AlphaRx, Inc. - Form 10-QSB/A - Prepared By TNT Filings Inc.

10QSB/A 1 alpharx10qmarch31.htm ALPHARX INC. - 10-QSB/A AlphaRx, Inc. - Form 10-QSB/A - Prepared By TNT Filings Inc.

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB-A

[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended: March 31, 2004

[_] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from: to

Commission File Number: 000-030813

AlphaRx, Inc.
(Name of Small Business Issuer in its Charter)

Delaware	98-0177440
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

168 Konrad Crescent, Suite 200
Markham, Ontario, Canada L3R 9T9
(Address of principal executive offices)

Registrant's telephone number, including area code: (905) 479-3245

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

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value
(Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

The number of outstanding shares of registrant's Common Stock on May 17, 2005 was 57,508,112.

Transitional Small Business Disclosure Format. Yes [ ] No [X]

ALPHARX, INC.

FORM 10-QSB-A

MARCH 31, 2004

TABLE OF CONTENTS

Interim Consolidated Balance Sheets as of March 31, 2004 as restated,
and September 30, 2003	1

Interim Consolidated Statements of Operations for the six months ended March
31, 2004, as restated, and March 31, 2003	3

Interim Consolidated Statements of Operations for the three months ended
March 31, 2004, as restated, and March 31, 2003	4

Interim Consolidated Statements of Stockholders' Deficiency for the six months
ended March 31, 2004, as restated, and the year ended September 30, 2003	5

Interim Consolidated Statements of Cash Flow for the six months ended March
31, 2004, as restated, and March 31, 2003	6

Condensed Notes to Interim Consolidated Financial Statements as restated	7

Management's Discussion and Analysis of Financial Condition and Plan	10
of Operation as restated

Other Information as restated	15

ALPHARX, INC.

INTERIM CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2004 AS RESTATED, (NOTE 7) AND SEPTEMBER 30, 2003
(UNAUDITED)

ASSETS

		March 31,	September 30,
		2004		2003
CURRENT ASSETS

Cash	$	470,018	$	24,520
Accounts Receivable		12,737		27,662
Deferred financing costs		86,100		-
Prepaid Expenses		7,218		3,690
Inventory		84,599		141,905


TOTAL CURRENT ASSETS		660,672		197,777


PROPERTY, PLANT & EQUIPMENT, at cost

Less accumulated deprecation of $98,667		145,121
Less accumulated depreciation of $79,097				126,535

OTHER ASSETS

Licensing Rights		1		230,000





TOTAL ASSETS	$	805,794	$	554,312

See condensed notes to the consolidated financial statements

ALPHARX, INC.

INTERIM CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2004, AS RESTATED, AND SEPTEMBER 30, 2003
(UNAUDITED)

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

	March 31,		September 30,
		2004		2003
CURRENT LIABILITIES

Accounts Payable and Accrued Liabilities	$	502,859	$	254,724
Notes Payable	1,119,551			474,837
Litigation Liabilities		25,000		25,000

TOTAL CURRENT LIABILITIES		1,647,410		754,561


SHAREHOLDERS' DEFICIENCY

Common Stock, $ 0.0001 par value,		1,703		1,692
Authorized 100,000,000 shares, issued and
outstanding 17,020,082 shares (September
30, 2003 - 16,920,082)
Additional paid-in capital	4,915,029			4,024,039
Deficit		(5,758,348)		(4,225,980)

TOTAL SHAREHOLDERS' DEFICIENCY		(841,616)		(200,249)

TOTAL LIABILITIES AND SHAREHOLDERS'	$	805,794	$	554,312
DEFICIENCY

See condensed notes to the consolidated financial statements

ALPHARX, INC.

INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS

FOR THE SIX MONTH PERIOD ENDED MARCH 31, 2004, AS RESTATED and 2003
(UNAUDITED)

Six Months Ended March 31, 2004 2003

SALES $ 362,610 $ 2,498

COST OF SALES 146,185 2,243

GROSS MARGIN 216,425 255

GENERAL AND ADMINISTRATIVE, SALES AND 597,987 642,962

MARKETING EXPENSES

RESEARCH AND DEVELOPMENT EXPENSES 40,245 155,288

DEPRECIATION 19,562 12,132

LOSS FROM OPERATIONS (441,369) (810,127)

OTHER INCOME AND EXPENSES

Interest Income/(expense) (861,000) 2

Write down of licensing rights (229,999) -

LOSS BEFORE INCOME TAXES, AS RESTATED (1,532,368) (810,125)

INCOME TAX - -

NET LOSS, AS RESTATED $ (1,532,368) $ (810,125)

NET LOSS PER COMMON SHARE, BASIC & (0.09) (0.05)

DILUTED

WEIGHTED AVERAGE NUMBER OF COMMON 16,994,258 15,764,160

SHARES OUTSTANDING

See condensed notes to the consolidated financial statements

ALPHARX, INC.

INTERIM CONSOLIDATEDSTATEMENTS OF OPERATIONS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2004, AS RESTATED AND 2003
(UNAUDITED)

Three Months Ended March 31, 2004 2003

SALES $ 315,441 $ 644

COST OF SALES 128,669 780

GROSS MARGIN 186,772 (136)

GENERAL AND ADMINISTRATIVE, SALES 327,070 485,473

AND MARKETING EXPENSES

RESEARCH AND DEVELOPMENT EXPENSES 28,817 51,645

DEPRECIATION 8,518 6,159

LOSS FROM OPERATIONS (177,633) (543,413)

OTHER INCOME AND EXPENSES

Interest Income /(expense) (861,000) -

Write down of licensing rights (229,999) -

LOSS BEFORE INCOME TAXES,AS RESTATED (1,268,632) (543,413)

INCOME TAX - -

NET LOSS, AS RESTATED $ (1,268,632) $ (543,413)

NET LOSS PER COMMON SHARE, BASIC & (0.07) (0.04)

DILUTED

WEIGHTED AVERAGE NUMBER OF COMMON 17,020,082 16,032,032

SHARES OUTSTANDING

See condensed notes to the consolidated financial statements

ALPHARX, INC.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY AS RESTATED
(UNAUDITED)

	Common Stock		Additional	Retained	Total
	Number of		Paid-in	Earnings	Shareholders'
	Shares	Amount	Capital	(Deficit)	Equity (Deficiency)


Balance as of	15,327,341	1,533	2,897,277	(2,811,383)	87,427
September 30,
2002

Issuances of	1,592,741	159	846,168		846,327
Common
Stock

Issuance of Stock			280,594		280,594
Options for consulting services

Net loss for the				(1,414,597)	(1,414,597)
Year ending
September 30,
2003

Balance as of	16,920,082	1,692	4,024,039	(4,225,980)	(200,249)
September 30,
2003

Issuance of
Common Stock	100,000	11	29,990		30,001

Issuance of
Convertible Debt			861,000		861,000

Net loss, as restated, for the
Six month period
Ending March
31, 2004				(1,532,368)	(1,532,368)

Balance as of
March 31, 2004	17,020,082	1,703	4,915,029	(5,758,348)	(841,616)

See condensed notes to the consolidated financial statements

ALPHARX, INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTH
PERIOD ENDED MARCH 31, 2004, AS RESTATED AND 2003(UNAUDITED)

Six months ended March 31,	2004	2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss, as restated	(1,532,368)	(810,125)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation	19,562	12,132
Write down of licensing rights	229,999	-
Shares issued for services rendered	30,000	280,594
Options issued for services rendered	-	246,472
Interest expense on convertible debt	861,000	-
Changes in assets and liabilities:
(Increase) decrease in inventory	57,306	(45,277)
(Increase) decrease in accounts receivable	14,925	(955)
Increase in prepaid expenses	(3,528)	(242,017)
Increase in deferred financing costs	(86,100)	-
Increase (decrease) in accounts payable and accrued	248,135	(832)
liabilities
NET CASH USED IN OPERATING ACTIVITIES	(161,069)	(560,008)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments	-	(20,000)
Purchase of property, plant & equipment	(38,147)	(17,992)
NET CASH USED IN INVESTING ACTIVITIES	(38,147)	(37,992)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in bank indebtedness	-	(3,373)
Repayment of officer advance	-	(83)
Issuance of notes payable	644,714	56,164
Proceeds from issuance of common stock	-	545,292
NET CASH PROVIDED BY FINANCING ACTIVITIES	644,714	598,000

NET INCREASE (DECREASE) IN CASH	445,498	-

CASH, beginning of period	24,520	-

CASH, end of period	470,018	-

See condensed notes to the consolidated financial statements

ALPHARX, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AS RESTATED
(UNAUDITED)

NOTE 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of all recurring accruals) considered necessary for fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ended September 30, 2004. Interim financial statements should be read in conjunction with the Company's annual audited financial statements.

NOTE 2. NATURE OF BUSINESS AND GOING CONCERN

ALPHARX, INC. (the Company) was incorporated under the laws of the State of Delaware on August 7, 1997. The company is an emerging pharmaceutical company specializing in the formulation of therapeutic products using proprietary drug delivery technologies. The company was formally known as LOGIC TECH INTERNATIONAL, INC., and had its corporate name amended during the fiscal year of 2000.

Effective July 1, 2003 the Company acquired all of the shares of AlphaRx Canada Limited for nominal value of $1. AlphaRx Canada Limited was dormant until this time. AlphaRx Canada Limited was incorporated under the laws of Ontario in order to streamline sales of the Company's products in the Canadian market. Prior to this time AlphaRx Canada Limited had no material assets or any liabilities and was wholly owned by the President & CEO of the Company. The consolidated financial statements reflect the activities of the Company and of AlphaRx Canada Limited - its wholly owned subsidiary. All material inter-company accounts and transactions have been eliminated.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, they do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the company be unable to continue as a going concern. Continuance of the company as a going concern is dependent on its future profitability and on the on-going support of its shareholders, affiliates and creditors.

NOTE 3 PROMISSORY NOTES AND DEFERRED FINANCING COSTS

The Company issued senior secured convertible promissory notes to 10 investors during February and March, 2004 in the aggregate amount of $861,000. These promissory notes are subject to voluntary conversion into common stock at any time at a price of $0.15 (fifteen cents) per share. Under certain circumstances the promissory notes are convertible into common stock at a lesser conversion price. In addition, holders of the promissory notes are entitled to warrants, exercisable up to 3 years from conversion date, to acquire an additional number of shares of common stock varying from 50% of the common stock acquired upon conversion and up to 300% of the common stock acquired upon conversion. These promissory notes are secured by a lien on substantially all of the assets of the Company.

In connection with the promissory notes for $861,000, and any funds raised in the future, the Company is liable for a fee to its placement agent equal to 10% of the gross proceeds. Accordingly, $86,100 has been recorded as deferred financing costs with respect to funds raised to date.

EITF 98-5 and EITF 00-27 requires recognition of a conversion feature that is in-the-money at issuance as additional paid in capital, measured by allocating a portion of the proceeds equal to the intrinsic value of that feature. Accordingly, interest expense of $861,000 has been recognized and additional paid in capital has been increased by the same amount.

Subsequent to March 31, 2004 the Company issued an aggregate of $300,000 of unsecured promissory notes under terms and conditions substantially the same as those described above, but such promissory notes are unsecured and have an interest rate of 5%. The fees payable to our placement agent in connection with these promissory notes are equal to 10% of the gross proceeds received and are payable at the election of the placement agent in cash or units consisting of one share of common stock and a warrant to purchase an additional share of common stock at a stipulated value of $0.15 per unit of common stock, together with warrants exercisable at $0.15 per share for a number of shares of common stock equal to 10% of the shares of common stock issued upon the conversion of such promissory notes.

NOTE 4 LICENSING RIGHTS

The Company acquired world-wide exclusive commercialization rights for VT-1 from Select Therapeutics Inc. in January 2003 with the intention of commercializing this drug. Subsequent to this acquisition the Company successfully launched Flexogan in Canada, and shifted focus on drug delivery products, and related sales and marketing. Having unsuccessfully attempted to resell these commercialization rights, they have been written down to a nominal value due primarily to prohibitive development costs, and the fact that there is no market for these rights.

NOTE 5. LITIGATION LIABILITY

The Company is a defendant in a lawsuit filed by a prospective investor alleging breach of contract, which seeks damages totalling $25,000. The Company believes the suit is without merit; however, to remain conservative, the entire claim has been accrued in the financial statements.

NOTE 6. BANK INDEBTEDNESS

The Company has available credit facilities up to a maximum of $23,000 ($30,000 Canadian), which bears interest at the bank's prime rate plus 3.5% and is guaranteed by a shareholder/director.

NOTE 7. RESTATEMENT

EITF 98-5 and EITF 00-27 requires recognition of a conversion feature that is in-the-money at issuance as additional paid in capital, measured by allocating a portion of the proceeds equal to the intrinsic value of that feature including the value of the warrants, which was applicable in this instance. The warrants were valued using the Black-Scholes Pricing Method. The debt discount on the beneficial conversion has been limited to the proceeds received and has been amortized over the term of the convertible debt.

Net loss for the six month period ended March 31, 2004 as previously reported was $671,368 and for the three month period ended March 31, 2004 was $407,632. The additional expense related to the issuance of senior convertible debt and detachable warrants totalled $861,000. Net loss as restated for the six month period ended March 31, 2004 is now $1,532,368 and for the three month period ended March 31, 2004 is now $1,268,632. There is no change in Shareholders' deficiency nor is there any affect on cash position as a result of this restatement.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the Financial Statements, including the Notes thereto, appearing in this Form 10-QSB-A. Except for the historical information contained herein the foregoing discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected in the forward-looking statements discussed herein.

General

AlphaRx is a drug delivery company specializing in the development of innovative therapeutic products for the pharmaceutical and consumer health care market. Our core competence is in the development of novel drug formulations for therapeutic molecules or compounds that have exhibited poor G.I. absorption due to poor solubility or have yet be administerable to the human body with an acceptable delivery method. Our drug delivery system is versatile and offers significant flexibility in the development of suitable dosage formulations (i.e. oral, topical or parenteral) to meet the requirements of specific drug molecules. Our primary activities since inception (August 7, 1997) have been, in addition to research and development, establishing our offices and research facilities, recruiting personnel, filing patent applications, developing a business strategy and raising capital. During 2003 and the first half of fiscal 2004 we have also started to focus on commercialization of our products and to that extent Flexogan product sales have started in the Canadian market.

We acquired the world-wide exclusive commercialization rights of VT-1 from Select Therapeutics Inc. in January, 2003. Given our recent retail launching of Flexogan™, and our new focus on drug delivery products and plans to evolve into a sales and marketing organization, we have determined that VT1 no longer meets our strategic objective and the VT1 program has been terminated. Resultingly, the VT-1 commercialization rights have been written down to a nominal value.

We launched Flexogan, a series of over-the-counter topical analgesics, in Canada during August, 2003. We expect Flexogan to incur significant marketing expenditures in 2004 in order to promote national sales and gain market share in Canada as well as a pre-launch in U.S.

We signed a licensing agreement with Andromaco Inc. in August, 2003 for the commercialization of our lead pharmaceutical products "Indaflex"™ in Mexico. The Company will receive royalties from product sales. We do not expect marketing approval from the Mexican health authority until at least the fourth quarter of 2004. In order to market and sell Indaflex products in the US and Canada, we will require successful completion of human and clinical trials as well as FDA approval. We expect these trials to commence during the fourth quarter ending September 30, 2004.

We intend to continue investing in the further development of our drug delivery technologies and to actively seek collaborators and licensees to accelerate the development and commercialization of

products incorporating our drug delivery systems. Depending upon a variety of factors, including collaborative arrangements, available personnel and financial resources, we will conduct or fund clinical trials on such products and will undertake the associated regulatory activities.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2004 AS RESTATED, AS COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2003

The Company incurred a net loss, as restated, of $1,532,368 for the six month period ended March 31, 2004 as compared to a loss of $810,125 incurred for the same period a year ago, an increase of $722,243 or approximately 89%. Included in the net loss, as restated, was a one time write down of VT-1 licensing rights in the amount of $229,999. Also included in the net loss, as restated, was interest expense in the amount of $861,000 related to the issuance of convertible debt.

The Company has generated noticeable gross margins for the first time, derived from the sale of Flexogan products. Gross margins of approximately 60% or $216,425 were generated from sales of $362,610 for the six month period ended March 31, 2004. Loss from Operations was $441,369 for the six month period ended March 31, 2004 as compared to Loss from Operations of $810,127 incurred for the same period a year ago, a reduction of $368,758 or approximately 45%.

Sales

Sales for the six months ended March 31, 2004 were $362,610 as compared to $2,498 generated for the same period a year ago, an increase of $360,112. During the first half of our fiscal year we placed our Flexogan products with three national retail chains including Shoppers Drug Mart Ltd., and Loblaws Companies Ltd. With significant marketing expenditures commencing during our second quarter ended March 31, 2004 we anticipate additional national and regional retailers to start stocking Flexogan.

Gross Margin

Cost of Sales for the six month period ended March 31, 2004 was $146,185 as compared to $2,243 incurred for the same period a year ago. Resulting Gross Margin increased to $216,425 or approximately 60% of sales as compared to Gross Margin of $255 or approximately 10% of sales for the same period a year ago. Deducted from Gross Sales for the six month period ended March 31, 2004 were discounts provided to certain customers related to the initial stocking of Flexogan products. We do not expect to continue providing these discounts in the future for existing customers, but rather, we expect to provide discounts in the future only in connection with the establishment of initial relationships with certain new strategic customers.

Sales and Marketing, General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs related to general management functions, finance, marketing, inventory logistics, office overheads, as well as insurance costs and professional fees related to legal, audit and tax matters. Sales and Marketing, General and Administrative expenses for the six months ended March 31, 2004 were $597,987 as compared to $642,962 incurred for the same period a year ago, a decrease of $44,975 or approximately 7%.

Approximately $287,000 or 48% of these expenses incurred for the six months ended March 31, 2004 related to sales and marketing of Flexogan in Canada. We expect to continue with sales and marketing expenditures in order to establish brand awareness, and increase sales of Flexogan, as well as introduction of new products in the future.

The remainder of these expenses incurred for the six month period ended March 31, 2004 related to legal expenses, professional fees, finance charges, and other office overheads. We expect that general and administrative expense will increase moderately over the near term.

Research and Development Expenses

Research and development expenses include costs for scientific personnel, supplies, equipment, outsourced clinical and other research activities.

Research and development expenses for the six months ended March 31, 2004 were $40,245 as compared to $155,288 incurred for the same period a year ago, a decrease of $115,043 or approximately 74%. The decrease results primarily from a reduction of science staff costs when compared to the same period a year ago.

We expect to increase research and development expenses over the remainder of 2004 related primarily to Indaflex development and testing.

Loss from Operations

Loss from operations were $441,369 for the six months ended March 31, 2004 as compared to a loss of $810,125 incurred for the same period a year ago, a decrease of $368,756 or approximately 45%. The reduction in our operating loss results primarily from the increase in gross margins generated when compared to the same period a year ago. Gross margin of $216,425 was generated for the six months ended March 31, 2004 as compared to $255 generated in the same period a year ago. We will continue to incur operating losses in the future as the expenditures for new product research and development as well as sales and marketing to establish new and to promote existing brands will continue to exceed gross margins generated by product sales.

Interest Expense

We issued $861,000 in convertible debt, convertible into common stock and warrants to purchase common stock, during the three month period ending March 31, 2004. At the time of issuance the trading price of our stock exceeded the conversion price. This in turn required interest expense to be reflected in the amount of $861,000 with no comparable expense in the same period a year ago.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2004 the Company had a working capital deficiency of $986,737 compared to $556,784 as at September 30, 2003. The bulk of the deficiency relates to promissory notes issued and outstanding totalling $1,119,551.

Since inception, we have financed operations principally from the sale of Common Stock and issuance of promissory notes and expect to continue this practice to fund our ongoing activities.

We currently do not have sufficient resources to complete the commercialization of any of our proposed products or to carry out our business strategy. Therefore, we will likely need to raise substantial additional capital to fund our operations in the future. We cannot be certain that any financing will be available when needed. Any additional equity financings may be dilutive to our existing shareholders, and debt financing, if available, may involve restrictive covenants on our business.

We expect to continue to spend capital on:

research and development programs;
preclinical studies and clinical trials;
regulatory processes; and
establishment of our own pilot scale manufacturing and marketing capabilities or a search for third party manufacturers and marketing partners to manufacture and market our products for us.

The amount of capital we may need will depend on many factors, including:

the progress, timing and scope of our research and development programs;
the progress, timing and scope of our preclinical studies and clinical trials;
the time and cost necessary to obtain regulatory approvals;
the time and cost necessary to establish our own sales and marketing capabilities or to seek marketing partners to market our products for us;
the time and cost necessary to respond to technological and market developments; and
new collaborative, licensing and other commercial relationships that we may establish.

The inability to raise capital would have a material adverse effect on the Company. We currently have no capital commitments other than the payment of rent on our facilities lease.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

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

Item 3. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer has re-evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2004. Despite the restatement of financial information reported in this amended quarterly report, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the SEC's rules and forms.

PART II: OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

Farhad Walji vs. AlphaRx, Inc. and AlphaRx Canada Limited filed in the Supreme Court of British Columbia on August 23, 2002. Farhad Walji has filed a claim asking for $25,000 plus interest for allegedly providing $20,000 pursuant to a subscription agreement to purchase common shares of AlphaRx's stock and damages resulting from lost opportunity. The Company has denied any liability in this case and is currently defending this action vigorously. Nonetheless, the value of the entire claim has been accrued in our financial statements as a current liability.

ITEM 2 - CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

No shares were issued during the three months ended March 31, 2004.

Between March 31, 2004 and April 6, 2004, the Company issued an aggregate of $300,000 of unsecured promissory notes to 3 investors under terms and conditions substantially the same as those described above, but such promissory notes are unsecured and have an interest rate of 5%. The fees payable to our placement agent in connection with these promissory notes are equal to 10% of the gross proceeds received and are payable at the election of the placement agent in cash or units consisting of one share of common stock and a warrant to purchase an additional share of common stock at a stipulated value of $0.15 per unit of common stock, together with warrants exercisable at $0.15 per share for a number of shares of common stock equal to 10% of the shares of common stock issued upon the conversion of such promissory notes. These securities were sold in reliance on the exemption provided by Rules 506 of Regulation D under the Securities Act of 1933.

Pursuant to a letter agreement dated February 2, 2004 for the provision to the Company of financial advisory and business development services, the Company agreed to issue to one investor a warrant to purchase 3,000,000 unregistered shares of the outstanding stock of the Company, exercisable at

$0.05 per share. Such warrant will not be exercisable before February 2, 2005 and is being issued in reliance of Section 4(2) on the Securities Act of 1933.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

At the Company's Annual Meeting of Stockholders held on March 31, 2004 the stockholders of the Company elected the following persons as directors of the Company to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified: Michael Lee, Dr. David Milroy, and Dr. Ford Moore. The results of the voting were as follows:

	Votes For	Votes Withheld
Michael Lee	10,475,234	NIL
Dr. David Milroy	10,475,234	NIL
Dr. Ford Moore	10,475,234	NIL

Also, at the Annual Meeting of Stockholders, the stockholders ratified the Board's selection of Schwartz Levitsky Feldman LLP as the Company's independent auditors for the fiscal year ending September 30, 2004 with 10,338,634 votes for ratification, nil against, and 136,600 abstaining.

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS.

31.1 Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of C.F.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Michael Lee pursuant to Section 1350 of Chapter 63 of Title 18 United States Code.
32.2 Certification of Marcel Urbanc pursuant to Section 1350 of Chapter 63 of Title 18 United States Code.

(b) REPORTS ON FORM 8-K

On March 16, 2004, we filed a Current Report on Form 8-K regarding completion of a private placement of senior convertible promissory notes.

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.

DATED: May 18, 2005

ALPHARx, INC.

By: /S/ Michael M. Lee

Michael M. Lee, Chief Executive Officer

Three Months Ended March 31,	2004	2003

SALES	$ 315,441	$ 644

COST OF SALES	128,669	780

GROSS MARGIN	186,772	(136)

GENERAL AND ADMINISTRATIVE, SALES	327,070	485,473
AND MARKETING EXPENSES
RESEARCH AND DEVELOPMENT EXPENSES	28,817	51,645
DEPRECIATION	8,518	6,159

LOSS FROM OPERATIONS	(177,633)	(543,413)

OTHER INCOME AND EXPENSES
Interest Income /(expense)	(861,000)	-
Write down of licensing rights	(229,999)	-


LOSS BEFORE INCOME TAXES,AS RESTATED	(1,268,632)	(543,413)

INCOME TAX	-	-


NET LOSS, AS RESTATED	$ (1,268,632)	$ (543,413)

NET LOSS PER COMMON SHARE, BASIC &	(0.07)	(0.04)
DILUTED

WEIGHTED AVERAGE NUMBER OF COMMON	17,020,082	16,032,032
SHARES OUTSTANDING