
|-------------------------------- |  | ------ | ------- | 
|Twelve Months
 Ended October 31, |  | Amount |        
|                                 |  |        |        
|                                 | 
|2009                             |  | $      | 650,282 | 
|2010                             |  |        | 662,905 | 
|2011                             |  |        | 256,091 | 
|2012                             |  |        | 175,816 | 
|2013                             |  |        |        | 

The Company
estimates additional rent expense aggregating $1,745,094 year for a period of
five years.

Capital Leases

Minimum future
lease payments under capitalized leases at the October 31, 2008 are as follows:

|                                    |  |        |         | 
|----------------------------------- |  | ------ | ------- | 
|Twelve Months
 Ended October 31,    |  | Amount |        
|                                    |  |        |        
|                                    | 
|2009                                |  | $      | 70,291  | 
|2010                                |  |        | 72,415  | 
|2011                                |  |        | 77,243  | 
|2012                                |  |        | 56,548  | 
|2013                                |  |        | 17,573  | 
|                                    |  |        |         | 
|Net minimum
 lease payments         |  |        |         | 
|Less: Amount
 representing interest |  | $      | 294,070 | 
|                                    |  |        |         | 
|                                    |  |        |         | 
|Current
 portion                    |  | $      | 70,291  | 
|                                    |  |        |         | 
|Long-term
 portion                  |  | $      | 294,071 | 
|                                    |  |        |         | 

The
capitalized leases have effective interest rates ranging from 8% through 12%
per annum.

F-30

---



NOTE 18 - 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 guiafenesin tablets, which occurred at Kirk in July 2008. The
DEA also alleges that Kirk failed to maintain appropriate recordkeeping
practices.

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

A hearing has
been scheduled before an administrative law judge to commence February 18,
2009. Based on the allegations made by the DEA, and the Companys understanding
of relevant facts and circumstances, it believes 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, 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.

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 would have a material adverse effect on the Companys business
prospects, financial condition and results of operation.

Bushido

On January 18,
2008, the Company received a complaint filed by Bushido Capital Master Fund,
L.P. (Bushido) and BCMF
Trustees, LLC against the Company in the United States District Court, Southern
District of New York. The complaint sought recovery of an amount of no less
than $579,395 arising from a default by the Company of a Convertible Promissory
Note dated October 3, 2005 in the principal amount of $500,000 (the Bushido Note). On June 6, 2008, the
Company entered into a settlement and general release agreement pursuant to
which the Company repaid the unpaid principal and accrued and unpaid interest
on the Bushido Note plus agreed upon legal fees in the aggregate amount of
$725,893. Further, pursuant to the terms of the settlement, the Company agreed
to re-price warrants to acquire 83,333 shares of Company common stock issued to
Bushido to $0.75 and extend the expiration date of such warrants to October 3,
2012.

Pamlab

On December 7,
2007, an action was commenced by Pamlab LLC against ANDAPharm, and another two
co-defendants in the United States District Court, District of Colorado. The
complaint, as amended, alleged that ANDAPharms Folnate Plus product infringed
a patent of which plaintiff is a licensee and that the advertising of the
product constituted false advertising under the Lanham Act. In the amended
complaint, plaintiff sought a preliminary and permanent injunction, treble
damages as well as attorneys fees and costs. On June 27, 2008, the Company
entered into a settlement agreement pursuant to which the Company agreed to
immediately cease the manufacture and sale of ANDAPharms Folnate Plus product.
The settlement involved no monetary payment by the Company and no admission of
wrongdoing. The Company believes that the terms of the settlement will not have
a material effect on the Companys financial condition or operations.

F-31

---



NOTE 18 - LITIGATION (CONTINUED)

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. The counterclaim is seeking 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. Most recently, on September 5, 2008, Nostrum
and Mulye made a motion to the Court to dismiss the Companys breach of
contract and breach of implied covenant of good faith and dealing claims and
the Company is in the process of responding to this motion. Both parties have
recently filed motions for summary judgment seeking a ruling from the Judge
regarding the return of the escrowed shares and the Court has scheduled a
hearing for February 5, 2009. 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. 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.

NOTE 19 - 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. Subsequent to the end of
fiscal year ended October 31, 2008, in connection with the Consulting Agreement,
the Companys board of directors authorized the grant of 125,000 shares of
common stock to Mr. Singh. (See Note 20)

F-32

---



NOTE 19 - RELATED PARTY TRANSACTIONS
(CONTINUED)

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.

NOTE 20  SUBSEQUENT EVENTS

Maneesh and Singh Grant

On November
11, 2008, the Companys board of directors authorized the grant of 500,000
shares of its common stock to Maneesh and 125,000 shares of our common stock to
Harry Singh, both related parties of the Company, in consideration for their
deferral in payment of certain fees due to them under the Joint Venture
Agreement in the case of Maneesh and the Consulting Agreement in the case of
Harry Singh.

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 as well as pay down
Dr. Lanes deferred compensation which was $214,102 at October 31, 2008 and
reimburse Dr. Lane for expenses incurred by him which were $77,147 at October
31, 2008.

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 $375,637 plus court costs and
pre-judgment interest.

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 agreed to issue 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.

F-33

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