SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  -------------

                                    FORM 10-Q
                                  -------------

                 |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the Quarter Ended March 31, 2005

              |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the Transition Period from to
                                   ----------

                         Commission File Number 0-22710

                            INTERPHARM HOLDINGS, INC.
                     --------------------------------------
             (Exact name of registrant as specified in its charter)

Delaware                                                13-3673965
--------------------------------------------------------------------------------
State or other jurisdiction of                           (I.R.S. Employer
corporation or organization)                            Identification Number)

75 Adams Avenue, Hauppauge, New York                   11788
--------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)

Issuer's telephone number, including area code (631) 952-0214

      Indicate by check mark whether the Registrant (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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 YES |X| NO |_|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act.
                                 YES |_| NO |X|

As of the close of business on May 13, 2005, there were 26,063,832 shares of the
Registrant's $.01 par value per share Common Stock outstanding.


<PAGE>


                            INTERPHARM HOLDINGS, INC.

TABLE OF CONTENTS

PART I     Financial Information                                            Page
------     ---------------------                                            ----

Item 1.      Financial Statements & Notes                                   1-18
Item 2.      Managements Discussion & Analysis of
             Financial Condition and Results of Operations                 19-25

Item 3.      Quantitative and Qualitative Disclosures about Market Risk       26

Item 4.      Controls and Procedures                                          26


PART II    Other Information Required in Report
-------    ------------------------------------

Items 1 through 6                                                             27

Forward Looking Statements and Associated Risks                               28

Signatures Page                                                               29

Exhibits/Certifications                                                    29-33


<PAGE>


                                    INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
                                       CONDENSED CONSOLIDATED BALANCE SHEETS

                                                      ASSETS
                                                      ------
<TABLE>
<CAPTION>

                                                                             March 31,               June 30,
                                                                                2005                   2004
                                                                          -----------------------------------
                                                                            (Unaudited)
CURRENT ASSETS
<S>                                                                                   <C>                <C>
      Cash and cash equivalents                                            $     2,627,650    $     2,884,639
      Marketable securities, at fair market value                                       --             36,791
      Accounts receivable, net                                                   6,512,372          6,849,778
      Inventories, net                                                           8,594,687          5,530,161
      Prepaid expenses and other current assets                                    584,291            453,157
      Deferred tax assets                                                               --          1,280,000
                                                                           ---------------    ---------------

       Total Current Assets                                                     18,319,000         17,034,526

      Land, building and equipment, net                                         19,942,927         15,007,132
      Deferred tax assets                                                        3,972,000          2,902,000
      Investment in APR, LLC                                                       772,500                 --
      Deposits                                                                     320,557            224,287
                                                                           ---------------    ---------------

       TOTAL ASSETS                                                        $    43,326,984    $    35,167,945
                                                                           ===============    ===============

</TABLE>

            See Notes To Condensed Consolidated Financial Statements.


                                       1

<PAGE>


                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

<TABLE>
<CAPTION>

                                                                                         March 31, 2005         June 30, 2004
                                                                                      ---------------------------------------------
                                                                                          (Unaudited)
CURRENT LIABILITIES
<S>                                                                                                   <C>                   <C>
  Current maturities of bank debt payable                                                      $6,340,000         $     764,014
  Accounts payable, accrued expenses, and other liabilities                                     7,194,271             4,560,313
                                                                                               ----------          ------------

       Total Current Liabilities                                                               13,534,271             5,324,327

OTHER LIABILITIES
  Bank debt, less current maturities                                                            6,783,333             7,060,833
                                                                                                ---------             ---------

       TOTAL LIABILITIES                                                                       20,317,604            12,385,160
                                                                                              -----------           -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred stocks, 10,000,000 shares authorized; issued and
   outstanding - 6,901,146 and 6,902,963, respectively; aggregate
   liquidation preference of $5,483,095 and $5,494,080, respectively                              346,244               348,042
  Common stock, $.01 par value, 70,000,000 shares
     authorized; shares issued - 24,967,202 and 25,591,311, respectively                          249,672               255,913
  Additional paid-in capital                                                                   18,394,454            19,184,291
  Accumulated other comprehensive loss                                                                 --                   (92)
  Retained earnings                                                                             4,019,010             3,792,499
  Treasury stock at cost, 624,145 shares in 2004                                                       --              (797,868)
                                                                                             ------------           -----------

       TOTAL STOCKHOLDERS' EQUITY                                                              23,009,380            22,782,785
                                                                                             ------------           -----------

       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             $43,326,984           $35,167,945
                                                                                              ===========           ===========

</TABLE>
            See Notes To Condensed Consolidated Financial Statements.


                                       2


<PAGE>


                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                                                 Three Months Ended March 31,         Nine Months Ended March31,
                                                                ------------------------------------------------------------------
                                                                       2005             2004            2005               2004
                                                                ------------------------------------------------------------------

<S>                                                                      <C>              <C>              <C>              <C>
SALES, Net                                                         $ 10,669,660     $ 11,307,974     $ 28,560,858     $ 29,889,553

COST OF SALES (including related party rent expense of
$102,000 and $306,000 for the three and nine months ended
March 31, 2005  and 2004, respectively)
                                                                      8,397,880        8,492,823       21,755,473       23,024,297
                                                                   ------------     ------------     ------------       ----------

       GROSS PROFIT                                                   2,271,780        2,815,151        6,805,385        6,865,256
                                                                   ------------     ------------     ------------       ----------

OPERATING EXPENSES
  Selling, general and administrative  expenses                       1,579,724        1,165,945        3,892,734        3,059,780
  Related party rent expense                                             18,000           18,000           54,000           54,000
  Research and development                                            1,658,975           80,535        2,197,961          269,570
                                                                   ------------     ------------     ------------       ----------

       TOTAL OPERATING EXPENSES                                       3,256,699        1,264,480        6,144,695        3,383,350
                                                                   ------------     ------------     ------------       ----------

       OPERATING (LOSS) INCOME                                         (984,919)       1,550,671          660,690        3,481,906
                                                                   ------------     ------------     ------------       ----------

OTHER INCOME  (EXPENSE)
  Gain on sale of marketable securities                                      --               --            8,943               --
  Gain on sale of property and equipment                                     --            2,554               --            2,554
  Interest expense                                                      (21,655)          (5,483)         (25,175)         (16,482)
  Interest income                                                            --           11,208               --           16,413
                                                                   ------------     ------------     ------------       ----------
       TOTAL OTHER INCOME (EXPENSE)                                     (21,655)           8,279          (16,232)           2,485
                                                                   ------------     ------------     ------------       ----------

        (LOSS) INCOME BEFORE INCOME TAXES                            (1,006,574)       1,558,950          644,458        3,484,391

(Forward)

</TABLE>

            See Notes To Condensed Consolidated Financial Statements.


                                       3


<PAGE>


                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                     Three Months Ended March 31,       Nine Months Ended March 31,
                                               -----------------------------------------------------------------------
                                                        2005              2004             2005             2004
                                               -----------------------------------------------------------------------
(Forward)

<S>                                                    <C>               <C>              <C>             <C>
(BENEFIT FROM) PROVISION FOR INCOME TAXES              (373,000)         575,420          239,228         1,249,325
                                                     ----------       ----------       ----------       -----------

       NET (LOSS) INCOME                             $ (633,574)      $  983,530       $  405,230       $ 2,235,066
                                                     ==========       ==========       ==========       ===========

EARNINGS PER SHARE
  Basic earnings per share                           $    (0.03)      $     0.05       $     0.01       $      0.11
                                                     ==========       ==========       ==========       ===========
  Diluted earnings per share                         $    (0.03)      $     0.01       $     0.00       $      0.03
                                                     ==========       ==========       ==========       ===========

  Basic weighted average shares outstanding          24,967,202       18,457,790       24,967,196        17,389,913
                                                     ==========       ==========       ==========       ===========
  Diluted weighted average shares and
   equivalent shares outstanding                     24,967,202       69,336,012       67,701,862        68,692,068
                                                     ==========       ==========       ==========       ===========

</TABLE>

            See Notes To Condensed Consolidated Financial Statements.


                                       4


<PAGE>


                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                     Additional
                                         Preferred Stock                   Common Stock               Paid-In
                                      Shares         Amount            Shares          Amount         Capital
                                 --------------------------------------------------------------------------------
<S>                                       <C>               <C>              <C>             <C>          <C>
BALANCE - July 1, 2004              6,902,963     $    348,042       25,591,311     $    255,913     $ 19,184,291
Unrealized gain on marketable
securities, net                            --               --               --               --               --

Net income                                 --               --               --               --               --
                                 ------------     ------------     ------------     ------------     ------------

BALANCE -
 September 30, 2004                 6,902,963          348,042       25,591,311          255,913       19,184,291
Unrealized loss on marketable
securities, net                            --               --               --               --               --
Conversion of Series C
convertible preferred stock
common stock                           (1,797)          (1,797)              36               --            1,797
Dividends declared -
  Series A-1                               --               --               --               --               --

Net income                                 --               --               --               --               --
                                 ------------     ------------     ------------     ------------     ------------

BALANCE -
 December 31, 2004                  6,901,166          346,245       25,591,347          255,913       19,186,088
Retirement of Treasury Shares              --               --         (624,145)          (6,241)        (791,627)
Redemption of Series A
  convertible preferred stock             (20)              (1)              --               --               (7)

Net loss                                   --               --               --               --               --
                                 ------------     ------------     ------------     ------------     ------------

BALANCE -  March 31, 2005           6,901,146     $    346,244       24,967,202     $    249,672     $ 18,394,454
                                 ============     ============     ============     ============     ============





                                  Accumulated
                                     Other                                                             Total
                                 Comprehensive      Retained              Treasury Stock            Stockholders'
                                     Income         Earnings           Shares        Amount            Equity
                                 --------------------------------------------------------------------------------
BALANCE - July 1, 2004           $        (92)    $  3,792,499         (624,145)    $   (797,868)    $ 22,782,785
Unrealized gain on marketable
securities, net                         3,194               --               --               --            3,194

Net income                                 --          413,272               --               --          413,272
                                 ------------     ------------     ------------     ------------     ------------

BALANCE -
 September 30, 2004                     3,102        4,205,771         (624,145)        (797,868)      23,199,251
Unrealized loss on marketable
securities, net                        (3,102)              --               --               --           (3,102)
Conversion of Series C
convertible preferred stock
common stock                               --               --               --               --               --
Dividends declared -
  Series A-1                               --         (178,719)              --               --         (178,719)

Net income                                 --          625,532               --               --          625,532
                                 ------------     ------------     ------------     ------------     ------------

BALANCE -
 December 31, 2004                         --        4,652,584         (624,145)        (797,868)      23,642,962
Retirement of Treasury Shares              --               --          624,145          797,868               --
Redemption of Series A
  convertible preferred stock              --               --               --               --               (8)

Net loss                                   --         (633,574)              --               --         (633,574)
                                 ------------     ------------     ------------     ------------     ------------

BALANCE -  March 31, 2005        $         --     $  4,019,010               --     $         --     $ 23,009,380
                                 ============     ============     ============     ============     ============

</TABLE>

            See Notes To Condensed Consolidated Financial Statements.

                                       5


<PAGE>


                    For The Nine Months Ended March 31, 2005
-------------------------------------------------------------------------------
                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHSENSIVE (LOSS) INCOME
                                   (UNAUDITED)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         Three Months Ended            Nine Months Ended
                                                              March 31,                     March 31,
                                                     --------------------- ---------------------------------
                                                         2005            2004          2005          2004
                                                      ----------     ----------     ----------   -----------
<S>                                                       <C>            <C>            <C>           <C>
NET (LOSS) INCOME                                     $ (633,574)    $  983,530     $  405,230    $2,235,066


OTHER COMPREHENSIVE (LOSS) INCOME
  Unrealized (loss) gain on marketable
     securities, net                                          --        (10,811)            --         1,926
                                                      ----------     ----------     ----------    ----------
TOTAL COMPREHENSIVE  (LOSS)
   INCOME                                             $ (633,574)    $  972,719     $  405,230    $2,236,992
                                                      ==========     ==========     ==========    ==========

</TABLE>

            See Notes To Condensed Consolidated Financial Statements.

                                       6


<PAGE>


                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------
                                   (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                    Nine Months Ended
                                                                                         March 31,
                                                                                2005                2004
                                                                        ------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                             <C>                 <C>
Net income                                                                $       405,230     $     2,235,066
                                                                          ---------------     ---------------
 Adjustment to reconcile net income to net
  cash provided by (used in) operating activities
   Gain on sale of marketable securities                                           (8,943)                 --
   Gain on sales of property and equipment                                             --              (2,554)
   Depreciation and amortization                                                  908,101             643,273
   Deferred tax expense                                                           210,000                  --
   Tax expense in connection with exercise of employee
    stock options credited to additional paid-in-capital                               --           1,219,000
 Changes in operating assets and liabilities
    Accounts receivable                                                           337,406          (2,979,204)
    Inventories                                                                (3,064,526)         (1,478,370)
    Prepaid expenses and other current assets                                     (85,308)           (177,416)
    Deposits                                                                           --             (98,406)
    Accounts payable, accrued expenses and other liabilities                    2,633,958             183,001
                                                                          ---------------     ---------------

TOTAL ADJUSTMENTS                                                                 930,688          (2,690,676)
                                                                          ---------------     ---------------
     NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                        1,335,918            (455,610)
                                                                          ---------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from notes receivable                                                       --           1,524,092
  Purchases of building and equipment                                          (5,843,896)         (2,198,531)
  Proceeds from sales of property and equipment                                        --              19,000
  Investment in APR, LLC                                                         (772,500)                 --
  Deposits                                                                        (96,270)           (925,000)
                                                                          ---------------     ---------------

        NET CASH USED IN INVESTING ACTIVITIES                                  (6,712,666)         (1,580,439)
                                                                          ---------------     ---------------

 CASH FLOWS FROM FINANCING ACTIVITIES
  Repayment of bank line of credit                                               (424,847)         (1,639,946)
  Borrowings from new bank lines of credit                                      5,970,000                  --
  Repayments of bank mortgage and notes payable                                  (246,667)           (461,762)
  Payment of Series A-1 preferred stock dividend                                 (178,719)
                                                                                              ---------------
  Redemption of Series A convertible preferred stock                                   (8)                 --
  Cash received in reverse merger transaction                                          --              64,029
  Proceeds from options and warrants exercised                                         --           3,508,175
                                                                          ---------------     ---------------

       NET CASH PROVIDED BY FINANCING ACTIVITIES                          $     5,119,759     $     1,470,496
                                                                          ---------------     ---------------

</TABLE>

            See Notes To Condensed Consolidated Financial Statements.

                                       7


<PAGE>


                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (UNAUDITED), Continued
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                              Nine Months Ended
                                                                                  March31,
                                                                           2005                  2004
                                                                   --------------------------------------
<S>                                                                  <C>                 <C>
       NET DECREASE IN CASH AND CASH  EQUIVALENTS                    $      (256,989)    $      (565,553)

CASH AND CASH EQUIVALENTS - Beginning                                      2,884,639           2,336,203
                                                                     ---------------     ---------------

CASH AND CASH EQUIVALENTS - Ending                                   $     2,627,650     $     1,770,650
                                                                     ===============     ===============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the periods for:
    Interest                                                         $       200,985     $        16,482
                                                                     ===============     ===============
    Income taxes                                                     $        31,148     $        99,054
                                                                     ===============     ===============

  Non-cash investing and financing activities:
    Conversion of Series J preferred stock to common stock           $            --     $         1,050
                                                                     ===============     ===============
    Conversion of Series C preferred stock to common stock           $         1,797                  --
                                                                     ===============     ===============
    Retirement of Treasury Stock                                     $       797,868                  --
                                                                     ===============     ===============
    Valuation Adjustment related to reverse merger                   $            --     $        50,000
                                                                     ===============     ===============

</TABLE>

            See Notes To Condensed Consolidated Financial Statements.

                                       8


<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 - Condensed Consolidated Financial Statements

      The  accompanying  interim  unaudited  consolidated  financial  statements
      include the accounts of  Interpharm  Holdings,  Inc. and its  subsidiaries
      that  are  hereafter  referred  to as (the  "Company").  All  intercompany
      accounts and transactions have been eliminated in consolidation.

      These   financial   statements  have  been  prepared  in  accordance  with
      accounting  principles  generally accepted in the United States of America
      for interim financial  information and with the instructions to Form 10-Q.
      Accordingly,  they do not include  all of the  information  and  footnotes
      required by accounting  principles generally accepted in the United States
      of  America  for  complete  financial   statements.   In  the  opinion  of
      management, such interim statements reflect all adjustments (consisting of
      normal  recurring  accruals)  necessary  to present  fairly the  financial
      position  and the  results of  operations  and cash flows for the  interim
      periods  presented.  The  operating  results for the three and nine months
      ended March 31, 2005 are not  necessarily  indicative  of the results that
      may be expected  for the fiscal year  ending  June 30,  2005.  For further
      information,  refer to the consolidated financial statements and footnotes
      thereto  included in the  Company's  Form 10-K for the year ended June 30,
      2004.

NOTE 2 - Summary of Significant Accounting Policies

      Nature of Business
      Interpharm Holdings, Inc. through its wholly-owned subsidiary, Interpharm,
      Inc. ("Interpharm, Inc.") is in the business of developing,  manufacturing
      and  marketing   generic   prescription   strength  and   over-the-counter
      pharmaceutical  products for wholesale distribution  throughout the United
      States.  The majority of the Company's  sales have been derived from sales
      of Ibuprofen tablets in both over-the-counter and prescription strength.

      Earnings Per Share
      Basic  earnings per share  ("EPS") of common stock is computed by dividing
      net (loss) income available to common stockholders by the weighted average
      number of shares of common stock  outstanding  during the period.  Diluted
      EPS reflects the amount of net (loss)  income for the period  available to
      each share of common stock outstanding during the reporting period, giving
      effect  to all  potentially  dilutive  shares  of  common  stock  from the
      potential  exercise  of stock  options and  warrants  and  conversions  of
      convertible  preferred  stocks.  In  accordance  with EITF Issue No. 03-6,
      "Participating  Securities  and the Two-Class  Method Under FASB Statement
      No. 128,  Earnings Per Share," in periods when there is a net income,  the
      Company  uses  the  two-class  method  to  calculate  the  effect  of  the
      participating   Series  K  on  the   calculation  of  basic  EPS  and  the
      if-converted  method is used to calculate the effect of the  participating
      Series K on diluted EPS. In periods  when there is a net loss,  the effect
      of the participating Series K is excluded from both basic and diluted EPS.

      Use of Estimates in the Financial Statements
      The  preparation  of financial  statements in conformity  with  accounting
      principles  generally  accepted in the United  States of America  requires
      management  to make  estimates  and  assumptions  that affect the reported
      amounts of assets and liabilities and disclosure of contingent  assets and
      liabilities  at the  date of the  financial  statements  and the  reported
      amounts of  revenue  and  expenses  during the  reporting  period.  Actual
      results could differ from those estimates.  Significant  estimates include
      deferred tax asset valuations and inventory overhead costing estimates.

      Capitalization of Interest and Other Costs
      The Company  capitalizes  interest on borrowings  and certain other direct
      costs during the active  construction  period of major  capital  projects.
      Capitalized  costs are added to the cost of the underlying assets and will

                                       9
<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 2 - Summary of Significant Accounting Policies, continued

      be  depreciated  over  the  useful  lives  of  the  assets.   The  Company
      capitalized  approximately  $271,000  during the nine month  period  ended
      March  31,  2005  in  connection  with  its  capital  improvements  to the
      Brookhaven, NY facility.

      Stock Based Compensation
      At March 31, 2005,  the Company had two  stock-based  employee  plans.  As
      permitted under Statement of Financial  Accounting  Standards ("SFAS") No.
      148,   "Accounting   for   Stock-Based   Compensation   -  Transition  and
      Disclosure,"  which  amended  SFAS No. 123,  "Accounting  for  Stock-Based
      Compensation," the Company has elected to continue to follow the intrinsic
      value  method in  accounting  for its  stock-based  employee  compensation
      arrangements as defined by Accounting Principles Board Opinion ("APB") No.
      25,   "Accounting   for  Stock   Issued   to   Employees,"   and   related
      interpretations  including Financial  Accounting  Standards Board ("FASB")
      Interpretation  ("FIN")  No.  44,  "Accounting  for  Certain  Transactions
      Involving  Stock  Compensation,"  an  interpretation  of APB  No.  25.  No
      stock-based employee compensation cost is reflected in operations,  as all
      options  granted  under those  plans have an  exercise  price equal to the
      market  value of the  underlying  common  stock on the date of grant.  The
      following table illustrates the effect on net (loss) income and net (loss)
      income per share as if the Company had applied the fair value  recognition
      provisions of SFAS No. 123 to stock-based employee compensation:


<TABLE>
<CAPTION>

                                                      Three Months Ended                   Nine Months Ended
                                                          March 31,                           March 31,
                                              ---------------------------------------------------------------------------
                                                     2005              2004               2005                2004
                                              ----------------    ---------------    ---------------     ----------------

<S>                                           <C>                 <C>                <C>                 <C>
Net (loss) income, as reported                $      (633,574)    $       983,530    $       405,230     $     2,235,066

Less: Stock-based employee
 compensation expense
 determined under fair value-based
 method for all  awards, net of income tax          9,270,345             212,550         10,583,286             545,977
                                              ---------------     ---------------    ---------------     ---------------

Pro forma net (loss) income                   $    (9,903,919)    $       770,980    $   (10,178,056)    $     1,689,089
                                              ===============     ===============    ===============     ===============


Basic net (loss) income per share
  As reported                                 $         (0.03)    $          0.05    $          0.01     $          0.11
                                              ===============     ===============    ===============     ===============
  Pro forma                                   $         (0.40)    $          0.04    $         (0.44)    $          0.08
                                              ===============     ===============    ===============     ===============

Diluted net (loss) income per share
  As reported                                 $         (0.03)    $          0.01    $          0.00     $          0.03
                                              ===============     ===============    ===============     ===============
  Pro forma                                   $         (0.40)    $          0.01    $         (0.44)    $          0.02
                                              ===============     ===============    ===============     ===============

</TABLE>



In December 2004, the FASB finalized SFAS No. 123R  "Share-Based  Payment" which
will require the Company to expense stock options based on grant date fair value
in its  financial  statements.  The  effect of  expensing  stock  options on the
Company's  results of operations using a Black-Scholes  option-pricing  model is
presented  in the  preceding  pro forma  table.  The 2005  period  includes  the
pro-forma effects of accelerating  options valued at $4.2 million,  as discussed
below.

In an effort to reduce the expected impact to be incurred in future periods as a
result of adopting SFAS 123R,  the Company has chosen to accelerate  the vesting
provisions of 1,192,000  options,  which  represents the total unvested  options
granted after May 30, 2003 through December 31, 2004. An aggregate of

                                       10


<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)


NOTE 2 - Summary of Significant Accounting Policies, continued

      1,000,000  such options were granted to executives  of the Company.  Since
      options  granted  on or prior to May 30,  2003 are not fully  vested,  the
      Company  expects to record  stock  options  expense  commencing  the first
      quarter of fiscal 2006.

      The fair values of Company common stock options  granted to employees were
      estimated  on the date of grant  using  the  Black-Scholes  option-pricing
      model with the following assumptions: (1) expected volatility ranging from
      106% to 131% in 2005 and 124% in 2004, respectively (2) risk-free interest
      rate ranging  from 4.25% to 5.58% in 2005 and 3.4% for 2004,  respectively
      and  (3)  expected   average   lives  of  10  years  for  2005  and  2004,
      respectively.

      Reclassifications

      Certain  reclassifications  have been made to the  condensed  consolidated
      financial  statements  for the prior period in order to have it conform to
      the current  period's  classifications.  These  reclassifications  have no
      effect on previously reported net (loss) income.


      Recently Issued Accounting Pronouncements

      In November  2004,  the FASB issued SFAS No.  151,  "Inventory  Costs,  an
      amendment  of ARB No. 43,  Chapter 4". SFAS 151  clarifies  that  abnormal
      inventory  costs  such as costs of idle  facilities,  excess  freight  and
      handling  costs,  and  wasted  materials  (spoilage)  are  required  to be
      recognized  as  current  period  costs.  The  provisions  of SFAS  151 are
      effective  for the  Company's  fiscal year 2006.  The Company is currently
      evaluating  the  provisions of SFAS 151 and does not expect  adoption will
      have a material impact on its financial  position,  results of operations,
      or cash flows.

      In December  2004,  the FASB  finalized  SFAS 123R  amending SFAS No. 123,
      effective  beginning  the first  quarter  of fiscal  2006.  SFAS 123R will
      require  the  Company to expense  stock  options  based on grant date fair
      value in its financial statements. Further, the adoption of SFAS 123R will
      require  additional  accounting  related  to the income  tax  effects  and
      additional  disclosure  regarding  the cash flow  effects  resulting  from
      share-based payment  arrangements.  The adoption of SFAS 123R will have no
      effect on the  Company's  cash  flows,  but is expected to have a material
      adverse impact on its results of operations.

      On March 3, 2005 the FASB issued FASB Staff  Position FIN 46 (R)-5,  which
      addresses whether a reporting  enterprise should consider whether it holds
      an implicit  variable  interest in a variable interest entity ("VIE") or a
      potential  VIE when  specific  conditions  exist.  The  guidance  shall be
      applied to the first reporting  period  beginning after March 3, 2005, but
      early  application is permitted for periods in which financial  statements
      have not yet been issued.

      The Company leases its premises from Sutaria Realty Family Trust.  Sutaria
      Realty  Family Trust is owned  directly or  indirectly  by officers of the
      Company. Management is evaluating the relationship between the Company and
      Sutaria Realty Family Trust to determine if Sutaria Realty Family Trust is
      an  implicit  variable  interest  entity and the  impact on the  condensed
      consolidated financial statements.

                                       11


<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 3 - Inventories
   Inventories consist of the following:
                                               March 31,           June 30,
                                                  2005               2004
                                          --------------------------------------
        Finished goods                          $    222,509        $    534,175
        Work in process                            4,874,591           2,710,270
        Raw materials                              3,033,464           1,932,971
        Packaging materials                          464,123             352,745
                                                ------------        ------------

              Total                             $  8,594,687        $  5,530,161
                                                ============        ============

NOTE 4 - Land, Building and Equipment

       Land, building and equipment consists of the following:

<TABLE>
<CAPTION>

                                                            March 31,             June 30,         Estimated
                                                      --------------------- -------------------      Useful
                                                               2005                  2004            Lives
                                                      --------------------- -----------------   ----------------

<S>                                                      <C>                <C>                        <C>
Land                                                     $     4,924,000    $     4,924,000
Building, improvements and construction in progress (a)        6,880,466          4,475,482           20 Years
Machinery and equipment                                        8,698,393          5,457,395          5-7 Years
Furniture and fixtures                                           360,144            319,762            5 Years
Leasehold improvements                                         2,780,735          2,623,203         5-15 Years
                                                         ---------------    ---------------
                                                              23,643,738         17,799,842
Less:  accumulated
depreciation and amortization                                  3,700,811          2,792,710
                                                         ---------------    ---------------

Land, Building and Equipment, net                        $    19,942,927    $    15,007,132
                                                         ===============    ===============

</TABLE>


(a)   Not yet been placed into service and no depreciation  expense has yet been
      recorded


NOTE 5 - Bank Debt

      At March 31, 2005,  the Company had $5,970,000  outstanding  under advised
      lines of credit, with $7,630,000 available for future borrowings. Interest
      rates applied to these  borrowings are calculated at ninety day LIBOR plus
      150 basis  points and range  from 4.12% to 4.46%.  At the end of each term
      the  Company  has the  option to extend the  borrowings  at LIBOR plus 150
      basis  points for terms  ranging from 3 to 36 months or at the Bank's then
      fixed prime rate. In addition, the Company will be required to comply with
      certain financial  covenants.  The credit lines are terminable by the Bank
      at any time as to undrawn amounts.

      Additionally,  the Company has a mortgage  note payable of  $7,153,333  of
      which  $6,783,333  is accounted for as long term and $370,000 is accounted
      for as current.  At March 31, 2005 the interest rate was 4.46% and will be
      recalculated on July 1, 2005.

      During the nine month  period  ended  March 31,  2005 the  Company  repaid
      approximately  $425,000  of  various  bank  lines  of  credit,  as well as
      $247,000 of the mortgage note payable.


                                       12

<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 5 - Bank Debt, continued

  A summary of the outstanding balances is as follows:


                                            March 31,2005         June 30, 2004
                                            -------------         ------------
Lines of credit                             $   5,970,000          $   394,014
Mortgage note payable                           7,153,333            7,430,833
                                            -------------         ------------
                                              13,123,333             7,824,847

Less current maturities                        6,340,000               764,014
                                            ------------          -------------

Bank debt, less current maturities          $  6,783,333          $  7,060,833
                                            ============          ============

NOTE 6- Income Taxes

      At March 31, 2005 the Company has  remaining  Federal net  operating  loss
      carryforwards  ("NOLs")  of  approximately  $11,500,000  and State NOLs of
      approximately  $10,900,000  expiring through 2024. Pursuant to Section 382
      of the Internal  Revenue  Code  regarding  substantial  changes in Company
      ownership,   utilization  of  these  NOLs  is  limited  to   approximately
      $2,690,000 per year, plus any prior years' amount not utilized, if any. As
      of March 31, 2005, the Company has determined  that it is more likely than
      not,  that the Company will utilize all of the Federal NOLs in the future.
      The Company recorded a valuation  allowance for  approximately  30% of the
      State NOLs which the Company does not  anticipate  utilizing  due to State
      limitations.

      In  calculating  its tax  provision  for the three and nine month  periods
      ended March 31, 2005, the Company applied an aggregate  effective tax rate
      of  approximately  37% thereby  creating a deferred  income tax benefit of
      $373,000 and an deferred income tax expense of $210,000, respectively, and
      adjusted its deferred tax asset by like amounts.


NOTE 7- Earning Per Share

 The calculations of basic and diluted EPS are as follows:

<TABLE>
<CAPTION>

                                                                      Three Months Ended                    Nine Months Ended
                                                                          March 31,                             March 31,
                                                         ------------------------------------------------------------------------
                                                                   2005               2004               2005              2004
                                                         ------------------------------------------------------------------------
 Numerator:
<S>                                                             <C>                 <C>                <C>                <C>
    Net (loss) income                                     $      (633,574)    $       983,530    $       405,230    $     2,235,066
    Less: Preferred stock  dividends                               41,392              41,392            124,176            124,176
      Less: Net (loss) income attributable to  Series K
    preferred stockholders                                            N/A              93,264             18,483            208,960
                                                         ----------------     ---------------    ---------------    ---------------

Numerator for basic EPS                                          (674,966)            848,874            262,571          1,901,930

 Effect of dilutive securities:
   Net (loss) income attributable to Series K
     preferred stockholders                                           N/A              93,264             18,483            208,960
 Numerator for diluted EPS                                $      (674,966)    $       942,138    $       281,054    $     2,110,889
                                                          ===============     ===============    ===============    ===============
</TABLE>


                                       13

<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 7- Earning Per Share, continued

<TABLE>
<CAPTION>


Denominator:
 Denominator for basic EPS weighted average
<S>                                                        <C>               <C>              <C>              <C>
   shares outstanding                                      24,967,202        18,457,790       24,967,196       17,389,913

 Effect of dilutive securities:
   Convertible Series K  preferred  stock                         N/A        43,779,647       37,648,650       43,102,897
   Convertible Series A, B, C and J preferred stocks              N/A             7,438            7,401           12,783
   Stock options                                                  N/A         7,091,137        5,078,615        8,186,475
                                                        -------------     -------------    -------------    -------------

 Denominator for diluted EPS                               24,967,202        69,336,012       67,701,862       68,692,068
                                                        =============     =============    =============    =============

  Basic EPS                                             $       (0.03)    $        0.05    $        0.01    $        0.11
                                                        =============     =============    =============    =============
  Diluted EPS                                           $       (0.03)    $        0.01    $        0.00    $        0.03
                                                        =============     =============    =============    =============
</TABLE>

As of March  31,2005,  the total  number of common  shares  outstanding  and the
number of common shares  potentially  issuable upon exercise of all  outstanding
stock  options  and  conversion  of  preferred  stocks   (including   contingent
conversions) is as follows:

      Common stock outstanding - March 31, 2005                     24,967,202

      Stock options and Warrants outstanding                        12,917,500
      Common stock issuable upon conversion of preferred stocks:
        Series A                                                         1,522
        Series A-1 (maximum contingent conversion) - (a)             4,855,389
        Series B                                                           292
        Series C                                                         5,584
        Series K -- (b)                                             37,648,650
                                                                    ----------

                        Total -  (c)                                80,396,139
                                                                    ==========

(a)   The Series A-1 shares are  convertible  only if the Company  reaches  $150
      million in annual sales or upon a merger, consolidation, sale of assets or
      similar transaction.

(b)   On June 4, 2004 one seventh of the 2,050,393  Series K shares,  or 292,913
      shares, converted into 6,274,775 of the Company's common stock. On June 4,
      2005 and on each anniversary date thereof,  through June 4, 2010,  292,913
      Series K shares will  automatically  convert into 6,274,775  shares of the
      Company's common stock.

(c)   Assuming  no further  issuance  of equity  instruments,  or changes to the
      equity structure of the Company,  this total represents the maximum number
      of shares of common stock that could be outstanding  through  December 31,
      2011 (the end of the current vesting and conversion periods).


                                       14


<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 8 - Equity Securities

      Common Stock and Stock Options
      During the three month  period ended March 31,  2005,  the Company  issued
      2,382,500 options to purchase its common stock as follows:

      o     As part of an employment  agreement  2,000,000  vested  options were
            issued to the Company's Chief Executive Officer, Cameron Reid having
            an  exercise  price of  $2.24,  which was the  closing  price of the
            Company's common stock on the date of the grant.

      o     25,000 vested options were granted to the Company's  Chief Financial
            Officer,  having an exercise  price of $2.24,  which was the closing
            price of the Company's common stock on the date of the grant.

      o     50,000  vested  options  were granted to the  Company's  director of
            business  development,  having an exercise price of $2.24, which was
            the closing price of the  Company's  common stock on the date of the
            grant.

      o     150,000  options  were  granted  to the  Company's  VP of sales  and
            marketing,  having an exercise price of $2.24, which was the closing
            price of the Company's common stock on the date of the grant. 20% of
            the options shall vest on June 30, 2006, and 20% on each of the next
            four anniversaries thereof.

      o     150,000  options  were granted to the  Company's VP of  intellectual
            property,  having an exercise price of $1.94,  which was the closing
            price of the Company's common stock on the date of the grant. 40,000
            of the options are fully vested on the grant date; the balance shall
            vest at 20% on February 28,  2006,  and 20% on each of the next four
            anniversaries thereof.

      o     7,500 options were granted to a non-executive  employee. The options
            vest at March 31,  2006 and have an exercise  price of $1.64,  which
            was the closing price of the  Company's  common stock on the date of
            the grant.

No common  stock  options  were  granted  during the three month  period  ending
December 31,  2004.  During the three month period  ending  September  30, 2004,
75,000  options were granted to a non  executive new employee to purchase a like
amount of the Company's common shares.  These options are exercisable at a price
of $2.73 per share.

Preferred Stock
In November,  2004, the Board of Directors,  declared a dividend of $178,719, in
accordance  with the terms set forth in the  Series A-1  Cumulative  Convertible
Preferred stock ("A-1 shares"). The A-1 shares have a cumulative annual dividend
of $0.0341 per share.  The  declared  dividend was  cumulative  through June 30,
2004,  and was paid March 10, 2005. As of March 31, 2005 the Company's  Board of
Directors  had not yet  declared  any  dividend on the A-1 shares for the period
July 1,  2004  thru  March 31,  2005.  Such  undeclared  dividends  amounted  to
approximately $124,000 (Note 14).

Treasury Stock
In January,  2005 the Company  retired  624,145  shares of its  treasury  stock,
valued at approximately  $798,000.  This was accounted for as a reduction of the
Company's Additional Paid-in Capital.

                                       15


<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)


NOTE 9 - Economic Dependency

      Major Customers

      The Company had the following  customer  concentrations  for the three and
      nine month periods ended March 31, 2005 and 2004:

                                        Sales - Percent of Revenue
<TABLE>
<CAPTION>
                                     Three Months Ended March 31,        Nine Months Ended March 31,
                                   ---------------------------------- ----------------------------------
                                        2005              2004             2005              2004
                                   ---------------- ----------------- ---------------- -----------------
<S>                                      <C>              <C>               <C>              <C>
          Customer "A"                   29%              24%               23%              29%
          Customer "B"                   18               35                24               29
          Customer "C"                   11               8                 14               10

                                    Accounts Receivable
                                                            March 31, 2005
                                                            --------------
        Customer "A"                                        $ 1,918,000
        Customer "B"                                          1,595,000
        Customer "C"                                            841,000

</TABLE>

      The Company complies with its supply  agreement to sell various  strengths
      of Ibuprofen to the Department of Veteran Affairs through two intermediary
      wholesale  prime vendors whose data are combined and reflected in Customer
      "C" above.

      Major Suppliers

      For the three and nine month  periods  ended March 31,  2005,  the Company
      purchased  materials from three suppliers  totaling  approximately 75% and
      73% of purchases, respectively. For the three and nine month periods ended
      March 31,  2004,  the Company  purchased  materials  from three  suppliers
      totaling  approximately and 73% and 85%,  respectively.  At March 31, 2005
      and 2004,  aggregate  amounts due to these suppliers  included in accounts
      payable, were approximately $3,832,000 and $3,095,000 respectively.

NOTE 10 - Related Party Transactions

      Rents
      The Company leases its business  premises located in Hauppauge,  New York,
      ("Premises")  from an  entity  controlled  by  three  stockholders  of the
      Company  under a  noncancelable  lease  expiring in October  2019,  and is
      obligated to pay minimum  annual rent of $480,000,  plus  property  taxes,
      insurance,  maintenance  and other expenses  related to the Premises.  The
      Company  believes that the aggregate lease costs for the premises are less
      than those for comparable facilities in the area.

      Upon a change in control,  as  defined,  of the  Company,  and every three
      years  thereafter,  the annual rent will be adjusted to fair market value,
      as determined by an independent third party.

                                       16
<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

      Investment in APR, LLC.
      On February 16, 2005 the Company  purchased 5.0 and 2.5 Class A membership
      interests  ("Interests")  from Cameron Reid ("Reid"),  our Chief Executive
      Officer,  and  John  Lomans  ("Lomans"),who  has no  affiliation  with the
      Company,  for purchase prices of $500,000 and $250,000,  respectively,  of
      APR, LLC, a Delaware limited  liability  company  primarily engaged in the
      development of complex bulk pharmaceutical products ("APR"). The purchases
      were made  pursuant  to  separate  Class A  Membership  Interest  Purchase
      Agreements dated February 16, 2005 between the Company and Reid and Lomans
      (the "Purchase Agreements"). At the time of the purchases, Reid and Lomans
      owned all of the  outstanding  Class A membership  interests of APR, which
      had outstanding 75 Class A membership interests and 100 Class B membership
      interests. The two classes of membership interests have different economic
      and  voting  rights,  and the Class A members  have the right to make most
      operational decisions.  The  Class  B  interests  are  held  by one of the
      Company's major customers and suppliers.

      In connection with the purchases made by the Company on February 16, 2005,
      the Company had an agreement to purchase up to an additional 2.5 Interests
      from Lomans.  On April 11, 2005 the Company  purchased an  additional  2.5
      Interests  from  Lomans for a purchase  price of  $250,000.  As such,  the
      Company  currently  owns  10  Interests  out  of  the  100  Interests  now
      outstanding.

      In accordance with the terms of the Purchase  Agreements,  the Company has
      granted to Reid and Lomans each a proxy to vote 5 of the  Interests  owned
      by the Company on all matters on which the holders of Interests  may vote.
      The Board of Directors  approved  the  purchases of Interests at a meeting
      held on  February  15,  2005,  based on an  analysis  and  advice  from an
      independent  investment  banking firm. Reid did not participate during the
      Company's  deliberations on this matter. The Company is accounting for its
      investment in APR pursuant to the cost method of accounting.

NOTE 11 - Contingencies

      From time to time,  the  Company is a party to  litigation  arising in the
      normal course of its business operations. In the opinion of management, it
      is not  anticipated  that the settlement or resolution of any such matters
      will have a material adverse impact on the Company's financial  condition,
      liquidity or results of operations.


NOTE 12 - Significant New Contracts

      As previously announced,  in February,  2005, the Company entered into two
      agreements with Tris Pharma,  Inc. ("Tris").  One of the agreements is for
      the  development  and licensing of twenty-five  liquid  generic  products.
      According to the terms of the agreement for the liquid  products,  Tris is
      to develop and deliver the  properties,  specifications  and  formulations
      ("Technical  Packages")  necessary to effectuate a technology  transfer to
      the Company for the twenty-five  generic liquid  pharmaceutical  products.
      The Company  will then utilize this  information  to obtain all  necessary
      approvals and manufacture and market the products. Further, this agreement
      provides  the  Company  with a  perpetual  license of all  technology  and
      components  of the  Technical  Packages  necessary  to produce  the liquid
      products that are the subject of the agreement. It also allows the Company
      the use of the technology for other products in exchange for an additional
      fee.  In the event that Tris  delivers  twenty-five  successful  Technical
      Packages,  of which there can be no  assurance,  the Company will pay Tris
      approximately  $3,000,000.  In  addition,  Tris is to receive a royalty of
      between  10% and 12% of net  profits  resulting  from  the  sales  of each
      product.  As of March 31,  2005,  the Company  paid  $250,000 to Tris.  In
      accordance  with the  terms in the  agreement,  the  Company  will pay the
      remaining portion as various milestone deliveries are presented.

                                       17


<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 12 - Significant New Contracts, continued

      The other  agreement  is for  development  and  licensing  of seven  solid
      generic  pharmaceutical   products,  some  of  which  require  specialized
      technology.  According to the terms of the  agreement for the solid dosage
      products,  the  Company  will  collaborate  with Tris on the  development,
      manufacture  and  marketing of seven solid oral dosage  generic  products,
      some of which may  require the  Company to  challenge  the patents for the
      equivalent  branded products.  This agreement  provides for payments of an
      aggregate of $3,750,000  to Tris,  whether or not  regulatory  approval is
      obtained for any of the  products.  The agreement for solids also provides
      for an equal sharing of net profits for each product that is  successfully
      sold  and  marketed,   after  the  deduction  and   reimbursement  of  all
      litigation-related  and  certain  other  costs.  Further,  this  agreement
      provides  the  Company  with a perpetual  royalty-free  license to use all
      technology  necessary  for the solid  products in the United  States,  its
      territories  and  possessions.  As of March 31,  2005,  the  Company  paid
      $750,000,  with the  balance  to be paid  essentially  over the next seven
      quarters.

NOTE 13 - Product Sales Analysis

      An analysis of the  Company's  net sales by product for the three and nine
      month periods ended March 31, 2005 and March 31, 2004 is present below.

<TABLE>
<CAPTION>

                                        Three Months                Nine Months
                                       Ended March 31              Ended March 31,
                                     2005         2004           2005           2004
                                     Sales        Sales         Sales          Sales
                                -----------   ------------    -----------    -----------

<S>                                     <C>            <C>           <C>             <C>
      Ibuprofen                       6,188          6,454    $    17,891    $    16,774
      Allopurinol & Atenolol          2,388          2,089          5,589          7,952
      Naproxen                          517          1,936          1,320          3,471
      All Other Products              1,577            829          3,761          1,693
            Total               $    10,670    $    11,308    $    28,561    $    29,890
                                ===========    ===========    ===========    ===========
</TABLE>


NOTE 14 - Subsequent events

      The Company's board of directors, at a meeting held May 12, 2005, declared
      a dividend  payable  amounting to $124,177  for the Series A-1  cumulative
      convertible  preferred stock for cumulative dividends earned through March
      31, 2005.

      Subsequent to March 31, 2005, the Company issued  1,096,630  shares of its
      common  stock as a result  of an  employee  exercising  a like  amount  of
      options.  The Company  received a cash deposit of  approximately  $627,000
      during the  quarter,  in advance of the  exercise  of said stock  options,
      included in Accounts payable, accrued expenses and other liabilities as at
      March 31, 2005.


                                       18


<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview

Interpharm   Holdings,   Inc.   ("Interpharm,"   "we,"  or  "us"),  through  its
wholly-owned  subsidiary,  Interpharm,  Inc.,  is  engaged  in the  business  of
developing,   manufacturing   and   marketing   generic   over-the-counter   and
prescription strength pharmaceutical  products. We make sales both under our own
label and to wholesalers,  distributors,  repackagers,  and other  manufacturers
which sell our  products  under  their  labels.  Sales are  recognized  when the
product is shipped and  appropriate  provisions  are made for returns and charge
backs.

Cameron  Reid,  with over 25 years  experience in the  pharmaceutical  industry,
joined our Board of Directors in May,  2004, to assist us in the creation of our
internal business plan. Under Mr. Reid's  direction,  we have created a business
plan which capitalizes on our core competencies in the selection of new products
as well as  diversifies  our  product  development  into new areas.  In order to
implement our plan, Mr. Reid was appointed Chief Executive Officer of Interpharm
in January,  2005.  Simultaneously  with his appointment,  Mr. Reid resigned his
position  on our  Board of  Directors  to focus  solely  on his  duties as Chief
Executive Officer.

In order to accelerate  our new product  development,  we have,  since  February
2005,  entered into arrangements with three companies for the development of new
products.  We spent approximately  $1,659,000 on research and development during
the quarter ended March 31, 2005 as compared to approximately $81,000 during the
same period last year.  In order to  successfully  implement  our plan,  we will
continue to increase our research and development  expenditures.  However, there
can be no assurance  that our increased  expenditures  will result in successful
products  or  increased  revenues  or  profits.  In order to  capitalize  on the
availability  of  qualified   scientific  and  other  research  and  development
personnel at significant cost savings, we have begun planning for a research and
development  facility in  Ahmnebad,  India.  In addition  to  supplementing  our
continuing research and development activities in the United States, the planned
facility in India,  if and when  completed,  will  reduce our  reliance on third
parties for new product development. However, as we expand our internal research
and development capabilities,  we will continue to seek strategic alliances with
third parties, such as our previously announced agreement with Tris Pharma Inc.,
for the development of products requiring specialized technologies.


Results of Operations

Summary

Our loss before  income taxes for the quarter ended March 31, 2005 of $1,007,000
represents a decrease in income of  $2,566,000  when  compared to income  before
taxes of $1,559,000 for the same period last year. The decrease is the result of
the increase in research and development  expenses of  approximately  $1,578,000
(62% of the  decrease),  an  increase in selling,  general,  and  administrative
expenses  of  approximately  $414,000  (16%) and a decrease  in gross  profit of
approximately  $543,000  (21%).  During the period  ended  March 31,  2005,  our
increase  in  research  and  development   expenses  was   attributable  to  the
commencement  of the  implementation  of our  business  plan.  The  increase  in
selling,  general  and  administrative  expenses  was to retain  key  management
personnel  that were not  employed by us a year ago and the  reduction  in gross
profit is primarily  attributable to a decrease in net sales and a 3.6% decrease
in gross profit  percentage.  We will continue to incur increasing  research and
development expenses in the future and believe that these expenditures, combined
with  the  hiring  of  additional  personnel,  are  critical  to the  successful
implementation of our business plan.


                                       19


<PAGE>


Net sales by product (in thousands of dollars):
<TABLE>
<CAPTION>

                                                      Three Months Ended March 31,
                                                      ----------------------------
                                    2005           % of         2004            % of
                                    Sales         Sales         Sales           sales       Variance $
                                    -----         -----         -----           -----      ----------
<S>                             <C>                   <C>         <C>              <C>          <C>
      Ibuprofen                 $    6,188            58    $    6,454             58    $     (266)
      Allopurinol & Atenolol         2,388            22         2,089             18           299
      Naproxen                         517             5         1,936             17        (1,419)
      All Other Products             1,577            15           829              7           748
            Total               $   10,670                  $   11,308                   $     (638)
                                ==========                  ==========                    ==========


                                                       Nine Months Ended March 31,
                                                       ---------------------------
                                    2005          % of         2004             % of
                                    Sales         Sales        Sales            sales       Variance $
                                    -----         -----        -----            -----       ----------
      Ibuprofen                 $   17,891            62    $   16,774             56    $    1,117
      Allopurinol & Atenolol         5,589            20         7,952             27        (2,363)
      Naproxen                       1,320             5         3,471             12        (2,151)
      All Other Products             3,761            13         1,693              6         2,068
            Total               $   28,561                  $   29,890                   $   (1,329)
                                ==========                  ==========                    ==========

</TABLE>

As  indicated  in the tables  above,  our net  revenues  decreased.  Significant
components include:

      o     Net sales of  Ibuprofen  for the nine month  period  ended March 31,
            2005  increased  $1,117,000  or 6.7% when compared to the nine month
            period ended March 31, 2004. However, during the quarter ended March
            31,  2005 there was a 4.1%  decrease  when  compared  to a year ago.
            Based upon an expanded customer base for Ibuprofen, we believe sales
            of Ibuprofen should increase during the balance of this fiscal year,
            however, there can be no assurance that this will occur.

      o     Both  Allopurinol  and  Atenolol are  manufactured  for one customer
            based on quantities ordered by the customer. Net sales for these two
            products  during the three  month  period  ended March 31, 2005 were
            slightly  higher than the same three month period in the prior year.
            However,  when examining the results for the nine months ended March
            31st, we  determined  that orders of  Allopurinol  and Atenolol were
            above normal quantities during the nine month period ended March 31,
            2004,  resulting in a decrease of  approximately  $2,363,000 or more
            than  one-third  of the  2004  year  to  date  results.  As  revenue
            attributable  for these two  products are from one  customer,  it is
            difficult  to  forecast,  however,  at  present  we  believe  future
            quarterly net sales  through the end of the calendar year 2005,  for
            Allopurinol  and Atenolol should  approximate the quarterly  average
            recognized  during  the nine  month  period  ended  March 31,  2005,
            however, there can be no assurance that this will occur.

      o     As compared to the three month period ended March 31, 2004,  our net
            sales of Naproxen decreased $1,419,000. Net sales of Naproxen during
            the three month  period ended March 31, 2004  included  shipments of
            more than $1,400,000, to one customer, an amount nearly equal to the
            six  month  period  ended  December  31,  2003 of  $1,535,000.  This
            customer has placed minimal re-orders since that time. We believe we
            have  identified new customers for Naproxen and  therefore,  believe
            that future net sales of Naproxen  may begin to increase  during our
            fiscal 2006 year.  However than can be no  assurance  that this will
            occur.

      o     Since we began  shipping  Hydrocodone-7.5  mg/Ibuprofen-200  mg, our
            generic version of Vicoprofen,  in October, 2004, we have recognized
            revenue  of  $1,242,000.  While it is still too early to  accurately
            forecast future net sales for this product,  wedo not believe future
            orders  will be as high  because  the  results  for the year to date
            period  included  initial  shipments,  which tend to be greater than
            future  replenishment  orders.  The results for the periods reported
            include   additional   revenue   derived  from  our  profit  sharing
            arrangement for this product.


                                       20


<PAGE>


Cost of Sales / Gross Profit

During the three and nine month  periods  ended March 31, 2005,  with respect to
our primary products, raw material prices have remained relatively constant when
compared to prior year. While no assurance can be given, we believe that our raw
material  costs should  remain  relatively  constant to current  prices at least
through June 30, 2005. The remaining components of our cost of sales,  primarily
direct labor and overhead have, as a percentage of net sales,  increased  during
the three months ended March 31, 2005, primarily as a result of costs associated
to training  production staff for the second facility,  which we anticipate will
be operational sometime in 2005. Additionally, we witnessed increases in general
overhead costs such as product liability and utilities.  We believe these higher
costs we likely continue for the near future.

As a result of the issues outlined above, our total gross profit  percentage for
the three  months ended March 31, 2005 was 21.3%,  a decrease of 3.6  percentage
points  compared to 24.9% for the three months  ended March 31, 2004.  Our total
gross profit  percentage for the nine months ended March 31, 2005 was 23.8%,  an
increase of 0.8  percentage  points  compared to 23.0% for the nine months ended
March 31, 2004.  During the  nine-month  period ended March 31, 2005, we shipped
approximately  $670,000 of inventory that had not been  previously  capitalized.
Without  such sale our gross profit  percentage  for the nine months ended March
31, 2005 would have been 21.5%, a decrease of 1.5 percentage  points compared to
23.0% for the nine months ended March 31, 2004.


Research and Development Expenses

As described above, as part of our business plan,  during the three month period
ended March 31, 2005,  we took  significant  steps toward  expanding our product
line.  During the three  month  period  ended  March 31,  2005,  the Company had
research and  development  expenses of $1,659,000  as compared to  approximately
$81,000 for the same period last year.

As previously announced, in February,  2005, we entered into two agreements with
Tris Pharma,  Inc.  ("Tris").  One of the agreements is for the  development and
licensing of twenty-five liquid generic products.  According to the terms of the
agreement  for  the  liquid  products,  Tris  is  to  develop  and  deliver  the
properties,  specifications and formulations ("Technical Packages") necessary to
effectuate  a  technology  transfer  to us for the  twenty-five  generic  liquid
pharmaceutical  products.  We will then utilize this  information  to obtain all
necessary  approvals  and  manufacture  and market the products.  Further,  this
agreement  provides us with a perpetual license of all technology and components
of the Technical  Packages necessary to produce the liquid products that are the
subject of the  agreement.  It also  allows us use of the  technology  for other
products  in exchange  for an  additional  fee. In the event that Tris  delivers
twenty-five  successful Technical Packages,  of which there can be no assurance,
we will pay Tris  approximately  $3,000,000.  In addition,  Tris is to receive a
royalty of between 10% and 12% of net profits  resulting  from the sales of each
product.

The other  agreement is for  development  and  licensing of seven solid  generic
pharmaceutical products, some of which require specialized technology. According
to the terms of the agreement for the solid dosage products, we will collaborate
with Tris on the  development,  manufacture  and  marketing  of seven solid oral
dosage generic  products,  some of which may require us to challenge the patents
for the equivalent branded products.  This agreement provides for payments of an
aggregate of $3,750,000 to Tris,  whether or not we obtain  regulatory  approval
for any of the  products.  The  agreement  for solids also provides for an equal
sharing of net profits for each product that is successfully  sold and marketed,
after the  deduction and  reimbursement  of all  litigation-related  and certain
other costs. Further,  this agreement provides us with a perpetual  royalty-free
license to use all  technology  necessary  for the solid  products in the United
States, its territories and possessions.

While  we have  selected  the  liquid  and  solid  products  we  believe  can be
successfully  developed,  manufactured  and marketed,  there can be no assurance
that the liquid products will be commercially successful, or that Interpharm and
Tris will be able to  successfully  develop,  manufacture  and market any of the
solid products.

In connection  with the  agreements  described  above,  we have, as of March 31,
2005, paid $1,000,000 to Tris. In addition,  during the three month period ended
March 31, 2005,  we have  disbursed an aggregate of  approximately  $659,000 for
labor, raw materials, bio-equivalency studies and tooling toward other projects.


                                       21


<PAGE>


If we are  successful  in our  efforts  we  believe  we could see sales from new
products to our line during fiscal 2006, however, there can be no assurance that
these products or our second facility will obtain timely FDA approval.


Selling, General and Administrative Expenses

Selling, general and administrative expenses include salaries and related costs,
commissions,   travel,  administrative  facilities,   communications  costs  and
promotional  expenses for our direct sales and marketing  staff,  administrative
and  executive  salaries  and  related  benefits,  legal,  accounting  and other
professional fees as well as general corporate overhead.

Selling, general and administrative expenses increased approximately $414,000 to
approximately  $1,580,000,  or 14.8% of net sales  during the three months ended
March 31, 2005, from approximately $1,166,000, or 10.3% of net sales, during the
same period in 2004. The significant  components of this increase are: salaries,
including payroll taxes and benefits  ($301,000);  legal and accounting costs of
($98,000); and software licenses and fees ($34,000).

Selling, general and administrative expenses increased approximately $833,000 to
approximately  $3,893,000,  or 13.6% of net sales  during the nine months  ended
March 31, 2005, from approximately $3,060,000, or 10.2% of net sales, during the
same period in the prior year. The significant  components of this increase are:
salaries,   including  payroll  taxes  and  benefits  ($444,000);   professional
services;   investor  relations   ($143,000)  and  public  relations  ($88,000);
utilities    ($62,000);    legal   and    accounting    ($54,000)   and   travel
/auto/entertainment ($50,000).

The  increase  in  salaries,  payroll  taxes,  benefits,  professional  fees and
utilities  are  primarily  attributable  to  our  continuing  overall  corporate
expansion.  An integral  part of our  corporate  development  was to attract and
retain key senior  executives who have the capability to effectively  manage and
effectuate our current and long term business  strategies.  To that end,  during
the three month period ending March 31, 2005, we retained a new chief  executive
officer,  and filled  openings of the vice  president of sales and marketing and
vice president of intellectual  property.  As relates to our investor and public
relations costs increasing,  we engaged a public relations firm during the three
month  period  ended March 31, 2004.  This action  resulted in  increased  costs
during the three and nine month  periods  ended March 31, 2005 with little or no
costs incurred  during the same period in the prior year. The increases in legal
and accounting  and  professional  fees witnessed  during the three month period
ended March 31, 2005 compared to the same period in the prior year are primarily
attributable  to added  services  which are  consistent  with our  product  line
growth.

In an effort to reduce the expected  material  adverse  impact to be incurred in
future  periods as a result of  adopting  SFAS 123R,  the  Company has chosen to
accelerate the vesting  provisions of 1,192,000  options,  which  represents the
total unvested  options granted after May 30, 2003 through December 31, 2004. An
aggregate of 1,000,000  such options were granted to  executives of the Company.
Since  options  granted on or prior to May 30,  2003 are not fully  vested,  the
Company expects to record stock options expense  commencing the first quarter of
fiscal 2006.


Income Taxes

The effective tax rate for the three and nine month periods ended March 31, 2005
of  approximately  37.1%,  resulted in an income tax benefit of $373,000  and an
income tax  provision  of  approximately  $239,000,  respectively,  compared  to
effective  aggregate  tax rates of 35.9%  and 36% for the  three and nine  month
periods ended March 31, 2004,  respectively,  which  resulted in provisions  for
income taxes of  approximately  $575,000 and 1,249,000,  respectively.  While we
anticipate  revenue to increase,  we further  believe that as a direct result of
accelerating our aggressive product  development  program,  we will likely incur
accelerated  increased  research and  development  expenses  which, in turn will
cause us to delay  utilization of the current portion of our deferred tax asset.
As such, we have  reclassified  the balance of our current deferred tax asset to
long term deferred tax asset.



                                       22


<PAGE>


Liquidity and Capital Resources

We  currently  finance our  operations  and capital  expenditures  through  bank
borrowings  and cash flows  from  operations.  Net cash  provided  by  operating
activities  for the nine month  period  ended March 31, 2005 was  $1,336,000  as
compared to $456,000 net cash used in operating  activities  for the same period
in the prior year. Components of the net cash provided from operating activities
for the nine month period ended March 31, 2005 include non-cash  operating items
of $1,092,000 plus net income of $405,000 and a decrease in accounts  receivable
of  $337,000,  a  increase  in  accounts  payable,  accrued  expenses  and other
liabilities  of  $2,634,000,  offset by  increases  in  inventories  and prepaid
expenses and other current  assets of $3,065,000 and $85,000,  respectively.  It
should be noted that during the three month  period  ended  March 31,  2005,  we
disbursed approximately $1,659,000 for research and development.  We belive this
level of spending will continue to occur for the forseeable future.

Net cash  provided by financing  activities  of  $5,120,000  for the nine months
ended March 31,  2005,  was a result of drawing  $5,970,000  from the  available
lines of credit offset by the pay down of a mortgage  note of $246,000,  payment
of $179,000 in dividends and working  capital  lines of credit by $425,000.  Net
cash  provided  by  financing  activities  a year ago was  $1,470,000.  Net cash
in-flows  for the nine  months  were used to finance  operations  as well as our
expansion.  A component of our current plan is the  completion of renovations to
our  second  facility  along with the  installation  of  additional  production,
packaging and research and development.  Additionally, we continue to add to our
capacity at our current facility as well. As such,  during the nine month period
ended March 31, 2005, we disbursed  $5,844,000 for new equipment,  furniture and
improvements.  In  addition,  we have  disbursed  $96,000  for  deposits  toward
additional assets. As further detailed in Note 10 to our condensed  consolidated
financial  statements,  based  upon  information  presented  by  an  independent
investment  banking  firm,  the Board of Directors  authorized  an investment of
$750,000,  plus  $22,500 of related  investment  banking  fees,  into APR,  LLC,
("APR"),  a  company  primarily  engaged  in the  development  of  complex  bulk
pharmaceutical  products.  In April 2005,  we made an  additional  investment of
$250,000. In the aggregate we used $6,713,000 in investing activities during the
nine months ended March 31, 2005.

As discussed in previous  filings,  we obtained a  $21,000,000  credit  facility
which consisted of:

      o     a  $7,400,000  mortgage  loan used for the  purchase  of the  second
            facilty.  As of  March  31,  2005  the  total  amount  remaining  is
            $7,153,333.  The  interest  rate,  as at March  31,  2005 was  4.46%
            through July 31, 2005, at which time it will be set according to the
            terms setforth below.

      o     An aggregate of  $13,600,000  of advised  credit lines  primarily to
            acquire new  equipment  and for  renovations  of the  Company's  two
            locations  and  working  capital.  A portion  of the funds  accessed
            through  these  credit  lines  are  eligible  to  convert  to  fully
            amortizing five year term loans. As of March 31, 2005, we have drawn
            down  $5,970,000,  all  currently  on an interest  only basis.  Each
            borrowing is a 90 day loan at LIBOR plus 150 basis points.  Interest
            rates average 4.34% and range from 4.12% to 4.46%.

      o     At our option,  interest  will be  calculated at (i) LIBOR plus 1.5%
            for 3 to 36 month  periods,  or at (ii) the Bank's  then fixed prime
            rate. In addition,  we are required to comply with certain financial
            covenants.  As of March 31,  2005,  we were in  compliance  with all
            covenants. The Bank reviews the credit facility annually. The credit
            lines are terminable by the Bank at any time as to undrawn  amounts.
            This credit facility is  collateralized  by substantially all assets
            of the Company.

During the nine month  period ended March 31, 2005,  working  capital  decreased
$6,925,000 to $4,785,000 from $11,710,000 at June 30, 2004.  Significant factors
which contributed to this reduction are increases in:
      o     current portion of bank borrowings of approximately $5,576,000
      o     accounts and accrued expenses payable of $2,004,000
      o     inventory of $3,065,000
plus decreases in:
      o     current portion of deferred tax assets of $1,280,000

                                       23


<PAGE>


As discussed  earlier,  we entered into agreements with Tris Pharma, Inc for the
development  and delivery of  thirty-two  new Technical  Packages.  The combined
costs of these two agreements will approximate  $6,750,000 of which we have paid
$1,000,000 as of March 31, 2005.  The balance on one agreement of  approximately
$2,750,000  could be paid within three years. The second agreement has a balance
of $3,000,000 and will be paid within two years.

Future cash flows could be aided by  utilization  of our  available  Federal net
operating loss carryforwards  ("NOLs").  At March 31, 2005, we had approximately
$11,075,000  NOLs available to reduce future taxable income,  subject to certain
limitations.  At current effective tax rates, these NOLs could result in savings
of approximately  $3,600,000 in future income tax payments  (although there will
be no  corresponding  benefit on income tax expenses).  Further,  utilization of
these NOLs is  limited  to  approximately  $2,690,000  per year,  plus any prior
years' amount not utilized, if any.

We believe the financing  arrangements  described  above along with the funds we
generate from operations  should allow us to continue our expansion plans and be
sufficient  for us to meet our  operating  requirements  during the next  twelve
months. We are, nevertheless, seeking to significantly increase our credit lines
with our banks and are likely to seek other financing arrangements to facilitate
the  timely  implementation  of our  business  plan.  However,  there  can be no
assurances that we will be able to raise the necessary  additional funds, and if
we are unable to raise such funds,  we will be  required to modify our  business
plan for new product developments.

Accounts Receivable

Our accounts  receivable at March 31, 2005 was $6,512,000 compared to $6,850,000
at June 30, 2004.  This decrease is primarily  attributable  to net sales in the
current  quarter  being less than that of the three month  period ended June 30,
2004. Our accounts receivable turnover ratio decreased 1.3 turns to 5.7 turns at
March 31,  2005 from 7.0 turns at June 30,  2004.  The  quality of our  accounts
receivable  is  good,  and as such we have  encountered  little  or no bad  debt
exposure.

Inventory

At March 31, 2005, our inventory was $8,595,000,  an increase of $3,065,000 from
$5,530,000 at June 30, 2004.  Our  inventory  turnover  ratio of 4.1  annualized
turns at March 31, 2005  decreased  when compared to June 30, 2004 - 6.2 average
turns.  The drop in turnover ratio to slightly over four turns, is primarily the
result of a deliberate  build-up of inventory in certain key products.  As such,
we believe the  reduction  in annual  turns as at March 31,  2005,  to be within
acceptable limits of our current operating plan.

Accounts Payable

The  accounts  payable,  accrued  expenses  and other  liabilities  increased by
approximately  $2,634,000 during the nine month ended March 31, 2005 as compared
to June 30, 2004.  As outlined  above,  this increase is primarily a result of a
build up of inventory.

Cash and Cash Equivalents

Cash and cash equivalents  decreased during the nine months ended March 31, 2005
by  approximately  $257,000  from  $2,885,000  at June 30, 2004 to $2,628,000 at
March 31, 2005.  Thus far this year we funded our business from bank  borrowings
and  operations:  bank  borrowings  -  net  $5,298,000;  net  cash  provided  by
operations - $1,336,000.  These were offset primarily through the use of cash to
acquire new property and  equipment and other  additions of  $5,940,000  and our
investment in APR, LLC of $772,500.

                                       24


<PAGE>


Critical Accounting Policies

Management's  discussion  and  analysis of  financial  condition  and results of
operations  discusses  our  financial  statements,  which have been  prepared in
accordance with accounting principles generally accepted in the United States of
America.  The preparation of these financial statements requires that Interpharm
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities,  the disclosure of contingent assets and liabilities at the date of
the  financial  statements,  and the  reported  amounts of revenues and expenses
during  the  reporting  period.  On  an  on-going  basis,  Interpharm  evaluates
judgments and estimates made,  including  those related to revenue  recognition,
inventories,  income taxes and contingencies  including  litigation.  Interpharm
bases its judgments and estimates on historical  experience and on various other
factors that it believes to be reasonable under the  circumstances,  the results
of which form the basis for making  judgments about 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 or conditions.

We  consider  the  following   accounting   policies  to  be  most  critical  in
understanding  the more complex  judgments  that are  involved in preparing  our
financial  statements  and  the  uncertainties  that  could  impact  results  of
operations, financial condition and cash flows.

Revenue Recognition

Revenue  from the sale of our  products  are  recognized  upon  shipment  of the
product.  Revenue is  recorded  net of  provisions  for  rebates,  charge-backs,
discounts and returns,  which are established at the time of sale. Estimates for
rebates,  charge-backs,  and discounts are calculated based on actual experience
and also cover chargebacks on sales to intermediary  wholesale prime vendors for
the supply of Ibuprofen to the Department of Veterans Affairs.

With respect to certain  products,  we purchase raw  materials  from  suppliers,
which is then used in the  manufacturing of completed goods and sold back to the
suppliers  or by direct drop  shipment  to the  supplier's  customers.  Some raw
materials may used in the manufacturing of products for other customers. We also
(i) have the general  inventory  risk by taking title to all of the raw material
purchased,  (ii) establish the selling price for the finished product and, (iii)
significantly  change the raw  materials  into the  finished  product  under our
specifications  and formulas.  These  factors  among  others,  qualify us as the
principal under the indicators set forth in EITF 99-19,  Reporting Revenue Gross
as a  Principal  vs.  Net  as an  Agent.  If  the  terms  and  substance  of the
arrangement  change, such that we no longer qualify to report these transactions
on a gross reporting basis, our net income and cash flows would not be affected.
However, our sales and cost of sales would both be reduced by a similar amount.

Inventory

Our  inventories  are  valued  at the lower of cost or  market  determined  on a
first-in,  first -out basis,  and includes the cost of raw materials,  labor and
manufacturing  overhead.  We  continually  evaluate  the  carrying  value of our
inventories and when factors such as expiration dates and spoilage indicate that
impairment  has  occurred,   either  a  reserve  is   established   against  the
inventories'  carrying value or the  inventories  are disposed of and completely
written off in the period incurred.

Issues And Uncertainties
Risk of Product Liability Claims

The testing,  manufacturing and marketing of pharmaceutical  products subject us
to the risk of product liability claims. We believe that we maintain an adequate
amount of product liability  insurance,  but no assurance can be given that such
insurance  will cover all existing and future  claims or that we will be able to
maintain existing coverage or obtain additional coverage at reasonable rates.


                                       25


<PAGE>


ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal financial instrument currently is a $21.0 million credit facility.
In June 2004 we took a $7,400,000  mortgage note payable for the purchase of our
second   facilty,located  in  Brookhaven,   New  York,  of  which  approximately
$7,153,333  was  outstanding  at March 31, 2005.  Additionally,  as of March 31,
2005, we borrowed an additional  $5,970,000 through the advised lines of credit.
Any obligations  created under this credit facility incur interest calculated at
our option at (i) LIBOR  plus 1.5% for  periods  ranging in length  from 3 to 36
months,  or (ii) at the Bank's then fixed prime rate. As of March 31, 2005,  the
interest rates on the mortgage note payable was 4.66%. The average interest rate
for the $5,970,000  borrowings was 4.34%. If our combined borrowings remained at
the same amount as of March 31, 2005,  for the remainder of our fiscal year, for
every one percent  change,  upward or downward in our  borrowing  rate, we would
incur or save approximately  $33,000 per quarter.  We anticipate that during the
next twelve months we will likely draw down  additional  funds from the existing
credit facility primarily to purchase equipment for both facilities,  as well as
implement  our  research  and  development  plan.  This  likely  increase in our
borrowings  will  increase  our exposure to interest  rate market  risk.  We are
required to comply with certain financial covenants. The Bank reviews the credit
facility annually. The credit lines are terminable by the Bank at any time as to
undrawn amounts.

We do not use any  derivative  financial  instruments  to hedge our  exposure to
adverse  fluctuations  in interest rates,  fluctuations  in commodity  prices or
other market risks, nor do we invest in speculative financial instruments.


ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures

We maintain  disclosure controls and procedures that are designed to ensure that
information  required to be  disclosed  in our Exchange Act reports is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to our  management  to allow timely  decisions  regarding  required  disclosure.
Management  necessarily applied its judgment in assessing the costs and benefits
of such  controls  and  procedures,  which,  by their  nature,  can provide only
reasonable assurance regarding management's control objectives.

At the  conclusion  of the three and nine month period ended March 31, 2005,  we
carried out an evaluation,  under the supervision and with the  participation of
our  management,  including  our Chairman  and Chief  Executive  Officer,  Chief
Financial  Officer and General Counsel,  of the  effectiveness of the design and
operation of our disclosure controls and procedures. Based upon that evaluation,
the Chairman and Chief Executive  Officer,  Chief Financial  Officer and General
Counsel concluded that our disclosure  controls and procedures were effective in
alerting them in a timely manner to information relating to the Company required
to be disclosed in this report but adopted  additional  disclosure  controls and
procedures  to improve the  quality  and  timeliness  of  disclosure  during our
transition from a private to a public company.

On September  20, 2004,  our  independent  registered  accounting  firm Marcum &
Kliegman,  LLP  ("MK"),  informed  us and our  Audit  Committee  of the Board of
Directors that in connection  with their audit of our financial  results for the
fiscal year ended June 30, 2004, MK had discovered a condition which they deemed
to be a material  weakness in our  internal  controls  (as defined by  standards
established by the Public Company Accounting Oversight Board). MK noted the lack
of adequate internal control / review procedures required to properly and timely
record customer chargebacks.  Management has informed MK and the Audit Committee
that it has modified its internal  control / review  procedures in such a manner
that it believes will prevent  reoccurrences of this  deficiency.  The impact of
the above  condition was isolated to the fiscal quarter ended June 30, 2004, and
did not  affect  the  results  of any prior  period nor the three and nine month
periods ended March 31, 2005.


                                       26


<PAGE>


                           PART II - OTHER INFORMATION


Item 1.           Legal Proceedings
                  None

Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds
                  None

Item 3.           Defaults Upon Senior Securities
                  None

Item 4.           Submission of Matters to a Vote of Security Holders
                  None


Item 5.           Other Information
                  None


Item 6.           Exhibits
    (a)                Exhibits

     31.1 - Certification of Chief Executive Officer pursuant to Rules 13a-14(a)
            as adopted,  pursuant to Section  302 of the  Sarbanes-Oxley  Act of
            2202.

     31.2 - Certification  of the  Chief  Financial  Officer  pursuant  to Rules
            13a-14(a) as adopted,  pursuant to Section 302 of the Sarbanes-Oxley
            Act of 2002.

     32.1 - Certifications  of the  Chief  Executive  Officer  and the  Chief
            Financial  Officer  pursuant to 18 U.S.C.  Section  1350 as adopted,
            pursuant to Section 906 of the Sabanes-Oxley Act of 2002.


                                       27


<PAGE>


 FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK

Certain statements in this Report,  and the documents  incorporated by reference
herein,  constitute  "forward-looking  statements" within the meaning of Section
27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of
1934  and  the  Private   Securities   Litigation   Reform  Act  of  1995.  Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other  factors  which may cause  deviations in actual  results,  performance  or
achievements to be materially different from any future results,  performance or
achievements  expressed or implied. Such factors include but are not limited to:
the  difficulty in predicting the timing and outcome of legal  proceedings,  the
difficulty of predicting the timing of U.S. Food and Drug Administration ("FDA")
approvals; court and FDA decisions on exclusivity periods;  competitor's ability
to extend  exclusivity  periods past initial  patent terms;  market and customer
acceptance and demand for our pharmaceutical products; our ability to market our
products;  the successful  integration of acquired  businesses and products into
our  operations;  the  use of  estimates  in the  preparation  of our  financial
statements;  the impact of  competitive  products  and  pricing;  the ability to
develop and launch new products on a timely basis;  the regulatory  environment;
fluctuations  in  operating   results,   including  spending  for  research  and
development and sales and marketing  activities;  and, other risks detailed from
time-to-time in our filings with the Securities and Exchange Commission.

The words "believe, expect, anticipate, intend and plan" and similar expressions
identify forward-looking  statements.  These statements are subject to risks and
uncertainties that cannot be predicted or quantified and,  consequently,  actual
results  may  differ   materially  from  those  expressed  or  implied  by  such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements,  which speak only as of the date the statement
was made.


                                       28


<PAGE>


                                   Signatures
                                   ----------


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



                               INTERPHARM HOLDINGS, INC.
                               (Registrant)


Date:  May 16, 2005
                           By: /s/ George Aronson
                               ------------------------
                               George Aronson,
                               Chief Financial Officer
                               (Duly authorized to sign on behalf of registrant)



                                       29


<PAGE>


Exhibits

Number                  Description

31.1                    Certification  of Cameron Reid  pursuant to Exchange Act
                        Rules 13(a)-14(a) and 15d-14(a),  as adopted pursuant to
                        Section 302 of the Sarbanes-Oxley Act of 2002;

31.2                    Certification of George Aronson pursuant to Exchange Act
                        Rules 13(a)-14(a) and 15d-14(a),  as adopted pursuant to
                        Section 302 of the Sarbanes-Oxley Act of 2002;

32.1                    Certification  pursuant to 18 U.S.C.  Section  1350,  as
                        adopted  pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002;


                                       30