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 December 31, 2004

              [ ] 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)

          69 Mall Drive Commack, New York                 11725
       --------------------------------------            --------
      (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 February 11, 2005,  there were 24,967,202  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 .................................1-14

Item 2.      Managements Discussion & Analysis of
             Financial Condition and Results of Operations................15-19

Item 3.      Quantitative and Qualitative Disclosures about Market Risk......20

Item 4.      Controls and Procedures.........................................20


PART II    Other Information Required in Report

Items 1 through 6.........................................................21-22

Forward Looking Statements and Associated Risks..............................23

Signatures Page..............................................................24

Exhibits/Certifications...................................................25-28
<PAGE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                     December 31,    June 30,
                                                        2004           2004
                                                     -----------    -----------
                                                     (Unaudited)
CURRENT ASSETS
  Cash and cash equivalents                          $   598,122    $ 2,884,639
  Marketable securities, at fair market value                 --         36,791
  Accounts receivable, net                             5,842,486      6,849,778
  Inventories, net                                     7,276,029      5,530,161
  Prepaid expenses and other current assets              669,446        453,157
  Deferred tax assets                                         --      1,280,000
                                                     -----------    -----------

         Total Current Assets                         14,386,083     17,034,526


  Land, building and equipment, net                   17,591,780     15,007,132
  Deferred tax assets                                  3,599,000      2,902,000
  Deposits                                               799,829        224,287
                                                     -----------    -----------

         TOTAL ASSETS                                $36,376,692    $35,167,945
                                                     ===========    ===========

            See Notes To Condensed Consolidated Financial Statements.

                                       1
<PAGE>

<TABLE>
<CAPTION>
                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                              December 31,    June 30,
                                                                                 2004           2004
                                                                             ------------    ------------
                                                                             (Unaudited)
<S>                                                                          <C>             <C>
CURRENT LIABILITIES
  Current maturities of bank debt payable                                    $  1,870,000    $    764,014
  Accounts payable, accrued expenses, and other liabilities                     3,987,897       4,560,313
                                                                             ------------    ------------

       Total Current Liabilities                                                5,857,897       5,324,327

OTHER LIABILITIES
  Bank debt, less current maturities                                            6,875,833       7,060,833
                                                                             ------------    ------------

       TOTAL LIABILITIES                                                       12,733,730      12,385,160
                                                                             ------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred stocks, 10,000,000 shares authorized; issued and outstanding -
   6,901,166 and 6,902,963, respectively; aggregate
   liquidation preference of $5,485,095 and $5,494,080, respectively              346,245         348,042
  Common stock, $.01 par value, 70,000,000 shares
   authorized; shares issued -  25,591,347 and 25,591,311, respectively           255,913         255,913
  Additional paid-in capital                                                   19,186,088      19,184,291
  Accumulated other comprehensive loss                                                 --             (92)
  Retained earnings                                                             4,652,584       3,792,499
  Treasury stock at cost, 624,145 shares                                         (797,868)       (797,868)
                                                                             ------------    ------------

       TOTAL STOCKHOLDERS' EQUITY                                              23,642,962      22,782,785
                                                                             ------------    ------------

       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $ 36,376,692    $ 35,167,945
                                                                             ============    ============
</TABLE>

            See Notes To Condensed Consolidated Financial Statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>
                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                                      Three Months Ended            Six Months Ended
                                                          December 31,                  December 31,
                                                  --------------------------    --------------------------
                                                      2004          2003           2004            2003
                                                  -----------    -----------    -----------    -----------
<S>                                                <C>           <C>            <C>            <C>
SALES, Net                                         $8,838,067    $11,706,231    $17,891,199    $18,581,579

COST OF SALES (including related party
 rent expense of $102,000 and $204,000
 for the three and six months ended
 December 31, 2004 and 2003, respectively)          6,244,565      9,087,956     13,357,593     14,531,474
                                                  -----------    -----------    -----------    -----------

       GROSS PROFIT                                 2,593,502      2,618,275      4,533,606      4,050,105
                                                  -----------    -----------    -----------    -----------

OPERATING EXPENSES
  Selling, general and administrative  expenses     1,226,339        860,060      2,313,012      1,893,835
  Related party rent expense                           18,000         18,000         36,000         36,000
  Research and development                            363,527        154,035        538,986        189,035
                                                  -----------    -----------    -----------    -----------

       TOTAL OPERATING EXPENSES                     1,607,866      1,032,095      2,887,998      2,118,870
                                                  -----------    -----------    -----------    -----------

       OPERATING INCOME                               985,636      1,586,180      1,645,608      1,931,235
                                                  -----------    -----------    -----------    -----------

OTHER INCOME  (EXPENSE)
  Gain on sale of marketable securities                 8,943             --          8,943             --
  Interest expense                                       (342)        (4,852)        (3,520)
                                                                                                   (10,999)
  Interest income                                          --          2,446             --          5,205
                                                  -----------    -----------    -----------    -----------

       TOTAL OTHER INCOME (EXPENSE)                     8,601         (2,406)         5,423         (5,794)
                                                  -----------    -----------    -----------    -----------

        INCOME BEFORE INCOME TAXES                    994,237      1,583,774      1,651,031      1,925,441

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

                                       3
<PAGE>

<TABLE>
<CAPTION>
                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                                Three Months Ended        Six Months Ended
                                                    December 31,              December 31,
                                              -----------------------   ------------------------
                                                 2004         2003         2004         2003
                                              ----------   ----------   ----------   -----------
(Forward)
<S>                                              <C>          <C>          <C>           <C>
PROVISION FOR INCOME TAXES                       368,705      559,677      612,227       673,905
                                              ----------   ----------   ----------   -----------

       NET INCOME                             $  625,532   $1,024,097   $1,038,804   $ 1,251,536
                                              ==========   ==========   ==========   ===========

EARNINGS PER SHARE
  Basic earnings per share                    $     0.02   $     0.05   $     0.04   $      0.06
                                              ==========   ==========   ==========   ===========
  Diluted earnings per share                  $     0.01   $     0.01   $     0.01   $      0.02
                                              ==========   ==========   ==========   ===========

  Basic weighted average shares outstanding   24,967,190   17,395,546   24,967,178    16,861,779
                                              ==========   ==========   ==========   ===========
  Diluted weighted average shares and
   equivalent shares outstanding              67,981,462   68,139,385   67,978,433    68,376,030
                                              ==========   ==========   ==========   ===========
</TABLE>
            See Notes To Condensed Consolidated Financial Statements.

                                       4
<PAGE>

<TABLE>
<CAPTION>
                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)

                   FOR THE SIX MONTHS ENDED DECEMBER 31, 2004


                                                                                                                     Accumulated
                                                                                                   Additional           Other
                                          Preferred Stock                Common Stock               Paid-In         Comprehensive
                                        Shares        Amount         Shares         Amount          Capital            Income
                                     -------------- ------------ --------------- -------------- ----------------- ------------------
<S>                                  <C>          <C>               <C>          <C>            <C>            <C>
BALANCE - July 1, 2004                6,902,963    $    348,042      25,591,311   $    255,913   $ 19,184,291   $        (92)
Unrealized gain on marketable
 securities, net                             --              --              --             --             --          3,194


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

BALANCE -
 September 30, 2004                   6,902,963         348,042      25,591,311        255,913     19,184,291          3,102
Unrealized loss on marketable                --
 securities, net                             --              --              --             --             --         (3,102)
Conversion of Series C
  convertible preferred stock to
  common stock                           (1,797)         (1,797)             36             --          1,797             --
Dividends declared                           --              --              --             --             --             --

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

BALANCE -
 December 31, 2004                    6,901,166    $    346,245      25,591,347   $    255,913   $ 19,186,088   $         --
                                   ============    ============    ============   ============   ============   ============


                                                                                 Total
                                    Retained           Treasury Stock         Stockholders'
                                    Earnings       Shares        Amount          Equity
                                  -------------- ----------- --------------- ----------------


BALANCE - July 1, 2004            $  3,792,499         624,145   $   (797,868)   $ 22,782,785
Unrealized gain on marketable
 securities, net                            --              --             --           3,194


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

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

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

BALANCE -
 December 31, 2004                $  4,652,584         624,145   $   (797,868)   $ 23,642,962
                                  ============    ============   ============    ============
</TABLE>

                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

            See Notes To Condensed Consolidated Financial Statements.

                                       5
<PAGE>

<TABLE>
<CAPTION>
                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF COMPREHSENSIVE INCOME
                                   (Unaudited)


                                             Three Months Ended        Six Months Ended
                                                 December 31,            December 31,
                                         ------------------------   -----------------------
                                            2004          2003         2004         2003
                                         ----------    ----------   ----------   ----------
<S>                                      <C>           <C>          <C>          <C>
NET INCOME                               $  625,532    $1,024,097   $1,038,804   $1,251,536


OTHER COMPREHENSIVE INCOME
  Unrealized (loss)/gain on marketable
     securities, net                         (3,102)       11,557           92       12,737
                                         ----------    ----------   ----------   ----------

TOTAL COMPREHENSIVE  INCOME              $  622,430    $1,035,654   $1,038,896   $1,264,273
                                         ==========    ==========   ==========   ==========
</TABLE>
            See Notes To Condensed Consolidated Financial Statements.

                                       6
<PAGE>

<TABLE>
<CAPTION>
                   INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                                         Six Months Ended
                                                                                           December 31,
                                                                                      2004              2003
                                                                                  -----------        -----------
<S>                                                                               <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                        $ 1,038,804        $ 1,251,536
                                                                                  -----------        -----------
 Adjustment to reconcile net income to net
  cash provided by (used in) operating activities
   Gain on sale of marketable securities                                               (8,943)                --
   Depreciation and amortization                                                      557,397            408,931
   Deferred tax expense                                                               583,000                 --
   Tax expense in connection with exercise of employee
    stock options credited to additional paid-in-capital                                   --            665,000
 Changes in operating assets and liabilities
    Accounts receivable                                                             1,007,292         (2,102,462)
    Inventories                                                                    (1,745,868)        (1,344,426)
    Prepaid expenses and other current assets                                        (170,463)          (294,946)
    Deposits                                                                               --              9,494
    Accounts payable, accrued expenses and other liabilities                         (751,136)         1,228,458
                                                                                  -----------        -----------

TOTAL ADJUSTMENTS                                                                    (528,721)        (1,429,951)
                                                                                  -----------        -----------

     NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                              510,083           (178,415)
                                                                                  -----------        -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from notes receivable                                                           --          1,524,092
  Purchases of building and equipment                                              (3,142,044)        (1,914,029)
  Deposits                                                                           (575,542)          (925,000)
                                                                                  -----------        -----------

        NET CASH USED IN INVESTING ACTIVITIES                                      (3,717,586)        (1,314,937)
                                                                                  -----------        -----------

 CASH FLOWS FROM FINANCING ACTIVITIES
  Repayment of bank line of credit                                                   (424,847)        (1,639,946)
  Borrowings from new bank lines of credit                                          1,500,000                 --
  Repayments of bank mortgage and notes payable                                      (154,167)          (461,762)
  Cash received in reverse merger transaction                                              --             64,029
  Proceeds from options and warrants exercised                                             --          2,698,764
                                                                                  -----------        -----------

       NET CASH PROVIDED BY INVESTING ACTIVITIES                                  $   920,986        $   661,085
                                                                                  -----------        -----------
</TABLE>
            See Notes To Condensed Consolidated Financial Statements.

                                        7
<PAGE>


<TABLE>
<CAPTION>
                INTERPHARM HOLDINGS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (UNAUDITED), Continued


                                                                 Six Months Ended
                                                                    December 31,
                                                                 2004           2003
                                                             -----------    -----------

<S>                                                          <C>            <C>
      NET DECREASE IN CASH AND CASH EQUIVALENTS              $(2,286,517)   $  (832,267)

CASH AND CASH EQUIVALENTS - Beginning                          2,884,639      2,336,203
                                                             -----------    -----------
CASH AND CASH EQUIVALENTS - Ending                           $   598,122    $ 1,503,936
                                                             ===========    ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the periods for:
    Interest                                                 $   105,098    $    10,999
                                                             ===========    ===========
    Income taxes                                             $    31,148    $    84,456
                                                             ===========    ===========

  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             --
                                                             ===========    ===========
    Declaration of preferred dividend                        $   178,719             --
                                                             ===========    ===========
    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 six months
      ended December 31, 2004 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 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 earnings 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.

      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.

                                       10
<PAGE>

      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
      be  depreciated  over  the  useful  lives  of  the  assets.   The  Company
      capitalized  approximately  $109,000  during  the six month  period  ended
      December  31,  2004 in  connection  with its capital  improvements  to the
      Brookhaven, NY facility.


NOTE 2 - Summary of Significant Accounting Policies, continued

      Stock Based Compensation
      At December 31, 2004, 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 income and net 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               Six Months Ended
                                                      December 31,                    December 31,
                                                      ------------                    ------------

                                                 2004            2003            2004             2003
                                             -------------   -------------   -------------    -------------

<S>                                          <C>             <C>             <C>              <C>
Net income, as reported                      $     625,532   $   1,024,097   $   1,038,804    $   1,251,536

Less: Stock-based employee
 compensation expense
 determined under fair value-based
 method for all  awards, net of income tax
                                                   656,470         166,714       1,312,941          333,428
                                             -------------   -------------   -------------    -------------

Pro forma net income (loss)                  $     (30,938)  $     857,383   $    (274,137)   $     918,108
                                             =============   =============   =============    =============


Basic net income (loss) per share
  As reported                                $        0.02   $        0.05   $        0.04    $        0.06
                                             =============   =============   =============    =============
  Pro forma                                  $          --   $        0.05   $       (0.01)   $        0.05
                                             =============   =============   =============    =============

Diluted net income (loss) per share
  As reported                                $        0.01   $        0.01   $        0.01    $        0.02
                                             =============   =============   =============    =============
  Pro forma                                  $          --   $        0.01   $       (0.01)            0.01
                                             =============   =============   =============    =============
</TABLE>

                                       11
<PAGE>

      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 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 of 145% and
      124% for 2004 and 2003,  respectively (2) risk-free interest rate of 4.25%
      and 3.4% for 2004 and 2003, respectively and (3) expected average lives of
      10 and 5 years for 2004 and 2003, respectively.


NOTE 2 - Summary of Significant Accounting Policies, continued

      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 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.

      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.

                                       12
<PAGE>

NOTE 3 - Inventories

       Inventories consist of the following:

                                               December 31,           June 30,
                                                  2004                  2004
                                                ----------          ----------
        Finished goods                         $   193,778           $ 534,175
        Work in process                          4,196,348           2,710,270
        Raw materials                            2,478,984           1,932,971
        Packaging materials                        406,919             352,745
                                                ----------          ----------

              Total                             $7,276,029          $5,530,161
                                                ==========          ==========




NOTE 4 - Land, Building and Equipment

       Land, building and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                                                 Estimated
                                                           December 31,           June 30,         Useful
                                                              2004                  2004           Lives
                                                            -----------         -----------     -----------
<S>                                                         <C>                 <C>             <C>
Land                                                        $ 4,924,000         $ 4,924,000
Building, improvements and construction in progress (a)       5,897,281           4,475,482      20 Years
Machinery and equipment                                       7,049,004           5,457,395     5-7 Years
Furniture and fixtures                                          341,781             319,762      5 Years
Leasehold improvements                                        2,729,820           2,623,203     5-15 Years
                                                            -----------         -----------
                                                             20,941,886          17,799,842
Less: accumulated
depreciation and amortization                                 3,350,106           2,792,710
                                                            -----------         -----------

Land, Building and Equipment, net                           $17,591,780         $15,007,132
                                                            ===========         ===========
</TABLE>

(a) Not yet been placed into service and no depreciation expense has yet been
    recorded
                                       13

<PAGE>
NOTE 5 - Bank Debt

      At December 31, 2004, the Company has $1,500,000 outstanding under advised
      lines of credit.  During the six month period ended  December 31, 2004 the
      Company repaid approximately  $425,000 of various bank lines of credit, as
      well as $154,000 of the mortgage note payable.


NOTE 6- Income Taxes

      At December 31, 2004 the Company has remaining  Federal net operating loss
      carryforwards  ("NOLs")  of  approximately  $10,500,000  and State NOLs of
      approximately $9,950,000 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 December 31, 2004,  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 reserved approximately 30% of the State NOLs which the
      Company does not anticipate utilizing due to State limitations.

      In  calculating  its tax provision for the six month period ended December
      31,  2004,  the  Company  applied  an  aggregate  effective  tax  rate  of
      approximately  37% thereby  creating an  approximate  $583,000  income tax
      expense  and  reduced its  current  deferred  tax asset by a like  amount.
      Additionally,  the Company has reclassified  the remaining  balance of its
      current deferred tax asset to long term deferred tax asset.



NOTE 7- Earning Per Share

       The calculations of basic and diluted EPS are as follows:
<TABLE>
<CAPTION>
                                                                                Three Months Ended             Six Months Ended
                                                                                  December 31,                   December 31,
                                                                             2004           2003            2004            2003
                                                                         -----------     -----------     -----------     -----------
<S>                                                                      <C>             <C>             <C>             <C>
 Numerator:
    Net income                                                           $   625,532     $ 1,024,097     $ 1,038,804     $ 1,251,536
    Less: Preferred stock dividends                                           41,392          41,392          82,784          82,784
    Less: Net income attributable to Series K preferred
    stockholders                                                              38,414         103,600          62,870         123,213
                                                                         -----------     -----------     -----------     -----------

Numerator for basic EPS                                                      545,726         879,105         893,150       1,045,539

 Effect of dilutive securities:
   Net income attributable to Series K preferred
     Stockholders                                                             38,414         103,600          62,870         123,213
                                                                         -----------     -----------     -----------     -----------
 Numerator for diluted EPS                                               $   584,140     $   982,705     $   956,020     $ 1,168,752
                                                                         ===========     ===========     ===========     ===========

 Denominator:
 Denominator for basic EPS weighted average
   shares outstanding                                                     24,967,190      17,395,546      24,967,178      16,861,779

 Effect of dilutive securities:
   Convertible Series K  preferred stock                                  37,648,650      42,844,356      37,648,650      42,764,522
   Convertible Series A, B, C and J preferred stocks                           7,402           7,474           7,402          15,463
   Stock options                                                           5,358,220       7,892,009       5,355,203       8,734,266

 Denominator for diluted EPS                                              67,981,462      68,139,385      67,978,433      68,376,030


  Basic EPS                                                              $      0.02     $      0.05     $      0.04     $      0.06
                                                                         ===========     ===========     ===========     ===========
  Diluted EPS                                                            $      0.01     $      0.01     $      0.01     $      0.02
                                                                         ===========     ===========     ===========     ===========
</TABLE>

                                       14
<PAGE>


NOTE 7 - Earning Per Share - Continued

      As of December 31, 2004, 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:

<TABLE>
      <S>                                                                        <C>
      Common stock outstanding - December 31, 2004                               24,967,202

      Stock options and Warrants outstanding                                     10,535,000
      Common stock issuable upon conversion of preferred stocks:
        Series A                                                                      1,526
        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)                                                           78,013,643
</TABLE>

      (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).

                                       15
<PAGE>

NOTE 8 - Equity Securities

      Common Stock and Stock Options 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.

      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
      is cumulative through June 30, 2004, has not yet been paid and is included
      in  Accounts  payable,  accrued  expenses,  and  other  liabilities  as at
      December 31, 2004.




NOTE 9 - Economic Dependency

      Major Customers
      The Company had the following  customer  concentrations  for the three and
      six month periods ended December 31, 2004 and 2003:

                                    Sales - Percent of Revenue

                                Three Months          Six Months
                             Ended December 31,   Ended December 31,
                             ------------------   ------------------
                               2004    2003        2004    2003
                               ----    ----        ----    ----

               Customer "A"     23%     35%         19%     33%
               Customer "B"     21      23          27      25
               Customer "C"     23      10          16      11

                               Accounts Receivable

                                     December 31, 2004
                                     -----------------

                Customer "A"            $ 1,781,000
                Customer "B"              1,546,000
                Customer "C"                950,000

      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 six month periods ended  December 31, 2004,  the Company
      purchased  materials from three suppliers  totaling  approximately 74% and
      72% of purchases,  respectively. For the three and six month periods ended
      December 31, 2003, the Company  purchased  materials from three  suppliers
      totaling approximately and 95% and 90%, respectively. At December 31, 2004
      and 2003,  aggregate  amounts due to these suppliers  included in accounts
      payable, were approximately $2,051,000 and $4,350,000 respectively.


NOTE 10 - Related Party Lease

      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.

                                       17
<PAGE>

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 - Subsequent Events

      As described in Note 2 above, in January,  2005, the Board of Directors of
      the Company approved the decision to accelerate the vesting of all options
      granted after May 30, 2003 with exercise  prices of greater than $2.24 per
      option.

      In January,  2005, the Board of Directors  granted an aggregate  2,350,000
      options  to  purchase  shares  of the  Company's  common  stock,  of which
      2,075,000  are  vested,  150,000  options  vest 20 % on each June 30, 2006
      through 2010 and 125,000  options will vest at conditions set forth by the
      Board of Directors in the future. All options, other than those which will
      have their  vesting  determined in the future,  have an exercise  price of
      $2.24,  which was the closing price of the  Company's  common stock on the
      date of the grant.

      2,000,000  of the options  were issued to the  Company's  Chief  Executive
      Officer,  Cameron  Reid.  Mr.  Reid has  agreed  to a three  year  term of
      employment with the Company for a base salary of $200,000 per year,  which
      may be increased at the  discretion of the  Compensation  Committee of the
      Company's Board of Directors

      25,000 of the vested options were granted to the Company's Chief Financial
      Officer.

                                       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  and  distributors  which sell our products under their
labels.

We market our products primarily to wholesalers, drug distributors, repackagers,
and other manufacturers  through our internal sales staff as well as independent
sales  representatives.  Some  of  our  wholesalers  and  distributors  purchase
products that are warehoused for drug chains, independent pharmacies,  state and
federal governmental  agencies and managed healthcare  organizations.  Sales are
recognized when the product is shipped and  appropriate  provisions are made for
returns and charge backs.


RECENT DEVELOPMENTS

As  further  detailed  in a Form 8-K  filed  with the  Securities  and  Exchange
Commission  on  January  31,  2005,  Cameron  Reid was  appointed  as our  Chief
Executive  Officer.  Mr.  Reid,  who had been  serving on our Board of Directors
since  May,  2004,   resigned  his  position  on  our  Board  to  focus  on  his
responsibilities as Chief Executive Officer. Mr. Reid has over twenty-five years
of experience in the pharmaceutical  business. From 1992 through March, 2004, Mr
Reid  served  as  President  of Dr.  Reddy's  Laboratories,  Inc.  Mr.  Reid was
responsible  for,  and oversaw  the  building  of its North  American  business,
including all aspects of strategic planning and new product development.

Since  joining our Board of  Directors,  Mr. Reid has conducted an evaluation of
our business,  and developed a business plan which includes  capitalizing on our
core  competencies in the selection of new products as well as diversifying  our
product  development  into  new  areas.  Under  Mr.  Reid's  guidance,  we  were
particularly active in planning for our future during the quarter ended December
31,  2004.  During this  period,  we also  focused on  preparing  for our future
expansion  and new product line  development  by  acquiring  new  equipment  and
implementing infrastructure improvements and adding inventory control systems.

As Mr. Reid's strategic plan for our growth  developed,  we believed it would be
best for him to be actively  involved in the  execution of the plan.  Therefore,
the Company and Mr. Reid agreed that  Interpharm  would best be in a position to
implement his strategic plan if Mr. Reid were appointed to the position of Chief
Executive Officer.  We have already commenced  development  activities under Mr.
Reid's  leadership and believe that we can start marketing  certain new products
by the end of fiscal 2005.


                                       19
<PAGE>

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.


RESULTS OF OPERATIONS


NET SALES BY PRODUCT (IN THOUSANDS OF DOLLARS):

                             Three Months Ended December 31,
                             -------------------------------
                            2004      % of       2003    % of
                            Sales    Sales      Sales    Sales   Variance $
                           ------    -----     -------   ----    ----------
Ibuprofen                  $5,532      63     $ 5,907     51     $  (375)
Allopurinol & Atenolol      1,884      21       4,097     35      (2,213)
Naproxen                      307       3       1,111      9        (804)

All Other Products          1,115      13         591      5         524
                           ------             -------            -------
      Total                $8,838             $11,706            $(2,868)
                           ------             -------            -------



                              Six Months Ended December 31,
                             -------------------------------
                            2004      % of       2003    % of
                            Sales    Sales      Sales    Sales   Variance $
                           ------    -----     -------   ----    ----------
Ibuprofen                  $11,703     65     $10,320     64     $ 1,383
Allopurinol & Atenolol       3,201     18       5,863     26      (2,662)
Naproxen                       803      5       1,535      6        (732)
All Other Products           2,184     12         864      4       1,320
                           -------            -------            -------
      Total                $17,891            $18,582            $  (691)
                           =======            =======            =======


As indicated in the tables above, we encountered a net decrease in our revenue.
Significant components include:

o     Both  Allopurinol and Atenolol are  manufactured for one customer based on
      quantities  ordered by the customer.  During the six months ended December
      31, 2003 orders of Allopurinol and Atenolol were above normal  quantities.
      We believe future  quarterly net sales levels for Allopurinol and Atenolol
      will  approximate  net sales during the three month period ended December,
      2004.

o     Net sales of Naproxen have been  primarily to one customer.  This customer
      during the three month  period ended  December 31, 2003 placed  orders for
      nearly  twice the amount  ordered  during  the three  month  period  ended
      September  30, 2003.  We believe that future net sales of Naproxen  should
      approximate  the  December  2004 levels for the quarter  ending  March 31,
      2005.As  a  result  of an  expanded  customer  base for  this  product  we
      anticipate  that sales could increase  during our fiscal fourth quarter of
      2005,  however  than can be no  assurances  that  orders  will be received
      timely.

o     When  comparing  the six month period  ended  December 31, 2004 to the six
      month period ended  December 31, 2003,  there was a  significant  increase
      --13.4%-- in sales of Ibuprofen.  However,  the quarter ended December 31,
      2004  witnessed a 6.3% 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.

o     Since  obtaining  FDA  approval,  revenue for  Reprexain(R)  totaled  over
      $410,000.

o     During  the three  month  period  ended  December  31,  2004,  we  shipped
      approximately  $670,000  of  Hydrocodone-7.5  mg /  Ibuprofen-200  mg. our
      generic version of Vicoprofen.  This was our first quarter of shipments of
      the product.  We do not believe  future orders for this product will be as
      high because the results for the quarter included initial shipments, which
      tend to be greater than future replenishment orders.  However, the results
      for the quarter  ended  December  31,  2004 do not include any  additional
      revenue which may be derived from our profit sharing  arrangement for this
      product  which we  anticipate  will be included in the revenues for future
      periods.


                                       20

<PAGE>


GROSS PROFITS / COST OF SALES

Our total gross profit  percentage  for the three months ended December 31, 2004
was 29.3%, an increase of 6.9 percentage  points compared to 22.4% for the three
months ended  December 31, 2003.  This is as a result of the sale in the current
quarter of one of our new products which we manufactured  during the three month
period  ended March,  2004 for a potential  new  customer.  The customer did not
place an order timely, and we were unable to identify other potential customers.
As such, we did not capitalize it as it became "short dated" inventory.  Without
such sale, which totaled approximately  $670,000, our gross profit for the three
month period ended December 31, 2004 would have been approximately  21.7%, which
would have been relatively consistent with recent prior periods. Our total gross
profit  percentage  for the six months  ended  December  31, 2004 was 25.3%,  an
increase of 3.5  percentage  points  compared to 21.8% for the six months  ended
December 31, 2004.

During the six month period ended December 31, 2004, with respect to our primary
products, raw material prices have remained relatively constant when compared to
2003.  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 slightly during the three
months ended  December 31, 2004,  primarily as a result of costs  associated  to
training staff for the second  facility which we anticipate  will be operational
in mid-2005.

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 $366,000 to
approximately  $1,226,000,  or 13.9% of net sales  during the three months ended
December 31, 2004, from approximately $860,000, or 7.3% of net sales, during the
same period in 2003. The significant  components of this increase are: salaries,
including  payroll taxes and benefits  ($91,000);  legal and accounting costs of
($89,000);  investor and public relations costs ($79,000);  utilities ($15,000);
professional fees ($30,000); travel expenses ($26,000) and telephone, office and
seminars ($20,000).

Selling, general and administrative expenses increased approximately $419,000 to
approximately  $2,313,000,  or 12.9% of net sales  during the six  months  ended
December 31, 2004, from approximately  $1,894,000, or 10.2% of net sales, during
the same  period in 2003.  The  significant  components  of this  increase  are:
salaries,  including payroll taxes and benefits ($143,000);  investor and public
relations costs ($117,000);  utilities  ($51,000);  professional fees ($62,000);
travel ($22,000);  freight ($28,000);  telephone, office and seminars ($33,000);
offset by reductions in our legal and accounting costs of $44,000.

The  increase  in  salaries,  payroll  taxes,  benefits,  professional  fees and
utilities  are  primarily  attributable  to  our  continuing  overall  corporate
expansion. 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 incurring  expenses during the three and six month
periods ended December 31, 2004 with little or no costs incurred during the same
period in 2003.  Additionally,  during the three months ended December 31, 2004,
we incurred  costs  associated to our annual meeting of  stockholders  which was
held in November, 2004, while none the previous year. The increases in legal and
accounting and  professional  fees witnessed during the three month period ended
December  31, 2004  compared to the same period in the prior year are  primarily
attributable  to added  services  which are  consistent  with our  product  line

                                       21
<PAGE>

growth.  However,  for the six month period ended  December 31, 2004 these costs
are less  than the same  period  in the  prior  year  primarily  as a result  of
significant  legal,  accounting and other professional costs incurred during the
first half of the six month period ended  December 31, 2003,  as a result of the
merger between ATEC Group, Inc. and Interpharm, Inc.



INCOME TAXES The  effective  tax rate for the three and six month  periods ended
December  31,  2004 of  approximately  37.1%  resulted in  aggregate  income tax
provisions of  approximately  $369,000 and $612,000,  respectively,  compared to
effective  aggregate  tax  rates of 35.3%  and 35.0% for the three and six month
periods ended December 31, 2003, respectively,  which resulted in provisions for
income  taxes of  approximately  $560,000 and  674,000,  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
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  amount of
$697,000 to long term deferred tax asset.

LIQUIDITY AND CAPITAL RESOURCES
We currently finance our operations and capital  expenditures through cash flows
from operations and bank borrowings.  Net cash provided by operating  activities
for the six month  period  ended  December  31, 2004 was $510,000 as compared to
$178,000  net cash used in operating  activities  for the same period last year.
Net cash provided in 2004 was a result of non-cash operating items of $1,131,000
added to net income of  $1,039,000  and a decrease  in  accounts  receivable  of
$1,007,000, offset by a decrease in accounts payable, accrued expenses and other
liabilities of $751,000,  and increases in inventories and prepaid  expenses and
other current assets of $1,746,000 and $170,000, respectively.

Net cash  provided by financing  activities of $921,000 for the six months ended
December 31, 2004, was a result of drawing upon $1,500,000 in available lines of
credit offset by the pay down of a mortgage loan of $154,000 and working capital
lines of credit by $425,000.

A component of our current plan is the expansion of the  production  capacity at
our current facility as well as erecting a second facility.  Consistent with our
expansion  plans,  during the six month  period  ended  December  31,  2004,  we
disbursed $3,142,000 for new equipment,  furniture and improvements. In addition
to which we have outlaid $576,000 for deposits toward additional assets. As such
in the  aggregate  we used  $3,718,000  in investing  activities  during the six
months ended December 31, 2004.

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.
      The loan is being  repaid  with 119  monthly  installments,  based upon an
      amortization  schedule of twenty years,  and a balloon  payment due in ten
      years for the balance.  As of December 31, 2004 the total amount remaining
      is $7,245,000

o     two advised credit lines aggregating  $6,600,000  primarily to acquire new
      equipment and for renovations of the Company's new Yaphank,  NY plant. The
      balance of the funds  accessed  through these credit lines will convert to
      fully amortizing five year term loans.

                                       22

<PAGE>

o     a  $2  million  advised   non-revolving  secured  facility  for  equipment
      purchases. Each advance cannot exceed 90% of the invoice amount of the new
      equipment and is convertible  into separate notes that fully amortize over
      60 months.

o     a $5,000,000  advised  line of credit  primarily  for working  capital and
      general  corporate  purposes.  As of December 31, 2004, we have drawn down
      $1,500,000.  Subsequent  to year end and as of the filing date we borrowed
      an additional  $1,500,000.  These subsequent borrowings are principally to
      replenish  funds for equipment and  renovations  paid for from cash flows.
      Each  borrowing is a 90 day loan at LIBOR plus 150 basis points.  Interest
      rates average 3.94%.

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. As of December 31,
2004, the interest rate on the mortgage note payable ranged from 3.66% to 3.94%.
In addition,  we are required to comply with certain financial covenants.  As of
December 31, 2004, 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 new credit  facility  is  collateralized  by
substantially all assets of the Company.

Working capital decreased  $3,182,000 to $8,528,000 from $11,710,000 at June 30,
2004.  Significant  factors which  contributed  to the decrease are decreases in
cash and net accounts receivable, utilizing $583,000 of our current deferred tax
asset and reclassifying $697,000 to long term, and borrowing $1,500,000 from our
credit facility, offset by an increase in inventory. As previously discussed, we
disbursed  in excess of  $3,718,000  for  purchases of  additional  building and
equipment and deposits on equipment.  Our inventory  levels at December 31, 2004
increased  when  compared to previous  levels.  This is primarily as a result of
production for future sales.

Future cash flows could be aided by our Federal net operating loss carryforwards
("NOLs"). At December 31, 2004, we had approximately  $10,500,000 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 funds we  generate  from  operations  along  with the  financing
arrangements described above should allow us to continue our expansion plans and
be sufficient for us to meet our operating  requirements  during the next twelve
months.  We may  nevertheless,  choose to raise  additional  funds or seek other
financing  arrangements  to  facilitate  more rapid  expansion,  to develop  new
products at a faster pace, or to acquire or invest in complimentary  businesses,
technologies, services or products.

ACCOUNTS RECEIVABLE

Our  accounts  receivable  at  December  31,  2004 was  $5,842,000  compared  to
$6,850,000  at June 30,  2004.  This  decrease is  primarily  attributable  to a
decrease in sales during the three month period ended December 31, 2004 compared
to the three month period ended June 30, 2004. Our accounts  receivable turnover
ratio  decreased  1.4 turns to 5.6 turns at December  31, 2004 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.

                                       23
<PAGE>

INVENTORY

At December 31, 2004,  our inventory was  $7,276,000,  an increase of $1,746,000
from $5,530,000 at June 30, 2004. Our inventory turnover ratio of 4.2 annualized
turns at  December  31,  2004  decreased  when  compared  to June 30, 2004 - 6.2
average  turns.  The drop in  turnover  ratio to slightly  over four  turns,  is
primarily as a result of two factors:  the  manufacture of product for which the
company was to receive  orders during the three month period ended  December 31,
2004,  which did not arrive  until the first  calendar  quarter  of 2005,  and a
planned  build-up of inventory in certain key products.  As such, we believe the
reduction  in annual  turns as at December  31,  2004,  to be within  acceptable
limits of our current operating plan.

ACCOUNTS PAYABLE

The  accounts  payable,  accrued  expenses  and other  liabilities  decreased by
approximately  $572,000 during the six month ended December 31, 2004 as compared
to June 30, 2004.

CASH AND CASH EQUIVALENTS

Cash and cash  equivalents  decreased  during the six months ended  December 31,
2004 by approximately $2,287,000 from $2,885,000 at June 30, 2004 to $598,000 at
December 31, 2004. We funded our business from  operations and bank  borrowings:
net cash  provided by  operations - $510,000;  bank  borrowings - net  $921,000.
These  were  offset by  acquisition  of new  property  and  equipment  and other
additions of $3,718,000.

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.

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.  The raw materials are also 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,

                                       24
<PAGE>

(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 its
second   facilty,located  in  Brookhaven,   New  York,  of  which  approximately
$7,245,000 was  outstanding at December 31, 2004.  Additionally,  as at December
31, 2004,  we borrowed  $1,500,000.  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 December 31, 2004,  the interest  rates on the mortgage  note
payable  was  3.66%  and  3.94% the  average  interest  rate for the  $1,500,000
borrowings was 3.94%. If our combined  borrowings remained at the same amount as
of December  31,  2004,  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  $22,000 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 six month period ended December 31, 2004, 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 six month
period ended December 31, 2004.

                                       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

                  The Company held its annual meeting of stockholders on
                  November 18, 2004, at the offices of the American Stock
                  Exchange.

                  1. The stockholders of the Company voted to elect six members
                  to the Board of Directors to serve until their respective
                  successors are elected. The results of the vote are:

                                                  For       Against    Abstain
                                                  ---       -------    -------
                  Dr. Maganlal K. Sutaria      23,463,714    21,079     84,807
                  David Reback                 23,482,393    2,400      84,807
                  Stuart H. Benjamin           23,480,088    4,705      84,807
                  Dr. Mark Goodman             23,481,093    3,700      84,807
                  Cameron Reid                 23,478,038    6,755      84,807
                  Kennith Johnson              23,482,793    2,000      84,807


                  2. The stockholders also voted ratify and approve Marcum &
                  Kliegman, LLP, as our independent public accountants, to audit
                  our financial statements for the fiscal year ending June 30,
                  2005. The result of the vote was:

                             For                Against           Abstain
                             ---                -------           -------
                             23,491,663         47,386             30,551



                  3. The stockholders voted to approve stock option grants. The
                  result of the vote was:

                             For                Against           Abstain
                             ---                -------           -------
                             15,030,716         429,398           27,119


                                       27
<PAGE>

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.


(b) Reports on Form 8-k

      1.    Form 8-K filed on October  20, 2004 - Item 8.01 - Other  Events.  On
            October 18,  2004,  Surinder  Rametra,  a Company  Director  and its
            Director of Business  Development,  and James Charles, a Director of
            the Company, resigned their directorships.  Mr. Rametra resigned his
            directorship  in  order  to  enable  him  to  focus  solely  on  his
            responsibilitiesas  Director of Business Development of the Company.
            Mr. Charles resigned inorder to pursue other interests.  Neither Mr.
            Rametra nor Mr.  Charles  resigned  as a result of any  disagreement
            with the Company on any matter,  including any matter related to the
            operations, policies or practices of the Company.


      2.    Form  8-k  filed on  November  24,  2004 - Item  5.02  Departure  of
            Directors or Principal Officers;  Appointment of Principal Officers.
            - Announced the  appointment  of Raj Sutaria as the Company's  Chief
            Operating Officer.

                                       28

<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.

                                       29

<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:  February 14, 2005
                           By: /s/ George Aronson
                               George Aronson,
                               Chief Financial Officer
                               (Duly authorized to sign on behalf of registrant)


                                       30

<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;